REG - Renew Infra Grp Ld - Announcement of Interim Results <Origin Href="QuoteRef">TRIG.L</Origin> - Part 2
19/08/2016 13:40
- Part 2: For the preceding part double click ID:nRSR4857Ha
hedge achieved in relation to the euro-denominated assets is approximately
50%. As sterling depreciated, the currency hedge generated a £6.1 million loss
in the six-month period to 30 June 2016 and serves to reduce the sensitivity
to movements in the sterling:euro exchange rate.
The Investment Manager keeps under review the level of euro explosure and
utilises hedges, with the objective of minimising variability in shorter-term
cash flows with a balance between managing the sterling value of cash flow
receipts and potential mark-to-market cash outflows.
(v) Changes in taxation assumptions: The most significant change was
the Chancellor's announcement in the UK March 2016 Budget of further planned
reductions in UK corporation tax (to 17% by 2020) partially offset by slower
use of brought-forward corporation tax losses. The changes in tax announced
provided a net benefit to valuation of £6.2 million.
(vi) Balance of portfolio return: This refers to the balance of
valuation movements in the period (excluding (i) to (v) above) and represents
an uplift of £45.2 million. This represents a 6.2% increase in the six months
in the rebased value of the portfolio. The balance of portfolio return mostly
reflects the net present value of the cash flows brought forward by six months
at the prevailing portfolio discount rate (9.0% per annum) and also some
additional valuation adjustments.
Valuation Sensitivities
The Investment Manager has provided sensitivity analysis to show the impact of
changes in key assumptions adopted to arrive at the valuation. For each of the
sensitivities, it is assumed that potential changes occur independently of
each other with no effect on any other base case assumption, and that the
investments in the portfolio remain unchanged throughout the model life. All
of the NAV per share sensitivities are calculated on the basis of 766.4
million Ordinary Shares that are currently in issue.
The analysis below shows the sensitivity of the portfolio value to changes in
key assumptions as follows:
· Discount rate assumptions The weighted average valuation discount rate applied to calculate the portfolio valuation is 8.7% at 30 June 2016. The sensitivity shows the impact on valuation of increasing or decreasing this rate by 0.5%. Discount rate -0.5% Base 8.7% +0.5% Implied change in portfolio valuation +£30.1 million £759.5 million -£28.3 million Implied change in NAV per ordinary share +3.9p 97.0p -3.7p
Discount rate -0.5% Base 8.7% +0.5%
Implied change in portfolio valuation +£30.1 million £759.5 million -£28.3 million
Implied change in NAV per ordinary share +3.9p 97.0p -3.7p
· Energy yield assumptions
The base case assumes a "P50" level of output. The P50 output is the estimated
annual amount of electricity generation (in MWh) that has a 50% probability of
being exceeded - both in any single year and over the long term - and a 50%
probability of being under achieved. Hence the P50 is the expected level of
generation over the long term.
The sensitivity illustrates the effect of assuming "P90 10-year" (a downside
case) and "P10 10-year" (an upside case) energy production scenarios on the
portfolio applied for all future periods. A P90 10-year downside case assumes
the average annual level of energy generation that has a 90% probability of
being exceeded over a 10-year period. A P10 10-year upside case assumes the
average annual level of energy generation that has a 10% probability of being
exceeded over a 10-year period. This means that the portfolio aggregate
production outcome for any given 10-year period would be expected to fall
somewhere between these P90 and P10 levels with an 80% confidence level, with
a 10% probability of it falling below that range of outcomes and a 10%
probability of it exceeding that range. The sensitivity is applied throughout
the life of each asset in the portfolio (even though this exceeds 10 years in
all cases).
Energy yield P90 (10-year) Base P50 P10 (10-year)
Implied change in portfolio valuation -£73.0 million £759.5 million +£70.6 million
Implied change in NAV per ordinary share -9.5p 97.0p +9.2p
· Power price assumptions
The sensitivity considers a flat 10% movement in power prices for all years,
i.e. the effect of adjusting the forecast electricity price assumptions in
each of the jurisdictions applicable to the portfolio down by 10% and up by
10% from the base case assumptions for each year throughout the operating life
of the portfolio.
