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Investing in Green Infrastructure Funds (ITs)

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
TheMotorcycleBoy
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Re: Investing in Green Infrastructure Funds (ITs)

#254786

Postby TheMotorcycleBoy » September 29th, 2019, 6:02 pm

PrefInvestor wrote:Hi Matt, I wish you the best of luck with interpreting a company's accounts. I am not an accountant and I readily admit I have trouble understanding them. But if they say they are making £X million in profit I tend to believe them, lets face it presumably some independent auditor will have checked them in detail. I suspect that TRIGs corporate structure may also affect the content and structure of the accounts ?. Even though I dont fully understand the accounts I still look through them looking for potential red flags though.

These renewable companies make their money via the various agreements which govern the sale of their electricity ROCs, PPAs etc. Many of these assets have something like a ~25 year lifespan, presumably the cost of the assets need to be amortised over that period ?. In recent times all of the renewable companies have been extending the life of, in particular their solar assets. This has given rise to a few pence increase in the NAV for quite a few of the renewable ITs.

ATB

Pref

Hi PI,

I'm not dissecting TRIG (or UKWs) accounts for laughs. But less than 2 months ago a whole bunch of us got burnt by an AIM share Burford Capital (BUR). I had the ARs for the past 5-6 years or so, and they boasted very high Operating margins and Returns on Capital. And yes audited accounts. However earlier this year an analyst/lawyer called Carson Block from a hedge fund figured out their stated revenues were not backed up by reality, and he shorted the firm and SP descended from about £15 to £8 rather fast. I believe it now oscillates between £6-£8.

I'm new to investing and we had about 3.5% of our book value of our foli in BUR. So I had to cut this loss fast and we lost probably half of our investment in this firm. What this taught me was that I shouldn't have disregarded Warren Buffett's investment advice "invest in businesses that you can understand". With businesses like TRIG and UKW on the face on it, sure, their business is power generation; however what you and I invest in is the SP and dividend stream from an entity which act as a kind of interface to bunch of assets, which somewhere buried underneath are wind turbines, solar farms and a supply of £££s. After my BUR experience I'd like to know more about that. That's all. So since my position in UKW is only about 1.6% of our total foli, I'm not panicking, but I'd like to know more before I commit anymore I think.

Forgetting about TRIG. I took another look at UKW. The wording of their of their Consolidated Statement of Comprehensive Income has much artistic license. This is condensed version of AR2018s, page 45. You don't have to be an accountant to understand this:


Note use of the words "profit" and "income". However proceed to Note 4, and see the sources of that income:


So... just over half of the source of that income is "Unrealised movement in fair value of investments...". Personally I find that the usage of the word "Unrealised" makes the later usage of this figure in an EPS statement a little bit disingenuous.

Matt

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Re: Investing in Green Infrastructure Funds (ITs)

#254795

Postby PrefInvestor » September 29th, 2019, 7:26 pm

Hi Matt, Well I'm not trying to criticise you for trying to analyse the accounts, though I suspect that you may find it difficult to obtain all of the information that you need to do that at the level of detail you seem to be going to. Regarding the extension life of the assets I wouldnt expect that to affect their income in any way but would clearly benefit the NAV and from that probably the ITs share price.

Regarding your experience with Burford I would offer the following comments:-
1. Its an AIM stock and they are in my experience an EXTREMELY hazardous place to invest. I have tried it only a very few times and always lost money in the end, I know many other people who would say the same. These days I dont invest in ANYTHING AIM any more - however attractive it might look on the surface (or even UNDER the surface).
2. It was a Woodford stock and I suspect that at least some of the losses might have come as a result of that ?.
3. I believe they were the target of an aggressive short by some US company as well ?.

Anyway these are all part and parcel of the perils of investing in single stocks, which is why I have largely stopped doing that. These days I will only invest in collectives ie ETFs and ITs. Though I appreciate that renewables are in reality single stocks dressed up as an IT......

