TRIG - share issue and future dividend guidance

[daveh]

Wasn't sure quiet where to stick this:

https://www.investegate.co.uk/renew-inf ... 00070917G/

TRIG has announce a large issue of new shares :

The Company is proposing to issue new ordinary shares (New Ordinary Shares) by way of a non-pre-emptive tap issue (the Issue) at a price of 125p per New Ordinary Share (the Issue Price).

Accordingly, in light of the near term funding requirement, the Board will shortly be publishing a circular (the Circular) in order to seek additional authority to allot up to a further 174,192,585 Ordinary Shares (representing 10 per cent. of its ordinary share capital in issue) on a non pre-emptive basis (the New Tap Authority). If the Company were not to supplement the AGM Tap Authority prior to the 2021 AGM with the New Tap Authority, the maximum gross proceeds which could be raised under the Issue would be approximately £79.7 million and accordingly the Company's ability to execute further acquisitions in the Pipeline would be reduced.

When aggregated, the AGM Tap Authority and New Tap Authority would permit the Company to issue up to 237,937,911 New Ordinary Shares (representing approximately 13.66 per cent. of the Company's existing issued ordinary share capital).

They are also increasing the revolving credit facility to £500m and extending its expiry date to Dec 2023


and comments on future dividends:

Dividends

The Board is pleased to re-confirm the dividend guidance of 6.76p per Ordinary Share for the year ending 31 December 2020. The New Ordinary Shares issued pursuant to the Issue will rank for the fourth quarterly interim dividend of 1.69 pence which is expected to be declared in February 2021 and paid in March 2021 with respect to the three months ending 31 December 2020.

The continuing pandemic, extended recession and the apparent absence of a trade agreement between the UK and EU create short and medium-term economic uncertainty. However, based on the current outlook for power prices and the Company's operational robustness to date, the Board expects that it will be able to set a dividend target for 2021 to at least maintain the level of the dividend from 2020 of 6.76p per share*. Further dividend guidance for 2021 is expected to be given at the time of the 2020 Annual Results in February 2021 as is usual for the Company.

In setting the dividend target for 2021 in February, consideration will be given to items impacting forecast cash flows and expected dividend cover, including the levels of inflation across the Company's markets, the outlook for electricity prices and the operational performance of the Company's Portfolio, in line with the Company's dividend policy.

[Dod101]

Could anyone please explain what a "tap authority" is? Are shares being offered for subscription or are shares being offered only to existing investors? I really don't know what this means, it's new terminology to me. Thanks.

Edited to add - Ah, in the prospectus, it says individuals cannot apply for shares. Only institutions invited can buy the new shares. I think that answers my question.

RVF

The point is that it is non pre emptive meaning that it is not a rights issue and if the resolution is approved the existing shareholders would be diluted once again. This is probably because at the end of this week the FCA is removing the emergency fundraising arrangements put in place for Covid fundraisings whereby companies could issue up to 20% of their share capital without giving existing investors first refusal, usually by means of a rights issue. The usual is only 5%.

Mind you they are at least seeking authority from the shareholders. I think the tap authority simply means the authority which the AGM resolution gives to the Directors to issue new shares by means of a placing rather than a rights issue, but at least it would seem that shareholders are at least being asked this time.

TRIG like several others does this regularly.

Dod

[Dod101]

The point is that it is non pre emptive meaning that it is not a rights issue and if the resolution is approved the existing shareholders would be diluted once again. This is probably because at the end of this week the FCA is removing the emergency fundraising arrangements put in place for Covid fundraisings whereby companies could issue up to 20% of their share capital without giving existing investors first refusal, usually by means of a rights issue. The usual is only 5%.

Mind you they are at least seeking authority from the shareholders. I think the tap authority simply means the authority which the AGM resolution gives to the Directors to issue new shares by means of a placing rather than a rights issue, but at least it would seem that shareholders are at least being asked this time.

TRIG like several others does this regularly.

Dod

Thanks for that explanation. So, not all share holders are regarded as being equal. As I thought, the company cherry picks who it wants as investors. Rather an incestuous kind of relationship one might think, if you're inclined to think that way. Thanks again.

RVF

Someone may correct me but I think that is the gist of it.

I think it is not so much the company choosing its investors although for all I know that may be part of it, but that it is faster and cheaper for them to place shares rather than go through a rights issue. TRIG does that regularly as does Primary Health Properties for instance. Companies that regularly pay out most of their earnings obviously do not have the opportunity to retain capital in the business and so have to increase borrowings or raise additional capital if they want to acquire additional assets.

I suppose the more positive spin on this is that TRIG clearly foresees opportunities to acquire assets to expand their business and they seem to be earnings accretive almost immediately so that they can keep increasing their dividends despite the increased capital. It sounds not a bad business to be in.

Dod

[richfool]

It seems to have knocked 3.47% off the SP and brought it down to 127.8p so far today.

[Dod101]

Very interesting. The share price being down might suggest that the existing shareholders are a bit p****d off. Quite right too by the sound of it.

