The Renewables Infrastructure Group (TRIG) has announced its final results for the year ended 31 December 2018. During the year, TRIG provided an NAV total return of 11.6%. It describes the year as one of “Strong financial performance during the year with portfolio generation close to budget” and has provided the following key highlights:
- Portfolio generated 2,011GWh of electricity in the year (2017: 1,766GWh)
- NAV per ordinary share of 108.9p as at 31 December 2018 (2017: 103.6p)
- Directors’ portfolio valuation of £1,268.7m as at 31 December 2018 (2017: £1,081.2m) following new acquisitions
- Total return of 11.6% for the year and 7.8% since IPO (annualised)
- Earnings per ordinary share of 11.7p (2017: 9.8p)
- Profit before tax of £123.2m (2017: £90.2m), reflecting an uplift in portfolio valuation
- Declared dividends of 6.50p per share in line with the target for 2018 (2017: 6.40p)
- Aggregate dividend of 6.64p per share targeted for the year to 31 December 2019 (2.2% increase)
Portfolio highlights
- Portfolio generating capacity increased by 33% to 1,110MW with a total of 62 portfolio projects in the UK, Ireland, France and Sweden4
- Four construction projects commenced operations with an aggregate generating capacity of 67MW
- First investment in the Nordic region with the acquisition of the Ersträsk wind farm in Sweden
- Raised £236m of new equity capital (before issue costs)
- Extended the revolving acquisition facility to £340m, with lending capacity provided by existing lenders RBS, NAB and ING
Chairman’s commentary on TRIG’s Financial results
“The net asset value (“NAV”) per share was 108.9p at 31 December 2018 (2017: 103.6p), an increase of 5.3p after the payment of dividends, reflecting the positive contribution of the above items.
The portfolio was valued at £1,268.7m as at 31 December 2018. This is an increase of 17% on the £1,081.2m valuation of the portfolio as at 31 December 2017 and includes investments made of £143.4m. As a result of increased market pricing for renewables assets, we have reduced the weighted average portfolio discount rate by 0.3% to 7.6% at the year end.
Profit before tax was £123.2m (2017: £90.2m) and earnings per share were 11.7p (2017: 9.8p), resulting from strong operational performance and an uplift in the portfolio valuation. Cash received from the portfolio by way of distributions, which include dividends, interest and loan repayments, was £98.5m (2017: £73.0m). Underlying this, realised electricity prices were above forecasts and ROC receipts, including the recycling element, have also been higher than expected for the period.
The Company made commitments of £348.0m, of which £143.4m was invested during the year and £204.6m of future commitments remain at the year-end as outlined in the Acquisitions section of the Strategic Report. In addition, the Company repaid the Revolving Acquisition Facility which was £106.4m drawn at the start of the year. These cash outflows were funded through a combination of £233.8m of share capital raised (net of costs) through the issue at premium to NAV of 219.2m ordinary shares over the year, and also the reinvestment of surplus cash generated from the Company’s portfolio.
In December 2018, TRIG extended its Revolving Acquisition Facility until December 2021 on improved terms and increased the committed facility size from £240m to £340m. This additional borrowing capacity will enable TRIG to access more short-term capital to execute on its active deal pipeline which includes some potentially large acquisitions, reflecting the increased scale of many new renewables projects.
The Company’s Ongoing Charges Percentage was broadly unchanged at 1.12% (2017: 1.11%)”
Chairman’s portfolio update
“TRIG’s portfolio is now 62 assets with a generation capacity of 1,110MW (2017: 821MW)[3]. Annual electricity production increased by 14% to 2,011GWh (2017: 1,766GWh), reflecting a full year’s production from Sheringham Shoal, Freasdail, Garreg Lwyd and Neilston wind farms, as well as at Clahane and the commencement of production at its extension. Despite good UK irradiation, wind speeds were lower than average which resulted in overall production at 3.7% below budget.
Asset operational performance was strong over the period and the assets experienced minimal downtime. Generation was good despite poorer wind speeds, mainly as a result of high levels of asset availability. Production at the UK solar sites was at its highest level since operations began at 8% above budget, following excellent availability during the sunny summer. Many of the wind farms benefited from proactive major component replacements and repairs which took place during the lower wind periods, which helped to minimise downtime over the windier winter.
TRIG made new investments in five onshore wind farms, comprising 100% interests in Clahane, a wind farm in the Republic of Ireland (55MW), Rosières and Montigny, two wind farms in France (31.8MW combined) and Solwaybank, a wind farm in Scotland (30MW), and a 75% equity interest in Ersträsk wind farm in Sweden (171.8MW, net share).
The Board notes the recent market commentary on extended asset life assumptions. This is an area that we, together with the Managers, keep under regular review.
We consider asset lives on an asset-by-asset basis taking into account technical advice. As well as the structural durability of the asset in question, consideration is given to maintenance costs, asset down-time and power price capture rates, which advisers anticipate will reduce over time compared to base-load prices due to the expected increase in low marginal-cost renewables generation (an effect which is also referred to as ‘cannibalisation’). In addition, we evaluate the likelihood of obtaining planning and lease extensions.
At IPO in 2013, the assumed operating life of an asset was 25 years. Assumptions adopted in the year-end valuation typically range from 25 to 30 years from the date of commissioning, with an average 26 years for the wind portfolio and 30 years for solar portfolio. The overall average across the portfolio as at 31 December 2018 was 27 years (31 December 2017: 27 years).
The Operations Manager is currently undertaking a detailed technical review of these assumptions to consider if longer lives should be assumed. Whilst increases will not be appropriate in all cases, an increase of between 2 and 3 years on average across the portfolio is being considered. Sensitivity analysis indicates that an increase in asset life of one year could increase the portfolio valuation by the equivalent of 1.1p per share (ie an increase to NAV per share of 2-3p, absent other movements).”