TRIG The Renewables Infrastructure Group Limited

9 August 2024

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.

Announcement of Interim Results for the six months to 30 June 2024

Cash generation in line with expectations; and modest valuation decline:

·      Dividend cover of 1.1x in the period (30 June 2023: 1.7x), or 2.2x before the repayment of £103m of project level debt. TRIG's dividend guidance of 7.47p/share for FY 2024 (4% growth year-on-year) is reaffirmed by the Board.

·      4.3p reduction in Net Asset Value per share to 123.4p as at 30 June 2024 (31 December 2023: 127.7p), predominantly due to lower near-term power price forecasts, lower forecast inflation and below budget generation.

·      Generation in the period was 7% below budget including the adverse impact of third-party owned cable outages at two UK offshore wind farms, one of which has been repaired. Remedial works have been scheduled for the second site with commercial protections in place.

·      Valuation discount rates unchanged. The weighted average portfolio discount rate increased by 0.2% to 8.3% (31 December 2023: 8.1%), driven by changes in portfolio composition including the acquisition of Fig Power, a UK-based energy projects developer.

·      Good cash flow visibility comes from:

o  67% of projected portfolio revenues over the next 10 years being at a fixed price per MWh generated,

o  57% of projected portfolio revenues over the next 10 years being directly linked to inflation, and

o  The vast majority of debt being fixed rate and amortising.

Disciplined capital allocation:

·      Disposal agreed for four wind farms across Ireland, UK (Scotland) and, post period-end, Germany, for a combined consideration of £189m, representing an average premium of 10% over carrying value.

·      Revolving Credit Facility ("RCF") floating rate drawings reduced by £30m in the period to £334m at 30 June 2024 from retained cash flows and proceeds from completed disposals, net of investment activities. Further proceeds of £138m due as agreed sales complete during the remainder of 2024.

·    Commencement of a £50m share buyback programme recognises both the significant progress of disposal activities and the accretive investment opportunity presented by acquiring TRIG's shares when they are trading at their current discount to Net Asset Value.

A diversified 2.7GW portfolio of renewable energy assets, with significant 1GW development pipeline:

·      2.9TWh of clean energy generated during the period (30 June 2023: 2.9TWh). The portfolio is capable of displacing 2.2 million tonnes of carbon emissions per annum and powering 1.8m homes.

·      121MW new onshore wind capacity added to the portfolio in the period following the commissioning into operations of the Ranasjö and Salsjö wind farms in Sweden.

·      Construction commenced of the first project from TRIG's 1GW 2030 development pipeline: Ryton 78MW battery storage project in the UK.

·      Operational and technical enhancements deliver capital growth through improving the generation output of TRIG's existing portfolio. Aerodynamic improvement installations progressed during the period.

·      TRIG's expert management team draws from the investment pedigree of InfraRed and operational excellence of RES to benefit TRIG's portfolio and enhance the Company's growth potential.

Richard Morse, Chair of TRIG, said:

"TRIG continues to offer investors scale, diversification and value. TRIG's attractive dividend, which has been increased by 12.5% over the past five years, is being supplemented by a £50m buyback programme in recognition of the Company's robust cash flows, balance sheet strength and the premium to carrying value achieved by the management team across £210m of successful divestments signed during the past 12 months. TRIG's management team takes a disciplined approach to implementing the Board's capital allocation priorities and actively manages TRIG's balanced portfolio to deliver long-term value to shareholders."

Enquiries

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

Phil George

Mohammed Zaheer

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

Mara James

Investec Bank Plc                                                 +44 (0) 20 7597 4000

Lucy Lewis

Tom Skinner

BNP Paribas                                                         +44 (0) 20 7595 9444

Virginia Khoo

Carwyn Evans

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 countries 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. 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 160 professionals operating worldwide from offices in London, New York, Sydney, Seoul and Madrid. 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$13bn+ of equity capital¹ 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 rating² for its infrastructure business for seven consecutive assessments, having secured a 5-star rating for the 2023 period³. 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.

Further details can be found on InfraRed's website at www.ircp.com 

¹ Uses 5-year average FX as at 31st March 2024 of GBP/USD of 1.2839; EUR/USD 1.1179. EUM is USD 12.927m.

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 the 2023 Principles for Responsible Investment ("PRI") assessment, InfraRed achieved a 5 star rating for the Policy Governance and Strategy and Infrastructure and a 4 star rating for the newly created Confidence Building Measures. Please find InfraRed's report available for download on our website here: https://www.ircp.com/sustainability/

Operations Manager

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

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-group.com.

Chair's Statement

TRIG enters its second decade positioned for growth, underpinned by robust cash flows from existing projects, a proprietary investment pipeline and a disciplined capital allocation strategy.

TRIG benefits from a specialist management team that leverages the expertise and wide-ranging capabilities of the Company's Managers: InfraRed and RES, to drive shareholder value. The Company owns and operates a significant £3.4bn portfolio of wind, solar and flexible capacity¹ assets. Located across the UK and mainland Europe, these assets are capable of powering up to 1.8m homes with clean electricity and displacing up to 2.2m tonnes of carbon annually. The Company's 2.7GW portfolio generated 2.9TWh of renewable electricity in the first half of 2024.

