TRIG - Renewables Infrastructure Group

TRIG continues to diversify its portfolio, and has reaffirmed its 2020 dividend target...

Add to watchlist Request a meeting Download View key data

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by TRIG - 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.

TRIG - Renewables Infrastructure Group

TRIG’s key differentiator to peers is its broad spread of asset geographies and technologies. As such, it might be considered a one-stop shop for the burgeoning renewable energy sector.

As we discuss in the Portfolio section, TRIG has continued to invest overseas in building its portfolio. During 2019, 92% of new investments were in Sweden, France and Germany. This means that between 31/12/2018 and 31/03/2020, UK assets fell from 72% to 55%.

COVID-19 has had a limited effect on the operations and build-out of the portfolio. However, the company recently announced that its independent power price forecasters have reduced their assumptions on (mainly short-term) electricity prices; which, as we note in the Performance section, is likely to reduce the 30 June 2020 NAV by 5p (all things being equal).

In terms of the dividend, it is worth noting that 74% of TRIG’s revenues through to 31 December 2024 (and in excess of 80% over the next two years) are fixed. Therefore, notwithstanding the lower power prices expected for 2020, TRIG’s projected dividend cash cover remains positive. Electricity generation in the quarter to 31 March 2020 was 22% above budget. In April, the board reaffirmed its dividend guidance of 6.76p for the year ending 31 December 2020.

At the current premium of 13% to the 31 March 2020 adjusted NAV, the shares trade at a slight discount to the sector’s weighted average premium. When markets were experiencing significant volatility, the shares traded on a material discount to NAV for several days. In hindsight this was an opportunity that passed too quickly, and the shares have bounced back to a premium again.

Kepler View

One of the reasons that we think TRIG’s shares consistently trade at such a premium is the company’s clear appeal for ESG investors. TRIG offers ‘pure’ exposure to one of the most pressing needs of the global economy – to significantly reduce our carbon intensity.

At the same time, TRIG has provided strong returns to investors since its IPO in 2013, with NAV returns of 8.4% per annum up to 31/12/2019. The relatively smooth pattern with which TRIG has delivered these returns is a function of both the asset class itself, and the investment strategy employed by the managers.

Most recently, COVID-19 has clearly presented challenges for everyone, but TRIG’s management team have ensured the portfolio has “enjoyed good availability” and maintained operational capacity within 1% of the availability budget for March.

As the company grows, the managers have proved adept in balancing risks with achieving their target returns; but, perhaps more importantly, without significantly changing the portfolio’s overall sensitivities to the main risk factors.

The company’s strategy to invest more overseas will clearly increase its diversification – certainly for investors who also hold any of the other London-listed renewable energy funds, which tend to have a more local focus.

Yielding 5.5% at the current price, TRIG offers a highly attractive level of income, especially when the equity income picture elsewhere looks relatively cloudy.

bull bear
High yield of 5.5% with potential for NAV preservation from reinvestment of surplus cash High premium to NAV in absolute terms
Pure exposure to diversified assets, technologies and subsidy regimes which are uncorrelated to equity markets and score well regarding ESG Dividend cover not as high as funds which are not amortising (paying down) debt
Debt being repaid within the subsidy period (amortising) Valuations based on long-term assumptions which may prove optimistic over time
William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

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.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.



Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase. We do not share your personal information and your answers are not linked to your identity for marketing purposes.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.