REG - Renew Infra Grp Ld - NAV, Dividend & Capital Allocation Update Q4 2024

Renewables InfrastructureAnnouncement

11/02/2025 07:15

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250211:nRSK5942Wa&default-theme=true

RNS Number : 5942W  Renewables Infrastructure Grp (The)  11 February 2025

 

 

11 February 2025

 

The Renewables Infrastructure Group Limited

"TRIG" or "the Company", a London-listed renewables investment company advised
by InfraRed Capital Partners ("InfraRed") as Investment Manager and Renewable
Energy Systems ("RES") as Operations Manager.

 

Net Asset Value, dividend & capital allocation update - Q4 2024

 

·      Estimated unaudited Net Asset Value as at 31 December 2024 is
115.9 pence per share, a decrease of 5.7 pence per share in the quarter
principally due to changes to operational assumptions and an increase in UK
discount rates by 30 basis points.

·      2024 dividend target of 7.47 pence per share was met. It was
covered 2.1x on a gross basis before the repayment of £206m project level
debt, and 1.0x on a net basis(1).

·      2025 dividend target increased to 7.55 pence per share(2). Gross
cash cover and net dividend cover are expected to increase to 2.1-2.2x and c.
1.1x, respectively, in 2025(2).

·      Share buyback programme increased from £50m to £150m.

·      The Company's recently renewed revolving credit facility ("RCF")
will be used to fund share buybacks as a bridge to further divestments and
refinancings, the proceeds of which are expected to exceed £300m.

Q4 2024 movements in Net Asset Value per share
                                     Net Asset Value  Positive Movements  Negative Movements

                                     (p / share)      (p / share)         (p / share)
 NAV per share at 30 September 2024  121.6
 Q4 portfolio performance                                                 (0.8)
 Q4 macroeconomic movements                                               (1.7)
 Changes to revenue forecasts                                             (0.1)
 Update of operational assumptions                                        (3.4)
 Value enhancement                                    0.2
 Impact of buybacks                                   0.1
 NAV per share at 31 December 20243  115.9

The key drivers of the movement in NAV per share over the quarter are
summarised in the table below:

 

Q4 portfolio performance

Portfolio performance was below forecast in the quarter principally due to
lower than budgeted wind generation in the UK and south of France, with
particularly low wind speeds in November. Power price levels achieved in the
period were consistent with valuation assumptions for most regions.

Q4 macroeconomic movements

The reduction in valuation due to macroeconomic movements in the quarter was
largely driven by discount rates for UK assets being increased by 30bps,
following the widening of Gilt yields observed over the period. No adjustment
was made to European discount rates where sovereign bond yields have remained
broadly stable. The movement in the UK discount rate resulted in a -1.5p
reduction in the NAV per share. The portfolio weighted average discount rate
is now 8.6%, representing a 4.7% equity risk premium over the portfolio
weighted average reference rate.

Actual inflation in the period was slightly below that forecast in the 30 June
2024 valuation. This was the net impact of UK RPI and CPI in the year being
slightly above the previous forecast and European inflation coming in below
expectations. The Euro strengthened against Sterling over the quarter, with
the impact partly offset by the hedges the Company has in place at group
level. Overall, movements in inflation and FX had a -0.2p impact on NAV per
share.

Changes to revenue forecasts

Changes to revenue forecasts have broadly had a neutral effect on the
valuation, mitigated in part by TRIG's diversification across technologies and
geographies. A recovery in Swedish power price forecasts was offset by
reductions in expectations for the GB and Spanish power market. Updates to
REGOs, GoOs and capacity market forecast revenues had a slightly negative
impact on valuation.

Changes to operational assumptions

The Managers review and update each project's budget annually, which includes
an assessment of the appropriateness of energy yield assumptions. This annual
process resulted in adjustments having both positive and negative impact on
the portfolio valuation. The more significant changes included:

·      A net reduction forecast cash flows resulting from a change in
energy yield and operating costs assumptions (-2.4p); and

·      Increased grid losses for transmission connected UK offshore wind
projects expected to apply from 1 April 2025(4) (-0.9p).