Our strategy is to deliver attractive total returns through robust income and capital growth. Active management of TRIG's balanced electricity generation portfolio is underpinned by responsible investment practices and operational excellence.

The portfolio remains cash generative with £203m of operational cash flows² generated in H1 2024. Divestments totalling £189m have been signed in 2024 to date at an average 10% premium to carrying value, continuing the Managers' active approach to portfolio and balance sheet management.

Operational cash flow² of £203m represents gross cash cover of 2.2x the H1 2024 dividend, or 1.1x net dividend cover after the repayment of £103m portfolio-level debt. Materially lower power prices in 2024 compared to recent years and cable outages at two offshore wind farms have moderated dividend cover in H1 2024. TRIG's cash flows remain robust with 75% and 67% of revenues fixed per unit of electricity generated for the next 12 months and 10 years, respectively. The Board reaffirms the dividend target of 7.47p per share for 2024.

The Board and Managers' capital allocation priorities remain to reduce floating rate debt borrowings while delivering attractive shareholder returns and pursuing strategic investment opportunities. The commencement of a £50m share buyback programme recognises both the significant progress of disposal activity and the accretive investment opportunity presented by acquiring TRIG's shares when trading at their current discount to Net Asset Value.

Based on current cash flow projections, divestments agreed to date, and assuming that c. £25m of the buyback programme is completed in 2024, RCF drawings would reduce from £364m at 31 December 2023 to c. £220m at 31 December 2024. The Managers are progressing further disposals as well as portfolio-level financing opportunities. Proceeds will be applied to reducing RCF drawings further, creating greater capacity for future investments. The Board and Managers have a rigorous approach to capital allocation that considers prevailing market conditions. New investments that progress the Company's strategy are appraised against alternative uses of capital, including buybacks. Current expectations are that disposals and financing activities would enable the reduction of RCF drawings to c. £100m during 2025.

The downward trend in near-term power prices has been a predominant factor in the reduction of the portfolio valuation in the period by 4.3p per share to 123.4p per share as at 30 June 2024. Base case return expectations from the portfolio are represented by the valuation discount rate, which increased 0.2% in the period to 8.3%, presented prior to the future incremental benefit from new investments, construction and development activities, and operational and portfolio enhancements.

TRIG's portfolio continues to benefit from inflation linkage, with over half of forecast revenues across portfolio companies over the next 10 years directly linked to inflation through government-backed contracts. TRIG also has limited cash flow exposure to higher interest rates, with the vast majority of TRIG's debt being fixed rate and amortising. These characteristics continue to help insulate the Company from changes in interest rates and inflation expectations.

During the period, the Ranasjö and Salsjö onshore wind farms in Sweden both became operational, bringing online 242MW of gross capacity. Since IPO, TRIG's Managers have now delivered 650MW net capacity through construction of new projects, 310MW of which has been organically funded from retained cash.

In February, the Company acquired Fig Power, a UK energy projects developer with a focus on battery storage. Development of the 78MW Ryton battery storage project was completed in the period and construction commenced in April.

The 23MW Cuxac onshore wind farm in France is currently being prepared to enable repowering works to commence. Once constructed, the project will benefit from a new 20-year, inflation-linked feed-in-tariff and an increased capacity of 25MW.

Looking forward, the Company has c. 1GW of development opportunities within the portfolio that could enter construction by 2030. As the development pipeline is progressed, it will continue to be appraised against alternative uses of capital. Projects built from TRIG's development pipeline are expected to be self-funded through retained cash in excess of the dividend, proceeds from portfolio rotation or debt capacity as existing portfolio-level debt amortises. The fixing of merchant revenues through PPAs or other medium-term fixes could create further debt capacity within the portfolio.

TRIG continues to be uniquely positioned to benefit from RES's deep knowledge and capabilities to optimise asset performance. Commercial and technical enhancement works remain ongoing at selected sites, with good progress on aerodynamic improvements and software enhancements during the period. These operational enhancements continue to improve yield at TRIG's projects, helping to reduce costs associated with downtime and increase revenue through generation optimisation.

As communicated in TRIG's 2023 Annual Report, InfraRed's Richard Crawford stepped down from leading the investment management of TRIG on 30 June 2024. Minesh Shah has taken over these responsibilities. TRIG will continue to benefit from Richard's experience through the TRIG Investment and Advisory Committees.

We anticipate macro trends to continue to support the renewables sector, with decarbonisation and energy security remaining high on the agendas across most of the European political spectrum. TRIG's management team is engaging with various energy sector and financial regulation consultations as policy makers address the challenges of delivering net zero commitments.

