TRIG - Results for 2020

The investment trust was launched in 2013 and gives investors an opportunity to tap into the UK and European renewable energy sector - wind, solar and battery storage. They aim to generate sustainable returns from a diversified portfolio of renewables infrastructure that contribute towards a zero-carbon future.

It has grown steadily over the past seven years, from £300m at launch to become one of the largest funds in the renewable infrastructure sector with assets of £2.2bn. The shares were first purchased for my portfolio in 2019 and topped up with discounted shares from the share issue last March at the price of 114p.

The trusts works closely with InfraRed Capital who have extensive expertise in the renewable energy market and flag up opportunities for expansion and also with Renewable Energy Systems who manage the assets after acquisition and ensure they are operated safely whilst delivering maximum efficiency.

Since launch in 2013, TRIG has outperformed the FTSE All Share Index with total returns averaging 8% p.a. plus lower volatility. The shares are increasingly in demand from institutional investors wanting to respond to the demand from their clients for more climate-friendly ESG investments.

Results

Last week the company released results for full year 2020 (link via Investegate).

Profits came in at £100m (2019 £162m) with earning per share of 5.9p (11.4p).

Net assets per share for the period was 115.3p compared to 115p a year earlier.

The board have announced a final dividend of 1.69p for the end of March making a total of 6.76p for the year which provides a yield of 5.3% based on the current share price of 127p. However no increase is planned for the coming year which is not really a surprise.

The shares still trade at a 13% premium to net assets having reached 20% last year.

Conclude

The demand for more renewable electricity both in the UK and Europe will only be moving in one direction as governments come under increasing pressure to decarbonise their economies and meet their carbon emission reduction targets. The UK government have brought forward the date for all new cars to be emission free from 2035 to 2030. In a decade we could see 35 million pure electric cars on our roads which will require lots of clean energy.

One year share price (click to enlarge)

In addition, gas which heats 90% of our homes is due to be phased out for all new house build from 2025 so there will be increased demand for alternatives for space heating. Hydrogen from renewable energy will be part of the mix as well as electric heat pumps.

However, as we have seen this past year, this does not necessarily translate into higher power prices which is an important aspect of valuing these renewable energy infrastructure trusts. TRIG have been caught out this past year having failed to accurately forecast wholesale prices. As a result NAV has decreased and the trust has taken a hit to the tune of £137m. Power prices are one of the key risks faced by the trust. This post by Finumus last May outlines some of the potential downside to renewable infrastructure investments and inflated long-term power prices.

The higher weighting in my green portfolio proved to be a drag on returns in 2020. Sure they provide a nice dividend which is relatively secure (unlike the oil companies) but as I no longer require an income from my portfolio I decided to slim down my holdings this year and focus more on green growth. Therefore my holding in TRIG has been reduced from 10% to currently just 2%.

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!