REG - Renew Infra Grp Ld - Announcement of Final Results <Origin Href="QuoteRef">TRIG.L</Origin> - Part 4
23/02/2016 07:24
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controls and their effectiveness and the creation of a risk control matrix.
Given the limited number of expected disposals from the portfolio and the similar risk profile of the investments within
the portfolio (i.e. they are all renewable energy infrastructure projects in the UK or Northern Europe with broadly similar
contractual structures), the type and nature of the risks in the Group are not expected to change materially from period to
period.
The following table summarises some important areas considered on a regular basis in the risk assessment process by risk
category as set out in the Alternative Investment Fund Management Directive:-
Category Key Elements
Operational Health and safety, risk of regulatory changes or breaches, fraud and management override, valuation error, political/regulatory changes, conflicts of interest, key man and service provider failure, breach of company policies or contractual covenants, energy yield, technology risk, project-level availability, project insurance, grid curtailment and outage, sub-contractor failure, tax
Liquidity Fund-level portfolio liquidity, fund-raising, project-level liquidity and gearing
Counterparty Contractual concentration
Credit Risk of counterparty failure
Market Power price, macro-economic (currency, interest rates, inflation), share price, competition
Tax Withdrawal of tax relief on interest deductions and other tax risks
Counterparty Exposures
Given the importance of state subsidies for investment in renewables, TRIG has exposure to the creditworthiness of and
policy commitments by national governments and is reliant on the consistency of government policy, for example
"grandfathering" within the UK whereby renewables generators continue to receive the same level of subsidy, set upon
commissioning, for the duration of the incentive. In addition, each project company enters into a commercial power purchase
agreement ("PPA") with a utility or energy trading company to enable them to sell the electricity generated and to receive
the feed-in tariff or Renewables Obligation Certificate ("ROC") subsidy payments. The project companies have entered into
PPAs with a range of providers. Each project company enters into a contract for the maintenance of the plant. In the case
of wind, this is usually with the turbine manufacturer. For both wind and solar sectors, projects may also benefit from
equipment provider warranties.
No supplier or off-taker is currently involved in more than 50% of the projects by value or number (with the exception of
RES, TRIG's Operations Manager, which has project asset management and/or maintenance roles in relation to a number of the
projects in addition to the portfolio-level services it provides to TRIG). Further acquisitions are likely to provide
further diversity of counterparty exposures.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with
applicable law and regulations. The Companies (Guernsey) Law, 2008, requires the Directors to prepare financial statements
for each financial period. Under that law they have elected to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the EU and Article 4 of the IAS Regulation and applicable
law.
Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view
of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these
financial statements, International Accounting Standard 1 requires that directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the entity's financial position
and financial performance; and
· make an assessment of the company's ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to
ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report and Corporate
Governance Statement. The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company's website.Legislation in Guernsey and the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' responsibility statement
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the Company;
· the Chairman's Statement and Report of the Directors include a fair review of the development and performance of the
business and the position of the Company and Group taken as a whole together with a description of the principal risks and
uncertainties that it faces; and
· the annual report and financial statements when taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's performance, business model and strategy.
Disclosure of information to the Auditors
The Directors who held office at the date of approval of this Directors' report confirm that, so far as they are each
aware, there is no relevant audit information of which the Company's auditors are unaware and that each Director has taken
all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit
information and to establish that the Company's auditors are aware of that information.
Auditors
Deloitte LLP have expressed their willingness to continue in office as auditors and a resolution proposing their
re-appointment will be submitted at the Annual General Meeting.
On behalf of the Board of Directors of The Renewables Infrastructure Group Limited
22 February 2016
Registered Office:
1 Le Truchot, St Peter Port, Guernsey, Channel Islands GY1 1WD
Financial Statements
Income statement
For the year ended 31 December 2015
Year ended Year ended
31 December 2015 31 December 2014
Note £'000's £'000's
Total operating income 6 15,917 23,121
Fund expenses 7 (964) (832)
Operating profit for the year 14,953 22,289
Finance and other income 8 2,061 1,008
Profit before tax 17,014 23,297
Income tax credit/(expense) 9 - -
Profit for the period 10 17,014 23,297
Attributable to:
Equity holders of the parent 17,014 23,297
17,014 23,297
Earnings per share (pence) 10 3.0 6.2
All results are derived from continuing operations.
