TIDMTRIG
RNS Number : 3791X
Renewables Infrastructure Grp (The)
21 February 2017
The Renewables Infrastructure Group Limited
Announcement of Final Results for the year ended 31 December
2016
21 February 2017
The Directors of The Renewables Infrastructure Group Limited
announce the results for the year ended 31 December 2016.
Highlights for the year to 31 December 2016
-- Total shareholder return for the year of 15.7% on a share
price basis and 9.3% on a NAV basis
-- Profit before tax of GBP67.9 million (2015: GBP17.0 million),
reflecting an uplift in portfolio valuation(1)
-- Earnings per ordinary share of 8.8 p (2015: 3.0p)
-- NAV per ordinary share(2) of 100.1p (2015: 99.0p)
-- Directors' portfolio valuation of GBP818.7 million(3) (2015: GBP712.3 million)
-- Achieved total distribution target of 6.25p per share for the
year(4) (2015: 6.19p) and moved from semi-annual to quarterly
dividends
-- Portfolio generation capacity increased by 8% to 710MW with a
total of 53 investments in the UK, Ireland and France
-- Launched second share issuance programme and raised GBP93 million of new equity capital
-- Pipeline of further attractive investment opportunities under
consideration across multiple technologies and markets
-- Shareholders approved increasing the investment limit for
technologies beyond onshore wind and solar PV from 10% to 20%
-- Targeting an aggregate dividend of 6.40p per share for the year to 31 December 2017
1 2015 profit before tax was reduced by GBP20.2 million by the
one-off adverse valuation impact of the withdrawal of Levy
Exemption Certificate (LEC) income in the 2015 UK Summer
Budget.
2 The NAV per share as at 31 December 2016 is calculated on the
basis of the 832,998,413 Ordinary Shares in issue as at 31 December
2016 plus a further 787,847 Ordinary Shares to be issued to the
Managers in relation to part-payment of Managers' fees for 2016 in
the form of Ordinary Shares. The NAV per share is expressed after
the payment relating to the accelerated dividend shift to quarterly
dividends as described in Note 4 below.
3 On an expanded basis. Please refer to Section 2.6 of the
Strategic Report for an explanation of the expanded basis.
4 The 6.25p per share dividend relates to performance during the
2016 financial year. Total cash dividends paid during 2016 amounted
to 7.7975p per share as they included an extra quarter of dividends
that resulted from the shift in 2016 from semi-annual to quarterly
dividends (i.e. dividends equivalent to one quarter of performance
have been accelerated, a one-off timing difference).
Helen Mahy CBE, Chairman of TRIG said
"I'm pleased to report that TRIG's portfolio has continued to
perform well despite the wider challenging market and weather
conditions. This resilient performance is underpinned by TRIG's
scale and diversified portfolio of solar and wind projects across
UK, Ireland and France."
Richard Crawford, Director, Infrastructure, InfraRed Capital
Partners said
"2016 has been a robust year for the group and we are well
placed to take advantage of further opportunities in the renewable
energy market. We maintain our disciplined approach and have a
strong pipeline with in the region of GBP100 million of projects at
an advanced stage of discussions."
Summary of Results
(For the year (For the year
to) 31 December to) 31 December
2016 2015
Profit before tax (1) GBP67.9m GBP17.0m
Earnings per share 8.8p 3.0p
Fourth quarterly interim 1.5625p -
dividend for period
to 31 December 2016(2)
Total dividend per share
for the year 6.25p 6.19p
Net Asset Value per
share(3) 100.1p 99.0p
1 2015 profit before tax was reduced by GBP20.2 million by the
one-off adverse valuation impact of the withdrawal of Levy
Exemption Certificate (LEC) income in the 2015 UK Summer
Budget.
2 The fourth quarterly interim dividend for 2016 is scheduled to
be paid on 31 March 2017. The equivalent dividend for 2015 was
incorporated in the second semi-annual interim dividend for 2015 of
3.11p per share.
3 The NAV per share as at 31 December 2016 is calculated on the
basis of the 832,998,413 Ordinary Shares in issue as at 31 December
2016 plus a further 787,847 Ordinary Shares to be issued to the
Managers in relation to part-payment of Managers' fees in the form
of Ordinary Shares.
Enquiries
InfraRed Capital Partners Limited
Richard Crawford
Matt Dimond
Phil George +44 (0) 20 7484 1800
Tulchan Communications
Doug Campbell
Latika Shah +44 (0) 20 7353 4200
Section 1
Chairman's Statement
Introduction
On behalf of the Board, I am pleased to present the 2016 report
and accounts for The Renewables Infrastructure Group Limited
("TRIG" or the "Company", and with the holding companies and
investments, the "Group").
In 2016 the Company continued to perform well against a
challenging global political backdrop, heightened economic
uncertainty, weak power prices and lower wind speeds. The
cornerstones of this performance are the Company's strategy to
invest in a high quality, predominantly operational portfolio
diversified by technology and geography and the specialised
capabilities of our Managers - InfraRed Capital Partners
("InfraRed") as Investment Manager and Renewable Energy Systems
("RES") as Operations Manager. Total shareholder return was 9.3% on
a NAV basis and 15.7% on a share price basis, compared to a total
return of 6.7% for the FTSE-250 Index (of which TRIG is a
constituent) and 16.8% for the broader FTSE-All Share Index.
With new investments of approximately GBP77.7 million in France
and the UK, TRIG's net generation capacity increased by 8% to 710MW
and portfolio value by 15% to GBP818.7 million across 53
projects.
Financial Results and Performance
Financial Results
Profit before tax for the year to 31 December 2016 was GBP67.9
million (2015: GBP17.0 million) and earnings per share were 8.8p
(2015: 3.0p), reflecting mainly an uplift in the portfolio
valuation. Cash received from the portfolio by way of
distributions, which include dividends, interest and loan
repayments, was GBP59.5 million (2015: GBP42.4 million). After
costs, net cash inflows from the investment portfolio were GBP50.3
million (2015: GBP34.0 million) (as measured under the Expanded
Basis - see Section 2.6 for further details). Cash dividend cover
(adjusting for the movement from semi-annual to quarterly dividends
which resulted in five quarters' worth of dividends being paid
during the year) was 1.2 times (2015: 1.2 times). TRIG raised new
equity capital of GBP91.2 million (net of costs) in two issues in
May and September enabling acquisitions in the year of GBP78.5
million (including acquisition costs). Cash balances increased from
GBP15.2 million to GBP18.7 million over the year.
The net asset value ("NAV") per share was 100.1p as at 31
December 2016 (31 December 2015: 99.0p). Excluding the impact of
the accelerated payment of an additional quarter's dividend during
the year, NAV per share increased 2.6p. This increase reflects
mainly a reduction in discount rates applicable to the valuation of
the investment portfolio outweighing reductions in the forecast
power curves.
During the year, the Company launched a second share issuance
programme (effective until 26 April 2017) of up to 300 million new
shares, of which 92 million have been issued to date. Ordinary
shares in issue, including as a result of these offerings as well
as shares issued by way of scrip dividend and as part payment of
fees to the Managers, increased to approximately 833.0 million as
at 31 December 2016 (31 December 2015: 732.8 million).
For 2016, using the methodology of the Association of Investment
Companies ("AIC"), the Company's Ongoing Charges Percentage was
1.10% (2015: 1.20%), reflecting the benefits of the fixed costs
spread over an expanded asset base.
Portfolio Update
During the year, TRIG invested in aggregate GBP77.7 million
(excluding acquisition costs) increasing the net generating
capacity of the portfolio by 8% to 710MW across 53 projects. Most
notably, in January 2016 TRIG acquired an interest in 15 French
solar parks - in both mainland France as well as in Corsica,
Reunion and Guadeloupe in partnership with Akuo Energy. In the
second half of the year, TRIG acquired an interest in another solar
park in the South of France - also alongside Akuo Energy - and
bought out some third party minority interests in the main Akuo
portfolio, furthering the companies' collaboration. In November,
TRIG acquired a Scottish wind firm (Freasdail) under construction
from RES, the Company's Operations Manager, under its right of
first offer agreement.
TRIG's annual electricity production increased by 9.2% in 2016
to 1,469 GWh (including an allocation for compensated downtime),
reflecting the increase in the generating portfolio. Total
portfolio production was 9.3% below P50 forecasts for the year
(2015: 2.3% above). The main driver of this shortfall was wind
resource, with grid availability also having an adverse impact.
Wind speeds in the UK were significantly below the long-term
average in 2016, particularly in March, June, October and November.
This was in part mitigated by the portfolio's geographical and
technological diversity: wind in France was within 1% of the
long-term average, whilst solar irradiation was fractionally above
budget overall. The newly acquired French solar portfolio performed
well and exceeded its production target for the year.
Following relatively good meteorological conditions experienced
by the portfolio in previous years, the production in 2016 brought
down the average performance since IPO to 3.7% below long-term
expectations. Multiple projects underwent remedial activities in
2016, placing them in a stronger position to perform well in the
coming years.
Valuation
The Investment Manager has prepared a fair market valuation for
each investment in the portfolio as at 31 December 2016. The
valuation is based on a discounted cash flow analysis of the future
expected equity and loan note cash flows accruing to the Group from
each investment. The valuation uses key assumptions which are set
by the Investment Manager using its experience and judgement having
taken into account available comparable market transactions and
financial market data in order to arrive at a fair market
value.
The Directors have satisfied themselves as to the methodology
used and the assumptions adopted, and have approved a valuation of
GBP818.7 million for the portfolio as at 31 December 2016. This is
an increase of 14.9% on the GBP712.3 million valuation of the
portfolio as at 31 December 2015. The valuation takes into account
the addition of new projects, a reduction in power price forecasts
year-on-year, a reduction in discount rates applied to the
valuation (reflecting a keen appetite in the market for investment
in renewables) and the beneficial impact of movement in foreign
exchange rates.
Dividends and Distribution Policy
The Board has declared a fourth interim dividend for the year
ended 31 December 2016 of 1.5625p per share to complete the
aggregate 2016 dividend of 6.25p per share set as a target at the
beginning of 2016. The fourth interim dividend is payable to those
ordinary shareholders on the register on the record date of 17
February 2017 and will be paid on 31 March 2017. There is a scrip
dividend alternative for those electing to receive their
distributions in TRIG shares. If not made already, this election
may be made by contacting Capita Registrars on 0871 664 0300 or by
completing and submitting an election form available at
www.capitashareportal.com/forms/ Home.aspx.
Since its IPO in 2013, TRIG has consistently met its dividend
targets, surpassing GBP100 million in shareholder distributions
(the first London-listed renewables investment company to do so),
and has maintained dividend growth consistent with UK inflation
rates in accordance with its medium-term objective set at IPO and
most recently restated in April 2016 at the launch of its current
12-month share issuance programme.
For the 2017 financial year, the Company is targeting an
aggregate dividend of 6.40p per share to be paid in four quarterly
instalments. This target dividend represents an increase of 2.4%,
consistent with UK inflation, on the aggregate dividend of 6.25p
per share for the 2016 financial year.
While TRIG benefits from support scheme revenues which are
generally inflation-linked and currently comprise the majority of
the portfolio revenue, the shape of cash flows will also be
affected, in particular, by the outlook for electricity prices as
well as by other factors. As previously stated, TRIG's distribution
policy assumes, in particular, steady growth in UK and European
wholesale power prices and on-target operating performance. After
successive falls in power price forecasts since launch, future
dividend increases may trend beneath inflation unless there are
sustained real long-term increases in power prices. The Board will
keep TRIG's distribution policy under review, taking into account
these factors as well as the prevailing rate of inflation and their
impact on dividend cover when considering whether it would be
prudent to move to a progressive dividend policy rather than one
directly linked to inflation in the future.
The Managers will continue to seek to optimise cash flow through
actions such as the negotiation of long-term power purchase
agreements, through prudent financing arrangements and through the
deployment of new and surplus capital into selective investments
with attractive cash flow profiles.
Risks
With a track record of more than three full years of operating
performance, a significant portfolio and a wide variety of external
conditions experienced, it is an appropriate point to reflect on
how TRIG's investment strategy has performed with focus on the
three key risk factors: operating performance, changes in wholesale
power prices and the maintenance of appropriate government support
schemes.
Operating performance
The Operations Manager continues to deliver innovative ways of
enhancing production. Significant savings were achieved in 2016
through various proactive management strategies.
Technical performance of the assets is closely monitored, so
that changes in performance are detected early and action is taken
swiftly to minimise losses. The Operations Manager seeks to
schedule remedial works during periods of low resource, reducing
lost production. Additionally, condition monitoring techniques
identify deteriorating components, allowing them to be fixed or
replaced before breaking and thus reducing unplanned outages.
Operational performance also benefitted from the portfolio's
diversity and scale. Diversification within the portfolio mitigates
the impact of localised issues, while scale enables investment in
strategic spare parts and efficient deployment of operating
resources.
Power prices
2016 started with another warm winter as well as the continued
oversupply of natural gas. This contributed to a further overall
decline in wholesale power prices (both current and forecast) in
Europe over the course of the year. In the second half of the year,
following the Brexit vote, power prices showed a reversal in
movement specifically in the GB market due to weaker sterling (gas
being traded in euros in the European market) as well as from some
smaller factors including reduced imports from France due to some
French nuclear capacity being offline and some cross-channel
interconnector unavailability due to repairs. In France and in the
Irish Single Electricity Market, the long-term forecasts have
continued to decline reflecting an underlying continued oversupply
of gas.
TRIG maintains a prudent strategy of mitigating changes in power
prices by using some fixes and floors in its contracts by
referencing prices paid to average season-ahead prices, as well as
by investing in a number of projects without power price exposure
during the term of the subsidy - the latter comprising 29 projects
representing about 26% of the portfolio by value.
Government support schemes
While the broader political backdrop carries uncertainties into
2017, the commitment to renewables in the UK and across Europe
remains strong, based on the key factors of environmental benefits,
energy security / localisation and increasing cost competiveness
provided by the sector.
2016 saw the formal enactment of the Paris agreement of the
United Nations Framework Convention on Climate Change (COP21)
following legislation so far undertaken by more than 125
authorities. In the UK, policies on renewables generation are
enshrined in domestic legislation, in particular the Climate Change
Act 2008. Therefore the vote to leave the European Union does not
appear to have any direct negative impact on the UK's commitment to
renewables or on TRIG's performance, albeit broadening as it does
the scope of policy decisions available to the UK Government and
reintroducing some question over the long-term future of Scotland
within the union. Some outcomes, including sterling's weakness
post-Brexit and the UK's imperative to secure long-term energy
security in a post-Brexit world, look to be positive for TRIG.
After the Theresa May-led administration came into power in the
second half of 2016, the UK made significant long-term low-carbon
commitments in the form of new offshore wind projects as well as
new nuclear generation with the long-awaited approval in September
of the Hinkley Point C plant. For now it appears that no new
support schemes will be forthcoming in the UK for additional
onshore wind and solar projects following the expiry of the final
Renewables Obligation Certificate (ROC) schemes and beyond the
initial round of Contracts-for-Difference back in 2015. However,
TRIG's portfolio benefits from long-term grandfathered subsidies
and does not depend on new projects to provide investors with the
targeted returns. Nonetheless, TRIG expects to continue to find
suitable investment opportunities, including in the UK offshore
wind and power storage segments and in other Northern European
countries which strive to meet their respective 2020 EU deployment
targets and longer-term UN COP21 goals.
Furthermore, projects without fixed subsidy components to their
revenues may represent viable opportunities with appropriate
structuring e.g. corporate PPAs, hedging and/or more cautious
capital structures.
Overall, we believe that TRIG's strategy has performed well
since IPO, enabling the Company to manage through challenging
conditions in terms of weather, energy prices and government
support schemes.
Sustainability and Corporate Culture
Corporate culture has a critical role to play in sustaining the
business model and providing the basis to achieve the Company's
long-term objectives. Accordingly, the Board of TRIG and its
Managers work together in enhancing its processes, team and
individual performance, whether in the context of the day-to-day
routine, scheduled meetings or special events. This subject also
continues to be one of particular importance to me, across a raft
of aspects, for example safety, governance procedures, carbon
efficiency and diversity, to name a few. As Chairman, I believe it
makes a difference when we challenge ourselves in the corporate
world - whether it be furthering engagement with investors to find
out ways to improve our offering or advocating in a broader sense
for a better world - and behaving accordingly. I am delighted that
TRIG aspires to make a difference externally and internally. In the
Strategic Report in 2.11, we give some examples of what we have
been doing.
Fundamentally, TRIG's investments play an important role in
society, now providing power for the equivalent of 390,000
households and preventing the emission of 570,000 tonnes of CO(2)
annually.
Beyond the deployment of capital into such projects, TRIG and
its Managers continue to pursue excellence in details of
environmental efficiency and social sensitivity across all aspects
of the portfolio and the management of the business. TRIG also
continues to sponsor a broad programme of community activities
(music, sport, craft, education and childcare) across a range of
its sites, including, through our Managers, InfraRed Capital
Partners and Renewable Energy Systems, our first Dragon's Den style
event! These initiatives forge a closer dialogue with local
communities as well as enhancing amenities in often remote
localities. We give some examples of these in the Strategic
Report.
As a member of the Association of Investment Companies ("AIC"),
TRIG reports governance against the AIC Code of Corporate
Governance endorsed by the Financial Reporting Council. The Company
continues to monitor and contribute to best practices in the
industry as a leading participant in the fast-growing renewables
segment of the infrastructure investment market.
As in previous years, TRIG's Managers continued to make
themselves available to existing and potential institutional
investors (in both one-on-one and conferences) and hosted a number
of investor representatives as well as market analysts on site
visits. The Board prioritises engagement with shareholders, with
the aim of providing market-leading disclosure regarding our
fast-evolving sector and TRIG's performance.
As part of good corporate governance, all of the Directors will
offer themselves for re-election at the Annual General Meeting to
be held on 3 May 2017.
Outlook
Looking ahead, we are both challenged and excited by a number of
evolving features of the renewables market which we expect may
provide significant opportunities for TRIG.
The market for secondary purchases is becoming increasingly
competitive, driven by the steady increase in global investor
allocation to the infrastructure asset class - of which renewables
is now an important component. TRIG applies a judicious approach to
what is a healthy pipeline of potential additions to the portfolio,
based on the backlog of historic developments available for
transfer from utilities and other developers.
TRIG has focused to date primarily on investing in fully
operational projects but has also invested in a solar construction
project - an extension at Marvel Farms completed in 2014 - and
recently a wind construction project - Freasdail, which has
recently achieved energisation ahead of schedule.
While TRIG's portfolio will remain predominantly operating,
investing judiciously in some construction stage projects will
position TRIG well to secure new opportunities at attractive
returns. TRIG benefits from the extensive construction-stage
experience of both of its Managers, InfraRed and RES.
So far, the Brexit vote in 2016 has not had any materially
negative impact on TRIG. In fact, as mentioned above, currency
effects of the vote have been positive so far for the portfolio in
terms of the power price curve as it increases the sterling cost of
imported fuels and currency gains on our overseas assets.
Developments in UK onshore wind and solar PV will slow, in the
absence of new subsidies. However, the scope afforded to TRIG under
its investment policy enables the Company to look at other markets
and we expect TRIG to continue to benefit from scale and
diversification. The Managers have been reviewing opportunities not
just in the UK, France and Ireland, but also selectively elsewhere
in Northern Europe, in particular Scandinavia.
During 2016, shareholders approved an amendment of the
investment policy to permit a higher allocation to technologies
other than onshore wind and solar PV as the renewables market
matures. While to date we have not utilised this expanded mandate,
it allows TRIG to consider broader opportunities in the energy
market including offshore wind and electricity storage, the latter
dovetailing well with intermittent renewables generation in
providing grid-balancing.
The current healthy pipeline includes in the region of GBP100
million of projects at an advanced stage of discussions, including
a number of projects under exclusivity, mostly in the onshore wind
sector but also in the electricity storage sector.
Having successfully navigated a range of challenges in recent
years - in power markets, in the regulatory framework for
renewables and in the weather, your Company has proven the
resilience of its diversified portfolio. This has been supported by
a conservative and detailed approach to portfolio and operational
management provided by InfraRed and RES, as appropriate for this
exciting and evolving market.
In 2017 we look forward to further solid financial performance
from the existing portfolio and the addition of new projects, where
appropriate, to bring additional scale and diversity. We appreciate
the consistent and strong support of our shareholders in enabling
TRIG to generate real value - not only for investors but for the
broader stakeholders for which renewable energy plays an important
role.
Helen Mahy CBE
Chairman
20 February 2017
Section 2
Strategic Report
2.1 Introduction
Contents
This Strategic Report sets out information covering the
following topics:
-- 2.1 - Introduction
-- 2.2 - Objectives;
-- 2.3 - Strategy;
-- 2.4 - Business Model;
-- 2.5 - Investment Approach and Policy;
-- 2.6 - Operational and Financial Review for the year, including KPIs;
-- 2.7 - Valuation of the Group's Portfolio as at 31 December 2016;
-- 2.8 - Outlook;
-- 2.9 - Ten Largest Investments;
-- 2.10 - Risks and Risk Management; and
-- 2.11 - Sustainability and Corporate Culture.
References in this report to the "Company" or "TRIG" mean The
Renewables Infrastructure Group Limited (and together with its
holding companies and investments, the "Group").
Overview
TRIG is a leading renewable energy infrastructure company
investing in multiple renewable energy technologies, jurisdictions
and climate systems. A Guernsey company, TRIG was launched on the
London Stock Exchange through an Initial Public Offering in July
2013, raising GBP300 million which was invested in an initial
portfolio of 18 wholly-owned projects in the UK, France and
Ireland.
Since the IPO, the Company has raised more than GBP520 million
through equity issues and increased the portfolio by acquiring a
further 35 projects creating a diversified portfolio of 53 onshore
wind and solar photovoltaic projects. TRIG continues to review a
broad pipeline of projects with a view to further investment and
diversification.
The Company aims to provide investors with attractive long-term
returns whilst seeking to preserve the capital value of its
investment portfolio through the reinvestment of surplus cash flows
and active portfolio management.(1)
With highly experienced Managers TRIG has access to leading
resources in specialised investment and operations teams at
InfraRed and RES which deploy resources together in the management
of TRIG and its portfolio. Shareholders benefit from a competitive
and simple fee structure that is the result of the operating scale
of both of the Managers, reflecting their committed, long-term
approach to the infrastructure and renewables markets.
TRIG's Investment Manager - InfraRed Capital Partners
("InfraRed"), is a leading global investment manager focused on
infrastructure and real estate. . The total headcount of the
InfraRed group is approximately 120 and the infrastructure team now
comprises 50 staff in offices in London, Hong Kong, New York, Seoul
and Sydney. InfraRed has been investing in infrastructure and/or
managing infrastructure dedicated funds for over 15 years,
including the established HICL Infrastructure Company Limited which
is also listed on the London Stock Exchange. InfraRed is authorised
and regulated by the Financial Conduct Authority.
-- Strong, 15+ year track record in raising and managing 15
infrastructure and real estate funds with over US$9 billion of
equity under management
-- Experience in managing a broad range of renewables investments since 2006
-- Also adviser to HICL Infrastructure Company Limited, the
largest of the London-listed infrastructure investment companies
with market capitalisation of c.GBP2.4 billion
-- Independent manager following successful spin-out from HSBC Group in April 2011
-- 10 year established working relationship with Sir Robert McAlpine group
TRIG's Operations Manager - Renewable Energy Systems ("RES"), is
the world's largest independent global renewable energy company
with operations in 12 countries and over 1,200 employees globally.
The RES team has more than 40 staff providing portfolio-level
operations management, supporting the evaluation of investment
opportunities for the Group and providing project-level services in
the UK, Ireland and France. RES has 35 years' experience in
renewables, from development through construction to
operations.
-- The world's largest independent renewable energy company with a 12 GW portfolio
-- Privately-owned, RES is part of the 145 year old Sir Robert McAlpine group of companies
-- Headquartered in Hertfordshire, UK, and operating in 12 countries
-- Over 1,200 employees engaged in renewables globally
-- Extensive, 35+ year experience in constructing and operating
renewables including onshore and offshore wind, solar and
biomass
-- Developed/constructed more than 250 wind, solar, energy
storage and transmission projects totalling more than 12 GW
2.2 Objectives
TRIG was created in 2013 with the purpose of investing
principally in a range of diversified operational assets which
generate electricity from renewable sources, with an initial focus
on onshore wind farms and solar PV parks in the UK and Northern
Europe, and with a view to providing investors with long-term,
stable dividends, while preserving the capital value of its
investment portfolio through re-investment of surplus cash flows
after payment of dividends.
Financial Objectives
The key financial objectives of the Group are set out as
follows:
-- to provide shareholders with an attractive long-term
income-based return with a positive correlation to inflation by
focusing on strong cash generation across a diversified portfolio
of predominantly operating projects(2) (3) ;
-- to maintain prudent financial management in terms of the
approach to cost control, cash management, dividend cover,
financing arrangements and foreign exchange and interest rate
hedging; and
-- to diversify its investment portfolio to enhance spreading of
risk, increase share liquidity and obtain further scale
efficiencies, while seeking to enhance NAV per share for
investors.
Non-Financial Objectives
The key non-financial objectives of the Group are:
-- to maintain an adaptive business model which benefits from
trends in energy and infrastructure with opportunities for both
portfolio management and portfolio growth, based on the evolution
of the economies and societies in which the Company invests;
-- to build and maintain strong stakeholder relationships of
both the Company and the Group's investments, including investors,
national and local governments, local communities, project
developers, vendors, key contractors and providers of finance;
-- to manage its affairs in accordance with its sustainability statements and policies; and
-- to provide knowledge leadership to the sector, enhancing the
understanding of investment in renewables and related energy
infrastructure through appropriate disclosure and engagement with
existing and potential investors, thereby further promoting
interest in investment in TRIG as a benchmark investment vehicle in
this expanding sector.
The Board considers that, as part of its corporate culture,
consistency in executing against its non-financial objectives
(adaptive business model, stakeholder approach, sustainability and
knowledge leadership) will contribute meaningfully to the Company's
ability to deliver targeted long-term investment returns.
2.3 Strategy
Portfolio Construction
TRIG's investment approach is based on accessing an expanding
renewables market resulting from the long-term commitment of the UK
and other select geographies to increasing the supply of cleaner,
more secure and sustainable energy. TRIG pursues this opportunity
via managing and expanding a diversified portfolio of power
generating assets across established technologies, different
weather systems and electricity markets, as well as by having a
suitable variety of counterparties in terms of power offtakers,
equipment suppliers and maintenance providers. This strategy of
portfolio growth and diversification supports the long-term
investment proposition of delivering stable dividends together with
NAV resilience.
The Renewables Market Growth Opportunity
Growth of the renewable energy infrastructure market is
supported by a long-term global shift - in particular in
industrialised and the larger emerging economies - towards
achieving economic growth with sustainability. Continuing increases
in human population, urbanisation, industrial and agricultural
production and consumption offset the benefits of ongoing energy
efficiency improvements.
Global initiatives continue to cut fossil fuel emissions and to
reduce and ultimately eliminate further contributions to man-made
greenhouse gases. 2016 saw the ratification of the landmark Paris
climate change agreement amongst the majority of countries who
attended the United Nations ("UN") Framework Convention on Climate
Change (or "COP 21") round of discussions in Paris in late 2015.
The Company sees further global support for the promotion of
decarbonisation in 2017 and beyond, with widespread renewable
energy generation being an important initiative alongside improved
demand-side response, efficient back-up generation capacity and
more flexible grid networks.
The roll-out of renewable energy generation projects and
supporting technologies is expected to continue across all major
markets, supported by a range of government programmes as well as
by increasing technological and supply chain improvements and cost
efficiencies as new projects start to become economically viable
without subsidies. In 2016, for the first time, more than 50% of
newly installed electricity generating capacity globally was in the
form of renewable energy infrastructure.
Recent additions to UK renewables capacity are expected to
result in solid deal flow for the Company for several years,
notwithstanding the slowdown in additions which will occur from
2017 as the very limited quantum of subsidies available for onshore
wind and solar PV bite. However, as deal flow eventually slows in
the core UK onshore wind and solar PV market, activity from the
Company's broader investment mandate is expected to contribute
increasingly to deal flow, including offshore wind, electricity
storage and other geographies.
Diversification - Across Established Renewables Technologies
TRIG predominantly invests in operational renewable energy
generation projects, with a current focus on onshore wind and solar
PV which are both established renewables technologies with an
effective combination of proven operating cost histories and a
strong pipeline of investment opportunities.
The Investment Manager is increasingly reviewing opportunities
in related renewable technology sectors which offer attractive
risk-adjusted returns. This includes the offshore wind sector which
has built up a meaningful operational and financial track record
and operating projects are becoming available for investment. In
the UK there are operating offshore wind farms with a combined 5GW
of capacity and in Germany a further 4GW of operating projects.
Other technologies which the Managers may consider include other
types of generation infrastructure (e.g. hydropower or landfill
gas) or supporting technologies (such as back-up power generation,
electricity storage or demand-side response), depending on the
availability of projects for investment which exhibit sufficient
scale of opportunity and which conform to TRIG's risk/return
profile.
In light of this, shareholders at the Company's Annual General
Meeting in May 2016 approved an increase in proportion of the
portfolio by value that may be invested in sectors other than
onshore wind and solar PV from 10% to 20%.
In the European Union, the majority of new power generation
installations are in wind and solar PV. Of a total of 24.5GW of new
capacity installations across the EU, renewables represented
approximately 86% with wind contributing 51% and solar PV 27%. The
bulk of new wind installations in 2016 were in Germany (44% of the
12.5GW EU total), followed by France, Netherlands and the UK,
contributing 12%, 7% and 6% respectively. (Source: WindEurope
Annual Statistics 2016)
At the end of Q3 2016, the UK had a renewable energy capacity of
over 33GW, an increase of 11% from 12 months previously. The
increase in capacity between 2014 and 2015 was, however,
significantly larger at 27%, suggesting that the overall rate of
renewables installation has slowed down.
The UK's onshore wind capacity is approaching the 2020 projected
target range of 11GW to 13GW as indicated by the Government in
2014. In 2016 solar PV has reached its equivalent projected target
capacity range and has overtaken onshore wind to have the largest
share of UK capacity among renewable technologies at 11GW (although
will remain lower in terms of electricity generation, due to wind
technology generating more of the time than solar). Most of this
additional solar PV was installed in Q1 2016, ahead of the key
Renewables Obligation (RO) closure date of 31 March 2016.
Deployment of new onshore wind and solar PV is now likely to
decrease with the expiry of the RO support scheme in relation to
additional projects in these technologies.
Although the UK's aggregate offshore wind capacity was flat with
no new large-scale projects being commissioned between Q3 2015 and
Q3 2016, this masks a volume of build activity and the sector still
offers the most scope for further development with another 5GW of
capacity needed in order to reach the indicative 2020 Government
target of 10GW.
