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The Renewable Inrastructure Group (TRIG)

Closed-end funds and OEICs
simoan
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Re: The Renewable Inrastructure Group (TRIG)

#344155

Postby simoan » October 1st, 2020, 11:05 am

I bought a lump of TRIG in the sell-off in March. It just struck me that the NAV didn't suddenly drop as much as the share price collapse indicated, so it was a bit of a no-brainer, amongst several others at that time. However, I am now considering selling as the outlook for electricity pricing doesn't look great to me. I realise some of these issues have been dealt with already but these would be my major concerns if I was thinking of buying:

1. How is the NAV calculated and how often? The underlying assets are not liquid and the valuation probably uses some kind of DCF model. I have a serious distrust of DCF models!!

2. The dividend has never been fully covered by free cashflow. Why?

3. The company employs truly epic shareholder dilution with constant equity raisings: in the 5 years to end of FY19 shares in issue increased by 442%! And Private investors seem to be excluded from the equity raises.

All the best, Si

Dod101
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Re: The Renewable Inrastructure Group (TRIG)

#344158

Postby Dod101 » October 1st, 2020, 11:12 am

simoan wrote:I bought a lump of TRIG in the sell-off in March. It just struck me that the NAV didn't suddenly drop as much as the share price collapse indicated, so it was a bit of a no-brainer, amongst several others at that time. However, I am now considering selling as the outlook for electricity pricing doesn't look great to me. I realise some of these issues have been dealt with already but these would be my major concerns if I was thinking of buying:

1. How is the NAV calculated and how often? The underlying assets are not liquid and the valuation probably uses some kind of DCF model. I have a serious distrust of DCF models!!

2. The dividend has never been fully covered by free cashflow. Why?

3. The company employs truly epic shareholder dilution with constant equity raisings: in the 5 years to end of FY19 shares in issue increased by 442%! And Private investors seem to be excluded from the equity raises.

All the best, Si


I must say that, apart from the electricity pricing, the constant dilution does bother me. As far as electricity pricing is concerned, they are presumably selling in to other markets besides the UK considering that they have sites in France Germany and Sweden as well. It would suggest though that they must be seeing good profit increases as they seem still to manage decent increases in their dividend each year. I need to take a closer look.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344187

Postby Dod101 » October 1st, 2020, 12:46 pm

Thanks to all who have contributed to this thread. Very interesting and educational for me. I have decided to change tack completely, forego the income and have bought into Baillie Gifford China Growth, Witan Pacific that was.

I will though keep an eye on this company.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344203

Postby Dod101 » October 1st, 2020, 1:37 pm

I hold National Grid and have done for a long while. I recently reinstated SSE having been a very long term holder. I sold some time before they sold their retail side and now that the dust has settled and they have committed to realising some fringe investments to pay down debt, I feel a bit happier with them now. They have always had a commitment to their dividend.

As for TRIG, I mulled over the various comments on this thread and just thought that maybe now is not the time. I have eyed BG China Growth since it was taken over by BG. I like them as an investment house.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344221

Postby UncleEbenezer » October 1st, 2020, 3:14 pm

simoan wrote:I bought a lump of TRIG in the sell-off in March.

Not a bad decision. But many other stocks had a much bigger dip, so there was potential for a bigger gain from a March buy.

At least, until the next fall. Or if we get a government that fails to print more money to prevent a real correction - which they're terrified to do because the biggest fall would then be the highest-leveraged - i.e. house prices.

simoan
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Re: The Renewable Inrastructure Group (TRIG)

#344228

Postby simoan » October 1st, 2020, 3:35 pm

UncleEbenezer wrote:
simoan wrote:I bought a lump of TRIG in the sell-off in March.

Not a bad decision. But many other stocks had a much bigger dip, so there was potential for a bigger gain from a March buy.

At least, until the next fall. Or if we get a government that fails to print more money to prevent a real correction - which they're terrified to do because the biggest fall would then be the highest-leveraged - i.e. house prices.

Well, yes, but the sell-of in March was like shooting fish in a barrel. TRIG was just one of many new positions opened and top-ups I made in March and April. Such is the problem of being 30% in cash at the time :) It may not have risen as much as some others but then with a couple of quarterly dividends it returned around 15% in 6 months with fairly low risk. I think the risk is now higher and the rewards have lessened, so I sold my TRIG holding this PM. I was due to review it this weekend but this thread brought that decision forward. Thanks Dod!