There is no other comprehensive income or expense apart from those disclosed above and consequently a statement of
comprehensive income has
not been prepared.
Balance sheetAs at 31 December 2015 As at As at
31 December 2015 31 December 2014
Note £'000's £'000's
Non-current assets
Investments at fair value through profit or loss 13 711,604 412,449
Total non-current assets 711,604 412,449
Current assets
Other receivables 14 736 1,300
Cash and cash equivalents 15 14,873 12,425
Total current assets 15,609 13,725
Total assets 727,213 426,174
Current liabilities
Other payables 16 (621) (493)
Total current liabilities (621) (493)
Total liabilities (621) (493)
Net assets 12 726,592 425,681
Equity
Share premium 17 728,227 411,768
Other reserves 17 706 428
Retained reserves 17 (2,341) 13,485
Total equity attributable to owners of the parent 12 726,592 425,681
Net assets per Ordinary Share (pence) 12 99.0 102.4
The accompanying Notes are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 22 February 2016, and signed
on its behalf by:
Director:
Director:
Statement of changes in shareholders' equity
For the year ended 31 December 2015
Share premium Other reserves Retained reserves Total equity
£'000's £'000's £'000's £'000's
Shareholders' equity at beginning of period 411,768 428 13,485 425,681
Profit for the year - - 17,014 17,014
Dividends paid - - (28,337) (28,337)
Scrip shares issued in lieu of dividend 4,503 - (4,503) -
Ordinary Shares issued 315,673 - - 315,673
Costs of Ordinary Shares issued (4,626) - - (4,626)
Ordinary Shares issued in period in lieu of Management Fees, earned in H2 20141 428 (428) - -
Ordinary Shares issued in period in lieu of Management Fees, earned in H1 20152 481 - - 481
Ordinary Shares to be issued in lieu of Management Fees, earned in H2 20153 - 706 - 706
Shareholders' equity at end of period 728,227 706 (2,341) 726,592
For the year ended 31 December 2014
Share premium Other reserves Retained reserves Total equity
£'000's £'000's £'000's £'000's
Shareholders' equity at beginning of period 304,324 233 10,307 314,864
Profit for the year - - 23,297 23,297
Dividends paid - - (15,820) (15,820)
Scrip shares issued in lieu of dividend 4,299 - (4,299) -
Ordinary Shares issued 104,730 - - 104,730
Costs of Ordinary Shares issued (2,135) - - (2,135)
Ordinary Shares issued in period in lieu of Management Fees, earned in 20134 233 (233) - -
Ordinary Shares issued in period in lieu of Management Fees, earned in H1 20145 317 - - 317
Ordinary Shares to be issued in lieu of Management Fees, earned in H2 20141 - 428 - 428
Shareholders' equity at end of period 411,768 428 13,485 425,681
In line with the Investment Management Agreement and the Operations Management Agreement, 20 per cent. of the management
fees are to be settled in Ordinary Shares.
1. The £428,054 transfer between reserves represents the 431,070 shares that relate to management fees earned in the six
months to 31 December 2014 and were recognised in other
reserves at 31 December 2014, and were issued to the Managers during the year, with the balance being transferred to share
premium reserves, on 31 March 2015.
2. The £480,556 addition to the share premium reserve represents the 483,455 shares that relate to management fees earned
in the six months to 30 June 2015 and were issued to the
Managers on 30 September 2015.
3. As at 31 December 2015, 736,190 shares equating to £705,933, based on a Net Asset Value ex dividend of 95.89 pence per
share (the Net Asset Value at 31 December 2015 of 99.0 pence
per share less the interim dividend of 3.11 pence per share) were due but had not been issued. The Company intends to issue
these shares to the Managers around 31 March 2016.
4. The £232,997 transfer between reserves represents the 235,351 shares that relate to management fees earned in the five
months to 31 December 2013 and were recognised in other
reserves at 31 December 2013, and were issued to the Managers during the year, with the balance being transferred to share
premium reserves, on 3 March 2014.
5. The £316,971 addition to the share premium reserve represents the 319,206 shares that relate to management fees earned
in the six months to 30 June 2014 and were issued to the
Managers on 30 September 2014.
