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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)

#217081

Postby TheMotorcycleBoy » April 24th, 2019, 7:00 pm

Hi BBB

BusyBumbleBee wrote:JLEN have a very good history of raising new money which knocks the share price. Look at the highs and lows for JLEN to see what I mean. I shall buy back in when the price drops.

So how does the fund raising exercise actually work? Sorry to appear a tad naive, but these ITs are uncharted waters for me.

Do they merely issue a batch of new shares, at priced a small discount of the market price of the existing shares?

If so, do they make an announcement prior to the issue?

Many thanks
Matt

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Re: Investing in Green Infrastructure Funds (ITs)

#217106

Postby BusyBumbleBee » April 24th, 2019, 9:27 pm

Hi, PrefInvestor,

Yes - they did do a big fund raise in October last year : They said "the Board has increased the size of the Issue from the target of £50 million to £105 million which results in the net proceeds of the Issue being sufficient to fully repay the outstanding balance on the Company's revolving credit facility. No cash will be taken onto JLEN's balance sheet as a result of increasing the size of the Issue." and also scaled back all applications to 84% of what was asked for'.

However, They said in their presentation (https://jlen.com/wp-content/uploads/201 ... tation.pdf) in November last year they had a "Strong pipeline from third party sources and John Laing Group under the First Offer Agreement (FOA)"

This is a list of the items in the 'first offer agreement with John Laing

Speyside UK
Cramlington UK
Klettwitz Wind Farm Germany
Horath Wind Farm Germany
Somette Wind Farm France
St Martin Wind Farm France
Nordergründe Wind Farm Germany
Rammeldalsberget Wind Farm Sweden
Svart Windfarm Sweden
with a total value of £205 million

The success of the fund raise last year could encourage them to go for another one.

On Page 13 to 15 of the presentation (see above) they give the way in which NAV is affected by changes to assumptions. I intend to try and correlate these for all six in the near future. But an uplift of 2 plus pence is already priced in and look at what the drop in inflation does to their figures

kind regards - BBB

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Re: Investing in Green Infrastructure Funds (ITs)

#217108

Postby BusyBumbleBee » April 24th, 2019, 9:41 pm

TheMotorcycleBoy wrote:So how does the fund raising exercise actually work?

Well, Matt, in potted form it works like this :

Most of the big six have an authority in place to issue a chunk of equity in tranches in the future. That authority is given by shareholders in a general meeting. To do this they need to publish a prospectus which is a long and boring document that few people read - I always do because it has to be honest with very little 'spin'. When they want to issue some they announce it in an RNS and give the price at which they will issue them and what kind of offer it is (basically whether it is open to Jo Public or just institutions). They might have to update the prospectus as well at this point.

The price set is likely to be above NAV but below the actual Share Price with the result that the SP drops.

As a PI you have no forewarning of this - you just get the RNS. I always act as quickly as I can on these.

IF the offer is open to the public there will be a list of intermediaries who can take your orders - you need to have an account with one of these to buy them at the offer price.

Hope this is useful - kind regards - BBB

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Re: Investing in Green Infrastructure Funds (ITs)

#217115

Postby BusyBumbleBee » April 24th, 2019, 10:12 pm

simoan wrote:Going off at a slight tangent, there is an alternative way to play this theme - by investing in a fund manager that specialises in green investments. I realise it's less of an income play, and more about capital appreciation, but I have a decent sized holding in Impax Asset Management (IPX). It may be worthy of consideration to some readers interested in green and renewable investments, so just adding my 2p! -- All the best, Si
Very interesting, Simoan,

Their mission statement is: "To generate superior, risk-adjusted investment returns from opportunities arising from the transition to a more sustainable economy for clients with a medium to long-term horizon. In addition, to provide a stimulating, collaborative and supportive work-place for our staff, and to make a contribution to the development of a sustainable society, particularly by supporting or undertaking relevant research and engaging or collaborating with others."