Changes to energy yield assumptions have reduced the overall portfolio P50
generation expectation by c. 95GWh (approximately 1.5% annual production).

Value enhancements and impact of buybacks

A number of attractive revenue fixes were struck in Q4, demonstrating the
Manager's active approach to power price management, and taking projected
fixed revenues per unit of generation to 80% for 2025:

·      Power price fixes were placed at four UK onshore wind farms for
100% of their output over 18 months, on a pay-as-produced basis.

·      A pay as produced fix for Valdesolar in Spain for 26% of its
generation for five years.

·      The Company also entered into a 10-year fixed price contract for
40% of the GoO certificates generated by the Ranasjö and Salsjö windfarms in
Sweden.

Since the period end, TRIG has entered heads of term discussions in respect of
a 10-year corporate power purchase agreement ("CPPA") for c. 2% of annual
portfolio-wide generation. The impact of this CPPA has not been included in
the valuation.

The clearance and consent process for the sale of a 15.2% stake in Gode
offshore wind farm for €100m at a 9% premium to carrying value, announced 1
August 2024, has taken longer than initially expected. The ticker fee agreed
as part of the sale uplifts the consideration due with the passage of time.
Completion of the sale is expected in late February 2025.

As part of the announced buyback programme, the Company purchased 15m shares
in the quarter, increasing the NAV per share by 0.1p.

Capital allocation, dividend and share buyback

The key principle in the Board's approach to capital allocation remains to act
in the best interests of long-term shareholders.

Based on current expectations for TRIG's inflation linked revenues and power
price forecasts, the Board has set the dividend target for 2025 at 7.55p per
share, representing 1.1% growth on the 2024 dividend. This increase is
consistent with TRIG's policy of increasing the dividend to the extent it is
prudent to do so. The 2025 dividend target represents a 9.4% yield to TRIG's
closing share price on 10 February 2025.

Having consulted the Managers, the Board is increasing the scale of the
Company's share buyback programme. The buyback programme is being increased
from £50m to £150m, representing approximately 7% of TRIG's shares in issue
based on the share price as at 10 February 2025, of which £30m has been
invested in the purchase of 32m shares to date. The programme is expected to
end by 31 May 2026, subject to market conditions.

This recognises:

·      The investment opportunity presented by the prevailing share
price compared to the Net Asset Value per share as at 31 December 2024.

·      The attractive dividend yield (9.4% based on the share price as
at 10 February 2025) compared to the Company's marginal cost of debt (c. 5.5%
interest rate).

·      Buybacks at the prevailing share price are accretive to cash flow
per share and therefore dividend growth prospects for long-term shareholders.

In increasing the share buyback programme, the Board notes:

·      The strength of TRIG's balance sheet having repaid c. £500m of
debt over the last two years and with the vast majority of debt across the
group being fixed rate (at an average interest rate of 3.5%) and amortising
(being repaid c. £190m per annum). TRIG's project-level gearing is modest at
37% of the portfolio enterprise value.

·      Divestments of £210m signed by the Managers over the past 24
months at an average 10% premium to carrying value.

·      The Company's revolving credit facility ("RCF") will be used to
fund share buybacks as a bridge to further divestments and refinancings, the
proceeds of which are expected to exceed £300m.

·      Drawings under the Company's revolving credit facility remain
expected to fall to c. £100m during the course of 2025, net of the increase
in the Company's buyback programme.

The visibility of projected revenues across the group (80% fixed price per MWh
electricity generated in 2025) as well as the resilient and growing operating
cash flows (gross cash cover was 2.1x in 2024 and is expected to grow to c.
2.1-2.2x in 2025).

Management terms

The Board is in discussion with the Managers about the terms of the Investment
Management Agreement and Operations Management Agreement (including future
fees). A further announcement in connection with this is expected to be made
alongside the annual results.

 

 

(1) Net dividend cover with profit on disposals completed in 2024 in respect
of Little Raith, Forss and Pallas onshore wind farms would increase to 1.06x,
which does not include profit on disposal of a 15.2% stake in Gode offshore
wind farm that is expected to complete in late February 2025.

