REG - Renew Infra Grp Ld - Net Asset Value – Q3 2023

Renewables InfrastructureAnnouncement

27/10/2023 07:15

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RNS Number : 4711R  Renewables Infrastructure Grp (The)  27 October 2023

 

 

27 October 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.

Net Asset Value - Q3 2023

TRIG announces that its estimated unaudited Net Asset Value as at 30 September
2023 is 131.0 pence per share, a decrease of 1.2 pence per share to the
Company's last announced Net Asset Value as at 30 June 2023, principally due
to an increase in the portfolio weighted average discount rate to 8.1%.

Earnings for the quarter were 0.6 pence per share. An interim dividend of
1.795 pence per share was paid in the quarter and the Company remains on track
to pay the target dividend for the full year 2023 of 7.18 pence per share*.

Operational cash flows across the portfolio remain strong and for the full
year 2023 are expected to be c. £500m*,  being c. 3.0x gross cash cover over
the Company's 2023 target dividend (i.e. before the repayment of
portfolio-level debt). Portfolio level debt repayments for the year are
scheduled to total c. £200m. The Company's net dividend cover for the year
(after the portfolio debt repayments) is expected to be c. 1.6x.

The key drivers of the movement in Net Asset Value per share in the quarter
are summarised in the table below with further details following:

                                                               Net Asset Value (pence per share)  Positive Movements  Negative Movements
 NAV per share at 30 June 2023                                 132.2p
 Q3 generation & power prices compared to forecasts                                                                   (0.3)p
 Q3 Inflation and foreign exchange movements                                                      0.7p
 Increase in forecast power prices                                                                0.4p
 Portfolio weighted average discount rate increased by +20bps                                                         (2.0)p
 NAV per share at 30 September 2023**                          131.0p

* 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.

**NAV per share at 30 September 2023 presented after unwind of the discount
rate, company costs and payment of the dividend, which in aggregate sum to net
nil impact.

Q3 generation & power prices compared to forecasts

Underlying financial performance in the period was slightly below budget,
mainly reflecting lower than expected energy resource. The portfolio-wide
energy yield continued to benefit from diversification with below budget
German offshore wind generation offset by above budget UK wind generation.
Other markets were broadly in-line with expectations. Power prices were close
to budget.

Operational performance remains good, and the Operations Manager continues to
progress technical and operational value enhancements.

Q3 inflation and foreign exchange movements

The movement in the period reflected foreign exchange gains on euro
denominated investments as sterling weakened during the quarter. This was
slightly offset by inflation which was marginally lower in the period than
forecast.

Over the next 10 years, 56% of the Company's forecast revenue per unit of
generation is directly indexed to inflation. Market implied inflation
expectations in the UK are c. 0.75% higher than TRIG's long-term inflation
assumptions. If these market implied inflation expectations were to be
reflected in TRIG's UK inflation assumptions, portfolio-wide return
expectations would increase by c. 0.6% (noting that UK investments represent
57% of TRIG's portfolio, by value).

Increase in forecast power prices

Power price forecasts have marginally increased across the duration of the
blended curve.

Over the next ten years, 67% of the Company's forecast revenues per unit of
generation are fixed through government contracts or long-term power purchase
agreements. TRIG continues to adopt the cannibalisation assumptions of power
price forecasters.

Active management

On 21 August 2023, TRIG announced the disposal of three onshore wind farms in
Ireland. This transaction has now been completed, raising gross proceeds of
£22m at a 26% premium to carrying value. The Investment Manager is evaluating
further disposals to support portfolio construction objectives and to continue
to reduce borrowings under the Group's revolving credit facility ("RCF").

Construction and development stage projects continue to progress well:

·   The Ryton battery storage project in the UK reached the Final Investment
Decision (FID) stage in the quarter with operational takeover expected during
2025.

·    At the Drakelow battery storage project in the UK, infrastructure
design is underway with FID expected in early 2024.

·   At the Ranasjö and Salsjö wind farm projects in Sweden, towers have
been erected for 38 of the 39 turbines with eight turbines now in the
commissioning phase.

·   The Managers continue to progress further development stage investments
including those organically generated such as repowering and co-location, as
well as two further battery storage projects.

Portfolio weighted average discount rate

During the period, the Company secured a sale of assets at a significant
premium to NAV, whilst transactions across the wider renewables and
infrastructure marketplace also seem to indicate that valuations remain
resilient. The Investment Manager notes that long-term government bond yields
have increased further in the period across the geographies in which TRIG
operates.

