Fund Research

The Renewables Infrastructure Group

Last update 09 October 2019

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by The Renewables Infrastructure Group. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Investment objective

The Renewables Infrastructure Group (TRIG) seeks to provide investors with long-term, stable dividends while preserving the capital value of its investment portfolio.

As at:

08/10/19

Group/Investment

The Renewables Infrastructure Group

Ticker

TRIG

Management Company

InfraRed / RES

Manager Name

Richard Crawford; Jaz Bains;

Association of Investment Companies (AIC) Sector

Renewable Energy Infrastructure

12 Mo Yield

5.8%

Dividend Distribution Frequency

Quarterly

Latest Market Capitalisation

£2,107,464,010

Latest Net Gearing (Cum Fair)

0%

Latest Ongoing Charge Ex Perf Fee

1.08%

Turnover Ratio

19.2%

Shares Outstanding

1,633,693,031

(Discount) / Premium (Cum Fair)

13.8%

Daily Closing Price

129p

Source: Morningstar

The Renewables Infrastructure Group (TRIG) is a one-stop shop for the burgeoning renewable energy sector. It differentiates itself from the other funds in the sector by being a non-specialist fund (wind, solar and battery storage so far) but with a remit to invest across the UK and in European countries where the directors and managers believe there is a stable renewable energy framework. Recently TRIG has announced a further extension of this policy, and the board is seeking shareholder approval to increase the proportion of assets the company can invest in Europe from 50% to 65%.

TRIG invests in assets which offer attractive long-term cash flows, elements of which are linked to inflation. The aim of the company is to provide long-term, stable dividends for shareholders, with any surplus cash flows after debt amortisation being re-invested to help maintain the capital value of the investment portfolio. The current portfolio, when fully built out in 2020, will be represented by 71 projects, with net capacity of 1.5GW. This is equivalent to 1 million UK homes or 1% of the total electricity generated in the UK.

Wind is currently the largest component of the portfolio (86% by value). However in the company’s recent announcement the managers state that to further diversify the portfolio they are considering investing in unsubsidised solar plants in Iberia, taking advantage of steeply declining capital costs and high solar resource. Solar provides a natural complement to wind technologies, given its peak electricity generation is during the summer months, while for wind peak generation occurs in the winter.

The push to invest overseas has gathered pace over the last couple of years, and during the 2018 calendar year 77% of new investments by value were made outside the UK. For the six months to end-June 2019, the company has invested in five projects, all of which are overseas (in Sweden, France and Germany). In total, 45% of the portfolio is currently invested outside the UK, up from 28% at the end of 2018.

TRIG has a progressive dividend policy. The company’s dividend has increased each year since launch, at an average compound annual rate of 1.8% pa. Every year the board sets a dividend target for the following year, payable in four equal instalments. The current dividend target is 6.64p per share, equivalent to a yield of 5.1% at the current price and representing an increase of 2.2% from 2018.

The company has delivered strong and consistent returns since inception. Over the past five years, it has outperformed the FTSE All Share index on a NAV total return basis, but with lower volatility. Since its initial public offering (IPO) in 2013 the company has delivered total shareholder returns of 10.4% per annum (to 30 June 2019).

TRIG currently has long-term gearing of approximately 36% of portfolio enterprise value, all of which is all held at the project level. This is at the low end of the peer group. The longer-term debt is amortised over the life of each asset’s specific subsidy regime, which de-risks these assets over time (unsubsidised assets are not geared).

The company continues to enjoy robust demand for its shares. Currently the share price premium over NAV is around 14%, a slight premium to the sector average premium of 12.7% (Source: Numis).

Find out how TRIG sources diverse renewables opportunities
William Heathcoat Amory

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

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Fund History: The Renewables Infrastructure Group

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