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#254798

Postby BusyBumbleBee » September 29th, 2019, 7:46 pm

Hi Pref, comments in your text thus {-- --}
PrefInvestor wrote:Hi BBB, You sound like you are in the same camp as Ian Cowie {-- No I am not in the same camp except to say that investing in these trusts does not help the renewables sector at all cos they are only invested (at the moment) in existing assets and give me no 'feel good factor' --}, see article below:-

https://citywire.co.uk/investment-trust ... h/a1227491 {-- Interesting but actually not very helpful --}

I am more in Walkeia’s camp and with climate change becoming an increasing hot topic and the net zero 2050 initiatives I feel that the renewables sector can only benefit {-- see below --}. I doubt the trusts are going to get any cheaper myself, {-- they are at too much of a premium to buy at the moment except GORE --}but of course the frequent share issues may provide opportunities to enter at a lower premium.{-- True --}

I take it you aren’t interested in the TRIG issue then ?. {-- not at all at the moment --} ... ATB... Pref

I am involved in a huge project at the moment with all tiers of local government - which have all been charged by central government with addressing climate change and meeting the net zero targets earlier than 2050 - in Norfolk (and some MPs) to advance, inter alia, the use of renewables, the reduction of carbon and better use of all resources. I chair the Task and Finish group seeking to improve these aspects throughout Norfolk with the working motto of "Mens sana in corpore sano in planeta sanus". One of the MPs is The Minister of State for the #FutureOfTransport who has a most exciting brief to remove blockages caused by turf warfare between departments - to remove the Silo'd thinking and have some really joined up government.

An inspirational video worth watching : http://webtv.un.org/meetings-events/sec ... 8742229001. This is really greta-thunberg-young-climate-activist-at-the-opening-of-the-climate-action-summit-2019 but TLF truncates URLS so you can't see the full title.

The figures quote by Greta are for real so believe them. We are approaching some tipping points which could really cause serious harm - which I personally will probably survive but not so my children and grandchildren and many people across the world.

So - hopefully - many, many more renewable projects will come on stream in the near future - built without the existing and continuing subsidies which these 'Green ITs rely on. Producing a plentiful supply of lower cost projects without some of the income streams these ITs rely on. Very possibly this will mean that those ITs will trade closer to real NAV.

We do live in interesting times though - with kind regards - BBB

PS : Tipping Points : one of my fellow members on the Task and Finish Group is Professor TIm O'Riordan and you can get a feel for tipping points by listening/reading to his lecture here https://www.thebritishacademy.ac.uk/tac ... ing-points

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Re: Investing in Green Infrastructure Funds (ITs)

#254799

Postby TheMotorcycleBoy » September 29th, 2019, 7:57 pm

PrefInvestor wrote:Hi Matt, Well I'm not trying to criticise you for trying to analyse the accounts, though I suspect that you may find it difficult to obtain all of the information that you need to do that at the level of detail you seem to be going to. Regarding the extension life of the assets I wouldnt expect that to affect their income

I know. That's why their (UKWs) Income Statement is a lie.

Regarding your experience with Burford I would offer the following comments:-
1. Its an AIM stock and they are in my experience an EXTREMELY hazardous place to invest. I have tried it only a very few times and always lost money in the end, I know many other people who would say the same. These days I dont invest in ANYTHING AIM any more - however attractive it might look on the surface (or even UNDER the surface).

I'm certainly much more cautious now. Firstly I want to know more about the underlying business. Secondly I expose myself less in AIM stocks than main market ones now. Thirdly, I take the view now, of top slicing much more often any AIM once they exceed a 30%-40% profit on my original investment. I started off on the practice initially, in fact I had in the past "profited" from BUR by taking a big slice just over a year ago, unfortunately I listened to the LTBH crew on here too much recently, and omitted to take a slice the last BUR peaked.

2. It was a Woodford stock and I suspect that at least some of the losses might have come as a result of that ?.

No. The hit from £15 to £8 was after the dubious reporting was uncovered. The Woodford effect was earlier and peeps were starting to buy back then at the lower price.

3. I believe they were the target of an aggressive short by some US company as well ?.

Nothing aggressive. It was overvalued plain and simple.