Balancing these two factors, we have increased valuation discount rates
applied in the UK and EU by 0.2%. This brings the total increase in applied
valuation discount rates to 1.8% in the UK and 0.8% in the EU over the last 12
months. The portfolio weighted average discount rate has increased to 8.1%,
meaning the implied portfolio discount rate premium to 10-year government bond
yields at 30 September 2023 was 4.2%.

Capital allocation

Proceeds from the disposal of assets together with internally-generated cash
flows in excess of Company costs and dividends paid to shareholders have been
applied since 30 June 2023 to reduce the Company's revolving credit facility
balance by £40m to £370m.

The Company's investment commitments, which are expected to be fully funded
from internally-generated cash flows, relate to the construction of two
onshore windfarms in Sweden and two battery storage projects in the UK,
totalling nearly 300MW generation or storage capacity. Each of these projects
have return expectations that are significantly higher than the portfolio
average, serve to further diversify the portfolio and drive long-term value
for shareholders.

It remains the priority of the Board and Managers to pay an attractive,
resilient dividend to shareholders, fulfil existing investment commitments and
reduce RCF drawings. Beyond these priorities, excess cash flows may also be
applied to accretive investment opportunities, which may include share
buybacks particularly at prevailing share price levels.

Enquiries

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

Richard Crawford

Phil George

Minesh Shah

Mohammed Zaheer

 

Brunswick
              +44 (0) 20 7404 5959 / TRIG@brunswickgroup.com
(mailto:TRIG@brunswickgroup.com)

Mara James

 

Investec Bank Plc
                                               +44
(0) 20 7597 4000

Lucy Lewis

Tom Skinner

Denis Flanagan

 

BNP Paribas
                                                       +44
(0) 20 7595 9444

Virginia Khoo

Carwyn Evans

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 countries in Europe with aggregate net generating capacity of over
2.8GW; enough renewable power for 1.9 million homes and to avoid over 2.4
million tonnes of carbon emissions per annum. TRIG is seeking further suitable
investment opportunities which fit its stated Investment Policy.

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

 

Investment Manager

InfraRed Capital Partners is an international infrastructure investment
manager, with more than 190 professionals operating worldwide from offices in
London, New York, Sydney and Seoul. Over the past 25 years, InfraRed has
established itself as a highly successful developer and custodian of
infrastructure assets that play a vital role in supporting communities.
InfraRed manages US$14bn+ of equity capital(1) for investors around the
globe, in listed and private funds across both income and capital gain
strategies.

A long-term sustainability-led mindset is integral to how InfraRed operates as
it aims to achieve lasting, positive impacts and deliver on its vision of
Creating Better Futures. InfraRed has been a signatory of the Principles of
Responsible Investment since 2011 and has achieved the highest possible PRI
rating(2) for its infrastructure business for seven consecutive assessments,
having secured a 5 star rating for the 2021 period. It is also a member of the
Net Zero Asset Manager's Initiative and is a TCFD supporter.

InfraRed is part of SLC Management, the institutional alternatives and
traditional asset management business of Sun Life. InfraRed represents the
infrastructure equity arm of SLC Management, which also incorporates
BentallGreenOak, a global real estate investment management adviser, and
Crescent Capital, a global alternative credit investment asset manager.

www.ircp.com (http://www.ircp.com/)

 

(1) Data as at Q4 2022. Equity Capital is calculated using a 5-year average FX
rate.

 

(2) Principles for Responsible Investment ("PRI") ratings are based on
following a set of Principles, including incorporating ESG issues into
investment analysis, decision-making processes and ownership policies. More
information is available at https://www.unpri.org/about-the-pri
(https://www.unpri.org/about-the-pri)

 

Operations Manager

TRIG's Operations Manager is RES ("Renewable Energy Systems"), the world's
largest independent renewable energy company.

RES has been at the forefront of wind energy development for over 40 years,
with the expertise to develop, engineer, construct, finance and operate
projects around the globe. RES has developed or constructed onshore and
offshore wind, solar, energy storage and transmission projects totalling more
than 23GW in capacity. RES supports over 12GW of operational assets worldwide
for a large client base. Headquartered in Hertfordshire, UK, RES is active in
11 countries and has over 2,500 employees engaged in renewables globally.

RES is an expert at optimising energy yields, with a strong focus on safety
and sustainability. Further details can be found on the website
at www.res-group.com (http://www.res-group.com/) .

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