However, it does not seem to have as many fixed assets (5%) as the six discussed here which all have about 98% tied up in fixed assets. So it is qualitatively different.

But some of the funds they run could well be of interest. So, what do you know of

A. Impax Environmental Markets plc Their First own-label listed equity fund launched in 2002:
B. Impax New Energy Investors Fund Their first private equity infrastructure fund launched in 2005,

with kind regards - BBB

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Re: Investing in Green Infrastructure Funds (ITs)

#217121

Postby BusyBumbleBee » April 24th, 2019, 10:34 pm

Sorry :oops: - should have said in my last post "have up to 98% in fixed assets" instead of "have about 98% tied up in fixed assets"

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Re: Investing in Green Infrastructure Funds (ITs)

#217135

Postby TheMotorcycleBoy » April 25th, 2019, 6:34 am

Thanks again BBB

As a PI you have no forewarning of this - you just get the RNS. I always act as quickly as I can on these.

I've just registered at https://jlen.com/investor-relations/rns-alerts/ . I selected "All stock exchange releases" as this option looked like the "send me all" option so will presumably include "Listing and issues".

BusyBumbleBee wrote:IF the offer is open to the public there will be a list of intermediaries who can take your orders - you need to have an account with one of these to buy them at the offer price.

I'm with the iWeb online platform, so I assume that I'll only be able to take advantage of open market purchases.

Referring to your earlier post to PrefInvestor:
On Page 13 to 15 of the presentation (see above) they give the way in which NAV is affected by changes to assumptions. I intend to try and correlate these for all six in the near future. But an uplift of 2 plus pence is already priced in and look at what the drop in inflation does to their figures

I looked at https://jlen.com/wp-content/uploads/201 ... tation.pdf, and I have found (on page 16 according to my pdf reader) the slide on "NAV sensitivity".

Could you confirm that my understanding of this chart is correct please? What I think I'm seeing is a positive correlation against inflation, a positive correlation against energy prices, for example a +0.5% rise in inflation gives us 5p rise in NAV, where as a +10% increase in energy prices gives a slightly over 5.5p NAV rise. Is that correct? The chart shown was somewhat terse, and as stated earlier I am new to this game.

(FWIW I believe that the current discount rate has a negative correlation to NAV, i.e. rate goes up, NAV goes down. I think.)

Matt

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Re: Investing in Green Infrastructure Funds (ITs)

#217162

Postby richfool » April 25th, 2019, 9:29 am

On a macro level, I am thinking that the current climate change demonstrations will generate more interest and demand for environmental investments including solar and wind and thus JLEN and TRIG.

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Re: Investing in Green Infrastructure Funds (ITs)

#217165

Postby simoan » April 25th, 2019, 9:36 am

BusyBumbleBee wrote:[
However, it does not seem to have as many fixed assets (5%) as the six discussed here which all have about 98% tied up in fixed assets. So it is qualitatively different.

But some of the funds they run could well be of interest. So, what do you know of

A. Impax Environmental Markets plc Their First own-label listed equity fund launched in 2002:
B. Impax New Energy Investors Fund Their first private equity infrastructure fund launched in 2005,

with kind regards - BBB

This is not a direct play on investing in underlying assets. Impax is a fund manager only and the assets are owned by the funds, hence the PTBV is 20x. AFAIK all the funds are for institutional investors only. It's an indirect play, based on institutions wanting to increase their exposure to renewable and green investments through funds run by a specialist in the area. If you look at the growth in EPS, which has risen over 400% in the past 5 years, it is clear the funds are proving popular.

All the best, Si

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Re: Investing in Green Infrastructure Funds (ITs)

#217173

Postby TheMotorcycleBoy » April 25th, 2019, 9:56 am

richfool wrote:On a macro level, I am thinking that the current climate change demonstrations will generate more interest and demand for environmental investments including solar and wind and thus JLEN and TRIG.

