Investing in Green Infrastructure Funds (ITs)

[PrefInvestor]

Every so often Quoted Data puts out a piece of research on JLEN. The latest is here https://quoteddata.com/research/jlen-en ... otential2/ and is well worth a read, not only because it focuses on JLEN but for the background info it gives on the whole sector.

It also has comment/analysis on other Green ITs such as https://quoteddata.com/2019/02/bluefiel ... cial-year/

Hope this is useful - BBB

Hi BBB, Yes a really interesting article I thought.

ATB

Pref

[midgesgalore]

Every so often Quoted Data puts out a piece of research on JLEN. The latest is here https://quoteddata.com/research/jlen-en ... otential2/ and is well worth a read, not only because it focuses on JLEN but for the background info it gives on the whole sector.

It also has comment/analysis on other Green ITs such as https://quoteddata.com/2019/02/bluefiel ... cial-year/

Hope this is useful - BBB

Thanks for that BBB, not too bad a read and I understand a bit more on the renewables ITs. Still keeping an eye on JLEN and TRIG for better entry points.

midgesgalore

[PrefInvestor]

Hi All, Well TRIG have issued an RNS this morning giving details of a new share issue at 123p a 6% discount to the previous closing price of 130.9 so they say. Not sure who can apply to be honest, ie whether its existing holders, "qualified investors" or anyone. Link provide to RNS below:-

https://www.londonstockexchange.com/exc ... 43894.html

Share price dropped by almost 3% this morning to ~127p, likely more to come given the 123p offer price ?. Probably not worth selling and buying back though IMV ?. Might pick up some more though at this price.

ATB

Pref

[Urbandreamer]

I was thinking about topping up anyway, so this has proved a good opertunity to do so.

[TheMotorcycleBoy]

Hi All, Well TRIG have issued an RNS this morning giving details of a new share issue at 123p a 6% discount to the previous closing price of 130.9 so they say. Not sure who can apply to be honest, ie whether its existing holders, "qualified investors" or anyone. Link provide to RNS below:-

https://www.londonstockexchange.com/exc ... 43894.html

Share price dropped by almost 3% this morning to ~127p, likely more to come given the 123p offer price ?. Probably not worth selling and buying back though IMV ?. Might pick up some more though at this price.

ATB

Pref

Hmm... Thanks for the kick PI. I might add it to my current limit lucky dip buy list.

[PrefInvestor]

Well checked the charts and UKW got within 1p of the offer price on their last placing so I’ve set a limit order to buy some more TRIG at 124 (TRIG offer price + 1p). Got till Oct 3rd I think ?. Will keep an eye on it and if the limit order doesn’t look like getting filled I might have to do something manually.....

ATB

Pref

[TheMotorcycleBoy]

Well checked the charts and UKW got within 1p of the offer price on their last placing so I’ve set a limit order to buy some more TRIG at 124 (TRIG offer price + 1p). Got till Oct 3rd I think ?. Will keep an eye on it and if the limit order doesn’t look like getting filled I might have to do something manually.....

ATB

Pref

I've been trying to get some more data on TRIG fundamentals. So with the most recent NAV at 115p presumably purchase at 124p means +7.8% premia, quite low for this one. What would be the DY at that price?

Matt

[PrefInvestor]

I've been trying to get some more data on TRIG fundamentals. So with the most recent NAV at 115p presumably purchase at 124p means +7.8% premia, quite low for this one. What would be the DY at that price?

Matt

Hi Again Matt, Well the TRIG 2019 dividends are 1.66p per quarter so 6.64 pa / 124p = 5.34% dividend yield. Not mega but increasing annually with RPI I think. Personally I suspect that (as per UKW) the stock price will probably soon return to its previous level of 130+ after this latest issue completes on 3rd October. UKW back up to 142.2p today .

ATB

Pref

[richfool]

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?

[TheMotorcycleBoy]

On a side note to TRIG, generally how we rate the profitability of these GrITs? I'm quite a fan of putting in some fundamental analysis prior to making an investment. Presumably the profitability is based on large initial fixed asset costs, then hopefully low maintenance costs going foreward combined which "predictable" cash flows subsequently.

