Sunday 27 February 2022

Putin Invades Ukraine - Some Initial Thoughts

Unbelievably it’s 2022 and with Putin’s decision to invade the independent democratic sovereign state of Ukraine, we seem to have regressed by a century...maybe two. Certainly this is the most aggressive and dangerous act of war in Europe since WW2 especially so as Russia holds nuclear weapons.

This is a disaster on many fronts...humanitarian, political, ecological, energy and of course for climate change. Russia is a big player on the world stage for energy providing almost 20% of the world’s fossil gas, three quarters of which goes to Europe. 

I don't think military intervention from NATO is an option or would help in any way so the only realistic option is sanctions. Half of Russia’s income is generated from the export of fossil fuels so it seems clear to me that the most effective sanctions would be to reduce the West’s dependence on Russia’s oil and especially gas and step up the transition to renewable energy such as wind, solar and energy storage.

It seems to me that our continued dependence on Russia's gas is the main leverage that Putin holds. We really cannot permit this to continue. Short of military action against a NATO or EU country, the ability to turn off the energy tap is Putin's ace in the pack. The message is clear...every nation needs to mobilise all resources to wean itself off fossil gas as quickly as possible to break this hold.

Of course the global oil companies play a big part in all this. For example Exxon’s Neftegas holds a 30% stake in the vast oil & gas project Sakhalin. The Russian government own a majority stake in the giant Rosneft but BP also hold 20%. Shell have a 27.5% stake in Sakhalin2 which is controlled by Gazprom. All contribute billions of dollars to the Russian economy and of course this revenue maintains the military war machine. Many investors will probably be unaware they hold these companies in their pensions via global index funds.

Orsted one week movement

I think the wider markets are coming round to understanding the bigger picture here. Of course the stockmarkets were impacted by the dramatic news earlier this week but I think it was significant that when the rest of the markets around the world were tanking, renewable energy and hydrogen stocks were heavily in demand.

Ceres Power jumps 25%

Energy Bills

Although the UK only imports around 5% of our gas consumption from Russia, we have been impacted by the huge increases in the global prices of wholesale gas. As a result, our energy price cap will rise by 54% from April which will add a further £700 to the average household bill taking it up from £1,270 per year to almost £2,000. Later in the year it could increase further - speculation a further 50% - and we will be spending a much larger proportion of our income on energy and obviously less on other things which will impact our economy.

We are already moving towards a low carbon energy economy with a target for a 78% reduction in carbon emissions by 2035 but the current crisis should make the case for the UK and EU to speed up the process.

Self Reliance

Even without this crisis, everyone is now aware of the need to move away from fossil fuels such as coal, oil and gas to tackle the problem of climate change. There is a broad consensus that to keep the target of 1.5C global warming within reach we need to move to net zero emissions by 2050.

There is little doubt that the invasion of Ukraine will sharpen up the resolve of leaders in the EU and UK to speed up the move to become much less dependent on Russia for energy. This will involve a strategy to firm up existing decarbonisation plans and hopefully put some real impetus behind the roll-out of renewable...offshore and onshore wind, solar, wave/tidal energy, storage solutions to solve the intermittency issues of wind and solar and also including green hydrogen which has so many applications.

In addition we need to also look at reducing demand for energy such as the simple measures of much better home insulation.


The conflict instigated by Putin cannot be allowed to succeed and the UK, US and EU must stand firm in solidarity with the Ukrainian people. In 1991, Ukrainians voted overwhelmingly for independence from Russia, they gave up their own nuclear weapons and the thought of turning back the clock 30 years if Russia is permitted to subjugate the nation simply cannot be allowed. Every possible sanction must be imposed to undermine Russia’s aggression and make it think again about its strategy.

However, I believe the most effective sanction will be related to energy. Russia is no doubt looking for other markets for its oil and gas such as China but that will take decades to install the pipelines and infrastructure. Moving quickly to reduce our dependence on Russia’s gas which currently accounts for 40% of Europe’s total annual consumption will not be easy but will be essential if a long term solution is to be found. Of course this will be painful in the short term but it will be required in any event to address the climate change crisis which looms in the background.