Power price -10% Base +10%
Implied change in portfolio valuation -£53.8 million £759.5 million +£55.0 million
Implied change in NAV per ordinary share -7.0p 97.0p +7.2p
· Inflation assumptions
The projects' income streams are principally a mix of subsidies, which are
amended each year with inflation, and power prices, which the sensitivity
assumes will move with inflation. The projects' management, maintenance and
tax expenses typically move with inflation but debt payments are fixed. This
results in the portfolio returns and valuation being positively correlated to
inflation.
The portfolio valuation assumes 2.75% p.a. inflation for the UK (based on the
Retail Prices Index) and 2.0% p.a. for each of France and Ireland (Consumer
Prices Indices).
The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase
from the assumed annual inflation rates in the financial model for each year
throughout the operating life of the portfolio.
Inflation rate -0.5% Base +0.5%
Portfolio valuation -£34.2 million £759.5 million +£38.0 million
Implied change in NAV per ordinary share -4.5p 97.0p +5.0p
· Operating costs at project company level
The sensitivity shows the effect of a 10% increase and a 10% decrease in
annual operating costs for the portfolio, in each case assuming that the
change in operating costs occurs on 1 July 2015 and thereafter remains
constant at the new level during the life of the projects.
Operating costs -10% Base +10%
Portfolio valuation +£24.8 million £759.5 million -£25.1 million
Implied change in NAV per ordinary share +3.2p 97.0p -3.3p
· Euro / sterling exchange rates
This sensitivity shows the effect of a 10% decrease and a 10% increase in the
value of the euro relative to sterling used for the 30 June 2016 valuation
(based on a 30 June 2016 exchange rate of E1.1987 to £1). In each case it is
assumed that the change in exchange rate occurs on 1 July 2016 and thereafter
remains constant at the new level throughout the life of the projects.
The hedging referred to above under "Valuation Movements" reduces the
sensitivity of the portfolio value to foreign exchange movements and
accordingly the impact is shown net of the benefit of the foreign exchange
hedge in place.
Euro value (relative to sterling) -10% Base +10%
Portfolio valuation -£5.0 million £759.5 million +£5.0 million
Implied change in NAV per ordinary share -0.6p 99.0p +0.6p
· Interest rates applying to project company debt and cash balances
This shows the sensitivity of the portfolio valuation to the effects of
changes in interest rates.
The sensitivity shows the impact on the portfolio of an increase in interest
rates of 2% and a reduction of 1%. The change is assumed with effect from 1
July 2016 and continues unchanged throughout the life of the assets. It is
assumed that the acquisition facility is repaid within 12 months as a result
of future equity capital raises and the sensitivity does not apply the impact
of changes in interest rates to the acquisition facility.
The portfolio is relatively insensitive to changes in interest rates. This is
an advantage of TRIG's approach of favouring long term structured project
financing (over shorter term corporate debt) which is secured with the
substantial majority of this debt having the benefit of long term interest
rate swaps which fix the interest cost to the projects.
Interest rates -1% Base +2%
Portfolio valuation +£1.6 million £759.5 million -£2.8 million
Implied change in NAV per ordinary share +0.2p 99.0p -0.4p
It should be noted that all of TRIG's sensitivities above are stated after
taking into account the impact of project-level gearing on returns.
Financing
In April 2016, the Group renewed its £150 million revolving acquisition
facility with the Royal Bank of Scotland and National Australia Bank to fund
new acquisitions for a further 3 years expiring in April 2019. This type of
short-term financing is limited to 30% of the portfolio value. It is intended
that any facility used to finance acquisitions is likely to be repaid, in
normal market conditions, within a year through equity fund-raisings.
The renewal of the facility (which includes a £15 million working capital
element) was on improved terms and reduced margins (of 2.05% when drawn).
The acquisition facility was undrawn at 31 December 2015. The facility was
drawn as to £43.7 million in January 2016 to fund the investment in the Akuo
French solar portfolio.
Following the equity fund raise in May 2016, where the company issued 30
million new shares and raised £30.3 million gross proceeds, the facility was
repaid down to £14.4 million. The Company drew £1.5 million in May 2016 to
fund a true-up payment due in relation to the Earlseat wind farm under the
terms of its purchase agreement following performance above base case. At 30
June 2016 the facility was drawn £15.9 million.