TRIG continues to offer investors scale, diversification and value. TRIG's attractive dividend, which has been increased by 12.5% over the past five years, is being supplemented by a £50m buyback programme in recognition of the Company's robust cash flows, balance sheet strength and the premium to carrying value achieved by the management team across £210m of successful divestments signed during the past 12 months. TRIG's management team takes a disciplined approach to implementing the Board's capital allocation priorities and actively manages TRIG's balanced portfolio to deliver long-term value to shareholders.

Richard Morse

Chair

8 August 2024

1.     Flexible capacity is generation technologies that can store energy and respond to electricity demand levels and pricing signals, such as batteries, pumped hydro storage and green hydrogen.

2.     Operational cash flow generated is reconciled to the cash flow statements as follows: Cash flow from investments £128m less Company (including its immediate subsidiaries TRIG UK and TRIG UK I) expenses £28m plus project-level debt repayments £103m.

Investment Report

Financial highlights

Financial performance and valuation

The Group's operational cash flow generation in the first half of 2024 was in line with expectations at £231m, or £203m less fund expenses. These operational cash flows represent 2.2x coverage of the £91m cash dividend paid to shareholders. During the period, repayment of £103m of portfolio-level debt (in accordance with amortisation schedules) together with operating costs, finance costs and working capital resulted in distributable cash flow of £100m (H1 2023: £145m), covering the cash dividend 1.1x.

Dividend cover in the period was moderated by materially lower prices than achieved in recent years and third-party owned cable outages at two UK offshore wind farms, Hornsea One and East Anglia 1. The outage at Hornsea One has been fixed and remedial works have been scheduled for East Anglia 1. Commercial protection is in place for future losses relating to this outage. These cable outages have resulted in a combined -0.8p per share adverse impact on TRIG's valuation, contributing to an overall -1.5p per share adverse impact due to lower generation. Distributions were also held back from assets being sold, as is customary. Dividend cover for the remainder of 2024 is expected to remain c. 1.1x before returning to levels consistent with the long-term average of 1.2x to 1.3x from 2025. Cash flows during the period were supported by the portfolio's inflation linkage, diversification and high proportion of fixed revenues, providing some resilience against power price declines in the period from recent peaks.

The Company's Net Asset Value as at 30 June 2024 was 123.4p per share (31 December 2023: 127.7p per share) and the Company's Portfolio Valuation was £3,358 million. Earnings for the period were -0.6p per share (H1 2023: +1.1p), principally reflecting below budget generation in the period and lower power price forecasts flowing through to a reduction in the portfolio valuation.

TRIG's portfolio benefited from continued active financial and operational management, including the disposal of four wind farms across Ireland, UK (Scotland) and Germany for a combined consideration of £189m, representing an average premium of 10% to the valuation of the wind farms as at 31 December 2023. Active management, driven by profits on disposals, reduced the impact of lower generation by adding 0.6p per share to the portfolio valuation.

Macroeconomic movements have impacted the portfolio valuation by approximately -3.2p per share in total, which largely reflected reductions in power price forecasts over the next five years across the markets where TRIG has investments and a reduced UK inflation forecast for 2024.

Accordingly, the Company's NAV per share has reduced by -4.3p in the period reflecting adverse macroeconomic movements and below budget generation, partially offset by active management factors.

TRIG benefits from 67% of revenues being fixed and 57% of revenues directly linked to inflation indices over the next ten years, largely through government-backed revenue contracts. These serve to reduce the portfolio's sensitivity to near-term fluctuations in power price forecasts and provide inflation linkage.

The portfolio's weighted average discount rate increased by 0.2% in the period to 8.3% as at 30 June 2024, reflecting changes in portfolio composition as well as the addition of higher-returning battery storage development to the portfolio. As at 30 June 2024, there remains an implied 4.7% equity risk premium above long-term government benchmark yields, which the Investment Manager considers appropriate in particular with reference to the pricing of TRIG's own disposals.

Greater detail on the valuation movements during the six months to 30 June 2024 can be found in the Valuation of the Portfolio section.

Gearing and capital allocation

The Company's Board and Managers continue to emphasise responsible management of TRIG's balance sheet. Portfolio-level debt is fixed rate and amortising during the period of government-backed contracts with no refinancing risk. £103m of portfolio company level debt was repaid in the period with further c. £100m scheduled to be repaid in H2 2024.

The primary use of retained cash flows from the portfolio and disposal proceeds has been to finance £41m investment activity, including construction and development expenditure in H1 2024 as well as reduce TRIG's floating rate debt exposure under the Company's Revolving Credit Facility.

TRIG's RCF, which has a total funding capacity of £600m and matures on 31 December 2025, is being used to fund TRIG's investment activities to deliver growth across the portfolio. The RCF total size was reduced in the period from £750m to £600m in order to reduce expenses associated with the reserved capacity.

At the Company's 2023 Annual Results announcement, RCF drawings were anticipated to be reduced from £364m at 31 December 2023 to about £150m over the following 12 months, through retained cash in excess of the dividend and divestment proceeds, net of funding construction commitments.