Dod

[Dod101]

I agree about the opportunities here, Dod. Perhaps worth quoting from the prospectus released today -

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE TAP ISSUE. THIS ANNOUNCEMENT (INCLUDING THIS APPENDIX) IS DIRECTED ONLY AT PERSONS SELECTED BY INVESTEC BANK PLC AND LIBERUM CAPITAL LIMITED (THE "JOINT BOOKRUNNERS") WHO ARE "INVESTMENT PROFESSIONALS" FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "FPO") OR "HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS ETC" FALLING WITHIN ARTICLE 49(2) OF THE FPO OR TO PERSONS TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED UNDER THE FPO (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). ONLY RELEVANT PERSONS MAY PARTICIPATE IN THE TAP ISSUE AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS.

Better explains my remarks.

Cheers

RVF

Very interesting but is that not what all share placings say so that it effectively excludes existing shareholders unless they tap in through say Primary Bid? (and act very quickly at that)

Dod

[Urbandreamer]

Very interesting. The share price being down might suggest that the existing shareholders are a bit p****d off. Quite right too by the sound of it.

Dod

Different share holders may have different opinions. I am a share holder and have taken advantage of the price fall to top up my holding. I don't really see the tap issue as diluting the value of my existing holding. Instead I see it as increasing the size of the pie.

As you have said, they do this sort of thing quite regularly.

Indeed, given our governments energy plans, more windfarms must be built. For TRIG to own any of these it must find money to buy them with. Hence capital calls are likely to continue IMHO.

[Dod101]

Very interesting. The share price being down might suggest that the existing shareholders are a bit p****d off. Quite right too by the sound of it.

Dod

Different share holders may have different opinions. I am a share holder and have taken advantage of the price fall to top up my holding. I don't really see the tap issue as diluting the value of my existing holding. Instead I see it as increasing the size of the pie.

As you have said, they do this sort of thing quite regularly.

Indeed, given our governments energy plans, more windfarms must be built. For TRIG to own any of these it must find money to buy them with. Hence capital calls are likely to continue IMHO.

It is increasing the size of the pie and at the same time reducing your holding in the company. You do not notice that probably because they are buying earnings accretive assets so that they can maintain or even increase their dividend notwithstanding the extra mouths to feed. In the event of a winding up of the company your share of the assets would be reduced.

Dod

[daveh]

I'm not worried either. TRIG issue new shares on a fairly regular basis to raise capital to invest in more assets. Providing they do that wisely then it should be good for me as an existing shareholder. They have in the past done their share sales as an open offer (to existing shareholders) as placings (not easily taken up by existing retail holders because as with this offer). The advantage of this is that it is a cheaper way for the company to get new capital. Why am I not worried 1) If I wanted to buy more shares it gives me a chance to buy in at a slightly cheaper price as the share price on the market has tended to fall towards the discounted offer price. 2) On previous occasions once the offer has been completed the share price has climbed back to the pre offer price.

[daveh]

It is increasing the size of the pie and at the same time reducing your holding in the company. You do not notice that probably because they are buying earnings accretive assets so that they can maintain or even increase their dividend notwithstanding the extra mouths to feed. In the event of a winding up of the company your share of the assets would be reduced.

Dod

But it would be a smaller share of more assets. If the company is investing the new capital wisely it shouldn't be a problem. You'd get a smaller % of a bigger pie and if the company is doing its job your actual piece of pie should be larger.

[Arborbridge]

I'm not a shareholder, but I believe this "disadvantage" was pointed out to me when buying PHP and/or BBOX. As Dod says, companies of this type need to do it occasionally to raise cash for development.

I guess must just get used to the idea when investing in this sector, so I am ready for it.

Arb.

[gnawsome]

Very interesting. The share price being down might suggest that the existing shareholders are a bit p****d off. Quite right too by the sound of it.

Dod

Different share holders may have different opinions. I am a share holder and have taken advantage of the price fall to top up my holding. I don't really see the tap issue as diluting the value of my existing holding. Instead I see it as increasing the size of the pie.

As you have said, they do this sort of thing quite regularly.

Indeed, given our governments energy plans, more windfarms must be built. For TRIG to own any of these it must find money to buy them with. Hence capital calls are likely to continue IMHO.

I would like some more TRIG in my ISA
Also registered with Primary Bid ( don't see that they are participating at the moment) but;
If I want 10k into my ISA the total costs are c £12780
If I go via PB the cost to buy 10k plus the estimated cost to get them into my ISA looks like c£12615.
Looks like e£165 wouldn't be a large cost for the certainty of getting what I want to where I want it.

[gnawsome]

Off topic, but thank you for informing me of Primary Bid. I had no idea anything like that existed out there.

RVF

Nor did I until very recently and I've not yet 'scratched the book'.
I'd like to test drive it and find out if it suits me. A TRIG offer might be a good comparitor as I have some already and I have felt disgruntled when there have been previous restricted offerings on stocks that I held

[Gerry557]

Very interesting. The share price being down might suggest that the existing shareholders are a bit p****d off. Quite right too by the sound of it.

Dod

Sounds like those with noses in the trough are selling, so they can buy back cheaper!