Diversification - Across Power Markets
TRIG's investment strategy provides for diversification across
electricity markets. TRIG has substantial near-term insulation from
movements in wholesale power prices as a result of receiving a high
proportion of its revenue from power purchase agreements with fixed
prices, feed-in tariffs and Renewables Obligation Certificates. In
the longer term, TRIG, based on its current portfolio, will have
greater exposure to future wholesale electricity prices as
subsidies and contracts with pre-determined pricing eventually run
off. TRIG also has the benefit of being diversified across three
separate power markets of Great Britain, the Single Electricity
Market (of The Republic of Ireland and Northern Ireland) and
France.
Over the longer term, European demand for power is expected to
be sustained by economic growth and factors such as increased
electrification of transportation. This, combined with Europe's
requirement to upgrade old power plants and grid networks,
including the decommissioning of old generation facilities (coal,
gas and nuclear), green subsidies (both for generators and
consumers in the form of energy efficiency grants) and carbon
pricing for fossil fuel based generation are likely to mean UK and
European prices will remain at relatively high levels, at least
relative to the United States.
Diversification - Across Regulatory Regimes and Contract
Types
TRIG aims to invest across multiple energy markets in projects
whose revenues are supported by a strong government commitment to
renewable energy generation as a key part of their energy mix.
While investments in the UK, France and Ireland form the current
portfolio, a number of other markets, including Scandinavia,
Benelux and Germany, offer a profile which may be attractive to
TRIG.
TRIG's portfolio revenues reflect the different regulatory
jurisdictions in which TRIG is invested with revenue sources
ranging from contracted feed-in tariffs ("FITs"), Renewables
Obligation Certificates ("ROCs"), embedded benefits and a variety
of wholesale power purchase agreements ("PPAs") with contracting
counterparties which are, for the most part, major utilities.
In the current portfolio, the majority of near-term project
revenues (2017 projected revenues: 73%) are expected to come from
fixed-type, contracted revenues, for example feed-in tariffs, fixed
price PPAs, or the sale of ROCs (with, accordingly, greater
stability and predictability of revenues) or other revenue sources
not linked to wholesale power prices, while expected near-term
project revenues linked to wholesale power prices (2017 projected
revenues: 27%) are in the minority. Some of these revenues have
floor price arrangements.
In the longer term (in the absence of further contracting or
re-contracting of the revenues), it is anticipated that the
majority of revenues will be based on variable market prices
(although some of these may be contracted based on, for example,
season-ahead or month-ahead pricing).
Diversification - Across Weather Systems
From a meteorological perspective, while short-term volatility
is to be expected, wind and solar resources demonstrate a high
degree of predictability over the long term. In addition, TRIG's
portfolio demonstrates the benefit of diversity as a result of the
geographical spread of the projects and the energy yield
performance of solar and wind technologies not being positively
correlated.
Given the complexity of wind flows, even within a specific
geographical area, energy yield outcomes do vary from location to
location and from time to time but these tend to even out over the
long-term. For solar, the key factor driving irradiation levels is
latitude, although the precise meteorological conditions
(prevailing local irradiation intensity, duration and temperature)
have a bearing on the energy output performance. Weather risk can
be reduced within a portfolio by combining a large number of plants
spread over a wide geography and by combining wind and solar.
With stronger summer solar irradiation counterbalancing the
lower typical summer wind speeds versus the winter, the portfolio
also has the benefit of a more balanced revenue mix through the
year than would be the case for a fund investing only in either
wind or solar. In TRIG's portfolio in a typical year, approximately
70% of the total annual solar production is expected to occur in
the six months between April and September (against 40% for wind)
and approximately 30% between October and March (against 60% for
wind).
TRIG is able to mitigate the risk of miscalculating energy
output (and therefore mispricing) by buying projects with some
operating history (the portfolio has on average more than 5 years
of operating track record) as well as by including acquisition
price adjustment mechanisms based on yield performance on newer or
development projects.
Diversification - by Counterparty
TRIG manages a project portfolio with an array of contractual
counterparties, which provides a spread of operational risk by
reducing reliance on any one supplier, as well as enabling TRIG's
Managers to assess relative performance and seek to deliver best
practices across the portfolio. Key power offtake counterparties
include SSE, EDF, Scottish Power, Statkraft and E.ON. Equipment
counterparties include Siemens, Vestas, Canadian Solar and ReneSola
among others. For maintenance, on-site services are provided in
particular by RES, Fred. Olsen group and Akuo Energy, although RES
- in its role as portfolio-wide Operations Manager - works closely
with all providers, including smaller ones, to ensure delivery of
services are optimised for the benefit of TRIG. Further details of
TRIG's counterparties are set out in section 2.10 below.
A Portfolio Focused on Long-Term Operating Projects
As at 31 December 2016, the TRIG portfolio comprised 53
investments in the UK, Republic of Ireland and France, including 25
onshore wind projects and 28 solar photovoltaic projects:
Onshore Wind Farms
Project Market (Region) TRIG's Net Capacity Year Commissioned(4) Turbine
Equity (MW) (MW)
Interest
Vestas
Roos GB (England) 100% 17.1 2013 (1.9)
Vestas
Grange GB (England) 100% 14.0 2013 (2.0)
Vestas
Tallentire GB (England) 100% 12.0 2013 (2.0)
Crystal Siemens
Rig 2 GB (Scotland) 49% 67.6 2010 (2.3)
Hill of Siemens
Towie GB (Scotland) 100% 48.3 2012 (2.3)
Siemens
Mid Hill GB (Scotland) 49% 37.2 2014 (2.3)
Siemens
Paul's Hill GB (Scotland) 49% 31.6 2006 (2.3)
Crystal Nordex
Rig 1 GB (Scotland) 49% 30.6 2003 (2.5)
Vestas
Green Hill GB (Scotland) 100% 28.0 2012 (2.0)
Siemens
Rothes 1 GB (Scotland) 49% 24.8 2005 (2.3)
Senvion
Freasdail(5) GB (Scotland) 100% 22.6 2017 (2.1)
Siemens
Rothes 2 GB (Scotland) 49% 20.3 2013 (2.3)
Vestas
Earlseat GB (Scotland) 100% 16.0 2014 (2.0)
Gamesa
Meikle Carewe GB (Scotland) 100% 10.2 2013 (0.85)
Siemens
Forss GB (Scotland) 100% 7.2 2003 (1.0-1.3)
Siemens
Altahullion SEM (N. Ireland) 100% 37.7 2003 (1.3)
Lendrum's Vestas
Bridge SEM (N. Ireland) 100% 13.2 2000 (0.7)
Siemens
Lough Hill SEM (N. Ireland) 100% 7.8 2007 (1.3)
SEM (Rep. Siemens
Taurbeg of Ireland) 100% 25.3 2006 (2.3)
SEM (Rep. Vestas
Milane Hill of Ireland) 100% 5.9 2000 (0.7)
SEM (Rep. Vestas
Beennageeha of Ireland) 100% 4.0 2000 (0.7)
Siemens
Haut Languedoc France (South) 100% 29.9 2006 (1.3)
Siemens
Haut Cabardes France (South) 100% 20.8 2005 (1.3)
Vestas
Cuxac Cabardes France (South) 100% 12.0 2006 (2.0)
Vestas
Roussas-Claves France (South) 100% 10.5 2006 (1.8)
--------------- ----------------- --------- ------------ -------------------- ----------
Total Onshore Wind as at
31 December 2016 554.5
--------------------------------------------- ------------ -------------------- ----------
Solar Photovoltaic Parks
Project Market (Region) TRIG's Net Capacity Year Commissioned(6) Panel
Equity (MW)
Interest
Parley Court
Farm GB (England) 100% 24.2 2014 ReneSola
Egmere Airfield GB (England) 100% 21.2 2014 ReneSola
Hanwha
Stour Fields GB (England) 100% 18.7 2014 SolarOne
Hanwha
Tamar Heights GB (England) 100% 11.8 2014 SolarOne
Penare Farm GB (England) 100% 11.1 2014 ReneSola
Four Burrows GB (England) 100% 7.2 2015 ReneSola
Canadian
Parsonage GB (England) 100% 7.0 2013 Solar
Canadian
Churchtown GB (England) 100% 5.0 2011 Solar
Canadian
East Langford GB (England) 100% 5.0 2011 Solar
Canadian
Manor Farm GB (England) 100% 5.0 2011 Solar
Marvel Farms GB (England) 100% 5.0 2011 LDK/Q.Cells
Midi France (South) 51% 6.1 2012 SunPower
Plateau France (South) 49% 5.9 2012 Sunpower
Puits Castan France (South) 100% 5.0 2011 Fonroche
Chateau France (South) 49% 1.9 2012 Sharp
Broussan France (South) 49% 1.0 2012 Sharp
Pascialone France (Corsica) 49% 2.2 2011 CSUN
Olmo 2 France (Corsica) 49% 2.1 2011 CSUN
Santa Lucia France (Corsica) 49% 1.7 2011 CSUN
Borgo France (Corsica) 49% 0.9 2011 Suntech
Agrinergie
1 & 3 France (Réunion) 49% 1.5 2011 Suntech/CSUN
Chemin Canal France (Réunion) 49% 1.3 2011 CSUN
Ligne des Canadian
400 France (Réunion) 49% 1.3 2011 Solar
Agrisol France (Réunion) 49% 0.8 2011 Sunpower
Agrinergie
5 France (Réunion) 49% 0.7 2011 Sunpower
Logistisud France (Réunion) 49% 0.6 2010 Sunpower
Sainte Marguerite France (Guadeloupe) 49% 1.2 2011 Sunpower
Marie Galante France (Guadeloupe) 25% 0.5 2010 GE
------------------ ---------------------- --------- ------------ -------------------- ------------
Total Solar PV as at 31
December 2016 155.8
----------------------------------------------------- ------------ -------------------- ------------
Total Portfolio as at
31 December 2016 710.4
----------------------------------------------------- ------------ -------------------- ------------
A Diversified Portfolio
by geography, jurisdiction, energy market, technology and
revenue source
The TRIG portfolio comprises a diverse range of assets across
different energy markets, regulatory jurisdictions, generating
technologies, revenue contracts and/or subsidy sources, as well as
a variety of geographic areas with differing meteorological
conditions. This is illustrated in the segmentation below, analysed
by investment value as at 31 December 2016 by market / jurisdiction
and by technology / weather system, as well as by projected
portfolio-level revenue type:
Portfolio by Jurisdiction (Electricity Market)
53 project investments
as at 31 December
2016
=========================== =======================
England (GB market) 28%
=========================== =======================
Scotland (GB market) 50%
=========================== =======================
Northern Ireland (SEM(7)
) 7%
=========================== =======================
Republic of Ireland (SEM) 2%
=========================== =======================
France 13%
=========================== =======================
Total 100%
=========================== =======================
Portfolio by Technology / Weather System
53 project investments
as at 31 December
2016
============================== =======================
Onshore Wind (Atlantic)(8) 65%
============================== =======================
Onshore Wind (Mediterranean) 5%
============================== =======================
Solar PV 30%
============================== =======================
Total 100%
============================== =======================
Portfolio by Project Revenue Type (based on 2017 modelled
revenues)
53 project investments
as at 31 December
2016
=================================== =======================
Fixed power purchase agreements
and feed-in tariffs 33%
=================================== =======================
Renewable Obligation Certificates
- Buyout 35%
=================================== =======================
Renewable Obligation Certificates
- Recycle, Embedded Benefits,
Other 5%
=================================== =======================
Power purchase agreements
- market based with floor
prices 12%
=================================== =======================
Power purchase agreements
- market based 15%
=================================== =======================
Total 100%
=================================== =======================
2.4 Business Model
Introduction
The Company is a Guernsey-registered investment company listed
on the London Stock Exchange, with an independent board of
directors. Through the group structure, the Company owns a
portfolio of renewable energy infrastructure investments in the UK,
Ireland and France. TRIG seeks to protect and enhance the income
from and value of the existing portfolio through active management
and sourcing of new investments which enhance the diversity and
scale of the portfolio, utilising the expertise of the
market-leading Investment and Operations Managers appointed by the
Company. The Company has a 31 December year-end, announces interim
results in August and full year results in February. The Company
pays dividends quarterly.
Group Structure
TRIG's Group structure, including management structure and key
service providers, is described below.
The Company is a self-managed Alternative Investment Fund under
the European Union's Alternative Investment Fund Managers
Directive. The Company has a board of four independent
non-executive directors (details of whom can be found in Section 3)
whose role is to manage the governance of the Company in the
interests of shareholders and other stakeholders. In particular,
the Board approves and monitors adherence to TRIG's investment
policy, determines risk appetite of the Group, sets Group policies
and monitors the performance of the Investment Manager, the
Operations Manager and other key service providers. The Board meets
a minimum of four times per year for regular Board meetings and
there are a number of ad hoc meetings dependent upon the
requirements of the business. In addition, the Board has four
committees covering Audit, Nomination, Remuneration and Management
Engagement.
The Board takes advice from the Investment Manager, InfraRed, as
well as from the Operations Manager, RES, on matters concerning the
market, the portfolio and new investment opportunities. Day-to-day
management of the Group's portfolio is delegated to the Investment
Manager and the Operations Manager, with investment decisions
within agreed parameters delegated to an Investment Committee
constituted by senior members of the Investment Manager.
The key roles of the Investment Manager and the Operations
Manager are set out below:
Investment Manager (InfraRed) Operations Manager (RES)
* Monitoring financial performance against Group * Day-to-day monitoring and oversight of the operations
targets and forecasts of the Group's portfolio of investments
* Advising the Board on investment strategy and * Appointment of directors to each project company
portfolio composition to achieve the desired target board
returns within the agreed risk appetite
* Sourcing, evaluating and implementing the pipeline o * Monitoring of service providers to project investment
f companies
new investments for the portfolio
* Managing the investment cash flows from the Group's * Facilitation of early resolution of operational
investments issues as they arise, including performance and
disputes
* Minimising cash drag (having un-invested cash on the * Management of project-level financing including
balance sheet) and improving cash efficiency implementation and project-level debt covenants
generally
* Managing the process and analysis for semi-annual * Management of power sales strategy including power
valuations of the Group's portfolio submitted to the purchase agreements
Board for approval
* Ensuring good financial management of the Group, * Assisting on technical and commercial due diligence
having regard to accounting, tax and debt covenants of projects being evaluated for acquisition by the
Group
* Hedging non-sterling investments * Seeking of cost savings through contract variations
and extensions
* Managing the Company's investor reporting and * Project level ESG co-ordination including community
investor relations activities relations and compliance with regulations affecting
project companies
Further details on the Investment Manager and the Operations
Manager are set out in Section 2.1 and in Section 2.6 with respect
to fees.
Other key service providers to the TRIG Group include Aztec
Financial Services (Guernsey) Limited providing Company Secretarial
and Administrative services, Canaccord Genuity Limited and Liberum
Capital Limited as joint brokers, Tulchan Communications LLP as
financial public relations advisers, Carey Olsen as legal advisers
as to Guernsey law, Norton Rose Fulbright LLP as legal advisers as
to English law, Capita Registrars (Guernsey) Limited as registrars,
Deloitte LLP as auditor and National Australia Bank and Royal Bank
of Scotland as lenders to the Group via the revolving acquisition
facility.
The Board reviews the performance of all key service providers
on an annual basis.
Making New Portfolio Investments
When seeking to acquire an investment, the proposition is
subject to a two-stage process: it is considered and recommended by
the Advisory Committee which includes representatives of both the
Investment Manager and the Operations Manager, and then it is fully
assessed by the Investment Committee of the Investment Manager
which, for investments within the Manager's delegated authority
(with agreed limits set by the Board), gives the final approval
before an investment may proceed. These committees may meet on a
number of occasions before an investment is acquired by the Group.
Commercial and technical due diligence is undertaken by the
Investment Manager (including a review of sustainability in
relation to the investment) with support from the Operations
Manager on aspects such as energy yield assessment, off-take
contract arrangements, maintenance and other operational costs.
Third party legal and technical due diligence is commissioned as
appropriate to support the acquisition.
An important characteristic of the Group is that it is
well-positioned to acquire assets from its Managers, in particular
RES in relation to which TRIG enjoys a right of first offer for
onshore wind and solar assets developed in the UK and Northern
Europe. With no representatives from RES on the Investment
Committee, decisions on acquisitions from RES under the Company's
Right of First Offer Agreement are taken at arms' length from the
Operations Manager, while any acquisitions from other funds managed
by InfraRed would require prior unanimous recommendation by the
Advisory Committee and also approval by TRIG's independent Board,
together with an independent valuation, as well as utilising
prudent internal conflict management procedures established at
InfraRed.
The Company is focused on owning operational, yielding projects
although the Managers expect that there will be opportunities where
it will be advantageous for the Company to invest in projects prior
to their completion and grid connection. While the Company is
currently invested in onshore wind and solar PV projects, there are
investment opportunities in other maturing technologies in the UK
and Northern Europe, notably offshore wind, as well as back-up
power, electricity storage and demand-side response
infrastructure.
The Company's investment policy does not permit the cost of
works on projects under development or construction (and not yet
operational) to which portfolio companies are exposed to exceed in
aggregate 15% of overall portfolio value. As at 31 December 2016
there was one asset under construction (Freasdail) with
construction costs representing approximately 2% of portfolio
value.
2.5 Investment Approach and Policy
Investment Approach
TRIG's investment approach is based on the following two
factors:-
the renewables market opportunity
-- the long-term public and political commitment in target
countries towards creating a cleaner, more secure and sustainable
energy mix
-- the shortfall in power generation capacity due principally to
the reduction in coal-fired and nuclear generation facilities due
to emissions, safety and/or age
-- the EU-wide renewables target requiring 20% of energy to be
generated from renewable sources by 2020, the UK's 2050 carbon
reduction programme and broader United Nations initiatives to
achieve challenging long-term de-carbonisation goals
-- extensive opportunities for investment in the secondary
market for generation assets as utilities and other developers find
it necessary to recycle their capital
and
the ability to construct a diversified portfolio
across established, low-risk technologies, electricity markets,
weather systems and revenue types
-- diversification across predominantly operational assets
providing a sustainable long-term investment proposition,
delivering stable income together with NAV resilience
-- investing in established technologies, including wind and
solar PV (which currently dominate new power capacity installations
in the EU) providing
o proven operational track record including predictable
operating costs
o future potential for incremental improvements in design, scale
and efficiency
-- focus on markets with a robust long-term energy demand outlook and a well-established political/regulatory commitment to renewables
-- variability of weather patterns across Europe adds to
diversification provided by exposure to wind and solar energy
sources
-- stability of revenues enhanced by contract with utility
counterparties and/or state subsidies in the short-to-medium term
with greater power price exposure in the long term
Investment Policy
In order to achieve its investment objective, the Company
invests principally in operational assets which generate
electricity from renewable energy sources, with a particular focus
on onshore wind farms and solar PV parks.
Investments will be made principally by way of equity and
shareholder loans which will generally provide for 100% or majority
ownership of the assets by the holding entities. In circumstances
where a minority equity interest is held in the relevant portfolio
company, the holding entities will secure their respective
shareholder rights (including voting rights) through shareholder
agreements and other transaction documentation.
The Group aims to achieve diversification principally through
investing in a range of portfolio assets across a number of
distinct geographies and a mix of renewable energy
technologies.
Limits
Investments will be focused in the UK and Northern European
countries (including France, Ireland, Germany and Scandinavia)
where the Directors, the Investment Manager and the Operations
Manager believe there is a stable renewable energy framework. Not
more than 50% of the portfolio value (calculated at the time of
investment) may be invested in projects that are located in
countries outside the UK.
Investments will be made in onshore wind farms and solar PV
parks with the amount invested in other forms of energy
technologies (or infrastructure that is complementary to, or
supports the roll-out of, renewable energy generation) limited to
20% of the portfolio value, calculated at the time of
investment.
In respect of investments in portfolio companies which have
assets under development or construction (including the repowering
of existing assets), the cost of works on such assets under
development or construction (and not yet operational) to which
portfolio companies are exposed may not in aggregate account for
more than 15% of overall portfolio value, calculated at the time of
investment or commitment.
The Company will not invest more than 15%, in aggregate, of the
value of its total assets in other investment companies or
investment trusts that are listed on the Official List maintained
by the Financial Conduct Authority.
In order to ensure that the Group has a spread of investment
risk, it is the Company's intention that no single asset will
account for more than 20% of the portfolio value, calculated at the
time of investment.
The Group may enter into borrowing facilities in the short term
principally to finance acquisitions. Such short-term financing is
limited to 30% of the portfolio value. It is intended that any
facility used to finance acquisitions is likely to be repaid, in
normal market conditions, within a year through further equity fund
raisings.
Wind farms and solar parks, typically with 25 year operating
lives, held within portfolio companies generate long-term cash
flows that can support longer term project finance debt. Such debt
is non-recourse and typically is fully amortising over a 10 to 15
year period. There is an additional gearing limit in respect of
such non-recourse debt of 50% of the gross portfolio value (being
the total enterprise value of such portfolio companies), measured
at the time the debt is drawn down or acquired as part of an
investment. The Company may, in order to secure advantageous
borrowing terms, secure a project finance facility over a group of
portfolio companies.
Revenue
Generally, the Group will manage its revenue streams to moderate
its revenue exposure to merchant power prices with appropriate use
of power purchase agreements, feed-in-tariffs and green
certificates.
Hedging
The Company may borrow in currencies other than Pounds Sterling
as part of its currency hedging strategy. The Group may enter into
hedging transactions in relation to currency, interest rates and
power prices for the purposes of efficient portfolio management.
The Group will not enter into derivative transactions for
speculative purposes.
Cash Balances
When the Company is not fully invested and pending reinvestment
or distribution of cash receipts, cash received by the Group will
be held as cash, or invested in cash equivalents, near cash
instruments or money market instruments.
Origination of Further Investments
Each of the investments comprising the portfolio complies with
the Company's investment policy and further investments will only
be acquired if they comply with the Company's investment policy. It
is expected that further investments will include operational
onshore wind and solar PV investments that have been originated and
developed by Renewable Energy Systems Limited, the Company's
Operations Manager. The Company will also review investment
opportunities originated by third parties, including from
investment funds managed or advised by the Investment Manager or
its affiliates.
Pursuant to the Right of First Offer Agreement, the Company has
a contractual right of first offer, for so long as the Operations
Manager remains the operations manager of the Company in respect of
the acquisition of investments in projects of which the Operations
Manager wishes to dispose and which are consistent with the
Company's investment policy. It is envisaged that the Operations
Manager will periodically make available for sale further interests
in projects although there is no guarantee that this will be the
case. Investment approvals in relation to any acquisitions of
investments from the Operations Manager are made by the Investment
Manager through the Investment Committee.
Furthermore, any proposed acquisition of assets by the Group
from InfraRed Funds will be subject to detailed procedures and
arrangements established to manage any potential conflicts of
interest that may arise. In particular, any such acquisitions will
be subject to approval by the Directors (who are all independent of
the Investment Manager and the Operations Manager) and will also be
subject to an independent private valuation in accordance with
valuation parameters agreed between the InfraRed Funds and the
Company.
A key part of the Company's investment policy is to acquire
assets that have been originated by RES by exercising the Company's
rights under the Right of First Offer Agreement. As such, the
Company will not seek the approval of Shareholders for acquisitions
of assets from the Operations Manager or members of its group in
the ordinary course of its investment policy. However, in the event
that the Operations Manager is categorised as a substantial
shareholder of the Company for the purposes of the Listing Rules
(i.e. it holds 10 per cent. or more of the Company's issued share
capital and for a period of 12 months after its shareholding first
drops below this threshold), the related party requirements of
Chapter 11 of the Listing Rules will apply to the acquisition of
solar assets from the Operations Manager or any member of its group
and accordingly the Company will seek Shareholder approval, as
necessary, for such acquisitions. Further Investments will be
subject to satisfactory due diligence and agreement on price which
will be negotiated on an arm's length basis and on normal
commercial terms. It is anticipated that any Further Investments
will be acquired out of existing cash resources, borrowings, funds
raised from the issue of new capital in the Company or a
combination of the three.
Repowering
The Company has the opportunity to repower the sites in some of
the projects in the investment portfolio. For these purposes,
repowering will include the removal of substantially all of the old
electricity generating equipment in relation to a project, and the
construction of new electricity generating equipment excluding, for
the avoidance of doubt, repair, maintenance and refurbishment of
existing equipment. Where the Company determines to repower a
project originally acquired from the Operations Manager, the
Operations Manager has the first option to repower such assets in
partnership with the Company, whilst the Company has the right to
acquire the newly constructed assets on completion, subject to
satisfactory due diligence and for a price determined in accordance
with a pre-agreed valuation mechanism and on normal commercial
terms. Repowering projects will be treated as development or
construction activity which, when aggregated with the cost of works
to assets under development or construction to which portfolio
companies are exposed, may not in aggregate account for more than
15 per cent. of the portfolio value, calculated at the time of
investment or commitment.
Material amendments
Material changes to the Company's investment policy may only be
made in accordance with the approval of the Financial Conduct
Authority and the Shareholders (by way of an ordinary resolution)
and, for so long as the Ordinary Shares are listed on the Official
List, in accordance with the Listing Rules. The investment limits
detailed above apply at the time of the acquisition of the relevant
investment. The Company will not be required to dispose of any
investment or to rebalance its investment portfolio as a result of
a change in the respective valuations of its assets. Non-material
changes to the investment policy must be approved by the Board,
taking into account advice from the Investment Manager and the
Operations Manager, where appropriate.
The Shareholders voted at the Annual General Meeting in May 2016
to expand the investment policy of the Company such that up to 20%
of its portfolio by value may be invested in investments other than
onshore wind and solar PV, previously this limit was 10%. This was
to position the Company to be able to take advantage of
opportunities in related sectors which are increasingly being seen
by the Investment Manager should the Board, as advised by the
Investment Manager with input from the Operations Manager, consider
the prospective risk and reward appropriate. Such investments may
include other generating infrastructure or supporting technology,
such as back-up power generation, energy storage or demand-side
response.
2.6 Operational and Financial Review
Key Performance Indicators
The Company sets out below its Key Performance Indicators
("KPIs") which it utilises to track its performance over time
against its objectives.
Category KPI (Year (Year (Year (Part
to) to) to) year(1)
to)
31 December 31 December 31 December 31 December
2013
2016 2015 2014
--------------- ----------------------- -------------- -------------- -------------- ---------------
Dividend per 6.00p
share (declared) 6.25p 6.19p 6.08p (annualised)
--------------------------------------- -------------- -------------- -------------- ---------------
Share price 109.6p 102.3p 104.00p 102.25p
--------------------------------------- -------------- -------------- -------------- ---------------
Net Asset Value
per share 100.1p(2) 99.0p(2) 102.4p 101.5p
--------------------------------------- -------------- -------------- -------------- ---------------
Total Shareholder + 15.7% + 4.4% + 7.5% -
Return(3)
for the year (FTSE (FTSE (FTSE
(share price All Share: All Share: All Share:
basis) + 16.8%) + 1.0%) + 1.2%)
----------------------- -------------- -------------- -------------- ---------------
Portfolio Value(4) GBP818.7m GBP712.3m GBP472.9m GBP300.6m
Year-on-year +15% +51% +57% -
growth
Number of 53 36 29 20
projects
Aggregate 710MW 658MW 439MW 288MW
capacity
----------------------- -------------- -------------- -------------- ---------------
Market capitalisation GBP912.9m GBP749.7m GBP432.1m GBP317.0m
Year-on-year +22% +73% +36% -
growth
Number of 833.0 732.8m 415.5m 310.0m
shares in issue
----------------------- -------------- -------------- -------------- ---------------
Ongoing Charges
Percentage 1.10% 1.20% 1.25% 1.20%
(annualised)
Financial
---------------------------------------- -------------- -------------- -------------- ---------------
Largest single
investment
as % of portfolio
by value 11% 12% 10% 16%
--------------------------------------- -------------- -------------- -------------- ---------------
Largest ten
investments
as % of portfolio
by value 52% 56% 65% 79%
--------------------------------------- -------------- -------------- -------------- ---------------
Operating history 6.7 years 5.9 years 5.0 years 5.5 years
(portfolio
average, weighted
by net capacity)
--------------------------------------- -------------- -------------- -------------- ---------------
Electricity 1,469 1,344GWh 814GWh 345GWh
Production +9% +65% +136% (since
% increase 1 August
2013)
--------------------------------------- -------------- -------------- -------------- ---------------
Average Revenue GBP83.2/MWh GBP78.6/MWh GBP84.0/MWh GBP84.9/MWh
Risk per MWh
& Operations
--------------- ----------------------- -------------- -------------- -------------- ---------------
1. For 2013, data is derived from the period from IPO on 29 July
2013 to 31 December 2013 unless otherwise stated.
2. NAV per share in 2015 was in particular affected by the
removal, in the UK's 2015 Summer Budget, of the benefit to
renewables generators of selling Levy Exemption Certificates,
effective 1 August 2015. NAV per share in 2016 is expressed after
the payment of an additional quarter's worth of dividends as a
result of the switch to quarterly dividends from semi-annual
dividends. In aggregate, 7.7975p per share of dividends were paid
in 2016.
3. Total Shareholder Return ("TSR") measures the internal rate
of return based on the share price at the beginning and end of the
financial year together with dividends per share reinvested in the
Company.
4. There have been five investment transactions in the year
including the acquisition of interests in 17 additional projects,
with aggregate consideration of GBP77.7 million, as set out in more
detail below.
5. Average revenue per MWh was boosted by the inclusion of the
Akuo portfolio of French solar assets (feed-in-tariff type),
excluding which the average revenue would have been GBP74.3 per MWh
across the portfolio.
TRIG Portfolio Update
Portfolio Operating Performance
After exceptional meteorological conditions in 2015, the UK and
Northern Europe saw further variability in weather patterns in 2016
which replaced 2015 as the warmest year globally on record. During
the year, the portfolio produced a total of 1,469 gigawatt hours
(GWh) of electricity, an increase of 9% over the production of
1,344GWh in 2015, reflecting the growth in the portfolio's
generating capacity.
Actual generation across the year was 9% below budget, of which
7% resulted from lower-than-expected weather resource
(predominantly lower wind speeds) with the remaining 2% mainly
relating to uncompensated grid outages, including those noted in
the interim results. Wind speeds in the UK and Ireland were 5%
below long term averages for the year, equating to an 8% shortfall
in generation for that segment. In addition, the UK and Ireland
wind portfolio suffered a number of grid outages during the year,
the most significant at the Taurbeg wind farm, resulting in a 10%
shortfall in segment production overall. Lower winds were also
recorded across several of the South of France wind projects
causing a 6% shortfall in production against segment budget. The UK
and France solar portfolio ended the year 10% below budget
production. The French portfolio performed slightly above budget
whilst the larger UK portfolio suffered from a major grid outage at
the Parley site over several summer months as well as some downtime
due to capital works performed under warranty.