The majority of the projects within the Company's investment portfolio have
underlying long-term debt. There is an additional gearing limit in respect of
such project finance debt, which is non-recourse to TRIG, of 50% of the Gross
Portfolio Value (being the total enterprise value of the Group's portfolio
companies), measured at the time the debt is drawn down or acquired as part of
an investment. The Company may, in order to secure advantageous borrowing
terms, secure a project finance facility over a group of portfolio companies.
The project-level gearing at 30 June 2016 across the portfolio was 40%.
As at 30 June 2016, the Group had cash balances of £6.2 million, excluding
cash held in investment project companies as working capital or otherwise.
Largest Investments
The largest investment is TRIG's share in the Crystal Rig II project (which
TRIG invested in alongside Fred. Olsen Renewables in June 2015), which
accounts for 12% of the portfolio as at 30 June 2016. The ten largest
investments together represent 54% of the overall portfolio value as at 30
June 2016.
Analysis of Financial Results
Accounting
At 30 June 2016, the Group had investments in 51 projects, which are carried
at fair value.
Basis of Preparation
IFRS 10 requires investment entities to 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, The Renewables
Infrastructure Group (UK) Limited ("TRIG UK"), the Company's direct subsidiary
through which investments are purchased, is measured at fair value as opposed
to being consolidated on a line-by-line basis. As a result, its cash, debt and
working capital balances are included as an aggregate number in the fair value
of investments rather than in the Group's current assets. In order to provide
shareholders with a more transparent view of the Group's capacity for
investment, ability to make distributions, operating costs and gearing levels,
the Company presents adjusted results to show the Group's performance for the
six months ended 30 June 2016 and the comparative period on a non-statutory
"Expanded Basis", where TRIG UK is consolidated on a line-by-line basis,
compared to the Statutory IFRS financial statements (the "Statutory IFRS
Basis").
The Directors consider the non-statutory Expanded Basis to be a more helpful
basis for users of the accounts to understand the performance and position of
the Company because key balances of the Group including cash and debt balances
carried in TRIG UK and expenses incurred in TRIG UK are shown in full rather
than being netted off. The necessary adjustments between the Statutory IFRS
Basis and the non-statutory Expanded Basis are shown below. Commentary is
provided below on the primary statements of TRIG on this basis.
Summary Income Statement
Six months to 30 June 2016£'million Six months to 30 June 2015£'million
Statutory IFRS Basis Adjustments1 Expanded Basis Statutory IFRS Basis Adjustments1 Expanded Basis
Operating income 25.9 6.9 32.8 12.7 4.4 17.1
Acquisition costs - - - - (0.5) (0.5)
Net operating income 25.9 6.9 32.8 12.7 3.9 16.6
Group expenses (0.5) (4.1) (4.6) (0.5) (2.4) (2.9)
Foreign exchange gains (6.2) 0.1 (6.1) 2.9 - 2.9
Finance costs - (2.9) (2.9) - (1.5) (1.5)
Profit before tax 19.2 - 19.2 15.1 - 15.1
EPS2 2.6p 2.6p 3.2p 3.2p
1. The following were incurred within TRIG UK: acquisition costs, the majority
of expenses and acquisition facility fees and interest. The income adjustment
offsets these cost adjustments.
2. Calculated based on the weighted average number of shares during the year
being approximately 742.2 million shares.
Expanded Basis versus Statutory IFRS Basis
The Statutory IFRS Basis nets off TRIG UK's costs, including overheads,
management fees and acquisition costs against income. Above we show the
Expanded Basis, which included the expenses incurred within TRIG UK to enable
users of the accounts to fully understand the Group's costs. There is no
difference in profit before tax or earnings per share between the two bases.
Analysis of Expanded Basis financial results
Profit before tax for the six months to 30 June 2016 was £19.2 million,
generating earnings per share of 2.6p, which compares to £15.1 million and
earnings per share of 3.2p for the six months to 30 June 2015.
The EPS of 2.6p is after the impact of reductions in forecast power prices on
portfolio valuation and net asset value flowing through to earnings in the
period and also reflects the below budget generation achieved, partially
offset by reduced valuation discount rates, beneficial foreign exchange
movements and portfolio return.