Drawings under the RCF as at 30 June 2024 were £334m. Divestments proceeds expected to be received in H2 2024 from the sales of Pallas onshore wind farm (announced on 12 March 2024) and the 15.2% equity interest in Gode would reduce TRIG's RCF borrowings to c. £195m.

Given the significant progress made in respect of TRIG's capital allocation priorities, the Board has announced a 12-month share buyback programme of up to £50m. The Board and Managers consider the acquisition of the Company's shares to be an attractive investment opportunity, particularly whilst TRIG's shares are trading at a significant discount to the Company's Net Asset Value and divestments are being realised in excess of carrying value.

Based on current cash flow projections, divestments agreed to date and assuming c. £25m of the buyback programme is completed in 2024, RCF drawings would reduce from £364m at 31 December 2023 to c. £220m at 31 December 2024. The Managers are progressing additional disposals as well as portfolio-level financing opportunities to enable the reduction of RCF drawings further, and to create greater capacity for future investment activities.

Investment highlights

TRIG continues to benefit from a large, diversified and balanced portfolio with investments spread across different geographies, technologies, revenue types and project stages to mitigate risk and deliver attractive long-term returns. The Investment Manager takes a careful and considered approach to portfolio composition. The risk-reward profile of new investments is appraised alongside alternative uses of the Company's retained cash flows, in particular reducing higher cost floating rate borrowings and share buybacks.

Successful delivery of development and construction projects into operation is a key mechanism for the Managers to create additional value for shareholders. During the period, the Ranasjö and Salsjö onshore wind farms in Sweden were both commissioned, adding 121MW of net capacity to TRIG's portfolio, further strengthening and diversifying the Company's revenues.

TRIG's portfolio includes development opportunities representing 1GW capacity that could enter construction by 2030 and be financed from retained cash, portfolio rotation or debt capacity without the need for equity issuance. This includes over 650MW of battery storage development projects, including that of Fig Power acquired in February 2024.

Development activities to maximise the value of TRIG's existing assets through repowering are progressing well in France and Northern Ireland. Repowerings can provide a route for TRIG to secure further government-backed, inflation-linked revenues, as well as install modernised and more efficient technology, from established sites that have local support and where the wind conditions are well understood. As the Company's portfolio matures, we expect to benefit from further opportunities to repower sites and crystalise additional value.

TRIG retains the option to build or sell assets in the development pipeline, with investment decisions being appraised against alternative uses of capital. In April 2024, development activities were concluded and construction commenced of the first project in the battery storage pipeline: the 78MW 2-hour Ryton project. The Board and the Managers continue to view battery storage as a critical sector for the European energy transition as batteries can respond to price signals and provide flexibility, while supporting grid stability and quality.

Current outstanding commitments

As at 30 June 2024, the Company had outstanding investment commitments of £102m relating to the construction of UK battery storage projects and the financing of the Fig Power platform. 

£138m of sales receipts are expected to be received in relation to the sales of Pallas and Gode following completion during H2 2024. The Company's £600m RCF was drawn £334m as at 30 June 2024.

Revenue profile

TRIG benefits from diversification across several power markets, with projects in Great Britain, the Single Electricity Market (relating to projects in Northern Ireland), the main continental European power market (France and Germany), the Nordic market (Sweden) and the Iberian market (Spain).

TRIG's portfolio cash revenues have good medium-term protection from movements in power prices as the portfolio receives the majority of its revenue from government-backed contracts, referred to as fixed revenues. These include Feed-in-Tariffs ("FiTs"), Contracts for Difference ("CfDs"), and Renewable Obligation Certificates ("ROCs") as well as Power Purchase Agreements ("PPAs") in which electricity generated is sold with fixed prices or from other hedges. The Managers continue to actively secure attractive new fixes of varying tenors.

67% of projected revenues over the next 10 years are fixed price per MWh generated. 57% of projected revenues are directly linked to inflation through government-backed revenue contracts.

The Group¹ receives a portion of its revenues in Euros. 41% of the portfolio by value is invested in Euro-denominated assets². The Group employs foreign exchange hedging to significantly mitigate the cash flow and valuation exposure to this risk, as expanded upon in the Valuation of the Portfolio section on page 18.

The Investment Manager implements the Company's foreign exchange hedging policy through Sterling-Euro swaps for up to four years forward. As a result of the interest rate differential between UK and the Eurozone, forward foreign exchange contracts over the next four years have been struck at levels better, in Sterling terms, compared to the foreign exchange rate as at 30 June 2024 and used in the portfolio valuation.

Principal risks and uncertainties

TRIG's principal risks for H2 2024, approach to risk management and counterparty exposures are unchanged to those set out in the Risk and Risk Management section of the 2023 Annual Report on page 56. TRIG has three enduring principal risks with a high residual impact (political/ regulatory risk, power prices and production performance) and, at present, counterparty credit remains an elevated principal risk due to the current macro environment. Below is a commentary on the key movements in these risks in the period.

In a macroeconomic environment where inflation and interest rates have been elevated, the correlation of portfolio returns to inflation and the Company's approach to long-term, fixed-rate and amortising structural debt are key risk mitigants.