This is a crazy move by Putin which is doomed to failure...I only hope when that happens he isn’t crazy enough to use the nuclear weapons option. In the meantime, all thoughts and solidarity with the people in Ukraine at this terrible time.

Feel free to share you thoughts on the crisis in the comments below.

Monday 21 February 2022

TRIG - Full Year Results

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

It has grown steadily over the past few years, from £300m at launch to become one of the largest funds in the renewable infrastructure sector with assets of £2.7bn. The shares were first purchased for my green portfolio in 2019 and topped up last November.

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, 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.


Last week the company released results for full year 2021 (link via TRIG website).

Profits came in more than double the previous year at £210m (2020 £100m) with earning per share back up to speed at 10.0p (5.9p). The portfolio generated 4,125 GWh of clean electricity, an increase of  4% on 2020 which is sufficient to power over 1m homes and avoid 1.4m tonnes of CO2.

Net assets per share for the period increased by 3.5% to 119.3p compared to 115.3p a year earlier. Factor in dividends and the total return for the year was 9.5%.

The board have announced a final dividend of 1.69p for the end of March making a total of 6.76p for the year and a 1.2% uplift to 6.84p  is planned for the coming year giving a fwd yield of 5.3%.

The shares trade at a 13% premium to net assets.

Power Prices

Given the recent dramatic rise in energy prices, I was interested to read this section of the report...

“The power price environment over recent months has been remarkable. From the pandemic induced lows of Q1 2021 we have now seen wholesale power pricing rise to the highest levels since the Company's IPO in 2013. Two factors dominate this surge: high commodity prices and low weather resource for renewables generators; with other factors such as increasing geopolitical concerns, supply outages and a rapid recovery in demand also contributing.

Elevated spot power prices are flowing into season ahead forward power prices. For instance in the GB market, which has been one of the most affected, forward power prices for the coming summer and winter seasons increased by an average of 166% over the last six months of 2021; indicating an expectation from the market that elevated power prices will continue for the next year or so. There is a similar pattern across all markets where TRIG has investment

The UK and European carbon prices reached all-time highs peaking above €89 a tonne during the year, influenced by demand from coal and gas generators competing to fill the gap created by low wind resource. Higher carbon prices are consistent with policy encouraging industry to invest in cleaner technologies.

The Company is seeking to benefit from these elevated near-term forward power prices by entering into forward fixes, supplementing its longer-term fixed revenues per megawatt hour from government subsidies. This is consistent with the Company's low-risk, yield-oriented investment proposition. Over the next 12 months, 70% (2020: 84%) of revenues are fixed per unit of generation and over ten years this figure is 66% (2020: 74%). The decline in these numbers is largely driven by the elevated power prices in the near-term compared to last year's assumptions”.


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.

In addition, gas which heats 85% of our homes is due to be phased out for all new house build from 2024 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.

In addition, we see the higher power prices which is an important aspect of valuing these renewable energy infrastructure trusts.. Power prices are one of the key risks faced by the trust.

TRIG 3 yr share price/NAV

Finally, with inflation expected to rise to 7% later this year and maybe remain at a high level whilst the energy crunch play out, I am hoping my renewable energy infrastructure holdings will provide their traditional hedge against rising inflation whilst their 5% income will offset my higher energy bills.

The higher weighting in my green portfolio proved to be a drag on returns in 2020. However, in more recent times, the performance has improved and no doubt the higher power prices due to the global energy crunch is a significant factor. I decided to top up my portfolio last Autumn and the shares currently make up around 6% of my green portfolio.

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!

Thursday 17 February 2022

NIBE Industrier - Full Year Results

NIBE is a heating technology company based in Sweden. It has three basic business areas - Element, Climate Solutions and Stoves. Climate is the fastest growing segment and over the past year accounted for around 2/3rds of sales and 72% of the groups profits. Clearly climate change is rising to the top of the political agenda on a global basis and the company is well positioned to take advantage of the opportunities this provides - especially in the field of heat pumps which will become an option for heating our homes as an alternative to fossil fuels such as natural gas. It is one of the leading companies in Europe and North America in the area of sustainable solutions for domestic heating.

The company has been trading for over 70 years and has a long-standing ethos of working on sustainable solutions and energy efficiency. It was floated on the stockmarket in 1997 and has grown sales at an average of 18% p.a. over this period with an ever increasing global presence.

