22 February 2023
The Renewables Infrastructure Group Limited
"TRIG" or "the Company", a London-listed investment company advised by InfraRed Capital Partners ("InfraRed") as Investment Manager and Renewable Energy Systems ("RES") as Operations Manager
Announcement of 2022 Annual Results
Highlights
For the year ended 31 December 2022
· Strong earnings and NAV performance:
o Earnings per ordinary share of 21.5p (2021: 10p)
o NAV per ordinary share of 134.6p1 as at 31 December 2022 (2021: 119.3p)
o Portfolio valuation2 of £3,737m as at 31 December 2022 (2021: £2,726m)
· Healthy operational cash generation:
o 2022 dividend target of 6.84p/share delivered and 2023 dividend target3 set at 7.18p/share, a 5% increase
o Dividend cover of 1.55x (2021: 1.12x), or 2.6x before the repayment of project level debt which was £174m during the year
o Strong reinvestment cashflows
o £694m of investments made
o A renewed Revolving Credit Facility, extended to £750m
· A diversified, 2.8GW portfolio of renewables assets:
o Portfolio generated 5,376GWh of electricity in the year (2021: 4,125GWh)
o 1.9m tonnes of CO2 avoided in 20224
o 1.6m homes (equivalent) powered with renewable electricity4
1. The NAV per share as at 31 December 2022 is calculated on the basis of the 2,483,583,248 Ordinary Shares in issue and to be issued as at 31 December 2022 due to the Managers' shares in part payment of the management fee.
2. On an Expanded Basis. Please refer to Section 3.2 of the Annual Report for an explanation of the Expanded Basis.
3. This is a target only and not a profit forecast. There can be no assurance that this target will be met.
4. Actual values calculated in accordance with the IFI Approach to GHG Accounting for Renewable Energy. Calculated based on each project's generation capacity, pro-rated for TRIG's share of subordinated debt and equity capital.
Richard Morse, Chairman of TRIG, said:
"This has been an important year in the history of TRIG. The Company's results have been the strongest in its history since IPO. This is against a challenging macro-economic backdrop, demonstrating the inherent quality of the Company's portfolio and management.
The Company has grown significantly in value, while investing to increase portfolio diversification and earnings visibility. Our highly expert Managers, InfraRed and RES, continue to combine to provide a unique proposition to investors. We also thank our shareholders for participating in the Company's successful equity issue in March, despite the challenges thrown up by the then recent outbreak of war.
As policy makers in the UK and European Union grapple with rising costs for consumers and governments, TRIG is well placed to contribute to the decarbonisation, independence and affordability of Europe's energy supply."
Richard Crawford, Partner, Head of Energy Income Funds, InfraRed Capital Partners said:
"TRIG has had a very strong financial result for the year, not only benefitting from high power prices, but also from strong correlation to inflation, limited cash exposure to interest rate increases and broad diversification. These characteristics make the Company's assets highly attractive. With active portfolio and asset management, InfraRed and RES continue to execute the Company's differentiated strategy with strong progress made during the year in the priority areas of solar and flexible capacity.
We have completed the construction of Vannier and Blary Hill onshore windfarms during the year, with Grönhult onshore wind farm and the Cadiz solar portfolio now being commissioned. Reinvesting cashflows generated into construction projects is a key value driver for the Company and brings vitally needed additional renewables capacity.
Looking forward, we are pleased to raise the dividend target of the Company to 7.18p, representing a 5% year on year increase, reflecting strong expected cashflow generation from the portfolio. We believe TRIG remains a compelling investment proposition: a robust business model with two market-leading managers in InfraRed and RES, sound board oversight, a highly supportive shareholder base, and all underpinned with favourable sector fundamentals."
Publication of documentation
The below information is an extract from TRIG's 2022 Annual Report. The Annual Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism. It can also be obtained from the Company Secretary or from the Reports & Publications section of the Company's website, at https://www.trig-ltd.com/.
Enquiries
InfraRed Capital Partners Limited +44 (0) 20 7484 1800
Richard Crawford
Phil George
Minesh Shah
Mohammed Zaheer
Maitland/AMO +44 (0) 20 7379 5151
Rhys Jones
Charles Withey
Investec Bank Plc +44 (0) 20 7597 4000
Lucy Lewis
Tom Skinner
Denis Flanagan
BNP Paribas +44 (0) 20 7595 9444
Virginia Khoo
Carwyn Evans
The Company
The Renewables Infrastructure Group ("TRIG" or the "Company") is a leading London-listed renewable energy infrastructure investment company. The Company seeks 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.
TRIG is invested in a portfolio of wind, solar and battery storage projects across six countries in Europe with aggregate net generating capacity of over 2.8GW; enough renewable power for 1.9 million homes and to avoid over 2.4 million tonnes of carbon emissions per annum. TRIG is seeking further suitable investment opportunities which fit its stated Investment Policy.
Further details can be found on TRIG's website at www.trig-ltd.com.
Investment Manager
InfraRed Capital Partners is an international infrastructure investment manager, with more than 180 professionals operating worldwide from offices in London, New York, Sydney and Seoul. Over the past 25 years, InfraRed has established itself as a highly successful developer and custodian of infrastructure assets that play a vital role in supporting communities. InfraRed manages US$14bn+ of equity capital5 for investors around the globe, in listed and private funds across both income and capital gain strategies.
A long-term sustainability-led mindset is integral to how InfraRed operates as it aims to achieve lasting, positive impacts and deliver on its vision of Creating Better Futures. InfraRed has been a signatory of the Principles of Responsible Investment since 2011 and has achieved the highest possible PRI rating6 for its infrastructure business for seven consecutive assessments, having secured a 5 star rating for the 2021 period. It is also a member of the Net Zero Asset Manager's Initiative and is a TCFD supporter.
InfraRed is part of SLC Management, the institutional alternatives and traditional asset management business of Sun Life. InfraRed represents the infrastructure equity arm of SLC Management, which also incorporates BentallGreenOak, a global real estate investment management adviser, and Crescent Capital, a global alternative credit investment asset manager.
5 Data as at Q3 2022. Equity Capital is calculated using a 5-year average FX rate.
6 Principles for Responsible Investment ("PRI") ratings are based on following a set of Principles, including incorporating ESG issues into investment analysis, decision-making processes and ownership policies. More information is available at https://www.unpri.org/about-the-pri
Operations Manager
TRIG's Operations Manager is RES ("Renewable Energy Systems"), the world's largest independent renewable energy company.
RES has been at the forefront of wind energy development for over 40 years, with the expertise to develop, engineer, construct, finance and operate projects around the globe. RES has developed or constructed onshore and offshore wind, solar, energy storage and transmission projects totalling more than 23GW in capacity. RES supports over 10GW of operational assets worldwide for a large client base. Headquartered in Hertfordshire, UK, RES is active in 11 countries and has over 3,000 employees engaged in renewables globally.
RES is an expert at optimising energy yields, with a strong focus on safety and sustainability. Further details can be found on the website at www.res-group.com.
1 Chairman's Statement
Since TRIG's IPO in 2013, the Company has consistently provided shareholders with sustainable returns from its diversified portfolio of renewable infrastructure assets. I am delighted to have joined TRIG as Chairman of the Board and am pleased to report that we delivered a NAV total return[1] for 2022 of 18.9%.
TRIG's diversified portfolio remains resilient against a backdrop of higher inflation and interest rates, benefiting from strong inflation correlation and elevated power prices.
InfraRed, as Investment Manager, and RES, as Operations Manager, continue to enhance the Company's portfolio both organically through value enhancement initiatives, including the construction of 378MW of new generation capacity[2], and also through acquisitions, with investments made into operating assets during the year totalling 297MW of generation capacity[3].
The Board remains grateful for the ongoing support of TRIG's shareholders. The case for investment in renewables has never been stronger, particularly in the context of the immediate energy security and affordability challenges, as well as the decarbonisation agenda. TRIG offers investors access to otherwise illiquid renewables infrastructure and the opportunity for participation in the net zero transition. The Company is also very well supported by Managers who share the Board's commitment to providing sustainable income and capital growth through investing in the transition to net zero.
Increases in interest rates during the year and the impact of the UK mini-budget have led to a sustained period of share prices trading at discounts to Net Asset Values across real assets investments companies. Specifically for the energy sub-sector, governments' interventions have also weighed on investor sentiment. In this context, TRIG's diverse portfolio, which has been stress-tested through the pandemic and the more recent energy crisis, ensures that the Company is strategically well positioned in 2023 to continue to enhance value for shareholders and contribute to greater energy security and faster decarbonisation.
Financial performance
The NAV as at 31 December 2022 was 134.6p per share, an increase of 15.3p per share in the year. Earnings for 2022 were 21.5p per share. The material drivers of this strong financial performance in the year were:
· The Managers' ongoing delivery of active asset management to maximise operational performance and additive investments, providing greater geographic and technological diversification.
· Increases in wholesale power prices and inflation, which feed into the Company's revenues and portfolio valuation.
To some extent offset by:
· An increase in valuation discount rates of 50bps on a weighted average basis across the portfolio. The long-term, inflation-correlated and lower risk, sustainable nature of renewables infrastructure underpins the demand for assets.
· Intervention by governments across Europe in the electricity generation sector, in particular the UK Government's Electricity Generator Levy and the European Council mandated cap on inframarginal (non-gas) generator revenues, which were announced in November 2022 and September 2022, respectively.
Over the next ten years, 63% of TRIG's forecast revenues are directly linked to inflation through subsidy support mechanisms, with the majority of remaining revenues indirectly linked to inflation due to the relationship between power prices and inflation indices, providing strong inflation protection. The combination of a high degree of fixed revenues, strong inflation correlation and power price forecasts that fully incorporate government interventions, serve to reduce the risks arising from a volatile macro outlook.
The Company has limited interest rate and refinancing risk. Interest rates on debt across the portfolio investments are substantially fixed. The Company has no structural short-to-medium term debt and interest paid on the Group's revolving credit facility ("RCF")[4] is linked to overnight interest rates. At the time of publication, the RCF is £413m drawn, with substantial headroom compared to its enlarged £750m committed capacity, and matures in December 2025.
Forecast cash flows from the portfolio indicate that the majority of these drawings can be repaid from re-investment cash flows over the RCF term.
Dividends
Strong achieved power prices and close-to-budget asset availability, tempered by below-budget generation, have contributed to strong dividend cover in 2022. After operating and finance costs, net cash flow covered the cash dividend 1.5 times[5], or 2.6 times before repayment of project-level debt.
Consistent with our policy of increasing the dividend when it is considered prudent to do so, I am pleased to report a dividend target[6] for 2023 of 7.18p per share, an increase of 5.0% on the 2022 total dividend. TRIG has delivered five projects from reinvested excess cash flows including Arenosas, El Yarte and Blary Hill in 2022, and continues to fund construction commitments at the Ranasjö and Salsjö onshore wind farms in Sweden from revenues generated by the portfolio.
Investment activity
The identification of accretive acquisitions is key to portfolio construction for TRIG. The Company's investment strategy remains unchanged, targeting renewables and related infrastructure investments[7] in the UK and mainland Europe[8].
TRIG's largest investment during the period was a 10% stake in the 1.2GW Hornsea One offshore wind farm in the UK. The Group also made an incremental investment in the Merkur offshore wind farm in Germany, a project we are very familiar with having first invested in 2019. Offshore wind farms have an important role to play in the portfolio: each of our six offshore wind projects benefits from protected cash flows for the term of their government support arrangements, which reduces the sensitivity of their equity returns to changes in power price levels. These investments help to facilitate the addition of unsubsidised, higher-returning projects into the portfolio, such as the March 2022 acquisition of a 49% stake in the Valdesolar solar park in Spain, whilst maintaining the portfolio's overall power price sensitivity.
Construction and development assets offer a source of higher risk-adjusted returns too. We are grateful to shareholders for their support at the 2022 AGM to increase TRIG's construction and development investment limit from 15% to 25%. In 2022, TRIG acquired four development-stage battery storage sites, which will provide c. 700MWh / 350MW flexible capacity once built. Flexible capacity, which includes battery storage, is critical to the energy transition and complements TRIG's renewable generation assets as it responds, and financially benefits from, the intermittency of renewables and electricity price volatility. At the period end, construction and development exposure represented 8% of the total portfolio.
Portfolio performance
Overall portfolio electricity generation in the year was 5% below budget due to lower than expected weather resource in some geographies and downtime resulting from both enhancement activities and unscheduled maintenance. Further detail is provided in Section 2.3 - Operations Report.
78MW of generation capacity was constructed during the year at Haut Vannier and Blary Hill onshore wind farms, with Blary Hill in Scotland fully funded from re-investment proceeds. 301MW of capacity is currently being commissioned, with Grönhult onshore wind farm and the Cadiz solar projects well progressed and close to construction completion; both are in the final commissioning stages and exporting electricity. A further 471MW of capacity is in construction or development.
Health and Safety ("H&S") has always been core to operations across TRIG's portfolio. H&S performance is regularly reviewed at both the project company level and by the Board across the whole portfolio, and we continually strive to promote a strong safety culture.
Sustainability
Sustainability, and the consideration of environmental, social and governance ("ESG") factors, is central to TRIG's strategy and InfraRed and RES's investment and asset management ethos, further details of which can be found in TRIG's annual Sustainability Report.
The United Nations Climate Change conference (COP27) in November 2022 and the UN Biodiversity Summit (COP15) in December 2022 highlighted the role of infrastructure in arresting and reducing the impact of adverse climate change and protecting the environment.
TRIG makes a significant contribution to tackling climate change. Our current commercially operational portfolio of 2GW is capable of powering 1.8 million homes and avoiding approximately 2.2 million tonnes of carbon emissions per annum[9]. TRIG committed to the Science Based Targets initiative (SBTi) in 2021, and has published estimated scope 1, 2 and 3 carbon emissions for its entire portfolio. We will be setting SBTi targets in line with this initiative during 2023.
Corporate Governance
In accordance with the Board's succession plan, 2022 saw the retirement of TRIG's initial three Non-executive Directors: Helen Mahy, Shelagh Mason and Jon Bridel. On behalf of my fellow Directors and the Managers, I would like to thank them for their service to TRIG's shareholders and their many contributions to the success of the Company over the nine years since IPO. John Whittle has replaced Jon Bridel as the Chair of the Audit Committee and Tove Feld has assumed the role of Senior Independent Director. Erna-Maria Trixl and I joined TRIG's Board of Directors in 2022, and the Board looks forward to welcoming Selina Sagayam as a Non-executive Director in March 2023. Selina is a successful practising lawyer, with a wealth of relevant M&A advisory experience, and also a distinctive expertise in ESG matters, which will be very welcome as she joins the Board.
Klaus Hammer will step down from the Board during 2023. He too has made a significant contribution since joining the Board a year after IPO, bringing considerable commercial and industry experience to bear as TRIG has built its portfolio. The Board joins me in thanking Klaus for all he has done during his tenure as a Director.
Given the importance of responsible investment practices in the strategy of the Company and recognising the evolving regulatory landscape, it is the intention of the Board to form a new committee focused on ESG / sustainability effective June 2023.
In line with good governance practice, TRIG's Nomination Committee commissioned an external board evaluation in 2022. The evaluation noted that TRIG's Board is functioning at a high level and that the transition to new Directors has been smooth.
Principal Risks and Uncertainties
The Board and the Managers monitor and, where practicable, mitigate a range of risks to TRIG's strategy. TRIG's principal risks are:
· Regulation and taxation: government or regulatory support for renewables changing adversely, or further intervention by governments in the electricity generation sector to levy generators for power prices achieved above threshold levels;
· Power prices: electricity prices falling or not increasing as expected; and
· Production performance: portfolio electricity production falling short of expectations, including as a result of unfavourable weather or asset unavailability.
These and other risks are considered and expanded on in Section 3.4 - Risks & Risk Management.
Outlook
Recent years have been challenging for many. In addition to the devastating impact on human lives and livelihoods, the conflict in Ukraine has underscored the importance of energy security and affordability.
For the energy sector, this has resulted in an increase in the attraction of, and competition for, renewables infrastructure assets, and an increase in power prices and resulting government intervention. In this context, the Company's business model and investment portfolio has demonstrated its inherent resilience and relevance. As governments across Europe look to fiscal policy as a means to address costs to consumers, we believe that our model has demonstrated the ability to withstand these changes and still deliver significant returns for our shareholders.
At 2.8GW[10], capable of generating the equivalent to 1.6% of the UK's electricity usage, TRIG's diverse portfolio is significant. Within the portfolio, the Managers continue to enhance value. The Company is delivering new capacity, with a further 538MW24 generation and flexible capacity currently in construction and development. As a long-term owner of assets with a supportive shareholder base, TRIG remains well placed to finance new renewables capacity - both that which is developed and built by TRIG as well as the acquisition of operational projects from developers seeking to recycle capital. Through selective acquisition activity and a focus on value enhancement, we continue to seek to provide shareholders with accretive growth.
We remain confident in our business model and the Managers' ability to deliver sustainable returns to shareholders while contributing towards a net-zero carbon future.
Richard Morse
Chairman, 21 February 2023
2 Investment Report
Financial highlights
The Company's Net Asset Value as at 31 December 2022 was 134.6p/share (31 December 2021: 119.3p/share) and the Company's Portfolio Valuation was £3,737 million. Earnings for 2022 were 21.5p/share (2021: 10.0p/share). Dividends of 6.84p per share were declared, giving an increase in NAV per share of 15.3p (2021 NAV per share increase: 4.0p).
The earnings of 21.5p/share in the year were a result of:
· Continued delivery of the investment strategy and active portfolio management
· The high revenues generated in the year as a result of particularly high wholesale power prices coupled with higher subsidies as a result of inflation indexation passing through
· Increases in the portfolio valuation as a result of expectations for power prices and inflation to continue to be elevated over the short to medium term compared to expectations last year
· The portfolio valuation increase has been offset to some extent by an increase in the portfolio weighted average discount rate of 0.5%, recognising the increased levels of government bond yields. The discount rate applied to UK cash flows were increased by 0.8%, whilst the equivalent rate applied in Europe was increased by 0.3%, recognising the increased macro-economic volatility in the UK in the second half of the year.
Greater detail on these movements can be found in Section 3.1 - Valuation of the Portfolio.
Net cash flow for 2022 was £249m[11] (2021: £150m) resulting in dividend cover for the year of 1.5x before the benefit of scrip take-up (2021: 1.06x). With the benefit of scrip take-up, dividend cover for the year was 1.55x (2021: 1.12x). Net cash flows in 2022 benefited from high achieved power prices during the period.
Dividend cover is stated after the repayment of project-level amortising debt, reflecting the Company's capital structure and prudent debt management which seeks to repay project debt during subsidy periods without reliance on merchant receipts. £174m project-level amortising debt was repaid in 2022 (2021: £145m). Whilst we believe having an amortising debt profile is the most appropriate structure for the Company's risk profile, capital structures do vary between renewables investment companies. Were dividend cover to be calculated based on operating cash flows before the repayment of debt, dividend cover for 2022 would have been 2.55x (2021: 2.1x). The Company has declared a dividend target for 2023 of 7.18p per share, reflecting the high earnings and strong cover, but also recognising the importance of the long-term sustainability of the Company's dividend to shareholders.
The Group also utilises a Revolving Credit Facility ("RCF") which is used to make new investments and is repaid from surplus earnings or fund raises. The RCF, which was refinanced in February 2023, has total funding capacity of £750m and matures in December 2025. At 31 December 2022, the RCF was drawn £399m. Forecast cash flows from the portfolio, net of Company costs after having paid the Company's dividend and project-level debt repayments, indicate that the majority of these drawings can be repaid from re-investment cash flows over the RCF term. In addition, the Company may use equity issuance, alternative debt instruments and the proceeds of any divestments which may be made to enhance portfolio construction, to repay the RCF.