The following table sets out the energy production performance
of TRIG's portfolio by category for the year as a whole against the
respective P50 central estimates:
TRIG's Portfolio - Analysis of Production
Technology Region Electricity Performance vs. Generating
production acquisition P50 capacity (MW)
(GWh) estimates Dec 2016
2016
2016 2015
Onshore UK & Ireland
wind (1) 1,103 -10% +4% 481.4
France 213 -6% -4% 73.2
Solar PV UK & France 153 -10% -1% 155.8
Total portfolio 1,469 -9% +2% 710.4
1. This included TRIG's 49% pro rata (equity) share of
production from the Fred. Olsen wind portfolio in Scotland (in
which Bonheur ASA, a company listed in Oslo, owns a 51% stake),
which produced approximately 956GWH of electricity during the year,
excluding any allocation for compensated grid downtime. Of this,
the fourth quarter production was 273GWh (Q4 2015: 349GWh),
predominantly reflecting low wind conditions in the quarter
compared to long-term averages.
While 2016 proved a relatively low resource year in terms of
both wind and solar, the performance remains within the range of
expectations for weather outcomes. TRIG's production performance
continues to track closely the underlying meteorological conditions
in the geographies in which we operate.
Acquisitions
During the year, the Group completed five investment
transactions in a further seventeen projects (one onshore wind and
16 solar PV) in France and Scotland, for a total consideration of
approximately GBP77.7 million, bringing the portfolio at the
year-end to 53 projects and increasing TRIG's generating capacity
from 658MW to 710MW.
-- In January 2016, the Group acquired a significant minority
interest in a portfolio of 15 ground-mounted and solar rooftop
solar PV projects for EUR57.2 million (GBP43.7 million).The vendor
was Akuo Energy Group, which was also the original developer of the
portfolio. The transaction comprised the purchase of a 49% interest
in the holding company of the portfolio company as well as 100% of
a mezzanine loan. Akuo continues to hold the remaining majority
equity stake and to provide the assets with O&M services.
The projects, with a gross capacity of 49 MW, are located in
mainland France, Corsica and two overseas departments (all
operating under French jurisdiction). Their revenues are wholly
derived from French feed-in tariffs. The portfolio benefits from
long term, fixed index-linked power purchase agreements with EDF of
up to 20 years.
-- Deferred consideration for Earlseat wind farm was paid during
the year of GBP1.5 million. The asset was originally purchased in
November 2014 with limited operational history so an adjustment was
agreed based upon an updated energy yield assessment once 18 months
of operational data was available.
-- In July 2016 TRIG acquired a 51% interest in an additional asset developed by Akuo: a 12MW ground-mounted solar PV project in the South of France. The consideration was EUR10.6 million (GBP8.9 million) and the vendor was Ventures123. Akuo will continue to own the remaining 49% of the project and will provide O&M services. As with the other Akuo assets, Midi benefits from a long-term power purchase agreement with EDF, providing fixed, index-linked revenues.
-- In November 2016, TRIG completed the acquisition of a 100%
interest in Freasdail wind farm, a 22.6MW onshore wind project for
GBP18.5 million. The project is located on the Kintyre Peninsula in
Scotland and has an expected 25-year lifespan. The project is in an
advanced stage of construction and is expected to be commissioned
in the first quarter of 2017. Freasdail wind farm was acquired from
RES, TRIG's Operations Manager.
-- In November 2016, TRIG completed a further investment of
EUR5.9 million (GBP5.0 million) into the TRIG / Akuo holding
company which enabled it to buy out most of the remaining minority
investors in the underlying solar portfolio companies. The
additional net capacity owned by TRIG as at 31 December 2016
increased as a result of this further purchase to 710MW.
Onshore wind projects now comprise 70% of TRIG's portfolio by
value (2015: 73%) with solar PV projects contributing the remaining
30% (2015: 27%). The portion of non-UK projects has increased over
the course of 2016 to 15% (2015: 8%).
Since IPO, TRIG has acquired projects from nine different
vendors (or vendor groups), including from RES under the Right of
First Offer Agreement, demonstrating the breadth of opportunities
available to the Company.
Financing
In April 2016, the Group renewed its three year GBP150 million
revolving acquisition facility with Royal Bank of Scotland ("RBS")
and National Australia Bank ("NAB") to fund new acquisitions and to
provide letters of credit for future investment obligations should
they be required. The renewal of the facility (which includes a
GBP15 million working capital component) was on improved terms and
reduced margins (of 2.05% when drawn). In January 2017 the Group
extended the facility duration by a further 5 months to take the
facility expiry date to 30 September 2019.
This short-term financing is limited to 30% of the portfolio
value. It is intended that any facility used to finance
acquisitions is repaid, in normal market conditions, within a year
through equity fundraisings.
The acquisition facility was drawn down to fund investments
several times in the year and fully repaid in the year from the
proceeds of equity capital raises.
During 2016, a total of GBP91.2 million of new equity capital
was raised (net of costs) that funded the new investments of
GBP77.7m which after taking into account other cash movements
leaves around GBP10 million funding surplus available that is
expected to be deployed in further investments shortly. The GBP150
million revolving acquisition facility was undrawn at the year end
and remains undrawn.
In addition to the revolving acquisition facility, the projects
may have underlying project level debt. There is an additional
gearing limit in respect of such debt, which is non-recourse to
TRIG, of 50% of the gross portfolio value (being the total
enterprise value of such portfolio companies), measured at the time
the debt is drawn down or acquired as part of an investment. The
Company may, in order to secure advantageous borrowing terms,
secure a project finance facility over a group of portfolio
companies. The project-level gearing as at 31 December 2016 across
the portfolio was 40% (2015: 38%). The slight increase in gearing
has mostly arisen as a result of the acquisitions of the
comparatively higher geared but lower risk French solar assets and
the recently built Freasdail wind farm during the year where the
projects came with existing long-term amortising project finance
debt in place, net of repayments made in the period. Overall
gearing may also change as a result of the purchase of further
investments with or without project-level debt within them,
scheduled repayment of project level debt and refinancings.
Long-term non-recourse project-level debt in the portfolio has
generally been secured for the full duration of its expected
amortisation (i.e. is without refinancing risk) and has swap
instruments fixing interest rates over the majority of the loans
(i.e. minimising exposure to increasing interest rates).
The composition of the portfolio is relevant in considering the
appropriate level of gearing to deploy within a renewables
portfolio. In considering the Company's portfolio alongside others
it may be noted that, in the opinion of the Managers:
-- Certain of the Company's projects have no or very low power
price risk during the subsidy period, when project debt is often in
place, because of the design of the subsidy arrangements. These
include French feed-in tariff projects, projects with long-term
fixed price PPAs and, in due course, UK CfD projects. Of the TRIG
portfolio, 26% by value falls into this category (of which broadly
half are onshore wind projects and half are solar PV projects).
-- In respect of other operational risks, the Company is
invested in renewables technologies which are established and do
not, for example, rely on feedstock supplies or process
engineering. The portfolio includes solar PV projects which
typically enjoy lower variation to their periodic cash flows than
wind projects as well as onshore wind which has less operational
risk than offshore wind.
As at 31 December 2016, the Group had cash balances of GBP18.7
million, excluding cash held in investment project companies as
working capital or otherwise.
Foreign Exchange Hedging
At the year-end, 15% of the portfolio was located within France
and the Republic of Ireland and hence is invested in
euro-denominated assets.
The Group enters into forward hedging contracts against its
expected income from the euro-denominated investments'
distributions over the short term, currently approximately the next
18 months. In addition the Group enters into further forward
hedging contracts such that, when combined with the "income
hedges", the overall level of hedge achieved in relation to the
euro-denominated assets is approximately 50% of their aggregate
value.
The Investment Manager keeps under review the level of euros
hedged, with the objective of minimising variability in shorter
term cash flows with a balance between managing the sterling value
of cash flow receipts and mark-to-market cash outflows.
As well as addressing foreign exchange uncertainty on the
conversion of the expected euro distributions from investments, the
hedge also provides a partial offset to foreign exchange movements
in the portion of the portfolio value relating to the
euro-denominated assets.
The impact on NAV per share of a 10% movement in the euro
exchange rate after the impact of hedges held by the Group outside
of the investment portfolio is 0.6p - this is explained in more
detail in Section 2.7 (Valuation Sensitivities - euro/sterling
exchange rate).
Analysis of Financial Results
As at 31 December 2016, the Group had investments in 53
projects. As an investment entity for IFRS reporting purposes, the
Company carries these 53 investments at fair value. The results
below are shown on a statutory and on an "expanded" basis done in
previous years. See the box below for an explanation of the two
methods of preparation.
Basis of preparation
In accordance with IFRS 10 the Group carries investments
at fair value as the Company meets the conditions
of being an investment entity. In addition IFRS
10 states that investment entities should measure
their subsidiaries that are themselves investment
entities at fair value. Being investment entities,
The Renewables Infrastructure Group (UK) Limited
("TRIG UK") and The Renewables Infrastructure Group
(UK) Investments Limited ("TRIG UK I"), the Company's
subsidiaries, through which investments are purchased,
are measured at fair value as opposed to being consolidated
on a line-by-line basis, meaning their cash, debt
and working capital balances are included as an
aggregate number in the fair value of investments
rather than the Group's current assets. In order
to provide shareholders with more transparency into
the Group's capacity for investment, ability to
make distributions, operating costs and gearing
levels, adjusted results have been reported in the
pro forma tables below.
The pro forma tables that follow show the Group's
results for the year and the comparative period
on a non-statutory "Expanded basis", where TRIG
UK and TRIG UK I are consolidated on a line-by-line
basis, compared to the Statutory IFRS financial
statements (the "Statutory IFRS basis").
The Directors consider the non-statutory Expanded
basis to be a more helpful basis for users of the
accounts to understand the performance and position
of the Company because key balances of the Group
including cash and debt balances carried in TRIG
UK and TRIG UK I and expenses incurred in TRIG UK
are shown in full rather than being netted off.
The necessary adjustments to get from the Statutory
IFRS basis to the non-statutory Expanded basis are
shown for the key financial statements. The commentary
provided on the primary statements of TRIG is on
the Expanded Basis.
-------------------------------------------------------------------------------
Income Statement Balance Sheet Cash Flow Statement
The Statutory The Statutory IFRS The Statutory IFRS
IFRS basis nets basis includes basis shows cash
off TRIG UK and TRIG UK and TRIG movements for the
TRIG UK I's costs, UK I's cash, debt top company only
including overheads, and working capital (TRIG). The Expanded
management fees balances as part basis shows the
and acquisition of portfolio value. consolidated cash
costs against The Expanded basis movements above
income. The Expanded shows these balances the investment
basis includes gross. There is portfolio which
the expenses incurred no difference in are relevant to
within TRIG UK net assets between users of the accounts.
and TRIG UK I the Statutory IFRS Differences include
to enable users basis and the Expanded income received
of the accounts basis. by TRIG UK applied
to fully understand to reinvestment
the Group's costs. and expenses incurred
There is no difference The majority of by TRIG UK that
in profit before cash generated are excluded under
tax or earnings from investments the Statutory IFRS
per share between had been passed basis.
the two bases. up from TRIG UK
to the Company
at both 31 December
2016 and 31 December
2015.
As at 31 December
2016, TRIG UK was
undrawn under its
revolving acquisition
facility (2015:
GBPnil million
drawn) accordingly
the adjustment
between the Statutory
IFRS basis and
the Expanded basis
is very small.
------------------------- ------------------------- -------------------------
Income statement
Summary Year to 31 December 2016 Year to 31 December 2015
income GBP'million GBP'million
statement
--------------- ------------------------------------------------- --------------------------------------------------
Statutory Adjustments(1) Expanded Statutory Adjustments(1) Expanded
IFRS Basis Basis IFRS Basis Basis
--------------- -------------- ---------------- --------------- --------------- ---------------- ---------------
Operating
income 76.0 12.1 88.1 15.9 11.4 27.3
--------------- -------------- ---------------- --------------- --------------- ---------------- ---------------
Acquisition
costs - (0.3) (0.3) - (1.1) (1.1)
--------------- -------------- ---------------- --------------- --------------- ---------------- ---------------
Net operating
income 76.0 11.8 87.8 15.9 10.3 26.2
--------------- -------------- ---------------- --------------- --------------- ---------------- ---------------
Fund expenses (1.0) (7.9) (8.9) (1.0) (6.2) (7.2)
--------------- -------------- ---------------- --------------- --------------- ---------------- ---------------
Foreign
exchange
(losses)/
gains (7.1) - (7.1) 2.0 (0.1) 1.9
-------------- ---------------- --------------- --------------- ---------------- ---------------
Finance costs - (3.9) (3.9) 0.1 (4.0) (3.9)
-------------- ---------------- --------------- --------------- ---------------- ---------------
Profit before
tax 67.9 - 67.9 17.0 - 17.0
-------------- ---------------- --------------- --------------- ---------------- ---------------
EPS 8.8p 8.8p(2) 3.0p 3.0p
--------------- -------------- ---------------- --------------- --------------- ---------------- ---------------
1. The following were incurred within TRIG UK and TRIG UK I:
acquisition costs, the majority of expenses and acquisition
facility fees and interest. The income adjustment offsets these
cost adjustments.
2. Calculated based on the weighted average number of shares
during the year being 771.4 million shares.
Analysis of Expanded basis income statement
Profit before tax for the year to 31 December 2016 was GBP67.9
million, generating earnings per share of 8.8p. The net operating
income for 2016 of GBP87.8 million is significantly greater than
the income for the previous year (GBP26.2 million). The previous
year results are after the adverse impact on the portfolio
valuation of the 8 July 2015 UK Summer Budget of GBP20.2 million
which included the removal of the Climate Change Levy exemption for
renewably sourced electricity. Also income has increased versus
2015 partly because the portfolio has increased in size and partly
because of a larger valuation gain (power price forecasts reduced
less in 2016 compared to 2015 and there has been a greater
reduction in valuation discount rates in 2016 compared to 2015).
Portfolio value movements (which make up operating income) are more
fully described in Section 2.7 of this Strategic Report.
The increase in expenses in the year ended 31 December 2016 as
compared to the previous year reflects the increase in the size of
the portfolio.
Acquisition costs, the costs to purchase new investments,
represent 0.4% (2015: 0.4%) of the cost of the assets acquired as
set out below.
Year to 31 December 2016 Year to 31 December 2015
(GBP'million) (GBP'million)
Acquisition costs 0.3 1.1
Purchase of new investments 77.7 299.3(1)
Acquisition costs as % of investments 0.4% 0.4%
---------------------------------------- -------------------------- --------------------------
1. Purchase of new investments balance include EUR57.2 million
which relates to the investment in the Akuo French solar projects
completed in January2016 with the acquisition costs for this
investment having been incurred in 2015.
Fund expenses of GBP8.9 million (2015: GBP7.2 million), includes
all operating expenses and GBP7.6 million (2015: GBP6.1 million)
fees for the Investment and Operations Managers. Management fees
are charged at 1% of Adjusted Portfolio Value as set out in more
detail in Note 18 to the Financial Statements.
The strengthening of the euro against sterling during 2016 has
increased the value of the euro-denominated assets in TRIG's
investment portfolio, with foreign exchange gains recognised in the
portfolio of GBP16.0 million (2015: GBP3.0 million loss). This was
partially offset by the foreign exchange losses on hedges held
outside the portfolio of GBP7.1 million (2015: GBP1.9 million
gain).) Portfolio value movements (included in operating income)
are more fully described in Section 2.7 of this Strategic Report.
The net foreign exchange gain in the period is hence GBP8.9 million
(2015: GBP1.1 million loss).
Finance costs relate to the interest and fees incurred relating
to the Group's revolving acquisition facility.
Ongoing charges
Ongoing Charges (Expanded Basis) Year to Year to
31 December 2016 31 December 2015
GBP'000s GBP'000s
Investment and Operations Managers' fees 7,609 6,090
Audit fees 93 99
Directors' fees and expenses 195 172
Other ongoing expenses 676 565
------------------- -------------------
Total expenses(1) 8,573 6,926
------------------- -------------------
Average net asset value 780,443 576,136
Ongoing Charges Percentage (OCP) 1.10% 1.20%
------------------------------------------- ------------------- -------------------
1. Total expenses excludes GBP0.3 million (2015: GBP0.3 million
one off professional fees excluded) of lost bid costs incurred
during the year.
The Ongoing Charges Percentage has reduced to 1.10% (2015:
1.20%). The reduction in OCP reflects portfolio growth during the
year as the Group's expenses are spread over a larger capital base.
The ongoing charges have been calculated in accordance with AIC
guidance and are defined as annualised ongoing charges (i.e.
excluding acquisition costs and other non-recurring items) divided
by the average published undiluted net asset value in the period.
The Ongoing Charges Percentage has been calculated on the Expanded
basis and therefore takes into consideration the expenses of TRIG
UK and TRIG UK I as well as the Company's.
Balance sheet
Summary As at 31 December 2016 As at 31 December 2015
balance sheet GBP'million GBP'million
---------------- ------------------------------------------------- -------------------------------------------------
Statutory IFRS Adjustments Expanded Basis Statutory IFRS Adjustments Expanded Basis
Basis Basis
---------------- ---------------- ------------- ---------------- ---------------- ------------- ----------------
Portfolio
value 818.8 0.0 818.7 711.6 0.7 712.3
---------------- ---------------- ------------- ---------------- ---------------- ------------- ----------------
Working
capital (2.0) (1.1) (3.1) 0.1 (1.0) (0.9)
---------------- ---------------- ------------- ---------------- ---------------- ------------- ----------------
Debt - - - - - -
---------------- ------------- ---------------- ---------------- ------------- ----------------
Cash 18.5 0.2 18.7 14.9 0.3 15.2
---------------- ------------- ---------------- ---------------- ------------- ----------------
Net assets 834.3 834.3 726.6 - 726.6
---------------- ------------- ---------------- ---------------- ------------- ----------------
Net asset
value per
share 100.1p 100.1p 99.0p 99.0p
---------------- ---------------- ------------- ---------------- ---------------- ------------- ----------------
Analysis of Expanded basis balance sheet
Portfolio value grew by GBP106.4 million in the year to GBP818.7
million, largely as a result of the acquisitions in the year as
described more fully in Section 2.7 of this Strategic Report.
Group cash as at 31 December 2016 was GBP18.7 million (2015:
GBP15.2 million) and acquisition facility debt drawn was GBPNil
(2015: GBPNil).
Net assets grew by GBP107.7 million in the year to GBP834.3
million. The Company raised GBP92.0 million (after issue expenses)
of new equity during the year and produced a GBP67.9 million profit
in the period, with net assets being stated after accounting for
dividends paid in the period (net of scrip take-up) of GBP53.0
million. Other movements in net assets totalled GBP0.8 million,
being the Managers' entitlement to shares accruing in H2 2016 and
to be issued on or around 31 March 2017.
Net asset value ("NAV") per share as at 31 December 2016 was
100.1p compared to 99.0p as at 31 December 2015.
Net asset value ("NAV") and Earnings per share ("EPS")
reconciliation
NAV per share Shares in issue (m) Net assets (GBPm)
---------------------------------------- --------------- --------------------- -------------------
Net assets as at 31 December 2015 99.0p 733.6 726.6
---------------------------------------- --------------- --------------------- -------------------
Profit/EPS to 31 December 2016 8.8p(1) - 67.9
---------------------------------------- --------------- --------------------- -------------------
Shares issued (net of costs) - 92.8 92.0(2)
--------------- --------------------- -------------------
Dividends paid in 2016 (7.7) - (59.7)
--------------- --------------------- -------------------
Scrip dividend take-up - 6.6(3) 6.7
--------------- --------------------- -------------------
H2 2016 Managers' shares to be issued - 0.8 0.8
--------------- --------------------- -------------------
Net assets as at 31 December 2016 100.1p 833.8 834.3
---------------------------------------- --------------- --------------------- -------------------
(1. Calculated based on the weighted average number of shares
during the year being 771.4 million shares)
2. Includes shares issued to Managers (less costs) during the
year.
(3. Scrip dividend take-up comprised: 2.7 million shares in
March 2016, equating to GBP2.6 million; 0.1 million shares in June
2016, equating to GBP0.1 million; 1.6m shares in September 2016,
equating to GBP1.7 million; and 2.2 million shares in December
2016, equating to GBP2.3 million. In each case these were shares
issued in lieu of cash dividends.)
Cash flow statement
Summary Year to 31 December Year to 31 December
cash flow 2016 2015
statement GBP'million GBP'million
---------------------- -------------------------------------- --------------------------------------
Statutory Adjustments Expanded Statutory Adjustments Expanded
IFRS Basis IFRS Basis
Basis Basis
---------------------- ----------- ------------- ---------- ----------- ------------- ----------
Cash received
from investments 47.4 12.1 59.5 24.0 18.4 42.4
---------------------- ----------- ------------- ---------- ----------- ------------- ----------
Operating
and finance
costs (1.1) (8.1) (9.2) (0.8) (7.6) (8.4)
----------- ------------- ---------- ----------- ------------- ----------
Cash flow
from operations 46.3 4.1 50.3 23.3 10.8 34.0
Debt arrangement
costs - (1.6) (1.6) - (1.6) (1.6)
Foreign
exchange
losses (4.9) - (4.9) 3.2 0.1 3.1
Issue of
share capital
(net of
costs) 92.7 (1.5) 91.2 311.7 (0.9) 310.8
Acquisition
facility
drawn/(repaid) - - - - (60.1) (60.1)
Purchase
of new investments
(including
acquisition
costs) (77.5) (1.0) (78.5) (307.3) 51.7 (255.6)
----------- ------------- ---------- ----------- ------------- ----------
Distributions
paid March
- September (42.3) - (42.3) (28.3) - (28.3)
----------- ------------- ---------- ----------- ------------- ----------
Distribution
paid December (10.7) - (10.7) - - -
----------- ------------- ---------- ----------- ------------- ----------
Cash movement
in period 3.6 (0.1) 3.5 2.5 (0.2) 2.3
----------- ------------- ---------- ----------- ------------- ----------
Opening
cash balance 14.9 0.3 15.2 12.4 0.5 12.9
---------------------- ----------- ------------- ---------- ----------- ------------- ----------
Net cash
at end of
period 18.5 0.2 18.7 14.9 0.3 15.2
---------------------- ----------- ------------- ---------- ----------- ------------- ----------
Analysis of Expanded basis cash flow
Cash received from investments in the period was GBP59.5 million
(2015: GBP42.4 million). The increase in cash received compared
with the previous year reflects the increase in the size of the
portfolio.
Dividends paid in the year were in respect of 15 months of
operations following the move to quarterly dividends from
semi-annual dividends during the year and totalled GBP53.0 million
(net of GBP6.7m scrip dividends). Excluding the final dividend paid
in the year of GBP10.7m (which is net of GBP2.3m of scrip
dividends) the dividends paid relating to a 12-month period were
GBP42.3m (net of GBP4.4m of scrip dividends). Dividends in the
previous year were GBP28.3m (net of GBP4.5m of scrip
dividends).
Cash flow from investments in the period less costs was GBP50.3
million (2015: GBP33.9 million) and, excluding the additional
quarterly dividend arising due to the move from semi-annual to
quarterly dividend payments, covers dividends paid of GBP42.3
million in the period by 1.2 times. This would be 1.1 times without
the benefit of scrip take up in the period or 1.6 times before
factoring in amounts invested in the repayment in project-level
debt. The Group repaid GBP24m of project-level debt (pro-rata to
the Company's equity interest) in the year.
Share issue proceeds (net of costs) totalling GBP91.2 million
(2015: GBP310.8 million) reflects the net proceeds of the 92
million shares issued during the year under the Share Issuance
Programme launched in April 2016. GBP78.5 million of the proceeds
of the share issuance programme were invested in acquisitions or
incurred in acquisition costs. After allowing for other cash
movements the Group has a funding surplus available for investment
remaining of around GBP10 million.
Cash balances increased slightly in the year which reflects the
net effect of the share capital raised not being fully deployed at
the year-end (that increases cash) and the additional quarterly
dividend paid in the year (that reduces cash).
2.7 Valuation of the Group's Portfolio
Introduction
The Investment Manager is responsible for carrying out the fair
market valuation of the Group's investments which is presented to
the Directors for their approval and adoption. A valuation is
carried out on a six monthly basis as at 31 December and 30 June
each year.
For non-market traded investments (being all the investments in
the current portfolio), the valuation is based on a discounted cash
flow methodology, and adjusted in accordance with the European
Venture Capital Associations' valuation guidelines where
appropriate to comply with IFRS 13 and IAS 39, given the special
nature of infrastructure investments. Where an investment is
traded, a market quote is used.
The valuation for each investment reflected in the portfolio
valuation is derived from the application of an appropriate
discount rate to reflect the perceived risk to the investment's
future cash flows to give the present value of those cash flows.
The Investment Manager exercises its judgment in assessing both the
expected future cash flows from each investment based on the
project's expected life and the financial models produced by each
project company and the appropriate discount rate to apply. This is
the same method as applied since the inception of the Company.
The Directors' Valuation of the portfolio as at 31 December 2016
was GBP818.7 million. This valuation compares to GBP712.3 million
as at 31 December 2015 and GBP759.5 million at 30 June 2016.
Valuation Movements
A breakdown of the movement in the Directors' valuation in the
year is set out in the table below.
Valuation movement during the GBP'million GBP'million
year to 31 December 2016
Valuation as at 31 December 2015 712.3
New investments in the period 77.7
Cash distributions from portfolio (59.5)
Rebased valuation of portfolio 730.5
Change in forecast power prices (16.2)
Change in economic assumptions
- discount rate 31.6
Change in economic assumptions 0.4
- interest rates
Forex movement on euro investments 16.0
Change in taxation assumptions 6.2
Portfolio return 50.2
Valuation as at 31 December 2016 818.7
Allowing for investments of GBP77.7 million and cash receipts
from investments of GBP59.5 million, the rebased valuation is
GBP730.5 million. The valuation as at 31 December 2016 is GBP818.7
million, representing an increase over the rebased valuation of
12.1% over the year.
Each movement between the rebased valuation and the 31 December
2016 valuation is considered in turn below:
Forecast power prices: Overall net reductions in power price
forecasts during the year had the impact of reducing the valuation
of the portfolio by a net GBP16.2 million. The valuation uses
updated power price forecasts for each of the markets in which TRIG
invests, namely the GB market, the Irish Single Electricity Market
and the French market.
The GBP16.2 million valuation loss breaks down into a loss for
the first half of the year of GBP43.0 million (that predominately
related to the first quarter of the year) and a valuation gain in
the second half of the year of GBP26.8 million. This reflects a
recovery in the GB power market prices, where imported fuel,
notably gas, has increased in cost when denominated in sterling as
a result of the depreciation of sterling. It should be noted
however that the power price forecasts in France and the Single
Electricity Market of Ireland declined throughout the year as gas
prices in Euro have remained low with globally weak demand and some
oversupply.
The weighted average power price used in the Directors'
valuation is comprised of the blend of forecasts for each of the
three power markets in which TRIG is invested after applying
expected Power Purchase Agreement power sales discounts. The
forecast assumes an increase in power prices in real terms over
time.
(i) Foreign exchange: Significant weakening of sterling in the
year versus the euro has led to a GBP16.0 million gain on foreign
exchange in the period in relation to the euro-denominated
investments located in France and the Republic of Ireland, which
reduces to a GBP8.9m gain after the impact of hedges as stated
below. As at 31 December 2016, euro-denominated investments
comprised 15% of the portfolio .
The Group enters into forward hedging contracts against its
expected income from euro-denominated investments over the short
term, currently approximately the next 18 months. In addition the
Group enters into further forward hedging contracts such that, when
combined with the "income hedges", the overall level of hedge
achieved in relation to the euro-denominated assets is
approximately 50%.
As sterling depreciated the currency hedge incurred a GBP7.1
million loss in the year to 31 December 2016 and serves to reduce
the sensitivity to movements in the euro/sterling exchange rate.
The overall positive impact on net assets of the foreign exchange
movement is hence GBP8.9 million after netting off the GBP7.1
million impact of the foreign exchange hedge.
(ii) Change in Economic Assumptions - discount rates: During the
year, there has continued to be strong demand for income-producing
infrastructure assets, including renewable energy projects, as the
market matures and more investors seek to gain exposure. This level
of demand appears to be even stronger following the Brexit vote and
at the year end the Managers report the market for renewables
investments being very strong. This has resulted in a continued
reduction in the prevailing discount rates applied for operating
projects which more than offsets the valuation impact of the net
overall reductions in power price forecasts. Overall the Investment
Manager, based on its experience of bidding and transacting in the
secondary market for renewable infrastructure assets, has applied
an average reduction of 0.5% in discount rates in the year (a 0.2%
reduction was applied in the first half of the year and a further
0.3% reduction has been applied at the year-end). The reduction in
valuation discount rates increased the valuation by GBP31.6
million.
The weighted average portfolio valuation discount rate as at 31
December 2016 was 8.4% (31 December 2015: 9.0%). The reduction
reflects both the market discount rate compression and the
investment in French solar projects in the year (which have a lower
level of return than the portfolio average).
(iii) Change in Economic assumptions - interest rates: The
valuation assumes lower interest rates (with increases occurring
later than previously and a lower long term rate). This assumption
affects interest receivable/payable rates applied to cash deposits
and project level debt not subject to fixed rate swaps to reflect
lower interest rate projections - rates now assumed are 1% until
March 2021 (previously March 2019) and a 2.0% rate thereafter
(previously 2.5%). This change in assumption leads to an increase
in the valuation of GBP0.4 million.
(iv) Changes in taxation assumptions: The most significant
change was the Chancellor's announcement in the UK March 2016
Budget of further planned reductions in UK corporation tax (to 17%
by 2020) partially offset by slower use of brought forward
corporation tax losses. The changes in tax announced provided a net
benefit to the valuation of GBP6.2 million. (This change is
unchanged from that reported at the half year).
(v) Portfolio return: This refers to the balance of valuation
movements in the period (excluding (i) to (iv) above and represents
an uplift of GBP50.2m. This represents a 6.9% increase in the
rebased value of the portfolio. The balance of portfolio return
mostly reflects the net present value of the cash flows brought
forward by a year at the prevailing portfolio discount rate (8.7%).
The lower than budgeted power generation production, caused mostly
by lower wind speeds, also impacts this item.
Valuation Sensitivities
The Investment Manager has provided sensitivity analysis to show
the impact of changes in key assumptions adopted to arrive at the
valuation. For each of the sensitivities, it is assumed that
potential changes occur independently of each other with no effect
on any other base case assumption, and that the number of
investments in the portfolio remains static throughout the model
life. All of the NAV per share sensitivities assume 833.8 million
Ordinary Shares as at 31 December 2016 (which includes those in
issue as well as approximately 0.8 million shares due to be issued
in March 2017 as part-payment of the Managers' fees).