All the best, Si

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Re: The Renewable Inrastructure Group (TRIG)

#344338

Postby Wyneric » October 2nd, 2020, 6:36 am

Curious to know whether anyone has considered INRG (ishares Global Clean Energy ETF),

https://www.ishares.com/uk/individual/en/products/251911/ishares-global-clean-energy-ucits-etf

The step change market view, from fossil fuel to renewable energy since the March lock down has been astounding, especially as the likes of Shell are about to follow BP into the world of green energy.
Probably the kiss of death but I'm struggling to see a short/medium term downside, especially if Biden gets in...

I have 16% of my SIPP in this...which probably sounds a tad reckless...

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Re: The Renewable Inrastructure Group (TRIG)

#344444

Postby 88V8 » October 2nd, 2020, 11:25 am

I was surprised to see how TRIG dilutes its holders.

Interesting point about upcoming maintenance. Rolls-Royce (aero) for instance makes half its income from maintenance.

Currently, Blackrock Energy BERI is yielding 6.6%, admittedly no increases for a while. The SP is pretty stable at present.
Trading at a 9% discount.
They are not neglectful of renewables - portfolio here https://www.blackrock.com/uk/individual ... rough=true - and I think I would rather let them manage the transition than invest on a one-trick pony like TRIG, much as one's heart may approve of the general idea.

V8

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Re: The Renewable Inrastructure Group (TRIG)

#344465

Postby mc2fool » October 2nd, 2020, 11:58 am

88V8 wrote:I was surprised to see how TRIG dilutes its holders.

What does it matter? So you end up with 0.001% of a £2bn IT instead of 0.002% of a £1bn IT; the £ value of your holding is the same.

simoan wrote: And Private investors seem to be excluded from the equity raises.

Well that's certainly not true of all of them, I've had at least three offers in the time I've held them (since very soon after launch).

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Re: The Renewable Inrastructure Group (TRIG)

#344489

Postby Dod101 » October 2nd, 2020, 12:39 pm

mc2fool wrote:
88V8 wrote:I was surprised to see how TRIG dilutes its holders.

What does it matter? So you end up with 0.001% of a £2bn IT instead of 0.002% of a £1bn IT; the £ value of your holding is the same.

simoan wrote: And Private investors seem to be excluded from the equity raises.

Well that's certainly not true of all of them, I've had at least three offers in the time I've held them (since very soon after launch).


The matter of dilution is important. I see the effect with Primary Health Properties which regularly raises capital by share placings (and often/mostly excluding private investors). I agree that the reduction in economic value is usually insignificant for private investors but the effect is more obvious with dividend payments where the dividend has to be spread out over many more shares after a placing than before and it also holds back the share price at least in the short term. The effect of dilution has been particularly obvious with Phoenix Holdings which has issued lots of new shares to SLA and to Swissre for acquisitions and that has stalled the dividend per share for a couple of years at least despite the fact that the dividend payment has increased significantly in the Company's accounts.

Through an outfit like Primary Bid it is surely not difficult for companies to include their private investors. Obviously a rights issue gives every investor an equal opportunity to contribute but share placings have become very popular especially since Covid as they are cheaper and quicker to achieve.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344526

Postby mc2fool » October 2nd, 2020, 1:14 pm

Dod101 wrote:The matter of dilution is important. I see the effect with Primary Health Properties which regularly raises capital by share placings (and often/mostly excluding private investors). I agree that the reduction in economic value is usually insignificant for private investors but the effect is more obvious with dividend payments where the dividend has to be spread out over many more shares after a placing than before and it also holds back the share price at least in the short term.

Well then you should be asking why PHP et al is asking for new money and using it in a non-earnings/non-dividend enhancing way.

Surely the point of raising new funds is to expand the business and, in doing so, increase the amount of earnings/dividends. It doesn't matter if there's twice the number of shares to spread the dividend over if the amount of earnings that can be given out as dividends has also doubled (or more).

Of course, some boards may make less than optimal choices and/or forget that turnover is vanity profit is sanity, and one should look into what any company has historically done with new money, but it's surely not right to simply assume that equity raising = bad.

In the case of TRIG the dividend has grown year or year since inception, and if there is any negative effect from their having grown the business considerably over its life it's not glaringly obvious.

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Re: The Renewable Inrastructure Group (TRIG)

#344565

Postby Dod101 » October 2nd, 2020, 2:42 pm

mc2fool wrote:
Dod101 wrote:The matter of dilution is important. I see the effect with Primary Health Properties which regularly raises capital by share placings (and often/mostly excluding private investors). I agree that the reduction in economic value is usually insignificant for private investors but the effect is more obvious with dividend payments where the dividend has to be spread out over many more shares after a placing than before and it also holds back the share price at least in the short term.