Though I appreciate that renewables are in reality single stocks dressed up as an IT......

Sure and I'd like to invest more in renewables, for both moral and economic reasons. But I don't feel comfortable buying into a lie.

Matt

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Re: Investing in Green Infrastructure Funds (ITs)

#254808

Postby PrefInvestor » September 29th, 2019, 10:45 pm

Hi Again Matt, Really not sure that you are right in your analysis, if you look at the table on Page 16 of AR2018 this makes perfect sense to me. Right up front they said that their wind farms produced ~2,000GWatt of electricity over the year. On page 16 they say that the typical price received was £57.44 per MWh giving total income of £117,267,000, = approximately 2,000,000MWatt x £57.44. They then go on to calculate the dividend cover at 1.6x. Not sure I understand the other two tables below that on Page 16 though or how it ties in with the figures on Page 45 – but I suspect that the line items being described there may not be what you think they are……

But TBH I don’t expect to understand it all. However it does seem to me that a lot of effort has gone into calculating and auditing the profits and NAV of the company and I am not convinced ATM that there is any significant problem with it. But obviously I could be wrong. I don’t doubt that you are almost certainly much better at understanding this stuff than me and you are totally entitled to your own view.

I guess that based on your analysis you’ll be selling your UKW shares tomorrow then ?.

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#254810

Postby PrefInvestor » September 29th, 2019, 11:16 pm

Hi Again BBB, Sounds like important work you are doing there, hope it comes to something and doesn’t get scuppered by bureaucracy or brexit !.

Obviously you are much closer to the real world issues of renewables given the work that you are doing. But I remain positive on these investments for the following reasons:-

1. The Government or Local Authorities aren’t going to put up the money or effort to make renewables happen. They are more likely to just get in the way as they have just done by scrapping the FIT scheme for household solar.
2. All the heavy lifting to make renewables happen, if it happens, is going to have to be done by private companies. And they require guarantees of a financial return for themselves and their shareholders or it simply won’t happen. Despite whatever Greta Thunberg might say.
3. The existing renewable companies work with ROCs that have a 20 year duration and FIT and PPA agreements which are also long term commitments (at least 5 years and ~20 years in some cases I believe). Without these long term commitments the renewable companies would not be prepared to put the money up to make these schemes happen. I don’t see how the Government can damage these other than by withdrawing support for new schemes – which just means that new schemes won’t happen. They will likely be extinguished just as the whole household solar business has been with the removal of the FIT scheme. Existing schemes will continue, just like my solar FIT payments which are good for 20 odd years now with RPI increases each year. They can’t easily take those away.
4. Some subsidy free schemes are just starting, particularly in solar. But it’s early days for those I think, they aren’t a significant part of the market ATM I don’t believe.
5. In the end it’s money that makes stuff happen and being altruistic is all very well but doesn’t replace hard cash. Sorry if that comes across as cynical…..
6. These investments pay a good dividend rising with inflation that is far above what you can get at the bank and safer than investing in other areas of the market. I am confident that the renewable energy trusts will remain popular with income investors, at least until their price renders the dividend yield unattractive.
7. If net zero is going to happen then it’s going to be down to private companies to do it.
8. With the steady move to electricity for powering everything (including cars) then electricity prices are going to rise potentially significantly, which will be good for the renewable energy companies. This is borne out by the wholesale price agreed for the new nuclear reactor when it comes online.

Sorry but I haven’t had time yet to review the two links in your last post. I will do so in slow time.

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#254816

Postby TheMotorcycleBoy » September 30th, 2019, 7:12 am

PrefInvestor wrote:Hi Again Matt, Really not sure that you are right in your analysis, if you look at the table on Page 16 of AR2018 this makes perfect sense to me.

Hi Pref, I'm at work today, so I can't refer to the reports that well.

