Why would subsidies be pulled when they are contracted?
Who would trust the Govt in future contracts after such an action? |
FGEN say their end of life valuation is conservative and but they believe that it may be possible to run some of these facilitates on a non subsidised basis beyond eol. Something they are pursuing.
So what happens if subsidies are pulled? Can we live with greatly reduced renewable supply? |
I think offshore wind AR5 there were no bids (£60 inflation adjusted) so price hiked substantially for AR6.
It’s been nice work if you can get it for renewable companies, but markets look forward. What are they seeing?
If by medium term you mean the length of Ed Millibrain’s tenure, is that to be measured in the life span of a lettuce? What kind of industrial policy elicits electricity prices 4x that of the USA and then wonders why bond yields are spiking and growth is going negative? |
Adam
New build would dry up without the subsidies so not in the mid term. Worst case less supply pushes up prices
The attraction of the existing renewable trusts is the cost of upgrading to new, cheaper and more efficient kit is a relatively small % of the sunk total cost which they have already incurred? Gives them a competitive advantage
Not sure if this applies to wind?
None of us know how this all unfolds, the issues are whether the discount is large enough and the management are good enough to work the assets |
How many of these companies would be profitable without subsidies? Either ROCs, CFDs and constraint payments? What would the NAVs and dividends be? So rephrasing the question: How long will the subsidies last or be so generous? |
I highly rate the management of BSIFOver the years directors have bought some sizeable amounts of shares |
 Payette
Just so folks dont get carried away with the >10% yield... I think that this is most likely a limited life company. Solar panels and wind turbines wear out. And more to the point, subsidies and leases of land on which assets are sat, are limited. So this company will pay out at similar levels for 10 year or so, then ramp down as assets become older or leasehold land returned to freeholder. Some assets may generate income for longer - e.g. the AD assets; I reckon one sixth of the asset base might go on "forever" (unfortunately some of these were sold to 3inf).
The company say the opposite! They claim that environmental infrastructure is a long-term asset class. They IPO'd in 2014 with a 19.8 year av life, now 10 years later it's 16.5 years and that this is conservative. NESS have said the same
Clearly their skill set is the ability to expand and extend.
My view is that if you rate the management, then relax and let them do their job with the risk reward screwed in your favour with the discount to NAV
I bought a load on Thursday and Friday plus NESF and GRID. Got SEIT.
Any others I should be looking at? |
Happy to have bought down here beats traditional christmas shopping! |
A strange post.(130)
It seems we are to take the company today and freeze it.....wait ten or twenty years and look again at some worn out assets ??
The AD business ...if it is to go on "forever" will require constant cap ex but the wind and solar are simply to be left to run down.
Blades and complete turbines can be replaced but most wind turbines are exceeding their projected lifespan and FGEN uses very conservative estimates.
To replace existing solar panels with cheaper, more efficient panels looks a good move when all the infrastructure is already in place.
A few years ago I was looking at a battery storage start up and investors were concerned about the technology rendering their batteries obsolete ....the guys pointed out that even if there was a problem the batteries were only 25% of the total cost of the installation
"Just so folks don't get carried away with the >10% yield".....hmmm !! ...the second word that springs to mind is "off" |
@Payette no one got carried away when the yield went above 9% a couple of moths ago so don't see 10% as being anymore beneficial. Fundamentally too many of these companies have been propped up by generous subsidy schemes particularly the ROC scheme which clearly will payout to the end but long run wholesale power prices are falling back and there is an increasing risk of negative power pricing starting to influence forward power pricing now as well. Also until the bond mkt has found a floor i feel these will continue to drift back and even though sub 70 was a good entry point im not so sure currently. |
 Just so folks dont get carried away with the >10% yield... I think that this is most likely a limited life company. Solar panels and wind turbines wear out. And more to the point, subsidies and leases of land on which assets are sat, are limited. So this company will pay out at similar levels for 10 year or so, then ramp down as assets become older or leasehold land returned to freeholder. Some assets may generate income for longer - e.g. the AD assets; I reckon one sixth of the asset base might go on "forever" (unfortunately some of these were sold to 3inf).
