Ecofin US Renewables Infrastructure Trust (RNEW) announced its half year report for the year period ended June 30 2023. NAV return for the period was 0.3% while shares fell 24.7% which saw the discount widen to 29%. Commenting on the performance, chairman Patrick O’D Bourke noted that this has been a difficult first half for the fund:
“In common with much of the UK investment trust sector, RNEW’s share price has been trading at a discount to NAV. While the UK investment trust sector as a whole is currently out of favour with equity investors against a back drop of high inflation and increased interest rates, these factors have been exacerbated in the case of RNEW by the resignation of a number of the Ecofin management team during Summer 2022, as well as more recent asset-related issues including the tornado damage in Q2 to the electricity substation to which Whirlwind, our largest investment, is connected.”
Despite this, the company laid out several first half milestones:
- During the first six months of 2023, the portfolio generated 156.6 GWh of clean electricity (2022: 177 GWh), equivalent to powering ~29,400 households, from a fully contracted portfolio of diversified solar and wind projects across eight states. The assets all benefit from long term Power Purchase Agreements with investment-grade equivalent utility, municipal or corporate off-takers with a weighted average PPA term remaining of 14.1 years (18.8 years excluding Whirlwind).
- In June, the company completed an amendment and extension to its $65 million revolving credit facility with KeyBank, one of the premier lenders to the U.S. renewable energy industry. The RCF, which comprises two tranches, has been extended by 12 months. The $50 million tranche has been extended to October 2024 and the $15 million tranche to October 2025.
- Progress continued in completing construction and financing of the Echo Solar Portfolio, a 36.0 MWdc commercial solar portfolio spread across Minnesota, Virginia and Delaware, including the completion of several tax equity milestone fundings during the second quarter and nearing completion on negotiation of a back leverage debt facility. Currently, two projects have achieved commercial operation, and the four remaining projects are mechanically complete and being commissioned for commercial operation during Q3 2023.
Regarding the outlook for the company, O’D Bourke continued:
“As set out in the Investment manager’s report, a number of key drivers continue to create a strongly favourable outlook for the U.S. renewable energy industry, particularly for solar and wind power. These include increasing climate change awareness in the U.S., as evidenced by the growing appetite among U.S. corporates to buy their electricity from renewable sources; strong federal and state policy support, in particular the Inflation Reduction Act, and the increasing cost-competitiveness of solar and wind relative to fossil fuel generation.
“While some challenges remain, including supply chain disruption, trade restrictions, uncertainty around the detailed application of certain IRA provisions, and inflation, these are expected to be more than offset by the key drivers above and, as a result, the U.S. renewable energy industry is set for significant growth in the rest of 2023 and beyond.
“Also, as we saw in our own portfolio this half year, severe weather events can give rise to both challenges and opportunities for the sector. On the one hand, events like the Texas tornado that indirectly incapacitated our Whirlwind asset raise concerns about the resilience of energy systems, including renewables. On the other hand, weather events such as the heat waves which simultaneously affected the southern U.S., southern Europe and parts of China in mid-2023 reinforce concerns over global warming and are likely to spur further demand for clean energy solutions.
“While the pipeline of investment opportunities for the company remains strong, we are currently fully invested, and the investment manager is focusing on asset management and operational improvements for the foreseeable future. The board will make further announcements about the strategic review announced on 8 September 2023 when appropriate.”
RNEW : Challenging start to the year for RNEW