The Renewables Infrastru... Share Discussion Threads

[muscletrade] 21/5/2020 11:01

TRIG issuing shares at big premium to ‘stale’ NAV
By Michelle McGagh 20 May, 2020
2
Comments
TRIG issuing shares at big premium to ‘stale’ NAV
The Renewables Infrastructure Group (TRIG) is attempting to raise around £50m in a share issue priced at up to 9% over net asset value (NAV).

Although it is good practice for investment companies to issue new shares at a small premium over NAV to boost the stakes of existing shareholders and avoid them paying the costs of a fund-raising, it is unusual for the premium to be so high.

The ‘tap’ issue, announced yesterday, will enable the £2bn wind and solar power fund to replenish its bank overdraft and meet the £35m cost of construction projects this year and next.

It is priced at 120p, a 5.8% discount below the closing price of its shares on Monday and a 4.3% premium to its 31 December NAV per share of 115p.

However, that end-of-year NAV is very much out of date after the company last month cautioned that falling long-term power price forecasts, which have cast a shadow over the renewables fund sector this year, had probably lopped 4.5% from the value of its portfolio.


Stifel analyst Iain Scouller said it was ‘a bit surprising that it is doing this when the NAV at 31 December is stale and the next one at 30 June is not due to be published until early August’.

‘It did indicate in a trading statement a few weeks ago that the NAV could have fallen by around 5% from the 115p reported at 31 December. Therefore at a price of 120p, the issue is being done at a fairly high 9% premium to this potential NAV of around 110p.’

The shares fell 4.8%, or 6p, to 121p yesterday, just above the issue price, but have added 1.9p to 123.1p this morning.

TRIG has grown rapidly in the past seven years through fund raisings as environmental and income-seeking investors have sought out the 5.6% yielder. The Guernsey investment company raised £227.6m in October with the issue of 185m shares at 123p.

The latest share issue comes after TRIG used up its available funds investing in German North Sea offshore wind farm Merkur with a Dutch pension fund, putting money into a French wind farm Fujin last year and, earlier this year, buying the Blary Hill wind farm in Scotland, swelling its portfolio of over 70 wind, solar, and battery storage investments.

In an announcement, TRIG said ‘asset availability’ remains strong and ‘progress at the company’s three construction projects remains materially on-track, notwithstanding the Covid-19 pandemic’.

‘In light of the attractive pipeline of suitable investment opportunities that InfraRed, the company’s investment manager, is continuing to evaluate for the company, the board believes that is an appropriate point at which to seek to raise money through the issue of new ordinary shares,’ it said.

Although TRIG did not say how much it wanted to raise, Numis Securities analyst Priyesh Parmar said having renewed its ‘10% tap issuance capacity’ at the last AGM it would be able to issue up to 163.7m shares, ‘although this would generate considerably more proceeds than is needed to repay the £50m expected to be drawn on the revolving credit facility by third quarter 2020’.

The results of the issue will be announced tomorrow with the new shares starting trading on the stock exchange next Tuesday.

[smidge21] 20/5/2020 17:34

AJBell are taking orders from punters

[carpingtris] 20/5/2020 11:45

Given the share price drop anyway probably just buy them from the open market... nearly hit 120p yesterday.

[gateside] 20/5/2020 09:52

Pity. I suppose it saves the company money. At least last time they raised cash it was an Open Offer and Private Investors could take part.

[speedsgh] 20/5/2020 09:45

@Gateside. Sounds like this would most likely preclude private investors. There is no Open Offer being made to existing shareholders.

"The Issue will be made to qualifying investors (as defined in section 86(7) of the Financial Services and Markets Act 2000 (as amended)) through TRIG's joint corporate brokers, Investec Bank plc ("Investec") and Liberum Capital Limited ("Liberum")..."

[gateside] 19/5/2020 16:40

Can private shareholders apply for the new shares at 120p or is it just for Financial Institutions?

[panshanger1] 22/4/2020 09:13

Thanks for posting

[davebowler] 22/4/2020 08:55

Liberum;
Event

The latest set of power price forecasts received by TRIG show a material reduction in assumptions in the near term (since the valuation at 31 December 2019). The latest forecasts indicate a 17% reduction in power price projections over the next five years (25% reduction in 2020 and 2021). Forecasts for the period from 2025-2050 have decreased by 5%. The fall in power price projections is due to reduced economic activity. Power price forecasts for each of the five jurisdictions across Europe in which TRIG operates show similar reductions. In the GB market, the average cannibalised capture price in the latest forecasts is £39 per MWh for the period 2020-2024 and £46 per MWh for the period 2025-2050 (real prices).

If these figures were applied to the portfolio valuation, the implied NAV reduction would be c.5p per share. The next portfolio valuation will be at the June 2020 interim results. The June valuation will incorporate the latest available set of assumptions as well as other variables such as value enhancements and the strong operational performance in Q1 2020.

Portfolio generation was 22% above budget for Q1 2020, driven by offshore wind farms and assets in Britain and Sweden. Site availability has also been within 1% of budget. 74% of TRIG's revenues are fixed over the period to December 2024. Over 80% of revenues are fixed over the next two years. The dividend for 2020 is projected to be fully covered and the board has reaffirmed the dividend guidance of 6.76p for 2020.