Investment highlights
The benefit of having a large and diversified portfolio has been especially evident this year, as the impact of regulatory and wind resource challenges on the portfolio as a whole have been reduced by geographic, technological and revenue diversification. The Company made investments into seven projects during the year, each of which will contribute to further portfolio resilience:
· The acquisition of a 49% equity stake in the 264MW Valdesolar solar PV project, an unsubsidised project in Spain. The Company is partnered with Repsol, the Spanish-listed global energy company. The project has the ability to capture merchant power prices.
· The acquisition of a 10.2% stake in Hornsea One in the UK, one of the world's largest operational offshore wind farms, and an incremental investment in the Merkur offshore wind farm taking TRIG's stake from a 25% to 36% shareholding. Both continue the strategy of investing in projects that benefit from government-backed revenue support. Merkur also benefits from the current higher power prices due to the functioning of the German Feed-in Tariff which acts as a floor.
· A strategic milestone was achieved with a significant investment in the flexible capacity sector through the acquisition of four in-development battery storage sites. The four projects have grid connection dates ranging from 2024 to 2031 and, once built, will have combined capacity of 350MW / 700MWh. Flexible capacity, including battery storage, is essential to the energy transition by providing grid-supporting services and responding to the intermittency of renewables generation. As such, flexible capacity projects provide a natural hedge within the portfolio for variability in market conditions.
The power price exposure of the portfolio as a whole is broadly unchanged as a result of the acquisitions in the year, as the Managers seek to maintain the power price risk profile of the Company.
At the Company's 2022 Annual General Meeting, shareholders supported an increase in the Company's Investment Policy development and construction limit from 15% to 25% of portfolio value[12]. Successfully managing projects through development and construction is a key value driver for shareholders, as these earlier stage investments represent a lower-priced entry point and the resulting prospect of higher returns. To date, TRIG has delivered 10 projects through construction since IPO, with five further projects expected to be delivered in Q1 2023. Development and construction also provides competitive access to projects that are increasingly being traded before construction has begun.
TRIG's construction projects have progressed well during the year, with the Blary Hill and Haut Vannier projects becoming operational in 2022. Both Grönhult onshore wind farm and the Cadiz solar portfolio started initial generation in late 2022 and are now in the final stages of construction. Ranasjö & Salsjö foundation works are being finalised, with turbine delivery scheduled for later in 2023. Sustainability considerations are made throughout the construction of these projects - for example with local employment and environmental plans created to maintain a net positive impact for the community. Construction on the Cadiz projects has employed the equivalent of 108 personnel for a year and further hired services in the municipality of San Jose del Valle, with total local investment reaching €750,000. The Company will begin to recognise the additional value derived from taking projects successfully through construction as key milestones are met, typically in the first 6-12 months from the commencement of operations.
The Managers continue to see construction and development projects as attractive opportunities to leverage the depth of their expertise and combined 60-year track record for the benefit of TRIG, and as some operating history is established we can look for valuation uplift. As the Company's portfolio matures, extending the lives or repowering of older sites is expected also to enhance value. The first sites to be repowered are likely to be four projects in the south of France, where two of the projects have secured new feed-in tariffs.
In addition to the markets in which the Company is already invested, markets with similar characteristics may offer additional investment opportunities. In particular, these include the wider Iberian and Nordic regions, particularly Portugal and Finland, and also the Benelux region.
| Date of completion | Project | Year commissioned | Equity share | Net capacity (MW)32 | Revenue type33 | Location | % of Portfolio on a committed basis34 |
| March 2022 | Valdesolar solar farm | 2021 | 49% | 129 | Wholesale market | Spain | 3% |
| July 2022 / October 2022 | Hornsea One offshore wind farm | 2020 | 10.2% | 122 | Contract for difference | UK | 8% |
| September 2022 / December 2022 | Ryton battery storage | Expected 2024 | 100% | 74 | Wholesale market & ancillary services | UK | 4% |
| Drakelow battery storage | Expected 2025 | 100% | 90 | ||||
| Drax battery storage | Expected 2029 | 100% | 89 | ||||
| Spennymoor battery storage | Expected 2031 | 100% | 100 | ||||
| December 2022 | Merkur offshore wind farm (Incremental investment) | 2019 | 11%35 | 143 | Feed-in Tariff | Germany | 2% |
In addition to attractive investment opportunities, the Managers continue to be alert to opportunities for strategic disposals should the Managers observe marked dislocations in value across the jurisdictions in which it invests or other portfolio construction benefits.
Current outstanding commitments
The Company has outstanding investment commitments of £205m relating to the Swedish onshore wind farm (Ranasjö and Salsjö) construction projects, and the UK battery storage projects (Ryton and Drakelow), broken down in the table below, by expected due date. Further information on Investment Obligations is detailed on page 63. The Company's £750m committed revolving credit facility was drawn £399m as at 31 December 2022.
| | RCF drawings | 2023 | 2024 | 2025 | Total |
| Outstanding Commitments (£m) | 399 | 97 | 78 | 30 | 205 |
Portfolio diversification
The TRIG portfolio benefits from being diversified across jurisdictions, power markets and generating technologies providing multiple revenue sources, as well as a variety of geographic areas with differing meteorological conditions affecting wind speeds and solar irradiation, reducing year-on-year volatility. The portfolio has been constructed to have low single-asset concentration, with the largest asset constituting less than 10% of the portfolio value on a committed basis and the top 10 assets cumulatively accounting for approximately half.
Revenue profile
TRIG has the benefit of being diversified across several separate power markets: Great Britain, the Single Electricity Market (of the Republic of Ireland and Northern Ireland), France and Germany (which sit within the main continental European power market), Sweden (which sits in the Nordic electricity market) and Spain (Iberian power market).
The TRIG portfolio has substantial near-term protection in cash revenues from movements in wholesale power prices, as the portfolio receives a high proportion of its revenue from selling electricity generated via Power Purchase Agreements ("PPAs") with fixed prices, and from government subsidies such as Feed‑in-Tariffs ("FiTs"), Contract for Differences ("CfDs"), Renewable Obligation Certificates ("ROCs") or from other hedges, together referred to as fixed revenues.
Over the next 12 months, 65% (2021: 70%) of revenues are fixed per unit of generation, with 63% (2021: 66%) fixed over the next ten years. The decline in these percentages is largely driven by the elevated power prices in the near term compared to last year's assumptions.
The large majority of the expected fixed revenues are derived from government subsidies. Of the 65% fixed over the next 12 months, 83% are drawn from subsidised projects in the UK, Ireland and France, which benefit from inflation linkage, helping to preserve Portfolio Value. Inflation is being driven to a large extent by commodity price increases, which ultimately benefit power prices. However, if non‑energy related inflation were to persist more structurally, inflation linked revenues could play a key role in value preservation.
In the longer term, based on its current portfolio, TRIG is expected to have greater exposure to future wholesale electricity prices as subsidies and contracts with pre-determined pricing run off. As existing fixed-price contracts expire, the replacement contracts may also have fixed-price elements, and any future additions to the portfolio may have subsidies, decreasing the merchant proportion.
The Company's prudent capital structure ensures all project-level debt is repaid within the associated subsidy period, and projects with merchant revenues do not have any debt in place. This has the result of releasing a greater portfolio of revenue in the future for re-investment and dividends.
As described in Section 2.5 - Market developments, governments in all the markets TRIG has investments in have announced or enacted interventions to reduce the wholesale power prices received by renewable energy projects. The interventions do not have an impact on subsidies revenues, but work to reduce or limit the wholesale power price achieved by renewable energy projects.
Macro-economic environment
Due to the ongoing commodity price shock (more details can be found on this in Section 2.5 - Market Developments), together with other effects of Covid-19 stimulus packages, inflation has risen to multi-decade highs across the jurisdictions TRIG is invested in. This has led to central banks increasing base rates to levels not seen since the introduction of quantitative easing.
Portfolio cash flow forecasts are relatively insensitive to rising interest costs due to project level debt interest rates being fixed, providing certainty over long-term interest and repayments on debt. This is an essential and deliberate element in the construction of the Company's portfolio, which provides resilience in the portfolio's cash flows against moves in interest rates.
In the second half of 2022, the Portfolio Valuation reflects the rise in both government bond reference rates and inflation with an increase in weighted average discount rates by 50bps, as described above on page 21, and near-term inflation forecasts. The Company benefits from subsidised revenues that are directly linked to inflation indices in the UK and France, which constitute more than half of the expected revenues across the Company's portfolio over the next 10 years.
The direct link to inflation, received from indexed subsidies, and the indirect link to inflation, observed in power prices over time, functions to offset potential associated increases in required investment returns (i.e. the valuation discount rates) when inflation increases.
This can be demonstrated through the following portfolio scenario analysis:
· If annual inflation rates were to be 0.5% higher than assumed in all forecast periods, portfolio returns would increase by 0.66%, based on the Company's latest published sensitivities in Section 3.1.
· If inflation rates were to be 3% higher in 2023 than assumed, portfolio returns would increase by 0.41%.
Reductions in outturn inflation would have broadly similar negative impacts.
|
| Increase to assumption | Decrease to assumption NAV impact |
| + / - 0.5% change in annual inflation rates | 6.1 | -5.1 |
| + / - 0.66% change in portfolio discount rate | -6.1 | 5.7 |
|
|
|
|
| + / - 0.41% change in portfolio discount rate | -3.7 | 3.5 |
| + / ‑ 3% change in inflation rates for FY 2023 | 3.5 | -3.5 |
The portfolio return is positively correlated to inflation, which combined with the ongoing demand for critical renewables infrastructure make the Company's assets attractive to own in a shifting environment.
Outlook
The Company has performed well in the year through strong earnings and NAV growth, benefiting from higher power prices through generating secure and clean electricity whilst also contributing to the alleviation of the cost of living crisis through additional taxation throughout the Company's key markets. The portfolio is well positioned to benefit from inflation protection whilst the Company's prudent capital structure ensures debt is repaid and has fixed costs, providing strong downside resilience to higher interest rates.
The critical themes of energy security, affordability and decarbonisation, together "the energy trilemma", underpin the positive outlook for renewables. Once built, renewable energy assets provide secure and locally-generated electricity without carbon emissions. The impetus behind the sector coupled with sustainability considerations should encourage the development of local supply chains and reduce the carbon content in construction.
In the wider context, energy security and affordability has been brought into sharp focus in 2022. Europe's dependence on external sources of key commodities has been highlighted emphatically by the reduction in Russian gas supply into Europe. Nonetheless, due to unseasonably warm weather spells across the UK and the European continent and government-guided reduction in energy demand in the EU, Europe is better placed at the end of 2022 than many had feared might be the case. Renewables infrastructure will also play an increasingly critical role in delivering further European energy independence.
In addition, decarbonisation and the transition to net zero remain central to government energy strategies, while elevated energy costs to consumers highlight the essential requirement for increased domestic generating capacity to make energy more affordable for all.
Critical investment in the flexibility of grids is needed to balance the intermittency of renewables and improve reliability. As such, TRIG has increased its investment plans in this area over the last twelve months.
As we enter the next year of the energy transition, the Managers remain well placed to enhance the value of the Company's portfolio, source growth opportunities and be selective in their approach to new investments for TRIG.
3 Operations Report
Operations summary
The overall performance of the portfolio was significantly ahead of budget in the year driven by high electricity prices, REGO and auxiliary service revenues. This strong performance was somewhat moderated by the underlying generation from the portfolio falling 5% below-budget in the year.
The geographic diversification of the portfolio meant that the lower than long-term average weather resource in three regions (France, GB Offshore and Germany Offshore) was partly offset by four regions experiencing above budget weather resource (GB Onshore, Scandinavia, Ireland and Solar).
Some operational performance was affected by grid downtime that exceeded allowances made in budgets and long-term forecasts, and other site-specific factors including repair or enhancement works to generation equipment and electrical infrastructure, which improves the operational resilience of the portfolio going forward.
The new acquisitions of Valdesolar Spanish solar farm and Hornsea 1 GB offshore wind farm are now fully incorporated into the portfolio and performing well, along with the recently constructed Vannier French onshore wind farm. The Cadiz Spanish solar farms and Grönhult Swedish onshore wind farm have also commenced early generation, as detailed in the Construction section.
Production
| Technology | Region | Electricity production (GWh) | Performance vs budget |
| Onshore wind | GB | 1,397 | -3% |
| | France | 542 | -8% |
| | Scandinavia | 554 | 0% |
| | Ireland | 298 | -13% |
| Offshore wind | GB | 1,450 | -7% |
| | Germany | 730 | -5% |
| Solar | GB, France, Spain | 405 | -3% |
| Total Portfolio |
| 5,376 | -5.2% |
GB - onshore wind
Performance was good across the portfolio of twenty projects, with three projects significantly ahead of budget and three assets that delivered uncompensated budget shortfalls:
· Solwaybank benefited from higher-than-budgeted availability under radar curtailment agreements in place at acquisition, due to good relationships with the neighbouring stakeholders. This resulted in a significant increase in production compared to budget.
· Earlseat and Rothes 2 both performed well, delivering notably above budgeted production.
· Hill of Towie had pro-active foundation works performed to protect the long-term integrity of the assets, which are now complete and not anticipated to recur.
· Crystal Rig 1 has experienced long-term availability challenges with turbines which are unique to this site within the portfolio. The asset manager and O&M provider were challenged to provide retrofits to deliver long-term solutions for specific problematic aspects, which are in final stages of implementation.
· Crystal Rig 2 underwent planned four yearly high voltage electrical system maintenance in the second half of 2022.
Performance shortfalls at Blary Hill and Little Raith are protected by contractual provisions:
· Blary Hill was curtailed for noise management purposes following commissioning which has now been resolved, with commercial protection from the turbine supplier in place for some of the losses incurred.
· In addition to the commercial protections associated with additional maintenance works, Little Raith's performance has improved in recent months through a constructive approach to resourcing and additional training for the on-site technicians, reinforcing the longer-term stability of the project.
There are also a range of technical innovations being trialled or deployed at various GB onshore windfarms, as referenced within the Enhancements section.
France - onshore wind
Across the fifteen assets that make up this region, the south of France suffered some poor wind resource in the middle of the year whilst the northern sites were in line with budget. Construction snagging at the Venelle site, which was commissioned at the end of 2020, is being addressed. Venelle's sister site, Vannier, has now completed construction and the contractual approach is benefitting from the experience gained at Venelle.
Repowering activities continue to progress well on the older southern sites, with Claves' and Cuxac's Feed-in Tariff applications now approved and contractual arrangements progressing to enable dismantling activities to commence in the second half of 2023. Repowering will commence at Claves and Cuxac; with Haut Languedoc and Haut Cabardes following thereafter. Repowering under Feed‑in‑Tariff mechanisms allows projects to benefit from a new 20‑year subsidy period.
Scandinavia - onshore wind
Jädraås continues to perform well operationally with strong availability. However, power price hedging arrangements have been challenging in the volatile market, requiring settlement of hedges at high market prices during periods of low production, which has impacting financial performance during the second half of the year, which may continue into 2023 depending on power price levels. The financial impact on the portfolio as a whole has not been, and is not expected to be, material. In constructing a balanced portfolio, Grönhult does not have such hedging arrangements in place and will receive market electricity pricing under a route-to-market power price agreement.
Grönhult construction is now substantially complete, with the project energised and exporting electricity to the grid.
Construction of Ranasjö and Salsjö (collectively known as Twin Peaks) is progressing well and, as is typical for TRIG's projects in construction, RES has been contracted to act as Owner's Engineer. Turbine foundations are laid for both sites, with site tracks and turbine crane hardstands more than 50% complete and substation works commenced. The sites are on track to commence operations in 2024.
Northern Ireland & Republic of Ireland - onshore wind
Consisting of seven projects spread across Northern Ireland and the Republic of Ireland, this region is the smallest of TRIG's regions by value. Downtime at the Altahullion and Taurbeg sites exceeded budgets due to a combination of component failures and proactive works to enhance the long-term performance of the sites.
GB - offshore wind
Hornsea 1, our largest acquisition of 2022, has bedded in well within this region of four projects spread from North Scotland to East Anglia. Works to inter-array cabling within the wind farms, connections to the grid and component exchanges at Sheringham Shoal, each of which adversely affected production in the year, are now largely complete and expected to improve performance going forward.
Through extensive negotiations working alongside our investment partners, one of the offshore projects secured substantially improved commercial rates mid-term on a core operations contract during the year, upon the investment case.
East Anglia 1 successfully completed the sale of its associated offshore substation and grid connection to shore, in accordance with market requirements.
Beatrice agreed contractual terms for a range of different yield enhancements, to improve both individual turbine and site-wide performance, for implementation during 2023.
End of warranty inspections are a core theme for the region given the young age of the assets, with a campaign of pro-active investigative works performed or on-going to identify and resolve any potential defects under warranty, or secure protection against their subsequent cost of resolution. There are also a range of ongoing contractual performance protections post warranty.
Germany - offshore wind
Merkur has received an extensive inspection, repair and retrofit regime in connection with the rear frame defect, which has now been completed, availability brought back in line with budget and liquidated damage payments for the associated downtime in the contract year ended March 2022 received. This good progress in resolving the rear frame defect was core to the investment case for an incremental 11% stake in the project, which was acquired from a co-shareholder in December 2022. Power curve enhancements are planned to be rolled out in 2023, which are expected to improve energy yield by c. 2.5%.
At Gode, yaw and pitch optimisations have been implemented to enhance production, with further specific opportunities being actively investigated.
A small amount of non-compensated grid downtime was experienced at both sites at various points during the year.
Solar
The Solar segment of the portfolio currently consists of 29 assets across southern England, France and Spain. Valdesolar in Spain contributes to over 50% of the segment's generation capacity, and the four Cadiz projects are also now generating and set to become fully operational in Q1 2023. As the Cadiz projects become fully operational they will add further geographical diversification within TRIG's solar sub-portfolio.
Given the relative greater predictability of solar generation compared to wind power, projects throughout TRIG's solar portfolio were able to secure electricity price fixes on pay-as-produced basis at attractive levels, in the context of the high but volatile electricity prices experienced in the year, for the next four years.
This area of the portfolio has already seen diversification benefits, whereby lower irradiance in France and Spain in 2022 was offset by high irradiation in GB. The new Spanish site Valdesolar maintained very high availability across the year but was impacted by grid curtailment in the summer. New arrangements have been put in place to reduce future grid curtailment.
Enhancements
As Operations Manager, RES is dedicated to enhancing the operational performance and shareholder and stakeholder value of the portfolio through both commercial and technical initiatives. RES applies a structured framework to identify, appraise and implement enhancements at both individual and portfolio levels. Examples of some of the commercial and technical value enhancements secured in 2022 include:
· Blade improvements: Aerodynamic improvements to wind turbine blades have been developed with specialist, independent experts to increase the efficiency of the blades in extracting energy from the wind. This enhancement has been rolled out at a Scottish onshore wind site following a successful trial, in which a 3% increase in energy yield was secured. Trials allow the site-specific conditions to be evaluated, including the turbine model and condition, local topography and wind characteristics such as shear and turbulence. A second Scottish site trial is currently underway, with other sites being assessed for further rollout, with greater emphasis on those onshore sites which use larger blades.
· Software upgrades: More recent vintages of wind turbines use sophisticated control systems to determine how the wind turbine responds to the environmental conditions, such as the yawing of the nacelle and pitching of the blades. Some of these software upgrades are more applicable to large turbine arrays with flatter topography such as offshore wind farms. Alternative software enhancements can also be used to secure improved performance on older turbines within the portfolio.