Increases in both net operating income and group expenses in the six months to
30 June 2016 as compared to the six months to 30 June 2015 reflect the
increase in the size of the portfolio. Group expenses of £4.6 million (2015:
£2.9 million), includes all operating expenses and £3.7 million (2015: £2.5
million) fees paid to the Investment and Operations Managers. Management fees
are charged at 1% of Adjusted Portfolio Value. The management fees are
discussed in more detail in the Related Party and Key Advisors Transactions
note (Note 14) of the financial statements along with the details of the
related party transactions over the period.
Foreign exchange losses on hedges held outside the portfolio of £6.1 million
are fully offset by £11.8 million foreign exchange gains incurred on the value
of the euro-denominated investments in the portfolio, arising from the
relative strengthening of the euro. In the comparative period, £2.9 million
foreign exchange gains on hedges held outside the portfolio partially offset
£5.2 million foreign exchange losses incurred on the value of the
euro-denominated investments in the portfolio, resulting from the weakening of
the euro. Portfolio value movements (included in operating income) are more
fully described in the "Valuation Movements" section of this Interim
Management Report. The net foreign exchange gain in the period is hence £5.7
million (2015: net loss of £2.3 million).
Finance costs relate to the interest and fees incurred relating to the Group's
revolving acquisition facility. The increase in finance costs reflects the
accelerated amortisation of the original revolving acquisition facility
arrangement fee, arising from its early replacement with a new facility in
April 2016, following the negotiation of better margins.
Ongoing Charges (Expanded Basis)
Six months to 30 June 2016£'000s Six months to 30 June 2015£'000s
Investment and Operations Management fees 3,727 2,513
Audit and Interim Review fees 55 57
Directors' fees and expenses 95 86
Other ongoing expenses 312 249
Total expenses 4,1891 2,905
Annualised equivalent 8,424 5,857
Average net asset value 735,355 471,548
Ongoing Charges Percentage (OCP) 1.15% 1.24%
1. Total expenses excludes £0.4 million of lost bid costs incurred
during the period.
The Ongoing Charges Percentage is 1.15% (2015: 1.24%). The ongoing charges
have been calculated in accordance with AIC guidance and are defined as
annualised ongoing charges (i.e. excluding acquisition costs and other
non-recurring items) divided by the average published undiluted net asset
value in the period. The Ongoing Charges Percentage has been calculated on the
Expanded Basis and therefore takes into consideration the expenses of TRIG UK
as well as the Company's. The reduction in OCP reflects portfolio growth
during the year as the Group's expenses are spread over a larger capital base.
There is no performance fee paid to any service provider.
Summary Balance Sheet
As at 30 June 2016£'million As at 31 December 2015£'million
Statutory IFRS Basis Adjustments Expanded Basis Statutory IFRS Basis Adjustments Expanded Basis
Portfolio value 743.0 16.5 759.5 711.6 0.7 712.3
Working capital (4.5) (1.2) (5.7) 0.1 (1.0) (0.9)
Debt - (15.9) (15.9) - - -
Cash 5.6 0.6 6.2 14.9 0.3 15.2
Net assets 744.1 - 744.1 726.6 0.0 726.6
Net asset value per share 97.0p 97.0p 99.0p 99.0p
Expanded Basis versus Statutory IFRS Basis
The Statutory IFRS Basis includes TRIG UK's cash, debt and working capital
balances as part of portfolio value. There is no change to net assets between
the two bases.
The majority of cash generated from investments had been passed up from TRIG
UK to the Company at both 30 June 2016 and 31 December 2015.
At 30 June 2016, TRIG UK had drawn down £15.9 million under its revolving
acquisition facility (2015: £Nil), being the net of £43.7 million drawn to
fund the investment in the Akuo French solar portfolio in January 2016, £1.5m
drawn to fund a true-up payment due to the vendor of the Earlseat wind farm
purchased by TRIG in November 2014 and £29.3 million repaid following the May
2016 equity raise.
Analysis of Expanded Basis financial results
Portfolio value grew by £47.2 million in the six months to £759.5 million,
primarily as a result of the Akuo investment made in January 2016 as described
more fully in the "Valuation Movements" section of this Interim Management
Report.
Group cash at 30 June 2016 was £6.2 million (2015: £15.2 million) and the
acquisition facility was £15.9 million drawn (2015: £Nil).