Assets in construction make up 8% of the portfolio (Solwaybank, Blary Hill and Venelle). Venelle in France is partly commissioned (6 out of 16 turbines are operational) with the remainder due to complete in the summer. Solwaybank is expected to be operational by the end of 2020 and Blary Hill is due to commence construction shortly.

Liberum view

TRIG's exposure to power prices is mitigated by the high proportion of fixed cash flows as a result of subsidy agreements and PPAs. Portfolio diversification has increased the amount of fixed revenues with projects in France and Germany benefiting from Feed in Tariffs. Fixes have been agreed for assets in other jurisdictions. This provides robust earnings visibility and underpins the dividend. The implied 5p NAV reduction from the latest set of power price forecasts does not include any upside from value enhancements. TRIG is operating from a position of strength with a robust balance sheet and a confident outlook on revenue generation in 2020. The company has increased the proportion of fixed rate revenues in recent months. Over 80% of revenues are fixed for the next two years. At 23 March, the figure was 77% for 2020.

Guidance on proportion of near-term fixed revenues

Fund

Near-term proportion of fixed revenues

Aquila European Renewables Income

70% of present value of forecast revenue over five years is comprised of subsidies of fixed price PPAs

Bluefield Solar Income Fund-

88% in 2020; 77% until June 2021

Foresight Solar Fund Ltd-

67% in 2020

Greencoat UK Wind-

Not disclosed

Greencoat Renewables-

97% contracted until December 2027

JLEN Environmental Assets-

64% of revenues are either Green benefits or PFI. Of remaining 36%, fixed price or floor contracts in place for 49% of generation for summer 2020 and 48% for winter 2020/21

NextEnergy Solar Fund Ltd-

61% of revenues regulated over next 12 months. Of remaining 39%, fixed price contracts in place for 95% of generation for summer 2020 and 50% for winter 2020/21

Renewables Infrastructure Group-

80% over next two years; 74% to December 2024



Source: Liberum, Company data

Only one fund in the peer group, Greencoat UK Wind, has reported an updated NAV since December 2019. Greencoat's NAV per share fell by 0.2p in Q1 2020. This included a slight reduction in near-term price forecasts due to lower gas and carbon prices. Greencoat UK Wind uses forecasts from one third-party provider in its portfolio valuation. TRIG and the majority of the peer group use forecasts from two providers. The latest forecasts received by TRIG are therefore likely to have come from the other major third-party provider. The peer group is likely to experience a similar adjustment to power price forecasts over the coming quarters.

Source of power price forecasts for listed renewable funds

Fund

Power price forecasts

Bluefield Solar Income Fund-

Average of three providers

Foresight Solar Fund Ltd-

Average of two providers

Greencoat UK Wind-

One provider

Greencoat Renewables-

One provider

JLEN Environmental Assets-

Blend of two providers

NextEnergy Solar Fund Ltd-

Average of two providers

Renewables Infrastructure Group-

Blend of two providers

[igoe104] 21/4/2020 09:34

Cant every see a lack of demand for renewables. Governments around the world want more and more. I hold trig and ukw good solid long-term holds for me.

[trekker60] 21/4/2020 09:27

I assume any drop in renewables industry share prices in general is driven by fears about the impact of a fall in overall demand for energy/power highlighted by the oil sector situation. Long-term, I still see TRIG and other renewables as solid holds for income; short-term, who knows !

[gateside] 21/4/2020 09:15

I've noticed that renewables seem to rise and fall more in conjunction with the price of Oil

[dmdmdmdm1] 21/4/2020 08:36

Dropping due to oil prices falling?

[chester42] 09/4/2020 10:53

Share price almost hitting 52 week high - I'm not sure if that's a sustainable price with so much uncertainty around. It's already heading south today. Share price seems more comfortable around 128p for now.

[tcuc3e] 07/4/2020 09:26

Amazing bounceback in share price for TRIG. Have barely seen a tighter v-shape crash and recovery. At the dip could have brought in at initial flotation prices, a couple of weeks later, the price is almost back to the pre-Covid peak.

[washbear] 02/4/2020 17:33

Well thats a good reason.Typically how long are the uk Government contracts ?And are the non uk contracts as safe as houses ?

[gateside] 02/4/2020 11:35

Prefer TRIG as they have wind and solar and are not just in UK.

[washbear] 02/4/2020 11:27

Hello GuysIs there a real preference bwtween TRIG and Greencoats .?

[gateside] 01/4/2020 22:48

Yes I think TRIG's should be safe

[goldry] 01/4/2020 20:48

I think the answer at the moment is "who knows"

[carpingtris] 01/4/2020 20:39

Received divi..

Do ppl think this should be fairly safe bet?

[goldry] 01/4/2020 15:21

Looks like the last one I'll be getting for a while

[drradcliffe] 01/4/2020 15:11

Got mine this afternoon as well.

[woodhawk] 01/4/2020 14:59

Thanks, Goldry - just got mine this afternoon too!