This blog is designed to record the investment journey of a UK based small investor. I hope to make a modest contribution to the collective wealth of investing knowledge made freely available to ordinary people. I am the author of five books [see sidebar and books tab]
Well, as so often in life, one thing leads to
another...and then another. Whilst looking at some of the renewable energy
holdings in my Capital Gearing trust, I came across the Foresight fund and
whilst researching that fund, I had a further look at the Renewables trust
when it released results last week.
So I have decided to add TRIG to my portfolio. The
investment trust was launched in 2013 and gives investors an opportunity to tap
into the renewable energy sector - wind, solar and battery storage. It has
grown steadily to become one of the largest funds in the sector with assets of
Last week, the trust released full year results
for 2018 (link via Investegate). Total return was 11.6% and earning per share
increased by just under 20% from 9.8p to 11.7p. Over the past year it has added
5 new wind farms to the portfolio - Ireland, Scotland, France(2) and Sweden.
This brings capacity up from 821MW to 1,110MW, an increase of 35%.
The combined portfolio generated a total of
2,011GWh over the year (1,766 for 2017) and sufficient clean energy to power
650,000 homes or 0.6% of total electricity consumed in the UK.
Helen Mahy CBE, Chair of TRIG said:
"2018 is TRIG's fifth year of operations and was
another strong year. Once again, we have been able to deliver attractive
returns to our investors with a total NAV and dividends return in the year of
11.6%. The period saw ongoing diversified growth through acquisitions, good
asset availability and healthy levels of cash generation.
In the years ahead we are confident of TRIG's ability
to continue to provide its investors with long-term, sustainable dividends
whilst contributing to a lower carbon future."
Under the Climate Change Act of 2008, the UK
government is obliged to reduce greenhouse gas emissions by 80% below
pre-industrial levels by 2050. This target is reviewed by parliament every 5
years and in the most recent review, a target of 57% by 2030 was agreed. In the
light of the recent IPCC report, many are suggesting this target is not
sufficient and are calling for zero emissions by 2035.
(click to enlarge)
Under the 2015 Paris Agreement, 200 countries
entered into a voluntary accord pledging to keep global warming well below 2C. Last year the IPCC agreed on the lower limit of 1.5C.
As a result of the efforts by the global community
to tackle climate change, renewable energy production such as wind and solar is
expected to expand rapidly. In its recent report, BP forecast that renewable
energy will be the worlds main source of power by 2040 - personally, I think it
could be much sooner.
Renewables asset class represents a growing and important segment of the
rapidly evolving energy market and, accordingly, a compelling investment
opportunity. Furthermore, TRIG is well placed over the longer term to take
advantage of the drive towards global de-carbonisation and continued investor
appetite for long-term yield from sustainable asset classes.
active and healthy pipeline, the management are confident that 2019 will be
another year of continued growth and solid performance. They have an advanced
pipeline comprising several investment opportunities where negotiations have
reached an advanced stage for investments in wind farms located within France,
the Nordics and the UK. Should all be successfully concluded they would involve
expected new investment in excess of £250m in aggregate by June 2019.
the renewables market in Europe continues to evolve at pace, the Board, along
with the Managers of the Company, will continue to look for opportunities to
adapt the portfolio, seeking to enhance diversification and avoid reliance on
singular markets at risk of scarcity premia, so to best capture value for
investors. This will include examining new markets in Europe including where
grid parity allows development of renewables without subsidies."
I have held back from investing in this sector for
some time due to the fact that most of the established trusts trade on a high
premium to underlying assets. However, I like the story so far and the
prospects of expanding the operation further afield to France, Spain and Sweden
The returns compare well against other investments
over the past 5 years - TRIG 56% v All Share Index 31.2% and Vanguard
LifeStrategy 60 is 46%. There is a handy quarterly dividend of 5.5% (which I
will reinvest). The share price has had a good run over the past year and is
currently trading at a premium of 9% however the management are thinking of
following Greencoat UK Wind and extending the life of its assets by a further 2
or 3 years which would lift the value of net assets by around 3% or 4%.
Obviously I would prefer to purchase at a discount but due to demand across the
sector, this is not currently an option. I have now added this trust to my ISA
portfolio with Halifax - purchase price is 117p. They are proposing to raise
funds next month for acquisitions and I hope to top up my holding at what could
be a lower price.
I don't imagine the re-alignment of one small
investor's portfolio towards more environmentally friendly investments will be
moving the climate change dial very far. This will be done by the large
institutional fund managers such as pension funds and the likes of Vanguard and BlackRock. However, I also
think that when lots of small investors start to rethink the relationship
between financial goals and the future security of the environment, it could have a significant impact.
Apart from all this it just makes me feel a bit
better. This takes the total 'green' portion of my portfolio to 15%.
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!