Political / regulatory

The risk of government or regulatory support for renewables changing adversely.

Decarbonisation and energy security are recognised as being of critical importance across most of the European political spectrum. In a year with elections across Europe there are risks in relation to renewables rollout rates and electrification. This may impact power price forecasts and the financing of renewables build out.

In the UK, the new Labour Government's energy policy priorities include establishing a state-owned energy company, increasing funding being made available in the next Contract for Difference auction round and revising planning policies related to the build out of onshore wind. Each of these measures seeking to accelerate the build out of renewables. There is also a strong recognition of the importance of increasing grid investment to support the energy transition. The Managers are encouraging the new Labour Government to make the CfD framework available to existing projects, particularly where there is an opportunity to upgrade or repower such projects.

'Windfall' taxes and levies on generators were introduced in 2022 on the back of particularly elevated power prices to help fund financial support to ease the cost of electricity to end users. In the UK, the Electricity Generator Levy is in place until 2028. In the EU, many of these levies expired on 30 June 2023, with the notable exception of France which extended electricity windfall taxation into 2024. There remains a risk that further intervention may result if electricity prices were to increase significantly again.

As detailed under Market Developments, the UK government is assessing options to reform electricity markets, including how wholesale electricity prices are set and long-term revenue support frameworks. TRIG's approach to diversify political and regulatory risk across several markets and jurisdictions helps to reduce the impact on the portfolio from individual risks at a national (or more local) level.

Power prices

The risk of electricity prices falling or not increasing as expected.

Power prices have been particularly volatile since 2020, with periods of very low pricing experienced during the Covid pandemic and periods of very high prices following the outbreak of the conflict in Ukraine which have since returned to more normalised levels.

Near-term power prices trended lower during the first three months of 2024 before recovering slightly in the second half of H1. The Electricity Generator Levy in the UK and Inframarginal cap in France remain in place but have a limited impact on these sensitivities. Near-term power price forwards continue to trade below current and/or former government intervention thresholds in all markets, with forward prices in GB close to the threshold.

There has been little change in the long-term fundamentals of power prices in the period, leading to limited movements in long-term power price forecasts compared to those as at 31 December 2023 in most geographies.

There remains an inherent risk of adverse movements in wholesale electricity prices reducing revenues, which may result from higher than expected renewables build-out, lower than expected natural gas and carbon prices, and lower than expected electricity demand.

These risks are partially mitigated through TRIG's power price management and portfolio diversification strategies. This includes negotiating fixed-price PPAs or other hedges which, taken together with subsidies, results in 67% of TRIGs revenues (per unit of electricity generated) being fixed over the next 10 years.

The valuation of the Company's portfolio considered the market derived forward prices in the shorter term in conjunction with a blend of cannibalised³ power price forecast curves produced by three independent forecasters.

Production performance

The risk that portfolio electricity production falls short of expectations.

Weather resource was mixed over the period, with wind levels experienced by TRIG's offshore projects in GB and Germany being greater than the long-term average. Wind levels in Sweden were lower than the long-term average. This variation between regions demonstrates the importance of geographic and technology diversification in a balanced portfolio.

Cable outages impacted the performance of two of TRIG's GB offshore sites limiting their ability to capture the favourable wind conditions. TRIG's approach to low single asset concentration limits the impact of issues at any one project on the portfolio as a whole.

Counterparty credit

The risk of a failure of a major supplier.

TRIG's portfolio is weighted towards wind-power assets, a sector that is dominated by a small number of equipment manufacturers. Counterparty failure could result in equipment not being supplied to construction projects or operational and maintenance services not being provided to commissioned projects or being disrupted. Given the challenges faced by some equipment manufacturers due to cost escalation in the current macro environment, counterparty credit risk increased in 2023.

Construction activities are limited by TRIG's Investment Policy cap of 25% of portfolio value and were 5% of portfolio value at 30 June 2024. The Ranasjö and Salsjö projects were commissioned into operations in the period, reducing counterparty risk in the portfolio. Remaining construction projects are in the battery storage sector where there is a wider range of equipment suppliers compared to the wind sector.

The increase in independent operations and maintenance service suppliers reduces dependence on the original equipment manufacturers, particularly with respect to onshore technologies.

Market developments

UK

In March 2024, the then UK Government issued its second phase Review of Electricity Market Arrangements ("REMA") consultation. Whilst nodal pricing, which would see Great Britain's electricity markets divided into hundreds of price areas, has been discounted, zonal locational marginal pricing remains a subject of ongoing debate. Under zonal pricing, the UK could be split into several price zones with pricing reflecting local supply and demand imbalances in each region.

A move to locational pricing may result in merchant power revenues received by projects closer to demand centres increasing. Conversely, in areas where electricity supply exceeds demand, offtake prices may reduce. Should locational pricing be adopted, it is unlikely to be beneficial for most wind farms as such projects tend to be located in remote areas, although transitional arrangements may be adopted that could mitigate this risk.