· TRIG is actively engaging with its offshore wind joint venture partners to identify and implement a wide range energy yield enhancements, for implementation during 2023. These enhancements include wake steering - whereby the overall site production is increased by reducing the wind obstructed by each turbine on those downwind from them and high wind ride through - allowing turbines to respond to and withstand gusting without shutting down whilst also avoiding excessive loading on the structures. RES has a deep experience of both identification, implementation and technical appraisal of the performance of such enhancements, helping to ensure that appropriate contractual structures are adopted.
· A wake steering and collective control trial, which seeks to enable turbines to optimise the overall yield from the whole site rather than on a per turbine basis, is progressing at Altahullion in Northern Ireland, with the next phase of validation to be completed in H1 2023. Collective control is expected to be beneficial on any site consisting of a large number of turbines within an array formation.
· Pallas onshore wind farm in the Republic of Ireland has undergone testing to evaluate the provision of certain specific grid services, supporting grid resilience, for which the site is remunerated by the grid operator.
· Active revenue stream management: Due to reduced market liquidity in 2022, TRIG ensured a disciplined approach to price fixing, whilst also engaged with offtakers to maximise value of REGOs across the portfolio (which have seen a tenfold increase in value on previous years).
· Repowering activities are progressing at the four older sites in the south of France, commencing at Claves and Cuxac, then following on at Haut Languedoc and Haut Cabardes thereafter. New 20-year government-supported tariffs have been secured for Claves and Cuxac. Decommissioning and repowering contracts are targeted for signing during the second half of 2023.
· Work has continued on extending the life of existing operational sites across the wholly owned UK and Ireland portfolio with planning extensions submitted for several solar and wind sites during the year. In addition, a review of the UK and Ireland onshore wind portfolio has been undertaken to identify likely repowering opportunities. Several opportunities have been identified and these will be progressed over the coming years.
Health and Safety
A strong focus on Health & Safety has always been core to TRIG's operations and the ethos of its Board and Managers. Each quarterly meeting of the TRIG Board starts with a discussion of Health & Safety across the portfolio. Health & Safety performance is reviewed at every project company board meeting throughout the year, using reporting obtained for every site in the portfolio, providing information on both leading and lagging indicators.
Leading indicators are those activities pro-actively performed or data collated to help reduce the risk of an accident ever occurring, such as performing internal or external safety audits, safety-focussed site walk-overs supported by discussions with site personnel, as well as collating and sharing information on:
· Good Catches - potential hazards that are identified and controlled;
· Hazard Identifications - hazards that have the potential to cause harm but are currently uncontrolled.
Lagging indicators are more focussed on collecting data on events that occurred, ensuring that each is appropriately investigated and key contributing factors identified to enable actions to be taken to reduce future recurrence and severity, including through sharing information across different businesses. Lagging indicators include:
· Near-misses - unplanned or uncontrolled events that have the potential to cause harm or damage.
· Non-lost time accidents - where an injury is sustained, however slight, and the injured party is able to return to work on the same day as the accident. The difference between a near-miss and a non-lost time accident can often be down to an element of timing, separation or good fortune that broke the chain of events.
· Lost-time accidents: where an injury is sustained and the injured party is unable to return to work on the day following the accident. A seven day lost-time accident classification is also used to reflect a higher degree of severity, such that the injured party is unable to return to their normal duties within seven days of suffering the injury.
The following provides an update of Health & Safety items of note during 2022:
· There were no severe accidents across the portfolio during the year. However, the Lost Time Accident Frequency Rate increased compared to 2021, in part reflecting improved reporting, as well as a larger construction portfolio and higher offshore activity, with actions taken to avoid recurrence in the case of each incident.
· The increased number of incidents is in part reflected by the increased construction activity in the portfolio with manual handling incidents (associated with the installation of the solar panels) seen at the Cadiz solar construction sites, where there were up to 400 people across the four sites at certain times. There were also several incidents reported at the Merkur offshore site, where there was a high level of activity associated with the rectification of the rear frame issue.
· The quality of Health & Safety reporting remains high across most of the portfolio, with good transparency and follow up of incidents. There has been an increased focus on positive leading indicators such as the number of independent and internal safety audits or reviews, hazard identifications and safety walks.
· Approval was given to install improved welfare facilities across the GB Solar sites in 2023.
· In addition, further safety equipment within the turbine towers of some of the older GB onshore wind farms will be installed in 2023.
· RES is a Tier 1 member of SafetyOn and sits on the SafetyOn Management Board. RES's TRIG Operations Management team attended a collaboration event in November which served as a great opportunity for owners and subcontractors to share their thoughts on key safety issues. In the same vein, RES continues to regularly hold its own Health & Safety coordination group to foster relationships between the various asset managers across the TRIG portfolio, share information and discuss matters that have occurred in the portfolio. This year it allowed those working on UK and German offshore sites to share their experiences, something that they wouldn't normally get the opportunity to do.
Projects in construction and development
By acquiring assets at an earlier stage in their development, TRIG seeks to access improved returns and a wider investment opportunity set.
The delivery and de-risking of projects through construction and development enhances value for shareholders who benefit from the shift to a lower discount rate used to value operational projects; and enable TRIG's Managers to deploy TRIG's balance sheet to create new low-carbon generation and flexible capacity to contribute to the decarbonisation of the electricity system and improve energy security.
Importantly, TRIG benefits from its Managers' expertise in investing in and delivering infrastructure projects through construction and development: InfraRed as a greenfield investor for the past 25 years and RES as a developer and/or constructor of over 23GW and operator of over 10GW of renewable assets globally.
In sourcing construction and development stage investments, InfraRed carefully screens opportunities to ensure they are aligned with TRIG's portfolio construction strategy and are additive to the portfolio as a whole. InfraRed, with input from RES, then perform due diligence and structure each opportunity to ensure that risks are allocated to parties best positioned to manage them and that the returns reflect the risks being borne by TRIG's portfolio company. Once an investment is brought into the portfolio, RES, with input from InfraRed, actively oversees construction and development activities to manage costs, timetable, quality, contractor interface, transition into operations, stakeholder engagement and, importantly, health & safety.
At the balance sheet date, 8% of the portfolio by value was in construction and development. This represents the Ranasjö, Salsjö and Grönhult wind farms in Sweden as well as the development premium for the four battery storage projects in development: Ryton, Drakelow, Drax and Spennymoor. Taking the expected construction spend for the Ryton and Drakelow batteries, which are expected to be contracted in 2023, would increase the construction and development exposure to 11% of the portfolio by value.
Recently completed construction projects
Vannier, France; completed Q3 2022
Located in the Haute-Marne department in France, Vannier is a 43MW onshore wind farm consisting of 17 Envision E-131 2.5MW turbines. Construction commenced in February 2020. Construction was delivered under an EPC wrap by an Envision-Velocita consortium.
Following permit issues at the site, for which full commercial protection had been previously obtained, construction was resumed in September 2021, with full commercial takeover achieved in September 2022.
Blary Hill, Scotland; completed Q1 2022
Located on the Kintyre Peninsula in Scotland, Blary Hill is a 35MW onshore wind farm consisting of 14 Nordex 2.5MW turbines. Construction started in 2020 and the project was completed early in 2022. Construction was delivered by RES under an EPC wrap, a management model in which a principal contractor secures each of the supply contracts and has contractual commitments to deliver the project on time and on budget. A third-party technical adviser provided independent oversight of key milestones.
Both the local community and the local environment have been considered throughout the construction process. Several local companies were engaged for construction work, with local employment centres being utilised for the recruitment of labour operatives. Additionally, habitat management plans will be implemented along with compensatory planting, to improve the condition of the natural environment.
Grönhult, Sweden due to complete Q1 2023
Located in southwest Sweden, the 12 x Vestas V162 5.6MW (67.2MW) project was acquired from Vattenfall in January 2021.
Vattenfall managed the construction to a high standard under a multi-contract approach with excellent health & safety performance. Construction commenced in Q1 2021 with all turbines erected prior to the end of 2022 and early generation achieved in October 2022. Snagging and commissioning activities are now being completed.
Construction projects
Ranasjö & Salsjö
Located in Sollefteå, Västernorrland County, Central Sweden, the two adjacent Ranasjö and Salsjö projects will consist of a total of 39 Siemens 6.2MW turbines (242 MW), with TRIG having 50% ownership share alongside InfraRed's European Infrastructure Income Fund 4.
The projects continue in line with programme. Civil works, electricals and foundations are all complete at the Salsjö project and the final roads and two foundations are left to be completed at Ranasjö. 'Dry runs' of turbine deliveries to site have been completed successfully ahead of deliveries scheduled to commence during the summer of 2023.
The projects are being managed by the developer Arise and are scheduled for take-over in spring 2024.
Arenosas, Malabrigo, El Yarte and Guita (Cadiz Solar), Spain Completed Q1 2023
Located in the province of Cadiz, Spain, the four projects have a total capacity of 234MW. Construction on the projects began in September 2021 and was delivered by Statkraft under an EPC wrap.
First export was achieved in December 2022 with commissioning activities progressing well and due to complete in Q1 2023. Across all projects, consideration of the local community has been actively embedded throughout the process, with the construction contractor engaging with its subcontractors to encourage local employment for less specialised work and the use of local businesses.
In total, local labour accounted for the equivalent of 108 people hired for a year, with €0.8m of local investment.
Development
Storage
TRIG acquired four consented battery storage projects in the second half of 2022, which will provide c. 700MWh / 350MW flexible capacity once built. Located in the North of England, these sites require detailed design works to be performed prior to procurement and construction.
The timescale for construction will be dictated by grid connection dates, which currently vary from 2023 to 2031. Ryton will be the first to progress, with construction anticipated to commence in 2023.
4 Valuation of the 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 30 June and 31 December 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 in accordance with IFRS 13 and IFRS 10, given the special nature of infrastructure investments.
The valuation for each investment in the portfolio is derived from the application of an appropriate discount rate to reflect the perceived risk to the investment's future cash flows in order to give the present value of those cash flows. The Investment Manager exercises its judgement in assessing the expected future cash flows from each investment based on the project's expected life and the financial model produced by each project entity. In determining the appropriate discount rate to apply to a given investment, the Investment Manager takes into account the relative risks associated with the revenues, which include fixed price per MWh income (lower risk) or merchant power sales income (higher risk). Where a project has both income types a theoretical split of future receipts has been applied, with a different (higher) discount rate used for an investment's return deriving from the merchant income compared to the fixed price income, equivalent to using an appropriate blended rate for the investment.
The Directors' Valuation of the portfolio as at 31 December 2022 was £3,737.0m. This valuation compares to £2,725.8m as at 31 December 2021 and £3,235.6m as at 30 June 2022[13].
Valuation movement in the year to 31 December 2022
|
Valuation movement during the year to 31 December 2022 | £m | £m |
| Valuation of portfolio at 31 December 2021 |
| 2,725.8 |
| Cash investments net of capital return | 693.8 |
|
| Cash distributions from portfolio | (280.5) |
|
|
|
|
|
| Rebased valuation of portfolio |
| 3,139.1 |
| Changes in power price forecasts* | 265.7 |
|
| Movement in discount rates | (176.6) |
|
| Change in inflation assumptions | 233.7 |
|
| Change in foreign exchange** | 73.0 |
|
| Balance of portfolio return | 201.9 |
|
| Valuation of portfolio at 31 December 2022 |
| 3,737.0 |
* The positive impact from the change in power price forecasts is net of the UK Electricity Generators Levy, which had an adverse impact of £188m.
** Foreign exchange movement is stated before the offsetting effect of hedges which are held at the Company and subsidiary levels. Foreign exchange gain reduces to £36.6m after the impact of foreign exchange hedges.
The opening valuation at 31 December 2021 was £2,725.8m. Allowing for net cash investments of £693.8m and cash receipts from investments of £280.5m, the rebased valuation as at 31 December 2022 was £3,139.1m.
Cash investments of £693.8m during the year is predominantly comprised of the following investments:
| % of Committed | Invested to | 2022 | Invested to | Total (fully committed)[15] |
| Hornsea One | 0% | 8% | 8% | 8% |
| Valdesolar | 0% | 3% | 3% | 3% |
| Cadiz solar projects (Arenosas, Malabrigo, El Yarte and Guita) | 2% | 2% | 5% | 5% |
| Merkur | 6% | 2% | 7% | 7% |
| Battery storage projects (Ryton, Drakelow, Drax and Spennymoor) | 0% | 1% | 1% | 4% |
| Grönhult | 1% | 1% | 3% | 3% |
| Twin Peaks (Ranasjö and Salsjö) | 1% | 1% | 2% | 4% |
Further detail on each investment is included in Section 2.5.
Each movement between the rebased valuation of £3,139.1m and the 31 December 2022 valuation of £3,737.0m is considered in turn below:
(i) Forecast power prices
The valuation at 31 December 2022 is based on current updated power price forecasts for each of the markets in which TRIG invests overlayed with a portion of the lower prices indicated by the forward markets over the next c.2 years. The forecasts are materially up in the short to medium term, but with the longer term broadly unchanged in real terms, resulting in an overall increase in valuation of the portfolio from a year ago by £453.8m. This is reduced by the impact of the UK Electricity Generator Levy ("EGL") which is explained in more detail below which leads to a net valuation increase arising from increase in power price forecasts after the impact of the UK EGL of £265.7m. This impact includes the long-term change in power curve inflation (see item (iv) changes to inflation assumptions).
Over the year, spot power prices and the short-to-medium term power price forecasts have markedly increased due to supply chain constraints exacerbated by the conflict in Ukraine and associated disruption to energy markets. This has had the effect of contracting the supply and pushing up the cost of natural gas. Many countries are seeking to reduce and/or eliminate their use of Russian gas, increasing their demand for other gas sources (including LNG) in the shorter term and increasing the drive to use and further develop other energy sources. This includes coal as a stopgap measure (notwithstanding its high carbon tax). This transition has resulted in wholesale power price forecasts remaining elevated across the 2020s before reverting to the levels similar to those being forecast at the previous year end as additional demand and supply are broadly expected to balance. Over the longer term this also includes electricity displacing gas usage (for example switching to electric heating), introducing the use of green hydrogen and including more intermittent renewable generation and/or nuclear generation.
Prior to the Ukraine conflict, near-term power prices across Europe were already elevated, mainly caused by increasing gas demand during 2021 and early 2022. Gas storage levels were low over the last winter period (2021/22) as electricity demand increased during 2021 as economies came out of lockdown and electricity generated from other sources, such as wind and nuclear, was lower than usual (due to unusually low wind levels and outages, respectively). This has led to European gas prices, and hence electricity prices, being more sensitive to reduced supply and/or increased demand.
Power prices are one of the key risks faced by the Company: a number of factors go into power price forecasting to estimate electricity demand, including the mix of generation technology meeting this demand and for each technology, their associated costs of supply. As such, it is inherently difficult to estimate and then apply these factors to accurately forecast the outcome of this dynamic market. Please refer to Section 3.4 - Risk and Risk Management for further analysis.
The weighted average power price used to determine the valuation is shown below in real terms (average of 2022 prices) - this is comprised of the blend of forecasts for each of the power markets in which TRIG is invested after applying expected PPA power sales discounts and reflecting cannibalisation[16] and, where it is believed appropriate, overlaying shorter-term forwards to reflect current market pricing.
Illustrative blended power price curve (real prices) for TRIG's portfolio[17]
| Region | | Average | Average | Average |
| GB (Real, £/MWh) | Before EGL | 121 | 41 | 56 |
| After EGL | 100 | 41 | 52 | |
| Average of 5 euro jurisdictions* (Real EUR/MWh) | After intervention | 89 | 48 | 55 |
* France, SEM, Germany, Sweden (SE2 and SE3) and Spain
Cannibalisation is assumed within the adopted power price forecasts across each jurisdiction. The reduction in captured wholesale electricity power prices is forecast to be further impacted in each geography over time as the proportion of production coming from renewables in each market increases.
The EU markets are imposing windfall taxes via inframarginal caps applied by EU markets to each county. These materially remove the benefit of power prices in excess of a threshold (set individually by country) and this has been incorporated within the assumed power price forecasts for each affected market. Further additional legislation applicable in Spain (a gas cap and a more onerous windfall tax related to gas pricing) is also incorporated within the power price forecast assumed. Additional detail by market is included within the market background section.
Electricity Generator Levy (UK-specific)
The Autumn Statement in November announced the introduction of the Electricity Generator Levy to applicable UK wind and solar assets. This imposes an effective 70% tax on "excess" revenues from the sale of electricity (excluding where these are derived from government support, i.e. ROCs, CfDs and FiTs). Excess revenues are defined as those above £75/MWh. The 70% effective tax comprises a direct 45% levy on revenues above the threshold and 25% corporation tax as the levy is not considered a deductible expense for corporation tax. The levy is expected to be applied for 5 years from 1 January 2023 and the £75 is indexed by CPI, with the first £10m of "excess revenue" provided as an allowance each year (i.e. escapes the levy).
The impact of the EGL is to reduce the uplift in value from increased power price forecasts. The adverse valuation impact of the introduction of the EGL has been £188.1m. It also has the effect of reducing project sensitivity to changes in power prices down to the £75 threshold, as analysed in the key sensitivities section.
(ii) Movement in valuation discount rates:
The weighted average portfolio valuation discount rate as at 31 December 2022 was 7.2% (31 December 2021: 6.6%). The discount rates used for valuing each investment represent an assessment of the rate of return at which it is estimated infrastructure investments with similar risk profiles would trade on the open market.
During the year we have observed continuing strong competition for renewables infrastructure, which remains a sought-after asset class. Whilst transaction evidence is not yet demonstrating a clear increase in discount rates, the yield of long-term government bonds has increased since 30 June 2022. The Investment Manager has applied an average increase of 0.5% to discount rates across the portfolio. The valuation discount rates applied to investments in the UK have been increased by more than those in the EU, reflecting the higher long-term government bond yields in the UK. The average increase of 0.5% represents an average increase of 0.8% applied to UK investments and 0.3% to non-UK investments compared to 31 December 2021.
As the portfolio progresses through time, assets with fixed price arrangements in the earlier years will see their future returns become proportionally more exposed to market price movements (unless current arrangements, notably subsidies, are renewed) and consequently contain an increased level of risk. This effect has increased the portfolio weighted average discount rate by 0.1% since December 2021.
During the year, the Company commissioned an independent valuation of the portfolio and undertook a further review of the discount rates adopted for the December 2022 valuation, which confirmed that the rates used were reasonable. This change in assumption has led to a reduction in the valuation of the investments of £176.6m.
(iv) Changes to inflation assumptions
Throughout 2022, the material increases in energy prices (as described in (i) above) as well as increases in food and other commodity prices exacerbated by the conflict in Ukraine have contributed to material increases in headline inflation (measured versus price levels 12 months previously) across all the geographies TRIG invests in.
In respect of energy prices, the most significant increase in the UK resulted from the step-up in the retail consumer energy price caps in April and October of 2022 (with a further change in energy price cap in January 2023), while other contributions have been more evenly spread. Headline inflation figures are likely to remain high both from continued inflationary pressures (in energy and in other factors) and as a result of the "base effect", while the material increase in April will remain within the headline figure until the April 2023 inflation figure is released.
Inflation applied to cash flows has been uplifted for actual inflation in all geographies for the 11 months to November 2022. For December 2022 we have assumed 6% for UK RPI, 5.25% for UK CPI and 3% for CPI in the other European countries TRIG invests in.
We have shown below the revised inflation assumptions and also the effective annual rate for 2022, which combines the very high actual inflation to date with the expected inflation levels for the balance of 2022.