Cash flow statementFor the year ended 31 December 2015 Year ended Year ended
31 December 2015 31 December 2014
Note £'000's £'000's
Cash flows from operating activities
Profit before tax 10 17,014 23,297
Adjustments for:
Loss/(gain) on investments 6, 13 12,120 (4,004)
Investment income 6, 13 (28,037) (19,117)
Movement in other reserves relating to Manager shares 278 195
Accrued share issue costs 275 (337)
Exchange gains on FX hedges 3,176 153
Finance and other income 8 (2,061) (1,008)
Operating cash flow before changes in working capital 2,765 (821)
Changes in working capital:
(Increase) in receivables (280) (226)
(Decrease)/increase in payables (214) 262
Cash flow from operations 2,271 (785)
Interest received from investments 13 24,037 25,574
Interest income 73 25
Net cash from operating activities 26,381 24,814
Cash flows from investing activities
Purchases of investments 13 (307,275) (102,949)
Net cash used in investing activities (307,275) (102,949)
Cash flows from financing activities
Proceeds from issue of share capital during period 316,582 105,280
Costs in relation to issue of shares (4,903) (1,798)
Dividends paid to shareholders 11 (28,337) (15,820)
Net cash from financing activities 283,342 87,662
Net (decrease)/increase in cash and cash equivalents 2,448 9,527
Cash and cash equivalents at beginning of period 15 12,425 2,898
Exchange gains on cash - -
Cash and cash equivalents at end of period 15 14,873 12,425
The accompanying Notes are an integral part of these financial statements.
Notes to the financial statements
For the year ended 31 December 2015
1. General information
The Renewables Infrastructure Group Limited ("TRIG" or the "Company") is a closed ended investment company incorporated in
Guernsey under Section 20 of the Companies (Guernsey) Law, 2008. The shares are publically traded on the London Stock
Exchange under a premium listing. Through its single, direct subsidiary, The Renewables Infrastructure Group (UK) Limited
("TRIG UK"), TRIG invests in operational renewable energy generation projects, predominantly in onshore wind and solar PV
segments, across the UK and Northern Europe. The Company, TRIG UK and its portfolio of investments are known as the
"Group".
These financial statements are for the year ended 31 December 2015 and comprise only the results of the Company as all of
its subsidiaries are measured at fair value following the amendment of IFRS 10 as explained below in Note 2 (a).
2. Key accounting policies
(a) Basis of preparation
The financial statements were approved and authorised for issue by the Board of Directors on 22 February 2016.
The financial statements, which give a true and fair view, have been prepared in compliance with the Companies (Guernsey)
Law, 2008 and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union
("EU") using the historical cost basis, except that the financial instruments classified at fair value through profit or
loss are stated at their fair values and that the Company has applied the second amendment to IFRS 10, see below, that has
not yet been adopted by the EU. All accounting policies have been applied consistently in these financial statements.
The financial statements are presented in sterling, which is the Company's functional currency. Foreign operations are
included in accordance with the policies set out in this note.
As first adopted in the annual financial statements of the Company for the year ended 31 December 2014, IFRS 10 states that
investment entities should measure all of their subsidiaries that are themselves investment entities at fair value
following the issuance of 'Investment entities: Applying the Consolidation Exception - Amendments to IFRS 10, IFRS 12 and
IAS 28'. Being an investment entity, TRIG UK is measured at fair value as opposed to being consolidated on a line-by-line
basis, meaning its cash, debt and working capital balances are included in the fair value of investments rather than the
Group's current assets.
The preparation of financial statements in conformity with IFRS as adopted by the EU requires the Directors to make
judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and
liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods. Note 3 shows critical accounting
judgements, estimates and assumptions.
(b) Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and
position are set out in the Strategic Report and also commented on in the Viability Statement contained in the Directors'
Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in
the Financial Results. In addition, Notes 1 to 4 of the financial statements include the Group's objectives, policies and
processes for managing its capital; its financial risk management objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk and liquidity risk.
The Group has a range of long-term contracts with various major UK and European utilities and well-established suppliers
across a range of infrastructure projects. In addition, the Company maintains a prudent level of leverage, limited to 30%
of portfolio value, and the Group's project-level financing, limited to 50% of Gross Portfolio Value, is non-recourse to
the Company. As a consequence, the Directors believe that the Group is well placed to manage its business risks
successfully.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. Thus they adopt the going concern basis of accounting in preparing the annual financial
statements.
