REG - Renew Infra Grp Ld - Announcement of Interim Results
04/08/2023 07:00
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RNS Number : 2873I Renewables Infrastructure Grp (The) 04 August 2023
4 August 2023
The Renewables Infrastructure Group Limited
"TRIG" or "the Company", a London-listed investment company advised by
InfraRed Capital Partners ("InfraRed") as Investment Manager and Renewable
Energy Systems ("RES") as Operations Manager.
Announcement of Interim Results
Highlights for the six months ended 30 June 2023
Healthy cash generation from underlying projects:
o Dividend cover of 1.7 times in the period (30 June 2022: 1.4 times), or
3.0 times before the repayment of project level debt
o Strong inflation linkage, with over 50% of revenues directly linked to
inflation over the next ten years
o Fixed interest rate borrowings across the project companies
o £119m of project level debt principal repaid. Project level gearing
reduced from 38% to 37%
o £65m reinvested in construction projects using £54m of surplus cash
generated during the period
o The Company's £750m RCF as at 30 June 2023 was £410m drawn - expected
surplus cashflow to enable the reduction of RCF borrowings after meeting the
Company's investment commitments
Resilient earnings and Net Asset Value ("NAV"):
o Earnings per ordinary share of 1.1p (30 June 2022: 17.9p)
o NAV per ordinary share of 132.2p as at 30 June 2023 (31 December 2022:
134.6p)
o Reduction in NAV driven by increase in discount rate to 7.9% (31 December
2022: 7.2%) partially offset by an increase in long-term inflation assumptions
o Increase in discount rates principally reflects higher interest rates
(weighted to the UK) and also includes higher returning development stage
battery storage projects
o NAV reduction also offset by active management initiatives, including
delivering projects through construction and securing attractive fixed power
pricing
o Portfolio valuation of £3,671m as at 30 June 2023 (31 December 2022:
£3,737m)
A technologically and geographically diversified portfolio of 2.8GW of
renewable energy assets:
o 1,040,000 tonnes of CO(2) avoided during the period (30 June 2022:
960,000)
o 2,919GWh of clean energy generated during the period (30 June 2022:
2,747GWh)
o Completion of five construction projects in H1, including solar projects
in Spain and an onshore wind farm in Sweden, commissioning 301MW of new
capacity
o 1.7m homes (equivalent) powered with renewable electricity (30 June 2022:
1.6m)
o Below budget generation in the period, predominantly driven by low wind
resource in the UK, partially moderated by portfolio diversification with the
solar portion of the portfolio ahead of budget
Richard Morse, Chair of TRIG, said:
"TRIG's portfolio continues to generate strong cash flows, benefiting from its
positive inflation correlation, low sensitivity to interest rate costs, and
active management from InfraRed and RES. The combined investment and
operational experience of our Managers is a competitive advantage, as TRIG
continues to play its part in delivering sustainable energy across several
European markets."
Richard Crawford, Head of Energy Income Funds, InfraRed, said:
"The Managers continue to drive value through commercial and technical
enhancements, including securing higher power prices and increased energy
output. We prioritise the use of TRIG's strong cash flow generation to reduce
group-wide borrowings. The inflation linkage within TRIG's revenues and the
diversification of our portfolio across geographies and technologies means we
are well-positioned to deliver shareholder value in a challenging
macro-economic backdrop."
Chairman's Statement
TRIG's portfolio demonstrates its resilience through the economic cycle,
underpinned by the positive inflation correlation of its revenues and low
exposure of its cash flows to rising interest rates.
Over the next ten years, more than 50% of forecast revenues are directly
linked to inflation through subsidy support mechanisms providing a natural
hedge to increasing return expectations. Despite these characteristics, we
have not been immune to the sustained trading of share prices at discounts to
Net Asset Values, as seen across the real assets investment company sector. In
a changing macroeconomic environment, we maintain our focus on capital
allocation together with active operational and financial management.
