by Val Cipriani, Investors’ Chronicle, December 13, 2023:
Infrastructure trusts have seen their average discounts to net asset value (NAV) narrow in the past month, as the decline of government bond yields brought some good news for the sector. But not all the trusts recovered to the same degree, overall discounts remain wide and the sector’s immediate future still looks uncertain…
Top performers
Last month’s top performers were in the battery storage space, which partially bounced back after months of severe underperformance in the summer. Discounts remain wide (around 26 per cent) for this area of infrastructure, which faces questions over the sustainability of its UK revenues. Of the three battery storage trusts, Gore Street Energy Storage (GSF) has delivered the best returns (or least bad returns) over the past year, partially thanks to its higher exposure to foreign assets. Its share price total return was still down by 16 per cent in the year to 8 December, against 32.7 per cent for Harmony Energy Income (HEIT) and 34.2 per cent for Gresham House Energy Storage (GRID).
In the core infrastructure sector, HICL Infrastructure (HICL) and International Public Partnerships (INPP) both had a strong run, with share price total returns of 5.8 per cent and 7.3 per cent respectively in the month to 8 December. Both trusts have been focusing on reducing debt levels. INPP is in the process of selling a second asset for this purpose, according to an update published last week.
Sector giant Greencoat UK Wind (UKW) returned 2.3 per cent in the month, less than some peers, but remains the only renewable energy trust with a positive share price total return performance on a one-year basis…
James Carthew, head of investment companies at QuotedData, noted that the trusts had to contend with the reversal of high power prices in the wake of Russia’s invasion of Ukraine. “Some of the estimates of future power prices were too optimistic. As this has worked its way out of the system it is putting downward pressure on NAVs,” he said. Depending on the weather and on any new interruption to gas supplies, power prices may yet spike upwards again, he added.
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