New standards early adopted for the current period
The Group has early adopted the following standards:
· Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities
· Amendments to IAS 32 Offsetting financial assets and financial liabilities
Standards not yet applied
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by
the EU):
· IFRS 9 Financial Instruments
· IFRS 15 Revenue from Contracts with Customers
· IAS 27 (amendments) Equity Method in Separate Financial Statements
· IFRS 11 (amendments) Accounting for Acquisitions of Interests in Joint Operations
· Annual Improvements to IFRSs: 2012-2014 Cycle - Amendments to: IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits and IAS 34 Interim Financial
Reporting
The Directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact
on the financial statements of the Company in future periods, except IFRS 9 will impact both the measurement and
disclosures of financial instruments.
(c) Basis of consolidation
The Company has adopted IFRS 10 'Consolidated Financial Statements', which supersedes IAS 27 'Consolidated and Separate
Financial Statements", and as an investment entity is required to measure all of its subsidiaries at fair value. The
financial statements therefore comprise the results of the Company only. Subsidiaries are those entities controlled by the
Company. The Company has control of an investee, when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee as defined in
IFRS 10 'Consolidated Financial Statements'.
The Directors believe it is appropriate and relevant to the investor to account for the investment portfolio at fair value,
where consolidating it would not be.
The Company's sole, direct subsidiary, TRIG UK, carries out investment activities and incurs overheads and borrowings on
behalf of the Group. The Directors therefore provide an alternative presentation of the Company's results in the Strategic
Report prepared under the "Expanded basis", which includes the consolidation of TRIG UK.
An entity shall consider all facts and circumstances when assessing whether it is an investment entity, including its
purpose and design. Under the definition of an investment entity, as set out in paragraph 27 in the standard, the entity
must satisfy all three of the following tests:
I. Obtains funds from one or more investors for the purpose of providing those investors with investment management
services; and
II. Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation,
investment income, or both (including having an exit strategy for investments); and
III. Measure and evaluate the performance of substantially all of its investments on a fair value basis.
The three essential criteria met by the Company are:
I. Typically, an investment entity would have several investors who pool their funds to gain access to investment
management services and investment opportunities that they might not have had access to individually. Investing in
renewable energy infrastructure, as per the Company's investment policy, would be considered an investment that is not
generally available to individual investors due the high capital costs, large barriers to entry and other regulatory
issues. The Company, being listed on the London Stock Exchange main market, obtains funds from a diverse group of external
shareholders.
II. The Company invests funds solely for returns from capital appreciation and investment income.
III. The Company elects to measure and evaluate the performance of all of its subsidiaries on a fair value basis because
using fair value results in more relevant information than, for example, consolidating its subsidiaries or using the equity
method for its interests in associates or joint ventures. This is supported by investor presentations, information
contained in the initial offer prospectus and the Company fact sheet. Investor focus is on the fair value of the portfolio
and investors will continue to challenge and assess discount rates applied to the underlying investment cash flows
vis-à-vis revenue and expenses of the project entities. In addition, the Company reports fair value information internally
to the entity's key management personnel (as defined in IAS 24), who use fair value as the primary measurement attribute to
evaluate the performance of substantially all of its investments and to make investment decisions.
The Directors are of the opinion that the Company has all the typical characteristics of an investment entity and meets the
definition in the standard.
(d) Financial instruments
Financial assets and liabilities are recognised on the balance sheet when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the
instrument expire or the asset is transferred and the transfer qualifies for derecognition in accordance with IAS 39
'Financial instruments: Recognition and measurement'.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash
and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value including directly attributable transaction
costs. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.
Investments in equity and debt securities
Investments in the equity and loanstock of entities engaged in renewable energy activities are designated at fair value
through profit or loss.
The Group manages these investments and makes purchase and sale decisions based on their fair value.
The initial difference between the transaction price and the fair value, derived from using the discounted cash flows
methodology at the date of acquisition, is recognised only when observable market data indicates there is a change in a
factor that market participants would consider in setting the price of that investment. After initial recognition,
investments at fair value through profit or loss are measured at fair value with changes recognised in the income
statement.
The Directors consider the equity and loanstock to share the same investment characteristics and risks and they are
therefore treated as a single unit of account for valuation purposes and a single class for disclosure purposes.
(e) Impairment
Financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each
balance sheet date. A financial asset is considered to be impaired if objective evidence indicates that one or more events
have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial
asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the
estimated future cash flows discounted at the original effective interest rate. Significant financial assets are tested for
impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar
credit risk characteristics. All impairment losses are recognised in the income statement. An impairment loss is reversed
if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial
assets measured at amortised cost the reversal is recognised in the income statement.
