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Any thoughts on The Renewables Infrastructure Group Ltd?

Looking at this (LON.TRIG) as part of my allocation to infrastructure. I invest in infrastructure as a diversifier/defensive asset, being (hopefully) less affected by a stock market crash than the equity bucket of my portfolio, as I don't recall less electricity being used during 2008 and the majority of returns from TRIG will be directly from cash produced from the sale of electricity.

Projected 6% dividend, first financial update seems to show production/energy prices in line with expectation and currently on a much smaller premium than some of my other infrastructure investments (HICL, 3IN)

In terms of risks, I imagine principally it has to be energy prices, or a change in current EU/UK policy towards renewable energy. I can't imagine a change in energy policy, is there any potential factor which could cause a long term drop in energy prices?

I confess I don't really know anything about renewable energy, has anyone bought this or looking at it?

Comments

  • bigadaj
    bigadaj Posts: 11,531 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper
    To me threes just huge political risk. Change in government policy makes virtually any form of renewable energy generation, in the uk at least, all forms of renewable he reaction are hugely loss making without subsidy.

    Given politician sensitivities to energy prices for example it's not impossible that subsidies will be cut, and more so on commercial developments than the money they give to pensioners for their solar panels.

    This is obviously a generic assessment rather than company specific, and whilst I work in the environmental field my main concern is investment in soe thing that is purely dependent on subsidy which could be changed ona. Political whim.
  • magyar
    magyar Posts: 18,909 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    I know a little about this as I work in the industry and know the sort of fund in question (Greencoat UK Wind plc being another example).

    As you say, the key risks that these companies are exposed to are
    1) political risk: their revenues are around 50% based upon subsidies
    2) energy price risk: they are exposed to power price up/downsides
    3) operational risk: breakdowns etc. of the assets

    These are mitigated by
    1) They only invest in operational plants, where the subsidy has been secured (usually for 20 years). Most of the uncertainty is around future plants; it is very, very unlikely that the government would make a retrospective change.

    2) I personally like a bit of energy price risk in a portfolio. When you think about it, most investments in a diversified portfolio would benefit from energy price cuts (as would you personally!) so one of your investments went down it wouldn't be the end of the world. Plus, I don't really think they will go down.

    3) Because they invest in operating plants, most of the risks (construction delays etc.) have been taken out and so the operational costs are quite well known.

    Personally I think these funds are pretty good investments, although buy for yield and not for growth.
    Says James, in my opinion, there's nothing in this world
    Beats a '52 Vincent and a red headed girl
  • Chargem
    Chargem Posts: 69 Forumite
    Ninth Anniversary Combo Breaker
    Thanks for your responses, that's some food for thought.
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