REG - Renew Infra Grp Ld - Net Asset Value

Renewables InfrastructureAnnouncement

21/11/2022 07:00

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RNS Number : 9790G  Renewables Infrastructure Grp (The)  21 November 2022

 

 

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STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA.

This announcement has been determined to contain inside information for the
purposes of the market abuse regulation (EU) No.596/2014.

21 November 2022

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

TRIG is providing an estimated unaudited Net Asset Value as at 30 September
2022 including the impact of subsequent government action to increase taxes or
cap the revenues of electricity generators (the "Estimated NAV"). The
Estimated NAV is 134.3p per share, which is broadly unchanged from the
Company's NAV at 30 June 2022 and represents an increase of 15.0p per share
compared with 31 December 2021.

Since the Company's last published Net Asset Value as at 30 June 2022:

·      the UK Government announced an electricity generator levy as part
of its Autumn Statement on 17 November 2022, and the EU has announced its
intention to introduce a power price cap;

·      power prices and inflation expectations are higher than assumed
within the 30 June 2022 portfolio valuation; and

·      government borrowing rates have increased.

The table below sets out these movements that, in aggregate, represent an
increase of 0.1p per share since 30 June 2022:

                                                                             Net Asset Value (pence per share)
                                                                                                                   Positive movements  Negative movements
 NAV as at 30 June 2022                                                      134.2p
  UK Government electricity generator levy                                                                                             -8.3p
  Increase in power price forecasts                                                                                +8.7p
  Increase in inflation actuals and near-term forecast                                                             +4.6p
  Increase in valuation discount rates to 7.1%                                                                                         -4.6p
  Other (foreign exchange, lower than budgeted generation in Q3 and higher                                                             -0.3p
 achieved power prices)
 Sum of movements                                                                                                  +13.3p              -13.2p
 Estimated NAV as at 30 September 2022 including the impact of the levy      134.3p
 introduced in the UK Government's Autumn Statement (unaudited)

Government Intervention

As announced within the Autumn Statement on 17 November 2022, the UK
Government will enact legislation as part of the 2023 Finance Bill, to impose
a 45% windfall levy on wholesale market revenues in excess of £75/MWh for the
period from 2023 to 2028 (the "Electricity Generator Levy"). Based upon the
information released, the Investment Manager estimates the expected impact of
the legislation has reduced the Company's Estimated NAV by 8.3p/share relative
to the valuation that it would have otherwise been as at 30 September 2022.

On 6 October 2022, the European Commission adopted a regulation to introduce
an inframarginal electricity price cap of up to €180/MWh, with individual
Member States able to set a lower cap level. No significant adverse impact of
this action is expected as the Company's investments:

·      in Germany and France earn predominantly fixed price per MWh
revenues via government support mechanisms;

·      in Sweden and Spain have forecast power prices which are assumed
to be significantly below the proposed cap levels; and

·      in Ireland have limited power price exposure in the context of
the portfolio as a whole.

Power prices

Forecast wholesale power prices have increased, adding 8.7p/share to the
Company's Estimated NAV. Approximately 80% of this impact relates to GB
projects where TRIG has the majority of its near-term power price exposure. As
at 30 June 2022, approximately 42% of portfolio revenues until December 2024
were not fixed and were exposed to merchant power prices. The table below sets
out the average assumed captured power prices used in TRIG's valuation in the
GB market as at 30 June 2022 for 2023 and 2024, and the equivalent figures
adopted in the Estimated NAV. These numbers are before the impact of the UK
government intervention, which we identify separately above.

 Assumed GB power price                          2023   2024

(£/MWh, real (current prices), cannibalised)
 As at 30 June 2022                              £169   £116
 As at 30 September 2022                         £205   £170

The power price assumptions in the table above represent approximately a 30%
discount to current baseload forward power prices. The methodology to
determine the discount applied is consistent with the approach taken for the
valuation as at 30 June 2022. This represents the limited ability to fix at
market forwards due to their low liquidity and higher than usual price
volatility being observed in the market (and therefore the uncertainty of
achieving the forward prices) as well as the cannibalisation effect that
results from the intermittent nature of renewables generation. The Company's
sensitivity to changes in these power prices down to £75/MWh is significantly
reduced as a consequence of the Electricity Generator Levy.

Inflation

Actual inflation has been higher than was forecast at 30 June 2022 across all
of the regions in which TRIG invests. In addition, the Company has increased
its expectations for near term inflation compared to its assumptions at 30
June 2022, as noted in the table below.

In assessing TRIG's inflation assumptions, we have considered the latest
independent near-term inflation forecasts for the UK and European markets.

Overall, these increases added c. 4.6p/share to the Company's Estimated NAV.

                        Assumptions as at 30 June 2022                        Assumptions in the Estimated NAV            Change in assumptions from 30 June 2022
 Inflation assumptions  2022(( 1  (#_ftn1) ))  2023      2024-2029  2030+     2022       2023       2024-2029  2030+      2022        2023        2024-2029   2030+
 UK RPI                 10.3%                  3.5%      2.75%      2.0%      13.4%      5.0%       2.75%      2.0%       +3.1%       +1.5%       -           -
 UK CPI                 8.4%                   2.75%     2.0%       2.0%      10.7%      4.25%      2.0%       2.0%       +2.3%       +1.5%       -           -
 UK Power Price         10.3%                  3.5%      2.75%      2.25%     13.4%      5.0%       2.75%      2.25%      +3.1%       +1.5%       -           -
 Eurozone               6.5%                   2.0%      2.0%       2.0%      7.3%       3.0%       2.0%       2.0%       +0.8%       +1.0%       -           -

Discount Rates

The average of the discount rates used in the valuation across the portfolio
is 7.1%. This represents an average increase of 0.5% to the valuation discount
rate applied at 30 June 2022 and is after taking account of lower risk
investment made in the quarter. Whilst transaction evidence is not yet
demonstrating a clear increase in discount rates, the yield of long-term
government bonds has continued to increase since 30 June 2022. The valuation
discount rates applied to investments in the UK have been increased by more
than those in the EU (by approximately twice as much) reflecting the higher
long-term government bond yields in the UK.

 

Enquiries

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

Richard Crawford

Phil George

Minesh Shah

Mohammed Zaheer

 

Maitland/AMO                                                       +44
(0) 20 7379 5151

Rhys Jones

Charles Withey

 

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
2.4GW; enough renewable power for 1.7 million homes and to avoid over 2
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 180 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 across the globe,
across listed and private funds in 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 stars rating for the 2021 period. It is also a member of
the Net Zero Asset Manager's Initiative, a certified CarbonNeutral®
company(3), 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 Q2 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)

 

(3) In accordance with The CarbonNeutral Protocol. Further information is
available at https://carbonneutral.com/the-carbonneutral-protocol
(https://carbonneutral.com/the-carbonneutral-protocol)

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 22GW in capacity. RES supports over 9.5GW of operational assets worldwide
for a large client base. Headquartered in Hertfordshire, UK, RES is active in
11 countries and has over 3,000 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/) .

 

 1  (#_ftnref1) 2022 is for the full year. It reflects latest actuals
available at the time of publication of results and 6% (annualised) for the
remainder of the year.

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