(f) Share capital and share premium
Ordinary Shares are classified as equity. Costs directly attributable to the issue of new shares or associated with the
establishment of the Company that would otherwise have been avoided are written-off against the value of the ordinary share
premium.
(g) Cash and cash equivalents
Cash and cash equivalents comprises cash balances, deposits held on call with banks and other short-term, highly liquid
investments with original maturities of three months or less. Bank overdrafts that are repayable on demand are included as
a component of cash and cash equivalents for the purpose of the cash flow statement.
(h) Investment income
Income from investments relates solely to returns from the Company's single, direct subsidiary, TRIG UK. This is recognised
when the right to receive interest income is determined on an accruals basis and dividends when these are received.
(i) Income tax
Under the current system of taxation in Guernsey, the Company is exempt from paying taxes on income, profits or capital
gains.
(j) Foreign exchange gains and losses
Transactions entered into by the Company in a currency other than its functional currency are recorded at the rates ruling
when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the
balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are
recognised immediately in the income statement.
(k) Segmental reporting
The Chief Operating Decision Maker (the "CODM") is of the opinion that the Group is engaged in a single segment of
business, being investment in renewable infrastructure to generate investment returns while preserving capital. The
financial information used by the CODM to allocate resources and manage the Group presents the business as a single segment
comprising a homogeneous portfolio.
(l) Fund expenses
All expenses are accounted for on an accruals basis. The Company's investment management and administration fees (refer to
Note 7), finance costs and all other expenses are charged through the income statement.
(m) Acquisition costs
In line with IFRS 3 (Revised), acquisition costs are expensed to the income statement as incurred.
(n) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends, this is when they are paid.
For scrip dividends, where the Company issues shares with an equal value to the cash dividend amount as an alternative to
the cash dividend, a credit to equity is recognised when the shares are issued.
(o) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987 the Company is a Registered Closed-Ended
Investment Scheme. As an authorised scheme, the Company is subject to certain on-going obligations to the Guernsey
Financial Services Commission.
(p) Share-based payments
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the
goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at
the fair value of the equity instruments granted, measured at that date the entity obtains the goods or the counterparty
renders the service.
3. Critical accounting judgements, estimates and assumptions
The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and
assumptions in certain circumstances that affect reported amounts. The judgements, estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial period are outlined below.
Investments at fair value through profit or loss
IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The Board base the fair value of the investments on
information received from the Investment Manager. Fair value is calculated on a discounted cash flow basis.
Fair values for those investments for which a market quote is not available are determined using the income approach, which
discounts the expected cash flows at the appropriate rate. In determining the discount rate, regard is had to relevant
long-term government bond yields, specific risks associated with the technology (on-shore wind and solar) and geographic
location of the underlying investment, and the evidence of recent transactions. The investments at fair value through
profit or loss, whose fair values include the use of level 3 inputs, are valued by discounting future cash flows from
investments in both equity (dividends and equity redemptions) and subordinated loans (interest and repayments) to the Group
at an appropriate discount rate.
The weighted average discount rate applied in the December 2015 valuation was 9.0% (2014: 9.0%). The discount rate is
considered one of the most significant unobservable inputs through which an increase or decrease would have a material
impact on the fair value of the investments at fair value through profit or loss.
The other material impacts on the measurement of fair value are the forward looking power price curve and energy yields
which are further discussed in Note 4 under sensitivities.
By virtue of the Company's status as an investment fund, and in conjunction with IFRS 10 and specifically the Amendments to
IFRS 10 for investment entities, investments are designated upon initial recognition to be accounted for at fair value
through profit or loss.
The Directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised
cost in the financial statement are approximately equal to their fair values.
4. Financial instruments
Financial risk management
The objective of the Group's financial risk management is to manage and control the risk exposures of its investment
portfolio. The Board of Directors has overall responsibility for overseeing the management of financial risks, however the
review and management of financial risks are delegated to the Investment Manager, which has documented procedures designed
to identify, monitor and manage the financial risks to which the Group is exposed. Note 4 presents information about the
Group's exposure to financial risks, its objectives, policies and processes for managing risk and the Group's management of
its financial resources.