The analysis below shows the sensitivity of the portfolio value
to changes in key assumptions as follows:
Discount rate assumptions
The weighted average valuation discount rate applied to
calculate the portfolio valuation is 8.4% as at 31 December 2016.
The sensitivity shows the impact on valuation of increasing or
decreasing this rate by 0.5%.
Discount rate sensitivity -0.5% Base 8.4% +0.5%
---------------------------- ------------- ----------- -------------
Directors' valuation +GBP32.0m GBP818.7m -GBP30.1m
---------------------------- ------------- ----------- -------------
Implied change in +3.8p/share -3.6p/share
NAV per Ordinary Share
---------------------------- ------------- ----------- -------------
Energy yield assumptions
The table below shows the sensitivity of the portfolio value to
changes in the energy yield applied to cash flows from project
companies in the portfolio. The terms P90, P50 and P10 are
explained below.
Energy yield sensitivity P90 (10-year) Base (P50) P10 (10-year)
-------------------------- --------------- ------------ ---------------
Directors' valuation -GBP80.4m GBP818.7m +GBP77.8m
-------------------------- --------------- ------------ ---------------
Implied change in -9.6p/share +9.3p/share
NAV per Ordinary Share
-------------------------- --------------- ------------ ---------------
The base case assumes a "P50" level of output. The P50 output is
the estimated annual amount of electricity generation (in MWh) that
has a 50% probability of being exceeded - both in any single year
and over the long term - and a 50% probability of being under
achieved. Hence the P50 is the expected level of generation over
the long term.
The sensitivity illustrates the effect of assuming "P90 10-year"
(a downside case) and "P10 10-year" (an upside case) energy
production scenarios. A P90 10-year downside case assumes the
average annual level of electricity generation that has a 90%
probability of being exceeded over a 10 year period. A P10 10-year
upside case assumes the average annual level of electricity
generation that has a 10% probability of being exceeded over a 10
year period. This means that the portfolio aggregate production
outcome for any given 10 year period would be expected to fall
somewhere between these P90 and P10 levels with an 80% confidence
level, with a 10% probability of it falling below that range of
outcomes and a 10% probability of it exceeding that range. The
sensitivity includes the portfolio effect which reduces the
variability because of the diversification of the portfolio. The
sensitivity is applied throughout the life of each asset in the
portfolio (even though this exceeds 10 years in all cases).
Power price assumptions
The sensitivity considers a flat 10% movement in power prices
for all years, i.e. the effect of adjusting the forecast
electricity price assumptions in each of the jurisdictions
applicable to the portfolio down by 10% and up by 10% from the base
case assumptions for each year throughout the operating life of the
portfolio.
Power price sensitivity -10% Base +10%
-------------------------- ------------- ----------- -------------
Directors' valuation -GBP63.6m GBP818.7m +GBP64.3m
-------------------------- ------------- ----------- -------------
Implied change in -7.6p/share +7.7p/share
NAV per Ordinary Share
-------------------------- ------------- ----------- -------------
Inflation assumptions
The projects' income streams are principally a mix of subsidies,
which are amended each year with inflation, and power prices, which
the sensitivity assumes will move with inflation. The projects'
management, maintenance and tax expenses typically move with
inflation but debt payments are fixed. This results in the
portfolio returns and valuation being positively correlated to
inflation.
The portfolio valuation assumes 2.75% p.a. inflation for the UK
and 2.0% p.a. for each of France and Ireland .
The sensitivity illustrates the effect of a 0.5% decrease and a
0.5% increase from the assumed annual inflation rates in the
financial model for each year throughout the operating life of the
portfolio.
Inflation rate sensitivity -0.5% Base +0.5%
----------------------------- ------------- ----------- -------------
Directors' valuation -GBP39.8m GBP818.7m +GBP45.0m
----------------------------- ------------- ----------- -------------
Implied change in -4.8p/share +5.4p/share
NAV per Ordinary Share
----------------------------- ------------- ----------- -------------
Operating costs at project company level
The sensitivity shows the effect of a 10% decrease and a 10%
increase to the base case for annual operating costs for the
portfolio, in each case assuming that the change to the base case
for operating costs occurs with effect from 1 January 2017 and that
change to the base case remains reflected consistently thereafter
during the life of the projects.
Operating cost sensitivity -10% Base +10%
----------------------------- ------------- ----------- -------------
Directors' valuation +GBP27.9m GBP818.7m -GBP27.9m
----------------------------- ------------- ----------- -------------
Implied change in +3.3p/share -3.3p/share
NAV per Ordinary Share
----------------------------- ------------- ----------- -------------
Euro/sterling exchange rates
This sensitivity shows the effect of a 10% decrease and a 10%
increase in the value of the euro relative to sterling used for the
31 December 2016 valuation (based on a 31 December 2016 exchange
rate of EUR1.1709 to GBP1). In each case it is assumed that the
change in exchange rate occurs from 1 January 2017 and thereafter
remains constant at the new level throughout the life of the
projects.
At the year-end, 15% of the portfolio was located in France and
Ireland comprising euro-denominated assets. The Group has entered
into forward hedging of the expected euro distributions for the
next 18 months and in addition placed further hedges to reach a
position where approximately 50% of the valuation of
euro-denominated assets is hedged. The hedge reduces the
sensitivity of the portfolio value to foreign exchange movements
and accordingly the impact is shown net of the benefit of the
foreign exchange hedge in place.
Exchange rate sensitivity -10% Base +10%
---------------------------- ------------- ----------- -------------
Directors' valuation -GBP5.3m GBP818.7m +GBP5.3m
---------------------------- ------------- ----------- -------------
Implied change in -0.6p/share +0.6p/share
NAV per Ordinary Share
---------------------------- ------------- ----------- -------------
The euro/sterling exchange rate sensitivity does not attempt to
illustrate the indirect influences of currencies on UK power prices
which are interrelated with other influences on power prices.
Interest rates applying to project company debt and cash
balances
This shows the sensitivity of the portfolio valuation to the
effects of a reduction of 1% and an increase of 2% in interest
rates. The change is assumed with effect from 1 January 2017 and
continues unchanged throughout the life of the assets.
The portfolio is relatively insensitive to changes in interest
rates. This is an advantage of TRIG's approach of favouring
long-term structured project financing (over shorter term corporate
debt) which is secured with the substantial majority of this debt
having the benefit of long-term interest rate swaps which fix the
interest cost to the projects.
Interest rate sensitivity -1% Base +2%
---------------------------- ------------- ----------- -------------
Directors' valuation +GBP1.9m GBP818.7m -GBP3.8m
---------------------------- ------------- ----------- -------------
Implied change in +0.2p/share -0.5p/share
NAV per Ordinary Share
---------------------------- ------------- ----------- -------------
Corporation Tax Rate Sensitivity
The profits of each project company are subject to corporation
tax in their home jurisdictions at the applicable rates (the tax
rates adopted in the valuation are set out in Note 4 to the
financial statements).
The tax sensitivity looks at the effect on the Directors'
valuation and the NAV per share of changing the tax rates by +/- 2%
each year in each jurisdiction and is provided to show that tax can
be a material variable in the valuation of investments.
Tax sensitivity -2% Base +2%
-------------------------- ------------- ----------- -------------
Directors' valuation +GBP14.0m GBP818.7m -GBP14.0m
-------------------------- ------------- ----------- -------------
Implied change in +1.7p/share -1.7p/share
NAV per Ordinary Share
-------------------------- ------------- ----------- -------------
It should be noted that all of TRIG's sensitivities above are
stated after taking into account the impact of project level
gearing on returns.
2.8 Outlook
Market Conditions and Impact on TRIG's Operating Portfolio
2017 has begun with the prospect of continued political and
economic uncertainty in the aftermath of the Brexit referendum and
the subsequent devaluation of sterling, with the impending
elections in several major European countries and with the recent
change in the US presidency. Interest rates remain low and the
prolonged effect of potentially lower economic growth may prevail
against a near-term rate rise in the UK, despite inflationary
pricing pressures linked to sterling devaluation. Amidst this
uncertainty, TRIG is fundamentally well-positioned owing to its
long-term yield-based returns, inflation-linked upside and low
correlation with equity markets.
Since 2013, the TRIG team has worked to create a strong
portfolio of cash-generative assets enabling the Company to deliver
an attractive dividend, to withstand an array of external
challenges and perform as a steady and diversifying income-based
investment. While some two-thirds of TRIG's near-term project
portfolio revenues are fixed-type, the remainder are exposed to
fluctuations in expected wholesale power prices. Having faced the
NAV impact of falling wholesale power prices since IPO, there is
the potential for shareholders to benefit from any sustained
improvement in the UK and/or European power markets, should this
materialise.
The compelling income-based characteristics of operating
renewables infrastructure projects ensure that the market for new
investments remains competitive. While this has been positive for
the valuation of the Company's existing investments, many of which
were acquired when discount rates were higher, it is becoming more
challenging to originate new investments that are value-accretive.
As well as numerous listed and private funds, insurance companies
and pension funds are growing their exposure to renewables. The UK
and broader European renewables market has also seen increased
interest from a range of international investors, including state
pension funds, energy groups (particularly from Asia) and high net
worth investors. The recent step-down in sterling (so far arguably
the most significant outcome of the Brexit vote for renewables) has
provided an additional currency-based rationale for such investors
looking at the UK.
Following an enormous volume of renewables development across
Europe over the past five years, buttressed with supportive
government incentive schemes, TRIG and its peers have benefited
from a steady stream of projects becoming available for acquisition
and recent development has been such that we can look forward to
continued deal flow for several years. This said, in the UK, TRIG's
core market, the Government has been reducing subsidy levels for
new wind and solar developments, notably with the phasing out of
ROC projects and the introduction of an alternative
Contracts-for-Difference (CfD) system which in the second round has
not favoured the lowest price technologies of onshore wind and
solar PV. Although this is consistent with the costs of
technologies coming down, it is likely that deployment in onshore
wind and solar PV will slow sharply over the near term as
developers adjust to the new pricing dynamics and prepare for an
unsubsidised future - which is likely to be several years ahead of
us for large-scale schemes.
2016 was a relatively quiet year for TRIG on the investment side
- at least in terms of capacity and value of projects in which it
has completed investment, although 2017 has started with a full
pipeline of opportunities under review and the Investment Manager
will continue to seek appropriate investments to increase the scale
and diversification of the Company without being drawn into
excessive pricing in competition with some of the "strategic"
bidders seen in 2016.
TRIG also has the advantage of being able to invest across a
range of technologies and jurisdictions with attractive risk /
return dynamics. There is an increasing pipeline in alternative
renewable technologies beyond onshore wind and solar PV, including
offshore wind, demand-side response and energy storage - as they
build operational and financial track records. Similarly, as TRIG
continues to expand its portfolio, it will not only focus on
further investment in the UK, France and Ireland, but it is also
considering additional appropriate geographies for investment, most
likely in Northern Europe - including Scandinavia, Germany and
Benelux.
Over the longer term, the Manager remains confident about the
renewables market in the UK. The UK is bound by decarbonisation
obligations nationally (under the Climate Change Act 2008) and
internationally (through longer-term commitments as a UN COP21
signatory as well as its nearer-term 2020 EU obligations). The UK
requires a balanced generation mix, in which renewables and
supporting technologies such as storage and dispatchable generation
will play an integral role. With the closure of coal fired power
stations, deployment of alternative energy sources is vital to
maintaining a generating capacity margin and to "keeping the lights
on". The Company notes the UK Government's commitment in the second
half of 2016 both to new large-scale offshore wind as well as to
new nuclear development and more recently, in January 2017, the
positive Hendry Report on tidal lagoon technology, in which the UK
is a pioneer and where InfraRed is one of the leading proponents.
There has also recently been a step-up in public concern regarding
urban pollution in London as well as elsewhere around the world
which can only accelerate initiatives to further the
electrification of transport systems.
The Board and Managers continue to work closely in reviewing the
evolving landscape in renewables infrastructure and assessing new
opportunities for investment to grow the portfolio and to ensure
the existing portfolio delivers to investors a stable return.
Despite current macro-economic and political uncertainties, the
Company remains confident of its ability to build on the strong
foundations of its performance since its IPO in 2013 - based on a
substantial, high-quality and diversified portfolio and on skilled
and disciplined management - and to continue to generate an
attractive long-term income-based return for investors well into
the future.
2.9 Ten Largest Investments
Set out below are the ten largest investments in the portfolio.
As at 31 December 2016, the largest investment (the Crystal Rig II
Wind Farm) accounted for approximately 11% of the portfolio by
value. In total, the 10 largest projects accounted for
approximately 52% of the project portfolio by value (2015:
56%).
Project Location Type % of project % of project
portfolio portfolio
by value by value
as at 31 as at 31
December December
2016 2015
Crystal Rig
II Scotland Wind (Atlantic) 11% 12%
Mid Hill Scotland Wind (Atlantic) 6% 5%
Hill of Towie Scotland Wind (Atlantic) 5% 6%
Altahullion N. Ireland Wind (Atlantic) 5% 4%
Green Hill Scotland Wind (Atlantic) 5% 5%
Rothes II Scotland Wind (Atlantic) 4% 5%
Earlseat Scotland Wind (Atlantic) 4% 5%
Parley England Solar PV 4% 5%
Pauls Hill Scotland Wind (Atlantic) 4% 5%
Egmere England Solar PV 4% 4%
Total 52% 56%
------------------------------------------------ ------------- -------------
Further information on each of these investments and on other
investments in the portfolio are set out in Section 2.3 of this
Strategic Report.
2.10 Risks and Risk Management
Risks and Uncertainties
While there are a broad range of risk elements that may
potentially impact TRIG including ones relating to general
macro-economic factors, there are three particular variables that
the Managers believe are most relevant, given the nature of its
business: (1) portfolio energy production; (2) electricity price
movements; (3) regulation, including levels of government support
schemes. TRIG's approach to risk is one of systematic assessment,
on an investment project basis on acquisition, and as part of the
overall portfolio management over time as external dynamics
shift.
The Managers and the Board have considered and reviewed the key
risks. The key event has been the Brexit vote in June 2016, which
adds further uncertainty. It is noted that the outturn of the exit
negotiations could lead to a second independence referendum for
Scotland, discussed further below, and that the UK government may
have a wider range of options when selling energy policy in the
future, but with the Climate Change Act expected to provide a
positive overall direction for renewables. This subject is covered
under the commentary below on both 'Electricity Prices' and
'Government Support for Renewables.
Major Risk Key Mitigants
Category
Portfolio
electricity * Established nature of onshore wind and solar PV
production technologies
falling short
of expectations
* Complementary seasonal bias of wind and solar
production
* Number and diversity of portfolio projects by
generating technology, weather system and specific
locality
* Experience of RES as Operations Manager in monitoring
and improving portfolio production
* Diversity of underlying equipment manufacturers and
O&M suppliers
* Improvements in technology providing future
opportunities for enhancement and repowering
Electricity
prices falling * Approximately two-thirds of TRIG's near-term
or not recovering portfolio-level revenue is fixed-type in nature,
as expected without power price exposure
* Electricity is sold into three distinct electricity
markets (GB, Irish SEM(9) and France)
* Long-term nature of revenues and forward pricing
mechanisms provides some protection against
short-term fluctuations
* Revenues from different projects shift towards
greater power exposure at different times depending
on support scheme, commissioning date and contractual
arrangements
* Recent falls in electricity prices provide upside
opportunity from economic growth, increased carbon
taxes, generation supply constraints or other factors
that may cause prices to rebound
* In the longer term, storage technologies may provide
ability for renewables to become partly dispatchable
and able to capture higher prevailing prices at times
of higher demand
Government
or regulatory * UK and Northern European economies expected to
support for continue to demonstrate a robust approach to
renewables grandfathering commitments to existing installed
changes adversely capacity
* Future subsidies generally tracking the fall in
development costs of maturing technologies, providing
appropriate public value-for-money
* Recent emphasis on energy security as a key item on
the public agenda, in light of both dwindling North
Sea fossil fuel production and broader geopolitical
concerns
* Strong public and political momentum in TRIG's
markets of focus towards maintaining a growth in the
contribution of renewables towards long-term United
Nations, European Union and national decarbonisation
efforts.
------------------- -------------------------------------------------------------
Further comment on these categories is provided below:
Portfolio Electricity Production
The Company has been structured to provide the Investment
Manager with the flexibility to invest across a variety of markets
and technologies, to enable diversification across weather systems,
renewables technologies and regulatory regimes.
Wind power and solar PV, while both termed "intermittent"
sources of electricity, compared say to coal or gas whose energy
outputs can be planned, in combination provide a smoothing effect,
with solar more productive in the summer and wind more productive
in the winter and with the absolute level of the two energy sources
month by month being uncorrelated. In addition, solar provides
greater predictability through the year, compensating for wind
which is more variable in the short term. Wind also typically
offers a slightly higher return on investment reflecting this
variability.
An important element in maintaining high levels of energy
production is minimising operating downtime (or maximising
"availability"). RES, as Operations Manager, has an extensive track
record in both developing and managing renewables and has the
experience of global operations, bringing considerable expertise
both to the prediction of energy yields prior to acquiring assets
and to the operation of assets in order to optimise energy
production. This is done through careful planning and execution of
project operations and prompt repair works both directly and
through subcontractors. As onshore wind and solar PV are now
well-proven technologies, typical levels of availability in a given
year are around 96% to 98%.
Electricity Prices
In valuing the TRIG portfolio it is necessary to take a
long-term view on wholesale electricity prices which is done in
consultation with independent energy price forecasters. It should
be noted that TRIG is more concerned about long-term energy prices,
as in the near term its revenues comprise a large proportion of
subsidies together with power price agreements ("PPAs") with fixed
prices or price floors, fixed price feed-in tariffs ("FITs") and
some assets with no exposure at all.
In 2017, the portfolio expects to benefit from approximately
two-thirds of its project-level revenues coming from fixed PPAs,
FITs, Renewables Obligation Certificates and other embedded
benefits, i.e. revenue sources other than those based on
electricity market prices.
It is forecast that in the long term European wholesale
electricity prices will increase in real terms from current levels.
The primary driver for rises in wholesale prices is recovering gas
prices, with cheap sources of gas declining and an increased
reliance on more expensive gas (LNG) to meet demand. Carbon taxes
are also expected to increase across Europe.
In the UK, TRIG's principal market, the recent depreciation of
sterling brought on by the Brexit vote in June has raised the
domestic cost of internationally priced commodities, including coal
and gas, putting upward pressure on electricity prices. In the
short term, TRIG has been able to benefit from these higher prices.
Over the longer-term the outcome of the UK's 'Leave' vote is less
clear, not only for electricity prices but also in other respects,
including broader political and economic changes (for example
whether in relation to regulations, GDP growth, foreign exchange,
inflation or interest rates) and potential resultant changes in
investment appetite.
In France, TRIG's second most significant geographic exposure,
electricity prices remain low, not having had a currency boost, but
have the potential to increase if there is a rise in gas and carbon
prices which are still at relatively low levels. Reduced nuclear
generation in the coming years, as instigated by the Hollande
government, may put upward pressure on power prices with tightening
of overall generation capacity. The recent 'Energy Transition Law,'
which came into effect in January 2016, caps nuclear capacity at
40% of national electricity production.
Progress in storage technologies may assist with dispatching
wind and solar generation to a market with increasingly
intermittent generation. This can increase the average price
received for power sales.
As TRIG's portfolio is split across several jurisdictions, the
Company has the benefit of diversification across electricity
markets. Finally, projects are purchased at different points in the
power price "cycle", with the most recent power forecasts being
incorporated for each acquisition, producing a cost-averaging
effect. The Group may be expected to acquire some portfolio
projects at times when the long-term power price forecasts utilised
turn out to be relatively high, though these would be offset over
time by projects purchased when the power forecasts turn out to
have been at relatively low levels.
Government Support for Renewables
The fundamental challenges for the future of the UK and EU
energy market, in which renewables play an increasing part, remain
in place. These challenges include the imperative of reducing
carbon dioxide and other noxious emissions, the desire to improve
energy security and the requirement to replace inefficient or aging
energy infrastructure. The gradual emergence of local shale oil and
gas opportunities may partially mitigate any reduction in North Sea
oil and gas production, but the expectation is that governments
will continue to require a significantly increased contribution by
renewables technologies to meet the region's needs for energy
security and carbon reduction.
Geographically, the Company focuses its investments
predominantly on the UK and Northern Europe where there is a strong
emphasis on delivering versus challenging renewable energy
deployment targets for 2020, and showing consistency in
grandfathering prior subsidy commitments to operating plants.
Ofgem, the UK energy regulator, is currently reviewing the
arrangements for embedded generation which may result in changes to
the levels of 'embedded benefits.' These are additional regulatory
incentives for the deployment of renewables capacity connected to
distribution networks. Although the outcome of this review is not
yet clear, the Managers will continue to monitor the consultation
as it progresses and update forecasts accordingly.
Other Risk Factors
There are a range of other risks, for example those that are
more macroeconomic in nature, including the potential impact of
material changes in market discount rates, inflation, interest
rates, tax rates or exchange rates. The estimated impact of these
on NAV, together with the impact of power price, energy yield and
operating cost variability, is illustrated in the sensitivities
section of the Company's portfolio valuation in Section 2.7
above.
Other risk factors which TRIG has been monitoring closely
include:
Interest rates: While interest rates remain low in our markets
of focus, the recent increase in US interest rates have turned
attention to the potential impact of higher rates elsewhere in due
course. To the extent that higher rates are correlated with higher
inflation, the portfolio is protected by a natural hedge through
exposure to inflation-linked subsidies. In addition, TRIG's
project-level debt is generally structured (including with swaps)
to fix the levels of interest payments.
The Brexit Vote: The UK's vote on 23 June 2016 to leave the EU
has resulted in political and economic uncertainty with consequent
market volatility. The full implications of the Brexit vote are
still difficult to assess with the Article 50 leaving negotiations
yet to unfold. The impact of Brexit is already partially addressed
under the major risk factors above, although one additional
uncertainty is how Brexit may affect Scotland and in particular how
any further potential independence initiatives might impact on its
currency (potentially leaving sterling for the euro materially
increasing the Group's currency exposure) and on the renewables
market, including future new capacity deployment, the treatment of
subsidies or the trajectory of power prices.
For TRIG's future portfolio valuations, the post-Brexit
depreciation of sterling may cause overseas assets to become more
expensive relative to valuations using historic foreign exchange
rates. The Company has foreign exchange hedges in place that aim to
offset approximately 50% of the Group's foreign exchange exposure
leading to a manageable NAV per share and mark to market exposure
in the event of significant foreign exchange movements (as indeed
have been the case during 2016). The immediate effect has been an
upward pressure on GB market electricity pricing, pushing up the
portfolio valuation (see Electricity Prices, discussed above). Over
the longer term, the impacts on electricity pricing are harder to
assess. In a low GDP growth scenario, demand will be lower which
will adversely impact electricity prices. However, there may
simultaneously be upward pressures on pricing if generating
capacity margins tighten.
In terms of macroeconomic impact, inflationary pressure in the
UK is likely. Higher inflation is mitigated by the inflation
linkage in the underlying contracts for the project companies.
BEPS: In December 2016, following consultation with industry,
HMRC published their latest proposals for the implementation in
April 2017 of the OECD's Base Erosion Profit Shifting (BEPS)
initiative in relation to the tax deductibility of corporate
interest expense. The Company's tax advisers and the Investment
Manager took part in the consultation and have been reviewing the
development of the proposals and have considered the potential
impact on the Company. Assuming the draft proposals are implemented
in their current form, they are not expected to materially impact
the Company materially. The Company and its advisers will continue
to monitor the situation and participate alongside industry peers
in the consultation process.
In addition, there are other risks also regularly assessed by
TRIG - including in the areas of operations, markets, liquidity,
credit, counterparties and taxation, and these are set out in the
following section on risk management.
Risk Management
Risk Management Framework
The Company has put a risk management framework in place
covering all aspects of the Group's business. Given the nature of
the Company (being an investment company where the Company
outsources key services to the Investment Manager, Operations
Manager and other service providers), reliance is placed on the
Group's service providers' own systems and controls.
The identification, assessment and management of risk are
integral elements of the Investment Manager's and the Operations
Manager's work in both managing the existing portfolio and in
transacting new investment opportunities. The Managers have
established internal controls to manage these risks and they review
and consider the Group's key risks with the Board on a quarterly
basis. If a new risk arises or the likelihood of a risk occurring
increases, a mitigation strategy is, where appropriate, developed
and implemented together with enhanced monitoring by the Investment
Manager and/or the Operations Manager.
The Board's Management Engagement Committee also reviews the
performance of the Investment Manager and Operations Manager (as
well as all key service providers) annually and in particular this
review includes a consideration of the Managers' internal controls
and their effectiveness and the creation of a risk control
matrix.
Given the limited number of expected disposals from the
portfolio and the similar risk profile of the investments within
the portfolio (i.e. they are all renewable energy infrastructure
projects in the UK or Northern Europe with broadly similar
contractual structures), the type and nature of the risks in the
Group are not expected to change materially from period to
period.
The following table summarises some important areas considered
on a regular basis in the risk assessment process by risk category
as set out in the Alternative Investment Fund Managers
Directive:-
Category Key Elements
------------- -------------------------------------------------
Operational Health and safety, risk of regulatory
changes or breaches, fraud and management
override, valuation error, political/regulatory
changes, conflicts of interest, key
man and service provider failure, breach
of company policies or contractual
covenants, energy yield, technology
risk, project-level availability, equipment
failure, project insurance, grid curtailment
and outage, sub-contractor failure,
tax
------------- -------------------------------------------------
Liquidity Fund-level portfolio liquidity, fund-raising,
project-level liquidity and gearing
------------- -------------------------------------------------
Counterparty Contractual concentration
------------- -------------------------------------------------
Credit Risk of counterparty failure
------------- -------------------------------------------------
Market Power price, macro-economic (currency,
interest rates, inflation), share price,
competition
------------- -------------------------------------------------
Tax Withdrawal of tax relief on interest
deductions and other tax risks
------------- -------------------------------------------------
Counterparty Exposures
Given the importance of state subsidies for investment in
renewables, TRIG has exposure to the creditworthiness of and policy
commitments by national governments and is reliant on the
consistency of government policy, for example "grandfathering"
within the UK whereby renewables generators continue to receive the
same level of subsidy, set upon commissioning, for the duration of
the incentive. In addition, each project company enters into a
commercial power purchase agreement ("PPA") with a utility or
energy trading company to enable them to sell the electricity
generated and to receive the feed-in tariff or Renewables
Obligation Certificate ("ROC") subsidy payments. The project
companies have entered into PPAs with a range of providers. Each
project company enters into a contract for the maintenance of the
plant. In the case of wind, this is usually with the turbine
manufacturer. For both wind and solar sectors, projects may also
benefit from equipment provider warranties.
TRIG has a broad range of PPA counterparties, equipment
providers and maintenance contractors. No supplier or off-taker is
currently involved in more than 50% of the projects by value or
number (with the exception of RES, TRIG's Operations Manager, which
has project asset management and/or maintenance roles in relation
to a number of the projects in addition to the portfolio-level
services it provides to TRIG). Further acquisitions are likely to
provide further diversity of counterparty exposures.
2.11 Sustainability and Corporate Culture
The Board recognises the importance of sustainability and
corporate culture in meeting the Company's long-term objectives and
is ambitious in promoting behaviours and activities which maximise
the Company's impact in these areas.
The Company's approach to sustainability and corporate culture
includes:
-- Considering the risk culture of the Company and within the
Managers on a regular basis to confirm it is consistent with the
risk appetite of the Company's investors and expected to support
the sustainability of the Company;
-- Embedding and improving on good practices in the day-to-day
management processes - which are assessed by the Board in the
course of the quarterly Board meetings as well as in a wide range
of ad hoc interactions during the year;
-- Promoting an appropriate culture of stewardship,
responsibility, accountability and openness; and
-- A focus by the Board and Managers on appropriate interaction
with key stakeholders, including shareholders, lenders, regulators,
vendors, co-investors and suppliers.
The Board and Managers prioritise the engagement with the
investment community, the renewables industry and regulators where
the Company's progress can be measured amongst the broader
stakeholders. The Chairman sets the bar high in creating and
maintaining an effective corporate culture, for example, by her
active advocacy of equal opportunities (outside TRIG, the Chairman
sits on the steering board advising the Parker Review regarding the
ethnic diversity of UK boards), by attending site visits with
investors and investment industry events and by making a point of
putting business in its proper perspective at a more detailed
level, for example by ensuring safety is the first issue addressed
at Board meetings.
As TRIG has no employees, the Directors look through to the
culture of TRIG's key service providers in annual review processes
as well as on an ongoing basis. The Board interacts regularly with
staff of the Managers both at senior and operational levels, in
both formal and informal settings. This promotes greater openness
and trust between the key individuals engaged in delivering against
the Company's objectives and ensures the Managers remain fully
aligned with the Company's corporate culture and approach to
sustainability. The Board also engages closely throughout the year
with the Company's administrator, brokers, and legal and public
relations advisers to gauge the broader positioning and direction
of the business.
The Investment Manager, InfraRed Capital Partners, has a strong
and clear set of values - which it promotes and monitors both
group-wide and at the individual level (through assessments) -
focusing on the principles of Passion, Curiosity, Trust,
Partnership and Fulfilment.
InfraRed also adopts and implements the Principles for
Responsible Investment ("PRI") (an investor initiative in
partnership with UNEP Finance Initiative and UN Global Compact)
which are widely recognised and highly regarded around the world.
The PRI can be summarised as follows:
-- to showcase leadership in responsible investment;
-- to incorporate sustainability issues into investment analysis and decision-making;
-- to be active owners and incorporate sustainability issues
into ownership policies and practices;
-- to seek appropriate disclosures on sustainability issues by
the entities in which the investments are made;
-- to promote acceptance and implementation of PRI within the investment industry; and
-- to report on activities and progress towards implementing the PRI.
Culture is very important for the Operations Manager, RES, from
both a business perspective and to RES people. The RES culture is
what enables its strategy and what motivates its people to perform:
in the last staff satisfaction survey, 92% of RES employees said
they were 'proud to be associated with RES'.
RES' leadership insists that as the organisation grows and
adapts, it remains true to its culture, heritage and vision to
create a future where everyone has access to affordable low carbon
energy. In 2013, RES staff members across the company were involved
in the development of the company's values. More recently these
have been simplified to Passion, Accountability, Collaboration and
Excellence.
RES supervises a range of activities at a portfolio level
designed to enhance the interaction with the local communities as
well as to make a difference to the amenities available in often
remote locations where TRIG's projects are sited. These community
initiatives included more than GBP400,000 in financial
contributions alongside substantial staff involvement.