Earnings in the six months to 30 June 2023 were 1.1p per share. Underlying
portfolio performance remains strong, with cash flows benefitting from
increases in index-linked subsidies as well as the exposure to wholesale power
prices, despite lower than expected wind resource. Portfolio Valuation has
slightly declined as valuation discount rates have been increased, reflecting
the higher returns environment which is significantly offset by the strong
inflation linkage in the portfolio. As at 30 June 2023, the portfolio discount
rate was 7.9% and the Company's NAV was 132.2p per share. Further explanation
of the Company's financial results is provided in the Investment Report.
Net cash flows from the Company's projects are very healthy, covering the cash
dividend 1.7 times. Operational cash flow generated in the period before
repayment of project-level debt in the period was £264m, representing 3.0
times cover of the dividend. We are pleased to reconfirm the 2023 dividend
target of 7.18p per share (2022: 6.84p per share).
We have applied surplus cash flows from the portfolio to fund existing
construction commitments and in time, as construction commitments are met, we
expect surplus cash flows to reduce short-term debt. Beyond this, the
Investment Manager adopts a disciplined approach to further capital outlay,
where, together with the Board, it also considers share buybacks alongside
potential new investments as well as disposals to generate cash for such
allocations in seeking the best return for shareholders.
Balance sheet discipline is reflected across the portfolio with project debt
almost entirely fixed rate and fully amortising over the remaining subsidy
periods without refinancing risk. This protects the portfolio's cash flows
from interest rate movements.
Diversification remains core to TRIG's strategy, and our operational portfolio
continues to expand with the commissioning of five projects constructed in
Sweden and Spain. The development of our two near-term battery storage
projects in the UK continues to progress well.
TRIG's Managers work both to preserve and enhance the portfolio's value. This
work encompasses both technical enhancements such as improvements to blade
aerodynamics that increase energy output, and commercial enhancements like the
long-term corporate Power Purchase Agreement TRIG entered into during the
period that helps manage variable power price exposure. We expect another
opportunity to enhance shareholder value will come from the repowering
potential of our older assets beyond that recognised in the Company's
Portfolio Valuation.
Energy policy evolution remains an area of attention. Reviews of electricity
market arrangements are ongoing in the UK and the EU, including the
consideration of wholesale pricing mechanisms, as expanded upon in the
Investment Report.
Klaus Hammer retired from TRIG's Board of Directors in May 2023. On behalf of
the Board, I would like to thank him for his nine years of service to TRIG's
shareholders and broader stakeholders. I also welcome Selina Sagayam who was
appointed to the Board in March 2023. Selina has extensive legal and ESG
experience, and she chairs our newly established ESG Committee. TRIG published
its fourth annual Sustainability Report in May, underscoring our commitment to
responsible investment, which this new committee will oversee.
During the period, Jaz Bains stepped down from the leadership of the
Operations Manager's team. I extend the Board's thanks to Jaz for his
significant contributions to TRIG since its launch in 2013. He hands over to
Chris Sweetman, who has been leading the day-to-day management as a senior
member of the RES team alongside Jaz since TRIG's IPO. Jaz remains on TRIG's
Advisory Committee.
In the ten years since TRIG's IPO, the Company has delivered shareholders a
return of 8.8% p.a.(1), grown the dividend by 20% and created the largest
diversified portfolio of renewables infrastructure projects of its peers,
spanning six European countries and four technologies. Looking forward, as
countries across Europe decarbonise to reach net zero emissions by 2050,
renewables remain at the heart of public policy and the opportunity set is
greater than ever. I firmly believe that TRIG's priorities of diversification,
value enhancement and effective capital allocation will continue to generate
resilient returns for our shareholders.
Richard Morse
Chairman
3 August 2023
1. Annualised NAV total return to 30 June 2023, including dividends
paid.
Investment Report
Financial highlights
The Company's portfolio generated strong cash flows in the first half of 2023.
Operational cash flow of £264m(2) represents 3 times cover of the £87m cash
dividend paid to shareholders. Operational cash flows were used to repay
£119m portfolio-level debt. After operating and finance costs, the Company's
net cash flow of £145m (H1 2022: £107 million) during the period covered the
cash dividend 1.7 times.