Several studies have been conducted to assess the potential impacts of the REMA market reform options. Two opposing positions of the potential market impact of locational marginal pricing have emerged: one indicating that locational marginal pricing might result in lower costs for customers but assuming no increase in cost of capital resulting from the market reform uncertainty and changes in electricity price dynamics, and the other positioning that increases to investors' cost of capital due to zonal price uncertainty would more than offset any system benefit that could be passed on to customers.

In both cases, studies highlight significant unquantified risks with overhauling market structures. It is also important that any reform options continue to appeal to renewables developers and financiers, with signs already that wind farm development is reducing due to mounting economic and supply chain pressures.

The extent to which the REMA process will feed into the new Government's policy position is unclear at the time of writing. The Managers are engaging with the Government to highlight the challenges of zonal pricing and to encourage any changes to market arrangements to focus on evolving existing frameworks.

EU

Discussion of electricity market reform in the EU remains ongoing. In 2019, the EU Agency for the Cooperation of Energy Regulators and European Transmission System Operators commenced a review of alternative bidding zone configurations across Europe. Currently, bidding zones in Europe are mostly defined by national borders, however the European electricity target model requires bidding zones to be defined based on network congestion. As in the GB electricity market, changes to electricity price areas could adversely impact renewable generation merchant revenues located in regions with higher proportions of supply relative to demand.

The overall implications of this review are not expected to be significant for the TRIG portfolio if enacted. TRIG's approach to portfolio diversification across markets, technologies, and subsidised and merchant projects help to reduce the impact of market reform at a portfolio level.

Further public consultations are expected to be held in Q3 2024.

Outlook

Though the macroeconomic and geopolitical environment continues to be unpredictable, TRIG remains well positioned, as evidenced by its recent divestments at a premium to carrying value and strong cash generation. Over the past eighteen months, the Company's self-sufficiency has been demonstrated through disciplined capital allocation and accretive investments. This continues to be the strategy looking forward, with a future development pipeline of c.1GW capacity that can be developed and enter construction by 2030, and the first project from this pipeline completing development activities and entering construction in the period.

The experience of TRIG's management team, which draws on the investment pedigree of InfraRed and operational excellence of RES, continues to benefit TRIG's portfolio. As markets recover, TRIG's growth strategy will not only enhance the income delivered to shareholders, but also provide the potential for capital growth to drive a greater proportion of total return to shareholders

1.     The Company, TRIG UK, TRIG UK I and its portfolio of investments are known as the "Group".

2.     Including Sweden which receives electricity revenues from Nord Pool in Euros. The proportion of the portfolio in Euros post disposals and commitments is 38%.

3.     Cannibalisation describes the effect that renewables (an intermittent generator) can have on the overall power prices, whereby the marginal cost of generation, which in turn drives the power prices, is lower than the average which would be expected of a continuous base load generator as a result of the additional supply when renewables are generating. Rates differ over time and between markets but all are affected.

Operations Report

Operational performance

*               Balance does not cast due to rounding.

Underlying generation performance was impacted by grid and cable outages, lower weather resource in some regions, particularly in Sweden, and negative price curtailments in Spain.

Onshore wind

UK & Ireland

Performance in the region was impacted by below budget wind resource in January and May, with availability being reduced due to several major component exchanges in the period. Grid faults also impacted performance across three Scottish onshore wind sites.

A retendering of Operations and Maintenance ("O&M") contracts for projects in Northern Ireland concluded in the period, with good value secured.

Blade enhancement installation works continued at six sites to improve the aerodynamic properties of the blades - see the Enhancements section on page 13 for more information.

There continues to be a focus on maximising REGO value when renewing Power Purchase Agreements ("PPAs"), and this has continued in the period through several new and renewed PPAs.

France

At Rosières onshore wind farm, a turbine blade damaged from a lightning strike has been returned to service following a blade replacement, with insurance expected to provide comprehensive commercial protection for repairs and lost generation.

The 42.5MW Vannier onshore wind farm's environmental authorisation is subject to an ongoing legal challenge. A court ruling has required the wind farm to temporarily suspend generation, for an assumed period of up to 12 months, whilst updated environmental data is collected. TRIG has commercial protection in place for this.

Proactive measures at some of the more mature sites have been undertaken to reduce risk to related downtime.

Sweden

Sweden experienced below budget resource in the period, with grid maintenance reducing export capacity at Jädraås.

The Ranasjö and Salsjö projects became operational in April. Located in central Sweden, the sites consist of 39 Siemens 6.2MW turbines. TRIG has a 50% interest in the projects representing 121MW of net generation capacity. Construction management was led by Arise. During construction, the Arise Construction Manager liaised regularly with the local Sami village chairperson to understand and share information on the reindeer herding movements and construction activities to avoid significant adverse impact on the community.

Offshore wind

GB

At Hornsea One, Power Curve 'Optipitch' upgrades have been rolled out and the project has also achieved success in a bid for the provision of Electricity System Response (ESR) services to National Grid ESO - see the Enhancements section for more information.

