Over the 12 months ended 30 September 2022, Ecofin Global Utilities and Infrastructure produced an NAV total return of 12.5% and a share price total return of 14.0%. This significantly outperformed the total return of global equities, measured by the MSCI World Index, which was -2.4% in sterling terms. The MSCI World Utilities Index and the S&P Global Infrastructure Index produced total returns of 15.5% and 12.7% respectively in sterling terms.
Revenue per share increased by 7.4%, supporting a dividend hike from 6.6p to 7.2p.
The shares traded at a premium to NAV for much of the year, enabling the trust to issue 11.23m shares, raising £25.4m. Another 575,000 shares have been issued since the end of the financial year. These share issues, which have all occurred at a premium to NAV, help to reduce cost ratios and improve liquidity in the shares.
Extract from the manager’s report
EGL’s NAV total return for the financial year was 12.5%, reinforcing the track record. Since inception, the NAV has returned a cumulative 92.7%, or 11.5% per annum (total returns including reinvestment of dividends). Sterling’s weakness had a materially positive impact on the year’s performance adding approximately 9.8 percentage points to the performance, of the investments in their local currency. This factor was most pronounced during the second half of the year when sterling was at its weakest. The use of leverage was mildly positive for the year.
In terms of attribution, regional performance was heavily skewed by currency moves and the US portion of the portfolio provided by far the greatest positive contribution to NAV over the year. The S&P 500 Utilities Index increased by 5.6% over 12 months, and by 27.7% in sterling adjusted terms. While not matching this performance, we generated good returns in the US book with strong contributions from Constellation Energy (America’s largest nuclear operator), American Electric Power, Exelon and NextEra.
We did outperform local sector indices by a good margin in Europe. Pan-European utilities were not defensive havens (EuroStoxx Utilities Index -5.5% in sterling terms and FTSE All-Share Utilities Index +5.2% for the 12 months to 30 September 2022) but portfolio returns in the region were positive and significantly better than the sector and broad market indices. The same was true for Continental names over the second half of the year – but not for UK utilities which were severely impacted by UK politics and wavering energy policy. The best pan-European contributors to NAV over 12 months were Drax, RWE, Acciona Energias, Atlantia and Greencoat UK Wind. Enel was a major disappointment as results were sub-par due to exposure to consumer end-markets, its heavy net debt burden and Italian sovereign risk. Veolia and E.ON underperformed owing to their end-consumer exposure.
The ‘rest-of-world’ segment of the portfolio contains exposure to Hong Kong listed renewables giants China Longyuan and China Suntien Green Power whose shares were weak, together removing 2.4 percentage points from the NAV over 12 months. The Chinese exposure had been reduced in the first part of the year. Australia- listed transportation infrastructure businesses, Spark Infrastructure and Atlas Arteria, were both helpfully the subject of M&A interest.
Another theme which has persisted and been profitable for EGL is M&A in the listed infrastructure space, benefitting portfolio holdings Spark Infrastructure, Atlas Arteria, Atlantia and EDF. We believe this will be an ongoing feature while listed infrastructure valuations trail those for transactions in the private market by a wide margin.
EGL : Year of progress for Ecofin Global Utilities and Infrastructure