The overall environmental contribution of the investment
portfolio is substantial, with the portfolio as at 31 December 2016
capable of producing enough clean energy annually to power the
equivalent of 390,000 homes in the UK, France and Ireland while
avoiding the emission of 570,000 tonnes of CO(2) annually.
The integration of generating plants into the landscape is
optimised to seek the maximum renewable energy generation while
minimising any local impacts through extensive consultation with
statutory consultees, local authorities and the local communities.
Engagement with stakeholders once assets become operational is
maintained at the highest standards.
As Operations Manager, RES has responsibility for monitoring the
operational performance of the asset portfolio as well as acting as
the interface with underlying third party asset managers or O&M
contractors and with local government and communities. With RES'
long history of developing and operating assets in the renewable
energy sector in the UK, France and Ireland as well as elsewhere
around the world, it has developed a reputation for establishing
and maintaining best practices in sustainability matters with staff
dedicated to support its operational management activities in these
areas.
On the basis of the Managers' recommendations the Directors have
considered the existing sustainability and corporate culture
policies relative to good industry practice as applicable to an
infrastructure investment company and believe them to be current
and appropriate.
The Board remains committed to high standards of corporate
governance and keeps the Company's practices under review with
respect to current best practice. Further details of how the
Company complies with the various corporate governance standards
are set out in the section on Corporate Governance and Regulatory
Matters.
The Board wishes to be at the forefront of disclosure and
reporting of the Company's performance and strategic intentions.
The Board believes this is achieved by the communications as
follows:
-- annual report and accounts;
-- interim statement and accounts;
-- detailed presentations to accompany the results;
-- announcements of all material acquisitions; and
-- meetings with shareholders held by the Investment Manager and the Operations Manager.
The Company's website (www.trig-ltd.com) which includes the
Company's prospectuses, financial disclosures and other
announcements since launch provides further information on TRIG and
its investments.
Disclosure of key sensitivities and risks has been developed by
the Board working with the Managers. The level and type of
disclosure has been developed and refined in order to assist in a
full and fair analysis of the Company and its investments.
This Strategic Report is approved by the Board of Directors of
The Renewables Infrastructure Group Limited.
20 February 2017
Registered Office:
Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1
3PP
Section 3
Board of Directors
Members of TRIG's Board of Directors, all of whom are
non-executive and independent of the Managers, are listed
below.
Helen Mahy CBE (Chairman, appointed 14 June 2013), aged 55, is
an experienced chairman and non-executive director. Helen was Group
Company Secretary and General Counsel of National Grid plc and was
a member of its Executive Committee from September 2003 to January
2013 when she retired from National Grid plc. She is also a
director of SSE plc where she joined the board in March 2016. Her
other directorships are with Bonheur ASA, an Oslo listed company,
which she joined in October 2013 (and which in May 2016 merged with
Ganger Rolf ASA where Helen was also on the board), and SVG Capital
plc (from July 2014) where she chairs the Remuneration Committee.
SVG Capital plc (SVG) is in the process (following shareholder
agreement) of selling its assets to an entity managed by
HarbourVest Partners LLC and it is expected that SVG will be wound
up during 2017. Helen is also a member of the steering committee of
the Parker Review which in 2016 reported on ethnic minorities on UK
Boards. She was a director of Stagecoach Group plc from January
2010 until February 2016 and she also chaired the Health, Safety
and Environment Committee there. She was also non-executive
director of Aga Rangemaster Group plc between March 2003 and
December 2009. In 2005 and 2006, Helen sat on the General
Management Committee of the Bar Council and chaired its Employed
Barristers' Committee in 2006 and was a Director of Bar Services
Company Ltd between January 2006 and February 2008. Helen was Chair
of the General Counsel 100 Group in 2007. Helen qualified as a
barrister and was an Associate of the Chartered Insurance
Institute. Helen was awarded a CBE for services to business in June
2015. Helen is a resident of the UK.
Jon Bridel (Director, appointed 14 June 2013), aged 52, is
currently a non-executive chairman or director of listed and
unlisted companies comprised mainly of investment funds and
investment managers. These include Alcentra European Floating Rate
Income Fund Limited, Starwood European Real Estate Finance Limited,
Sequoia Economic Infrastructure Income Fund Limited and Funding
Circle SME Income Fund Limited which are listed on the main market
of the London Stock Exchange, as well as DP Aircraft I Limited and
Fair Oaks Income Fund Limited. He was previously Managing Director
of Royal Bank of Canada's investment businesses in the Channel
Islands. Prior to this and after specialising in corporate finance
with Price Waterhouse, Jon served in senior management positions in
the British Isles and Australia in banking, specialising in
corporate and commercial credit and in private businesses as chief
financial officer. Graduating from the University of Durham with a
degree of Master of Business Administration in 1988, Jon also holds
qualifications from the Institute of Chartered Accountants in
England and Wales where he is a Fellow, the Chartered Institute of
Marketing and the Australian Institute of Company Directors. Jon is
a member of the Chartered Institute of Marketing, the Institute of
Directors and a Chartered Fellow of the Chartered Institute for
Securities and Investment. Jon is a resident of Guernsey.
Shelagh Mason (Director, appointed 14 June 2013), aged 57, is an
English property solicitor with over 30 years of experience in
commercial property. She retired as Senior Partner of Spicer and
Partners Guernsey LLP on 30 November 2014 and has taken up the
position of consultant with Collas Crill, specialising in English
commercial property. Her last position in the United Kingdom was as
a senior partner of Edge & Ellison. For two years until 2001,
she was Chief Executive of a property development company active
throughout the United Kingdom and the Channel Islands. Shelagh was
a member of the board of directors of Standard Life Investments
Property Income Trust, a property fund listed on the London Stock
Exchange for 10 years until December 2014. She is also a director
of Medicx Fund Limited, a main market listed investment company
investing in primary healthcare facilities. She is also
non-executive Chairman of the Channel Islands Property Fund Limited
which is listed on the Channel Islands Securities Exchange and also
holds other non-executive positions. She is a past Chairman of the
Guernsey Branch of the Institute of Directors and a member of the
Chamber of Commerce, the Guernsey International Legal Association
and she also holds the IOD Company Direction Certificate and
Diploma with distinction. Shelagh is a resident of Guernsey.
Klaus Hammer (Director, appointed 1 March 2014), aged 61, is a
graduate of the University of Hamburg and gained an MBA at IMD
Lausanne. He was previously Chief Operating Officer of the global
combined-cycle gas turbine power plant business of E.ON, and also
served on a variety of boards including E.ON Värmekraft Sverige AB,
Horizon Nuclear Power Ltd. and the UK Association of Electricity
Producers. Prior to E.ON, which he joined in 2005, he spent 20
years with Royal Dutch Shell in a variety of roles in both Europe
and Africa. Among his other recent roles, he was a public member of
Network Rail until mid-2014. Klaus also advises investors in
energy-related businesses. Klaus is a resident of Germany.
Section 4
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations. The Companies (Guernsey) Law, 2008, as
amended, requires the Directors to prepare financial statements for
each financial period. Under that law they have elected to prepare
the financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU.
Under company law the directors must not approve the accounts
unless they are satisfied that they give a true and fair view of
the state of affairs of the company and of the profit or loss of
the company for that period. In preparing these financial
statements, International Accounting Standard 1 requires that
directors:
-- Properly select and apply accounting policies;
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- Provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- Make an assessment of the company's ability to continue as a going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report and Corporate
Governance Statement. The Directors are responsible for the
maintenance and integrity of the corporate and financial
information included on the Company's website. Legislation in
Guernsey and the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors' responsibility statement
We confirm that to the best of our knowledge:
-- The financial statements, prepared in accordance with
International Financial Reporting Standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company;
-- The Chairman's Statement and Report of the Directors include
a fair review of the development and performance of the business
and the position of the Company and Group taken as a whole together
with a description of the principal risks and uncertainties that it
faces; and
-- The annual report and financial statements when taken as a
whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
Disclosure of information to the Auditor
The Directors who held office at the date of approval of this
Directors' report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditor is unaware and that each Director has taken all the steps
that he or she ought to have taken as a Director to make himself or
herself aware of any relevant audit information and to establish
that the Company's auditor is aware of that information.
Auditor
Deloitte LLP have expressed their willingness to continue in
office as auditor and a resolution proposing their re-appointment
will be submitted at the Annual General Meeting.
On behalf of the Board of Directors of The Renewables
Infrastructure Group Limited
20 February 2017
Registered Office:
East Wing, Trafalgar Court, Les Banques, St Peter Port,
Guernsey, Channel Islands, GY1 3PP
Section 5
Report of the Directors
The Directors present their report and accounts of the Company
for the year to 31 December 2016.
Principal Activity
The Company is a closed-ended Guernsey incorporated investment
company, investing in and managing a portfolio of investments in
renewable energy infrastructure project companies. Its shares have
a premium listing on the Official List of the UK Listing Authority
and are traded on the main market for listed securities of the
London Stock Exchange.
Results and Distributions
The results for the year are summarised in the Operational and
Financial Review and Valuation of the Group's Portfolio section of
the Strategic Report (Sections 2.6 and 2.7) and set out in detail
in the audited financial statements.
Distributions and Share Capital
The Company has declared four quarterly interim dividends for
the year ended 31 December 2016 for an aggregate annual dividend of
6.25p (2015: 6.19p) per share as follows:
-- 1.5625p per share was declared on 5 May 2016, to shareholders
on the register as at 27 May 2016, paid on 30 June 2016;
-- 1.5625p per share was declared on 28 July 2016, to
shareholders on the register as at 19 August 2016, paid on 30
September 2016;
-- 1.5625p per share was declared on 8 November 2016, to
shareholders on the register as at 18 November 2016, to be paid on
30 December 2016; and
-- 1.5625p per share was declared on 9 February 2017, to
shareholders on the register on 17 February 2017, to be paid on 31
March 2017.
The Company had one class of share capital, Ordinary Shares, in
issue on 31 December 2016.
Shares in Issue
Ordinary Shares in issue have increased during the year from
732,838,095 to 832,998,413 as a result of further share issues,
issue of shares to the Managers in lieu of fees pursuant to the
Investment Management Agreement (in relation to InfraRed Capital
Partners Limited) and the Operations Management Agreement (in
relation to Renewable Energy Systems Limited) and take-up of scrip
shares in lieu of dividends.
Date Description New Ordinary Number of
Shares Issued Shares in
Issue
31 December
2015 Opening Position 732,838,095 732,838,095
issue of scrip
dividend shares
31 March in lieu of 2015
2016 (H2) interim dividend 2,715,189 735,553,284
issue of shares
to the Managers
in lieu of fees
31 March relating to 2015
2016 Q3 and Q4 736,190 736,289,474
Placing (GBP30.3m
19 May 2016 raised) 30,000,000 766,289,474
issue of scrip
dividend shares
in lieu of 2016
30 June 1(st) (Q1) interim
2016 dividend 133,715 766,423,189
27 September Placing (GBP62.6m
2016 raised) 62,000,000 828,423,189
issue of scrip
dividend shares
in lieu of 2016
30 September 2(nd) (Q2) interim
2016 dividend 1,635,646 830,058,835
issue of shares
to the Managers
in lieu of fees
30 September relating to 2016
2016 Q1 and Q2 781,125 830,839,960
issue of scrip
dividend shares
in lieu of 2016
30 December 3(rd) (Q3) interim
2016 dividend 2,158,453 833,998,413
31 December
2016 Closing Position 832,998,413 832,998,413
Share Issues in the Year
In April 2016, the Company published a prospectus to implement a
second Share Issuance Programme enabling the issuance of up to 300
million new Ordinary Shares and/or C shares over the ensuing 12
months. Under the Share Issuance Programme, the Company undertook
two equity fund-raisings during the year.
On 17 May 2016, the Company raised gross proceeds of GBP30.3
million through the issue of 30,000,000 New Ordinary Shares at an
Issue Price of 101.0 pence each. The net proceeds were applied
towards paying down amounts drawn under the Group's revolving
acquisition facility that had been used to fund the acquisition of
a portfolio of solar PV projects from Akuo in January 2016.
On the 23 September 2016, The Company raised gross proceeds of
GBP62.6 million through the issue of 62 million New Ordinary Shares
at a price of 101.0 pence per New Ordinary Share. The Company used
the proceeds to repay the remaining balance on the acquisition
facility and finance the acquisition of a number of investment
opportunities, including the acquisition of underlying third-party,
minority interests in the portfolio of companies held jointly with
Akuo and the acquisition of Freasdail wind farm, both completed in
November 2016.
The Company made five investments over the year for a total
consideration of GBP77.7 million funded by new equity share
capital, use of the revolving acquisition facility and reinvestment
of the Company's own surplus cash generated in the year.
Shares Issued to the Managers
The Managers are paid 20% of their annual management and
advisory fees in shares. In relation to this, 736,190 shares were
issued in March 2016 (478,523 to the Investment Manager and 257,667
to the Operations Manager) relating to fees for the second six
months of 2015. A further 781,125 shares were issued in September
2016 (507,731 to the Investment Manager and 273,394 to the
Operations Manager) relating to fees for the first 6 months of
2016. Shares in lieu of fees relating to the second six months of
2016 (expected to be 787,847 shares in total - comprised of 512,101
to the Investment Manager and 275,746 to the Operations Manager)
are to be issued in March 2017. (See note 18 to the financial
statements for further detail).
For the calculation of Net Asset Value ("NAV") per share as at
31 December 2016, the shares earned by the Managers but not yet
issued at that date have been included in the number of shares
meaning that the Net Assets are divided by 833,786,260 shares to
arrive at the NAV per share.
For the calculation of Earnings per Share ("EPS"), the shares
earned by the Managers but not yet issued have been included in the
calculation of the weighted average number of shares based upon
them being issued at the end of the quarter in which the management
fees were earned. The resulting weighted average shares in issue
used to calculate EPS is 771,406,099.
As a result of the share issues during the year and the expected
issuance to the Managers in March 2017, the number of shares in the
Company held by the Investment Manager(10) will be 2,337,308 and
the number of shares held by the Operations Manager will be
1,184,939 shares.
Scrip Shares
The Directors were granted authority in June 2013 by an ordinary
resolution of the Company's then sole shareholder to offer
shareholders the right to receive further Ordinary Shares ("Scrip
Shares") instead of cash in respect of all or part of any dividend
that may be declared, with such authority expiring at the
conclusion of the Company's fifth annual general meeting (in
2018).
The Board believes that it would be in the general interest of
shareholders, who may be able to treat distributions of Scrip
Shares as capital for tax purposes or who may otherwise wish to
roll over their dividend entitlement into further investment in the
Company, to have the option of electing to receive part or all of
their dividends in the form of Scrip Shares. Shareholders who elect
to take Scrip Shares instead of receiving cash dividends will
increase their holdings without incurring dealing costs or stamp
duty. The Company benefits from the retention of cash for further
investment which would otherwise be paid out as dividend.
The scrip dividend alternative was offered to shareholders in
relation to the interim dividends declared for the year ended 31
December 2016. A scrip alternative will again be offered to
shareholders for the dividend to be paid on 31 March 2017 relating
to the final quarter of 2016 and a scrip dividend circular will be
published separately in March 2017 with details of this scrip
dividend alternative for 2017. The Scrip Shares issued do not have
any entitlement to the dividends paid in the same month and
declared in the month before they are issued. The average take-up
of scrip dividends over the year was 11.3%.
Guernsey Regulatory Environment
As a Guernsey-registered closed-ended investment company, TRIG
is subject to certain ongoing obligations to the Guernsey Financial
Services Commission.
Listing Rules
The Company confirms it has complied with the applicable Listing
Rules and has no disclosures to make under Listing Rule 9.8.4R.
Directors
The Directors who held office during the period to 31 December
2016 were:
Helen Mahy CBE
Jon Bridel
Shelagh Mason
Klaus Hammer
Biographical details of each of the Directors are shown in
Section 3 above.
Investment Manager
InfraRed Capital Partners Limited (the "Investment Manager" or
"InfraRed") acts as Investment Manager to the Group. A summary of
the contract between the Company, its subsidiaries and InfraRed in
respect of services provided is set out in Note 18 to the
accounts.
InfraRed is an independent investment business, managing a range
of infrastructure and real estate funds and investments with total
equity under management of more than US$9 billion. InfraRed has
more than 120 employees and partners, based mainly in offices in
London and with smaller offices in Hong Kong, New York, Seoul and
Sydney.
To date, InfraRed has launched 15 funds including two companies
listed on the London Stock Exchange: HICL Infrastructure Company
Limited and The Renewables Infrastructure Group Limited. Six of
these funds have been realised.
The infrastructure investment team within the InfraRed Group
currently consists of over 60 investment professionals, all of whom
have an infrastructure investment background and a broad range of
relevant skills, including private equity, structured finance,
construction, renewable energy and facilities management. The
InfraRed Group has a long and successful proven track record in
sourcing, structuring, acquiring, managing and financing
infrastructure equity investments of over 16 years.
InfraRed started in 1990 as part of Charterhouse Bank, investing
in real estate and expanded in 1997 to encompass infrastructure. In
2000, it was acquired by HSBC and evolved into the HSBC Group's
global real estate and infrastructure investment platform. In 2011
the business was rebranded as InfraRed after completing a
successful management buy-out from HSBC.
The business is now owned by its management team. Since the
spin-out, InfraRed has thrived as an independent business and
significantly grown its equity under management and its investor
base.
Operations Manager
Renewable Energy Systems Limited (the "Operations Manager" or
"RES") acts as Operations Manager to the Group. A summary of the
contract between the Company, its subsidiaries and RES in respect
of services provided is set out in Note 18 to the accounts.
RES is the world's largest independent renewable energy company,
with extensive experience in developing, financing, constructing
and operating renewable energy infrastructure projects globally
across a wide range of low carbon technologies including onshore
and offshore wind, solar PV and energy storage. RES has been at the
forefront of renewable energy development for 35 years. Since it
was established in 1982, RES has developed and/or constructed more
than 250 wind and solar farms, energy storage projects and
transmission lines around the world with a combined capacity of
over 12,000MW. RES' global headcount totals over 1,200 staff across
four continents with its head office in the UK and operations in 12
countries. RES is part of the Sir Robert McAlpine group of
companies, a family-owned British firm with over 145 years of
construction and engineering experience.
The Management Engagement Committee met in November 2016 to
consider the performance of, and services provided by, RES. This
took the form of a written paper in which the Operations Manager
explained its activities in the period and summarised its
performance. The Committee discussed the paper with the Operations
Manager. After careful consideration of RES's performance,
primarily in terms of its performance during and since the IPO in
providing operations management services, supporting new
investments and communicating effectively with stakeholders, the
Committee recommended to the Board that it would be in the best
interests of the Company that RES continue on the agreed
contractual terms.
Broker, Administrator and Company Secretary
The Company's joint brokers during the year to 31 December 2016
were Canaccord Genuity Limited and Liberum Capital Limited.
In July 2016, in agreement with the Company, the Company
Secretary and Administrator role (and key staff) passed from Dexion
Capital (Guernsey) Limited to Aztec Financial Services (Guernsey)
Limited and the existing Administration Agreement was novated to
Aztec Financial Services (Guernsey) Limited.
Substantial interests in share capital
As at 21 February 2017, the Company has received notification in
accordance with the Financial Conduct Authority's Disclosure
Guidance and Transparency Rule 5 of the following interests in 5%
or more of the Company's Ordinary Shares to which voting rights are
attached:
Number of Percentage
Ordinary Shares Held
Held
----------------------------------- ----------------- -----------
Prudential plc group of companies 83,230,178 9.99%
Third National Swedish Pension
Fund 82,742,107 9.93%
Newton Investment Management
Ltd 37,517,941 7.26%
----------------------------------- ----------------- -----------
Donations
The Company made no political donations during the year or the
preceding year.
Payment of suppliers
It is the policy of the Company to settle all suppliers in
accordance with the terms and conditions of the relevant market in
which it operates. Although no specific code or standard is
followed, suppliers of goods and services are generally paid within
30 days of the date of any invoice. The Company has no trade
creditors.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities
are described in the Operational and Financial Review section of
the Strategic Report. In addition, notes 1 to 4 to the financial
statements include the Group's objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and
its exposures to credit risk and liquidity risk.
The Group has the necessary financial resources to meet its
obligations. The Group benefits from a range of long-term contracts
with various major UK and European utilities and well-established
suppliers across a range of infrastructure projects. In addition,
it maintains a working capital component of GBP15m as part of its
revolving acquisition facility (currently sized at GBP150m and
limited to 30% of portfolio value). The Group's project-level
financing is non-recourse to the Company and is limited to 50% of
gross portfolio value. As a consequence, the Directors believe that
the Group is well placed to manage its business risks
successfully.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they adopt the going concern basis of
accounting in preparing the annual financial statements.
This conclusion is based on a review of the Company's cash flow
projections including reasonably expected downside sensitivities
together with cash and committed borrowing facilities available to
it.
Viability Statement
The Directors have assessed the viability of the Group over a
five-year period to December 2021. In making this statement the
Directors have considered the resilience of the Group, taking
account of its current position, the principal risks facing the
business (being achieved energy yield, the level of future energy
prices and continued government support for renewable subsidy
payments), in severe but plausible downside scenarios, and the
effectiveness of any mitigating actions.
As part of being a self-managed Alternative Investment Fund, the
Directors, together with the Managers, rigorously assess the risks
facing the Group and consider sensitivity analysis against the
principal risks identified.
The Directors have determined that the five-year period to
December 2021 is an appropriate period over which to provide this
viability statement as this period accords with the Group's
business planning exercises and is appropriate for the investments
owned by the Group.
TRIG is the owner of a portfolio of project companies whose
underlying assets (being wind farms and solar parks) are
predominately fully constructed and operating renewable electricity
generating facilities. As a result, TRIG benefits from predictable
long term cash flows and a set of risks that can be identified and
assessed. The projects are each supported by detailed financial
models. The Directors believe that the diversification within the
portfolio of projects helps to withstand and mitigate for the risks
it is most likely to meet.
The Investment Manager prepares, and the Directors review,
summary five-year cash flow projections each year as part of
business planning and dividend approval processes. The projections
consider cash balances, key covenants and limits, dividend cover,
investment policy compliance and other key financial indicators
over the period. Sensitivity analysis considers the potential
impact of the Group's principal risks actually occurring
(individually, and together). These projections are based on the
Managers' expectations of future asset performance, income and
costs, and are consistent with the methodology applied to provide
the valuation of the investments. The Directors review significant
changes to the Company's cash projections each quarter with the
Managers as part of the quarterly Board meetings. The viability
assessment assumes continued government support for existing
subsidy arrangements for the projects within the portfolio that are
spread across three jurisdictions (UK, Ireland and France). Where
governments change subsidy arrangements applying to renewables
projects these changes are expected to apply only to projects not
yet operating.
Based on this review, the Directors confirm that they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
to December 2021.
Internal Controls Review
Taking into account the information on principal risks and
uncertainties provided in the Strategic Report and the ongoing work
of the Audit Committee in monitoring the risk management and
internal control systems on behalf of the Board (see the Audit
Committee report), the Directors:
-- are satisfied that they have carried out a robust assessment
of the principal risks facing the Company, including those that
would threaten its business model, future performance, solvency or
liquidity; and
-- have reviewed the effectiveness of the risk management and
internal control systems and no significant failings were
identified.
To enable the Directors to provide this statement in relation to
risks and controls the Directors have worked with the Managers
to:
-- review the Company's risk matrix each quarter;
-- consider each Manager's compliance with their own internal
controls each quarter and to receive presentations from each
Manager on the effectiveness of these controls and their internal
controls environment;
-- consider the Company's risk appetite, agree this with the Managers and document this; and
-- consider the risk culture of the Company and within the
Managers and confirm these are appropriate and expected to support
the sustainability of the Company and consistent with the risk
appetite
Share repurchases
No shares have been bought back in the period. The latest
authority for the Company to make market purchases of Ordinary
Shares was granted to the Directors on 4 May 2016 and expires on
the date of the next Annual General Meeting. The Directors are
proposing that their authority to buy back shares be renewed at the
forthcoming Annual General Meeting.
Treasury shares
Section 315 of the Companies (Guernsey) Law, 2008 allows
companies to hold shares acquired by market purchase as treasury
shares, rather than having to cancel them. Up to 14.99% of the
number of shares in issue at the date of the last AGM (4 May 2016)
may be held in treasury and may be subsequently cancelled or sold
for cash in the market. This gives the Company the ability to
reissue shares quickly and cost efficiently, thereby improving
liquidity and providing the Company with additional flexibility in
the management of its capital base.
There are currently no shares held in treasury. The Board would
only authorise the sale of shares from treasury at prices at or
above the prevailing net asset value per share (plus costs of the
relevant sale). If such a measure were to be implemented, this
would result in a positive overall effect on the Company's net
asset value. In the interests of all shareholders, the Board will
keep the matter of treasury shares under review.
On behalf of the Board of Directors of The Renewables
Infrastructure Group Limited
20 February 2017
Registered Office:
East Wing, Trafalgar Court, Les Banques,
St Peter Port
Guernsey GY1 3PP
Section 6
Corporate Governance Statement
Introduction
The Board recognises the importance of a strong corporate
governance culture that meets the listing requirements. The Board
has put in place a framework for corporate governance which it
believes is appropriate for an investment company in line with the
best practices in relation to matters affecting shareholders,
communities, regulators and other stakeholders of the Company. With
a range of relevant skills and experience, all Directors contribute
to the Board discussions and debates on corporate governance. In
particular, the Board believes in providing as much transparency
for investors as is reasonably possible to ensure investors can
clearly understand the prospects of the business and enhance
liquidity of its shares while also preserving an appropriate level
of commercial confidentiality.
AIFM Directive
The Alternative Investment Fund Managers Directive seeks to
regulate alternative investment fund managers (in this paragraph,
"AIFM") and imposes obligations on managers who manage alternative
investment funds (in this paragraph, "AIF") in the EU or who market
shares in such funds to EU investors. The Company is categorised as
a self-managed Non EEA AIF for the purposes of the AIFM Directive.
In order to maintain compliance with the AIFM Directive, the
Company needs to comply with various organisational, operational
and transparency obligations.
Association of Investment Companies
The Company is a member of the Association of Investment
Companies (the "AIC") and has considered the principles and
recommendations of the AIC Code of Corporate Governance (the "AIC
Code") and has decided to follow the AIC's Corporate Governance
Guide for Investment Companies (the "AIC Guide"). The Company has
complied with the recommendations of the AIC Code and the relevant
provisions of the UK Corporate Governance Code, except as set out
below.
The UK Corporate Governance Code includes provisions relating to
the role of the chief executive, executive directors' remuneration
and the need for an internal audit function. For the reasons set
out in the AIC Guide, the Board considers these provisions are not
relevant to the position of the Company as it has no executive
directors, employees or internal operations. The Company has
therefore not reported further in respect of these provisions.
Guernsey regulatory environment
The Guernsey Financial Services Commission (the "Commission")
issued a Finance Sector Code of Corporate Governance. The Code
comprises Principles and Guidance, and provides a formal expression
of good corporate practice against which shareholders, boards and
the Commission can better assess the governance exercised over
companies in Guernsey's finance sector.
The Commission recognises that the different nature, scale and
complexity of specific businesses will lead to differing approaches
to meeting the Code. Companies which report against the UK
Corporate Governance Code or the AIC Code are also deemed to meet
this Code. The Directors have determined that the Company will
continue as a Guernsey-registered closed-ended investment
company.
Non-Mainstream Pooled Investments
On 1 January 2014, certain changes to the FCA rules relating to
restrictions on the retail distribution of unregulated collective
investment schemes and close substitutes came into effect.
As announced by the Company on 7 January 2014, following the
receipt of legal advice the Board confirms that it conducts the
Company's affairs, and intends to continue to conduct the Company's
affairs, such that the Company would qualify for approval as an
investment trust if it were resident in the United Kingdom. It is
the Board's intention that the Company will continue to conduct its
affairs in such a manner and that Independent Financial Advisers
should therefore be able to recommend its Ordinary Shares to
ordinary retail investors in accordance with the FCA's rules
relating to non-mainstream investment products.
The Board
Disclosure under Principle 5 of the AIC Code
The Board consists of four non-executive Directors. In
accordance with Principle 2 of the AIC Code all of the
non-executives are independent of the Investment Manager. The
Chairman, Helen Mahy, met the independence criteria of the AIC Code
Principle 1 upon appointment and has continued to meet this
condition throughout her term of service. Although not a
requirement of the AIC Code, in accordance with guidance in
Principle 1, the Board has a Senior Independent Director, Shelagh
Mason, who was appointed as Senior Independent Director in 2013.
Being non-executive Directors, none of the Directors has a service
contract with the Company.
The Articles of Incorporation currently provide that at least
one third of the Directors retire by rotation at each annual
general meeting. If their number is not three or a multiple of
three, the number nearest to, but not exceeding, one third, shall
retire from office. In accordance with Principle 3 of the AIC Code,
all 4 Directors intend to retire and offer themselves for
re-election at the forthcoming Annual General Meeting on 3 May
2017.
The Board believes that long serving Directors should not be
automatically prevented from forming part of an independent
majority of the Board upon reaching nine years' service. In
accordance with Principle 4 of the Code, if a Director has served
more than nine years, the Board will consider the issue of
independence carefully on an annual basis as part of the Board
self-evaluation and will disclose its conclusions in the Directors'
Report. As the Company was formed in 2013 no Director has yet
served for nine years or more. A Director who retires at an annual
general meeting may, if willing to act, be reappointed. The
Directors are not subject to automatic re-appointment.
The Board believes that the balance of skills, gender,
experience and knowledge of the current Board provides for a sound
base from which the interests of investors will be served to a high
standard, although as the Company grows, the Board may consider
whether additional directors may be suitable. The Board has chosen
to adopt a definitive policy with quantitative targets for Board
diversity. The Company aspires to equal representation of men and
women on the Board and from 1 March 2014 this was achieved.
However, gender, knowledge, skills, experience, residency and
governance credentials are all considered by the Nominations
Committee when recommending appointments to the Board and in
formulating succession plans. Notwithstanding this, the selection
of the preferred individual to be invited to join the Board will
always be based on merit.
The Board requires the Investment Manager and the Operations
Manager, to whom the day to day management of the Company is
delegated, to present to them on their own Diversity policies,
targets and achievements as part of the review of the Managers
carried out by the Management Engagement Committee.
The Board recommends the re--election of each Director and
supporting biographies are disclosed in Section 3 of this annual
report.
The Board is scheduled to meet at least four times a year and
between these formal meetings there is regular contact with the
Investment Manager and Operations Manager, the Secretary and the
Company's Joint Brokers. The Directors are kept fully informed of
investment and financial controls, and other matters that are
relevant to the business of the Company that should be brought to
the attention of the Directors. The Directors also have access,
where necessary in the furtherance of their duties, to independent
professional advice at the expense of the Company.
