The Reeves' Budget whence the 10 year swap has risen from 4.0% to 4.3% impacting the attractiveness of Bond Proxies. The gloomy rhetoric has also Crashed the Economy from the fastest growing Economy in the G7 in Q2 to last. Tbf US interest rates have also risen sharply; not the Euro, the 10 year swap has actually fallen since our Budget. In 2022 there was a Global Bond Crisis and our interest rates moved in lockstep with the entire World, barring a blip that lasted days. This time Reeves has Crashed the Economy on her own. |
I took a small position in this at £1 and it has let me down so far.
Can anyone who follows this company closely enlighten me as to why the share price is continually falling? Why is this so out of favour? The revenues look copper-bottom, the yield is high, sentiment in the sector seems OK. What’s the problem with it?
Thanks.
Salty. |
Decided to join the party here. |
I have the intention of increasing my holding here, the dividend gives excellent yield and is well covered, share price well below assett value. Each week I delay' it seems one of my better decisiions. I will not catch the bottom, or if I do it is just a fluke, but downward moomentum does say, continue too wait a bit. That or I am missing something which means the divi is under some sort of threat. |
TRIG appears reasonable value at these levels, but agree the rate at which the share price has been falling is scary. |
I posted on the UKW board about Value & Momentum analysis. The UKW chart seems to be forming a base - perhaps helped by the fee reduction - but, for now, TRIG (and NESF), are classic cases of ‘good value / bad momentum’. |
I’m furious that nobody in the media held up an interest rate chart from say 2021, in front of the mantra spouting “Liz Truss trashed the economy” morons, to show that was just a blip on an upward slope.
In fact if I were Truss, I’d be thinking about a slander case against Labour. Partcularly as it looks like interest rates and gilt yields are not going down any time soon under Labour. |
CPI predicted to rise to 2.7%, not sure if that will go down like a lead balloon on these bond proxies, on the other hand this dies offer some inflation protection.
Seems like Reeves has managed to crash the Economy on her own. The irony was that the rise in Bond yields after the Truss budget was global, every country in the World went up in exactly the same proportion ( US 2 year swap jumped to over 5% also). Karma for Reeves, this time it's just us. |
httpS://www.bbc.co.uk/news/articles/cx27wppegddo |
As I mentioned earlier, the 10 year swap is unchanged on December 23, so it will be interesting to see where we go with NAV in the New Year. I'm holding and reinvesting dividends only, but hope you are correct. |
The whole sector is down so nothing specific to TRIG. Likewise, reductions in NAV due to higher interest rates, although underlying cashflows haven't changed. Personally think this is a big buying opportunity and have been adding to a few of these. |
Indeed taking us into territory that once seemed impossible. The quarterly accruing dividend almost at 9% now and that's covered with hardly any gearing, plus the income is supposed to be nearly all hedged or guaranteed by Government over the next decade or so.
But yes, NAV releases over the last two years have wiped out any earnings. And I guess the Market assumes this will continue ( even though I am puzzled on how further downward revisions are possible when the valuation variables appear to be unchanged over the preceeding 12 months) but my bet is it will continue to fall. |
Red every day at the moment, good buying opportunity or are we being forewarned for some pending bad news? |
Crown Estates own sea bed up to 12 miles so get a cut for anything built on it. Nice little earner consider CE do absolutely nothing in return for our rent. |
Just looking at the rolling annual factors that affect nav as I mentioned it...wholesale electricity prices are slightly up by about £3 from £92 to £95 mwh. The 10 year swap is about identical at 4.07%, windspeeds are going to be identical to 2023, and the two outages are presumably sorted. So it would be disapponting if nav is again trimmed early next year. It just doesn't sit well. No doubt there are other factors at play. |
Worth remembering that 40% of TRIGs energy is generated in: Sweden, France, Germany and Spain |
The North Atlantic conveyor has been slightly slowing, and falling wind speeds is a known risk, NAV should take it into account but probably doesn't. October and November wind speeds were beyond dire, obviously December has been brilliant (even with the switch off factor for storms). 2023 was a dreadful year, CET records show just 7mph, 2024 to date is just under 7mph, so another poor year. We could be about identical by the month end. And poor generation does feed into lower NAVs.
I'd say most offshore windfarms are too close to shore to be a significant risk factor for Russusn sabotage.