Inflation applied to future UK power prices tracks UK RPI till 2030 and is assumed to be 2.25% thereafter.
| Inflation assumptions used in the Portfolio Valuation | |||||
| Index | 2022 Forecast (Dec) full-year equivalent* | 2023 | 2024-2029 | 2030+ | |
| UK RPI | 6.00% | 13.3% | 5.00% | 2.75% | 2.00% |
| UK CPI | 5.25% | 10.5% | 4.25% | 2.00% | 2.00% |
| UK Power Price | 6.00% | 13.3% | 5.00% | 2.75% | 2.25% (December 2021: 2.75%) |
| Eurozone | 3.00% | 8.2% | 3.00% | 2.00% | 2.00% |
* This represents the average inflation across the year 2022 measured against the prior 12 months.
The inflation changes above have had the impact of increasing the valuation by £233.7m. This number was mainly driven by inflation actuals accounting for approximately 80% of the total.
(v) Foreign Exchange Movement:
Over the year the sterling has depreciated 5% against the euro (31 December 2021: EUR 1.1899; 31 December 2022: EUR 1.1304). In aggregate this has led to a gain in the year of £73.0m in the valuation of the euro-denominated investments located in France, the Republic of Ireland, Sweden[18], Spain and Germany. After the impact of forward currency hedges held at Company level are taken into account, the foreign exchange gain reduces to £36.6m.
Euro-denominated investments comprised 41% of the portfolio at the year end.
The Group enters into forward hedging contracts (selling euros, buying sterling) for an amount equivalent to its expected income from euro-denominated investments over the short term, currently approximately the next 48 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 typically in the range of 60% to 80% of their valuation. Hedging is also effected when making investments using the revolving credit facility by drawing in euros for euro acquisitions.
The Investment Manager keeps under review the level of euro exposure and utilises hedges, with the objective of minimising variability in shorter term cash flows with a balance between managing the sterling value of cash flow receipts and potential mark-to-market cash outflows.
(vi) Balance of portfolio return:
This refers to the balance of valuation movements in the year (excluding (i) to (v) above) and represents an uplift of £201.9m and a 6.4% increase over the rebased value of the portfolio. The balance of portfolio return mostly reflects the net present value of the cash flows brought forward at the prevailing portfolio discount rate (6.6% at 31 December 2021). Accounting for the fact that the acquisitions during the year occurred partway through the year and consequently these cash flows were brought forward by less than 12 months, then the increase in value would be the equivalent of an annualised rate of 6.9%.
In addition to the unwinding of the discount rate:
· Actual operating performance has been greater than forecast, with higher-than-forecast power prices being partially offset by lower overall generation for the year.
· Changes have been made to deposit rate assumptions, increasing interest rate forecasts in line with market expectations and the recent rises enacted by central banks across TRIG's markets. The portfolio has a low sensitivity to the changes in interest rates, which is an advantage to TRIG's approach of favouring long-term structured project financing rather than short-term corporate debt. Structured project financing is secured against the underlying assets, with the substantial majority benefitting from long-term interest rate swaps which fix the interest costs to the projects. As such, the overall impact of interest rate changes is not material. Please see further detail on page 157.
· Several projects secured new fixed price power purchase agreements, while others utilised existing optionality to fix some prices at attractive rates, providing additional value and revenue security.
Investment Obligations
At the balance sheet date, the Company had outstanding investment commitments in relation to the construction of the Ranasjö, Salsjö and Grönhult onshore wind farms, and the Cadiz solar projects (Arenosas, Malabrigo, El Yarte and Guita).
The commitment amounts below include further development and subsequent construction spend on two battery storage projects (Ryton and Drakelow). These two projects for a combined size of 165MW/30MWh of flexible capacity are expected to become operational in 2024 and 2025. The expected cost to build these two projects is included in Outstanding Commitments, even though contracts have not yet been entered into, given that the contracts to build these projects are expected to be signed in the short term (in 2023).
TRIG has acquired the rights to develop and construct two further battery storage projects (located near Spennymoor and Drax). These projects are scheduled for grid connection in 2029 and 2031, and are expected to have total capacity of c. 190MW / 380MWh once built. The construction costs for these two projects are not included in the Company's Outstanding Commitments as no build contracts have been entered into, nor are they expected to be entered into in the short term.
| Name | Acquired | Net MW | Status | Completion Date |
| Grönhult | Feb-21 | 67.0 | Construction | Q1 2023 |
| Ranasjö | Jul-21 | 43.4 | Construction | 2024 |
| Salsjö | Jul-21 | 77.5 | Construction | 2024 |
| Arenosas | Sept-21 | 58.1 | Construction* | Q1 2023 |
| El Yarte | Sept-21 | 58.1 | Construction* | Q1 2023 |
| Guita | Sept-21 | 58.1 | Construction* | Q1 2023 |
| Malabrigo | Sept-21 | 58.1 | Construction* | Q1 2023 |
| Ryton | Sept-22 | 74.0 | Late Stage Development | 2024 |
| Drakelow | Sept-22 | 90.0 | Late Stage Development | 2025 |
* TRIG does not bear construction risk on the Cadiz solar projects. TRIG has a right to put any of the four projects back to the developer of the projects in the event that a project is not successfully commissioned by its long stop date.
The timeline of outstanding commitments is presented below (approximately half in relation to Ryton and Drakelow):
| | 2023 | 2024 | 2025 | Total |
| Outstanding Commitments (£m) | 97 | 78 | 30 | 205 |
Fully invested Portfolio Valuation
The valuation of the portfolio on a fully invested basis can be derived by adding the valuation at 31 December 2022 and the expected outstanding commitments as follows:
| Portfolio valuation at 31 December 2022 | £3,737.0m |
| Future investment commitments | £204.5m |
| Portfolio valuation once fully invested | £3,941.6m* |
* Table does not cast due to rounding.
Key sensitivities
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 modelled life.
The sensitivities assume the portfolio is fully invested and hence the Portfolio Value for the sensitivity analysis is £3,941.6m. Accordingly, the NAV per share impacts shown above assumes the issue of further shares to fund the balance of these commitments.
All of TRIG's sensitivities above are stated after taking into account the impact of project-level gearing on returns.
The output sensitivity above incorporates an updated calculation of the portfolio effect which reduces the variability as a result of the diversification of the portfolio. The increased diversification of the portfolio has increased this effect and consequently reduced the sensitivity of the portfolio.
The windfall taxes imposed by the UK (the Electricity Generator Levy) and the EU (Inframarginal Cap and Spanish-specific legislation) result in price sensitivity becoming lower while the assumed pricing exceeds the threshold for the imposition of these taxes (e.g. for the UK in 2023 for prices in excess of £75/MWh, the valuation sensitivity to change in price would be reduced by approximately 60% compared to the sensitivity were the Electricity Generator Levy not in place).
Ten Largest Investments
Set out below are the ten largest investments in the portfolio. As at 31 December 2022, the largest investment (Hornsea One) accounted for approximately 9% of the portfolio by invested value. In total, the 10 largest projects accounted for approximately 52% of the project portfolio by invested value (2021: 55%).
| Ten largest investments - Invested to date basis | ||||
| Project | Location | Type | % of portfolio by value at | |
| 31 December 2022 | 31 December 2021 | |||
| Hornsea One | England | Offshore Wind | 9% | - |
| Merkur | Germany | Offshore Wind | 7% | 6% |
| Jädraås | Sweden | Onshore Wind | 7% | 8% |
| Beatrice | England | Offshore Wind | 6% | 10% |
| East Anglia 1 | England | Offshore Wind | 6% | 9% |
| Gode Wind 1 | Germany | Offshore Wind | 4% | 5% |
| Garreg Lwyd | Wales | Onshore Wind | 4% | 5% |
| Crystal Rig II | Scotland | Onshore Wind | 3% | 3% |
| Valdesolar | Spain | Solar PV | 3% | - |
| Sheringham Shoal | England | Offshore Wind | 3% | 3% |
| December 2022 ten largest investments | 52% |
| ||
| Solwaybank | Scotland | Onshore Wind | 2% | 3% |
| Blary Hill | Scotland | Onshore Wind | 2% | 2% |
| December 2021 ten largest investments | | 55%[19] | ||
|
| Ten largest investments - Committed basis | |||
| Project | Location | Type | % of portfolio by value at |
| 31 December 2022 | |||
| Hornsea One | England | Offshore Wind | 8% |
| Merkur | Germany | Offshore Wind | 7% |
| Jädraås | Sweden | Onshore Wind | 6% |
| Beatrice | England | Offshore Wind | 6% |
| East Anglia 1 | England | Offshore Wind | 6% |
| Gode Wind 1 | Germany | Offshore Wind | 4% |
| Garreg Lwyd | Wales | Onshore Wind | 3% |
| Grönhult | Sweden | Onshore Wind | 3% |
| Crystal Rig II | Scotland | Onshore Wind | 3% |
| Valdesolar | Spain | Solar PV | 3% |
| December 2022 ten largest investments | 49% | ||
5 Analysis of Financial Results
As at 31 December 2022, the Group had investments in 90 projects. As an investment entity for IFRS reporting purposes, the Company carries these investments at fair value. The results below are shown on a statutory and on an "expanded" basis as we have done in previous years. See the box below for further explanation.
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 ended 31 December 2022 and the prior year 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 have provided the non-statutory Expanded basis to assist users of the accounts in understanding the performance and position of the Company, by including the cash and debt balances carried in TRIG UK and TRIG UK I and expenses incurred in TRIG UK and TRIG UK I.
The necessary adjustments to get from the Statutory IFRS basis to the non-statutory Expanded basis are shown for the primary financial statements. The commentary provided on the primary statements of TRIG is on the Expanded Basis.
Income Statement
The Statutory IFRS basis does not include TRIG UK and TRIG UK I's costs, such as overheads, management fees and acquisition costs against income. The Expanded basis includes the expenses incurred within TRIG UK and TRIG UK I to enable users of the accounts to fully understand the Group's costs. There is no difference in profit before tax or earnings per share between the two bases.
Balance Sheet
The Statutory IFRS basis includes TRIG UK and TRIG UK I's cash, debt and working capital balances as part of portfolio value. The Expanded basis shows these balances gross. There is no difference in net assets between the Statutory IFRS basis and the Expanded basis.
The majority of cash generated from investments had been passed up from TRIG UK and TRIG UK I to the Company by 31 December 2022.
At 31 December 2022, TRIG UK I was £398.5m drawn on its revolving credit facility (2021: £72.8m drawn) being the majority of the difference between the Statutory IFRS basis and the Expanded basis.
Cash Flow Statement
The Statutory basis shows cash movements for the top company only (TRIG Limited). The Expanded basis shows the consolidated cash movements above the investment portfolio which are relevant to users of the accounts. Differences include income received by TRIG UK and TRIG UK I applied to reinvestment and expenses incurred by TRIG UK and TRIG UK I that are excluded under the Statutory IFRS basis.
The purchase of investments on the Expanded basis is funded by both the company's revolving credit facility and amounts passed down after capital raises. The remaining balance is that of reinvestment.
Income statement
| Summary income statement | Year to 31 December 2022 £'million | Year to 31 December 2021 £'million | ||||
| | Statutory | Adjustments1 | Expanded Basis | Statutory | Adjustments1 | Expanded Basis |
| Operating income | 555.2 | 43.4 | 598.6 | 174.8 | 29.5 | 204.3 |
| Acquisition costs | - | (2.6) | (2.6) | - | (1.9) | (1.9) |
| Net operating income | 555.2 | 40.8 | 596.0 | 174.8 | 27.6 | 202.4 |
| Fund expenses | (2.3) | (27.1) | (29.4) | (1.9) | (21.9) | (23.8) |
| Foreign exchange (loss)/gains | (32.1) | (4.3) | (36.4) | 37.6 | 0.0 | 37.6 |
| Finance costs | (0.1) | (9.4) | (9.5) | (0.0) | (5.7) | (5.7) |
| Profit before tax | 520.7 | 0.0 | 520.7 | 210.5 | 0.0 | 210.5 |
| EPS2 | 21.5p | - | 21.5p | 10.0p | - | 10.0p |
1. The following were incurred within TRIG UK and TRIG UK I; acquisition costs, the majority of expenses and credit 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 approximately 2,424.0 million shares.
Analysis of Expanded Basis financial results
Profit before tax for the year to 31 December 2022 was £520.7 million, generating earnings per share of 21.5p, which compares to £210.5 million and earnings per share of 10.0p for the year to 31 December 2021.
The EPS of 21.5p reflects high revenues generated in the year as a result of particularly high wholesale power prices coupled with higher subsidies as a result of their indexation to inflation, and increases in the portfolio valuation (which is included in Operating Income) primarily as a result of expectations for power prices and inflation continuing to be elevated over the short-medium term.
Other areas contributing to valuation growth have been foreign exchange movements as sterling has weakened against the euro.
These increases are partially offset by the Electricity Generator Levy (EGL) introduced in the UK applied to actual revenues from the sale of electricity in excess of the threshold schemes and other government intervention schemes (clawback and caps) across the other markets. The valuation discount rate has also been increased in the year with the portfolio discount rate increasing to 7.2% (2021: 6.6%) reflecting increasing long-term government borrowing rates. This also had the effect of reducing the overall valuation. The factors causing the movement in the valuation are more fully described in Section 3.1 - Valuation of the Portfolio.
Generation volume in the year was below budget, although this was more than offset by the higher-than-budgeted power prices achieved during the year.
Acquisition costs of £2.6m (2021: £1.9m) relate to the investments in the year, mostly attributable to the investments in Hornsea One, Valdesolar, Spennymoor, Ryton, Drakelow and Drax battery storage projects as well as the incremental investment in Merkur.
| | Year to (£'million) | Year to (£'million) |
| Acquisition costs | 2.6 | 1.9 |
| Total acquisition commitments made in the year | 648.1 | 677.9 |
| Acquisition costs as % of investments | 0.4% | 0.3% |
An increase in fund expenses in the year to 31 December 2022 as compared to the year to 31 December 2021 reflects the increase in the size of the portfolio.
Fund expenses of £29.4 million (2021: £23.8 million) includes all operating expenses and £26.6 million (2021: £21.5 million) in fees paid to the Investment and Operations Managers. Management fees are charged as follows: at 1% of Adjusted Portfolio Value up to £1 billion, 0.8% of Adjusted Portfolio Value in excess of £1 billion, 0.75% of Adjusted Portfolio Value in excess of £2 billion and 0.7% of Adjusted Portfolio Value in excess of £3 billion. This is set out in more detail in the Related Party and Key Advisor Transactions note, Note 19 to the financial statements.
During the year the sterling weakened against the euro by 5% resulting in a positive foreign exchange valuation movement for existing euro-denominated assets, giving a valuation gain of £73.0 million (2021: £58.7 million loss), partially offset by loss on foreign exchange hedges and cash and debt balances held at Company level of £36.4 million (2021: £37.6 million gain) recorded in the Income Statement. The net foreign exchange gain in the period is hence £36.6 million (2021: £21.1 million loss).
Finance costs relate to the interest and fees incurred relating to the Group's revolving credit facility. The finance costs in the period are higher than the comparative period, reflecting increased interest rates in the year.
Ongoing charges
| Ongoing Charges (Expanded Basis) | Year to £'000s | Year to £'000s |
| Investment and Operations Managers' fees | 26,639 | 21,520 |
| Audit fees | 300 | 272 |
| Directors' fees and expenses | 375 | 342 |
| Other ongoing expenses | 1,934 | 1,519 |
| Total expenses1 | 29,246 | 23,653 |
| Average net asset value | 3,123,518 | 2,435,718 |
| Ongoing Charges Percentage (OCP) | 0.93% | 0.97% |
1. Total expenses excludes £0.1m (2021: £1.1m) of lost bid costs incurred during the year.
The Ongoing Charges Percentage is 0.93% (2021: 0.97%). 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 year. 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 those of the Company.
The decrease in OCP level reflects the tiered Manager Fees that reduce as Portfolio Value grows as well as the growth of the Company in the year, meaning the Company's expenses are spread over a larger capital base. There is no performance fee paid to any service provider.
Balance sheet
| Summary balance sheet | As at 31 December 2022 £'million | As at 31 December 2021 £'million | ||||
| | Statutory IFRS Basis | Adjustments | Expanded Basis | Statutory IFRS Basis | Adjustments | Expanded Basis |
| Portfolio value | 3,322.6 | 414.4 | 3,737.0 | 2,636.8 | 89.0 | 2,725.8 |
| Working capital | 12.4 | (16.0) | (3.6) | 13.9 | (15.9) | (2.0) |
| Hedging Asset/(Liability) | (16.8) | (0.7) | (17.5) | 27.3 | (0.6) | 26.7 |
| Debt | - | (398.5) | (398.5) | - | (72.8) | (72.8) |
| Cash | 24.5 | 0.8 | 25.3 | 28.2 | 0.3 | 28.5 |
| Net assets1 | 3,342.7 | - | 3,342.7 | 2,706.2 | - | 2,706.2 |
| Net asset value per share | 134.6p | - | 134.6p | 119.3p | - | 119.3p |
1. The hedging liability has been shown net above, this consists of current and non-current asset and liability balances relating to FX forward contracts, this is discussed further in note 18 of the financial statements.
Analysis of Expanded Basis financial results
Portfolio value grew by £1,011.2 million in the year to £3,737.0 million, primarily as a result of the investments made in the year to 31 December 2022 and strong valuation growth as described more fully in the "Valuation of the Portfolio" section of this Strategic Report.
Hedging liabilities and assets represent the value of outstanding foreign exchange derivatives used to manage the Company's risk to movements in the foreign exchange rate between the sterling and euro. Working capital amounts include debtors, liabilities and capitalised financing costs.
Group cash at 31 December 2022 was £25.3 million (2021: £28.5 million) and credit facility debt drawn at 31 December 2022 was £398.5 million (2021: £72.8 million).
Net assets grew by £636.5 million in the year to £3,342.7 million. The Company raised £276.3 million (after issue expenses) of new equity during the year to support investment activity and produced a £520.7 million profit in the year, with net assets being stated after accounting for dividends paid in the year (net of scrip take-up) of £160.4 million. Other movements in net assets totalled £1.0 million, being the Managers' shares which form part of the management fee accrued at 31 December 2022 and to be issued on or around 30 March 2023.
Net asset value ("NAV") and Earnings per share ("EPS") reconciliation
Net asset value ("NAV") per share as at 31 December 2022 was 134.6p compared to 119.3p at 31 December 2021.
| | NAV per share | Shares in issue (m) | Net assets |
| Net assets at 31 December 2021 | 119.3p | 2,267.2 | 2,705.2 |
| Profit/EPS to 31 December 2022 | 21.5p1 | - | 520.7 |
| Shares issued (net of costs)2 | 0.6p3 | 211.7 | 276.3 |
| Dividends paid in 2022 | (6.8)p | | (165.6) |
| Scrip dividend take-up4 | - | 3.9 | 5.2 |
| H2 2022 Managers' shares to be issued | - | 0.8 | 1.0 |
| Net assets at 31 December 2022 | 134.6p | 2,483.65 | 3,342.85 |
1. Calculated based on the weighted average number of shares during the year being 2,424.0 million shares.
2. Includes shares issued to managers (less costs) during the year.
3 The increase in net assets per share of 0.6p was the result of accretive share issues where shares were issued above the Company's net asset value per share.
