The Renewables Infrastructure Group (TRIG) is grappling with some tough headwinds, as evidenced by a 4% decline in its net asset value (NAV) since the year kicked off. The £2.5 billion investment trust, which has been a player in the renewable energy sector since its inception in 2013, is facing the double whammy of low power prices and underwhelming energy generation. The interim results paint a stark picture: generation over the past six months fell below budget, largely due to two cable outages at UK offshore wind farms. While one of those issues has been patched up, the other is still in the works, leaving investors on edge.
Despite these challenges, TRIG managed to maintain a dividend cover of 1.1 times during the period, albeit a noticeable drop from the previous year’s 1.7 times. This signals that while the trust is still committed to returning value to its shareholders, the cushion has thinned, and that could raise some eyebrows among investors. With two-thirds of projected portfolio revenues over the next decade locked in at fixed energy prices and 57% directly linked to inflation, there’s a mixed bag of stability and uncertainty ahead.
The trust’s share price has been lagging behind the broader renewable energy infrastructure trust sector. Over the past three years, TRIG’s shares have plummeted by 10.7%, starkly contrasting with the 5.9% average dip among its peers. Currently, the shares are trading at a 20% discount to NAV, a troubling sign that investors may be losing faith in the trust’s ability to bounce back. To counter this, TRIG has initiated a £50 million share buyback program, a move that could bolster share prices by reducing the number of shares in circulation.
The weighted average portfolio discount rate has crept up by 0.2%, influenced by the acquisition of Fig Power, a UK-based energy projects developer. This could be a strategic play, as diversifying the portfolio could yield better returns in the long run. Additionally, TRIG has made some headway in asset sales, offloading four wind farms across Ireland and the UK for £189 million, booking an average sale premium of 10% above book value. This savvy maneuver not only enhances liquidity but also demonstrates a disciplined approach to capital allocation.
Chairman Richard Morse remains optimistic, stating, “[Our] attractive dividend, which has been increased by 12.5% over the past five years, is being supplemented by a £50 million 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 £210 million of successful divestments signed during the past 12 months.” This commitment to shareholder value is crucial, especially as the sector navigates these choppy waters.
As the renewable energy landscape evolves, TRIG faces a pivotal moment. Will these strategic maneuvers turn the tide and restore investor confidence? Or will external factors, like fluctuating energy prices and ongoing operational challenges, continue to weigh down the trust’s performance? Only time will tell, but one thing is for sure: the sector’s resilience will be tested, and the stakes have never been higher.