(2) Past performance is not a reliable indicator of future results. There can
be no assurance that targets will be met or that the Company will make any
distributions, or that investors will receive any return on their capital.
Capital and income at risk.

(3) NAV per share at 31 December 2024 presented after unwind of the discount
rate, company costs and payment of the quarterly interim dividend.

(4) Large assets connected to the transmission network have their generation
volumes adjusted for "transmission losses" to reflect the electricity lost as
heat through the network (split between generators and consumers). These
losses are assessed every year and are applicable as of 1 April 2025. The
losses comprise two components: a) an "average" component which is the same
for all generators in any half hour period, designed to recover the cost; and
b) a "locational" component differing between 14 zones designed to
redistribute losses (i.e. a net-zero impact) based upon how efficiently the
marginal unit of electricity generated / consumed in the zone can be utilised.
The results of the annual review of the locational losses have led to
relatively significant redistribution of losses between relevant zones.
Overall, this redistribution has been slightly positive for wind farms in
England and more negative for wind farms in Scotland.

 

 

Enquiries

 

 InfraRed Capital Partners Limited Minesh Shah  +44 (0) 20 7484 1800

 Phil George Mohammed Zaheer
 Brunswick Mara James                           +44 (0) 20 7404 5959 / TRIG@brunswickgroup.com
                                                (mailto:TRIG@brunswickgroup.com)
 Investec Bank Plc Lucy Lewis                   +44 (0) 20 7597 4000

 Tom Skinner
 BNP Paribas Virginia Khoo Carwyn Evans         +44 (0) 20 7595 9444
 Notes
 The Company

 

The Renewables Infrastructure Group ("TRIG" or the "Company") is a leading
London-listed renewable energy infrastructure investment company. The Company
seeks to provide shareholders with an attractive long-term, income-based
return with a positive correlation to inflation by focusing on strong cash
generation across a diversified portfolio of predominantly operating projects.

 

TRIG is invested in a portfolio of wind, solar and battery storage projects
across six markets in Europe with aggregate net generating capacity of 2.7GW;
enough renewable power for 1.8 million homes and to avoid 2.2 million tonnes
of carbon emissions per annum.

Further details can be found on TRIG's website at www.trig-
(http://www.trig-ltd.com/) ltd.com (http://www.trig-ltd.com/) .
(http://www.trig-ltd.com/)

 

Investment Manager

InfraRed Capital Partners is an international infrastructure asset manager,
with more than 160 professionals operating worldwide from offices in London,
Madrid, New York, Sydney and Seoul. Over the past 25 years, InfraRed has
established itself as a highly successful developer and steward of
infrastructure assets that play a vital role in supporting communities.
InfraRed manages US$13bn of equity capital1for investors around the globe, in
listed and private funds across both core and value-add strategies.

InfraRed is part of SLC Management, the institutional alternatives and
traditional asset management business of Sun Life.

For more information, please visit www.ircp.com. (https://www.ircp.com/)

1 Uses 5-year average FX as at 30th June 2024 of GBP/USD of 1.2821; EUR/USD
1.1141. EUM is USD 12.741m.

Operations Manager

TRIG's Operations Manager is RES ("Renewable Energy Systems"). RES is the
world's largest independent renewable energy company, working across 24
countries and active in wind, solar, energy storage, biomass, hydro, green
hydrogen, transmission, and distribution. An industry innovator for over 40
years, RES has delivered more than 24GW of renewable energy projects across
the globe and plans to bring more than 22GW of new capacity online in the next
five years.

As a service provider, RES has the skills and experience in asset management,
operations and maintenance (O&M), and spare parts - supporting 41GW of
renewable assets across 1,300 sites. RES brings to the market a range of
purposeful, practical technology-based products and digital solutions designed
to maximise investment and deployment of renewable energy. RES is the power
behind a clean energy future where everyone has access to affordable zero
carbon energy bringing together global experience, passion, and the innovation
of its 4,500 people to transform the way energy is generated, stored and
supplied.

Further details can be found on the website at www.res-
(http://www.res-group.com/) group.com (http://www.res-group.com/) .
(http://www.res-group.com/)

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  NAVGZGMZMGRGKZZ