On NAV, on a rolling annual basis, we are comparing poor data from last year on just about every metric, be it wind speeds, electricity prices or interest rates. I really think they are running out of excuses for further revisions downwards and the Market is running out of patience too. |
Wind turbines are designed to shut off at wind speeds above 55 miles per hour, for safety purposes.So many would have not been generating power over the weekend. |
 Chat gbt seems to think there is risk to wind farm deep sea cables… could explain some of the recent discount. It’s what’s putting me off increasing my stake.
“There is growing concern about the potential risk of sabotage to undersea wind farm cables, particularly in light of recent geopolitical tensions with Russia. These cables are critical infrastructure, transmitting electricity from offshore wind farms to onshore grids, and they could be targeted to disrupt energy supplies or exert pressure on countries relying on renewable energy sources.
Efforts are underway to improve the resilience and security of these systems, including better monitoring technologies, enhanced international cooperation, and rapid repair capabilities. However, the risk remains significant, especially in times of heightened geopolitical tension.”
I think what determines whether this is a bargain or not depends on your view of what Russia might start doing next. We’ve seen nordstream deep sea pipelines blown up and a deep sea data cable was cut last month between Norway and mainland Europe. Could be more on the way potentially. Russia has specific submarines developed for cutting deep sea cables.
Wind speeds have also been a bit weak lately.
It’s a hold from my perspective at these prices |
These Kepler reports seem to have a totally random effect on share prices, if not causing a drop subsequently. |
Dividends of this level can be found sector wide eg UKW
I don't think this is TRIG specific it's just the sectors out of favour.
Perhaps another rate cut or two might change that?
I hold from ~96p but am not topping up until I see a recovery 'proper'. |
The narrative is at odds with the Market price, on the current 8.73% yield an investment at this entry point would double in just over 8 years, assuming no raise in dividends, dividends have been raised for eight consecutive years. On that point, I really think the Board has to raise the dividend in 2025, frozen dividends is usually an admission all is not well and the price might react accordingly. |
 Below is what that Kepler mob say about the dividend (from the above note).
Dividend
TRIG pays a high dividend covered by cash, which currently yields 8.2% at the current share price of 92p per share. Over the past five years, the dividend has risen by 12.5% in total, equivalent to growth of c. 2.4% per annum. TRIG’s managers look to manage risks as well as provide strong returns, so whilst the dividend yield and dividend progression is less high than some peers, on a risk-adjusted basis TRIG remains competitive. Underpinning TRIG’s resilience is the fact that 67% of TRIG’s revenues are insulated from electricity price changes over the next ten years. 57% of total expected revenues are directly and contractually linked to inflation for the next ten years, giving shareholders a relatively high degree of certainty, as long as TRIG continues to generate electricity in line with expectations.
We understand that the board is mindful of setting the correct balance between paying a sustainable dividend for the long term and the desire to provide a progressive dividend. Bearing this in mind, the board has prioritised paying down floating-rate debt and share buybacks, instead of paying significantly higher dividends with TRIG’s surplus capital that it earned in 2022 and 2023. Given the operational challenges that the portfolio has endured in 2024 (see Portfolio section), this appears to have been a good decision by the board. However, given buybacks are so accretive at the current discount to NAV (see Discount section), we think it makes sense that TRIG’s board channel surplus cash flows into buybacks rather than incremental dividend increases at the current juncture.
ANNUAL DIVIDENDS
Source: The Renewables Infrastructure Group
Higher interest rates around the world, and specifically the UK, have certainly made TRIG less attractive on a relative basis, which we believe is the major contributor to the discount widening out. Over the long term, it is worth bearing in mind that TRIG’s revenues are positively correlated with inflation, and so whilst savings accounts or fixed interest bonds offer relatively high nominal returns, TRIG’s offers the potential to deliver real returns. As we discuss in the Performance section, TRIG offers a prospective total return of 8.3% on a NAV basis before fees, the majority of which comes from a covered dividend, which has averaged over 1.25× on a median basis since IPO.
Dividend cover has been impacted in 2024 year to date by materially lower electricity prices than achieved in recent years and cable outages at two of TRIG’s larger assets – the UK offshore wind farms, Hornsea One and East Anglia One. Both of these outages are now repaired, but the impact has been lower-than-expected dividend cover, which is expected at c. 1.1× on a cash basis, before returning to the long-term average of 1.2× to 1.3× from 2025. With the dividend still projected to be covered this year, 2024 shows the resilience in TRIG’s model. In the chart below we also include dividend cover before debt repayments, which, as discussed in the Gearing section, are made formulaically for TRIG’s structural, project finance debt. |
Is the yield sustainable? |
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