The attendance record of Directors for the period to 31 December
2016 is set out below:
Quarterly
Board Audit Management Engagement Remuneration Nomination
meetings Committee Committee Committee Committee
------------------- ---------- --------------------- ------------ ----------
Number of
meetings 4 4 3 1 3
------------------- ---------- --------------------- ------------ ----------
Meetings attended:
H Mahy 4 4 3 1 3
J Bridel 4 4 3 1 3
S Mason 4 4 3 1 3
K Hammer 4 4 3 1 3
------------------- ---------- --------------------- ------------ ----------
During the period a further twenty-two ad hoc Board/Committee
meetings were held in Guernsey to deal with matters substantially
of an administrative nature and these were attended by those
directors available.
The Board has a breadth of experience relevant to the Company
and the Directors believe that any changes to the Board's
composition can be managed without undue disruption.
The Board considers agenda items laid out in the notice and
agenda of meeting which are circulated to the Board in advance of
the meeting as part of the Board papers. Directors may request any
agenda items to be added that they consider appropriate for Board
discussion. Each Director is required to inform the Board of any
potential or actual conflicts of interest prior to Board
discussion.
The Board constantly considers the Company's strategy with
regard to market conditions and feedback from shareholders received
directly or from the Managers. The investment strategy is reviewed
regularly with the Investment Manager. Board meetings include a
review of investment performance and associated matters such as
health and safety, marketing/investor relations, risk management,
gearing, general administration and compliance, peer group
information and industry issues.
Performance evaluation
The Board evaluates its performance and considers the tenure and
independence of each Director on an ongoing basis.
During 2016 Optimus Group Limited, an independent consultant,
was engaged by the Company to conduct a formal evaluation of the
effectiveness of the Board. The report concluded that the Board, as
a whole, and its Committees are well informed and give strong
challenge to the Investment Manager and the Operations Manager and
do so in an environment of collegiality and mutual trust. The Board
were considered to be well prepared for meetings and effective and
professional in their decision making and boardroom behaviour with
the appropriate skills and experience. Optimus concluded that the
board worked well with the Managers and Company Secretary and other
service providers and demonstrated a high standard of Corporate
Governance.
A number of useful recommendations of a minor administrative
nature were made by Optimus that the Company has taken on board.
Optimus considered the interaction of Board members and were
generally very positive but provided useful observations about how
these interactions could be further enhanced, which have been acted
upon.
The Board also asked Optimus to review the procedures of the
Company (a self-managed Alternative Investment Fund) in respect of
AIFMD compliance which was confirmed.
The Board continues to monitor training for Directors. The
Directors consider and report regularly their training needs and
their continuing professional development and training carried out.
The Board receive regular feedback from investors and sector
analysts and continue to focus on risk management and controls.
The independence of each Director has been considered and each
has been confirmed as being independent of the Company and its
Managers.
The Board believes that the composition of the Board and its
Committees reflect a suitable mix of skills and experience, and
that the Board, as a whole, and its Committees functioned
effectively during 2016 and since the launch of the Company in
2013. The Board has employed the use of a skills matrix to identify
if there are any missing competences and confirmed that the
existing Directors held the appropriate range of skills. The skills
matrix tool will inform the Directors in the recruitment of any
additional or replacement Directors to the Company. The Board
considers its composition to be appropriate and hence no such
recruitment is considered necessary at this time.
Delegation of responsibilities
The Board has delegated the following areas of
responsibility:
The day-to-day administration of the Company has been delegated
to Aztec Financial Services (Guernsey) Limited in its capacity as
Company Secretary and Administrator.
The Investment Manager has full discretion (within agreed
parameters) to make investments in accordance with the Company's
investment policy and has responsibility for financial
administration and investor relations, in addition to advising the
Board in relation to further capital raisings and the payment of
dividends amongst other matters, subject to the overall supervision
and oversight of the Board. Among the specific tasks of the
Investment Manager are the overall financial management of the
Company and existing portfolio as a whole, including the deployment
of capital, management of the Group's debt facilities, hedging
arrangements, the sourcing of new investments, preparing the
semi-annual valuations, the statutory accounts, the management
accounts, business plans, presenting results and information to
shareholders, coordinating all corporate service providers to the
Group and giving the Board general advice.
The Operations Manager is responsible for monitoring, evaluating
and optimising technical and financial performance across the
portfolio. The services provided by the Operations Manager include
maintaining an overview of project operations and reporting on key
performance measures, recommending and implementing strategy on
management of the portfolio including energy sales agreements,
insurance, maintenance and other areas requiring portfolio-level
decisions, maintaining and monitoring health and safety and
operating risk management policies. The Operations Manager also
works jointly with the Investment Manager on sourcing and
transacting new business, providing assistance in due diligence on
potential new acquisitions, refinancing of existing assets and
investor relations. The Operations Manager does not participate in
any investment decisions taken by or on behalf of the Company or
undertake any other regulated activities for the purposes of the
UK's Financial Services and Markets Act 2000.
Members of the Investment Manager's and/or the Operations
Manager's teams are also appointed as directors of the Group's
project companies and/or intermediate holding companies and as part
of their role in managing the portfolio, they attend board meetings
of these companies and make appropriate decisions. Material
decisions are referred back to the TRIG's investment committee
and/or advisory committee for consideration and determination, and
the TRIG Board is consulted on key matters relevant to TRIG's
strategy, policies or overall performance, both on an ad hoc basis
where required and during formal reporting sessions, including all
matters outside the Managers' delegated authority.
Committees of the Board
The committees of the Board are the Audit Committee, the
Remuneration Committee, the Nomination Committee and the Management
Engagement Committee. Terms of reference for each Committee have
been approved by the Board.
The Chairman and members of each committee as at 31 December
2016 are as follows:
Audit Remuneration Nomination Management
Committee Committee Committee Engagement
Committee
========= =========== ============= =========== ============
Chairman J Bridel S Mason H Mahy H Mahy
Members S Mason H Mahy J Bridel J Bridel
K Hammer J Bridel S Mason S Mason
K Hammer K Hammer K Hammer
--------- ----------- ------------- ----------- ------------
Nomination Committee
The main terms of reference of the Committee are to:
regularly review the structure, size and composition required of
the Board and make recommendations to the Board with regard to any
changes (including skills, knowledge and experience in accordance
with Principle 6 of the AIC Code);
give full consideration to succession planning for Directors
taking into account the challenges and opportunities facing the
Company; and
be responsible for identifying and nominating for the approval
of the Board, candidates to fill Board vacancies as and when they
arise.
The Nomination Committee met three times during 2016. The Board
is currently composed of 50% male and 50% female directors.
Management Engagement Committee
The terms of reference of this Committee are to review the
relationships between the Company and its main service providers,
including their performance, compliance with their contracts, and
levels of fees paid. Recommendations from the Committee's review
are given to the Board for consideration and action.
The Management Engagement Committee met three times in 2016 in
accordance with its plan to review the performance of the key
service providers to the Group and the Company. No material
weaknesses were identified, some recommendations were conveyed to
certain providers, and the recommendation to the Board was that the
current arrangements are appropriate and provide good quality
services and advice to the Company and the Group. The Committee
convenes a planning meeting in August each year followed by a
meeting in November of each year to review the Investment Manager
and Operations Manager, and a meeting in February of each year to
review the other service providers. In July 2016 in agreement with
the Company, the Company Secretary and Administrator role (and key
staff) passed from Dexion Capital (Guernsey Limited) to Aztec
Financial Services (Guernsey) Limited. The Managers were duly
considered at the meeting of the Management Engagement Committee in
November 2016 and no material issues were identified in connection
with their respective appointments.
Details of the activities of the Remuneration Committee and the
Audit Committee are set out in Section 7 and Section 8
respectively. All terms of reference for Committees are available
from the Company's website or the Company Secretary upon
request.
Relations with shareholders - AIC Code Principle 19
The Company welcomes the views of shareholders and places great
importance on communication with its shareholders. The Investment
Manager produces a regular factsheet which is available on the
Company's website. Senior members of the Investment Manager and
Operations Manager make themselves available, as practicable, to
meet with principal shareholders and key sector analysts. Feedback
from these meetings is provided to the Board on a regular basis.
The Board is also kept fully informed of all relevant market
commentary on the Company by the Company's Financial PR agency, as
well as receiving relevant updates from the Managers and the
Company's Joint Brokers.
The Company reports formally to shareholders twice a year and
will hold an Annual General Meeting in Guernsey on 3 May 2017, at
which members of the Board will be available to answer shareholder
questions. In addition, shareholders receive written communications
from the Company either with documents enclosed or to notify them
of new information available to view on the Company's website.
Results of Extraordinary and Annual General Meetings are
announced by the Company promptly after the relevant meeting.
Additionally, other notices and information are provided to
shareholders on an ongoing basis through the Company's website in
order to assist in keeping shareholders informed. The Secretary and
Registrar monitor the voting of the shareholders and proxy voting
is taken into consideration when votes are cast at the Annual
General Meeting.
Shareholders may contact the Board via the Company Secretary,
whose contact details are found at the back of the report and
accounts.
Section 7
Directors' Remuneration Report
The Remuneration Committee, chaired by Shelagh Mason and
comprising all the Directors, operates within clearly defined terms
of reference.
The terms of reference of the Committee are to determine and
agree the Board policy for the remuneration of the Directors of the
Company, including the approval of any ad hoc payments in respect
of additional corporate work required (e.g. for the work involved
with the issue of prospectuses and equity fund raises).
Statement of the Chairman of the Remuneration Committee
As all Directors of the Company are non-executive they receive
an annual fee appropriate for their responsibilities and time
commitment but no other incentive programmes or performance-related
emoluments.
During the year the Committee reviewed the level of cost of
living increases typically being applied by similar investment
companies to Directors Remuneration. The Board commissioned an
independent remuneration consultant, Trust Associates, to conduct a
formal review of Directors' remuneration in 2015 and the Board
implemented the recommendations of that review having obtained
shareholder approval at the AGM held on 4 May 2016. Part of the
advice from the independent remuneration consultant's work from
2015 was that between formal independent reviews, inflation based
increases should be applied.
The Committee proposes and the Board has, subject to
Shareholders' approval, agreed to implement the cost of living
inflationary increases set out in the table below.
Remuneration Policy
All Directors of the Company are non-executive and as such there
are:
-- no service contracts with the Company;
-- no long-term incentive schemes;
-- no options or similar performance incentives; and
-- no payments for loss of office unless approved by shareholder resolution
The Directors' remuneration shall:
-- reflect the responsibility, experience, time commitment and position on the Board;
-- allow the Chairman and Chairman of the Audit Committee to be
remunerated in excess of the remaining Board members to reflect
their increased roles of responsibility and accountability;
-- be paid quarterly in arrears;
-- include remuneration for additional, specific corporate work
which shall be carefully considered and only become due and payable
on completion of that work; and
-- be reviewed by an independent professional consultant with
experience of investment companies and their fee structures, at
least every three years.
The maximum annual limit of aggregate fees payable to the
Directors as set in the Articles of Incorporation is
GBP350,000.
Remuneration Committee
The Remuneration Committee met once during 2016 to consider the
remuneration of the Directors. The Committee reviewed the level of
cost of living increases typically being applied by similar
investment companies to Directors Remuneration and recommended cost
of living increases as set out below.
The table below sets out the Directors' remuneration approved
and actually paid for the year to 31 December 2016 as well as that
proposed for the year ending 31 December 2017.
Director Role Base Base Additional Total
remuneration remuneration fees for Directors'
proposed paid 2016 fund raising remuneration
for 2017 in 2016 in 2016
------------- ----------- --------------------- --------------------- -------------------- ----------------------
Helen Mahy Chairman GBP61,500 GBP60,000 GBP10,000 GBP70,000
Jon Bridel Audit GBP49,200 GBP48,000 GBP10,000 GBP58,000
Committee
Chairman
Klaus Hammer Director GBP41,000 GBP40,000 GBP10,000 GBP50,000
Shelagh Director GBP41,000 GBP40,000 GBP10,000 GBP50,000
Mason
------------- ----------- --------------------- --------------------- -------------------- ----------------------
Total GBP192,700 GBP188,000 GBP40,000 GBP228,000
Where the Company requires Directors to work on specific
corporate actions, such as the raising of further equity, an
additional fee will be appropriately determined. Additional fees
payable to the Directors in 2016 relate to the Share Issuance
Programme launched in April 2016 that permits the Company to raise
up to an additional 300 million new shares over the period of 12
months from the issue of the prospectus.
Directors are entitled to claim reasonable expenses which they
incur attending meetings or otherwise in performance of their
duties relating to the Company. The total amount of Directors'
expenses paid for 2016 was GBP7,278.
The Board will seek approval at the AGM in May 2017 for the
Remuneration Policy and the annual Directors' fees for routine
business for 2016 and fees for additional specific corporate
actions, as set out above, with a view to implementing the proposed
inflationary increases back dated to 1 January 2017.
Directors' Interests
The Directors of the Company as at 31 December 2016, and their
interests in the Ordinary Shares of the Company, are shown in the
table below.
31 December 31 December
2016 2015
Ordinary Ordinary
Shares Shares
------------------------ ------------------ ------------------
Helen Mahy(1) 67,249 62,261
Jon Bridel(1) 22,260 20,610
Klaus Hammer 24,838 24,838
Shelagh Mason(1) 60,650 56,152
------------------------ ------------------ ------------------
(1) Jointly held with spouse
All holdings of the Directors and their families are beneficial.
No changes to these holdings had been notified up to the date of
this report.
Other Disclosures
At the last AGM, held on 4 May 2016, the following resolution
including Directors Remuneration was approved:
Ordinary Resolution 9 - To approve the proposed annual
remuneration for routine business for each Director, as set out in
the Report and Financial Statements, for the year ending 31
December 2016:
Shares voted Percentage
In Favour 434,073,955 99.95
Discretionary 159,448 0.04
Against 54,071 0.01
Share Price Performance
In setting the Directors' remuneration, consideration is given
to the size and performance of the Company. In 2016, the Total
Shareholder Return (on a share price basis) for the Company was
15.7% (2015: 4.4%) versus 16.8% for the FTSE-All Share Index (2015:
1.0%). Over the period from the IPO in July 2013 to 31 December
2016 the Total Shareholder Return for the Company was 8.6% p.a.
versus 6.9% p.a. for the FTSE-All Share Index.
Section 8
Audit Committee Report
The Audit Committee has been in operation since the inception of
the Company. Chaired by Jon Bridel, it operates within clearly
defined terms of reference and comprises all of the Directors other
than the Chairman (who is not a member in accordance with provision
C3.1 of the UK Corporate Governance Code). It is also the formal
forum through which the auditor reports to the Board of Directors
and met four times in 2016 (it meets at least three times
annually).
The main duties of the Audit Committee are:
-- giving full consideration and recommending to the Board for
approval the contents of the half year and annual financial
statements and reviewing the external auditor's report thereon
including consideration of whether the financial statements are
overall fair, balanced and understandable;
-- agreeing with the auditor the external audit plan including
discussing with the external auditor the key risk areas within the
financial statements;
-- considering and understanding the key risks of misstatement
of the financial statements and formulating an appropriate plan to
review these and agreeing with the Managers their processes to
manage these risk areas;
-- reviewing the Viability and Going Concern Statements and
reviewing the work prepared by the Investment Manager supporting
these statements;
-- reviewing the draft valuation of the Company's investments
prepared by the Investment Manager and making a recommendation to
the Board on the valuation;
-- reviewing the scope, results, cost effectiveness,
independence and objectivity of the external auditor as well as
reviewing the effectiveness of the external audit process and
making any recommendations to the Board for improvement of the
audit process;
-- reviewing and recommending to the Board for approval the
audit, audit related and non-audit fees payable to the external
auditor or their affiliated firms overseas and the terms of their
engagement;
-- reviewing the appropriateness of the Company's accounting policies;
-- ensuring the standards and adequacy of the internal control systems;
-- to consider any reports or information received in respect of whistleblowing; and
-- reporting to the Board on how it has discharged its duties.
None of the members of the Audit Committee have any involvement
in the preparation of the financial statements of the Company, as
this has been contracted to the Investment Manager.
The Audit Committee meets the external auditor before and after
their audit and has discussed with the auditor the scope of their
annual audit work and also their audit findings. The auditor
attends the Audit Committee meetings at which the annual and
interim accounts are considered, and at which they have the
opportunity to meet with the Committee without representatives of
the Managers being present. The Audit Committee has direct access
to the auditor and to key senior staff of the Investment Manager,
and it reports its findings and recommendations to the Board which
retains the ultimate responsibility for the financial statements of
the Company.
Significant Issues Considered
After discussion with both the Managers and the external
auditor, the Audit Committee determined that the key risks of
misstatement of the Company's financial statements related to the
valuation of the investments.
Valuation of Investments
As outlined in Note 13 to the financial statements, the total
carrying value of the investments at fair value (excluding the fair
value of TRIG UK) as at 31 December 2016 was GBP818.7m. Market
quotations are not available for these financial assets, and as
such, their valuation is undertaken using a discounted cash flow
methodology. This requires a series of material judgements to be
made as further explained in Note 4 to the financial
statements.
The valuation process and methodology were discussed by the
Audit Committee with the Investment Manager at the time of the
interim review, in November 2016 prior to the year-end valuation
process and again in February 2017 as part of the year-end sign off
process. The Committee met with the auditor when it reviewed and
agreed the auditor's Group audit plan and also at the conclusion of
the audit of the financial statements, in particular discussing the
valuation process. The Investment Manager carries out a valuation
semi-annually and provides a detailed valuation report to the
Company.
Valuation of Investments - key forecast assumptions
The Audit Committee considered in detail those assumptions that
are subject to judgement that have a material impact on the
valuation. The key assumptions are:
-- Power price assumptions
A significant proportion of the wind and solar projects' income
streams are contracted subsidy streams and power income under
long-term PPAs; some of which have fixed price mechanisms. However
over time the proportion of power income that is fixed reduces and
the proportion where the Company has exposure to wholesale
electricity prices increases. Market participants expect
electricity prices to increase in real terms (i.e. ahead of
inflation) over the medium and long term. The Investment Manager
considers the forecasts provided by expert energy advisors and
adopts a profile of assumed future power prices by jurisdiction.
Further detail on the assumptions made in relation to power prices
and other variables that may be expected to affect these are
included in the Valuation section of the Strategic Report.
-- Macroeconomic assumptions
Macroeconomic assumptions include inflation, interest and tax
rate assumptions. The Investment Manager's assumptions in this area
are set out and explained in the Valuation section of the Strategic
Report.
-- Other key income and costs assumptions
Other key assumptions include operating costs, facility energy
generation levels and facility remaining operating life
assumptions.
The Investment Manager has discussed and agreed the valuation
assumptions with the Audit Committee. In relation to the key
judgements underpinning the valuation, the Investment Manager has
provided sensitivities showing the impact of changing these
assumptions and these have been reviewed by the Investment Manager
and the Audit Committee.
Valuation of Investments - valuation discount rates
The discount rates adopted to determine the valuation are
selected and recommended by the Investment Manager. The discount
rate is applied to the expected future cash flows for each
investment's financial forecasts derived adopting the assumptions
explained above, amongst others, to arrive at a valuation
(discounted cash flow valuation). The resulting valuation is
sensitive to the discount rate selected. The Investment Manager is
experienced and active in the area of valuing these investments and
adopts discount rates reflecting its current extensive experience
of the market. It is noted however that this requires subjective
judgement and that there is a range of discount rates which could
be applied. The discount rate assumptions and the sensitivity of
the valuation of the investments to this discount rate are set out
in the Valuation section of the Strategic Report.
The Audit Committee discussed with the Investment Manager the
process adopted to arrive at the selected valuation discount rates
(which includes comparison with other market transactions and an
independent review of valuation discount rates both at December
2015 and at December 2016) and satisfied itself that the rates
applied were appropriate. The external auditor explained the
results of their review of the valuation, including their
consideration of the Company's underlying cash flow projections,
the economic assumptions and discount rates to the Audit Committee.
On the basis of their audit work there were no adjustments proposed
that were material in the context of the financial statements as a
whole.
Internal Controls and Risk Management
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness, and has therefore
established an ongoing process designed to meet the particular
needs of the Company in managing the risks to which it is
exposed.
The process is based on a risk-based approach to internal
control through a matrix which identifies the key functions carried
out by the Investment Manager, Operations Manager and other service
providers; the various activities undertaken within those
functions; the risks associated with each activity; and the
controls employed to minimise and mitigate those risks. A scoring
based on 1 to 5 for Likelihood and 1 to 5 for Impact is used and
these are multiplied together to give a total score. Mitigation is
considered on a scale of 1 to 5 and this leads to a residual risk
rating being derived. The matrix is updated on an on-going basis
and reviewed quarterly and the Board considers all material changes
to the risk ratings and the action which has been, or is being,
taken. By their nature, these procedures will provide a reasonable,
but not absolute, assurance against material misstatement or
loss.
At each Board meeting, the Board also monitors the Group's
investment performance and it reviews the Group's activities since
the last Board meeting to ensure that the Investment Manager is
adhering to the Company's investment policy and approved investment
guidelines. The pipeline of new potential opportunities is
considered and the prices paid for new investments during the
quarter are also reviewed.
Further, at each Board meeting, the Board receives reports from
the Company Secretary and Administrator in respect of compliance
matters and duties they have performed on behalf of the
Company.
The Board has considered the need for an internal audit function
and it has decided that the systems and procedures employed by the
Investment Manager, the Operations Manager and the Administrator,
including their own internal review processes and processes in
place in relation to the Company, provide sufficient assurance that
a sound system of internal control, which safeguards the Company's
assets, is maintained. An internal audit function specific to the
Group is therefore considered unnecessary.
The Board recognises that these control systems can only be
designed to manage rather than eliminate the risk of failure to
achieve business objectives, and to provide reasonable, but not
absolute, assurance against material misstatement or loss, and
relies on the operating controls established by the Company's
Administrator, the Investment Manager and the Operations Manager.
The Board considers on a periodic basis whether further third party
assurance is appropriate.
The Investment Manager prepares management accounts and updates
business forecasts on a quarterly basis, which allow the Board to
assess the Company's activities and review its performance. The
Board and the Investment Manager have agreed clearly defined
investment criteria, return targets, risk appetite, and exposure
limits. Reports on these performance measures, coupled with cash
projections and investment valuations, are submitted to the Board
at each quarterly meeting.
The Operations Manager prepares quarterly project performance
and project financial analysis, and highlights the key activities
performed and any specific new risks identified relating to the
operating portfolio for consideration by the Board.
Appointment of the External Auditor
Deloitte LLP was appointed to be external auditor for the TRIG
Group on 19 September 2013, following a competitive tendering
process. This process involved a review of the audit proposals and
interviewing and challenging of each firm.
The objectivity of the external auditor is reviewed by the Audit
Committee which also reviews the terms under which the external
auditor may be appointed to perform non-audit services. The Audit
Committee reviews the scope and results of the audit, its cost
effectiveness and the independence and objectivity of the auditor,
with particular regard to any non-audit work that the auditor may
undertake. In order to safeguard auditor independence and
objectivity, the Audit Committee ensures that any other advisory
and/or consulting services provided by the external auditor does
not conflict with their statutory audit responsibilities.
Advisory and/or consulting services generally only cover reviews
of interim financial statements, tax compliance and capital raising
work. Any non-audit services conducted by the external auditor
outside of these areas which are above GBP20,000 in aggregate in
any period require the consent of the Audit Committee before being
initiated. The external auditor may not undertake any work for the
Company in respect of the following matters - preparation of the
financial statements, valuations used in financial statements,
provision of investment advice, taking management decisions or
advocacy work in adversarial situations.
The Committee reviews the scope and results of the audit, its
cost effectiveness and the independence and objectivity of the
auditors, with particular regard to the level of non-audit fees.
Total fees paid amounted to GBP287,533for the period ended 31
December 2016 of which GBP91,490 related to audit and audit related
services to the Company and its subsidiaries, TRIG UK and TRIG UK
Investments, and GBP196,043 related to audit of the Group's project
subsidiaries and other audit related services. The only non-audit
services provided by Deloitte in the year to the Company and its
subsidiaries are in relation to the review of the interim financial
statements at the half year (GBP26,000).
Notwithstanding such services the Audit Committee considers
Deloitte LLP to be independent of the Company and that the
provision of such non-audit services is not a threat to the
objectivity and independence of the conduct of the audit.
To fulfil its responsibility regarding the independence of the
external auditor, the Audit Committee considered:
-- changes in audit personnel in the audit plan for the current period;
-- a report from the external auditor describing their
arrangements to identify, report and manage any conflicts of
interest; and
-- the extent of non-audit services provided by the external auditor.
To assess the effectiveness of the external audit process, the
Audit Committee reviewed:
-- the external auditor's fulfilment of the agreed audit plan and variations from it;
-- reports highlighting the major issues that arose during the course of the audit; and
-- the effectiveness and independence of the external auditor
having considered the degree of diligence and professional
scepticism demonstrated by them.
The Audit Committee notes the requirements of the UK Corporate
Governance Code and in particular the requirement to put the
external audit out to tender at least every 10 years. This is the
fourth year of Deloitte's appointment as the Company's auditor. The
Audit Partner for the Company is David Becker and he has been in
place for three years.
The Audit Committee is satisfied with Deloitte's effectiveness
and independence as auditor having considered the degree of
diligence and professional scepticism demonstrated by them. As
such, the Committee has not considered it necessary during this
period to conduct a tender process for the appointment of its
auditors for the year ended 31 December 2017.
The Audit Committee confirms that TRIG has complied with the
requirements of The Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014 since it became a
member of the FTSE 350 Index on 18 December 2015 and up to 31
December 2016. Deloitte were appointed as external auditor in 2013
following a competitive process and our Audit Committee terms of
reference are in line with the Order.
The Committee intends to conduct a full review of Deloitte
following the issue of these financial statements as it did in 2016
to ensure that the Committee considers all aspects of the auditor's
service and performance. The outcome of the review in May 2016 was
positive and led to no material concerns over the performance of
the auditor.
Having satisfied itself that the external auditor remain
independent and effective, the Audit Committee has recommended to
the Board that Deloitte LLP be reappointed as auditor for the
period ending 31 December 2017.
Financial Statements
Income statement
For the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
Note GBP'000's GBP'000's
------------------------------- ----- ------------------- -------------------
Total operating income 6 76,026 15,917
Fund expenses 7 (995) (964)
Operating profit for the year 75,031 14,953
Net finance cost 8 (7,128) 2,061
------------------------------- ----- ------------------- -------------------
Profit before tax 67,903 17,014
Income tax credit/(expense) 9 - -
------------------------------- ----- ------------------- -------------------
Profit for the period 10 67,903 17,014
------------------------------- ----- ------------------- -------------------
Attributable to:
Equity holders of the parent 67,903 17,014
------------------------------- ----- ------------------- -------------------
67,903 17,014
------------------------------- ----- ------------------- -------------------
Earnings per share (pence) 10 8.8 3.0
All results are derived from continuing operations.
There is no other comprehensive income or expense apart from
those disclosed above and consequently a statement of comprehensive
income has not been prepared.
Balance sheet As at As at
As at 31 December 2016 31 December 2016 31 December 2015
Note GBP'000's GBP'000's
--------------------------------------------------- ----- ------------------- -------------------
Non-current assets
Investments at fair value through profit or loss 13 817,761 711,604
--------------------------------------------------- ----- ------------------- -------------------
Total non-current assets 817,761 711,604
--------------------------------------------------- ----- ------------------- -------------------
Current assets
Other receivables 14 815 736
Cash and cash equivalents 15 18,537 14,873
--------------------------------------------------- ----- ------------------- -------------------
Total current assets 19,352 15,609
--------------------------------------------------- ----- ------------------- -------------------
Total assets 837,113 727,213
--------------------------------------------------- ----- ------------------- -------------------
Current liabilities
Other payables 16 (2,847) (621)
--------------------------------------------------- ----- ------------------- -------------------
Total current liabilities (2,847) (621)
--------------------------------------------------- ----- ------------------- -------------------
Total liabilities (2,847) (621)
--------------------------------------------------- ----- ------------------- -------------------
Net assets 12 834,266 726,592
--------------------------------------------------- ----- ------------------- -------------------
Equity
Share premium 17 827,650 728,227
Other reserves 17 776 706
Retained reserves 17 5,840 (2,341)
--------------------------------------------------- ----- ------------------- -------------------
Total equity attributable to owners of the parent 12 834,266 726,592
--------------------------------------------------- ----- ------------------- -------------------
Net assets per Ordinary Share (pence) 12 100.1 99.0
The accompanying Notes are an integral part of these financial
statements.
The financial statements were approved and authorised for issue
by the Board of Directors on 20 February 2017, and signed on its
behalf by:
Jon Bridel Helen Mahy CBE
Director Director
Statement of changes in shareholders' equity
For the year ended 31 December 2016
Share premium Other reserves Retained reserves Total equity
GBP'000's GBP'000's GBP'000's GBP'000's
---------------------------------------------- --------------- ---------------- ------------------- --------------
Shareholders' equity at beginning of period 728,227 706 (2,341) 726,592
---------------------------------------------- --------------- ---------------- ------------------- --------------
Profit for the year - - 67,903 67,903
Dividends paid - - (52,987) (52,987)
Scrip shares issued in lieu of dividend 6,735 - (6,735) -
Ordinary Shares issued 92,920 - - 92,920
Costs of Ordinary Shares issued (1,684) - - (1,684)
Ordinary Shares issued in period in lieu of
Management Fees, earned in H2 2015(1) 706 (706) - -
Ordinary Shares issued in period in lieu of
Management Fees, earned in H1 2016(2) 746 - - 746
Ordinary Shares to be issued in lieu of
Management Fees, earned in H2 2016(3) - 776 - 776
Shareholders' equity at end of period 827,650 776 5,840 834,266
---------------------------------------------- --------------- ---------------- ------------------- --------------
For the year ended 31 December 2015
Share premium Other reserves Retained reserves Total equity
GBP'000's GBP'000's GBP'000's GBP'000's
--------------------------- ------------------- ------------------------ --------------------- -------------------
Shareholders' equity at
beginning of period 411,768 428 13,485 425,681
--------------------------- ------------------- ------------------------ --------------------- -------------------
Profit for the year - - 17,014 17,014
Dividends paid - - (28,337) (28,337)
Scrip shares issued in
lieu of dividend 4,503 - (4,503) -
Ordinary Shares issued 315,673 - - 315,673
Costs of Ordinary Shares
issued (4,626) - - (4,626)
Ordinary Shares issued in
period in lieu of
Management Fees, earned
in 2014(4) 428 (428) - -
Ordinary Shares issued in
period in lieu of
Management Fees, earned
in H1 2015(5) 481 - - 481
Ordinary Shares to be
issued in lieu of
Management Fees, earned
in H2 2015(1) - 706 - 706
Shareholders' equity at
end of period 728,227 706 (2,341) 726,592
--------------------------- ------------------- ------------------------ --------------------- -------------------
In line with the Investment Management Agreement and the
Operations Management Agreement, 20 per cent. of the management
fees are to be settled in Ordinary Shares.