Looking forward, cash flows are expected to continue to be supported by the
portfolio's strong inflation linkage and power price levels above historical
averages. This has provided resilience to valuations in the face of marked
increases in nominal return requirements, with valuations softening only
slightly in the first half of the year as the higher returns required by
investors have been mitigated by higher forecast cash flows. This resilience
can be further demonstrated by looking back over the last 18 months where
valuations have increased due to increases in forecast cash flows, despite the
Company's 1.0% increase in valuation discount rate applied over this period.
The Company's Net Asset Value as at 30 June 2023 was 132.2p per share (31
December 2022: 134.6p per share) and the Company's Portfolio Valuation was
£3,671 million. Earnings for the period were 1.1p per share (H1 2022: 17.9p).
This resilient underlying financial performance has been the result of:
- Continued active financial and operational management of TRIG's
portfolio, including:
· The delivery through construction into operations of four solar
projects in Spain and one onshore wind farm in Sweden.
· Fixing power prices for several projects at attractive prices,
including the signing of a ten-year corporate power purchase agreement, which
secured an attractive fixed tariff for Blary Hill onshore wind farm.
- Reintroduction of historical feed-in tariffs on older solar projects
thereby reversing the retroactive changes introduced by the French Government.
- Increases in index-linked subsidies and strong wholesale power
prices flowing through to revenues.
- Fixed interest rate borrowings across the project companies and
limited refinancing risk across the project debt in the portfolio, largely
removing sensitivity to recent increases in interest rates.
- Strong pricing performance of Renewable Energy Guarantees of Origin
certificates ("REGOs") in the UK and Guarantees of Origin certificates
("GoOs") in the EU, resulting in increased forecast revenues.
This has been partly offset by below budget generation, predominantly driven
by low wind resource in the UK relative to long-term forecasts.
Macroeconomic movements included:
- Decreases in short- and medium-term power price forecasts across the
markets where TRIG has investments, which reduced the Portfolio Valuation by
3.5p per share. However, relative to historical norms, power prices remain
elevated following the substantial increases seen in 2022. The decreases in
2023 significantly reduce the impact of the windfall taxes introduced in 2022
on the Company's NAV.
- The portfolio's weighted average discount rate has increased by 0.7%
to 7.9%. This is mostly due to the Investment Manager increasing valuation
discount rates for projects, by an average of 0.5% (UK +0.8%, EU +0.3%). This
increase of 0.5% has reduced the Portfolio Valuation by 5.7p per share in the
period. This reflects the increased return expectations for the portfolio
whilst recognising the movement in government bond yields, particularly in the
UK where there have been fewer renewables transactions on which to base
valuations.
- The valuation impact of the higher discount rate was substantially
mitigated by increased near-term and longer-term inflation assumptions, which
have increased the Portfolio Valuation by 3.9p per share as these inflation
assumptions flow into revenue forecasts through index-linked subsidies and
indirectly increase power price forecasts. Over 50% of the Company's
forecasted revenues over the next ten years benefit from subsidy regimes with
a direct link to inflation indices.
Greater detail on these movements can be found in the 'Valuation of the
portfolio' section of the 2023 Interim Report.
Responsible management of the balance sheet is a key focus for the Company's
Board and Managers, informing their approach to capital allocation in
consideration of the current macroeconomic environment. In the current market
context, managing short-term borrowings on its RCF (see below) and meeting the
Company's construction commitments are the primary uses of excess cash flows
from the portfolio.
The Company's underlying gearing at asset level continues to amortise and will
be repaid debt during the remaining period of government subsidy and revenue
support mechanisms.
TRIG utilises a RCF, which is used to make new investments and is repaid from
surplus cash flows, equity fund raises or disposal proceeds. The RCF which was
refinanced in February 2023, has total funding capacity of £750m and matures
in December 2025. As at 30 June 2023, the RCF was drawn £410m, remaining
broadly level over the period. Surplus investment cash flows have been used to
fund the Company's construction activities during the period.
In H1 2023 construction spend of £65m was largely met by surplus operational
cash flows generated of £54m. Committed spend on construction is reducing as
projects come out of build, so it is expected that the construction
commitments which are £150m over the next three years will be exceeded by
surplus operational cash flows.