4. Scrip dividend take-up comprises 3.9 million shares issued during the year.
5. Balance may not cast due to rounding.
Cash flow statement
| Summary cash flow statement | Year to 31 December 2022 £'million | Year to 31 December 2021 £'million | ||||
| | Statutory IFRS Basis | Adjustments | Expanded Basis | Statutory IFRS Basis | Adjustments | Expanded Basis |
| Cash received from investments | 184.8 | 98.9 | 283.7 | 155.4 | 20.5 | 175.9 |
| Operating and finance costs | (2.0) | (33.0) | (35.0) | (1.9) | (23.6) | (25.5) |
| Cash flow from operations | 182.8 | 65.9 | 248.7 | 153.5 | (3.1) | 150.4 |
| Debt arrangement costs | - | (0.3) | (0.3) | - | (0.1) | (0.1) |
| Foreign exchange gains/(losses) | 11.8 | (6.5) | 5.3 | 3.1 | 0.5 | 3.6 |
| Issue of share capital (net of costs) | 276.3 | (2.0) | 274.3 | 434.9 | (2.0) | 432.9 |
| Credit facility drawn/(repaid) | - | 325.7 | 325.7 | - | 32.8 | 32.8 |
| Purchase of new investments (including acquisition costs) | (314.1) | (382.1) | (696.4) | (452.3) | (28.6) | (480.9) |
| Distributions paid | (160.5) | - | (160.5) | (134.1) | - | (134.1) |
| Cash movement in year | (3.7) | 0.5 | (3.2) | 5.1 | (0.5) | 4.6 |
| Opening cash balance | 28.2 | 0.3 | 28.5 | 23.1 | 0.8 | 23.9 |
| Net cash at end of year | 24.5 | 0.8 | 25.3 | 28.2 | 0.3 | 28.5 |
Analysis of Expanded Basis financial results
Cash received from investments in the year was £283.7 million (2021: £175.9 million). The increase in cash received compared with the previous year reflects the increase in the size of the portfolio. The adjustment reflects working capital movements and cash flow available for reinvestment and proceeds in the year.
Dividends paid in the year totalled £160.5 million (net of £5.2 million scrip dividends). Dividends paid in the prior year totalled £134.1 million (net of £7.5 million scrip dividends).
Cash flow from operations in the year was £248.7 million (2021: £150.4 million) and covers dividends paid of £160.5 million in the year (2021: £134.1 million) by 1.55 times (or 1.50 times without the benefit of scrip take-up), or 2.55 times before factoring in amounts invested in the repayment in project-level debt. The Group repaid £174 million of project-level debt (pro-rata to the Company's equity interest) in the year.
Share issue proceeds (net of costs) totalled £274.3 million (2021: £432.9 million) reflecting the net proceeds of the 210.1 million shares issued in the March 2022 equity fund raise.
In the year, £696.4 million was invested in acquisitions. These were funded through the March equity fund raise (net proceeds of £274.3 million), drawing on the Company's credit facility of £325.7 million, as well as the reinvestment of surplus cash flows.
Cash balances decreased slightly in the period by £3.2 million.
The company has future commitments relating to the Cadiz solar projects (Arenosas, El Yarte, La Guita and Malabrigo), Ranasjö and Salsjö wind farms, Grönhult and Goshawk (Ryton, Drakelow and Drax) as follows.
| | 2023 (£'m) | 2024 (£'m) | 2025 (£'m) | Total (£'m) |
| Outstanding Commitments | 98 | 64 | 37 | 205 |
Financing
The Group's recently increased £750m revolving credit facility is with a banking group comprising Royal Bank of Scotland International, National Australia Bank, ING, Sumitomo Mitsui Banking Corporation, Barclays, Lloyds, BNP Paribas, ABN Amro, Skandinaviska Enskilda Banken (SEB) and Intesa SanPaolo. The facility expiry date is 31 December 2025 with options to extend for up to an additional 24 months. Margins on the facility when drawn are 1.85% over the relevant reference rate. The facility can be drawn in sterling or euros.
The revolving credit facility enables the Group to fund new acquisitions and to provide letters of credit should they be required. The facility includes a £45m working capital element.
The short-term financing provided by the revolving credit facility is limited to 30% of the portfolio value. It is intended that any drawings used to finance acquisitions are repaid, in normal market conditions, within a year through equity fundraisings.
The credit facility was drawn at the commencement of the year having funded investments in 2021 and was subsequently repaid following the capital raising in March 2022. During the second half of the year further new investments were funded in addition to providing funding to the Spanish solar projects and Swedish wind projects the Group has in construction. The balance at the year end is £399m.
In addition to the revolving credit facility, the projects may have underlying project-level debt. There is an additional gearing limit in respect of such debt, which is typically 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 at 31 December 2022 across the portfolio was 38% (2021: 40%). Principal repayments in the year totalled £174m, as the debt is retired over the project's subsidy periods. Gearing has reduced during 2022 partially due to the scheduled repayment of debt in the year and partially due to the mix of acquisitions in the year, some of which introduced new debt in projects and some of which were acquired without project debt.
The vast majority of the project debt is fixed and has an average cost of 3.6% (including margin). The project-level debt is fully amortising and repaid in each case over the period of the subsidy term. The portfolio weighted average subsidy life remaining is 11 years.
Foreign Exchange Hedging
At the year end, 41% of the portfolio was located within France, the Republic of Ireland, Sweden[20], Germany and Spain and hence is invested in euro-denominated assets.
The Group enters into forward hedging contracts against expected income from the euro-denominated investments' distributions up to four years ahead. In addition, the Group aims to enter 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 at least 50% of their aggregate value. The group may also make drawings under the revolving credit facility in euros, which provides further foreign exchange hedging.
During the majority of 2022, the Group targeted hedging of approximately 60% to 80% of the overall euro portfolio value. The Group has been maintaining this increased hedging level since 2019 in light of increased euro / sterling exchange rate volatility risk related to Brexit and subsequently due to other economic factors.
The Investment Manager keeps the level of euros hedged under review, with the objective of minimising variability in shorter-term cash flows and reducing NAV volatility. It seeks to maintain 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 1.7p assuming an effective euro foreign exchange hedge of 60% - this is explained in more detail in Section 3.1 and Note 4 in the Notes to the Financial Statements (Valuation Sensitivities - euro/sterling exchange rate).
Going Concern
Having performed the assessment of going concern, the Directors considered it appropriate to prepare the financial statements of the Company on a going concern basis. The Company has sufficient financial resources and liquidity and is well placed to manage business risks in the current economic environment (including but not limited to the conflict in Ukraine and current upward inflationary pressures) and can continue operations for a period of at least 12 months from the date of these financial statements.
Further information on the Directors, assessment and decision to prepare the financial statement on a going concern basis can be found in the Report of the Directors in Section 4.6 of this report.
Related Parties
Related party transactions are disclosed in Note 19 to the set of financial statements.
6 Financial Statements
Income Statement
For the year ended 31 December 2022
| | Note | Year ended | Year ended |
| Net gain on investments | 6 | 433,960 | 68,775 |
| Dividend income | 6 | - | 4,900 |
| Interest income from investments | 6 | 121,247 | 101,121 |
| Total operating income | | 555,207 | 174,796 |
| Fund expenses | 7 | (2,290) | (1,904) |
| Operating profit | | 552,917 | 172,892 |
| Finance and other (expense)/income | 8 | (32,207) | 37,570 |
| Profit before tax | | 520,710 | 210,462 |
| Income tax | 9 | - | - |
| Profit after tax | 10 | 520,710 | 210,462 |
| Attributable to: | | | |
| Equity holders of the parent |
| 520,710 | 210,462 |
|
|
| 520,710 | 210,462 |
| Earnings per share (pence) | 10 | 21.5 | 10.0 |
All results are derived from continuing operations. The accompanying notes are an integral part of these financial statements.
There is no other comprehensive income or expense apart from those disclosed above and consequently, a separate statement of comprehensive income has not been prepared.
Balance Sheet
As at 31 December 2022
| | Note | As at | As at |
| Non-current assets | | | |
| Investments at fair value through profit or loss | 13 | 3,322,611 | 2,636,785 |
| Fair value of FX forward contracts | 18 | 1,622 | 13,219 |
| Total non-current assets |
| 3,324,233 | 2,650,004 |
| Current assets | | | |
| Other receivables | 14 | 12,913 | 14,232 |
| Fair value of FX forward contracts | 18 | 1,096 | 14,074 |
| Cash and cash equivalents | 15 | 24,469 | 28,229 |
| Total current assets |
| 38,478 | 56,535 |
| Total assets |
| 3,362,711 | 2,706,539 |
| Non-current liabilities | | | |
| Fair value of FX forward contracts | 18 | (16,780) | - |
| Total non-current liabilities |
| (16,780) | - |
| | | | |
| Current liabilities | | | |
| Fair value of FX forward contracts | 18 | (2,753) | - |
| Other payables | 16 | (440) | (362) |
| Total current liabilities |
| (3,193) | (362) |
| Total liabilities |
| (19,973) | (362) |
| Net assets | 12 | 3,342,738 | 2,706,177 |
| | | | |
| Equity | | | |
| Share capital and share premium | 17 | 2,770,050 | 2,488,594 |
| Other reserves | 17 | 1,008 | 1,008 |
| Retained reserves | 17 | 571,680 | 216,575 |
| Total equity attributable to owners of the parent | 12 | 3,342,738 | 2,706,177 |
| Net assets per Ordinary Share (pence) | 12 | 134.6 | 119.3 |
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 21 February 2023, and signed on its behalf by:
Director: John Whittle
Director: Richard Morse
Statement of Changes in Shareholders' Equity
For the year ended 31 December 2022
| | Share capital and share premium | Other reserves | Retained reserves | Total equity |
| Shareholders' equity at beginning of year | 2,488,594 | 1,008 | 216,575 | 2,706,177 |
| Profit for the year | - | - | 520,710 | 520,710 |
| Dividends paid | - | - | (160,454) | (160,454) |
| Scrip shares issued in lieu of dividend | 5,151 | - | (5,151) | - |
| Ordinary Shares issued | 277,338 | - | - | 277,338 |
| Costs of Ordinary Shares issued | (3,033) | - | - | (3,033) |
| Ordinary Shares issued in year in lieu of Management Fees earned in H2 20211 | 1,008 | (1,008) | - | - |
| Ordinary Shares issued in year in lieu of Management Fees earned in H1 20222 | 992 | - | - | 992 |
| Ordinary Shares to be issued in lieu of Management Fees earned in H2 20223 | - | 1,008 | - | 1,008 |
| Shareholders' equity at end of year | 2,770,050 | 1,008 | 571,680 | 3,342,738 |
For the year ended 31 December 2021
| | Share capital and share premium | Other reserves | Retained reserves | Total equity |
| Shareholders' equity at beginning of year | 2,046,237 | 1,005 | 147,629 | 2,194,871 |
| Profit for the year | - | - | 210,462 | 210,462 |
| Dividends paid | - | - | (134,058) | (134,058) |
| Scrip shares issued in lieu of dividend | 7,458 | - | (7,458) | - |
| Ordinary Shares issued | 439,850 | - | - | 439,850 |
| Costs of Ordinary Shares issued | (6,948) | - | - | (6,948) |
| Ordinary Shares issued in year in lieu of Management Fees earned in H2 20204 | 1,005 | (1,005) | - | - |
| Ordinary Shares issued in year in lieu of Management Fees earned in H1 20215 | 992 | - | - | 992 |
| Ordinary Shares to be issued in lieu of Management Fees earned in H2 20211 | - | 1,008 | - | 1,008 |
| Shareholders' equity at end of year | 2,488,594 | 1,008 | 216,575 | 2,706,177 |
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 up to an Adjusted Portfolio Value of £1 billion.
1 The £1,008,219 transfer between reserves represents the 857,254 shares that relate to management fees earned in the six months to 31 December 2021 and were recognised in other reserves at 31 December 2021, and were issued to the Managers during the year, with the balance being transferred to share premium reserve on 31 March 2022.
2 The £991,779 addition to the share premium reserve represents the 748,569 shares that relate to management fees earned in the six months to 30 June 2022 and were issued to the Managers on 30 September 2022.
3 As at 31 December 2022, 758,686 shares equating to £1,008,219, based on a Net Asset Value ex dividend of 132.89 pence per share (the Net Asset Value at 31 December 2022 of 134.6 pence per share less the interim dividend of 1.71 pence per share) were due but had not been issued. The Company intends to issue these shares to the Managers around 31 March 2023.
4 The £1,005,462 transfer between reserves represents the 885,012 shares that relate to management fees earned in the six months to 31 December 2020 and were recognised in other reserves at 31 December 2020, and were issued to the Managers during 2021, with the balance being transferred to share premium reserves on 31 March 2021.
5 The £991,778 addition to the share premium reserve represents the 880,719 shares that relate to management fees earned in the six months to 30 June 2021 and were issued to the Managers on 30 September 2021.
The accompanying notes are an integral part of these financial statements.
Cash Flow Statement
For the year ended 31 December 2022
| | Note | Year ended | Year ended |
| Cash flows from operating activities | | | |
| Profit before tax | 10 | 520,710 | 210,462 |
| Adjustments for: | | | |
| Net gain on investments | 6, 13 | (433,960) | (68,775) |
| Dividend income | | - | (4,900) |
| Investment income from investments | 6 | (121,247) | (101,121) |
| Acquisition costs | 7 | 16 | - |
| Movement in other reserves relating to Manager shares | | 0 | 3 |
| Realised gains on settlement of FX forwards | | 9,689 | 7,643 |
| Finance and other expense/(income) | 8 | 32,207 | (36,336) |
| Operating cash flow before changes in working capital | | 7,415 | 6,976 |
| | | | |
| Changes in working capital: | | | |
| Increases in receivables | | (2) | (4) |
| Decreases in payables |
| 77 | 63 |
| Cash flow from operations | | 7,490 | 7,035 |
| | | | |
| Distributions from investments | 13 | 184,763 | 149,522 |
| Interest on bank deposits |
| 120 | 1 |
| Net cash from operating activities |
| 192,373 | 156,558 |
| | | | |
| Cash flows from investing activities | | | |
| Purchases of investments | 13 | (314,059) | (452,289) |
| Acquisition costs | 7 | (16) | - |
| Net cash used in investing activities |
| (314,075) | (452,289) |
| | | | |
| Cash flows from financing activities | | | |
| Proceeds from issue of share capital during year | | 279,338 | 441,847 |
| Costs in relation to issue of shares | 17 | (3,033) | (6,948) |
| Dividends paid to shareholders | 11 | (160,454) | (134,058) |
| Net cash from financing activities |
| 115,851 | 300,841 |
| Net (decrease)/increase in cash and cash equivalents |
| (5,851) | 5,110 |
| Cash and cash equivalents at beginning of year | 15 | 28,229 | 23,116 |
| Exchange gains on cash |
| 2,091 | 3 |
| Cash and cash equivalents at end of year | 15 | 24,469 | 28,229 |
The accompanying notes are an integral part of these financial statements.
7 Notes to the 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 publicly 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 mainly operational renewable energy generation projects, predominantly in onshore and offshore wind and solar PV segments, across the UK and Europe. The Company, TRIG UK, TRIG UK I and its portfolio of investments are known as the "Group".
These financial statements are for the year ended 31 December 2022 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 21 February 2023.
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 pounds 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 ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years. Note 3 shows critical accounting judgements, estimates and assumptions.
(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 on page 82. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Results on pages 67 to 73. 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 the necessary financial resources to meet its obligations for the foreseeable future. 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.
On 3 February 2023, the revolving credit facility was renewed and extended from £600m to £750m with an expiry date of 31 December 2025. The revolving credit facility includes a working capital component of £45m and is limited to 30% of Portfolio Value.
The revolving credit facility is ESG-linked, resulting in a possible increase or reduction to future interest payments based on the company's performance against KPIs relating to ESG targets over time.
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.
At 31 December 2022, the Company's leverage was 11% for fund-level financing (2021: 3%) and 38% for project-level financing (2021: 40%).
The Company has sufficient headroom on its revolving credit facility covenants. These covenants have been tested and relate to interest cover ratios and group gearing limits and the Company does not expect these covenants to be breached. The Company and its direct subsidiaries have a number of guarantees, detailed in note 20 of these financial statements. These guarantees relate to certain obligations that may become due by the underlying investments over their useful economic lives. We do not anticipate these guarantees to be called in the next 12 months and in many cases the potential obligations are insured by the underlying investments.
A cash balance of £24.5m at 31 December 2022 is held by the Company, with further amounts held in the Company's direct and indirect subsidiaries. In addition, the Company has a working capital facility on its revised revolving credit facility of £45m, which remains undrawn at the date of signing this report.
Further to the above, the Company has a number of outstanding commitments which are detailed in Section 2.2 of this Annual Report and Note 20 of these financial statements. These commitments can be fully covered by the Company's revolving credit facility.
As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The directors do not believe that there is a significant risk to the business as a result of the Russian invasion of Ukraine but will continue to monitor any future developments.
The Company is affected by climate-related risks, as set out in the Company's TCFD reporting, and the Board consider these when they assess the Company's ability to continue as a going concern. The Company continues to assess, monitor and where necessary and possible, mitigate and manage these risks.
Having performed the assessment of going concern, the Directors considered it appropriate to prepare the financial statements of the Company on a going concern basis. The Company has sufficient financial resources and liquidity and is well placed to manage business risks in the current economic environment (including but not limited to the conflict in Ukraine and current upward inflationary pressures) and can continue operations for a period of at least 12 months from the date of these 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 owned by the Company. The Company has ownership 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 67 to 73 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:
▲ Obtains funds from one or more investors for the purpose of providing those investors with investment management services; and
▲ 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
▲ Measures and evaluates the performance of substantially all of its investments on a fair value basis.
In respect of the first criterion, TRIG is an investment company which enables shareholders to gain exposure to a diversified portfolio of renewable energy and related infrastructure investments coupled with the management of these investments.
In respect of the second criterion, the Company's purpose is to invest funds for returns from capital appreciation and investment income. The Company's exit of its investments in project companies may be at the time the existing turbines or other generation assets get to the end of their economic lives or planning or leasehold land interests expire, at which point the project companies may be considering redevelopment (referred to as a "repowering") of the site. The Company may remain invested in the event there is the opportunity to repower and undertake the repowering, subject to its investment limits on construction activity being met and depending on economic considerations at the time. The Company may also exit investments earlier for reasons of portfolio balance or profit, as there is an active secondary market for renewables projects in the countries in which we operate.
In respect of the third criterion, the board evaluates the performance of the assets on a fair market value basis throughout the year as part of the management accounts review, and the company undertakes a fair market valuation of its portfolio twice a year for inclusion in its report and accounts with the movement in the valuation taken to the Income Statement and thus measured within its earnings.
Taking these factors into consideration, 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 IFRS 9 "Financial Instruments".
Financial derivatives are valued using a mark to market valuation based on the underlying derivative contracts that are executed with the banks. The movements in mark to market valuation are recognised in the profit and loss statement.
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 where these instruments are held at amortised cost). Subsequent to initial recognition, non-derivative financial instruments are measured as described below.
Investments in equity and debt securities
Investments in the equity, loan stock and mezzanine debt of entities engaged in renewable energy activities are designated upon initial recognition as held at fair value through profit or loss. Gains or losses resulting from the movement in fair value are recognised in the Income Statement at each valuation point.
Financial assets are recognised/derecognised at fair value at the date of the purchase/disposal. A financial asset (in whole or part) is derecognised either:
▲ when the group has transferred substantially all of the risks and rewards of ownership; or
▲ when it has neither transferred nor retained substantially all of the risks and rewards when it no longer has control over the asset or a portion of the asset; or
▲ when the contractual rights to receive cash flow have expired.
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. For the years ended 31 December 2022 and 31 December 2021, there were no such differences.
The Group manages these investments and makes purchase and sale decisions based on their fair value.
The Directors consider the equity and loan stock 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. Expected credit losses are assessed and measured annually and where appropriate, recognised as a loss allowance.
(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 comprise 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 subsidiaries, TRIG UK and TRIG UK I. This is recognised as it accrues by reference to the principal outstanding and the effective interest rate applicable 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 non-Guernsey source income 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 ongoing 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 the 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.
(q) New and revised standards
The Company notes the following standards and interpretations which were in issue but not effective at the date of these financial statements. They are not expected to have a material impact.