1. The GBP705,933 transfer between reserves represents the
736,190 shares that relate to management fees earned in the six
months to 31 December 2015 and were recognised in other reserves at
31 December 2015, and were issued to the Managers during the year,
with the balance being transferred to share premium reserves, on 31
March 2016.
2. The GBP745,506 addition to the share premium reserve
represents the 781,125 shares that relate to management fees earned
in the six months to 30 June 2016 and were issued to the Managers
on 30 September 2016.
3. As at 31 December 2016, 787,847 shares equating to
GBP776,325, based on a Net Asset Value ex dividend of 98.54 pence
per share (the Net Asset Value at 31 December 2016 of 100.1 pence
per share less the interim dividend of 1.5625 pence per share) were
due but had not been issued. The Company intends to issue these
shares to the Managers around 31 March 2016.
4. The GBP428,054 transfer between reserves represents the
431,070 shares that relate to management fees earned in the six
months to 31 December 2014 and were recognised in other reserves at
31 December 2014, and were issued to the Managers during the year,
with the balance being transferred to share premium reserves, on 31
March 2015.
5. The GBP480,556 addition to the share premium reserve
represents the 483,455 shares that relate to management fees earned
in the six months to 30 June 2015 and were issued to the Managers
on 31 September 2015.
Cash flow statement Year ended Year ended
For the year ended 31 December 2016 31 December 2016 31 December 2015
Note GBP'000's GBP'000's
------------------------------------------------------- ------ ------------------- -------------------
Cash flows from operating activities
Profit before tax 10 67,903 17,014
Adjustments for:
(Gain)/loss on investments 6, 13 (38,675) 12,120
Investment income 6, 13 (37,351) (28,037)
Movement in other reserves relating to Manager shares 70 278
Accrued share issue costs 62 275
Exchange gains/ (losses) on FX hedges (4,875) 3,176
Finance and other income 8 7,128 (2,061)
Operating cash flow before changes in working capital (5,738) 2,765
Changes in working capital:
Decrease/ (increase) in receivables (78) (280)
(Decrease)/increase in payables (64) (214)
------------------------------------------------------- ------ ------------------- -------------------
Cash flow from operations (5,880) 2,271
Interest and principal received from investments 13 47,395 24,037
Interest income 36 73
------------------------------------------------------- ------ ------------------- -------------------
Net cash from operating activities 41,551 26,381
------------------------------------------------------- ------ ------------------- -------------------
Cash flows from investing activities
Purchases of investments 13 (77,526) (307,275)
Net cash used in investing activities (77,526) (307,275)
------------------------------------------------------- ------ ------------------- -------------------
Cash flows from financing activities
Proceeds from issue of share capital during period 94,372 316,582
Costs in relation to issue of shares (1,746) (4,903)
Dividends paid to shareholders 11 (52,987) (28,337)
Net cash from financing activities 39,639 283,342
------------------------------------------------------- ------ ------------------- -------------------
Net increase in cash and cash equivalents 3,664 2,448
------------------------------------------------------- ------ ------------------- -------------------
Cash and cash equivalents at beginning of period 15 14,873 12,425
Exchange gains on cash - -
------------------------------------------------------- ------ ------------------- -------------------
Cash and cash equivalents at end of period 15 18,537 14,873
------------------------------------------------------- ------ ------------------- -------------------
The accompanying Notes are an integral part of these financial
statements.
1. General information
The Renewables Infrastructure Group Limited ("TRIG" or the
"Company") is a closed ended investment company incorporated in
Guernsey under Section 20 of the Companies (Guernsey) Law, 2008.
The shares are publically traded on the London Stock Exchange under
a premium listing. Through its subsidiaries, The Renewables
Infrastructure Group (UK) Limited ("TRIG UK"), and The Renewables
Infrastructure Group (UK) Investments Limited ("TRIG UK I"), TRIG
invests in operational renewable energy generation projects,
predominantly in onshore wind and solar PV segments, across the UK
and Northern Europe. The Company, TRIG UK and its portfolio of
investments are known as the "Group".
These financial statements are for the year ended 31 December
2016 and comprise only the results of the Company as all of its
subsidiaries are measured at fair value as explained below in Note
2 (a).
2. Key accounting policies
(a) Basis of preparation
The financial statements were approved and authorised for issue
by the Board of Directors on 20 February 2017.
The financial statements, which give a true and fair view, have
been prepared in compliance with the Companies (Guernsey) Law, 2008
and in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") using the
historical cost basis, except that the financial instruments
classified at fair value through profit or loss are stated at their
fair values. All accounting policies have been applied consistently
in these financial statements.
The financial statements are presented in sterling, which is the
Company's functional currency. Foreign operations are included in
accordance with the policies set out in this note.
The preparation of financial statements in conformity with IFRS
as adopted by the EU requires the Directors to make judgements,
estimates and assumptions that affect the application of policies
and the reported amounts of assets and liabilities, income and
expense. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
Note 3 shows critical accounting judgements, estimates and
assumptions.
New and revised accounting standards have been published and
will be mandatory for the Company's accounting periods beginning on
or after 1 January 2017 or later periods. However the impact of
these standards is not expected to be material to the reported
results and financial position of the Company.
(b) Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report and also commented on in the
Viability Statement contained in the Directors' Report on page 57.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Financial
Results on pages 75 to 78. In addition, Notes 1 to 4 of the
financial statements include the Group's objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity
risk.
The Group has a range of long-term contracts with various major
UK and European utilities and well-established suppliers across a
range of infrastructure projects. In addition, the Company
maintains a prudent level of leverage, limited to 30% of portfolio
value, and the Group's project-level financing, limited to 50% of
Gross Portfolio Value, is non-recourse to the Company. As a
consequence, the Directors believe that the Group is well placed to
manage its business risks successfully.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they adopt the going concern basis of
accounting in preparing the annual financial statements.
(c) Basis of consolidation
The Company applies IFRS 10 'Consolidated Financial Statements',
and as an investment entity is required to measure all of its
subsidiaries at fair value. The financial statements therefore
comprise the results of the Company only. Subsidiaries are those
entities controlled by the Company. The Company has control of an
investee, when it is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to
affect those returns through its power over the investee as defined
in IFRS 10 'Consolidated Financial Statements'.
The Directors believe it is appropriate and relevant to the
investor to account for the investment portfolio at fair value,
where consolidating it would not be.
The Company's subsidiaries, TRIG UK and TRIG UK I, carry out
investment activities and incur overheads and borrowings on behalf
of the Group. The Directors therefore provide an alternative
presentation of the Company's results in the Strategic Report on
pages 31 to 35 prepared under the "Expanded basis", which includes
the consolidation of TRIG UK and TRIG UK I.
An entity shall consider all facts and circumstances when
assessing whether it is an investment entity, including its purpose
and design. Under the definition of an investment entity, as set
out in paragraph 27 in the standard, the entity must satisfy all
three of the following tests:
I. Obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
and
II. Commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both (including having an exit strategy for
investments); and
III. Measure and evaluate the performance of substantially all
of its investments on a fair value basis.
Being an investment entity, TRIG UK and TRIG UK I are measured
at fair value as opposed to being consolidated on a line-by-line
basis, meaning its cash, debt and working capital balances are
included in the fair value of investments rather than the Group's
current assets.
The Directors are of the opinion that the Company has all the
typical characteristics of an investment entity and meets the
definition in the standard.
(d) Financial instruments
Financial assets and liabilities are recognised on the balance
sheet when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised
when the contractual rights to the cash flows from the instrument
expire or the asset is transferred and the transfer qualifies for
derecognition in accordance with IAS 39 'Financial instruments:
Recognition and measurement'.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in
equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings, and trade and other
payables.
Non-derivative financial instruments are recognised initially at
fair value including directly attributable transaction costs.
Subsequent to initial recognition, non-derivative financial
instruments are measured as described below.
Investments in equity and debt securities
Investments in the equity and loanstock of entities engaged in
renewable energy activities are designated at fair value through
profit or loss.
The Group manages these investments and makes purchase and sale
decisions based on their fair value.
The initial difference between the transaction price and the
fair value, derived from using the discounted cash flows
methodology at the date of acquisition, is recognised only when
observable market data indicates there is a change in a factor that
market participants would consider in setting the price of that
investment. After initial recognition, investments at fair value
through profit or loss are measured at fair value with changes
recognised in the income statement.
The Directors consider the equity and loanstock to share the
same investment characteristics and risks and they are therefore
treated as a single unit of account for valuation purposes and a
single class for disclosure purposes.
(e) Impairment
Financial assets
Financial assets, other than those at fair value through profit
or loss, are assessed for indicators of impairment at each balance
sheet date. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount, and the present value of the estimated future cash flows
discounted at the original effective interest rate. Significant
financial assets are tested for impairment on an individual basis.
The remaining financial assets are assessed collectively in groups
that share similar credit risk characteristics. All impairment
losses are recognised in the income statement. An impairment loss
is reversed if the reversal can be related objectively to an event
occurring after the impairment loss was recognised. For financial
assets measured at amortised cost the reversal is recognised in the
income statement.
(f) Share capital and share premium
Ordinary Shares are classified as equity. Costs directly
attributable to the issue of new shares or associated with the
establishment of the Company that would otherwise have been avoided
are written-off against the value of the ordinary share
premium.
(g) Cash and cash equivalents
Cash and cash equivalents comprises cash balances, deposits held
on call with banks and other short-term, highly liquid investments
with original maturities of three months or less. Bank overdrafts
that are repayable on demand are included as a component of cash
and cash equivalents for the purpose of the cash flow
statement.
(h) Investment income
Income from investments relates solely to returns from the
Company's subsidiary, TRIG UK. This is recognised when the right to
receive interest income is determined on an accruals basis and
dividends when these are received.
(i) Income tax
Under the current system of taxation in Guernsey, the Company is
exempt from paying taxes on income, profits or capital gains.
(j) Foreign exchange gains and losses
Transactions entered into by the Company in a currency other
than its functional currency are recorded at the rates ruling when
the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the balance sheet
date. Exchange differences arising on the retranslation of
unsettled monetary assets and liabilities are recognised
immediately in the income statement.
(k) Segmental reporting
The Chief Operating Decision Maker (the "CODM") is of the
opinion that the Group is engaged in a single segment of business,
being investment in renewable infrastructure to generate investment
returns while preserving capital. The financial information used by
the CODM to allocate resources and manage the Group presents the
business as a single segment comprising a homogeneous
portfolio.
(l) Fund expenses
All expenses are accounted for on an accruals basis. The
Company's investment management and administration fees (refer to
Note 7), finance costs and all other expenses are charged through
the income statement.
(m) Acquisition costs
In line with IFRS 3 (Revised), acquisition costs are expensed to
the income statement as incurred.
(n) Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends, this is when they are paid. For
scrip dividends, where the Company issues shares with an equal
value to the cash dividend amount as an alternative to the cash
dividend, a credit to equity is recognised when the shares are
issued.
(o) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey)
Law, 1987 the Company is a Registered Closed-Ended Investment
Scheme. As an authorised scheme, the Company is subject to certain
on-going obligations to the Guernsey Financial Services Commission
and meets its compliance requirements.
(p) Share-based payments
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated
reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at that date the entity
obtains the goods or the counterparty renders the service.
3. Critical accounting judgements, estimates and assumptions
The preparation of financial statements in accordance with IFRS
requires management to make judgements, estimates and assumptions
in certain circumstances that affect reported amounts. The
judgements, estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial period are outlined
below.
Investments at fair value through profit or loss
IFRS 13 establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. Fair
value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Board base
the fair value of the investments on information received from the
Investment Manager. Fair value is calculated on a discounted cash
flow basis.
Fair values for those investments for which a market quote is
not available, in this instance being all investments, are
determined using the income approach, which discounts the expected
cash flows at the appropriate rate. In determining the discount
rate, regard is had to relevant long-term government bond yields,
specific risks associated with the technology (on-shore wind and
solar) and geographic location of the underlying investment, and
the evidence of recent transactions. The investments at fair value
through profit or loss, whose fair values include the use of level
3 inputs, are valued by discounting future cash flows from
investments in both equity (dividends and equity redemptions) and
subordinated loans (interest and repayments) to the Group at an
appropriate discount rate.
The weighted average discount rate applied in the December 2016
valuation was 8.4% (2015: 9.0%). The discount rate is considered
one of the most significant unobservable inputs through which an
increase or decrease would have a material impact on the fair value
of the investments at fair value through profit or loss.
The other material impacts on the measurement of fair value are
the forward looking power price curve and energy yields which are
further discussed in Note 4 under sensitivities.
By virtue of the Company's status as an investment fund, and in
conjunction IFRS 10 for investment entities, investments are
designated upon initial recognition to be accounted for at fair
value through profit or loss.
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statement are approximately equal to their
fair values.
4. Financial instruments
Financial risk management
The objective of the Group's financial risk management is to
manage and control the risk exposures of its investment portfolio.
The Board of Directors has overall responsibility for overseeing
the management of financial risks, however the review and
management of financial risks are delegated to the Investment
Manager, which has documented procedures designed to identify,
monitor and manage the financial risks to which the Group is
exposed. Note 4 presents information about the Group's exposure to
financial risks, its objectives, policies and processes for
managing risk and the Group's management of its financial
resources.
Through its subsidiaries, TRIG UK and TRIG UK I, the Company
invests in a portfolio of investments predominantly in the
subordinated loanstock and ordinary equity of project finance
companies. These companies are structured at the outset to minimise
financial risks where possible, and the Investment Manager
primarily focuses their risk management on the direct financial
risks of acquiring and holding the portfolio but continues to
monitor the indirect financial risks of the underlying projects
through representation, where appropriate, on the Boards of the
project companies, and the receipt of regular financial and
operational performance reports.
Interest rate risk
The Group invests in subordinated loanstock of project
companies, usually with fixed interest rate coupons. The
portfolio's cash flows are continually monitored and reforecast,
both over the near future and the long-term, to analyse the cash
flow returns from investments. The Group may use borrowings to
finance the acquisition of investments and the forecasts are used
to monitor the impact of changes in borrowing rates against cash
flow returns from investments as increases in borrowing rates will
reduce net interest margins.
The Group's policy is to ensure that interest rates are
sufficiently hedged to protect the Group's net interest margins
from significant fluctuations when entering into material
medium/long-term borrowings. This includes engaging in interest
rate swaps or other interest rate derivative contracts.
The Company has an indirect exposure to changes in interest
rates through its investment in project companies, many of which
are financed by senior debt. Senior debt financing of project
companies is generally either through floating rate debt, fixed
rate bonds or index linked bonds. Where senior debt is floating
rate, the projects typically have similar length hedging
arrangements in place, which are monitored by the project
companies' managers, finance parties and boards of directors.
Inflation risk
The Group's project companies are generally structured so that
contractual income and costs are either wholly or partially linked
to specific inflation, where possible, to minimise the risks of
mismatch between income and costs due to movements in inflation
indexes. The Group's overall cash flows vary with inflation,
although they are not directly correlated as not all flows are
indexed. The effects of these inflation changes do not always
immediately flow through to the Group's cash flows, particularly
where a project's loanstock debt carries a fixed coupon and the
inflation changes flow through by way of changes to dividends in
future periods. The sensitivity of the portfolio valuation is shown
further on in Note 4.
Market risk
Returns from the Group's investments are affected by the price
at which the investments are acquired. The value of these
investments will be a function of the discounted value of their
expected future cash flows, and as such will vary with, inter alia,
movements in interest rates, market prices and the competition for
such assets.
Currency risk
The projects, in which the Group invests, all conduct their
business and pay interest, dividends and principal in sterling,
with the exception of the euro-denominated investments which at 31
December 2016 comprised 15% (2015: 8%) of the portfolio by value.
The sensitivity of the portfolio valuation is shown in Note 4.
The Group monitors its foreign exchange exposures using its
near-term and long-term cash flow forecasts. Its policy is to use
foreign exchange hedging to provide protection to the level of
sterling distributions that the Company aims to pay over the
medium-term, where considered appropriate. This may involve the use
of forward exchange.
Credit risk
Credit risk is the risk that a counterparty of the Group will be
unable or unwilling to meet a commitment that it has entered into
with the Group.
The credit standing of subcontractors is reviewed, and the risk
of default estimated for each significant counterparty position.
Monitoring is on-going, and period end positions are reported to
the Board on a quarterly basis. The Group's largest credit risk
exposure to a project at 31 December 2016 was to the Crystal Rig II
project, representing 11% (2015: Crystal Rig II project,
representing 12%) of the portfolio by value, and the largest
subcontractor counterparty risk exposure was to Siemens who
provided turbine maintenance services in respect of 45% (2015:
Siemens 49%) of the portfolio by value.
The Group's investments enter into Power Price Agreements
("PPA") with a range of providers through which electricity is
sold. The largest PPA provider to the portfolio at 31 December 2016
was EDF who provided PPAs to projects in respect of 25% (2015: EDF
19%) of the portfolio by value.
At 31 December 2016, there were no loans and other receivables
considered impaired for the Group.
The Group's maximum exposure to credit risk over financial
assets is the carrying value of those assets in the balance sheet.
The Group does not hold any collateral as security.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible,
that it will have sufficient financial resources and liquidity to
meets its liabilities when due. The Group ensures it maintains
adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and
liabilities. The Group's investments are predominantly funded by
share capital and medium-term debt funding.
The Group's investments are generally in private companies, in
which there is no listed market and therefore such investment would
take time to realise, and there is no assurance that the valuations
placed on the investments would be achieved from any such sale
process.
The Group's investments have borrowings which rank senior and
have priority over the Group's own investments into the companies.
This senior debt is structured such that, under normal operating
conditions, it will be repaid within the expected life of the
projects. Debt raised by the investment companies from third
parties is without recourse to the Group.
At 31 December 2016, the Company itself did not have any
outstanding debt. The Group's revolving acquisition facility, which
was undrawn at 31 December 2016, is held by TRIG UK and TRIG UK I,
is guaranteed by the Company. The facility is in place until
September 2019.
Capital management
TRIG UK, the Company's subsidiary, entered into an GBP80m
revolving acquisition facility on 20 February 2014, which was
extended to GBP120m on 3 February 2015 and further to GBP150m on 25
June 2015. The facility was renewed on 23 April 2016 and was
undrawn at 31 December 2016 (2015: GBP0m).
The Group makes prudent use of its leverage. Under the
investment policy, borrowings, including any financial guarantees
to support outstanding subscription obligations but excluding
internal Group borrowings of the Group's underlying investments,
are limited to 30% of the portfolio value.
From time to time, the Company issues its own shares to the
market; the timing of these purchases depends on market prices.
In order to assist in the narrowing of any discount to the Net
Asset Value at which the Ordinary Shares may trade, from time to
time the Company may at the sole discretion of the Directors:
-- make market purchases of up to 14.99% per annum of its issued
Ordinary Shares; and
-- make tender offers for the Ordinary Shares.
There were no changes in the Group's approach to capital
management during the year.
Fair value estimation
The following summarises the significant methods and assumptions
used in estimating the fair values of financial instruments:
Non-derivative financial instruments
The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date.
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. The
Group uses the income approach, which discounts the expected cash
flows attributable to each asset at an appropriate rate to arrive
at fair values. In determining the discount rate, regard is had to
relevant long-term government bond yields, the specific risks of
each investment and the evidence of recent transactions.
Derivative financial instruments
The fair value of financial instruments inputs other than quoted
prices traded in active markets is based on quoted market prices at
the balance sheet date. The quoted market price used for financial
assets held by the Group is the current bid price. Note 2 discloses
the methods used in determining fair values on a specific
asset/liability basis. Where applicable, further information about
the assumptions used in determining fair value is disclosed in the
notes specific to that asset or liability.
Classification of financial instruments
31 December 2016 31 December 2015
GBP'000s GBP'000s
-------------------------------------------------- ----------------- -----------------
Financial assets
Designated at fair value through profit or loss:
Investments 817,761 711,604
Other financial assets - -
-------------------------------------------------- ----------------- -----------------
Financial assets at fair value 817,761 711,604
--------------------------------------------------- ----------------- -----------------
At amortised cost:
Other receivables 815 736
Cash and cash equivalents 18,537 14,873
-------------------------------------------------- ----------------- -----------------
Financial assets at amortised cost 19,352 15,609
--------------------------------------------------- ----------------- -----------------
Financial liabilities
Designated at fair value through profit or loss:
Other financial liabilities 2,633 344
-------------------------------------------------- ----------------- -----------------
Financial liabilities at fair value 2,633 344
--------------------------------------------------- ----------------- -----------------
At amortised cost:
Other payables 214 277
Financial liabilities at amortised cost 214 277
--------------------------------------------------- ----------------- -----------------
The Directors believe that the carrying values of all financial
instruments are not materially different to their fair values.
Other financial assets/liabilities represent the fair value of
foreign exchange forward agreements in place at the year end.
Fair value hierarchy
The fair value hierarchy is defined as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices)
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
As at 31 December 2016
Level 1 Level 2 Level 3 Total
GBP'000's GBP'000's GBP'000's GBP'000's
-------------------------------------------------- --------------- ---------- ---------- ----------
Investments at fair value through profit or loss - - 817,761 817,761
Other financial assets - - - -
--------------- ---------- ---------- ----------
- - 817,761 817,761
------------------------------------------------------------------ ---------- ---------- ----------
Other financial liabilities - 2,633 - 2,633
--------------- ---------- ---------- ----------
- 2,633 - 2,633
------------------------------------------------------------------ ---------- ---------- ----------
As at 31 December 2015
Level 1 Level 2 Level 3 Total
GBP'000's GBP'000's GBP'000's GBP'000's
-------------------------------------------------- --------------- -------------- -------------- ----------
Investments at fair value through profit or loss - - 711,604 711,604
Other financial assets - - - -
--------------- -------------- -------------- ----------
- - 711,604 711,604
------------------------------------------------------------------ -------------- -------------- ----------
Other financial liabilities - 344 - 344
--------------- -------------- -------------- ----------
- 344 - 344
------------------------------------------------------------------ -------------- -------------- ----------
Other financial assets/liabilities represent the fair value of
foreign exchange forward agreements in place at the year end.
Investments at fair value through profit or loss comprise the
fair value of the investment portfolio, on which the sensitivity
analysis is calculated, and the fair value of TRIG UK and TRIG UK
I, the Company's subsidiaries being its cash, working capital and
debt balances.
31 December 2016 31 December 2015
GBP'000's GBP'000's
Portfolio value 818,672 712,284
TRIG UK and TRIG UK I
Cash 188 347
Working capital (2,343) (2,762)
Debt(1) 1,244 1,735
----------------- -----------------
(911) (680)
Investments at fair value through profit or loss 817,761 711,604
----------------- -----------------
1 Debt arrangement costs of GBP1,244k (2015: GBP1,735k) have
been netted off the GBPNil (2015: GBPNil) debt drawn by TRIG
UK.
Level 2
Valuation methodology
Fair value is based on price quotations from financial
institutions active in the relevant market. The key inputs to the
discounted cash flow methodology used to derive fair value include
foreign currency exchange rates and foreign currency forward
curves. Valuations are performed on a six monthly basis every June
and December for all financial assets and all financial
liabilities.
Level 3
Valuation methodology
The Investment Manager has carried out fair market valuations of
the investments as at 31 December 2016 and the Directors have
satisfied themselves as to the methodology used, the discount rates
and key assumptions applied, and the valuation. All investments are
at fair value through profit or loss and are valued using a
discounted cash flow methodology.
The following economic assumptions were used in the discounted
cash flow valuations at:
31 December 2016 31 December 2015
--------------------------------------- ------------------------------------- --------------------------------------
UK inflation rates 2.75% 2.75%
--------------------------------------- ------------------------------------- --------------------------------------
Ireland and France inflation rates 2.00% 2.00%
--------------------------------------- ------------------------------------- --------------------------------------
UK, Ireland and France deposit 1.00% to 31 March 2021, 2.00% 1.00% to 31 March 2019, 2.50%
interest rates thereafter thereafter
--------------------------------------- ------------------------------------- --------------------------------------
UK corporation tax rate 20.00%, reducing to 19% from 1 April 20.00%, reducing to 19% from 1 April
2017 and then to 17% from 1 April 2017 and then to 18% from 1 April
2020 2020
--------------------------------------- ------------------------------------- --------------------------------------
France corporation tax rate 33.3% + 1.1% above EUR763,000 33.3% + 1.1% above EUR763,000
threshold threshold
--------------------------------------- ------------------------------------- --------------------------------------
Ireland corporation tax rate 12.5% active rate, 25% passive rate 12.5% active rate, 25% passive rate
--------------------------------------- ------------------------------------- --------------------------------------
Euro/sterling exchange rate 1.1709 1.3569
--------------------------------------- ------------------------------------- --------------------------------------
Energy yield assumptions P50 case P50 case
--------------------------------------- ------------------------------------- --------------------------------------
Discount rates
The discount rates used for valuing each renewable
infrastructure investment are based on market information and the
current bidding experience of the Group and its Managers.
The weighted average portfolio valuation discount rate used for
valuing the projects in the portfolio is 8.4% (2015: 9.0%) and a
change by plus or minus 0.5% has the following effect:
Discount rate -0.5% change Total Portfolio Value +0.5% change
================================ ======================== ====================== =============
Directors' valuation - Dec 2016 +GBP32.0m GBP818.7 (GBP30.1m)
================================ ======================== ====================== =============
Directors' valuation - Dec 2015 +GBP28.5m GBP712.3m (GBP27.0m)
================================ ======================== ====================== =============
Power Price
The power price forecasts are based on the base case assumptions
from the valuation date and throughout the operating life of the
portfolio. The base case power pricing is based on the current
forecast real price reference curve data provided by a leading
power price forecaster, adjusted to reflect the value the market
will place on such generation in an arm's length transaction.
A change in the forecast electricity price assumptions by plus
or minus 10% has the following effect:
Power Price -10% change Total Portfolio Value +10% change
================================ ======================= ====================== ============
Directors' valuation - Dec 2016 (GBP63.6m) GBP818.7 +GBP64.3m
================================ ======================= ====================== ============
Directors' valuation - Dec 2015 (GBP56.0m) GBP712.3m +GBP55.8m
================================ ======================= ====================== ============
Energy Yield
The portfolio's aggregate production outcome for a 10 year
period would be expected to fall somewhere between a P90 10 year
exceedance (downside case) and a P10 10 year exceedance (upside
case), refer to Section 2.7 of the Strategic Report on page 39.
The effect of a P90 10 year exceedance and of a P10 10 year
exceedance, applied to all future years, would have the following
effect:
Energy Yield P90 10 year exceedance Total Portfolio Value P10 10 year exceedance
================================ ======================= ====================== =======================
Directors' valuation - Dec 2016 (GBP80.4m) GBP818.7 +GBP77.8m
================================ ======================= ====================== =======================
Directors' valuation - Dec 2015 (GBP78.5m) GBP712.3m +GBP77.0m
================================ ======================= ====================== =======================
Inflation rates
The portfolio valuation assumes long-term inflation of 2.75% per
annum for UK investments, and 2.00% per annum for France and
Republic of Ireland investments.
Inflation assumption -0.5% change Total Portfolio Value +0.5% change
================================ ======================== ====================== =============
Directors' valuation - Dec 2016 (39.8m) GBP818.7 +GBP45.0m
================================ ======================== ====================== =============
Directors' valuation - Dec 2015 (GBP35.0m) GBP712.3m +GBP39.2m
================================ ======================== ====================== =============
Operating costs
The table below shows the sensitivity of the portfolio to
changes in operating costs by plus or minus 10% at project company
level.
Operating costs -10% change Total Portfolio Value +10% change
================================ ======================= ====================== ============
Directors' valuation - Dec 2016 +GBP27.9m GBP818.7 (GBP27.9m)
================================ ======================= ====================== ============
Directors' valuation - Dec 2015 +GBP23.0m GBP712.3m (GBP23.2m)
================================ ======================= ====================== ============
Taxation rates
The table below shows the sensitivity of the portfolio to
changes in taxation rates by plus or minus 2% at project company
level for companies in the UK, Northern Ireland and Ireland.
Taxation rates -2% change Total Portfolio Value +2% change
================================ ====================== ====================== ===========
Directors' valuation - Dec 2016 +GBP14.0m GBP818.7 (GBP14.0m)
================================ ====================== ====================== ===========
Interest rates
The table below shows the sensitivity of the portfolio to
changes in interest rates by plus 2% or minus 1% at project company
level.
Interest rates -1% change Total Portfolio Value +2% change
================================ ====================== ====================== ===========
Directors' valuation - Dec 2016 +GBP1.9m GBP818.7 (GBP3.8m)
================================ ====================== ====================== ===========
Currency rates
The spot rate used for the 31 December 2016 valuation, from euro
to sterling, was 1.1709 (2015: 1.3569).
A change to this currency rate by plus or minus 10% has the
following effect:
Currency rates -10% change Total Portfolio Value +10% change
================================ ======================= ====================== ============
Directors' valuation - Dec 2016 (GBP5.3m) GBP818.7 +GBP5.3m
================================ ======================= ====================== ============
Directors' valuation - Dec 2015 (GBP2.6m) GBP712.3m +GBP2.6m
================================ ======================= ====================== ============
5. Segment reporting
The Chief Operating Decision Maker (the "CODM") is of the
opinion that the Group is engaged in a single segment of business,
being investment in renewable infrastructure to generate investment
returns while preserving capital. The financial information used by
the CODM to allocate resources and manage the Group presents the
business as a single segment comprising a homogeneous
portfolio.
6. Total operating income
For year ended For year ended
31 December 31 December
2016 2015
Total Total
GBP'000s GBP'000s
----------------------------- ---------------- ----------------
Interest income 37,351 28,037
Gain/ (loss) on investments 38,675 (12,120)
----------------------------- ---------------- ----------------
76,026 15,917
----------------------------- ---------------- ----------------
On the Expanded basis, which includes TRIG UK and TRIG UK I, the
Company's subsidiaries, that the Directors consider to be an
extension of the Company's investment activity, total operating
income is GBP88,235k (2015: GBP27,284k). The reconciliation from
the IFRS basis to the expanded basis is shown in Section 2.6 of the
Strategic Report on page 32.
7. Fund expenses
For year ended For year ended
31 December 31 December
2016 2015
Total Total
GBP'000s GBP'000s
----------------------------------------------------------------- ---------------- ---------------------------------
Fees payable to the Company's auditors for the audit of the
Group accounts 57 52
Investment and management fees (Note 18) 200 200
Directors' fees (Note 18) 188 167
Other costs 550 545
----------------------------------------------------------------- ---------------- ---------------------------------
995 964
----------------------------------------------------------------- ---------------- ---------------------------------
Included within Other costs, GBP26k (2015: GBP28k) was paid to
Deloitte LLP in respect of the interim review of the Group
accounts.