Yes the sentences you quoted earlier

Right up front they said that their wind farms produced ~2,000GWatt of electricity over the year. On page 16 they say that the typical price received was £57.44 per MWh giving total income of £117,267,000,

does contain a figure of £117M, which matches the figure stated as "Unrealised movement in fair value of investments (note 9) 116695" (which is in £'000). But the usage of the terminology "Unrealised movement" makes me very unclear as to what they really, and of course this figure is a key ingredient of their EPS calculation.

I don’t doubt that you are almost certainly much better at understanding this stuff than me and you are totally entitled to your own view.

Well I'm no accountant or equity analyst. I just like maths and analysing situations, but I have very little experience in these matters. I just wish that others here would pipe up and put my mind at rest, but I do appreciate we all must "do our own research".

To summarise, my issue is what that £117M means regards their real(ised) cash flows in the future. On page 68, there is a note 17. explaining their cash flows (I'm just referring to the one labelled "Group" not "Company").

Operating profit for the year                       |  215164
Movement in fair value of investments (notes 4 & 9) | -116695
Net cash flows from operating activities | 101829

So we can see none of that £117M you mentioned earlier has turned into cash yet. Of course, that's why it's "unrealised", the difference between profit and cash. Perhaps the customers further down the chain (who presumably have been invoiced?) will pay up. I don't know.

I guess that based on your analysis you’ll be selling your UKW shares tomorrow then ?.

No. Since my exposure to GreenITs is minimal (about 1.5%). I'm not too sure about my exact approach on UKW or TRIG. But lack of clarity has dampened my enthusiasm. Like I hinted earlier, for similar reasons as BBB (e.g. the impact of climate change), I'd like to get on board more with renewables. I have a family including teenage girls, very concerned as we all are with environmental issues.

I apologise if I appeared at all aggressive in any of my posts, but I think I personally need to know exactly what's going behind on these investments regards the interplay of government subsidies, power generated and cash which the generating assets will receive from bill payers. I wish I had more time to research... alas I have a dayjob! :(

Matt

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Re: Investing in Green Infrastructure Funds (ITs)

#254820

Postby PrefInvestor » September 30th, 2019, 8:15 am

Hi Matt, Ah yes working, remember that !!. I was in IT and an IT Consultant for most of my 40 working years (retired at 58 cos I got p'd off with it).

Anyway yes your language was perhaps a bit "strong", but I suspect inspired by your recent losses on Burford ?. Such things can leave you feeling ill used I know. I myself suffered a major loss (~11% of my portfolio) around March 2018 due to crash in Preference Share prices. But this year has been good and I have recovered a significant proportion of those losses now.

Take care and good luck with your investments.

Have a good day at work. I'm off to the library this morning with my daughter & grandaughter (Age 3).

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#254833

Postby richfool » September 30th, 2019, 10:04 am

PrefInvestor wrote:
richfool wrote:Don't have proper internet acess currently to explore this properly, but is it worth selling current holding and buying back through the offer, at the lower offer price, assuming that the SP hasn't dropped any further? Or just leave/keep existing holding and top up through the offer?


Hi richfool, Well you can’t buy the offer directly (to get it at 123) so it all depends on where the price drops to ahead of the closing date. It’s already down to 126.2, personally I think you’ll be lucky to buy at less than 124 and even that’s pretty optimistic based on what we saw with UKW. So selling at 126.2 to buyback at 124 (at best) ?. Well I’m not going to do that, you’d have commission to pay on the buy and the sell and stamp duty (I think ?) on the buy. Shame we didn’t sell at 130+ though !.

Err if you haven’t got internet access how come you can use this site....?

ATB

Pref
Thanks for your thoughts.

I am currently using my smartphone to access, as opposed to my laptop which has a problem with acessing wifi.

Re the current discussion about renewables and understanding their accounts, may I throw in an alternative perspective:

Have a look at Capital Gearing Trust IT run by Peter Spiller. In the R&A's, he has holdings of at least 3 renewables, including TRIG and JLEN, and there is a short piece in the report about them. Noting that CGT trust is run as a cautious wealth preserver.