Hornsea One suffered a cable fault in January when one of three third-party OFTO-owned export cables failed. The remaining two other cables were temporarily curtailed to preserve cable integrity. The first cable failure was repaired in February, and following an initial restriction of export capacity all curtailments were lifted in early June 2024. All repair costs were borne by the OFTO and an insurance claim process is underway for the lost generation.

Cable failures also occurred at East Anglia 1 in the period. A failure in one of two OFTO-owned export cables led to a reduction in total transmission capacity. Repair works are anticipated to commence in Q3 2024 at the cost of the OFTO, and insurance processes are underway for some of the lost generation.

Ofgem continues to review generators' participation in the balancing market. It was announced on 28 May 2024, that the Beatrice project (which TRIG owns 17.5% of) had agreed with Ofgem to make a payment of c. £33m to the Ofgem Redress Fund. The payment followed Beatrice's inadvertent breach of one of its Electricity Generation Standard Licence Conditions relating to the price bid into the balancing market, to reduce generation where needed by the system operator to ensure the electricity system remained balanced. The inadvertent breach relates to the pricing approach in periods of unusually high wholesale power prices. The Operations Manager has reviewed the other GB wind projects participating within the balancing market in TRIG's portfolio and does not consider any of these other projects to have breached their licence conditions in respect of price charged in the balancing market.

Germany

Production was on budget, with good wind resource offsetting some grid losses and a substation outage at Merkur.

A turbine power curve upgrade was completed at Merkur. Elsewhere at the site, blade leading edge protection works continue under warranty and are scheduled to conclude in Q3 2024.

Solar

Spain

Generation was 8% below budget despite very high availability due to low irradiance in Q1 and curtailments for the Cadiz projects during periods of low pricing, stemming from the high rainfall increasing run of river hydroelectric power generators' output in the period. New route to market agreements for the sites have enabled participation in the ancillary services market, which provides an additional revenue stream for the projects when curtailed at low prices, which is already in place at Valdesolar.

In July, the Cadiz solar projects were awarded the Spanish Photovoltaic Union (UNEF) Seal of Excellence for Sustainability, recognising the integration of social and environmental factors following an independent audit.

GB

In the GB region, a site will shortly be moving forwards with module replacement of a significant number of modules to improve the overall efficiency and prolong the life of the site.

France

In France, panels were procured in the period to upgrade two sites within a joint venture portfolio.

Development & construction

Swedish wind farms Ranasjö and Salsjö have now been fully constructed, commissioned, and passed into operations. The project team has successfully negotiated and placed the route to market agreement, and relevant long-term agreements are in place with both the turbine supplier and asset manager to support the operations of the project.

The first project in TRIG's 1GW 2030 development pipeline, the 78MW 2-hour Ryton Battery Energy Storage System (BESS) project near Newcastle, commenced construction in April. Ryton is progressing on schedule with enabling ground works complete and Independent Connection Provider (ICP) and Electrical Balance of Plant works commenced in July. The Narada BESS units will be delivered to site in 2025 ahead of energisation in H2 2025.

Pre-construction activity on the next two battery projects is progressing. The grid connection date for the 100MW Spennymoor project has been brought forward from 2031 to 2026. There may be an up to two year delay to the grid connection date for the 90MW Drakelow project. The development team is engaging with grid companies to minimise this delay. A revised planning consent has been obtained for the Drakelow project to reflect the final site design. 

Repowering works continue to progress in France. Cuxac has secured a tariff of €86/MWh and obtained authorization for increase in site capacity from 22.8MW to 25.2MW. The preferred turbine supplier has also been selected. Dismantling of the site is expected to commence in H2 2025.

Health, Safety and Environment

Delivering high quality health, safety and environmental ("HSE") standards within the portfolio continues to be the top priority. The portfolio asset managers promote a strong safety culture through a pro-active approach, utilising safety drills, training days and internal and external audits, amongst other activities, which complement the core safety frameworks. The Operations Manager continues to engage with the asset managers to share best practice and lessons learned across the portfolio.

During the first half of 2024, across the portfolio there have been no HSE-reportable severe accidents.

The standard of HSE reporting remains high across the portfolio with good transparency and follow up of incidents. There has been a continued focus on positive leading indicators such as the number of independent and internal safety audits and assurance reviews, hazard identifications and safety walks.

TRIG continues to host a portfolio HSE coordination group twice a year to foster relationships between the various asset managers across the portfolio, share information and discuss matters that have arisen on the portfolio and wider industry.

Highlights of proactive measures taken in 2024 include:

·      Project company director visits which have taken place or are scheduled at sites across the portfolio, to ensure familiarity with the sites and to engage with the local service providers on safety and other key themes.

·      A large number of drills and exercises conducted across the portfolio. This includes offshore rescue training at Merkur offshore wind farm, vessel to turbine gangway failure training at Gode offshore wind farm and a fire incident emergency drill at the Cadiz solar projects. HSE awareness campaigns were run on a large number of topics including livestock safety, winter weather driving, working in hot weather and wildfire risk awareness.