Cash balances at 30 June 2016 are lower than at the end of the prior period as
the two dividends paid in the six-month period reflect dividends in respect of
nine months (H2 2015 and Q1 2016), as the Company moved from semi-annual to
quarterly interim dividends.
Net assets grew by £17.5 million in the period to £744.1 million. The Company
raised £29.6 million (after issue expenses) of new equity during the period
and produced a £19.2 million profit in the period, with net assets being
stated after accounting for dividends paid in the period (net of scrip take
up) of £32.0 million. Other movements in net assets totalled £0.7 million,
being Managers' shares accruing in H1 2016 and to be issued on or around 30
September 2016.
Net asset value ("NAV") per share as at 30 June 2016 was 97.0p compared to
99.0p at 31 December 2015. The decline in NAV in the period mostly reflects
the additional quarterly interim dividend of 1.5625p paid on 30 June 2016.
Net Asset Value ("NAV") and Earnings Per Share ("EPS") Reconciliation
NAV per share Shares in issue (million) Net assets (£'million)
Net assets at 31 December 2015 99.0p 733.6 726.6
H2 2015 interim dividend, paid March 2016 (3.11p) - (22.8)
31 December 2015 NAV (post interim dividend) 95.9p 733.6 703.8
Profit/EPS to 30 June 2016 2.6p1 - 19.2
Shares issued (net of costs) - 30.0 29.6
Q1 2016 interim dividend, declared May 2016 and paid June 2016 (1.5625p) - (12.0)
Scrip dividend take-up2 - 2.8 2.8
H2 2016 Managers' shares to be issued - 0.8 0.7
Net assets at 30 June 2016 97.0p3 767.2 744.1
1. Calculated based on the weighted average number of shares during the year
being 742.2 million shares.
2. Scrip dividend take-up comprises 2.7 million shares, equating to £2.7
million, and 0.1 million shares, equating to £0.1 million, issued in lieu of
the dividends paid in March 2016 and June 2016, respectively.
3. Small casting difference due to rounding, mainly 99.0p net assets as 31
December 2015 being 99.05p to 2 decimal places.
Summary Cash Flow Statement
Six months to 30 June 2016£'million Six months to 30 June 2015£'million
Statutory IFRS Basis Adjustments Expanded Basis Statutory IFRS Basis Adjustments Expanded Basis
Cash received from investments 23.8 7.0 30.8 17.0 7.8 24.8
Operating and finance costs (0.7) (4.1) (4.8) 0.1 (3.9) (3.8)
Cash flow from operations 23.1 2.9 26.0 17.1 3.9 21.0
Debt arrangement costs - (1.6) (1.6) - (1.5) (1.5)
Foreign exchange gains (1.4) 0.1 (1.3) 1.6 (0.1) 1.5
Issue of share capital (net of costs) 30.3 (0.7) 29.6 108.4 (0.4) 108.0
Acquisition facility drawn - 15.9 15.9 - 143.9 143.9
Purchase of new investments (including acquisition costs) (29.3) (16.3) (45.6) (108.8) (145.9) (254.7)
Distributions paid in March (20.1) - (20.1) (11.9) - (11.9)
Distributions paid in June (11.9) - (11.9) - - -
Cash movement in period (9.3) 0.3 (9.0) 6.4 (0.1) 6.3
Opening cash balance 14.9 0.3 15.2 12.4 0.5 12.9
Net cash at end of period 5.6 0.6 6.2 18.8 0.4 19.2
Expanded Basis versus Statutory IFRS Basis
The most significant differences in the period between the Statutory IFRS
Basis and the Expanded Basis cash flows arise because the Statutory IFRS Basis
excludes the debt drawn by TRIG UK under the revolving credit facility to fund
the purchase of acquisitions. Other differences reflect income received by
TRIG UK applied to reinvestment and expenses incurred by TRIG UK, including
the debt facility arrangement costs and movements in TRIG UK's working capital
which are excluded under the Statutory IFRS Basis.
Analysis of Expanded Basis financial results
Cash received from investments in the period was £30.8 million (2015: £24.8
million). The cash received is from a larger portfolio than in the previous
period.
