By Val Cipriani, Investors Chronicle, February 17, 2023:
For a sector that prides itself on offering attractive yields with an eye on capital preservation, renewable energy trusts have had a bumpy ride over the past few months. Having soared in early 2022 as energy prices spiked, share prices plummeted following the Truss-Kwarteng ‘mini’ Budget in September and have yet to fully recover…
Foresight Solar Fund invests in solar panels and battery storage assets, primarily in the UK but also in Spain and Australia. JLEN Environmental Assets also focuses on UK assets but is more diversified…
‘Mini’ Budget aftermath
The ‘mini’ Budget led to a sharp hike in market interest rates, which in turn tend to push discount rates up, eroding the present value of future cash flows and eating away at the value of infrastructure assets…
Windfall tax
The sector is not just facing discount rate issues. In November 2022, chancellor Jeremy Hunt announced the details of the government’s electricity generator levy..
The electricity generator levy “underlines the fact that if you want to have a decent infrastructure business, you can’t just focus on one country,” says Fairman…
In the UK, the focus has recently been on battery storage assets. In September 2022, Foresight Solar Fund and JLEN Environmental Assets acquired a company holding the development rights to construct a 49.9 megawatt lithium-ion battery energy storage plant in Scotland…
Hungry for capital
If investment trusts trade at a discount to NAV they struggle to raise capital – something the sector is hungry for, according to Fairman. “I don’t think there is any shortage of deals to be done,” he says…
JLEN Environmental Assets and Foresight Solar had a better year than some of their peers and are staging a stronger recovery. James Carthew, head of investment companies at QuotedData, says that this is likely due to a mix of factors. Foresight Solar has seen a number of projects previously in the construction phase become operational, while solar has proven more generative than wind in recent times. JLEN has a higher exposure to inflation-linked revenues than other funds.
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