Heat pumps and related technology are tried and tested solutions for space heating in Scandinavian countries but relatively unknown in many parts of the world. Many countries, including the UK are actively looking at ways to decarbonise the domestic heating sector which accounts for around 40% of carbon emissions.


Climate change is the greatest challenge of our time. We need to reduce greenhouse gas emissions by 50% by 2030 compared to 2010 levels to keep on track for net zero by 2050. All of the products offered by the company are designed to make a significant contribution to tackle climate change. They offer sustainable, energy-efficient solutions such as heat pumps that reduce energy consumption by up to 80% and reduce GHG emissions in all types of buildings both domestic and commercial.

Last year, the EU announced their 'Green Deal' and proposals to target net zero carbon emissions by 2050. A central part of the strategy will be the goal to decarbonise the energy sector and prioritise energy efficiency and transition to a power sector based on renewable energy. In the US, the new Biden administration has pledged to cut greenhouse gas emissions by at least 50% by 2030. This is double the country's previous commitment under the 2015 Paris agreement.

Heat Pumps

The largest sector for the group is climate solutions and within this sector, the largest element is heat pumps. These pumps extract the stored energy from the sun contained in the soil or air and transfer this energy indoors to provide indoor heat as well as hot water. The two main types of heat pump are ground source where pipes are laid under the soil and air source where heat is extracted directly from the air.

In the UK (and much of Europe) around 85% of our homes are heated by gas central heating. However we have legislated for net zero emissions by 2050 and will need to find alternative ways to heat the nations homes as fossil gas (fossil fuel) will not be an option. We have already ruled out gas central heating for all new homes built after 2024 so electric heat pumps (as well as green hydrogen and battery storage) could play a big part in the huge transition of our energy use.

Air Source Heat Pump

The UK still offers financial incentives to install a heat pump via its Renewable Heat Incentive. This covers a period of 7 years from installation and will provide payments for a typical home of £1,300 p.a for air source heat pump and a higher figure of £3,300 p.a. for a ground source heat pump. In addition there will be a significant saving on heating bills. These incentives will go a long way towards the costs of installing a heat pump system which range between £6,000 for air source and maybe up to £20,000 for a ground source heat pump. However,the scheme is due to be closed from March 2022 and will be replaced by a new scheme offering a grant of £5,000. The aim is to offer 30,000 grants in each of the first three years on a first come first serve basis. (see article)

Obviously the demand for solutions which support the switch from fossil fuels to renewables will grow and grow. As the market grows so prices fall which in turn creates greater demand. Companies like NIBE who have a clear commitment to sustainable solutions will be the likely beneficiaries of the transition to a new way of doing things. This is why I have decided to add this company to my portfolio.

Results for 2021

The company have this week released full year results for 2021 (link via company website).

Combined sales increased by 13.6% to SEK 30.8bn and generated net profits of SEK 4.3bn which reflects a margin of 14%. The company pays dividends which will increased by 29% this year to SEK 0.5 per share after taking account of the 4:1 share split (subject to FX considerations for UK shareholders!).

Given the backdrop of the global pandemic, this has been an excellent performance and another step closer to achieving the sales goal of 40bn by 2025.

The shares were added to my green portfolio in June 2020 at the price of SEK 50 and have advanced steadily to reach an all-time high of SEK 135 by the end of 2021 - a gain of 170% plus dividend. The shares have retreated quite sharply in recent weeks and I may well look at a top up around the current price of SEK 85. The holdings currently makes up around 8% of my green portfolio.

NIBE - One year share price

From what I have seen so far, this appears to be a very well run and profitable company with a focus on providing solutions to the global problem of climate change. As the world increasingly moves away from its dependence on fossil fuels, this will provide huge opportunities for growth from companies such as NIBE which offers ready-made, energy efficient systems using renewable energy.

The biggest challenge we face is the reduction of greenhouse gas emissions to slow down the current rate of climate change. There is now a growing awareness of the changing climate and the rise in extreme weather which threatens our living conditions, biodiversity and political stability. NIBE and its products will increasingly be part of the solution and is a good example of how businesses are an essential part of solving the climate crisis we face.

This is likely to be a long term hold for my portfolio.

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!