Dividends paid in the period were in respect of nine months of operations
following the move to quarterly dividends from semi-annual dividends and
totalled £32.0 million (net of £2.8m scrip dividends). This comprised
dividends declared for the half-year ended 31 December 2015 (£20.1 million,
net of £2.7 million scrip dividends) and the quarter ended 31 March 2016
(£11.9 million, net of £0.1 million scrip dividends). Dividends paid in the
comparative period totalled £11.9 million (net of £0.9 million scrip
dividends) and reflect the dividend declared for the six-month period ended 31
December 2014.
Cash flow from investments in the period less costs was £26.0 million (2015:
£21.0 million) and, excluding the additional quarterly dividend, covers
dividends paid of £20.1 million in the period by 1.3 times. This would be 1.1
times without the benefit of scrip take-up in the period or 1.6 times before
factoring in amounts invested in the repayment in project-level debt. The
Group typically repays project-level debt at the rate of c. 0.6 to 0.7 times
the dividends paid in each period, which contributes to NAV. This repayment
rate is relatively fast compared to underlying asset lives and could be slowed
to increase the cash available to pay up from investments to the Company,
further supporting dividend cash cover. In the period under review, the cash
dividend cover of 1.3 times benefitted from c. £7 million of extraction of
surplus working capital balances at project level and is after repaying £14
million of project-level debt (pro rata to the Company's equity interest). The
net debt reduction in the period which contributes to NAV may therefore be
considered to be £7 million and is equivalent to c.0.3 times the dividend
paid.
Share issue proceeds (net of costs) totalling £29.6 million (2015: £108.0
million) reflect the net proceeds of the 30 million shares issued during the
period under the Share Issuance Programme launched in April 2016.
In the period, £45.6 million was invested in acquisitions. This was funded
through £29.7 million of share capital raised (net of costs) and £15.9 million
of acquisition facility debt that remained drawn at the period-end. Cash
balances reduced in the period as an additional quarter's dividend was paid.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge:
1. The condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting; and
2. The Chairman's Statement and the Managers' Report meets the
requirements of an interim management report, and includes a fair review of
the information required by
a. DTR 4.2.7R, being an indication of important events during the first
six months and description of principal risks and uncertainties for the
remaining six months of the year; and
b. DTR 4.2.8R, being the disclosure of related parties' transactions and
changes therein.
By order of the Board
Helen Mahy
Chairman
17 August 2016
Consolidated Financial Statements
Condensed Income Statement
For the six month period 1 January 2016 to 30 June 2016
Six months ended Six months ended
30 June 2016 30 June 2015
(unaudited) (unaudited)
Note £'000s £'000s
Total operating income 5 25,850 12,649
Fund expenses 6 (464) (480)
Operating profit for the period 25,386 12,169
Finance and other (expenses)/income 7 (6,156) 2,921
Profit before tax 19,230 15,090
Income tax 8 - -
Profit for the period 9 19,230 15,090
Attributable to:
Equity holders of the parent 9 19,230 15,090
9 19,230 15,090
Ordinary shares earnings per share (pence) 9 2.6 3.2
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.
Condensed Balance Sheet
As at 30 June 2016
As at As at
30 June 31 December 2015
2016
(unaudited) (audited)
Note £'000s £'000s
Non-current assets
Investments at fair value through profit or loss 12 742,972 711,604
Total non-current assets 12 742,972 711,604
Current assets
Other receivables 788 736
Cash and cash equivalents 5,637 14,873
Total current assets 6,425 15,609
Total assets 749,397 727,213
Current liabilities
Other payables (5,280) (621)
Total current liabilities (5,280) (621)
Total liabilities (5,280) (621)
Net assets 11 744,117 726,592
Equity
Share premium 13 761,248 728,227
Other reserves 13 745 706
Retained reserves 13 (17,876) (2,341)
Total equity attributable to owners of the parent 11 744,117 726,592
Net assets per Ordinary Share (pence) 11 97.0 99.0
The accompanying Notes are an integral part of these interim financial
statements.