·      A RES' Global Safety Focus Event which took place in May 2024 incorporating some 4,500 colleagues from 24 countries all undertaking a safety stand down day to focus on best-in-class safety culture and performance.

·      A revised HSE assurance process launched by RES for TRIG projects focusing on undertaking desk-based management system and site-based inspections. The assurance process is built upon core ISO standards and is overseen by the Operations Manager.

Enhancements

As Operations Manager, RES is dedicated to enhancing portfolio performance, shareholder returns and stakeholder value through both commercial and technical initiatives. RES applies a structured framework to identify, appraise and implement enhancements at both individual and portfolio levels. Examples of the enhancements progressed during H1 2024 include:

Increasing revenues:
Blade improvements to increase generation:

·      The installation of a package of aerodynamic improvements to multiple turbines' blades at four sites in the GB and Northern Ireland wind portfolio (100% owned with total site capacities of 66MW) is nearly complete, after which the data collection period to validate the energy uplift will commence prior to wider roll out.

·      Installation is well progressed at two further joint venture projects, with contracting underway at another two sites within a separate joint venture portfolio (of which 56MW represents TRIG's share), benefitting from RES' wider understanding and associated research and development on TRIG sites.

·      An associated suite of parameter changes to the turbine controller are underway or under consideration to maximise the additional energy yield from the hardware upgrades installed on a trial site in the GB region (48MW). Once the blade aerodynamics have been altered it is beneficial to further optimise the way in which the blades are operated. Validation of the performance will follow thereafter.

·      Blade and associated software upgrades improved yield by up to 5% at the initial trial site.

Wind turbine software enhancements:

·      The wake steering and collective control trial at the Altahullion onshore wind farm in Northern Ireland has been completed with independent energy yield uplift analysis concluded over the winter demonstrating an uplift of up to 1.3%. This enhancement is an innovative retrofitted upgrade to increase production and reduces turbine loads. Application across the wider portfolio is under consideration.

·      A power curve upgrade package that optimises the pitch of the blades at wind speeds below rated power has been deployed at Merkur offshore wind farm following trials, expected to increase energy yield by 0.7%. Validation has commenced to determine the final energy yield uplift, on which payment is based. Contracting is well progressed for the same upgrade at another offshore project.

·      Power Curve 'Optipitch' upgrades have also been rolled out at Hornsea One with an estimated 0.7% energy yield uplift. The project was also successful in bidding to provide Electricity System Response (ESR) services to National Grid ESO, due to commence in November 2025.

·      A wake steering system from a turbine manufacturer continues to be progressed at two offshore wind farms, with negotiations underway at a third.

Minimising lost production:

·      Blary Hill shadow flicker validation is now complete, which will reduce related curtailments.

·      Ice-phobic blade waxing trial complete at Haut Languedoc. Build-up of ice can require turbines to automatically stop, causing production losses in winter.

·      Additional revenue streams:

·      A new route to market agreement for the Cadiz solar sites has enabled participation in the ancillary services market, which reduces the likelihood of uncompensated curtailment.

·      Ancillary services for the provision of grid balancing services have been identified, with the installation of software to facilitate the process contracted, in order to access a new revenue stream at Ranasjö and Salsjö.

·      Opportunities to provide grid-balancing ancillary services have also been identified across the four southern French onshore wind sites which are being developed for repowering, potentially offering an alternate revenue stream for the remaining operating life of these projects.

·      Two GB solar sites are in the process of either taking part in or finalising terms to take part in a flexibility service offered by local Distribution Network Operators.

·      Hornsea One was successful in tendering for the provision of Electricity System Restoration (formerly known as Black Start) "Top-up" functionality to National Grid over a five-year contract from November 2025.

Optimising operations:

·      The recently renewed operation and maintenance contracts at Altahullion and Lendrum's Bridge onshore wind farms will be supplemented by pairing with a comprehensive spares strategy to mitigate ongoing challenges in the spares market for components of these older turbines, facilitating a more efficient procurement approach.

·      GB Solar inverter repowering studies are well progressed, which once inverters have been replaced, will reduce operating costs, increase availability and prolong the life of the sites.

·      GB Solar inverter software optimisation opportunities are also currently being evaluated, to enable inverters to operate more dynamically, particularly in hot weather, to avoid degradation and trips due to excessive temperatures.

Directors' Statement of Responsibilities

We confirm that to the best of our knowledge:

1. The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting; and

2. The Chairman's Statement and the Managers' Report meets the requirements of an Interim Managers' Report, and includes a fair review of the information required by

a. DTR 4.2.7R, being an indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year; and

b. DTR 4.2.8R, being the disclosure of related parties' transactions and changes therein.

By order of the Board

Richard Morse

Chair

8 August 2024

Publication of documentation

The above information is an extract from TRIG's 2024 Interim Report. The Interim Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism. It can also be obtained from the Company Secretary or from the Reports & Publications section of the Company's website, at https://www.trig-ltd.com/.