Investment highlights
TRIG consistently benefits from a large and diversified portfolio with
investments spread across different geographies, technologies and revenue
types to mitigate risk.
The Investment Manager takes a careful and considered approach to portfolio
composition. New investments are appraised alongside alternative uses of the
Company's surplus cash flows, in particular reducing RCF borrowings and the
consideration of share buybacks.
The Managers' successful delivery of development and construction projects
through to operations is a key driver to create value for shareholders.
Several significant milestones were reached during the period, including the
commissioning of the four Cadiz solar projects in Spain and the Grönhult
onshore wind farm in Sweden. Adding 301MW of operational capacity to the
portfolio, these projects strengthen and further diversify the Company's
revenues. Approximately half of the construction risk premia across these
investments has been released and reflected in an increase in the valuation of
these investments. The remaining construction risk premia will be released as
the energy yield and operational performance is further evidenced in steady
state operations.
TRIG's ongoing construction projects also continued to progress well during
the period. The first turbines were erected at Ranasjö and Salsjö (Twin
Peaks) onshore wind farms in Sweden where operational take-over is scheduled
for 2024.
Works are also being progressed to maximise the value of TRIG's existing
assets. Repowering development works have commenced for the 38MW Altahullion
wind farm in Northern Ireland. An agreement was also reached during the period
to commence development work which leverages the grid connection and land
space at the Cadiz solar projects through the addition of onshore wind, a
process known as 'co-location'.
The development of the four two-hour duration battery storage projects
acquired in late 2022 has also progressed well. The 74MW Ryton project, is
expected to reach the Final Investment Decision ("FID") stage post period end.
Additionally, a follow-on loan was added to the Phoenix mezzanine debt
investment to enable our partner, Akuo, to build 25MW of new battery storage
capacity at sites on Corsica and La Reunion.
The Investment Manager also considers opportunities to secure greater value
for shareholders through divestments where a third party may attribute greater
value to a project than recognised in the Portfolio Valuation. There may be
selective opportunities to adjust the portfolio's composition by rotating out
of certain assets and into diversifying, and potentially higher returning,
opportunities.
Current outstanding commitments
The Company has outstanding investment commitments (for construction
activities) of £146m relating to the Swedish onshore wind construction
projects (Ranasjö and Salsjö), and two of the UK battery storage projects
(Ryton and Drakelow), set out in the table below by expected due date. Further
information is detailed on page 18 of the 2023 Interim Report. The Company's
£750m committed RCF was drawn £410m as at 30 June 2023.
H2 2023 2024 2025 Total
Outstanding commitments (£m) 44 72 30 146
Revenue profile
TRIG benefits from diversification across several power markets, with projects
in Great Britain, the Single Electricity Market (Northern Ireland and the
Republic of Ireland), the main continental European power market (France and
Germany), the Nordic market (Sweden) and the Iberian market (Spain).
TRIG's portfolio cash revenues, as well as benefitting from wholesale power
prices, have substantial medium-term protection from movements in power prices
as the portfolio receives a high proportion of its revenue from government
subsidies such as Feed-in-Tariffs ("FiTs"), Contracts for Difference ("CfDs"),
Renewable Obligation Certificates ("ROCs") or from selling electricity
generated via Power Purchase Agreements ("PPAs") with fixed prices or from
other hedges, together referred to as fixed revenues.
The Group(3) receives a portion of its revenues in Euros; 42% of the portfolio
by value is invested in Euro-denominated assets. The Group employs foreign
exchange hedging to significantly mitigate the cash flow and valuation
exposure to this risk, as expanded upon in the 'Valuation of the portfolio'
section.
The Investment Manager implements the Company's foreign exchange hedging
policy through Sterling-Euro swaps for up to four years forward. As a result
of the interest rate differential between UK and the Eurozone, forward foreign
exchange contracts over the next four years have been struck at levels better,
in Sterling terms, compared to the foreign exchange rate as at 30 June 2023
and used in the Portfolio Valuation.