The interim financial statements were approved and authorised for issue by the
Board of Directors on 17 August 2016, and signed on its behalf by:
Helen Mahy CBE
Jon Bridel
Director
Director
Condensed Statement of Changes in Shareholders' Equity
For the six month period 1 January 2016 to 30 June 2016
Share premium Other reserves Retained reserves Total equity
(unaudited) (unaudited) (unaudited) (unaudited)
£'000s £'000s £'000s £'000s
Shareholders' equity at beginning of period 728,227 706 (2,341) 726,592
Profit for the period - - 19,230 19,230
Dividends paid - - (32,021) (32,021)
Scrip shares issued in lieu of dividend 2,744 - (2,744) -
Ordinary Shares issued 30,300 - - 30,300
Costs of Ordinary Shares issued (729) - - (729)
Ordinary Shares issued in period in lieu of Management Fees, earned in H2 20151 706 (706) - -
Ordinary Shares to be issued in lieu of Management Fees, earned in H1 20162 - 745 - 745
Shareholders' equity at end of period 761,248 745 (17,876) 744,117
For the year ended 31 December 2015
Share premium Other reserves Retained reserves Total equity
£'000s £'000s £'000s £'000s
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 20143 428 (428) - -
Ordinary Shares issued in period in lieu of Management Fees, earned in H1 20154 481 - - 481
Ordinary Shares to be issued in lieu of Management Fees, earned in H2 20151 - 706 - 706
Shareholders' equity at end of period (audited) 728,227 706 (2,341) 726,592
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 £705,933 transfer between reserves represents the 736,190 shares
that relate to management fees earned in the six months to 31 December 2015
and were recognised in other reserves at 31 December 2015, and were issued to
the Managers during the period, with the balance being transferred to share
premium reserves, on 31 March 2016.
2. As at 30 June 2016, 781,125 shares equating to £745,487, based on a Net
Asset Value ex dividend of 95.44 pence per share (the Net Asset Value at 30
June 2016 of 97.0 pence per share less the interim dividend of 1.5625 pence
per share) were due but had not been issued. The Company intends to issue
these shares to the Managers on or around 30 September 2016.
3. 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.
4. 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.
Condensed Cash Flow Statement
For the six month period 1 January 2016 to 30 June 2016
Six months ended Six months ended
30 June 2016 30 June 2015
(unaudited) (unaudited)
Note £'000s £'000s
Cash flows from operating activities
Profit before tax 9 19,230 15,090
Adjustments for:
Gain on investments 5 (7,569) (1,148)
Interest income from investments 5 (18,281) (11,501)
Movement in Other reserves relating to Managers shares 39 53
Movement in accrued share issue costs (59) (15)
Finance and similar expenses/(income) 7 6,156 (2,921)
Operating cash flow before changes in working capital (484) (442)
Changes in working capital:
Increase in receivables (13) (58)
(Decrease)/increase in payables (123) 31
Cash flow from operations (620) (469)
Interest received from investments 22,281 11,501
Loanstock and equity repayments received 1,500 6,014
Interest income 16 50
Net cash from operating activities 23,177 17,096
Cash flows from investing activities
Purchases of investments 12 (29,300) (108,776)
Net cash used in investing activities (29,300) (108,776)
Cash flows from financing activities
Proceeds from issue of share capital during period 31,006 110,348
Costs in relation to issue of shares (729) (1,901)
Dividends paid to shareholders 10 (32,021) (11,933)
Net cash (used in)/from financing activities (1,744) 96,514
Net (decrease)/increase in cash and cash equivalents (7,867) 4,834
Cash and cash equivalents at beginning of period 14,873 12,425
Exchange (losses)/gains on cash (1,369) 1,567
Cash and cash equivalents at end of period 5,637 18,826
The accompanying Notes are an integral part of these interim financial
statements.
Notes to the unaudited financial statements
For the six month period 1 January 2016 to 30 June 2016
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 publicly traded on the
London Stock Exchange under a premium listing. Through its 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 United Kingdom and Northern Europe. The
Company, TRIG UK and its portfolio of investments are known as the "Group".
The interim condensed unaudited financial statements of the Company (the
"interim financial statements") as at and for the six months ended 30 June
2016 comprise only the results of the Company, as all of its subsidiaries are
measured at fair value following the amendment to IFRS 10 as explained below
in Note 2.
The annual financial statements of the Company for the year ended 31 December
2015 were approved by the Directors on 22 February 2016 and are available from
the Company's Administrator and on the Company's website http://trig-ltd.com/.
The auditor's report on these accounts was unqualified.
2. Key accounting policies
Basis of preparation
The interim financial statements were approved and authorised for issue by the
Board of Directors on 17 August 2016.