In addition to the above, GBP205k (2015: GBP189k) was paid to
Deloitte LLP (the Company's auditor) in respect of audit services
provided to unconsolidated subsidiaries and therefore is not
included within fund expenses above.
On the Expanded basis, fund expenses are GBP8,923k (2015:
GBP7,196k); the difference being the costs incurred within TRIG UK
and TRIG UK I, the Company's subsidiaries. The reconciliation from
the IFRS basis to the Expanded basis is shown in Section 2.6 of the
Strategic Report on page 32.
The Company had no employees during the current or prior period.
The Company has appointed the Investment Manager and the Operations
Manager to manage the portfolio, the Company and its subsidiaries,
on its behalf.
8. Finance and other income
For year ended For year ended
31 December 31 December
2016 2015
Total Total
GBP'000s GBP'000s
---------------------------------------------------- ---------------- --------------------------------
Interest income:
Interest on bank deposits 36 73
---------------------------------------------------- ---------------- --------------------------------
Total finance income 36 73
---------------------------------------------------- ---------------- --------------------------------
(Loss)/ gain on foreign exchange:
Realised (loss)/ gain on settlement of FX forwards (4,993) 3,097
Fair value loss of FX forward contracts (2,289) (1,188)
Other foreign exchange gain 118 79
---------------------------------------------------- ---------------- --------------------------------
Total gain/ (loss) on foreign exchange (7,164) 1,988
---------------------------------------------------- ---------------- --------------------------------
Finance and other income/ (expense) (7,128) 2,061
---------------------------------------------------- ---------------- --------------------------------
On the Expanded basis, finance income is GBP47k (2015: GBP91k)
and finance costs are GBP3,895k (2015: GBP3,994k); the difference
being the Group's acquisition facility costs which are incurred
within TRIG UK, the Company's subsidiary. These costs are shown in
Section 2.6 of the Strategic Report on page 32.
9. Income tax
Under the current system of taxation in Guernsey, the Company is
exempt from paying taxes on income, profits or capital gains.
Therefore, income from investments is not subject to any further
tax in Guernsey, although these investments will bear tax in the
individual jurisdictions in which they operate.
10. Earnings per share
Earnings per share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of Ordinary Shares in issue during the period.
31 December 31 December
2016 2015
'000's '000's
Profit attributable to equity holders of the Company GBP67,903 GBP17,014
Weighted average number of Ordinary Shares in issue 771,406 565,195
Earnings per Ordinary Share 8.8p 3.0p
------------------------------------------------------ ------------- ---------------------------
Further details of shares issued in the period are set out in
Note 17.
11. Dividends
31 December 31 December
2016 2015
GBP'000s GBP'000s
----------------------------------------------------------------------------------------- ------------ -------------
Amounts recognised as distributions to equity holders during the year:
Interim dividend for the 6 month period ended 31 December 2014 of 3.08p (2013: 2.5p) per
share 12,797
Interim dividend for the 6 month period ended 30 June 2015 of 3.08p (2014: 3.0p) per
share 20,043
Interim dividend for the 6 month period ended 31 December 2015 of 3.11p 22,791
Interim dividend for the 3 month period ended 31 March 2016 of 1.5625p 11,974
Interim dividend for the 3 month period ended 30 June 2016 of 1.5625p 11,975
Interim dividend for the 3 month period ended 30 September 2016 of 1.5625p 12,982
----------------------------------------------------------------------------------------- ------------ -------------
59,722 32,840
Dividends settled as a scrip dividend alternative 6,735 4,503
Dividends settled in cash 52,987 28,337
----------------------------------------------------------------------------------------- ------------ -------------
59,722 32,840
----------------------------------------------------------------------------------------- ------------ -------------
On 8 February 2017, the Company declared an interim dividend of
1.5625 pence per share for the period 1 October 2016 to 31 December
2016. The total dividend, GBP13,015,600, payable on 31 March 2017,
is based on a record date of 16 February 2017 and the number of
shares in issue at that time being 832,998,413.
31 December 31 December
2016 2015
------------------------------------------------------ ------------ ------------
Interim dividend for the period ended June 2015 3.08p
Interim dividend for the period ended December 2015 3.11p
Interim dividend for the period ended March 2016 3.11
Interim dividend for the period ended June 2016 1.5625
Interim dividend for the period ended September 2016 1.5625
Interim dividend for the period ended December 2016 1.5625
------------------------------------------------------ ------------ ------------
7.7975p 6.19p
------------------------------------------------------ ------------ ------------
12. Net assets per Ordinary Share
31 December 31 December
2016 2015
'000's '000's
----------------------------------------------------------------------------- ------------ -------------------------
Shareholders' equity at balance sheet date GBP834,266 GBP726,592
----------------------------------------------------------------------------- ------------ -------------------------
Number of shares at balance sheet date, including management shares accrued
but not yet issued 833,786 733,574
----------------------------------------------------------------------------- ------------ -------------------------
Net Assets per Ordinary Share at balance sheet date 100.1p 99.0p
----------------------------------------------------------------------------- ------------ -------------------------
In line with the Investment Management Agreement and the
Operations Management Agreement, 20 per cent of the Group's
management fees are to be settled in Ordinary Shares. Shares are
issued to the Investment Manager and the Operations Manager twice a
year in arrears, usually in March and September for the half year
ending December and June, respectively.
As at 31 December 2016, 787,847 shares equating to GBP776,325,
based on a Net Asset Value ex dividend of 98.54 pence per share
(the Net Asset Value at 31 December 2016 of 100.1 pence per share
less the interim dividend of 1.5625 pence per share) were due but
had not been issued. The Company intends to issue these shares
around 31 March 2017.
In view of this, the denominator in the above Net assets per
Ordinary Share calculation is as follows;
31 December 31 December
2016 2015
'000's '000's
Ordinary Shares in issue at balance sheet date 832,998 732,838
Number of shares to be issued in lieu of Management fees 788 736
-------------------------------------------------------------------------- ------------- ------------
Total number of shares used in Net Assets per Ordinary Share calculation 833,786 733,574
-------------------------------------------------------------------------- ------------- ------------
13. Investments at fair value through profit or loss
Investments at fair value through profit or loss is the sum of
the portfolio valuation and the carrying amount of TRIG UK and TRIG
UK I, the Company's subsidiaries.
31 December 31 December
2016 2015
GBP'000s GBP'000s
--------------------------- ------------- ------------
Brought forward 711,604 412,449
Investments in the year 77,526 307,275
Distributions received (47,395) (24,037)
Interest income 37,351 28,037
Gain/ (loss) on valuation 38,675 (12,120)
Carried forward 817,761 711,604
--------------------------- ------------- ------------
The following information is non-statutory. It provides
additional information to users of the financial statements,
splitting the fair value movements between the investment portfolio
and TRIG UK, the Company's subsidiary that was previously
consolidated.
31 December 31 December
2016 2015
GBP'000s GBP'000s
-------------------------------------------------------- ------------- ------------
Fair value of investment portfolio
Brought forward value of investment portfolio 712,284 472,870
Investments in the year 77,667 254,485
Distributions received (59,467) (42,355)
Interest income 24,435 20,772
Dividend income 1,959 5,341
Gain on valuation 61,794 1,171
-------------------------------------------------------- ------------- ------------
Carried forward value of investment portfolio 818,672 712,284
-------------------------------------------------------- ------------- ------------
Fair value of TRIG UK
Brought forward value of TRIG UK (680) (60,421)
Cash movement (159) (106)
Working capital movement 419 (722)
Debt movement(1) (491) 60,569
-------------------------------------------------------- ------------- ------------
Carried forward value of TRIG UK (911) (680)
-------------------------------------------------------- ------------- ------------
Total investments at fair value through profit or loss 817,761 711,604
-------------------------------------------------------- ------------- ------------
1 Debt arrangement costs of GBP1,244k (2015: GBP1,735k) have
been netted off the GBPNil (2015: nil) debt drawn by TRIG UK
The gains on investment are unrealised.
The SPV's (Project companies) in which the company invests are
generally restricted on their ability to transfer funds to the
Company under the terms of their individual senior funding
arrangements. Significant restrictions include:
- Historic and projected debt service and loan life cover ratios exceed a given threshold;
- Required cash reserve account levels are met;
- Senior lenders have agreed the current financial model that
forecasts the economic performance of the project company;
- The Project company is in compliance with the terms of its senior funding arrangements; and
- Senior lenders have approved the annual budget for the company.
Details of investments recognised at fair value through profit
or loss were as follows:
31 December 2016 31 December 2015
---------------------------
Investments (project name) Country Equity Subordinated loanstock Equity Subordinated loanstock
--------------------------- --------------------- ------- ----------------------- ------- -----------------------
TRIG UK UK 100% 100% 100% 100%
TRIG UK I UK 100% 100% - -
Roos UK 100% 100% 100% 100%
The Grange UK 100% 100% 100% 100%
Hill of Towie UK 100% 100% 100% 100%
Green Hill UK 100% 100% 100% 100%
Forss UK 100% 100% 100% 100%
Altahullion UK 100% 100% 100% 100%
Lendrums Bridge UK 100% 100% 100% 100%
Lough Hill UK 100% 100% 100% 100%
Milane Hill Republic of Ireland 100% 100% 100% 100%
Beennageeha Republic of Ireland 100% 100% 100% 100%
Haut Languedoc France 100% 100% 100% 100%
Haut Cabardes France 100% 100% 100% 100%
Cuxac Cabardes France 100% 100% 100% 100%
Roussas-Claves France 100% 100% 100% 100%
Puits Castan France 100% 100% 100% 100%
Churchtown UK 100% 100% 100% 100%
East Langford UK 100% 100% 100% 100%
Manor Farm UK 100% 100% 100% 100%
Parsonage UK 100% 100% 100% 100%
Marvel Farms UK 100% 100% 100% 100%
Tamar Heights UK 100% 100% 100% 100%
Stour Fields UK 100% 100% 100% 100%
Meikle Carewe UK 100% 100% 100% 100%
Tallentire UK 100% 100% 100% 100%
Parley UK 100% 100% 100% 100%
Egmere UK 100% 100% 100% 100%
Penare UK 100% 100% 100% 100%
Earlseat UK 100% 100% 100% 100%
Taurbeg Republic of Ireland 100% 100% 100% 100%
Four Burrows UK 100% 100% 100% 100%
Rothes 2 UK 49% 84% 49% 87%
Mid Hill UK 49% 84% 49% 87%
Paul's Hill UK 49% 84% 49% 87%
Rothes 1 UK 49% 84% 49% 87%
Crystal Rig 1 UK 49% 84% 49% 87%
Crystal Rig 2 UK 49% 84% 49% 87%
Broussan France 48.9% 100% - -
Plateau France 48.9% 100% - -
Borgo France 48.9% 100% - -
Olmo 2 France 48.9% 100% - -
Chateau France 48.9% 100% - -
Pascialone France 48.9% 100% - -
Santa Lucia France 48.9% 100% - -
Agrinergie 1&3 France 48.9% 100% - -
Agrinergie 5 France 48.9% 100% - -
Agrisol France 48.9% 100% - -
Chemin Canal France 48.9% 100% - -
Ligne des 400 France 48.9% 100% - -
Logistisud France 48.9% 100% - -
Marie Galante France 24.9% 100% - -
Ste Marguerite France 48.9% 100% - -
Freasdail UK 100% 100% - -
FVP du Midi France 51.0% 100% - -
On 28 January 2016, TRIG acquired, from Akuo, a 100% shareholder
loan interest and a 49% equity interest in a holding company that,
alongside some minority shareholders, owns investments in 15 French
solar parks (Broussan Solar, Chateau Solar, Plateau Solar, Borgo
Solar, Olmo 2 Solar, Pascialone Solar, Santa Lucia Solar,
Agrinergie 1&GBP Solar, Agrinergie 5 Solar, Agrisol Solar,
Chemin Canal Solar, Ligne des 400 Solar, Logistisud Solar, Marie
Galante Solar and Ste Marguerite Solar) for a consideration of
EUR57.2 million (GBP43.7 million).
On 8 July 2016, TRIG purchased a 51% equity interest and 100%
shareholder loan interest in Midi, from investment funds managed by
123Venture, a solar photovoltaic plant in the South of France for
consideration of EUR10.6 million (GBP9.0 million).
On 9 November 2016, TRIG acquired from RES (the Operations
Manager) a 100% interest in the Freasdail wind farm for a
consideration of GBP18.5 million.
On 20 November 2016, TRIG subscribed a further EUR5.9 million
(GBP5.0 million) to the Akuo Tulip Assets SAS (the Holding Company
of the portfolio of French Solar investments jointly held with
Akuo) which enabled Akuo Tulip Assets to buy out minority interests
in underlying investments, thus increasing TRIG's effective
interest in those projects.
Further detail of acquisitions made in the year can be found in
Section 2.6 of the Strategic Report.
14. Other receivables
31 December 31 December
2016 2015
GBP'000's GBP'000's
--------------- ------------- -------------------------------
Other debtors 815 736
815 736
--------------- ------------- -------------------------------
15. Cash and cash equivalents
31 December 31 December
2016 2015
GBP'000's GBP'000's
--------------------------- ------------- ----------------------------
Bank balances 18,537 14,873
--------------------------- ------------- ----------------------------
Cash and cash equivalents 18,537 14,873
--------------------------- ------------- ----------------------------
On the Expanded basis, which includes balances carried in TRIG
UK and TRIG UK I, cash is GBP18,724k (2015: GBP15,220k). The
reconciliation from the IFRS basis to the Expanded basis is shown
in Section 2.6 of the Strategic Report on page 36.
As at the year end, cash and cash equivalents consisted of
GBP18,001k held with Sumitomo Mitsui Banking Corporation Europe
Limited and GBP535k held with Royal Bank of Scotland International
Limited. At 31 December 2016 Royal Bank of Scotland International
Limited had a Fitch credit rating of BBB+ and Sumitomo Mitsui
Banking Corporation Europe Limited had an S&P rating of A.
16. Other payables
31 December 31 December
2016 2015
GBP'000's GBP'000's
------------------------------------ ------------- ----------------------------
Management fees(1) 50 50
Fair value of forward FX contracts 2,633 344
Other payables 164 227
------------------------------------ ------------- ----------------------------
2,847 621
------------------------------------ ------------- ----------------------------
(1 For related party and key advisor transactions see note
18.)
The Company has entered into forward foreign currency contracts
to hedge the expected euro distributions for the next 18 months. In
addition, the Company has placed further hedges to reach a position
where approximately 50% of the valuation of euro denominated assets
is hedged, providing a partial offset to foreign exchange movements
in the portfolio value relating to such assets.
The following table details the forward foreign currency
contracts outstanding as at 31 December 2016. The total euro
balance hedged at 31 December 2016 was EUR79.5m (2015:
EUR42.9m).
31 December 2016
Average exchange rate Foreign currency Notional value Fair value
EUR'000's GBP'000's GBP'000's
------------------------ ---------------------- ----------------- --------------- -----------
Less than 3 months - - - -
3 to 6 months 1.269 33,850 26,894 (2,202)
6 to 12 months 1.244 7,700 6,190 (470)
Greater than 12 months 1.145 37,900 33,131 39
------------------------ ---------------------- ----------------- --------------- -----------
(2,633)
------------------------ ---------------------- ----------------- --------------- -----------
As at the year end, the liabilities on foreign exchange
derivatives consisted of GBP1,549k payable to The Royal Bank of
Scotland Plc and GBP1,084k payable to National Australia Bank
Limited. At 31 December 2016 The Royal Bank of Scotland Plc had an
S&P credit rating of BBB+ and National Australia Bank Limited
had an S&P rating of AA-.
17. Share capital and reserves
Ordinary Shares Ordinary Shares
31 December 31 December
2016 2015
'000's '000's
---------------------------------------- ----------------- -------------------------
Opening balance 732,838 415,476
---------------------------------------- ----------------- -------------------------
Issued for cash 92,000 311,988
Issued as a scrip dividend alternative 6,643 4,459
Issued in lieu of management fees 1,517 915
---------------------------------------- ----------------- -------------------------
Issued at 31 December - fully paid 832,998 732,838
---------------------------------------- ----------------- -------------------------
The Company had two equity fund raises during the year.
On 19 May 2016, the Company issued 30,000,000 shares raising
GBP30,300k before costs and on 27 September 2016, the Company
issued a further 62,000,000 shares raising GBP62,620k before costs.
The Company used the funds to repay the Group's revolving
acquisition facility and to form part of the funding for the
acquisitions in 2016.
The holders of the 832,998,413 (2015: 732,838,095) Ordinary
Shares are entitled to receive dividends as declared from time to
time and are entitled to one vote per share at meetings of the
Company. The Company shares are issued at nil par value.
Share premium
31 December 31 December
2016 2015
GBP'000s GBP'000s
-------------------------------- ------------- -----------------------------
Opening balance 728,227 411,768
Ordinary Shares issued 101,107 321,085
Cost of Ordinary Shares issued (1,684) (4,626)
-------------------------------- ------------- -----------------------------
Closing balance 827,650 728,227
-------------------------------- ------------- -----------------------------
Other reserves
31 December 31 December
2016 2015
GBP'000s GBP'000s
----------------------------------------------------------------------- ------------ -------------------------------
Opening balance 706 428
Shares to be issued in lieu of management fees incurred in H1 2015 - 481
Shares to be issued in lieu of management fees incurred in H2 2015
(Note 18) - 706
Shares to be issued in lieu of management fees incurred in H1 2016
(Note 18) 746 -
Shares to be issued in lieu of management fees incurred in H2 2016
(Note 18) 776 -
Shares issued in the year, transferred to share premium (1,452) (909)
----------------------------------------------------------------------- ------------ -------------------------------
Closing balance 776 706
----------------------------------------------------------------------- ------------ -------------------------------
Retained reserves
Retained reserves comprise retained earnings, as detailed in the
statement of changes in shareholders' equity.
18. Related party and key advisor transactions
Loans to related parties:
31 December 31 December
2016 2015
'000's '000's
----------------------------------------------------------------------------------------- ------------ -------------
Short-term receivable from TRIG UK(1) - 4,000
Short-term balance outstanding from TRIG UK, in relation to Management fees to be
settled
in shares(2) 776 706
Long-term loan to TRIG UK(1) 485,569 468,937
-----------------------------------------------------------------------------------------
486,345 473,643
----------------------------------------------------------------------------------------- ------------ -------------
(1 Included within Investments at fair value through profit or
loss on the Balance Sheet)
(2 Included within Other receivables on the Balance Sheet)
During the year, interest totalling GBP37,351k (2015:
GBP28,037k) was earned in respect of the long-term interest-bearing
loan between the Company and its subsidiary TRIG UK, of which
GBPnil (2015: GBP4,000k) was receivable at the balance sheet
date.
Key advisor transactions
The Group's Investment Manager (InfraRed Capital Partners
Limited) and Operations Manager (Renewable Energy Systems Limited)
are entitled to 65 per cent and 35 per cent, respectively, of the
aggregate management fee (see below), payable quarterly in
arrears.
The aggregate management fee payable to the Investment Manager
and the Operations Manager is 1 per cent of the Adjusted Portfolio
Value in respect of the first GBP1 billion of the Adjusted
Portfolio Value, and 0.8 per cent in respect of the Adjusted
Portfolio Value in excess of GBP1 billion. These fees are payable
by TRIG UK, less the proportion that relates solely to the Company,
the advisory fees, which are payable by the Company.
The advisory fees payable to the Investment Manager and the
Operations Manager in respect of the advisory services they provide
to the Company are GBP130k per annum and GBP70k per annum,
respectively. The advisory fees charged to the Company are included
within the 1% total fee amount charged to the Company and its
subsidiary, TRIG UK. The Investment Manager advisory fee charged to
the income statement for the year was GBP130k (2015: GBP130k), of
which GBP33k (2015: GBP33k) remained payable in cash at the balance
sheet date. The Operations Manager advisory fee charged to the
income statement for the year was GBP70k (2015: GBP70k), of which
GBP18k (2015: GBP18k) remained payable in cash at the balance sheet
date.
The Investment Manager management fee charged to TRIG UK for the
year was GBP4,946k (2015: GBP3,829k), of which GBP1,023k (2015:
GBP930k) remained payable in cash at the balance sheet date. The
Operations Manager management fee charged to TRIG UK for the year
was GBP2,663k (2015: GBP2,061k), of which GBP638k (2015: GBP501k)
remained payable in cash at the balance sheet date.
In addition, the Operations Manager received GBP3,515k (2015:
GBP2,880) for services in relation to Asset Management, Operation
and Maintenance and other services provided to project companies
within the investment portfolio, and GBP94k (2015: GBP95k) for
additional advisory services provided to TRIG UK, neither of which
are consolidated in these financial statements.
In line with the Investment Management Agreement and the
Operations Management Agreement, 20 per cent of the Group's
aggregate management fees are to be settled in Ordinary Shares. The
shares issued to the Managers by the Company relate to amounts due
to the Managers by TRIG UK. Accordingly, TRIG UK reimburses the
Company for the shares issued.
As at 31 December 2015, 736,190 shares equating to GBP705,933,
based on a Net Asset Value ex dividend of 95.89 pence per share
(the Net Asset Value at 31 December 2015 of 99.0 pence per share
less the interim dividend of 3.11 pence per share) were due, in
respect of management fees earned in H2 2015, but had not been
issued. The Company issued these shares on 31 March 2016.
On 30 September 2016, the Company issued 781,125 shares,
equating to GBP745,506, based on a Net Asset Value ex dividend of
95.4 pence per share (the Net Asset Value at 30 June 2016 of 97.0
pence per share less the interim dividend of 1.56 pence per share),
in respect of management fees earned in H1 2016.
As at 31 December 2016, 787,847 shares equating to GBP776,325,
based on a Net Asset Value ex dividend of 98.5 pence per share (the
Net Asset Value at 31 December 2016 of 100.1 pence per share less
the interim dividend of 1.56 pence per share) were due, in respect
of management fees earned in H2 2016, but had not been issued. The
Company intends to issue these shares on 31 March 2017.
In March 2016 a further payment of GBP1.5 million was made in
relation to the Earlseat Wind Farm originally purchased in November
2014, from a fund managed by the Investment Manager, pursuant to an
energy yield true-up arrangement following an increased energy
yield assessment.
In November 2016 the company purchased Freasdail, an onshore
wind project in Scotland from the Operations Manager for
consideration of GBP18.5 million.
The Directors of the Company received fees for their services.
Further details are provided in the Directors' Remuneration Report
on page 66. Total fees for the Directors for the period were
GBP188,000 (2014: GBP166,500). Directors' expenses of GBP7,278
(2015: GBP5,966) were also paid in the period.
All of the above transactions were undertaken on an arm's length
basis.
19. Guarantees and other commitments
As at 31 December 2016, the Company and or its subsidiaries, had
provided GBP18.3m (2015: GBP18.5m) in guarantees to the projects in
the TRIG portfolio.
The Company also guarantees the revolving acquisition facility,
entered into by TRIG UK, which it may use to acquire further
investments.
20. Contingent consideration
The Group has performance-related contingent consideration
obligations of up to GBP10.2m (2015: GBP13.9m) relating to
acquisitions completed prior to 31 December 2016. These payments
depend on the performance of certain wind farms and solar parks and
other contracted enhancements. The payments, if triggered, would be
due before 2019. The valuation of the investments in the portfolio
does not assume that these enhancements are achieved. If further
payments do become due they would be expected to be offset by an
improvement in investment. The arrangements are generally two way
in that if performance is below base case levels some refund of
consideration may become due.
21. Events after the balance sheet date
On 23 January 2017 the revolving credit facility was amended to
enable TRIG UK I to borrow under the facility as well as TRIG UK,
and to extend the expiry date to 30 September 2019 (previously 20
April 2019).
On 9 February 2017, the Company declared an interim dividend of
1.5625 pence per share for the period 1 October 2016 to 31 December
2016. The total dividend, GBP13,015,600, payable on 31 March 2017,
is based on a record date of 16 February 2017 and the number of
shares in issue at that time being 832,998,413.
There are no other events after the balance sheet date, which
are required to be disclosed.
22. Subsidiaries
As a result of applying Investment Entities (Amendments to IFRS
10, IFRS 12 and IAS 27) and Investment Entities: Applying the
Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS
28), all subsidiaries are held at fair value as opposed to being
consolidated on a line-by-line basis. The following subsidiaries
have not been consolidated in these Financial Statements;
Ownership
Name Country Interest
-------------------------------------------------------------- --------------------- ----------
The Renewables Infrastructure Group (UK) Limited UK 100%
The Renewables Infrastructure Group (UK) Investments Limited UK 100%
Roos Energy Limited UK 100%
Grange Renewable Energy Limited UK 100%
Hill of Towie Limited UK 100%
Green Hill Energy Limited UK 100%
Wind Farm Holdings Limited UK 100%
Forss Wind Farm Limited UK 100%
Altahullion Wind Farm Limited UK 100%
Lendrum's Bridge Wind Farm Limited UK 100%
Lendrum's Bridge (Holdings) Limited UK 100%
Lough Hill Wind Farm Limited UK 100%
MHB Wind Farms Limited Republic of Ireland 100%
MHB Wind Farms (Holdings) Limited Republic of Ireland 100%
The Renewables Infrastructure Group (France) SAS France 100%
CEPE de Haut Languedoc SARL France 100%
CEPE du Haut Cabardes SARL France 100%
CEPE de Cuxac SARL France 100%
CEPE des Claves SARL France 100%
CEPE de Puits Castan SARL France 100%
European Investments (SCEL) Limited UK 100%
European Investments (Cornwall) Limited UK 100%
Churchtown Farm Solar Limited UK 100%
East Langford Solar Limited UK 100%
Manor Farm Solar Limited UK 100%
European Investments Solar Holdings Limited UK 100%
Sunsave 12 (Derriton Fields) Limited UK 100%
Sunsave 25 (Wix Lodge Farm) Limited UK 100%
Parley Court Solar Park Limited UK 100%
Egmere Airfield Solar Park Limited UK 100%
Penare Farm Solar Park Limited UK 100%
European Investments (Earlseat) Limited UK 100%
Earlseat Wind Farm Limited UK 100%
European Investments Solar Holdings 2 Limited UK 100%
BKS Energy Limited UK 100%
Hazel Renewables Limited UK 100%
Kenwyn Solar Limited UK 100%
MC Power Limited UK 100%
Tallentire Energy Limited UK 100%
Taurbeg Limited Republic of Ireland 100%
Fred. Olsen Wind Limited UK 49%
Fred. Olsen Wind Holdings Limited UK 49%
Crystal Rig Windfarm Limited UK 49%
Rothes Wind Limited UK 49%
Paul's Hill Wind Limited UK 49%
Crystal Rig II Limited UK 49%
Rothes II Limited UK 49%
Mid Hill Wind Limited UK 49%
Freasdail Energy Limited UK 100.0%
FVP Broussan France 48.9%
FVP Chateau France 48.9%
FPV du Plateau France 48.9%
SECP Borgo France 48.9%
Sole e Aria 1 France 48.9%
SECP Olmo 2 France 48.9%
Sole e Aria 2 France 48.9%
FPV Pascialone France 48.9%
Sole e Aria 3 France 48.9%
FPV Santa Lucia France 48.9%
FPV Agrinergie France 48.9%
FPV d'Export France 48.9%
Agrisol 1A Services France 48.9%
SECP Chemin Canal France 48.9%
FPV Ligne des Quatre Cents France 48.9%
FPV Ligne des Bambous France 48.9%
Heliade Bellevue France 24.9%
SECP Creuilly France 48.9%
Akuo Tulip Assets SAS France 48.9%
Verrerie Photovoltaique SAS France 100.0%
FPV du Midi France 51.0%
DIRECTORS
Helen Mahy (Chairman)
Jonathan (Jon) Bridel
Shelagh Mason
Klaus Hammer
REGISTRAR
Capita Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey GY2 4LH
ADMINISTRATOR TO COMPANY, DESIGNATED MANAGER, COMPANY SECRETARY
AND REGISTERED OFFICE
Aztec Financial Services (Guernsey) Limited
PO Box 656
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
+44 1481 748 831
INVESTMENT MANAGER
InfraRed Capital Partners Limited
12 Charles II Street
London SW1Y 4QU
OPERATIONS MANAGER
Renewable Energy Systems Limited
Beaufort Court
Egg Farm Lane
Kings Langley
Hertfordshire WD4 8LR
FINANCIAL PR
Tulchan Communications LLP
85 Fleet Street
London EC4Y 1AE
UK TRANSFER AGENT
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Helpline: 0871 664 0300
AUDITORS
Deloitte LLP
Regency Court
Esplanade
St Peter Port
Guernsey GY1 3HW
BROKERS
Canaccord Genuity Limited
9(th) Floor
88 Wood Street
London EC2V 7QR
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/3791X_1-2017-2-20.pdf
(1) Achievement of these long-term targets is not guaranteed and
may be dependent on a number of factors, not least the reversion of
wholesale power prices, after their recent falls, to an expected
long-term growth trend at a rate above prevailing inflation.
(2) Dividends are paid gross as the Company is registered in
Guernsey. The Company also offers shareholders a scrip dividend
alternative to cash dividends as this can be advantageous to
certain investors.
(3) Based on a theoretical investment at 100p under the current
Share Issuance Programme, investors may factor in the possibility
of a long-term IRR of in the region of 7% to 9% net of fees and
expenses via active management of the investment portfolio and
reinvestment of excess cash flows. In considering the ability of
the Company to achieve its long-term objectives, the Investment
Manager uses its judgement to assess a number of factors such as
the potential for recovery of forecast power prices in the longer
term, inflation rates and further movements in discount rates, as
well as the potential upside from repowering and/or otherwise
enhancing the performance or extending the life of projects in the
portfolio and from scale efficiencies across an expanding portfolio
given the Company's growth strategy.
(4) Where a project has been commissioned in stages, this refers
to the earliest commissioning date.
(5) Freasdail Wind Farm was acquired in November 2016 as a
construction project with expected commissioning in March 2017.
(6) Where a project has been commissioned in stages, this refers
to the earliest commissioning date.
(7) Northern Ireland and the Republic of Ireland form a Single
Electricity Market ("SEM"), distinct from that operating in Great
Britain.
(8) Dominant winds in the British Isles are from the south-west
and are generally driven by the passages of Atlantic cyclones
across the country. Dominant winds in Southern France are
associated with gap flows which are formed when north or north-west
air flow (associated with cyclogenesis over the Gulf of Genoa)
accelerates in topographically confined channels.
(9) Northern Ireland and the Republic of Ireland form a Single
Electricity Market ("SEM") distinct from that operating in Great
Britain.
(10) Some shares are held by the Investment Manager's group for
the benefit of employees and partners of the group
This information is provided by RNS
The company news service from the London Stock Exchange
END
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