Well then you should be asking why PHP et al is asking for new money and using it in a non-earnings/non-dividend enhancing way.

Surely the point of raising new funds is to expand the business and, in doing so, increase the amount of earnings/dividends. It doesn't matter if there's twice the number of shares to spread the dividend over if the amount of earnings that can be given out as dividends has also doubled (or more).

Of course, some boards may make less than optimal choices and/or forget that turnover is vanity profit is sanity, and one should look into what any company has historically done with new money, but it's surely not right to simply assume that equity raising = bad.

In the case of TRIG the dividend has grown year or year since inception, and if there is any negative effect from their having grown the business considerably over its life it's not glaringly obvious.


Well there is an earnings drag and so a delay before dividends catch up. I noticed that TRIG has nevertheless increased its dividend per share each year and that is presumably because it is issuing new shares each year and so the increase in profits is not from the current year's fundraising but the previous year. Once you are on that bandwagon it should work out fine. As I said though, for a company to do a big issue of shares like Phoenix has done, you can see the effect quite clearly.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344577

Postby simoan » October 2nd, 2020, 3:12 pm

mc2fool wrote:
Dod101 wrote:The matter of dilution is important. I see the effect with Primary Health Properties which regularly raises capital by share placings (and often/mostly excluding private investors). I agree that the reduction in economic value is usually insignificant for private investors but the effect is more obvious with dividend payments where the dividend has to be spread out over many more shares after a placing than before and it also holds back the share price at least in the short term.

Well then you should be asking why PHP et al is asking for new money and using it in a non-earnings/non-dividend enhancing way.

Surely the point of raising new funds is to expand the business and, in doing so, increase the amount of earnings/dividends. It doesn't matter if there's twice the number of shares to spread the dividend over if the amount of earnings that can be given out as dividends has also doubled (or more).

Of course, some boards may make less than optimal choices and/or forget that turnover is vanity profit is sanity, and one should look into what any company has historically done with new money, but it's surely not right to simply assume that equity raising = bad.

In the case of TRIG the dividend has grown year or year since inception, and if there is any negative effect from their having grown the business considerably over its life it's not glaringly obvious.

Yes, buying more and more assets is a good way to grow earnings, but only if you are not paying over the odds for them. The thing I didn't like about TRIG that gave me the collywobbles is that although the number of shares and net assets have grown roughly in line with one another, the free cashflow generated has not grown at all in the past six financial years i.e. FCF was less in FY19 than it was in FY14.

So for some reason the cash conversion has got progressively worse. Ultimately, if you have an investment vehicle designed to generate income it is a good idea for the dividend payment to be covered by free cashflow. This has not been the case once in the past six years for TRIG and it has paid out all free cashflow plus a bit extra to maintain the dividend. I am not sure what happens if we have a bad recession and electricity prices collapse. How would they maintain or grow the dividend in those circumstances?

All the best, Si
Last edited by simoan on October 2nd, 2020, 3:26 pm, edited 1 time in total.

simoan
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Re: The Renewable Inrastructure Group (TRIG)

#344584

Postby simoan » October 2nd, 2020, 3:27 pm

ReallyVeryFoolish wrote:
simoan wrote:
mc2fool wrote:Well then you should be asking why PHP et al is asking for new money and using it in a non-earnings/non-dividend enhancing way.

Surely the point of raising new funds is to expand the business and, in doing so, increase the amount of earnings/dividends. It doesn't matter if there's twice the number of shares to spread the dividend over if the amount of earnings that can be given out as dividends has also doubled (or more).

Of course, some boards may make less than optimal choices and/or forget that turnover is vanity profit is sanity, and one should look into what any company has historically done with new money, but it's surely not right to simply assume that equity raising = bad.

In the case of TRIG the dividend has grown year or year since inception, and if there is any negative effect from their having grown the business considerably over its life it's not glaringly obvious.

Yes, buying more and more assets is a good way to grow earnings, but only if you are not paying over the odds for them. The thing I didn't like about TRIG that gave me the collywobbles is that although the number of shares and net assets have grown roughly in line with one another, the free cashflow generated has not grown at all in the past five years i.e. FCF was less in FY19 than it was in FY14.