Principal risks and uncertainties
TRIG's principal risks, approach to risk management and counterparty exposures
are unchanged to those set out in section 3.4 of the Company's 2022 Annual
Report - Risks and Risk Management. Updates against the principal risks are
summarised below.
In addition, in a macroeconomic environment with elevated inflation and rising
interest rates, the correlation of portfolio returns to inflation and the
Company's approach to long-term, fixed-rate and amortising structural debt are
key risk mitigants.
Regulation and taxation
The risk of government or regulatory support for renewables changing
adversely.
In 2022, prolonged high power prices saw governments across Europe intervening
in energy markets, including through the introduction of 'windfall' taxes and
levies on generators to, in the first instance, help fund financial support to
ease the cost of electricity to end users. In the UK, the Electricity
Generator Levy is in place until 2028. In the EU, many of these levies expired
on 30 June 2023, with several countries not extending the period of
application, including Germany. There remains a risk that further intervention
may result if electricity prices were to increase significantly again;
however, the price levels that have historically triggered intervention are
not taken into account in the valuation of the Company's portfolio.
As detailed under Market Developments, the UK and EU governments are also
assessing options to reform electricity markets, including how the wholesale
electricity price is set and whether new long-term revenue support contracts
should be made available to existing generators. TRIG's approach to diversify
political and regulatory risk across jurisdictions helps to reduce the impact
on the portfolio from individual risks at the national level.
Power prices
The risk of electricity prices falling or not increasing as expected.
Power prices have been particularly volatile since 2020, with periods of very
low pricing experienced during the Covid pandemic and very high prices since
the outbreak of the conflict in Ukraine.
Power prices trended lower during the first half of 2023 but remain elevated
compared to historical levels. A combination of infra-marginal power price
caps implemented in Europe and the Electricity Generator Levy in the UK
reduced sensitivity to this change. Near-term forwards are now at levels
consistent with, or below, government intervention thresholds.
There has been little change in the long-term fundamentals of power prices in
the period, leading to limited movements in long-term power price forecasts
compared to those as at 31 December 2022 in most geographies. We are yet to
see the increase in supply chain costs and cost of capital flow through into
forecasters' renewables deployment and electricity demand assumptions.
The valuation of the Company's portfolio overlays market derived forward
prices to a blend of cannibalised power price forecast curves produced by
three independent forecasters.
Production performance
The risk that portfolio electricity production falls short of expectations.
Weather resource was below budget in the period, particularly wind in the UK
and Ireland. The overall shortfall against budget was moderated by portfolio
diversification, particularly the solar portion of the portfolio which was
ahead of budget for the period. Portfolio diversification has been enhanced in
the period with the commissioning of the Cadiz solar projects in Spain and the
Grönhult onshore wind farm in Sweden. Further, operational partners across
the portfolio, including RES, continue to develop energy yield value
enhancements to improve energy output.
Market developments
UK
In February 2023, the UK government published a summary of responses to the
Autumn 2022 Review of Electricity Market Arrangements consultation, and at the
same time reinforced the current pay-as-clear price setting mechanism as the
most appropriate. One of the key areas which is subject to ongoing debate is
the market structure and whether there remains one price across the whole of
Great Britain, or there is a move to locational pricing with the island split
into either several price zones or hundreds of price nodes.
A move to locational pricing may result in merchant power price revenues
received by projects nearer demand centres increasing; but projects further
from demand centres may see electricity offtake pricing fall. Should
locational pricing be adopted, it is unlikely to be beneficial for most wind
farms which tend to be in remote areas, although transitional arrangements may
be adopted which could mitigate this risk.
A number of studies are currently underway in relation to the different market
structures being considered. One such study has indicated that a move to
locational pricing might result in savings for consumers; another indicates
that locational pricing would be more expensive. In both cases, each study
highlights significant unquantified risks with overhauling the market
structure. It is also important to continue to appeal to wind farm developers
and financiers, with signs already that wind farm development is reducing due
to economic pressures. Further studies are expected to be published during the
summer and a second industry consultation is expected in the autumn.
