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Fund Profile

TRIG - Renewables Infrastructure Group 10 December 2020

Disclaimer

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.

Overview
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Overview

Like an ocean liner, The Renewables Infrastructure Group (TRIG) has sailed through 2020’s turbulence, maintaining its trajectory of providing steady returns to shareholders. The aim of the investment company is to provide a long-term, stable and sustainable dividend for shareholders, with any surplus cash flows after debt amortisation being reinvested to help maintain the capital value of the investment portfolio.

TRIG differentiates itself from the rest of the sector by being a one-stop shop investing across a range of technologies (wind, solar and battery storage so far), and with a remit to invest across the UK and Europe. As we discuss in the Portfolio section, TRIG has continued to invest overseas in building its portfolio, and overseas assets (i.e. those not based on the UK mainland) now represent 42% of the portfolio. Offshore wind has grown as a proportion of the total value of the portfolio from 8.5% to 29% (as at 31/10/2020), with further assets in the pipeline. TRIG’s growing scale enables larger-sized assets, of which offshore wind farms are typical examples.

The investment company has achieved a progressive dividend every year since being listed in 2013, which we illustrate in the Dividend section. Despite the unique challenges of 2020, and potential unknowns as we head toward Brexit, the board has announced that it hopes to be able to set a dividend target next year (for 2021) to at least maintain the 2020 level.

In terms of total returns, TRIG has delivered total NAV returns of 8% per annum. This means it has significantly outperformed the FTSE All-Share Index on both a price and NAV total return basis since launch, but with lower volatility.

Analyst's View

The strong position of TRIG relative to traditional sources of equity income has become more apparent this year. Oil and banks’ ability to pay dividends this year has been sharply reduced, which has thrown an ever more positive light on income sources such as TRIG.

These income attractions, but also TRIG’s strong ESG credentials (see ESG), are the reason why in our view the company has continued to trade at a meaningful premium to NAV. Currently at 13.2%, this is lower than the 16% average for 2020. At the same time, the risks of investing at chunky premiums are illustrated by the experience of TRIG and its peers in March 2020.

Since its IPO in 2013, TRIG has been on a growth trajectory, and now has a portfolio worth £2bn. Shareholders have benefitted, both through issuance of equity at a premium – which is marginally incremental to NAV – but also because growth reduces costs per share. For the six months to 30 June 2020 the OCF was 0.96%, compared to 0.98% for the same period in 2019. With further growth we would expect this to continue to reduce.

In the first six months of 2020, the dividend was 1.2x covered by cash generation. It is worth noting that this metric is after the cost of amortising the project finance debt (see Gearing section), without which the dividend would have been covered 2.2x. Notwithstanding power prices being lower than expected, the board projects positive dividend cash cover for 2020. Yielding 5.2% at the current price, TRIG therefore offers an attractive income, especially when the equity income picture elsewhere looks relatively cloudy.

bull bear
High yield of 5.2% 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 on ESG matters
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
Continue to Portfolio
2024 Kepler Alternative Income Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for alternative income... Find out more

Fund History

17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
19 Dec 2023 Fund Analysis
TRIG’s shares have dramatically derated over 18 months, yet prospective returns appear more attractive, not less…
29 Nov 2023 We need to talk about discounts
Viewing investment trust discounts as a problem ignores the crucial role they play in keeping the sector on an even keel...
09 Aug 2023 Should I stay, or should I go?
Re-appraising the invitation to the bond party…
19 Jul 2023 Fund Analysis
TRIG’s long-term inflation-linkage seems underappreciated by a market fixated on the short term…
13 Apr 2023 Fund Analysis
TRIG’s consistent and inflation-linked returns are underpinned by a high-quality portfolio…
22 Mar 2023 Good vibrations
We identify some sectors with structural discounts we think could close over time…
09 Feb 2023 Here comes the sun
Our analysis suggests renewable energy should be at the core of a well balanced portfolio...
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
20 Dec 2022 Fund Analysis
TRIG’s attractions remain undiminished, yet trade on a discount of 4.5%…
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
26 Oct 2022 Fund Analysis
We look at TRIG’s key sensitivities to macro factors…
21 Sep 2022 Jolly green giant
There could be a solution to economic troubles on the horizon, and one where the UK is a world leader...
10 Mar 2022 Fund Analysis
TRIG’s managers continue to diversify the portfolio…
09 Mar 2022 Private markets: A closer look at infrastructure and renewables
We examine the £27bn listed Infrastructure and Renewable Energy Infrastructure sectors…
24 Nov 2021 Holding back the tears
While the final text of COP26 fell short of what many had hoped for, the writing is on the wall for fossil fuels and, from an investment perspective, the age of sustainability has only just begun…
14 Jul 2021 Fund Analysis
TRIG is putting ESG considerations at the centre of everything it does…
10 Jun 2021 Green is good!
2021 will see billions dedicated to sustainable initiatives, which brings with it a host of possible investment opportunities...
12 May 2021 Riders on the storm
We look at the yields in the alternatives space and how they have been affected by the pandemic…
24 Feb 2021 Dire Straits or Money for Nothing?
As discounts reach historically narrow levels across the board – our analysts debate whether a premium is a price worth paying…
17 Feb 2021 Jungle Fever
Soaring interest in ESG has exciting implications, but risks pushing some stocks to distinctly unsustainable valuations...
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
10 Dec 2020 Fund Analysis
TRIG’s diversified income and strong ESG credentials justify its premium rating…
15 Oct 2020 Nice guys finish first
ESG has moved from hippy pipe-dream to corporate mainstream, but what is it really and where do we see opportunities?
09 Sep 2020 Time to switch horses?
We look at what returns are likely from equity markets in the coming decade and identify which alternatives could offer similar or greater returns for lower levels of risk…
09 Jul 2020 The next big thing: two mega-trends that everyone should own
Tech seems to beat every other sector hands down – in both up and down markets – but nothing lasts forever. Where else should investors be looking for secular growth themes?
01 Jul 2020 Fund Analysis
TRIG continues to diversify its portfolio, and has reaffirmed its 2020 dividend target...
09 Oct 2019 Bond proxy?
As a replacement or complement for longer duration bonds, listed alternative income funds look an interesting, well… alternative..
09 Oct 2019 Fund Analysis
Seeks to provide investors with long-term, stable dividends from an increasingly diversified portfolio of renewable energy assets…
22 Mar 2019 Fund Analysis
Seeks to provide investors with long-term, stable dividends whilst preserving the capital value of its investment portfolio...
06 Mar 2019 Stairway to heaven
Our research shows that reinvesting the income generated by alternative assets could add a significant boost to long-term portfolio performance…
15 Aug 2018 The income edge
Last year saw investment trusts soar in popularity among both retail investors and wealth managers. We examine why this has happened, as well as the structural advantages of investment trusts for income-hungry investors...
19 Jul 2018 Fund Analysis
The Renewables Infrastructure Group (TRIG) seeks to provide investors with long-term, stable dividends whilst preserving the capital value of its investment portfolio...
19 Jul 2018 A new dawn
As the sun sets on fossil fuels, we examine the opportunities for investors in the burgeoning listed renewable infrastructure sector...
View all

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