So for some reason the cash conversion has got progressively worse. Ultimately, if you have an investment vehicle designed to generate income it is a good idea for the dividend payment to be covered by free cashflow. This has not been the case once in the past five years for TRIG and it has paid out all cashflow plus a bit extra to maintain the dividend. I am not sure what happens if we have a bad recession and electricity prices collapse. How would they maintain or grow the dividend in those circumstances?

All the best, Si

As I said earlier, reducing subsidy, more competition, falling prices for renewable energy on the grid?

RVF

As I was trying to make clear, they seem to be running very hard to stand still! :)

All the best, Si

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Re: The Renewable Inrastructure Group (TRIG)

#344585

Postby Dod101 » October 2nd, 2020, 3:30 pm

Buying assets by issuing new shares is not usually particularly beneficial to existing shareholders because these new shares have go to be serviced as well. OTOH if you are buying (profitable) assets using retained earnings well that is altogether another matter, and the additional profits will accrue to the existing shareholders. I often think that the main beneficiary is the manager, as in the case of PHP and TRIG, as well as the manager of ITs which occasionally buy another IT (such as Murray Income where the main beneficiary is the manager)

Being diluted as a minority shareholder is not usually good news. As for TRIG I am glad that I started this thread as I have learned a lot thanks to all those who contributed.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344591

Postby UncleEbenezer » October 2nd, 2020, 3:44 pm

Don't most ITs issue more shares when at a premium? Some of them issue an RNS about it about five times a week!

All of these Renewable Infrastructure fundraises are at prices significantly above NAV, now that the sector as a whole commands premia.

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Re: The Renewable Inrastructure Group (TRIG)

#344622

Postby Dod101 » October 2nd, 2020, 5:20 pm

So many angles on this! Certainly ITs often issue new shares (many often buy in their sharers as well) but that is usually to control the discount, not for the purpose of acquiring a new business, and very often in relatively modest amounts.

I suppose if TRIG and others like them are issuing shares at a premium that ought to be beneficial to the existing holders, but only I suppose if the price is actually above the quoted market price. Otherwise I cannot see any real benefit for existing shareholders.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344702

Postby Urbandreamer » October 2nd, 2020, 9:25 pm

I confess that I view TRIG as more like a traditional company than an investment trust. Their assets are windfarm's, from which they make a return.
Finding money to buy more assets, either from retained earnings, placings, or, as I have subscribed to, an open offer. Is what any company would do.

OK! I accept that this makes it VERY different from many IT's. However there is a form of IT, known as a REIT, Would you expect them to be like other investment trusts? Why expect this type of IT to be like FCIT et-al?

TRIG is not for everyone. As I have said, I'm happy with my investment.

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Re: The Renewable Inrastructure Group (TRIG)

#344722

Postby Dod101 » October 2nd, 2020, 11:49 pm

I cannot see anywhere in its Annual Report that TRIG claims to be an investment trust and if that is the case then Urbandreamer should view it as a traditional company (whatever that may be :) )

Neither is it a REIT as far as I can see, but the fact that it needs to raise additional capital on a regular basis suggests that it pays out most if not all of its earnings as dividends. That has already been mentioned earlier in this thread. Most companies that do that are indeed REITs because they are obliged to pay out not less than 90% of their income profits as dividends (called PIDs in their case) so that there is almost no opportunity to build up capital for future investment.

ITs are entirely different because they have no need to raise capital for expansion; they simply invest the subscribed capital and sometimes borrow for expansion.

Dod

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Re: The Renewable Inrastructure Group (TRIG)

#344787

Postby Urbandreamer » October 3rd, 2020, 10:33 am

I'm sorry if my post was unclear.

Yes TRIG is an investment trust. REIT's are a special type of investment trust. IBT is also a investment trust, as is FCIT.

However each is VERY different, even ignoring what they invest in.

Nobody thinks it strange that REIT's pay out 90% of what they bring in. Sure they are required by law to do so, but that doesn't require anyone to buy them. Those who do are happy with that structure.
FCIT reserves income and uses that to make fresh investments.
IBT has little to no income, yet pays a dividend from capital. Quite the reverse of what FCIT is doing.
TRIG pays out it's income, but raises money to invest when it sees an investment opportunity.

What I was trying to say was that it's not helpful to regard all IT's as being very similar other than what they invest in. Instead we need to recognise their differences and decide if we wish to invest given how they operate as well as what they invest in.

I think the act of placings, open offers and rights issues to take advantage of investment opportunities as something that most associate with companies rather than investment trusts. I don't see it as a problem that TRIG acts the same way.


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