TIDMTRIG
RNS Number : 9790G
Renewables Infrastructure Grp (The)
21 November 2022
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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 Negative
movements 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 achieved power prices) -0.3p
---------------- ----------- -----------
Sum of movements +13.3p -13.2p
---------------- ----------- -----------
Estimated NAV as at 30 September
2022 including the impact of the
levy introduced in the UK Government's
Autumn Statement (unaudited) 134.3p
---------------- ----------- -----------
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 GBP75/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
EUR180/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
(GBP/MWh, real (current prices), cannibalised) 2023 2024
As at 30 June 2022 GBP169 GBP116
------- -------
As at 30 September 2022 GBP205 GBP170
------- -------
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
GBP75/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 Assumptions in the Change in assumptions
30 June 2022 Estimated NAV from 30 June 2022
Inflation 2022
assumptions ([1]) 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 .
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(R) 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
(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
(3) In accordance with The CarbonNeutral Protocol. Further
information is available at
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 .
[1] 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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