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TRIG’s diversity in technology and geography a source of strength over 2020

The Renewables Infrastructure Group (TRIG) has published its annual results, covering the period to 31 December 2020. Performance highlights include:

  • Portfolio generated 3,953GWh of electricity in the year (2019: 3,036GWh)
  • Directors’ portfolio valuation of £2,213m, as at 31 December 2020 (2019: £1,745m) following six acquisitions
  • NAV total return of 6.1% for the year and 8.1% since IPO (annualised)
  • Earnings per ordinary share of 5.9p (2019: 11.4p) and profit before tax of £100m (2019: £162m). Gains as a result of a reduction in valuation discount rates and the manager’s portfolio and asset-level initiatives dampened by lower power price forecasts
  • Declared dividends of 6.76p per share in line with the target for 2020 (2019: 6.64p)
  • Dividend target of 6.76p per share maintained for the year to 31 December 2021

‘Investments totalling £588m made and disposals of £118m in 2020’

Extracts from the statement of TRIG’s chair, Helen Mahy CBE, are provided below:

“The limits on the movement and activities of people following the outbreak of the pandemic significantly depressed demand for electricity in 2020, contributing to greater power price volatility and lower overall power price forecasts. The timescale for recovery in economic activity is uncertain. Nonetheless, the threat of climate change persists. The decarbonisation agenda has remained central to government policy across Europe, with increasing electrification of the energy system and renewables build-out at the core of further policy developments such as the EU’s New Green Deal and the key drivers in UK’s 2020 Energy White Paper. Together, these are key drivers in resetting the sector’s power price expectations and in 2020 we have seen an average 12% reduction in year-on-year power price forecasts across the markets in which TRIG has investments.

TRIG is notable amongst renewables investment companies for the combination of its scale with its portfolio diversification, both in terms of geography and technology. Diversification helps manage exposures to individual power markets, local weather patterns and regulatory risk (including different subsidy regimes), and resulted in a robust financial performance in 2020. Whilst the COVID-19 pandemic has affected all markets, it has had differing impacts on each European country where TRIG has an investment; for example, average power demand since 1 April 2020 compared to ‘business as usual’ has ranged from 2% less in Sweden to 6% less in the UK, with even greater short-term variability. TRIG continued to be acquisitive and the portfolio continued to grow with investments totalling £588m made and disposals of £118m in 2020. Investments were funded by a combination of the proceeds of equity fundraisings and cash reserves including the reinvestment of surplus cash generated from the company’s portfolio. At 31 December 2020, the company was drawn £40m under its renewed, three-year ESG-linked £500m revolving credit facility. TRIG has current investment commitments of £392m, of which £313m are expected to fall due by the end of H1 2021, including the completion of the Beatrice offshore wind farm acquisition and investments into construction projects (Blary Hill and Grönhult onshore wind farms).

TRIG continued to be acquisitive and the portfolio continued to grow with investments totalling £588m made and disposals of £118m in 2020. Investments were funded by a combination of the proceeds of equity fundraisings and cash reserves including the reinvestment of surplus cash generated from the Company’s portfolio. At 31 December 2020, the company was drawn £40m under its renewed, three-year ESG-linked £500m revolving credit facility. TRIG has current investment commitments of £392m, of which £313m are expected to fall due by the end of H1 2021, including the completion of the Beatrice offshore wind farm acquisition and investments into construction projects (Blary Hill and Grönhult onshore wind farms).

TRIG’s acquisition focus remains unchanged, targeting investments in the UK and Europe (including France, Germany, Ireland, and the Iberian and Nordic regions) across onshore wind, offshore wind and solar PV technologies. Geographic and technological diversification avoids reliance on singular markets at risk of over-priced acquisitions due to scarcity premia; and the Company’s exposure to any one regulatory regime, power price characteristics and weather system risk is reduced.

Offshore wind projects are fewer in number and significantly larger in scale than onshore renewables projects. This means that, with an increasing volume of capital looking to deploy into sustainable investment themes, they can be highly sought after, and that investment discipline is key. “Off-market” transactions sourced by InfraRed remain an important route to attractive opportunities.

The highly contracted nature of subsidised projects, including offshore wind, affords room to further diversify through selected non-subsidised assets, whilst retaining a balanced portfolio. The power price exposure of unsubsidised projects is typically managed through offtake agreements or hedging instruments. Such opportunities are most likely to come from the Nordic (onshore wind) and Iberian (solar PV) regions.

In 2020, the portfolio generated 3,953GWh of electricity, including compensated curtailments (2019: 3,036GWh), with the year-on-year increase primarily due to acquisitions. Overall, generation was 1% ahead of budget. Good weather resource in Great Britain and Sweden was offset by grid curtailments in the Republic of Ireland and Germany, reinforcing the benefits of TRIG’s diversified portfolio.

Asset availability has remained solid despite the challenges of Covid-19-related restrictions across Europe. TRIG benefits from sophisticated remote monitoring undertaken by project company management teams and the operations manager and having assets that are typically located away from densely populated areas where infection rates have been highest.

The Board believes investing responsibly and the consideration of environmental, social and governance (ESG) factors are essential to maintain a sustainable business model over the long term. In addition to mitigating climate change, TRIG’s sustainability goals are to preserve our natural environment, positively impact the communities we work in, and maintain ethics and integrity in governance. This means, through the Managers, ensuring each portfolio company takes responsibility for its ESG impact, risks and opportunities.

TRIG’s Sustainability Policy (published on the company’s website) is designed to provide an overview of the Company’s approach to ESG considerations, including climate change risks and opportunities. It comprises a framework of ESG objectives that are designed to improve outcomes for TRIG’s shareholders and its portfolio’s stakeholders.

The Board has allocated an additional £500,000 to help address the Covid-19 impact on the local communities around our sites. This is in addition to the c. £900,000 that the portfolio companies contribute to their local communities each year.

2021 will be a pivotal year for the climate change agenda, with the United States re-joining the Paris climate agreement and the UK set to host COP26 in November. Government policies around the world have shown renewable energy has a central role to play in decarbonising our energy usage. We are confident that the markets in which TRIG operates will continue to grow as government policy encourages the transition to a net-zero carbon future.

TRIG’s focus remains investing in the UK and other European countries where there are stable renewable energy frameworks. Acquisitions will continue to follow our strategy of maintaining a balanced portfolio with an appropriate risk-return profile and complement our existing, diversified portfolio. The greatest investment activity in TRIG’s key markets is expected from subsidised offshore wind in the North Sea and onshore wind in France, and unsubsidised onshore wind in the UK and Nordics and solar in Iberia. For investments made by TRIG in unsubsidised projects, we would expect, over time, to utilise offtake agreements or hedging instruments to manage power price risk.

The challenges of 2020 have resulted in a recognition that, when environmental, social and economic sustainability come together in a strong governance framework, they create the foundations for a sustainable, long-term investment proposition.”

TRIG: TRIG’s diversity in technology and geography a source of strength over 2020

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