Whilst I wasn't prepared to put the sliderule agains TRIG in quite the same way that I would for a standalone investment, I did look at the 2018 AR, and based on a few figures did a few sums:


As you can see I based Cost of capital on that of their annual div. payout. It looks like there is a reasonably healthy spread between cost and return. However I decided to drill down into how their Operating income is defined. I have to say that there is little detail. However on page 115, Note 6 I found a table detailing the following:


What does this imply? It looks a considerable portion of the trust's profitability is due to interest (on what?). Removing this figure from the value for "Total operating income" actually makes the power storing and generating part of the investment look a lot less attractive (5.05% and 5.82% for 2017 and 2018 respectively).

Can anyone provide a better interpretation of this?

Matt

[PinkDalek]

On a side note to TRIG ...
As you can see I based Cost of capital on that of their annual div. payout. It looks like there is a reasonably healthy spread between cost and return. However I decided to drill down into how their Operating income is defined. I have to say that there is little detail. However on page 115, Note 6 I found a table detailing the following:


What does this imply? It looks a considerable portion of the trust's profitability is due to interest (on what?). Removing this figure from the value for "Total operating income" actually makes the power storing and generating part of the investment look a lot less attractive (5.05% and 5.82% for 2017 and 2018 respectively).

Can anyone provide a better interpretation of this?

Matt

Is this the source https://www.trig-ltd.com/sites/default/files/TRIG%20Annual%20Report%202018.pdf ?

I have to say that there is little detail.

I haven't delved deeper but there is this on page 124:

18. RELATED PARTY AND KEY ADVISOR TRANSACTIONS ... During the year, interest totalling £51,193k (2017: £43,919k) was earned in respect of the long-term interest-bearing loan between the Company and its subsidiaries TRIG UK and TRIG UK I, of which £803k (2017: £nil) was receivable at the balance sheet date.

[TheMotorcycleBoy]

On a side note to TRIG ...
As you can see I based Cost of capital on that of their annual div. payout. It looks like there is a reasonably healthy spread between cost and return. However I decided to drill down into how their Operating income is defined. I have to say that there is little detail. However on page 115, Note 6 I found a table detailing the following:


What does this imply? It looks a considerable portion of the trust's profitability is due to interest (on what?). Removing this figure from the value for "Total operating income" actually makes the power storing and generating part of the investment look a lot less attractive (5.05% and 5.82% for 2017 and 2018 respectively).

Can anyone provide a better interpretation of this?

Matt

Is this the source https://www.trig-ltd.com/sites/default/files/TRIG%20Annual%20Report%202018.pdf ?

I have to say that there is little detail.

I haven't delved deeper but there is this on page 124:

18. RELATED PARTY AND KEY ADVISOR TRANSACTIONS ... During the year, interest totalling £51,193k (2017: £43,919k) was earned in respect of the long-term interest-bearing loan between the Company and its subsidiaries TRIG UK and TRIG UK I, of which £803k (2017: £nil) was receivable at the balance sheet date.

Yes that's right, PD. Apologies are due from me for not linking my source. And yes that explains the source of the sums. Presumably those interest payments originate from revenues due to power generation somewhere.

Still I'd like to know more about the difference regards the eyes of TRIGs management between "Interest Income" and "Gain on investments", since if my above interpretation is correct then this interest received is also logically a gain from an investment.

I'm not wishing to seem incredibly pedantic, but after my recent experience with Burford Capital (BUR) I'd like to make sure that my investments are transparent in so far as the accountablity of revenue streams.

Matt

[PrefInvestor]

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

[TheMotorcycleBoy]

I did a similar drive by on Greencoat UKWind's AR2018, which I bought a few months back. These people seem to call their operating income, "Return on investments".


Again, I'm somewhat disturbed by the smoke and mirrors feel to the revenues/income figures. It appears that their revenues/profits are accounted for at the IT's level as a combination of loan interest, dividends from their investments, and disturbingly "unrealised movement in fair value of investments". As follows:


So the more cynical among us will note that over half of the income for 2018, is accounted as a fairly abstract concept i.e. "Unrealised movement in fair value of investments". I did read onto (to Note 9) and to be honest it does seem to based on lots of assumptions, and furthermore I'm not even sure whether the final figure is really a revenue, it just seems to me now, to be an estimate in the appreciation of the IT's Fixed Asset valuation.

Am I just being paranoid? Love to hear some other opinions on this.

Matt

[TheMotorcycleBoy]

On a side note to TRIG, generally how we rate the profitability of these GrITs? I'm quite a fan of putting in some fundamental analysis prior to making an investment. Presumably the profitability is based on large initial fixed asset costs, then hopefully low maintenance costs going foreward combined which "predictable" cash flows subsequently.