▲ Amendments to IAS 1 Classification of Liabilities as Current or Non-current (effective for annual periods beginning on or after 1 January 2023)
▲ Amendments to IAS 8 Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023)
▲ New IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 1 January 2023)
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 year are outlined below.
Key source of estimation uncertainty: 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, relevant long-term government bond yields, specific risks associated with the technology (onshore wind, offshore wind, battery storage and solar) and geographic location of the underlying investment, and the evidence of recent transactions have all been considered. 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 2022 valuation was 7.2% (2021: 6.6%). 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, which are further discussed in Note 4 under sensitivities.
The other material impacts on the measurement of fair value are the forward-looking power price curve, energy yields, operating costs and macro economic assumptions (including rates of inflation) which are further discussed in Note 4 under sensitivities. The company considers climate-related risks such as power prices (including the impact of net zero curves), asset availability and maintenance costs when assessing these assumptions. Further information on these climate change risks is discussed in more detail in part 4 of Section 3.6 in of this Annual Report.
The Investment Manager, when considering the assumptions to apply to the valuation of the investments at 31 December 2022, considers several key assumptions.
Key judgements
By virtue of the Company's status as an investment fund, and in conjunction with 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 loan stock and ordinary equity of renewable energy project 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.
The Company has a diversified portfolio of assets which include investments with both higher and lower risks and returns. These risks and return differences relate, but are not limited to, qualification to receive government subsidies, exposure to fluctuations in future energy prices and levels of project finance debt.
Interest rate risk
The Group invests in subordinated loan stock 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.
The revolving credit facility is ESG-linked, resulting in a possible increase or reduction to future interest payments based on the Group's performance against KPIs relating to ESG targets over time. More details can be found in part 11 of Section 3.6 of this annual report.
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 loan stock debt carries a fixed coupon and the inflation changes flow through by way of changes to dividends in future years. Inflation is managed through the use of inflation-linked swaps where the Group deems it to be appropriate. 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. The Investment Manager carries out a full valuation semi-annually and this valuation exercise considers changes described above.
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 2022 comprised 41% (2021: 37%) of the portfolio by value on an invested basis and 41% (2021: 42%) of the portfolio by value on a committed basis. The sensitivity of the portfolio valuation is shown in this note.
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. Key credit ratings for the Company's counterparties are detailed in Note 18.
The credit standing of subcontractors is reviewed, and the risk of default estimated for each significant counterparty position. Monitoring is ongoing, and year-end positions are reported to the Board on a quarterly basis. The Group's largest credit risk exposure to a project at 31 December 2022 was to the Hornsea One project, representing 9% (2021: Beatrice project, representing 10%) of the invested portfolio value.
The largest subcontractor counterparty risk exposure (O&M or OEM whereby the maintenance provider is not always the original equipment manufacturer) was to Vestas who provided turbine maintenance services in respect of 21% (2021: Vestas 24%) of the invested portfolio by value. The largest exposure to any equipment manufacturer was to Siemens who provided turbines in respect of 46% of the invested portfolio value (2021: Siemens 46%).
The Group's investments enter into Power Price Agreements ("PPA") with a range of providers through which electricity is sold; the PPAs are priced into the fair value of the investments. The largest PPA provider to the portfolio at 31 December 2022 was Statkraft, who provided PPAs to projects in respect of 17% (2021: Statkraft 19%) of the invested portfolio value.
At 31 December 2022, 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 meet 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.
The Group's revolving credit facility, which was £398.5m drawn at 31 December 2022 (31 December 2021: £72.8m), is held by TRIG UK and TRIG UK I, and is guaranteed by the Company. The renewed facility is in place until December 2025 and contains an option to extend.
Capital management
At the date of this report, the Group has a £750m revolving credit facility with Royal Bank of Scotland International Limited, National Australia Bank Limited, ING Bank N.V, Barclays Bank PLC, Sumitomo Mitsui Banking Corporation, Lloyds Bank PLC, SanPaolo S.P.A., BNP Paribas, Skandinaviska Enskilda Banken AB and ABN Amro. The facility was sized at £600m as at 31 December 2022, it has been renewed and extended to £750m since then and expires on 31 December 2025. The facility was £398.5m drawn as at 31 December 2022 and has been included in the fair value of investments.
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, relevant long-term government bond yields, the specific risks of each investment and the evidence of recent transactions are taken into account.
Derivative financial instruments
The fair value of financial instrument 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 | 31 December |
| Financial assets | | |
| Designated at fair value through profit or loss: | | |
| Investments | 3,322,611 | 2,636,785 |
| FX forward contracts | 2,718 | 27,293 |
| Financial assets at fair value | 3,325,329 | 2,160,946 |
| At amortised cost: | | |
| Other receivables | 12,913 | 14,232 |
| Cash and cash equivalents | 24,469 | 28,229 |
| Financial assets at amortised cost | 37,382 | 42,461 |
| | | |
| Financial liabilities | | |
| Designated at fair value through profit or loss: | | |
| FX forward contracts | 19,533 | - |
| Financial liabilities at fair value | 19,533 | - |
| | | |
| At amortised cost: | | |
| Other payables | 440 | 362 |
| Financial liabilities at amortised cost | 440 | 362 |
The Directors believe that the carrying values of all financial instruments are not materially different to their fair values.
The fair value of FX forward contracts is discussed in more detail in Note 18 of these financial statements.
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 2022 | |||
| | Level 1 | Level 2 | Level 3 | Total |
| Investments at fair value through profit or loss | - | - | 3,322,611 | 3,322,611 |
|
| - | - | 3,322,611 | 3,322,611 |
| FX forward contracts - assets | - | 2,718 | - | 2,718 |
| FX forward contracts - liabilities | - | (19,533) | - | (19,533) |
|
| - | (16,815) | - | (16,815) |
| | As at 31 December 2021 | |||
| | Level 1 | Level 2 | Level 3 | Total |
| Investments at fair value through profit or loss | - | - | 2,636,785 | 2,636,785 |
|
| - | - | 2,636,785 | 2,636,785 |
| FX forward contracts - assets | - | 27,293 | - | 27,293 |
|
| - | 27,293 | - | 27,293 |
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 2022 | 31 December 2021 |
| Portfolio value | 3,737,045 | 2,725,805 |
| TRIG UK and TRIG UK I | | |
| Cash | 809 | 225 |
| Working capital | (18,342) | (19,345) |
| Debt1 | (396,901) | (69,900) |
|
| (414,434) | (89,020) |
| Investments at fair value through profit or loss | 3,322,611 | 2,636,785 |
1 Debt arrangement costs of £1,602k (2021: £2,927k) have been netted off the £398.5m (2021: £72.8m) debt drawn by TRIG UK and TRIG UK I.
The debt figure of £396.9m above is held in TRIG UK and TRIG UK I, the Company's subsidiaries, and represents the revolving credit facility (less debt arrangement costs). The revolving credit facility is included within the fair value of the Company's subsidiaries.
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 at least 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 2022 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 fair value of investments has been calculated using a bifurcated methodology, whereby cash flows are discounted on the basis of the risk and return profile of the underlying cash flows.
The following economic assumptions were used in the discounted cash flow valuations as at:
| | 31 December 2022 | 31 December 2021 |
| Inflation assumed as measured by the UK Retail Prices Index (applies to UK ROC Income)* | Actual inflation applied to Nov-22, 6.00% | 3.75% (2022), 3.50% (2023), 2.75% until 2030, 2.00% thereafter |
| Inflation assumed as measured by the UK Consumer Prices Index (applies to UK CfD Income)* | Actual inflation applied to Nov-22, 5.25% | 3% (2022), 2.75% (2023), 2.00% thereafter |
| Inflation assumed to apply to UK Power Prices* | Actual inflation applied to Nov-22, 6.00% | 3.75% (2022), 3.50% (2023), |
| Inflation assumed to apply in Ireland, France, Sweden, Germany and Spain* | Actual inflation applied to Nov-22, 3.00% (2023), 2.00% thereafter | 2.00% |
| UK deposit interest rates | 3.00% to 2023, 2.50% thereafter | 0.25% to 2025, 1.25% thereafter |
| Ireland, France, Sweden, Germany and Spain deposit interest rates | 2.00% to 2023, 1.50% thereafter | 0.0% to 2025, 0.25% thereafter |
| UK corporation tax rate | 19% to April 2023, 25% thereafter | 19% to April 2023, 25% thereafter |
| Ireland corporation tax rate | 12.5% active rate, 25% passive rate | 12.5% active rate, 25% passive rate |
| France corporation tax rate | 25% | 25% |
| Sweden corporation tax rate | 20.6% | 20.6% |
| Germany corporation tax rate | 15.8% | 15.8% |
| Spain corporation tax rate | 25% | 25% |
| Euro/sterling exchange rate | 1.1304 | 1.1899 |
| Energy yield assumptions | P50 case | P50 case |
* The stated inflation assumptions apply the stated (annualised) rate on a monthly basis to the previous month's index.
The table below highlights the power price averages for GB and the EU markets:
| Region | | Average 2023-2027 | Average 2028-2050 | Average 2023-2050 |
| GB (Real, £/MWh) | Before EGL | 121 | 41 | 56 |
|
| After EGL | 100 | 41 | 52 |
| Average of 5 euro jurisdictions* (Real EUR/MWh) | After intervention | 89 | 48 | 55 |
A blended curve is provided in section 3.1.
As identified in Section 2.5, as of the balance sheet date legislation was enacted or in the process of being enacted within each of the jurisdictions in which the Group has invested, which would impact generating assets under specific conditions in relation to the revenue received from the sale of electricity at elevated prices.
Within the UK the Electricity Generator Levy ("EGL") (published as draft legislation in December) is expected to be incorporated within the Spring Finance Bill 2023. It will have effect from 1 January 2023 to 31 March 2028 and applies a levy of 45% (which is not deductible for corporation tax, resulting in an effective tax rate (when considering levy and tax) of 70%) to revenues received for the sale of wholesale above a threshold level. The threshold level for revenues is £75 per MWh (indexed by the Consumer Prices Index on 1 April each year from 2024) +£10m per annum per group allowance (with the UK assets the Group holds considered one group). The EGL has been reflected within the valuation and the valuation sensitivities for the legislated period (beyond which the prices assumed would be below the threshold level).
The European Union had introduced a legislative framework to apply Inframarginal Caps, under which each of the national governments can introduce legislation within specified parameters. This would seek to apply a tax in respect of revenues received in excess of a threshold price (typically the applicable tax rate is between 90% to 100%). The threshold price is determined by the national governments and can vary by technology. In general, the legislation as enacted or planned to be enacted is for a relatively limited duration with an expectation that this would be extended as required - as such the valuation and sensitivities assume that the legislation will apply until the prices drop below the applicable threshold level, with the threshold level expected to remain constant in real terms.
Within Iberia, specific legislation applies (which would have a more significant impact than the inframarginal cap) to both cap the price of gas used for electricity generation and to clawback prices received by generators over a level based upon an assumed gas price where they do not incur the cost of purchasing gas. The valuation and sensitivities assume these pieces of legislation will be extended until the prices fall below the threshold level, with the threshold level expected to remain constant in real terms.
A summary of the intervention measures is included within the table below:
| Market | Applies above | Effective rate applicable | Reliefs | Legislated period | |
| Electricity Generator Levy | UK | £75/MWh indexed by CPI | 70% | First £10m p.a. | 1 Jan 2023 to |
| Inframarginal Revenue Cap
| Ireland | EUR 120/MWh | 100% | None stated | 1 Jan 2023 to |
| France | EUR 100/MWh | 90% | Excludes FiT's and CfD's | 1 Jul 2022 to | |
| Germany | Feed in Tariff | 90% | Allowance for PPA costs | 1 Dec 2022 to | |
| Sweden | EUR 180/MWh | 90% | None stated | 1 Jan 2023 to | |
| Gas Clawback | Spain and Portugal | A calculated level based on assumed gas price | 85% | Formula includes an allowance to reflect some costs | Enacted in 2021, applicable |
Valuation sensitivities
Sensitivity analysis is produced 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 modelled life.
The sensitivities assume the portfolio is fully invested and hence the Portfolio Value for the sensitivity analysis is the sum of the Portfolio Valuation at 31 December 2022 (£3,737m) and the outstanding investment commitments (£204.5m), being £3,942m.
Accordingly, the NAV per share impacts shown below assume the issue of further shares to fund these commitments.
The analysis below shows the sensitivity of the portfolio value (and its impact on NAV) to changes in key assumptions as follows:
Discount rates
The discount rates used for valuing each investment are based on market information and the current bidding experience of the Group and its Managers.
The weighted average valuation discount rate applied to calculate the portfolio valuation is 7.2% at 31 December 2022 (2021: 6.6%). An increase or decrease in this rate by 0.5% has the following effect on valuation.
| Discount rate | NAV/share impact | -0.5% change | Total Portfolio Value | +0.5% change | NAV/share impact |
| Directors' valuation - December 2022 | +4.6p | +£134.4m | £3,941.6m | (£125.4m) | (4.3p) |
| Directors' valuation - December 2021 | +4.4p | +£111.7m | £2,957.0m | (£103.9m) | (4.1p) |
Power price
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.
The sensitivity incorporates the impact of the EGL and other similar legislation across each jurisdiction, with the forecast power price for the jurisdiction before the legislation is applied sensitised by 10% and the resulting forecast price is then subject to the legislation. As such the movement in the applied price (after the legislation is considered may differ from +/- 10%.
A change in the forecast electricity price assumptions by plus or minus 10% has the following effect.
| Power price | NAV/share impact | -10% change | Total Portfolio Value | +10% change | NAV/share impact |
| Directors' valuation - Dec 2022 | (9.2p) | (£270.9m) | £3,941.6m | +£258.2m | 8.8p |
| Directors' valuation - Dec 2021 | (8.1p) | (£202.7m) | £2,957.0m | +£200.8m | 8.0p |
Energy yield
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 underachieved. 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 where this exceeds 10 years).
The sensitivity incorporates the impact of the EGL and other similar legislation across each jurisdiction.
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 as per the terms P90, P50 and P10 explained above.
| Energy yield | NAV/share impact | P90 10 year exceedance | Total Portfolio Value | P10 10 year exceedance | NAV/share impact |
| Directors' valuation - Dec 2022 | (15.4p) | (£451.7m) | £3,941.6m | +£490.5m | 16.7p |
| Directors' valuation - Dec 2021 | (13.9p) | (£348.6m) | £2,957.0m | +£381.3m | 15.2p |
Inflation rates
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 the majority of the portfolio debt payments are fixed, with a proportion of these fixed payments covered by derivatives, either held at project level or in a holding company. This results in the portfolio returns and valuation being positively correlated to inflation.
The assumptions for inflation incorporated in the portfolio valuation are stated below. The differences in forecast result from differences in market, in the calculation methodology of the index or in the basket of goods considered within the index, or specific good in the case of UK power prices. The sensitivity is applied to all forecast inflation assumptions (actual inflation assumptions remain unchanged).
| | 31 December 2022 | 31 December 2021 |
| Inflation assumed as measured by the UK Retail Prices Index (applies to UK ROC Income) | Actual inflation applied to Nov-22, 6.00% | 3.75% (2022), 3.50% (2023), 2.75% until 2030, 2.00% thereafter |
| Inflation assumed as measured by the UK Consumer Prices Index (applies to UK CfD Income) | Actual inflation applied to Nov-22, 5.25% | 3% (2022), 2.75% (2023), 2.00% thereafter |
| Inflation assumed to apply to UK power prices | Actual inflation applied to Nov-22, 6.00% | 3.75% (2022), 3.50% (2023), |
| Inflation measured by national Consumer Price Indices assumed to apply in Ireland, France, Sweden, Germany and Spain | Actual inflation applied to Nov-22, 3.00% (2023), 2.00% thereafter | 2.00% |
The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase from all of the assumed annual inflation rates as stated above in the financial model for each year throughout the operating life of the portfolio, and including the impact upon inflation derivatives held at project or holding company level.
The sensitivity incorporates the impact of the EGL and other similar legislation as modelled across each jurisdiction.
| Inflation assumption | NAV/share impact | -0.5% change | Total Portfolio Value | +0.5% change | NAV/share impact |
| Directors' valuation - December 2022 | (5.1p) | (£149.8m) | £3,941.6m | +£177.7m | 6.1p |
| Directors' valuation - December 2021 | (4.3p) | (£107.7m) | £2,957.0m | +£115.4m | 4.6p |
Operating costs
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 2023 and that change to the base case remains reflected consistently thereafter during the life of the projects.
| Operating costs | NAV/share impact | -10% change | Total Portfolio Value | +10% change | NAV/share impact |
| Directors' valuation - December 2022 | 5.6p | +£163.4m | £3,941.6m | (£162.6m) | (5.5p) |
| Directors' valuation - December 2021 | 5.2p | +£129.5m | £2,957.0m | (£130.7m) | (5.2p) |
Taxation rates
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 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. The sensitivities incorporate the impact of portfolio-level reliefs.
| Taxation rates | NAV/share impact | -2% change | Total Portfolio Value | +2% change | NAV/share impact |
| Directors' valuation - December 2022 | 2.3p | +£66.9m | £3,941.6m | (£67.0m) | (2.3p) |
| Directors' valuation - December 2021 | 1.7p | +£43.5m | £2,957.0m | (£43.8m) | (1.7p) |
Interest rates
This shows the sensitivity of the portfolio valuation to the effects of a reduction of 2% and an increase of 2% in interest rates. The change is assumed with effect from 1 January 2023 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 rates | NAV/share impact | -2% change | Total Portfolio Value | +2% change | NAV/share impact |
| Directors' valuation - December 2022 | (0.0p) | (£1.5m) | £3,941.6m | +£3.3m | 0.1p |
| Directors' valuation - December 2021 | (0.2p) | (£5.0m) | £2,957.0m | +£0.8m | 0.0p |
Currency rates
The sensitivity shows the effect of a 10% decrease (euro weakens relative to sterling) and a 10% increase (euro strengthens relative to sterling) in the value of the euro relative to sterling used for the 31 December 2022 valuation (based on a 31 December 2022 exchange rate of €1.1304 to £1). In each case it is assumed that the change in exchange rate occurs from 1 January 2023 and thereafter remains constant at the new level throughout the life of the projects.
At the year end, 41% of the committed portfolio was located in Sweden, France, Germany, Ireland and Spain comprising euro-denominated assets.
The Group has entered into forward hedging of the expected euro distributions for up to 48 months ahead, and in addition placed further hedges to reach a position where at least 60% 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. The value of the outstanding commitments on Grönhult, Ranasjö, Salsjö, the Cadiz solar projects (Arenosas, El Yarte, La Guita and Malabrigo), Ryton and Drakelow are included in this sensitivity. A 60% hedge is assumed for the sensitivity below and during 2022, typical hedge levels have been between approximately 60-80%.
| Currency rates | NAV/share impact | -10% change | Total Portfolio Value | +10% change | NAV/share impact |
| Directors' valuation - December 2022 | (1.7p) | (£49.5m) | £3,941.6m | +£49.5m | 1.7p |
| Directors' valuation - December 2021 | (1.8p) | (£44.0m) | £2,957.0m | +£44.0m | 1.8p |
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.
Asset lives
Assumptions adopted in the year-end valuation typically range from 25 to 40 years from the date of commissioning, with an average 31 years for the wind portfolio and 39 years for the solar portfolio. The overall average across the portfolio at 31 December 2022 is 31 years (31 December 2021: 30 years).