EU
Shortly following their consultation in February 2023, the European Commission
proposed a number of possible reforms to power markets. Discussion of the
reforms remains ongoing. These reforms indicate a desire to improve
electricity pricing visibility for generators and customers through greater
use of power purchase agreements with government guarantees, by strengthening
power markets through grid infrastructure investment, by increasing the use of
two-way Contracts for Difference for new build renewable projects, and in
doing so protecting retail consumers.
Outlook
During a period of continued geopolitical and macroeconomic uncertainty, the
Company's portfolio has again demonstrated its inherent resilience through
strong cash generation. The strength of the Company's prudent capital
structure, the inflation correlation within its revenue streams, and distinct
investment strategy continues to be underscored in the current volatile
market.
The opportunity to deliver higher returns from progressing late-stage
development and construction assets means that the Company is well positioned
to continue its track record of delivering income and capital growth. The
active management of the portfolio includes the consideration of disposals
where complementary to the Company's overall strategy.
The Managers' implementation of the Company's strategy through their approach
to portfolio diversification, value enhancement and capital allocation seeks
to maximise returns for shareholders. InfraRed's differentiated investment
capabilities combined with RES' operational excellence, stand the Company in
good stead to deliver a real value proposition to shareholders.
2. Operational cash flow generated is reconciled to the cash flow
statements as follows: Cash flow from investments £171.3m less Company
(including its immediate subsidiaries TRIG UK and TRIG UK I) expenses £26.1m
plus project level debt repayments £119.1m
3. The Company, TRIG UK, TRIG UK I and its portfolio of investments
are known as the "Group"
Operations Report
Operational performance
H1 2023 Electricity H1 2023 Variance to budget
Production (GWh)(*)
Onshore GB 583 (21%)
Ireland 131 (18%)
France 329 (6%)
Scandinavia 353 (7%)
Offshore GB 703 (7%)
Germany 400 (7%)
Solar GB, France, Spain 455 2%
Total 2,954 (9.3%)
* Includes compensated production due to grid curtailments, and other
availability warranties and insurance
Overall, wind resource in most of the jurisdictions in which TRIG invests
across Europe has been below budget in the period. The impact of a
particularly poor wind resource period in the UK and Ireland has been
moderated by the diversification of the portfolio in regions such as France,
Germany and Sweden, where the negative variance to budget has been less, and
the inclusion of solar in the portfolio, which outperformed budget.
Onshore wind
GB
Production in the GB region was adversely affected across the region by very
low wind in the half year period. During this time a number of major component
exchanges were undertaken so to minimise the lost production during the
associated downtime compared to undertaking works when wind levels are more
normal.
New Operations & Maintenance ("O&M") contracts were signed for three
more of the seven UK and Ireland projects which were competitively tendered in
2022. These contracts leverage TRIG's portfolio size and purchasing power
whilst capturing site-specific technical requirements.
A ten-year corporate PPA was signed to secure fixed revenue at an attractive
price at TRIG's first subsidy-free wind farm in the GB region, Blary Hill.
Northern Ireland & Republic of Ireland
Generation in the region, which constitutes 4% of the portfolio, was below
budget due to a mixture of low wind and major component replacements at older
sites.
France
Sites in the north of France performed well, driven by strong wind resource
and high availability. This was offset by below-budget production at the
southern sites, which experienced a significant number of high wind events
requiring preventative shut downs during Q1. Vannier, which completed
construction in H2 2022, performed on budget.
Repowering activities on the four older southern sites continue, with grid
connection secured for Claves in the period. Major components continue to be
replaced to enable the projects to maximise the benefit from current high
power pricing ahead of decommissioning and repowering. Dismantling of the
first site is expected to commence in late 2024.
Sweden
Production was 7% under budget, due to low wind compared to long-term
averages. Jädraås and the newly constructed Grönhult are located in
different regions of Sweden, adding diversification to the production within
the country.
Offshore wind
GB
Production was 9% below budget again due to low wind resource relative to
long-term averages. Production was also adversely impacted at Beatrice by
array cable issues which required some curtailment. Additional monitoring is
planned to gather the required data to support the removal of this
curtailment.
Improved terms were secured on a major O&M contract for one asset in the
region, which will amount to significant savings over a period of ten years.