[Dod101]

It is increasing the size of the pie and at the same time reducing your holding in the company. You do not notice that probably because they are buying earnings accretive assets so that they can maintain or even increase their dividend notwithstanding the extra mouths to feed. In the event of a winding up of the company your share of the assets would be reduced.

Dod

But it would be a smaller share of more assets. If the company is investing the new capital wisely it shouldn't be a problem. You'd get a smaller % of a bigger pie and if the company is doing its job your actual piece of pie should be larger.

If you want to see the sometimes effect of dilution just take a look at the dividend record of Phoenix Holdings. They have sprayed new shares around for first the takeover of Standard Life and then Reassure. The result is that they have increased the divided as a cost to the Company but the dividend per share has been static for two or three years. beware complacency in the issue of share placings.

Dod

[Urbandreamer]

If you want to see the sometimes effect of dilution just take a look at the dividend record of Phoenix Holdings. They have sprayed new shares around for first the takeover of Standard Life and then Reassure. The result is that they have increased the divided as a cost to the Company but the dividend per share has been static for two or three years. beware complacency in the issue of share placings.

Dod

I certainly didn't mean to suggest that dilution is not something to worry about in general. However your example is an example of bad decisions made by a company board. The investment didn't grow the pie and the additional shares diluted holdings in a shrinking pie.

What I meant to suggest is that dilution is not an issue if the pie is genuinly growing by the aditional capital. That's how I see this and previous capital calls in this sector. The difficulty for everyone will be judging when that situation is changing.

[daveh]

If you want to see the sometimes effect of dilution just take a look at the dividend record of Phoenix Holdings. They have sprayed new shares around for first the takeover of Standard Life and then Reassure. The result is that they have increased the divided as a cost to the Company but the dividend per share has been static for two or three years. beware complacency in the issue of share placings.

Dod

I certainly didn't mean to suggest that dilution is not something to worry about in general. However your example is an example of bad decisions made by a company board. The investment didn't grow the pie and the additional shares diluted holdings in a shrinking pie.

What I meant to suggest is that dilution is not an issue if the pie is genuinly growing by the aditional capital. That's how I see this and previous capital calls in this sector. The difficulty for everyone will be judging when that situation is changing.

Its one to keep an eye on. There were comments on the oil, gas and energy board (viewforum.php?f=16) on whether the CFD prices obtained for some of the large offshore wind farms now in development were sufficient to cover the development and financing costs over the lifetime of the CFD. We need to keep an eye on the new investments that TRIG and similar companies are making and make sure they are earnings accretive. The question is can we notice in time (if it happens) to exit at a profit.

[Dod101]

I certainly didn't mean to suggest that dilution is not something to worry about in general. However your example is an example of bad decisions made by a company board. The investment didn't grow the pie and the additional shares diluted holdings in a shrinking pie.

What I meant to suggest is that dilution is not an issue if the pie is genuinly growing by the aditional capital. That's how I see this and previous capital calls in this sector. The difficulty for everyone will be judging when that situation is changing.

Time will tell if Phoenix made bad decisions. As Chou en Lai did not say of the French Revolution, it is too early to tell. The investments certainly grew the pie, where did you get the idea that buying Standard Life and Reassure did not? Anyway we are not discussing Phoenix; I simply used it as an example of the possible effect of share dilution.

I looked at TRIG as I mentioned on another thread and decided to give it a miss for a number of reasons, firstly, that is in but one part of the green renewables sector, secondly. I do not like the regular dilution that takes place by share placings, and thirdly, as RVF has said, windfarms have become flavour of the month and prices may no longer be that competitive. If it were that easy..........Finally the share price is about 14% or so above NAV.

Good luck to holders; I wish them well.

Dod

[richfool]

I wonder how this will affect the demand for TRIG and other renewable energy trusts/stock:

Picked up from the HL website under SSE news, but is also in several other sources:

UK government to double subsidies for renewable energy in 2021

(Sharecast News) - The UK government plans to double the amount of green energy it will subsidise in 2021 as it agrees to include onshore power projects.
The projects could support up to 12GW of renewable energy or at least enough to charge up to 20m electric vehicles a year.

Energy companies will compete for contracts in auction at the end of 2021 which is set to be almost double the size of the last 5.8GW auction in 2019.

The next round will include three separate auctions for different renewable energy technologies to compete for a contract.

There will be one "pot" for offshore wind projects and another for less-established technologies.

The third pot will allow onshore wind and solar farms to compete for a support contract for the first time in six years.

Kwasi Kwarteng, the energy minister, said the new auction is part of the Prime Minister Boris Johnson's 10-point climate plan, which includes a £12bn public investment, to help the country reach net zero carbon emissions by 2050.

The plan will see the UK's offshore windfarms grow four-fold to 40GW in the next ten years and an expansion of EVs on British roads.

https://www.hl.co.uk/shares/shares-sear ... lc-ord-50p
https://www.lse.co.uk/news/uk-governmen ... qykqh.html
https://www.theguardian.com/environment ... y-projects

Also posted here:

viewtopic.php?f=16&t=11176&p=360204#p360204

[richfool]

Issue of new shares oversubscribed and scaled back:

https://www.investegate.co.uk/renew-inf ... 38037989G/