The sensitivity below shows the impact on the valuation of assuming all assets within the portfolio have a year longer and a year shorter asset life assumed.
| Asset Lives | NAV/share impact | -1 year change | Total Portfolio Value | +1 year change | NAV/share impact |
| Directors' valuation - December 2022 | (1.0p) | (£28.7m) | £3,941.6m | +£25.8m | 0.9p |
| Directors' valuation - December 2021 | (1.0p) | (£25.6m) | £2,957.0m | +£23.3m | 0.9p |
Additional sensitivities
Given the current macroeconomic environment, in addition to the sensitivities representing the changes in the long-term assumptions impacting the portfolio valuation, additional sensitivities representing short-term one-off reasonably possible changes in assumptions have also been considered for two key assumptions which have experienced significant changes in short-term forecasts over the period.
For inflation, an increase of 3% in annual inflation applied over the next 12 months would be expected to increase the portfolio valuation by £86.9m (equivalent to 3.5 pence per share); a 3% decrease over the next 12 months would be expected to reduce the portfolio valuation by £87.6m (equivalent to 3.5 pence per share).
For power prices, a reduction of short-term pricing in GB to £120/MWh in 2023 and 2024 and to £100/MWh in 2025 (and the forecasters, curve thereafter) is expected to result in a valuation reduction of £56.2m. This level represents an average discount of 24% to the assumptions incorporated in the valuation and an average discount of 10% to the forward prices as of 17 February 2023.
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 |
| Gain on investments | 433,960 | 68,775 |
| Dividend income | - | 4,900 |
| Interest income from investments | 121,247 | 101,121 |
| Total operating income | 555,207 | 174,796 |
Interest income from investments is the long-term loan stock interest owed to the Company by TRIG UK and TRIG UK I; further details can be found in Note 19 of these financial statements.
7. Fund expenses
| | For year ended | For year ended |
| Fees payable to the Company's Auditor: | | |
| For audit of the Company's financial statements | 232 | 171 |
| For the other audit-related assurance services | 53 | 45 |
| For additional fees in respect to the prior period | - | 15 |
| Investment and management fees (Note 19) | 200 | 200 |
| Directors' fees (Note 19) | 361 | 339 |
| Acquisition costs | 16 | - |
| Other costs | 1,428 | 1,134 |
| Fund expenses | 2,290 | 1,904 |
On the Expanded basis, fund expenses are £29,376k (2021: £23,759k); the difference being the costs incurred within TRIG UK and TRIG UK I, the Company's subsidiaries. A further £31k of audit fees relating to the 2021 audits of unconsolidated subsidiaries were also agreed in the current year. The reconciliation from the IFRS basis to the Expanded basis is shown in Section 2.8 of the Strategic Report on page 67.
The fees to the Company's Auditor include £53k (2021: £45k) payable in relation to audit-related assurance services in respect of the interim review of the half-yearly financial statements.
In addition to the above, £657k (2021: £508k) was paid to Deloitte LLP (the Company's auditor) in respect of audit services provided for the 2022 audit to unconsolidated subsidiaries. Please refer to the Independent Auditor's Report on pages 129 to 137.
The Company had no employees during the current or prior year. 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 (expense)/income
| | For year ended | For year ended |
| Interest income: | | |
| Interest on bank deposits | 120 | 1 |
| Total finance income | 120 | 1 |
| | | |
| Gain on foreign exchange: | | |
| Realised gains on settlement of FX forwards | 9,689 | 7,643 |
| Fair value (loss)/gain of FX forward contracts | (44,107) | 28,693 |
| Other foreign exchange gains | 2,091 | 1,233 |
| Total (loss)/gain on foreign exchange | (32,327) | 37,569 |
| Finance and other (expense)/income | (32,207) | 37,570 |
On the Expanded basis, finance income is £120k (2021: £1k) and finance costs are £9,584k (2021: £5,793k); the difference being the Group's credit facility costs which are incurred within TRIG UK and TRIG UK I, the Company's subsidiaries. These costs are shown in Section 3.2 of the Strategic Report on page 68.
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 year.
| | 31 December | 31 December |
| Profit attributable to equity holders of the Company ('000) | £520,710 | £210,462 |
| Weighted average number of Ordinary Shares in issue ('000) | 2,424,010 | 2,103,869 |
| Earnings per Ordinary Share (pence) | 21.5p | 10.0p |
There are no shares in issue that have a dilutive effect and therefore the diluted EPS is the same as the basic EPS disclosed. Further details of shares issued in the year are set out in Note 17.
11. Dividends
| | 31 December | 31 December |
| Amounts recognised as distributions to equity holders during the year: | | |
| Interim dividend for the quarter ended 31 December 2020 of 1.69p | | 32,167 |
| Interim dividend for the quarter ended 31 March 2021 of 1.69p | | 35,508 |
| Interim dividend for the quarter ended 30 June 2021 of 1.69p | | 35,548 |
| Interim dividend for the quarter ended 30 September 2021 of 1.69p | | 38,293 |
| Interim dividend for the quarter ended 31 December 2021 of 1.69p | 38,316 | |
| Interim dividend for the quarter ended 31 March 2022 of 1.71p | 42,407 | |
| Interim dividend for the quarter ended 30 June 2022 of 1.71p | 42,425 | |
| Interim dividend for the quarter ended 30 September 2022 of 1.71p | 42,456 |
|
| | 165,6041 | 141,516 |
| Dividends settled as a scrip dividend alternative | 5,151 | 7,458 |
| Dividends settled in cash | 160,454 | 134,058 |
|
| 165,6051 | 141,516 |
1 Balances do not reconcile due to rounding.
On 2 February 2023, the Company declared an interim dividend of 1.71 pence per share for the period 1 October 2022 to 31 December 2022. The total dividend, £42,456,300, payable on 31 March 2023, is based on a record date of 10 February 2023 and the number of shares in issue at that time being 2,482,824,562.
| | 31 December | 31 December |
| Amounts recognised as distributions to equity holders during the year: | | |
| Interim dividend for the quarter ended December 2020 | | 1.69 |
| Interim dividend for the quarter ended March 2021 | | 1.69 |
| Interim dividend for the quarter ended June 2021 | | 1.69 |
| Interim dividend for the quarter ended September 2021 | | 1.69 |
| Interim dividend for the quarter ended December 2021 | 1.69 | |
| Interim dividend for the quarter ended March 2022 | 1.71 | |
| Interim dividend for the quarter ended June 2022 | 1.71 | |
| Interim dividend for the quarter ended September 2022 | 1.71 |
|
| Total dividend per share | 6.82 | 6.76 |
12. Net assets per Ordinary Share
| | 31 December | 31 December |
| Shareholders' equity at balance sheet date ('000) | £3,342,738 | £2,706,177 |
| Number of shares at balance sheet date, including management shares accrued but not yet issued ('000) | 2,483,583 | 2,268,104 |
| Net Assets per Ordinary Share at balance sheet date (pence) | 134.6p | 119.3p |
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 up to an Adjusted Portfolio Value of £1 billion.
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 2022, 758,686 shares equating to £1,008,219, based on a Net Asset Value ex dividend of 132.89 pence per share (the Net Asset Value at 31 December 2022 of 134.6 pence per share less the interim dividend of 1.71 pence per share) were due but had not been issued. The Company intends to issue these shares around 31 March 2023.
In view of this, the denominator in the above Net assets per Ordinary Share calculation is as follows:
| | 31 December | 31 December |
| Ordinary Shares in issue at balance sheet date | 2,482,825 | 2,267,246 |
| Number of shares to be issued in lieu of management fees | 759 | 857 |
| Total number of shares used in Net assets per Ordinary Share calculation | 2,483,5831 | 2,268,1041 |
1 Balance does not cast due to rounding
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 |
| Brought forward | 2,636,785 | 2,160,946 |
| Investments in the year | 314,059 | 452,289 |
| Distributions paid to the Company | (184,763) | (149,522) |
| Dividend income | - | 4,900 |
| Interest income from investments | 122,570 | 99,397 |
| Gain on valuation | 433,960 | 68,775 |
| Carried forward | 3,322,611 | 2,636,785 |
The following information in this note 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 and TRIG UK I, the Company's subsidiaries.
| | 31 December | 31 December |
| Fair value of investment portfolio | | |
| Brought forward value of investment portfolio | 2,725,805 | 2,213,030 |
| Investments in the year | 693,810 | 478,928 |
| Distributions paid to TRIG UK & TRIG UK I | (280,497) | (169,447) |
| Interest income | 85,020 | 75,167 |
| Dividend income | 57,785 | 33,928 |
| Gain on valuation | 455,122 | 94,199 |
| Carried forward value of investment portfolio | 3,737,045 | 2,725,805 |
| | | |
| Fair value of TRIG UK & TRIG UK I | | |
| Brought forward value of TRIG UK & TRIG UK I | (89,020) | (52,083) |
| Cash movement | 583 | (512) |
| Working capital movement | 1,005 | (2,135) |
| Debt movement1 | (327,002) | (34,290) |
| Carried forward value of TRIG UK & TRIG UK I | (414,434) | (89,020) |
| Total investments at fair value through profit or loss | 3,322,611 | 2,636,785 |
1 Debt arrangement costs of £1,602k (2021: £2,927k) have been netted off the £398.5m (2021: £72.8m) debt drawn by TRIG UK and TRIG UK I.
The gains on investment valuation are unrealised.
The SPVs (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 2022 | 31 December 2021 | ||
| Investments (project name) | Country | Equity | Subordinated loan stock | Equity | Subordinated loan stock |
| TRIG UK | UK | 100% | 100% | 100% | 100% |
| TRIG UK I | UK | 100% | 100% | 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% | 49% | 49% | 49% |
| Mid Hill | UK | 49% | 49% | 49% | 49% |
| Paul's Hill | UK | 49% | 49% | 49% | 49% |
| Rothes 1 | UK | 49% | 49% | 49% | 49% |
| Crystal Rig 1 | UK | 49% | 49% | 49% | 49% |
| Crystal Rig 2 | UK | 49% | 49% | 49% | 49% |
| Broussan | France | 48.9% | 100% | 48.9% | 100% |
| Plateau | France | 48.9% | 100% | 48.9% | 100% |
| Borgo | France | 48.9% | 100% | 48.9% | 100% |
| Olmo 2 | France | 48.9% | 100% | 48.9% | 100% |
| Chateau | France | 48.9% | 100% | 48.9% | 100% |
| Pascialone | France | 48.9% | 100% | 48.9% | 100% |
| Santa Lucia | France | 48.9% | 100% | 48.9% | 100% |
| Agrinergie 1&3 | France | 48.9% | 100% | 48.9% | 100% |
| Agrinergie 5 | France | 48.9% | 100% | 48.9% | 100% |
| Agrisol | France | 48.9% | 100% | 48.9% | 100% |
| Chemin Canal | France | 48.9% | 100% | 48.9% | 100% |
| Ligne des 400 | France | 48.9% | 100% | 48.9% | 100% |
| Logistisud | France | 48.9% | 100% | 48.9% | 100% |
| Marie Galante | France | 48.9% | 100% | 48.9% | 100% |
| Sainte Marguerite | France | 48.9% | 100% | 48.9% | 100% |
| Freasdail | UK | 100% | 100% | 100% | 100% |
| FVP du Midi | France | 51.0% | 100% | 51.0% | 100% |
| Neilston | UK | 100% | 100% | 100% | 100% |
| Garreg Lwyd | UK | 100% | 100% | 100% | 100% |
| Broxburn | UK | 100% | 100% | 100% | 100% |
| Sheringham Shoal | UK | 14.7% | 14.7% | 14.7% | 14.7% |
| Pallas | Republic of Ireland | 100% | 100% | 100% | 100% |
| Solwaybank | UK | 100% | 100% | 100% | 100% |
| Montigny | France | 100% | 100% | 100% | 100% |
| Rosieres | France | 100% | 100% | 100% | 100% |
| Jadraas | Sweden | 100% | 100% | 100% | 100% |
| Venelle | France | 100% | 100% | 100% | 100% |
| Fujin | France | 41.9% | 100% | 34.6% | 100% |
| Epine | France | 100% | 100% | 100% | 100% |
| Little Raith | UK | 100% | 100% | 100% | 100% |
| Gode Wind 1 | Germany | 25% | 25% | 25% | 25% |
| Blary Hill | UK | 100% | 100% | 100% | 100% |
| Merkur | Germany | 35.7% | 35.7% | 24.6% | 24.6% |
| Haut Vannier | France | 100% | 100% | 100% | 100% |
| East Anglia 1 | UK | 14.3% | 14.3% | 14.3% | 14.3% |
| Beatrice | UK | 17.5% | 17.5% | 17.5% | 17.5% |
| Grönhult | Sweden | 100% | 100% | 100% | 100% |
| Ranasjö | Sweden | 50% | 50% | 50% | 50% |
| Salsjö | Sweden | 50% | 50% | 50% | 50% |
| Arenosas | Spain | 100% | 100% | 100% | 100% |
| El Yarte | Spain | 100% | 100% | 100% | 100% |
| Guita | Spain | 100% | 100% | 100% | 100% |
| Malabrigo | Spain | 100% | 100% | 100% | 100% |
| Arcos | Spain | 100% | 100% | - | - |
| Valdesolar | Spain | 100% | 100% | - | - |
| Hornsea One | UK | 10.2% | 10.2% | - | - |
| Ryton | UK | 100% | 100% | - | - |
| Drakelow | UK | 100% | 100% | - | - |
| Drax | UK | 100% | 100% | - | - |
| Spennymoor | UK | 100% | 100% | - | - |
| | | 31 December 2022 | 31 December 2021 | ||
| Investments (project name) | Country | Ownership | Mezzanine debt | Ownership | Mezzanine debt |
| Phoenix | France | - | 100% | - | 100% |
In March 2022, the Company exchanged contracts to acquire a 7.8% equity interest in the Hornsea One offshore wind farm in the UK from Global Infrastructure Partners. The transaction subsequently completed on 21 July 2022.
On 19 July 2022, the Company exchanged contracts to acquire a further 2.4% equity interest in the Hornsea One offshore wind farm from Global Infrastructure Partners (from whom the Company announced the acquisition of its original stake on 17 March 2022). The incremental acquisition brings the total stake to 10.2% and was completed on 27 October 2022.
Also, in March 2022, the Company acquired a 49% equity interest in Project Valdesolar, an operating solar park in the province of Badajoz, Spain from Repsol, a Spanish-listed global energy company. Together with the Cadiz solar projects, this acquisition further enhances TRIG's technological and geographical diversification.
On 8 September 2022, the Company exchanged contracts to acquire the rights to develop three battery storage sites (Ryton, Drakelow and Draw) in the North of England. Two of the projects (Ryton and Drakelow), when built are scheduled for grid connection and commencement of operations in 2024 and 2025. The third site (Drax) will be built later in line with its grid connection date, which is in 2029, although it may be possible to bring this date forward. The transaction subsequently completed on 9 September 2022 and is in line with TRIG's strategy to complement the renewable generation assets in the portfolio with flexible capacity.
On 19 December 2022, the Company exchanged contracts to acquire a further 11.1% equity interest in the Merkur offshore wind farm, located in the German North Sea. This incremental investment is approximately 2% of TRIG's portfolio value. The project completed shortly before year end and brings TRIG's total equity interest in Merkur to 35.7%.
During December 2022, the Company also acquired 100% equity interest in Project Spennymoor, a battery storage development project which will have a total capacity of 100MW / 200MWh when completed, from RES. The project is located in County Durham, and is in the late-stage development stage.
In the year, TRIG made additional investments in the Cadiz solar projects and Grönhult, Ranasjö and Salsjö wind farms to fund their respective construction programmes, in line with outstanding commitments.
Further detail of acquisitions made in the year can be found in Section 2.5 of the Strategic Report.
14. Other receivables
| | 31 December | 31 December |
| Other receivables | 12,913 | 14,232 |
| Total other receivables | 12,913 | 14,232 |
15. Cash and cash equivalents
| | 31 December | 31 December |
| Bank balances | 24,469 | 28,229 |
| Cash and cash equivalents | 24,469 | 28,229 |
On the Expanded basis, which includes balances carried in TRIG UK and TRIG UK I, cash is £25,278k (2021: £28,454k). The reconciliation from the IFRS basis to the Expanded basis is shown in Section 3.2 of the Strategic Report on page 67.
As at the year end, cash and cash equivalents on the Expanded basis consisted of £20,000k held with Sumitomo Mitsui Banking Corporation Europe Limited and £5,278k held with Royal Bank of Scotland International Limited. At 31 December 2022 Sumitomo Mitsui Banking Corporation Europe Limited had an S&P credit rating of A-/Stable and Royal Bank of Scotland International Limited had an S&P credit rating of A-/Stable.
16. Other payables
| | 31 December | 31 December |
| Management fees1 | 50 | 50 |
| Other payables | 390 | 312 |
| Total current payables | 440 | 362 |
1 For related party and key advisor transactions see Note 19.
17. Share capital and reserves
| | Ordinary shares | Ordinary shares |
| Opening balance | 2,267,246 | 1,903,403 |
| Issued for cash | 210,105 | 356,289 |
| Issued as a scrip dividend alternative | 3,868 | 5,788 |
| Issued in lieu of management fees | 1,606 | 1,766 |
| Issued at 31 December - fully paid | 2,482,8241 | 2,267,246 |
1 Balance may not cast due to rounding
On 28 March 2022, the Company issued 210,104,535 shares, raising £277,337,986 before costs.
The Company used the funds to repay the revolving credit facility and to fund the acquisition of Hornsea One.
The Company issued 3,867,789 shares in relation to scrip take-up as an alternative to dividend payments in relation to the dividends paid in the year.
The holders of the 2,482,824,562 (2021: 2,267,246,415) 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 capital and share premium
| | 31 December | 31 December |
| Opening balance | 2,488,594 | 2,046,237 |
| Ordinary Shares issued | 284,489 | 449,305 |
| Cost of Ordinary Shares issued | (3,033) | (6,948) |
| Closing balance | 2,770,050 | 2,488,594 |
Other reserves
| | 31 December | 31 December |
| Opening balance | 1,008 | 1,005 |
| Shares to be issued in lieu of management fees incurred in H1 2021 (Note 19) | - | 992 |
| Shares to be issued in lieu of management fees incurred in H2 2021 (Note 19) | - | 1,008 |
| Shares to be issued in lieu of management fees incurred in H1 2022 (Note 19) | 992 | |
| Shares to be issued in lieu of management fees incurred in H2 2022 (Note 19) | 1,008 | |
| Shares issued in the year, transferred to share premium | (2,000) | (1,997) |
| Closing balance | 1,008 | 1,008 |
Retained reserves
Retained reserves comprise retained earnings, as detailed in the statement of changes in shareholders' equity.