Whilst supporting their actions, I do wish they'd waited until after I'd opened a position.

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Re: Investing in Green Infrastructure Funds (ITs)

#217179

Postby PrefInvestor » April 25th, 2019, 10:30 am

Hi simoan, Interesting post from you. Looks like this conpany does the more usual IT thing of holding other companies that do the business rather than owning the assets and operating them themselves, which is what the 6 the BBB has discussed do. Mostly US and Overseas holdings though by the look of it, though thats good for diversification.

Couple of questions though:-

1. I thought that you said that Impax funds were for institutional investors only, but clearly you own some as a PI ?.
2. And why did you go for IPX (which has a very large spread) when IEM seems more specifically targeted and with a much smaller spread ?. I see that I can buy them both thru my broker.

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#217183

Postby UncleEbenezer » April 25th, 2019, 10:38 am

simoan wrote:This is not a direct play on investing in underlying assets. Impax is a fund manager only and the assets are owned by the funds, hence the PTBV is 20x. AFAIK all the funds are for institutional investors only. It's an indirect play, based on institutions wanting to increase their exposure to renewable and green investments through funds run by a specialist in the area. If you look at the growth in EPS, which has risen over 400% in the past 5 years, it is clear the funds are proving popular.
All the best, Si

IEM is a regular retail investment, and listed on the LSE. I've held it longer than any of the (more narrowly focussed) renewable infrastructure funds. Performance was pretty disappointing for quite a few years (along with the whole sector), but it's done nicely in the last three or four years and moved to a premium. In the last few months the managers started to issue shares from treasury to raise funds and meet demand at not too far from NAV.

A key difference compared to the renewable infrastructure sector reviewed in this thread is a wider investment focus, with a significant element in higher-risk and higher-growth assets outside the energy sector: things like water, waste, and efficiency. Oh, and a worldwide focus. It's also a low yield: not something you invest in for income!

p.s. Fools interested in Green Infrastructure ITs might also look at the VCT options. They've been kind-of fossilised by rule changes that closed the sector to VCTs, but existing VCTs continue to generate a healthy and tax-free income streams. Ironically the rule changes preventing new investment have kind-of de-risked the VCT sector: no new investments means no new speculative projects!

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Re: Investing in Green Infrastructure Funds (ITs)

#217199

Postby Pendrainllwyn » April 25th, 2019, 11:28 am

PrefInvestor wrote:I thought that you said that Impax funds were for institutional investors only, but clearly you own some as a PI ?

I think you'll find Simoan owns shares in the asset management company, Impax Asset Managememt, that earns fees from managing funds (that he thinks may only be for sale to institutional clients).

Impax's growth has certainly been very impressive and it looks reasonably priced to me.

Pendrainllwyn

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Re: Investing in Green Infrastructure Funds (ITs)

#217217

Postby PrefInvestor » April 25th, 2019, 12:19 pm

Hi Pendrainllwyn, Yes I think I see the difference, IPM is a management company making money out of investors investing in its funds (but with a close to 5% spread on its bid/offer price 233/244 today) whereas IEM would appear to be an IT which invests in renewable energy companies (of the ilk of those listed by BBB I assume, but mostly overseas). This has a very low dividend yield but increasingly good SP performance (bid/offer price 302/305 today and trading at a very slight premium to NAV). As an income seeker I am not sure that I am much interested in either really, but I can see that it might be of interest to others.

ATB

Pref

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Re: Investing in Green Infrastructure Funds (ITs)

#217260

Postby BusyBumbleBee » April 25th, 2019, 2:45 pm

Hi Matt - you said
Could you confirm that my understanding of this chart is correct please? What I think I'm seeing is a positive correlation against inflation, a positive correlation against energy prices, for example a +0.5% rise in inflation gives us 5p rise in NAV, where as a +10% increase in energy prices gives a slightly over 5.5p NAV rise. Is that correct? The chart shown was somewhat terse, and as stated earlier I am new to this game.