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Re: Investing in Green Infrastructure Funds (ITs)

#254854

Postby PrefInvestor » September 30th, 2019, 11:57 am

richfool wrote:Have a look at Capital Gearing Trust IT run by Peter Spiller. In the R&A's, he has holdings of at least 3 renewables, including TRIG and JLEN, and there is a short piece in the report about them. Noting that CGT trust is run as a cautious wealth preserver.


Hi richfool, Yes I guess its a bit of a recommendation that CGT holds these renewables (GRP, TRIG & JLEN), I confirmed that from looking at their detailed portfolio on their web site. I cant imagine that these guys invest in anything without doing their due diligence ?.

But try as I might I couldnt find the "short piece in the report" that you referred to, and TBH I dont know what you mean by R&As (nothing to do with the Royal & Ancient Golf Society I'm guessing !). A link to the report would be good if you can manage it !.

Thanks

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#254885

Postby PrefInvestor » September 30th, 2019, 1:31 pm

marktime1231 wrote:Any chance the price premium could dip to a more attractive entry point so maybe a 120p buy ... what would drive the market down for a bit, noting it is pretty popular from most angles and seemingly represents long term value.


Hi marktime, Well anything is possible but personally I think even buying at 124 is unlikely looking at the price action this morning 30/9. Let’s face it before the placing price was published they were trading at 130.9 and they dropped a good 4p as a result. They have been as high as 133. They haven’t been as low as 120 since around May 2019. If they move up from here I may give it a miss but we’ll see, I have a full holding already really.

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#254935

Postby dubre » September 30th, 2019, 2:46 pm

CGT Lots of selling going on today?

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Re: Investing in Green Infrastructure Funds (ITs)

#254968

Postby richfool » September 30th, 2019, 5:22 pm

PrefInvestor wrote:
richfool wrote:Have a look at Capital Gearing Trust IT run by Peter Spiller. In the R&A's, he has holdings of at least 3 renewables, including TRIG and JLEN, and there is a short piece in the report about them. Noting that CGT trust is run as a cautious wealth preserver.


Hi richfool, Yes I guess its a bit of a recommendation that CGT holds these renewables (GRP, TRIG & JLEN), I confirmed that from looking at their detailed portfolio on their web site. I cant imagine that these guys invest in anything without doing their due diligence ?.

But try as I might I couldnt find the "short piece in the report" that you referred to, and TBH I dont know what you mean by R&As (nothing to do with the Royal & Ancient Golf Society I'm guessing !). A link to the report would be good if you can manage it !.

Thanks

Pref

The annual Report & Accounts.

"The property and alternative portfolios delivered
exceptionalreturns, given theirrelatively lowrisk proXle.
The fund participated in newstock placings in John Laing
Environmental Assets, The Renewables Infrastructure
Group, GreencoatUK Wind, Foresight Solar Fund and
Greencoat Renewables. This renewable infrastructure
portfolio delivered in excess of 20% returns due to strong
demand for stable investmentswith environmental
credentials. After aweak yearin 2017/2018,the PFI
infrastructure funds also delivered strong returns,
boosted by the move to take John Laing Infrastructure
Fund private, and out ofthe public market."

And:

"For a portfolio as defensive asCapital Gearing Trust’s to
deliver high single digitreturns, almost everything had to
go ourway in the year. Many assets thatwere selected
primarily fortheir defensive characteristics delivered
double digitreturns in sterling terms. These notably
included material holdings in Swedish and German
property companies,renewable and PFI infrastructure
funds and the near 25% holding inUS inYation linked
government bonds."

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Re: Investing in Green Infrastructure Funds (ITs)

#254971

Postby richfool » September 30th, 2019, 5:30 pm

dubre wrote:CGT Lots of selling going on today?

Lots of buying too.
CGT trading at a 2% plus premium.
CGT like PNL is a defensive wealth preserving trust, with a prudent manager.

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Re: Investing in Green Infrastructure Funds (ITs)

#254974

Postby PrefInvestor » September 30th, 2019, 5:35 pm

dubre wrote:CGT Lots of selling going on today?