18. Foreign exchange forward contracts
The Company has entered into forward foreign currency contracts to hedge the expected euro distributions up to a maximum of 48 months. In addition, the Company has placed further hedges and aims to reach a position where 60%-80% 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 2022. The total euro balance hedged at 31 December 2022 was €1,056.9m (2021: €747.5m).
| | 31 December 2022 | |||
| | Average exchange rate (GBP:EUR) | Foreign currency | Notional value | Fair value |
| Less than 3 months | - | - | - | - |
| 3 to 6 months | 1.1447 | 95,600 | 83,515 | (1,754) |
| 6 to 12 months | 1.1119 | 73,000 | 65,652 | 97 |
| 12 to 24 months | 1.1094 | 269,400 | 242,835 | (1,194) |
| Greater than 24 months | 1.1164 | 618,900 | 554,374 | (13,965) |
|
| 1.1168 | 1,056,900 | 946,377 | (16,815) |
As at the year end, the valuation on the foreign exchange derivatives consisted of:
| Bank | Payable amount (£'000) | S&P credit rating at 31 December 2022 |
| NatWest Markets Plc | 4,675 | A-/Stable |
| National Australia Bank Limited | 5,714 | AA-/Negative |
| Santander UK Plc | 4,482 | A+/Stable |
| Barclays Bank Plc | 1,944 | A/Stable |
| Total fair value of FX forward hedges | 16,815 |
|
The fair value of the derivative trades have been split in the following table. At year end, the Company was in a net payable position of £16.8m (£2.7m receivable netted off with £19.5m payable).
| | 31 December | 31 December |
| Assets | | |
| FX forward contracts expiring within 12 months | 1,096 | 14,074 |
| FX forward contracts expiring after 12 months | 1,622 | 13,219 |
| Total assets | 2,718 | 27,293 |
| Liabilities | | |
| FX forward contracts expiring within 12 months | (2,753) | - |
| FX forward contracts expiring after 12 months | (16,780) | - |
| Total liabilities | (19,533) | - |
19. Related party and key advisor transactions
Loans to related parties:
| | 31 December | 31 December |
| Short-term balance outstanding on accrued interest receivable1 | 11,826 | 13,147 |
| Short-term balance outstanding from TRIG UK, in relation to management fees to be settled in shares1 | 1,008 | 1,008 |
| Long-term loan stock to TRIG UK and TRIG UK I2 | 1,853,493 | 1,671,894 |
|
| 1,866,327 | 1,686,049 |
1 Included within Other receivables on the Balance Sheet
2 Included within Investments at fair value through profit or loss on the Balance Sheet
During the year, interest totalling £121,247k (2021: £101,121k) was earned in respect of the long-term interest-bearing loan between the Company and its subsidiaries TRIG UK and TRIG UK I, of which £11,826k (2021: £13,147k) 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 £1 billion of the Adjusted Portfolio Value, 0.8 per cent in respect of the Adjusted Portfolio Value between £1 billion and £2 billion, 0.75 per cent in respect of the Adjusted Portfolio Value between £2 billion and £3 billion and 0.70 per cent in respect of the Adjusted Portfolio Value in excess of £3 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 £130k per annum and £70k per annum, respectively. The advisory fees charged to the Company are included within the total fee amount charged to the Company and its subsidiary, TRIG UK, as set out above. The Investment Manager advisory fee charged to the income statement for the year was £130k (2021: £130k), of which £33k (2021: £33k) remained payable in cash at the balance sheet date. The Operations Manager advisory fee charged to the income statement for the year was £70k (2021: £70k), of which £18k (2021: £18k) remained payable in cash at the balance sheet date.
The Investment Manager management fee charged to TRIG UK for the year was £17,183k (2021: £13,858k), of which £4,538k (2021: £3,290k) remained payable in cash at the balance sheet date. The Operations Manager management fee charged to TRIG UK for the year was £9,257k (2021: £7,462k), of which £2,444k (2021: £1,772k) remained payable in cash at the balance sheet date.
In addition, the Operations Manager received £12,493k (2021: £13,070k) for services in relation to Asset Management, Operation and Maintenance and other services provided to project companies within the investment portfolio, and £25k (2021: £79k) 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 up to an Adjusted Portfolio Value of £1 billion 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 2021, 857,254 shares equating to £1,008,219, based on a Net Asset Value ex dividend of 117.61 pence per share (the Net Asset Value at 31 December 2021 of 119.3 pence per share less the interim dividend of 1.69 pence per share) were due, in respect of management fees earned in H2 2021, but had not been issued. The Company issued these shares on 31 March 2022.
On 30 September 2022, the Company issued 748,569 shares, equating to £991,779, based on a Net Asset Value ex dividend of 132.49 pence per share (the Net Asset Value at 30 June 2022 of 134.2 pence per share less the interim dividend of 1.71 pence per share), in respect of management fees earned in H1 2022.
As at 31 December 2022, 760,976 shares equating to £1,008,219, based on a Net Asset Value ex dividend of 132.89 pence per share (the Net Asset Value at 31 December 2022 of 134.6 pence per share less the interim dividend of 1.71 pence per share) were due, in respect of management fees earned in H2 2022, but had not been issued. The Company intends to issue these shares on 31 March 2023.
The Company is governed by a Board of Directors (the "Board"), all of whom are independent and non-executive. During the year, the Board received fees for their services. Further details are provided in the Directors' Remuneration Report on page 121. Total fees for the Directors for the year were £361,044 (2021: £338,500). Directors' expenses of £11,477 (2021: £3,510) were also paid in the year. There are no other Key Management personnel within the Company.
All of the above transactions were undertaken on an arm's length basis.
20. Guarantees and other commitments
As at 31 December 2022, the Company and its subsidiaries had provided £164.0m (2021: £177.0m) in guarantees in relation to projects in the TRIG portfolio.
The Company also guarantees the revolving credit facility, entered into by TRIG UK and TRIG UK I, which it may use to acquire further investments.
As at 31 December 2022 the Company has £204.5m of future investment obligations (2021: £231.2m).
More details on timing and amounts can be found in Section 2.2 of the Strategic Report.
The Company and its subsidiaries have issued decommissioning and other similar guarantee bonds with a total value of £44.4m (2021: £22.8m).
21. Contingent consideration
The Group has performance-related contingent consideration obligations of up to £0.4m (2021: £1.8m) relating to acquisitions completed prior to 31 December 2022. These payments depend on the performance of certain wind farms and other contracted enhancements. 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.
22. Events after the balance sheet date
On 2 February 2023, the Company declared an interim dividend of 1.71 pence per share for the period 1 October 2022 to 31 December 2022. The total dividend, £42,456,300, payable on 31 March 2023, is based on a record date of 10 February 2023 and the number of shares in issue at that time being 2,482,824,562.
On 3 February 2023, the Company renewed and increased its revolving credit facility from £600m to £750m with a £45m working capital element.
23. Subsidiaries, joint ventures and associates
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 (including Associates and Joint Ventures) are held at fair value based on the Company's ownership interest as opposed to being consolidated on a line-by-line basis. The following entities have not been consolidated in these Financial Statements:
| Name | Country | Ownership |
| 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% |
| European Investments (SCEL) Limited | UK | 100% |
| European Investments (Cornwall) Limited | UK | 100% |
| European Investments (Cornwall) Holdings 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% |
| Freasdail Energy Limited | UK | 100% |
| Neilston Community Wind Farm LLP | UK | 100% |
| Carbon Free Limited | UK | 100% |
| NDT Trading Limited | UK | 100% |
| Carbon Free Neilston Limited | UK | 100% |
| Garreg Lwyd Energy Limited | UK | 100% |
| UK Energy Storage Services Limited | UK | 100% |
| Solwaybank Energy Limited | UK | 100% |
| European Wind Investments Group Limited | UK | 100% |
| European Wind Investments Group 2 Limited | UK | 100% |
| Irish Wind Investments Group Limited | UK | 100% |
| Offshore Wind Investments Group Limited | UK | 100% |
| Scandinavian Wind Investments Group Limited | UK | 100% |
| European Storage Investments Group Limited | UK | 100% |
| Trafalgar Wind Holdings Limited | UK | 100% |
| European Investments Tulip Limited | UK | 100% |
| Little Raith Wind Farm Limited | UK | 100% |
| Blary Hill Energy Limited | UK | 100% |
| Offshore Wind Investments Group 2 Limited | UK | 100% |
| Offshore Wind Investments Group 3 Limited | UK | 100% |
| Offshore Wind Investments Group 4 Limited | UK | 100% |
| Offshore Wind Investments Group 5 Limited | UK | 100% |
| Offshore Wind Investments Group 6 Limited | UK | 100% |
| Offshore Wind Investments Group 7 Limited | UK | 100% |
| Offshore Wind Investments Group 8 Limited | UK | 100% |
| Scandinavian Wind Investments Group 2 Limited | UK | 100% |
| Iberian Solar Investment Group Limited | UK | 100% |
| Iberian Solar Investment Group 2 Limited | UK | 100% |
| European Storage Investments Group 2 Limited | UK | 100% |
| Verneuil Holdings Limited | UK | 72% |
| Merkur Offshore Wind Farm Holdings Limited | UK | 69% |
| Fred. Olsen Wind Limited | UK | 49% |
| Fred. Olsen Wind Holdings Limited | UK | 49% |
| Fred Olsen Wind 2 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% |
| Equitix Offshore 3 Limited (MidCo 1) | UK | 37% |
| Equitix Offshore 4 Limited (MidCo 2) | UK | 37% |
| Equitix Offshore 5 Limited (BidCo) | UK | 37% |
| Bilbao Offshore Investment Limited | UK | 36% |
| Bilbao Offshore Holding Limited | UK | 36% |
| Beatrice Offshore Windfarm holdco Ltd | UK | 18% |
| Beatrice Offshore Windfarm Ltd (ProjectCo) | UK | 18% |
| Scira Offshore Energy Limited | UK | 15% |
| East Anglia One Limited | UK | 14% |
| Horizon Offshore Wind Limited | UK | 40.6% |
| Jupiter Investor TopCo Limited | UK | 20.3% |
| Jupiter Investor MidCo Limited | UK | 20.3% |
| Jupiter Investor HoldCo Limited | UK | 20.3% |
| Jupiter Offshore Wind Limited | UK | 20.3% |
| Hornsea 1 Holdings Limited | UK | 10.2% |
| Hornsea 1 Limited | UK | 10.2% |
| European Storage Investments Holdings 1 Limited | UK | 100% |
| European Storage Investments Holdings 2 Limited | UK | 100% |
| European Storage Investments Holdings 3 Limited | UK | 100% |
| Capella BESS Limited | UK | 100% |
| Aludra BESS Limited | UK | 100% |
| Botein BESS Limited | UK | 100% |
| Spennymoor Energy Storage Limited | UK | 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% |
| Verrerie Photovoltaique SAS | France | 100% |
| Parc Eollen Nordex XXI SAS | France | 100% |
| CEPE Rosieres | France | 100% |
| CEPE Montigny La Cour SARL | France | 100% |
| Energies TIlle et Venelle Holdings SAS | France | 100% |
| Energies Entre Tille et Venelle SAS | France | 100% |
| Haut Vannier Holding SAS | France | 100% |
| Haut Vannier SAS | France | 100% |
| FPV du Midi | France | 51% |
| FPV Chateau | France | 49.1% |
| FPV du Plateau | France | 49.1% |
| SECP Bongo | France | 49.1% |
| SECP Olmo 2 | France | 49.1% |
| FPV Pascialone | France | 49.1% |
| FPV Santa Lucia | France | 49.1% |
| FPV Agrinergie | France | 49.1% |
| FPV d'Export | France | 49.1% |
| Agrisol 1A Services | France | 49.1% |
| SECP Chemin Canal | France | 49.1% |
| FPV Ligne des Quatre Cents | France | 49.1% |
| FPV Ligne des Bambous | France | 49.1% |
| Heliade Bellevue | France | 49.1% |
| SECP Creuilly | France | 49.1% |
| Akuo Tulip Assets SAS | France | 49.1% |
| FPV Broussan | France | 49.1% |
| Fujin SAS | France | 41.9% |
| Eolienne de Rully | France | 41.9% |
| Parc Eollen de Fontaine Macon | France | 41.9% |
| Parc Eollen de Vignes | France | 41.9% |
| Val De Gronde | France | 37.3% |
| Energie du Porcin | France | 33.5% |
| German Offshore Wind Investments Group (Holdings) Limited | Germany | 100% |
| German Offshore Wind Investments Group Limited | Germany | 100% |
| Gode Wind 1 Investor Holding GmbH | Germany | 50% |
| Gode Wind 1 Offshore Wind Farm GmbH | Germany | 25% |
| Merkur Offshore GP GmbH | Germany | 35.7% |
| Merkur Offshore Investment Holdings GmbH & Co KG | Germany | 35.7% |
| Merkur Offshore Holdings GmbH | Germany | 35.7% |
| PG Merkur Holding GmbH | Germany | 35.7% |
| Merkur Offshore GmbH | Germany | 35.7% |
| Merkur Offshore Service GmbH | Germany | 35.7% |
| Malabrigo Solar SLU | Spain | 100% |
| Arenosas Solar SLU | Spain | 100% |
| El Yarte Solar SLU | Spain | 100% |
| Pisa Solar Holdings SL | Spain | 100% |
| Evacuacion Solar Arcos SL | Spain | 100% |
| Valdesolar SL | Spain | 49% |
| MHB Wind Farms Limited | Republic of Ireland | 100% |
| MHB Wind Farms (Holdings) Limited | Republic of Ireland | 100% |
| Taurbeg Limited | Republic of Ireland | 100% |
| Pallas Energy Supply Limited | Republic of Ireland | 100% |
| Pallas Windfarm Limited | Republic of Ireland | 100% |
| Sirocco Wind Holding AB | Sweden | 100% |
| Jadraas Vindkraft AB | Sweden | 100% |
| Gronhult Wind AB | Sweden | 100% |
| Hallasen Kraft AB | Sweden | 100% |
| Krange Wind AB | Sweden | 50% |
| GOW01 Investor LuxCo SARL | Luxembourg | 50% |
Alternative Performance Measures ("APMs")
We assess our performance using a variety of measures that are not specifically defined under IFRS. These alternative performance measures are termed "APMs". The APMs that we use may not be directly comparable with those used by other companies.
These APMs are used to present an alternative view of how the Company has performed over the year and are all financial measures of historical performance.
The table below defines our APMs and how they relate to the Company's subsidiaries, The Renewables Infrastructure Group UK Limited ("TRIG UK") and The Renewables Infrastructure Group UK Investments Limited ("TRIG UK I").
| Performance Measure | Definition |
| Investments made | This is a measure of amounts invested into the portfolio of investments less any amounts relating to refinance proceeds or sell-downs. The IFRS measure of investments made consists of funding into TRIG UK and TRIG UK I, which is shown in more detail in Note 13 of these financial statements. TRIG invests in its portfolio through its subsidiaries, TRIG UK and TRIG UK I. This is a measure of the valuation of the portfolio of investments only. It is exclusive of cash, working capital and debt balances in TRIG UK and TRIG UK I. |
| Directors' Portfolio Valuation | TRIG invests in its portfolio through its subsidiaries, TRIG UK and TRIG UK I. This is a measure of the valuation of the portfolio of investments only. It is exclusive of cash, working capital and debt balances in TRIG UK and TRIG UK I. The IFRS measure of investments at fair value through profit or loss is the Directors' Portfolio Value plus the fair value of net assets including cash, working capital and debt held in TRIG UK and TRIG UK I. Directors' Portfolio Value (or Portfolio Value) is reconciled to investments at fair value through profit or loss in Note 13 of these financial statements. |
| NAV per share | This is a measure of Net Asset Value ("NAV") per ordinary share in the Company and is calculated as the NAV divided by the total number of shares in issue at the balance sheet date. The calculation uses IFRS measures and is explained further in Note 12 of these financial statements. |
| Total shareholders' return for the year (share price appreciation plus dividends paid) | The Internal Rate of Return upon the share price at 31 December 2021 (134.4p) of dividends (quarterly as paid totalling 6.82p as detailed in note 11 of these financial statements) plus the share price at 31 December 2022 (130.0p). |
| Total NAV return for the year (NAV per share appreciation plus dividends paid) | The Internal Rate of Return upon the NAV at 31 December 2021 (119.3p) of dividends (quarterly as paid totalling 6.82p as detailed in note 11 of these financial statements) plus the NAV at 31 December 2022 (134.6p). |
| Dividend Cover | Dividend Cover is calculated as Cashflow from Operations (which is an Expanded Basis measure explained in section 3.2 and reconciled to the IFRS measure) divided by Dividends paid in the year. Dividend Cover, when expressed on a cash basis, has cash dividends paid as the denominator and is calculated as 1.55 times for 2022. Dividend Cover, when expressed as being without the benefit of scrip dividends, has the scrip dividends allocated to shareholders in lieu of cash dividends added to the cash dividends paid for the calculation. This slightly increases the denominator and hence this measure has a slightly smaller value, which was 1.5 times for 2022. |
Sustainability Terminology Glossary
| Term | Definition |
| Renewable electricity generated | The amount of renewable electricity generated by the portfolio during the year, net of the Company's ownership share. |
| Tonnes of CO2 avoided per annum | The estimate of the portfolio's annual CO2 emission reductions, based on the portfolio's estimated generation as at the relevant reporting date prepared on the International Financial Institution's ("IFI") approach to greenhouse gas ("GHG") Accounting. |
| Lost Time Accident Frequency Rate (LTAFR) | A safety at work metric for every 100,000 hours worked. Calculated as the number of accidents which occurred in the given period divided by number of hours worked times 100,000. Whilst all accidents are recorded, only accidents that have resulted in the worker being unable to perform their normal duties for more than seven days are included in this calculation, in line with reportable accidents as defined by UK HSE RIDDOR. UK HSE RIDDOR is defined as the UK Health and Safety Executive Reporting of Injuries, Diseases and Dangerous Occurrences Regulation. |
[1] Based on NAV per share appreciation plus dividends paid during the year ended 31 December 2022.
[2] From 1 January 2022 to 21 February 2023. Including both Grönhult and the Cadiz solar projects, which have started exporting electricity and are in final commission during Q1 2023.
[3] Pro-rated based on TRIG's percentage of ownership.
[4] The RCF is held within TRIG UK and TRIG UK I, and guaranteed by TRIG Limited.
[5] Dividend cover was 1.55x with the benefit of scrip take-up (which was £5.2m in the period).
[6] The Company's dividend policy is to increase the dividend when the Board considers it prudent to do so, considering forecast cash flows, expected dividend cover, inflation across TRIG's key markets, the outlook for electricity prices and the operational performance of the Company's portfolio.
[7] Including onshore wind, offshore wind, solar PV and flexible capacity technologies. Flexible capacity is generation technologies that can store energy and respond to electricity demand levels and pricing signals, such as batteries, pumped hydro storage and green hydrogen. Within flexible capacity technologies, the Investment Manager's current principal focus is on battery storage projects.
[8] To date the Company has invested in the UK, France, Germany, Ireland, Spain and Sweden.
[9] On a committed basis at the date of this report. Based on average regional household electricity consumption figures and the IFI Approach to GHG Accounting for Renewable Energy.
[10] As at 31 December 2022, including investment commitments.
[11] On an Expanded Basis. Please refer to Section 3.2 for an explanation of the Expanded Basis.
[12] Construction and development exposure across the portfolio was 8% as at 31 December 2022.
[13] Directors' Valuation is an Alternative Performance Measure ("APM"). See page 175 for details of APMs. Further, the reconciliation from the Expanded Basis financial results is provided in Section 3.2 - Analysis of Financial Results, and a reconciliation of the Directors' Portfolio Value (APM) to Investments at Fair Value is provided in Note 13 to the Financial Statements.
[14] % of Invested portfolio excluding commitments
[15] Committed Portfolio Value is £3,942m and includes £205m of investment commitments outstanding at the balance sheet date
[16] Cannibalisation describes the effect that renewables (an intermittent generator) can have on the overall power prices, whereby the marginal cost of generation, which in turn drives the power prices, is lower than the average which would be expected of a continuous base load generator as a result of the additional supply when renewables are generating. Rates differ over time and between markets but all are affected.
[17] Power price forecasts used in the Directors' valuation for each market are based on analysis by the Investment Manager using data from leading power market advisers. In the illustrative blended price curve, the power price forecasts are weighted by the P50 estimate of production for each of the projects in the 31 December 2022 portfolio. Forecasts are shown net of assumptions for PPA discounts and cannibalisation. The average level of reduction to the baseload forecast power price assumed to renewable generation across the portfolio is approximately 15%-20%.
[18] The majority of the Swedish wind farm income is from wholesale power sales which in the Nord Pool are denominated in euros, accordingly the investment is treated as euro-denominated.
[19] This column does not cast due to rounding differences.
[20] The majority of the Swedish wind farms' income is from wholesale power sales which in the Nord Pool are denominated in euros. Accordingly, the investments in Sweden are treated as euro-denominated, notwithstanding that the smaller subsidy element of the revenues and some operating costs are denominated in Swedish krona.
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