Proactive end of warranty inspections and negotiations across TRIG's offshore
wind portfolio continue to maximise the long-term performance and value of
these assets.
Germany
Production was 7% below budget, largely due to low wind resource and a grid
outage at Merkur in Q1.
Leading edge protection works are being progressed at Merkur over the summer
to protect the long-term integrity of the blades. These works are being
conducted under warranty by the turbine provider and include protection
against lost revenue.
At Gode 1, the grid operator has constructed and commissioned a new offshore
substation for future neighbouring windfarms. In the years leading up to
project completion, this will provide an alternative export route for Gode 1
in the event of an outage on its main substation, thereby reducing the risk of
future grid losses. It also provides an alternative import route, which can be
used to reduce downtime following grid outages.
Solar
GB, France & Spain
The solar portfolio outperformed budget, reinforcing the benefits of a diverse
portfolio.
Within Spain, generating ahead of their takeover date in Q1, the four solar
projects in Cadiz performed well, resulting in above-budget production in the
period. The other Spanish solar project Valdesolar maintained very high
availability and its production was on budget in the period.
Within GB, a major panel replacement programme is underway at Parsonage
following a successful warranty claim. The newer, more efficient modules are
expected to improve future performance.
Manufacturer Exposure
It is important to work with a range of suppliers, and TRIG's portfolio is
well diversified across a range of different models and vintages of wind and
solar technology. TRIG has exposure to many different equipment manufacturers,
with Siemens Gamesa Renewable Energy (SGRE) being the largest of these on a
Portfolio Valuation basis. Issues with equipment inevitably occur from time to
time across different manufacturers. The Company has not been materially
impacted by these due to contractual protections in place and repairs /
correction works being carried out. This includes a range of different
contract types, some of which are long-term and all-inclusive, providing
protection against expenditure and downtime. End-of-Warranty inspections are
also pro-actively conducted, providing time for any issues to be rectified
ahead of expiry. The combination of visibility across the TRIG portfolio, and
RES's market awareness allows the Operations Manager to identify potential
issues in advance and focus in on monitoring the areas with the greatest
potential risks.
Construction
Arenosas, Malabrigo, El Yarte and Guita, the four Spanish solar projects
located in Cadiz, successfully reached operations in Q1 2023. These projects
significantly increase the size of TRIG's operational solar portfolio and
strengthen its technological and geographical diversification. The independent
Owner's Engineer will continue to be closely involved in the projects until
the end of the construction warranty period, to ensure any defects are
captured under the warranty and thereby protect long-term quality.
Following first export in October 2022, commissioning activities at the
Swedish onshore windfarm Grönhult were completed in the period. The site
achieved operational takeover in Q2 2023, culminating with a well-attended
inauguration ceremony in June.
Swedish windfarms Ranasjö and Salsjö remain on target to take over in 2024.
Turbine component deliveries are ongoing with the first turbines now erected.
On- and off-site electrical works are progressing with energisation expected
later this year.
Development
Design and procurement works on the first of the four storage development
projects are well advanced with contracts expected to be placed and ground
works commenced later this year. Activities on the latter projects will ramp
up in line with their grid connection dates.
Health & safety
Delivering high quality health and safety within the construction and
operational portfolio is the top priority. The portfolio's asset managers
promote a strong safety culture through a pro-active approach utilizing safety
drills, training days, internal and external audits and other activities which
complement core safety frameworks. The Operations Manager continues to engage
with the asset managers to ensure sharing of best practice and lessons learned
across the portfolio.
In H1 2023 a very low incident rate was achieved, with two Lost Time
Accidents.
A selection of proactive health & safety measures from the period are
included below:
- Members of the Board visited Broxburn storage project in Scotland.