Through its single, direct subsidiary, TRIG UK, the Company invests in a portfolio of investments predominantly in the
subordinated loanstock and ordinary equity of project finance companies. These companies are structured at the outset to
minimise financial risks where possible, and the Investment Manager primarily focuses their risk management on the direct
financial risks of acquiring and holding the portfolio but continues to monitor the indirect financial risks of the
underlying projects through representation, where appropriate, on the Boards of the project companies, and the receipt of
regular financial and operational performance reports.
Interest rate risk
The Group invests in subordinated loanstock of project companies, usually with fixed interest rate coupons. The portfolio's
cash flows are continually monitored and reforecast, both over the near future and the long-term, to analyse the cash flow
returns from investments. The Group may use borrowings to finance the acquisition of investments and the forecasts are used
to monitor the impact of changes in borrowing rates against cash flow returns from investments as increases in borrowing
rates will reduce net interest margins.
The Group's policy is to ensure that interest rates are sufficiently hedged to protect the Group's net interest margins
from significant fluctuations when entering into material medium/long-term borrowings. This includes engaging in interest
rate swaps or other interest rate derivative contracts.
The Company has an indirect exposure to changes in interest rates through its investment in project companies, which are
financed by senior debt. Senior debt financing of project companies is generally either through floating rate debt, fixed
rate bonds or index linked bonds. Where senior debt is floating rate, the projects typically have similar length hedging
arrangements in place, which are monitored by the project companies' managers, finance parties and boards of directors.
Inflation risk
The Group's project companies are generally structured so that contractual income and costs are either wholly or partially
linked to specific inflation, where possible, to minimise the risks of mismatch between income and costs due to movements
in inflation indexes. The Group's overall cash flows vary with inflation, although they are not directly correlated as not
all flows are indexed. The effects of these inflation changes do not always immediately flow through to the Group's cash
flows, particularly where a project's loanstock debt carries a fixed coupon and the inflation changes flow through by way
of changes to dividends in future periods. The sensitivity of the portfolio valuation is shown further on in Note 4.
Market risk
Returns from the Group's investments are affected by the price at which the investments are acquired. The value of these
investments will be a function of the discounted value of their expected future cash flows, and as such will vary with,
inter alia, movements in interest rates, market prices and the competition for such assets.
Currency risk
The projects, in which the Group invests, all conduct their business and pay interest, dividends and principal in sterling,
with the exception of the euro-denominated investments which at 31 December 2015 comprised 8% (2014: 13%) of the portfolio
by value. The sensitivity of the portfolio valuation is shown in Note 4.
The Group monitors its foreign exchange exposures using its near-term and long-term cash flow forecasts. Its policy is to
use foreign exchange hedging to provide protection to the level of sterling distributions that the Company aims to pay over
the medium-term, where considered appropriate. This may involve the use of forward exchange.
Credit risk
Credit risk is the risk that a counterparty of the Group will be unable or unwilling to meet a commitment that it has
entered into with the Group.
The credit standing of subcontractors is reviewed, and the risk of default estimated for each significant counterparty
position. Monitoring is on-going, and period end positions are reported to the Board on a quarterly basis. The Group's
largest credit risk exposure to a project at 31 December 2015 was to the Crystal Ring II project, representing 12.4% (2014:
Hill of Towie project, representing 9.5%) of the portfolio by value, and the largest subcontractor counterparty risk
exposure was to Siemens who provided turbine maintenance services in respect of 48.7% of the portfolio by value. At 31
December 2014, the largest subcontractor counterparty risk exposure was to Vestas who provided turbine maintenance services
in respect of 32.4% of the portfolio by value.
The Group's investments enter into Power Price Agreements ("PPA") contracts with a range of providers through which
electricity is sold. The largest PPA provider to the portfolio at 31 December 2015 was EDF who provided PPAs to projects in
respect of 19.0% of the portfolio by value. At 31 December 2014, the largest PPA provider was Scottish Power who provided
PPAs to projects in respect of 27.4% of the portfolio by value.
At 31 December 2015, there were no loans and other receivables considered impaired for the Group.
The Group's maximum exposure to credit risk over financial assets is the carrying value of those assets in the balance
sheet. The Group does not hold any collateral as security.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible, that it will have sufficient financial resources and
liquidity to meets its liabilities when due. The Group ensures it maintains adequate reserves, banking facilities and
reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities. The Group's investments are predominantly funded by share capital and medium-term debt
funding.