(FWIW I believe that the current discount rate has a negative correlation to NAV, i.e. rate goes up, NAV goes down. I think.) Matt

Certainly

The correlation against inflation rate is as you would expect. Inflation rate goes up, so do the FIT and ROC payments and so the company gets more income which is "locked in for ever" thus making the company more valuable so the NAV goes up. However, what it the RPI? There are two figures each month: for the month and the year as a whole. There are quarterly figures as well. So which one does the company take? Who knows? but we can ask. JLEN also use this figure to increase dividends - again which one? In the presentation they project RPI rates of over 3% for the next two year BUT the MArch figure as 2.4%. This should have a negative impact on NAV of about 6 pence according to the chart - but we will see.

There are quarterly figures as well. So which one does the company take? Who knows? but we can ask.

Discount Rate : if this goes up - the NAV falls and if it goes down the NAV goes up i.e. the reverse effect to RPI. It is here that the directors and the manager have some scope for discretion. There are other measures that could be used such as WACC - weighted average cost of capital and some companies do use that.

Hope this helps - kind regards - BBB

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Re: Investing in Green Infrastructure Funds (ITs)

#217263

Postby BusyBumbleBee » April 25th, 2019, 2:48 pm

richfool wrote:On a macro level, I am thinking that the current climate change demonstrations will generate more interest and demand for environmental investments including solar and wind and thus JLEN and TRIG.

You are very probably right - but actually an investment here does nothing to increase the renewables in use.

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Re: Investing in Green Infrastructure Funds (ITs)

#217269

Postby BusyBumbleBee » April 25th, 2019, 3:04 pm

UncleEbenezer wrote:p.s. Fools interested in Green Infrastructure ITs might also look at the VCT options. They've been kind-of fossilised by rule changes that closed the sector to VCTs, but existing VCTs continue to generate a healthy and tax-free income streams. Ironically the rule changes preventing new investment have kind-of de-risked the VCT sector: no new investments means no new speculative projects!
How right UncleE is. But and it is a BIG But:

1. There are very few of these, they are small and their free float is tiny : they are difficult to buy in quantity: sometimes the shares are as rare as hens teeth : even a small purchase can move the price
2. The management charges are high (3% or so and often generous bonuses for the manager.

However , the yield on VEN is about 8% and on VEN2 about 7%. and all dividends are both IT and CGT free

Some of us bought them when they were much unloved and have done well - Perhaps, UncleE you could provide a fuller list.

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Re: Investing in Green Infrastructure Funds (ITs)

#217285

Postby UncleEbenezer » April 25th, 2019, 4:12 pm

BusyBumbleBee wrote:Perhaps, UncleE you could provide a fuller list.

Sorry, not much to say.

Basically there are three options: Foresight, Ventus, and Hazel/Gresham House.

You've already spoken for Ventus: the only thing I can really add is that there's a bit of history: Ventus 2 had some failed projects which hammered them, but have recovered well since then albeit from a reduced base (I bought at a huge discount). They have a choice of share classes: the "C" shares of both are, I think, identical. Management charges are outrageous for a mature portfolio, and the management seem impervious to shareholder interests in a few matters (BBB has made some valiant efforts). But if you can turn a blind eye to that, the income is good.

Foresight Solar & Infrastructure has been a good investment from the start. I no longer hold (sold in an offer too good to refuse), so my info may be out of date, but I don't think much has changed. A steady 6p/year dividend on a stable NAV of just under £1. And much lower management charges than Ventus. But liquidity is low and my attempts to get a decent price (to buy back in) from the market maker failed miserably a while back. The main reason to make the effort would be (as with Ventus) if the tax exemption on the income is going to make a big difference to you.

I've never held nor followed Hazel; all I know comes from Foolish boards (TMF, then here). They've been a profitable investment, but there have been some shareholder fireworks. I'm absolutely unqualified to comment.

