VH Global Energy Infrastructure (ENRG)

VH Global Sustainable Energy Opportunities (GSEO) is a global renewable energy infrastructure trust specialising in assets relating to the global energy transition, with the current portfolio focussed on the US, UK, Australia and Brazil. GSEO’s target return of over 10% is higher than average for a renewable infrastructure trust and reflects that it may take on projects at the construction phase as well as operational assets with scope for active management.

As well as geographical diversification, the portfolio is also diversified compared to peers in terms of the technologies and stages of energy transition, such as fuel storage, flexible generation or co-located solar and battery storage assets, and with a bias to assets where there is a construction or expansion angle, or a financial or operational optimisation opportunity. The current portfolio is concentrated, with the largest three assets valued being 50% of NAV. Over time this concentration should reduce as other assets in the portfolio go through further construction and expansion, with resulting increases in value.

The trust is managed by Victory Hill’s co-chief investment officers Richard Lum and Eduardo Monteiro. They lead a team of eight experienced investment professionals, with the single focus of managing GSEO.

GSEO yields 7.6%, and has a progressive dividend policy, supported by the fact that 90% of cashflows have some form of inflation link. The dividend is fully covered, and GSEO has very little gearing, c. 2%, and this is all secured against GSEO's largest asset, meaning that the dividend does not rely on gearing, nor do higher interest rates present a challenge to the cover.

GSEO trades at a c. 35% discount, wider than the peer group average of c. 23%, and the board has instigated an active share buyback programme, which we chart in the Discount section, which will enhance both the NAV and earnings, and potentially alleviate the discount.