Alongside the Managers they met with the site Operations & Maintenance and
Asset Management teams, and reviewed the measures taken to mitigate inherent
safety risks of a storage project
- Project company directors continued to visit and undertake safety
walks at both operational and construction projects, including the Cadiz and
Ranasjö & Salsjö construction sites, where they met with the on-site
teams
- Welfare facilities were installed at four GB solar sites, providing
improved workplaces for technicians. A full roll-out is planned following good
feedback
- One of TRIG's offshore wind projects provided assistance when a crew
member on a local fishing vessel became critically ill. The wind farm's medic
responded to the emergency call and attended to the patient until the
coastguard arrived
- In recognition of the additional risks relating to major,
non-standard works on offshore wind projects, 24-hour enhanced safety
supervision has been put in place for the ongoing Merkur blade protection work
- Safety drills and emergency response exercises were undertaken at
several assets both and on and offshore, with bad weather days used as
opportunities for further training and familiarisation with vessel cranes,
lifting procedures, use of gangways and fire and first aid procedures
Enhancements
As Operations Manager, RES is dedicated to enhancing the operational
performance to increase the shareholder and stakeholder value of the portfolio
through both commercial and technical initiatives. RES applies a structured
framework to identify, appraise and implement enhancements at both the
individual project and portfolio levels.
Enhancements secured during the first half of 2023 included:
Commercial enhancements:
- TRIG entered into a corporate Power Purchase Agreement at Blary Hill
onshore wind farm for a ten-year period on pay-as-produced terms. This
provides TRIG with long-term price security and improves value on a
risk-adjusted basis.
- Two GB Solar sites qualified for UKPN Flexibility Regime, to enable
voluntary compensated curtailment at times of excess generation relative to
demand.
- A significant reduction in the cost of a core operations maintenance
contract for an offshore wind farm was achieved following extensive
negotiations alongside investment partners, improving upon the investment
case. There were no material changes to contract scope.
- A framework agreement for inverter spares has been signed across
eight GB solar projects that will reduce downtime for long-lead time items and
enables TRIG to leverage the portfolio effect. Avoided downtime estimated at
£500k over the 15-year contract term.
- FID reached for the installation of additional battery storage at a
hybrid solar and battery project within the Phoenix portfolio. TRIG provided
financing through the addition of a follow-on loan.
Blade improvements:
- Following trials at two GB wind farms of aerodynamic improvements to
turbine blades, a package is being rolled out across four more sites in the GB
wind portfolio, totalling 59MW of generation capacity. The package also
includes a suite of software upgrades to maximise the additional energy yield
gained from equipment installations and will be initially implemented at one
of the trial sites with the upgrades already installed.
- Across the wider portfolio, application is being investigated, with
technical due diligence for aerodynamic blade upgrades being progressed at two
joint venture projects.
Wind turbine software enhancements:
- The wake steering and collective control trial at Altahullion in
Northern Ireland has been completed, with testing concluded on three of the
four elements. This enhancement is an innovative retrofitted upgrade to
increase production and reduce turbine loads. The reduction in loads has been
verified by an independent assessment demonstrating an increase in the
remaining life of turbine components.
- Validation of a suite of yield-enhancing software upgrades at Garreg
Lwyd wind farm in Wales has been completed following implementation in 2021,
confirming a >1% increase in the energy yield.
- Results from implementation of a pitch and yaw optimization tool at
Gode demonstrated an 0.2% yield uplift.
- Life extension work also continues across TRIG's onshore wind and
solar projects in the UK and Ireland. Key milestones in the period include
extensions to planning consents at Meikle Carewe and Earlseat onshore wind
farms.
Directors' Statement of 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 Managers' 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
Richard Morse
Chairman
3 August 2023
Publication of documentation
The above information is an extract from TRIG's 2023 Interim Report. The
Interim Report has been submitted to the National Storage Mechanism and will
shortly be available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fdata.fca.org.uk%2F%23%2Fnsm%2Fnationalstoragemechanism&data=02%7C01%7Cphilippe.vuillaume%40partnersgroup.com%7C9921b2a94ca84f80abd008d83e0034f3%7C0bcc0075229d4973b0c30ef63eb9c51f%7C0%7C0%7C637327517903944751&sdata=7xdHtTc7SAh63in9nIZT0csRmMwIWJIIjmp6yNOLWDo%3D&reserved=0)
. It can also be obtained from the Company Secretary or from the Reports &
Publications section of the Company's website, at https://www.trig-ltd.com/
(https://www.trig-ltd.com/) .
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