There were some others in the class, but I believe the above three are the (only) ones that have been decent investments.

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Re: Investing in Green Infrastructure Funds (ITs)

#217317

Postby BusyBumbleBee » April 25th, 2019, 5:38 pm

UncleE said "Foresight Solar & Infrastructure has been a good investment from the start." which is I think true but we are where we are now and that isn't necessarily why we would buy the share today. UncleE and I (and a few others : see the VCT board) have made really good money buying distressed VCTs which is to say when they have fallen so far out of favour that there is a big stock overhang and no buyers and there maybe some really good hidden value.

Some of the hidden value may be in the way the assets have been financed and whether the debt is carried at individual asset level or at the fund level. For the six we are talking about, it is a mixture with some more heavily weighted one side or the other. [yet something else I must look into and tabulate!]. FTSV itself has 30% debt at the fund level - which is high for a VCT: other VCTs have none with all the debt at individual company level and - most importantly - that local debt is usually of the fully amortising type which in turn means that when it is paid off, there is a wall of money to be transmitted onwards to the fund itself each year until the asset itself is worn out. It is this sort of thing that is hidden value and it is our job as investors to find this and profit by it.

What we must also realise is that fund managers do not do the job for love; they do it for money and, as simoan has pointed out this can be hugely profitable. We have to try and do the same!

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Re: Investing in Green Infrastructure Funds (ITs)

#217330

Postby simoan » April 25th, 2019, 6:45 pm

UncleEbenezer wrote:
simoan wrote:This is not a direct play on investing in underlying assets. Impax is a fund manager only and the assets are owned by the funds, hence the PTBV is 20x. AFAIK all the funds are for institutional investors only. It's an indirect play, based on institutions wanting to increase their exposure to renewable and green investments through funds run by a specialist in the area. If you look at the growth in EPS, which has risen over 400% in the past 5 years, it is clear the funds are proving popular.
All the best, Si

IEM is a regular retail investment, and listed on the LSE. I've held it longer than any of the (more narrowly focussed) renewable infrastructure funds. Performance was pretty disappointing for quite a few years (along with the whole sector), but it's done nicely in the last three or four years and moved to a premium. In the last few months the managers started to issue shares from treasury to raise funds and meet demand at not too far from NAV.

A key difference compared to the renewable infrastructure sector reviewed in this thread is a wider investment focus, with a significant element in higher-risk and higher-growth assets outside the energy sector: things like water, waste, and efficiency. Oh, and a worldwide focus. It's also a low yield: not something you invest in for income!

p.s. Fools interested in Green Infrastructure ITs might also look at the VCT options. They've been kind-of fossilised by rule changes that closed the sector to VCTs, but existing VCTs continue to generate a healthy and tax-free income streams. Ironically the rule changes preventing new investment have kind-of de-risked the VCT sector: no new investments means no new speculative projects!

Thanks! As you could probably tell I wasn't totally convinced that none of the funds were accessible to retail investors. However, I am happy owning the asset management company, rather than the funds. If you look at the Op Margins and Free cashflow of Impax, plus the healthy net cash position and a not too bad 2% forecast yield you can see why I'm happy. As for the spread, you can easily deal inside it if you time it right i.e. buy when someone is offloading and sell when there is a keen buyer.

All the best, Si

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Re: Investing in Green Infrastructure Funds (ITs)

#218875

Postby PrefInvestor » May 2nd, 2019, 8:59 am

Hi Again BBB, Well just to re-inforce your point about these renewable ITs and their penchant for capital raising, UKW have just come out today announcing an open offer at 133p (yesterdays closing price was ~143 !). They reckon thats a 5% discount (more like 6.x% I think) and a 10% uplift on the last reported NAV, but see the RNS for full details.

Needless to say the shares have dropped by about 2.5% this morning and will likely go lower. A little annoying as an existing holder but not a disaster, at least the dividends are good !.

ATB

Pref


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