Whilst I wasn't prepared to put the sliderule agains TRIG in quite the same way that I would for a standalone investment, I did look at the 2018 AR, and based on a few figures did a few sums:


As you can see I based Cost of capital on that of their annual div. payout. It looks like there is a reasonably healthy spread between cost and return. However I decided to drill down into how their Operating income is defined. I have to say that there is little detail. However on page 115, Note 6 I found a table detailing the following:


What does this imply? It looks a considerable portion of the trust's profitability is due to interest (on what?). Removing this figure from the value for "Total operating income" actually makes the power storing and generating part of the investment look a lot less attractive (5.05% and 5.82% for 2017 and 2018 respectively).

Can anyone provide a better interpretation of this?

Matt

I'm not sure if any of you have noticed in the figures I posted earlier but the amount TRIG claim to receive in interest income (which is subsequently taxed) is alarmingly close to the amount they dish out as dividends.

[PrefInvestor]

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

[Walkeia]

Just a quick thank you to all on this board & particularly PrefInvestor for continued excellent discussion on these. I'll be re-entering TRIG this week and not sure I'll sell the entire holding again as watching it tick up to 131 gave me a major sense of FOMO.

My two pence, in the past month the ECB lowered the effective interest rate to -0.5%, announced QE bond purchases until inflation rises which is a long long way off. Fed cut 0.25% indicating at least one more before year end. Lastly, BoE Saunders said may have to cut interest rates regardless of the outcome of Brexit which is a complete flip of his position. The long term UK gilt is trading effectively at the base rate of 0.75%. Therefore I see Green Infra trusts trading at 5%+ dividends linked to RPI back by government contracts as completely the wrong price. I guess it depends on your investment angle - an equity investor probably views these trusts are boring, but for a bond investor / interest rate specialist they look incredibly attractive so this will be bought and locked away for some time.

The eventual driver of these assets I believe will be life insurance companies - particularly European. The Life Insurance model doesn't work given the level of long term interest rates and while there is significant discussion concerning the impact of low interest rates on banks there is not enough talk about the impact on life insurers' capital. Ultimately, to solve this regulation will have to change to allow them to hold more risky assets - infrastructure assets such as TRIG will be first in line in my opinion.

Lastly, on the respective discount I would add the recent SEQI issuance to the UKW example. While UKW went within 1p of the issuance level, this issuance format looks more like SEQI in that it is a placement and a quick turnaround. SEQI intra-day went 2p above the issuance level but never closed below 114p which was 3p above the respective placement level. Therefore I think any further sell off from here will be limited / brief.

[PrefInvestor]

Hi Walkeia, You may be right about the price level, just depends on what existing holders do I think. I have set my limit order at what I think is the “most optimistic” buy-in price of 124 (or is that the “most pessimistic” price for existing holders ?). But as I said in my previous post, if we get closer to the day and it’s still down around 125/126 then I will forget my limit order and do a manual trade.

ATB

Pref

[BusyBumbleBee]

Just a quick thank you to all on this board & particularly PrefInvestor for continued excellent discussion on these. I'll be re-entering TRIG this week and not sure I'll sell the entire holding again as watching it tick up to 131 gave me a major sense of FOMO.

Good morning,Walkeia. Yes it is good to see the discussion here and I am very conscious of the fact that I have not done what said I would do in the first five posts I made to start this discussion. I can only plead that I have much else to do and cannot focus my mind on this at the moment.

There are three parts to the appeal of these shares

a) the dividends all seem to be covered by cash income as far as I can see - but the company structures are very complicated with FSFL having the most(?) complicated but the best explained in their annual report
b) the NAV of each and the way it is calculated - which I seriously need to look at and publish (as I once promised)
c) the life of the underlying assets which have a huge effect on NAV.

and a fourth which I won't mention - yet

I am out of all of these bar GSF (Gore) as I think they are too far ahead of themselves - kind regards - BBB

[PrefInvestor]

Hi BBB, You sound like you are in the same camp as Ian Cowie, see article below:-

https://citywire.co.uk/investment-trust ... h/a1227491

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. I doubt the trusts are going to get any cheaper myself, but of course the frequent share issues may provide opportunities to enter at a lower premium. I take it you aren’t interested in the TRIG issue then ?.

ATB

Pref