The Group's investments are generally in private companies, in which there is no listed market and therefore such
investment would take time to realise, and there is no assurance that the valuations placed on the investments would be
achieved from any such sale process.
The Group's investments have borrowings which rank senior and have priority over the Group's own investments into the
companies. This senior debt is structured such that, under normal operating conditions, it will be repaid within the
expected life of the projects. Debt raised by the investment companies from third parties is without recourse to the
Group.
At 31 December 2015, the Company itself did not have any outstanding debt. The Group's revolving acquisition facility,
which was undrawn at 31 December 2015, is held at TRIG UK, the Company's single, direct subsidiary, and is guaranteed by
the Company. The facility is in place until February 2017.
Capital management
TRIG UK, the Company's single, direct subsidiary, entered into an £80m revolving acquisition facility on 20 February 2014,
which was extended to £120m on 3 February 2015 and further to £150m on 25 June 2015. During the year, the facility was
temporarily increased and drawn to £204m to enable the investment alongside Fred. Olsen Renewables. The facility was
undrawn at 31 December 2015 (2014: £60.1m).
The Group makes prudent use of its leverage. Under the investment policy, borrowings, including any financial guarantees to
support outstanding subscription obligations but excluding internal Group borrowings of the Group's underlying investments,
are limited to 30% of the portfolio value.
From time to time, the Company issues its own shares to the market; the timing of these purchases depends on market
prices.
In order to assist in the narrowing of any discount to the Net Asset Value at which the Ordinary Shares may trade, from
time to time the Company may at the sole discretion of the Directors:
§ make market purchases of up to 14.99% per annum of its issued Ordinary Shares; and
§ make tender offers for the Ordinary Shares.
There were no changes in the Group's approach to capital management during the year.
Fair value estimation
The following summarises the significant methods and assumptions used in estimating the fair values of financial
instruments:
Non-derivative financial instruments
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet
date.
The fair value of financial instruments that are not traded in an active market is determined by using valuation
techniques. The Group uses the income approach, which discounts the expected cash flows attributable to each asset at an
appropriate rate to arrive at fair values. In determining the discount rate, regard is had to relevant long-term government
bond yields, the specific risks of each investment and the evidence of recent transactions.
Derivative financial instruments
The fair value of financial instruments inputs other than quoted prices traded in active markets is based on quoted market
prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid
price. Note 2 discloses the methods used in determining fair values on a specific asset/liability basis. Where applicable,
further information about the assumptions used in determining fair value is disclosed in the notes specific to that asset
or liability.
Classification of financial instruments
31 December 2015 31 December 2014
£'000s £'000s
Financial assets
Designated at fair value through profit or loss:
Investments 711,604 412,449
Other financial assets - 844
Financial assets at fair value 711,604 413,293
At amortised cost:
Other receivables 736 456
Cash and cash equivalents 14,873 12,425
Financial assets at amortised cost 15,609 12,881
Financial liabilities
Designated at fair value through profit or loss:
Other financial liabilities 344 -
Financial liabilities at fair value 344 -
At amortised cost:
Other payables 277 493
Financial liabilities at amortised cost 277 493
The Directors believe that the carrying values of all financial instruments are not materially different to their fair
values.
Other financial assets/liabilities represent the fair value of foreign exchange forward agreements in place at the year
end.
Fair value hierarchy
The fair value hierarchy is defined as follows:
§ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
§ Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
§ Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
As at 31 December 2015
Level 1 Level 2 Level 3 Total
£'000's £'000's £'000's £'000's
Investments at fair value through profit or loss - - 711,604 711,604
Other financial assets - - - -
- - 711,604 711,604
Other financial liabilities - 344 - 344
- 344 - 344
As at 31 December 2014
Level 1 Level 2 Level 3 Total
£'000's £'000's £'000's £'000's
Investments at fair value through profit or loss - - 412,449 412,449
Other financial assets - 844 - 844
- 844 412,449 413,293
Other financial liabilities - - - -
- - - -
Other financial assets/liabilities represent the fair value of foreign exchange forward agreements in place at the year
end.
Investments at fair value through profit or loss comprise the fair value of the investment portfolio, on which the
sensitivity analysis is calculated, and the fair value of TRIG UK, the Company's single, direct subsidiary being its cash,
working capital and debt balances.
31 December 2015 31 December 2014
£'000's £'000's
Portfolio value 712,284
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