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Renewables trust takes up DIY as competition ramps up

Renewables trust takes up DIY as competition ramps up

The Renewables Infrastructure Group (TRIG) wants to ramp up its energy construction projects to secure returns in what has become a competitive market.

The £1 billion trust, which trades at a premium of 4.8%, is considering further construction projects after completing its ‘milestone’ first wind farm in Freasdail in Scotland, comprising 11 turbines, in the first half of the year.

Helen Mahy, chairman of the trust, said the company may take on new projects to enable it ‘to secure projects at more favourable returns in an increasingly competitive market as investors hunt out long-term yielding assets with positive inflation correlation’.

However, future development projects would need to be kept in line with the trust's investment limits, which cap construction works at 15% of the portfolio value.

The competition in the sector has ramped up and many renewable trusts are starting to look abroad for returns, including Foresight Solar (FSFL) which recently announced its intention to invest in Western Europe, US and Australia.

TRIG, which already has the most international portfolio in the sector, is also hunting out new markets such as Benelux, Germany, and Scandinavia.

Mahy said on top of this, managers InfraRed Capital were also looking at ‘alternative technologies within the 20% limit for projects beyond onshore wind and solar’.

‘These technologies include offshore wind – a high-growth, large-scale market in the UK and Northern Europe – and battery storage, an important industry for the future balancing of renewables,’ she said.

TRIG has already acquired one battery storage project in Broxborn since its first-half results, marking the first investment in ‘renewable-enabling’ infrastructure.

‘Battery storage will be used on the grid to stabilise the frequency of grid supplied electricity – matching the variability of supply and demand,’ said Mahy.

In the six months to 30 June, the trust reported a net asset value (NAV) total return of 7.6% and said the portfolio generated 851GWh of energy, versus 738GWh in the same period last year.

It paid a dividend of 6.4p, up on the 6.25p paid in the first half of 2016.

Over the period it invested £129 million on building Freasdail and investing in Neilston Community Wind Farm in Scotland and bought its first Welsh wind farm in Powys, taking the total number of assets to 56.

Mahy said the trust ‘achieved target generation despite challenging weather conditions in certain geographies’ but lower power prices were ‘reflected in the company’s portfolio valuation’.

Canaccord analyst Ben Newell has a ‘buy’ recommendation on the stock and said it is ‘well diversified by weather systems, renewable technologies and regulatory regimes’.

‘TRIG has performed well since launch delivering an annualised total shareholder return of 8.4% and it gives investors a well-managed, low cost and low risk exposure to the asset class,’ he said.

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