The annual financial statements of the Company are prepared in accordance with
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
amendment to IFRS 10, as described below, that has not yet been adopted by the
EU. The condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with IAS 34 'Interim
Financial Reporting', as adopted by the EU and in compliance with the
Companies (Guernsey) Law, 2008.
The interim financial statements are presented in sterling, which is the
Company's functional currency.
IFRS 10 states that investment entities should measure all of their
subsidiaries that are themselves investment entities at fair value. 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 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.
The Directors believe that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the interim financial
statements.
The same accounting policies, presentation and methods of computation are
followed in these interim financial statements as were applied in the
preparation of the Company's financial statements for the year ended 31
December 2015.
The Company's financial performance does not suffer materially from seasonal
fluctuations.
3. Financial instruments
30 June 2016 31 December 2015
£'000s £'000s
Financial assets
Designated at fair value through profit or loss:
Investments 742,972 711,604
Financial assets at fair value 742,972 711,604
At amortised cost:
Other receivables 788 736
Cash and cash equivalents 5,637 14,873
Financial assets at amortised cost 6,425 15,609
Financial liabilities
Designated at fair value through profit or loss:
Other financial liabilities 5,147 344
Financial liabilities at fair value 5,147 344
At amortised cost:
Other payables 133 277
Financial liabilities at amortised cost 133 277
The Directors believe that the carrying values of all financial instruments
are not materially different to their fair values.
Other financial liabilities represents the fair value of foreign exchange
forward agreements in place at the period 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 30 June 2016
Level 1 Level 2 Level 3 Total
£'000s £'000s £'000s £'000s
Investments at fair value through profit or loss - - 742,972 742,972
- - 742,972 742,972
Other financial liabilities - 5,147 - 5,147
- 5,147 - 5,147
As at 31 December 2015
Level 1 Level 2 Level 3 Total
£'000s £'000s £'000s £'000s
Investments at fair value through profit or loss - - 711,604 711,604
- - 711,604 711,604
Other financial liabilities - 344 - 344
- 344 - 344
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 direct subsidiary, being its cash,
working capital and debt balances.
30 June 2016 31 December 2015
£'000s £'000s
Portfolio value 759,520 712,284
TRIG UK
Cash 535 347
Working capital (2,700) (2,762)
Debt1 (14,383) 1,735
(16,548) (680)
Investments at fair value through profit or loss 742,972 711,604
1 Debt arrangement costs of £1,517k (Dec 2015: £1,735k) have been netted off
the £15,900k (Dec 2015: £Nil) debt drawn by TRIG UK.
Level 2
Valuation methodology
Fair value is based on price quotations from financial institutions active in
the relevant market. The key inputs to the discounted cash flow methodology
used to derive fair value include foreign currency exchange rates and foreign
currency forward curves. Valuations are performed on a six monthly basis every
June and December for all financial assets and all financial liabilities.
Level 3
Valuation methodology
The Investment Manager has carried out fair valuations of the investments as
at 30 June 2016 and the Directors have satisfied themselves as to the
methodology used, the discount rates and key assumptions applied, and the
valuation. All investments are at fair value through profit or loss and are
valued using a discounted cash flow methodology.
The following economic assumptions were used in the discounted cash flow
valuations at:
30 June 2016 31 December 2015
UK inflation rates 2.75% 2.75%
Ireland and France inflation rates 2.00% 2.00%
UK, Ireland and France deposit interest rates 1.00% to 31 March 2020, 2.50% thereafter 1.00% to 31 March 2019, 2.50% thereafter
UK corporation tax rate 20.00%, reducing to 19% from 1 April 2017 and then to 17% from 1 April 2020 20.00%, reducing to 19% from 1 April 2017 and then to 18% from 1 April 2020
France corporation tax rate 33.3% + 1.1% above E763,000 threshold 33.3% + 1.1% above E763,000 threshold
Ireland corporation tax rate 12.5% active rate, 25% passive rate 12.5% active rate, 25% passive rate
Euro/sterling exchange rate 1.1987 1.3569
Energy yield assumptions P50 case P50 case
Discount rates
The discount rates used for valuing each renewable infrastructure investment
are based on the appropriate long term government bond yield and a risk
premium. The risk premium takes into account risks and opportunities
associated with the project earnings.
The weighted average
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