The Renewables Infrastructure Group (TRIG) announced its annual results for the year end 31 December 2024. The company saw a 11.8p (9.2%) reduction in NAV per share to 115.9p driven by a reduction in power price forecasts, adjustments to operational assumptions, the impact of third-party grid outages and higher valuation discount rates. The shareholder total return fell 18.8%.
Despite the poor returns, the underlying portfolio performance was solid with pro-forma portfolio EBITDA of £493m (2023: £610m), reflecting more normalised power price levels in GB and Europe compared to highs of 2022 / 2023. Cash flow generation was also healthy despite third-party transmission-related outages, with gross cash cover of 2.1x (2023: 2.8x) and net dividend cover of 1.0x (2023:1.6x), after the repayment of £206m project level debt.
The company continues to focus on its balance sheet management and cash returns for shareholders. During the course of the year, TRIG completed the sale of four windfarms: Little Raith, Forss, Pallas and a partial stake in Gode 1 for a total £185m, at an average premium of >10%. Overall it reduced gearing by £340m (following post year end completion of the Gode disposal), with project-level gearing of 37% (31 December 2024: 37%). Project-level debt is fixed rate and is scheduled to be systematically repaid within the term of contracts with fixed revenue per unit generation.
Its share buyback programme was tripled from £50m to £150m, representing approximately 8% of TRIG’s shares in issue based on the share price as at 21 February 2025.
For 2025 the company announced a dividend target of 7.55p per share, a 1.1% increase on 2024’s achieved dividend of 7.47p/share.
Revisions to investment management agreement
The board has agreed in principle with the manager InfraRed Capital Partners and operations manager, Renewable Energy Systems Limited, to revise its fee arrangements with effect from 1 April 2025. The board says the changes agreed further align the managers with the strategy and the interests of shareholders.
Average of market cap and NAV
The basis of the fee changes from NAV to an equal weighting of average market capitalisation during a quarter and the NAV. Assuming the current share price persists, this change would result in a reduction in the ongoing annualised management fee by 28%.
[This is great while the trust is trading at a discount, but might upset investors if it went back to trading on a premium].
New transaction fee
A transaction fee will be payable in respect of certain future transactions including sales of investments and the raising of new debt financing. No fee will apply to transactions in progress, which are expected to raise about £300m of proceeds in aggregate. Thereafter, qualifying transactions will be subject to prior board approval. Fees on such disposals of assets and new incremental debt financings will be 0.5% of the relevant transaction value. The combination of the management fee and transaction fees in any one calendar year shall not exceed the quantum of the management fee that would have been charged under the present arrangements.
[So, the manager can make up its fee income by doing more deals. In an environment where assets need to be sold to fund buybacks, that might be good news. But a fee that encourages turnover for its own sake is not likely to be helpful to returns.]
New takeover fee
In order to incentivise the managers to achieve the best result for shareholders in the event of a takeover or an equivalent asset sale, the board has agreed a fee payable to the managers of 3% of the value achieved in excess of net asset value and 3% of the value achieved in excess of market capitalisation (pro-rated accordingly in relation to an equivalent asset sale). Such a fee would be capped at 4.99% of the lower of net asset value or market capitalisation.
[It is too soon for this to be a response to the launch of Achilles or even the bid for BBGI. Does it mean that the board/managers were already seeing an increased chance of a takeover?]
TRIG : The Renewables Infrastructure Group continues to navigate challenging market environment