Hi dubre, Down about 0.46% on slightly higher volume than normal ~21,000 today by the look of it, 10-15,000 a normal figure looking at volumes on the LSE. Mostly sells if you can trust the Buy/Sell indicator on the sharesmagazine.co.uk site that I used to look at todays trades.

No big deal I wouldnt have thought. But a bit surprising given the capital preservation theme of this trust, would have expected VERY low volumes myself.

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#254979

Postby PrefInvestor » September 30th, 2019, 5:50 pm

marktime1231 wrote:Think you are right Pref it will be oversubscribed again and back over 130p soon. Not for me then at this stage at this price but I am jealous of those who have been in since 110p and wish you well.


Hi Again MarkTime, Yes I bought mine at 104, 105, 112 & 114 - did sell a load at about 126 a while back. But still got quite enough really.

Quite understand your point about the premium, not so sure about the bid/offer spread - only 0.2p ?. And no stamp duty !.

So being stocked up wont stop me buying some more if I can get them for 124 .....but will plan to sell them at 130+. Only sold the last lot so that my portfolio wasnt 20%+ weight in renewables ! (I hold UKW, NESF, FSFL, TRIG, JLEN & BSIF). Running at 17.5% ATM.... Am OK with that.

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#255062

Postby PrefInvestor » October 1st, 2019, 8:14 am

Hi All, Another Green IT placing announced today, FSFL this time. Couldn’t immediately see the price in the RNS but shares are down about 4.5p (ouch !). Link to RNS below:-

https://www.londonstockexchange.com/exc ... 47996.html

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#255074

Postby PrefInvestor » October 1st, 2019, 9:13 am

Hi Again All, Just read the FSFL Placing offer in some more detail. Qualified Investors only = not your average PI. No price given, just ring up and make an offer by the sound of it ?. Placing due to complete 10th October.

Anyway selling price with my broker was 120p a minute or so ago and I bought a few more for 120.38p with a bit of spare cash I had lying around. No stamp duty on these. Price was ~124+p yesterday. Will likely sell them again when the price recovers....

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#255199

Postby BusyBumbleBee » October 1st, 2019, 5:32 pm

PrefInvestor wrote:Hi Again All, Just read the FSFL Placing offer in some more detail. Qualified Investors only = not your average PI. No price given, just ring up and make an offer by the sound of it ?. Placing due to complete 10th October.

Anyway selling price with my broker was 120p a minute or so ago and I bought a few more for 120.38p with a bit of spare cash I had lying around. No stamp duty on these. Price was ~124+p yesterday. Will likely sell them again when the price recovers.... ATB
Pref
Seems you got a good price Pref ;) But consider this :

Last NAV was 109.6 (June) a decline since December.

The say in the prospectus
The Placing Price will be greater than the total of the latest announced unaudited NAV per existing Ordinary Share plus the estimated costs of the Placing and is therefore expected to be accretive to the NAV attributable to existing shareholders.
so possibly as low as 115?

This is/was one of my favourite Green ITs but they have the same disease as a lot of companies - they totally ignore the PI who is quite interested in the SP and not so much in the NAV.

with kind regards - BBB

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Re: Investing in Green Infrastructure Funds (ITs)

#255210

Postby PrefInvestor » October 1st, 2019, 6:59 pm

Hi Again BBB, Yes this would appear to be a different type of placing where the company seems to just want to just shift the 10% of shares that it wants to sell for (NAV + costs + a bit) with the minimum possible effort. I’m guessing that they are targeting institutional investors with a view to getting a few big players onto the list of holders ?. Seems obvious to me that they could easily have raised more money by just putting them on sale at a good discount, I am sure 119-120 would have been more than low enough to draw in the PI buyers. No idea why they have decided to do this, guessing that they have their reasons.

We aren’t going to see what they actually sell them for of course as these are not issued shares and the purchase transactions won’t be published anywhere, but I guess we will get an idea when they publish the results of the placing. Meantime the PI world has drawn its own conclusions and shares are down about 4-5p. Whether my buy at 120.38p turns out to be good depends on whether the price recovers to where it was or not.

ATB

Pref


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