Targeting renewable energy opportunities across Europe provides a best of both worlds situation for infrastructure groups, suggests Minesh Shah, investment director at InfraRed Capital Partners (InfraRed).
Mr Shah believes that expanding the scope of investment trusts targeting renewable energy opportunities beyond one country or territory can dilute multiple risk factors such as regulatory, weather and pricing issues. In his view, a limited expansion across a continent, such as Europe, would allow for these benefits while also containing any issues concerning management and economies of scale.
Speaking to Fundeye, Mr Shah commented on the geographic variation within The Renewables Infrastructure Group’s (TRIG) 74-asset strong portfolio, which is managed by InfraRed.
Mr Shah explained: “Clearly, the wider the portfolio, the more diversified it can be and therefore the more you spread risk across geographies. You can spread regulatory risk, market risk, and weather risk as well. The narrower your focus then clearly you can bring economies of scale by being in a single geography. We feel that by being kind of in Europe, that provides a nice balance between the two. You're not too broadly stretched, but actually you can get that diversification benefit.”
The director’s comments follow TRIG’s sustained efforts to expand its portfolio into Scandinavia, with the group investing in on-shore wind projects in Sweden alongside its staple markets such as the UK, Ireland and France.
During the current calendar year, the London-listed investment company completed the acquisition of three Swedish wind energy sites – with a 100 percent equity in Gronhult and a 50 percent equity in Twin Peaks, a pair of wind farms in Ranasjö and Salsjö. Overall, the purchases represent eight percent of TRIG’s portfolio.
As it stands, 61 percent of the portfolio consists of offshore and onshore wind holdings in the UK whole 39 percent resides in the rest of Europe across France, Sweden, Germany, and Ireland. Approximately 89 percent of its assets are operational, with the rest remaining under construction.
Earlier this month, TRIG released a highly resilient set of half-year results, reflecting its steady handling of the pandemic. The NAV per share only decreased 0.9 percent to 114.3p in H1 2021, earnings per share has increased from 1.0p to 1.8p during the same period, while £240 million in equity has been raised, double the amount in H1 2020. Meanwhile, higher power prices have also offset the issues with lower wind levels than expected during the six-month window. The portfolio’s overall value has increased by 13 percent, to £2.49 billion.
TRIG intends to increase the overall energy capacity and revenue available in its portfolio through the future acquisition of solar opportunities in Iberia, and further wind power sites in Finland, Denmark and Norway.
Commenting on TRIG’s future ambitions, Mr Shah said: “We mentioned in our results that we're looking at the Iberian Peninsula in relation to solar investments on an unsubsidized basis. Clearly being in the south of Europe, it has excellent weather resource. It is clearly another regulatory power price and weather market, and therefore can provide further diversification.”