Can it go lower? If interest rates rise, then, yes. The FGEN price is highly related to interest rates - what can I earn on my money if I buy govt paper instead of buying FGEN. A 15 yr gilt yields 4.7%. And you get most of your stake back at the end of 15 yrs - not necessarily true with FGEN.
However, even given that, its on a huge discount. Even rudimentary spreadsheet calcs indicate I'll get >30% more cash from FGEN than 15yr gilts (I've calculated for a 15 year end-of-life (EOL) time for all assets, AVERAGE asset life is actually 16 years).
I think the management team do a good job. The hydrogen debacle is the only black mark I recall on a long successful run. There could be rabbits that the team could produce:
(i) dealing with EOL assets; I guess the land freeholder gets the assets in a default position - can the team negotiate anything better (giving e.g. 10% of value to FGEN?). All those grid connections (with obsolete solar and wind hardware) will be valuable at EOL - can FGEN extract any of this value?
(ii) buying up other distressed assets?
(iii) cut the divi, increase buybacks?
(iv) if interest rates fall, then the business can continue indefinitely
(v) amalgamation with other investment trusts
(vi) with govt intervention, extend the life of assets
May buy more. Conflict of interest - I hold the shares already. |
TRIG also hitting ATL today |
Added here too |
Added some more too - massive overreaction to one speculative investment that went wrong, but only made up 2.5% of portfolio. Share price down about 17% since announcement which is clearly ludicrous given the rest of the portfolio is held in very safe, operational assets. The good thing with this is you can just collect the 11% yield until market comes to its senses - frankly doesn't bother me if it takes a couple of years to recover. |
Well so much for self discipline .....bought more and put the lot in my income portfolio.....this is now 14% of the total and not close to my very strict limit of 10%.....hmmmm!!??
Anyway the dividend has compounded at c. 3% since the IPO so 8p after March 25 looks very likely....11% yield !!
The recent sales have shown that the NAV looks sound (unlike some REIT values).
Time to leave this in my income fund and move on. |
I would have hoped that there would have been a greater FUSS if management hadn't invested in green hydrogen.
I doubt if management said "Okay ...heads we invest... tails we give it a miss"....thought went into this !!
Green hydrogen is a new and very important part of the renewable energy story.....I would want FGEN involved so a 2.5%(of total assets) investment was entirely appropriate.
Meanwhile a 10.5% (and rising)yield and 30%+ discount continues to look very good. |
HH2 might have value |
I share your sentiment/ confidence here in what I have viewed as a very solid investment taking everything in to account.However to describe the outright loss of some 22m as a fuss is imv somewhat mild.Fortunately this loss only impacted the NAVby about 2.6%The hope is that more caution will prevail when it comes to future investments by the Manager.Regards. |
Always liked this and find the fuss over the hydrogen and even the fish farm to be rather strange.....it's what they do to create a diverse portfolio.
If people want wind, solar or even battery storage there are plenty of focused alternatives.
I got interested when they went into AD....love the big greenhouse !!
In and out over the years but when I set up a pure income portfolio two years ago this was my first purchase.
Increased my holding by over 50% in the last week and added again this morning.
My recent purchases are yielding over 10% and if the share price were to return to 90p the yield would still be close to 9%.
I imagine that a 3% increase in dividend will be difficult to resist so 8p next year.
Have cash available but this is at my limit for my income shares but not for my total investments so may come back for more !!??? |
Very agreeable move. Could be better opportunities in the future to buy back in to solar, when interest rates are lower, with better IRR, and not to overlook higher performance of newer panels. |
Seems like a good sale and well timed. |
They say "...Proceeds will be used to strengthen our balance sheet through a further reduction in debt", which seems a good move.
Bought in 2015, not quite the height of ZIRP (0.5% in 2015) but clearly not such a good investment in 2024. |
Poor return on this solar roof project. IRR of ~4% doesn’t cover interest and management charges.
I wonder how many other assets are poor performing like this.
On the positive side at least it is gone and management have £20m to spend wisely. Hopefully not on buybacks which will not do anything for the share price in the current environment. |
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