Minesh Shah, Managing Director, The Renewables Infrastructure Group (TRIG)

In an era where geopolitics and climate change dominate global policymaking, investment in energy infrastructure remains essential to improve energy security and decarbonise our economies. The economic backdrop for energy investment needs to address the prospect of stubborn inflation and higher-for-longer interest rates. In this context, renewables investment strategies founded on active management practices drawing from deep investment and operational expertise are best placed to outperform.

Throughout the last decade of low interest rates, investors were satisfied with income-focussed investments acting as “bond proxies”. Looking forward, investors demand higher total return strategies that not only maintain but also grow the underlying capital value.

The companies in the energy sector that will succeed are those that can develop and build new infrastructure and that have the balance sheet to hold the investments through their lifecycle to extract maximum value from innovative commercial and operational enhancements.

This article explores this concept of active management, from the perspective of The Renewables Infrastructure Group (TRIG), a FTSE 250 London-listed investment company that invests in a diversified portfolio of renewable energy and supporting infrastructure projects across Europe.

Developing new projects

The development of new energy infrastructure projects is a strategic imperative for economies to transition to a more secure and decarbonised electricity system. Where a company has a robust balance sheet and a management team that has the expertise to progress a development pipeline, such projects provide investors with the opportunity to access higher returns.

Managed jointly by InfraRed and RES, TRIG benefits from InfraRed’s 25-years infrastructure investment track record as well as RES’s 40-years’ experience of developing, operating and enhancing renewable energy and supporting infrastructure. TRIG’s 2.3GW portfolio of operational wind farms, solar parks and battery storage projects underpin the Company’s revenues, meanwhile its 1GW construction and development pipeline provides a route to capital growth.

Investment managers such as InfraRed have invested in development stage infrastructure projects worldwide; and operations managers such as RES have been at the heart of the energy transition having developed or constructed over 27GW projects around the world. For managers like these, a new investment often starts at the conceptualisation stages where they can shape the project through the planning and consenting processes to the start of construction when shovels hit the ground.

TRIG has already delivered 15 projects through construction to operation since IPO. Building out its 1GW development pipeline will be underpinned by balance sheet discipline, which allows maximum flexibility as to whether to hold or sell projects as they progress into construction and beyond. The choice available to TRIG is then whether to sell projects and crystalise a premium or operate the assets through the lifecycle and extract further economic gains for shareholders.

Optimising operational assets

Maximising the efficiency and output of operational assets stems from continuous monitoring and optimisation. RES, TRIG’s operations manager, is at the forefront of innovation in the operations of renewable energy projects. By example, they work with leading motorsport aerodynamicists to enhance wind turbine performance across the portfolio. By refining blade designs and leveraging machine learning techniques, they can significantly boost energy production from existing assets. InfraRed, TRIG’s investment manager, complements RES’s capabilities by leading on commercial enhancements through active revenue management and building on the defensive, inflation-linked cash flows of the portfolio – critical as the risk of protectionism around the world has the potential to re-introduce inflationary pressures.

Active management does not stop at commercial and technological upgrades. It includes a strategic approach to predictive maintenance regimes and the management of equipment spares to minimise downtime. RES uses its 24/7 control centre in Glasgow to implement its data-driven decision-making processes to enhance operational efficiency.

Listed closed-ended investment companies can continue to catalyse infrastructure investment

Closed-ended investment companies such as TRIG have played an important role in mobilising over £10bn capital into renewable energy and supporting infrastructure investment in the UK and across Europe. They democratise direct access to highly attractive private and illiquid assets by utilising an investment structure that has been around for over 150 years.

Investment companies like TRIG have a crucial role to play in building the energy system of the future. The companies best placed to take advantage of this opportunity are those with a robust balance sheet and the right management team to deliver resilient income and capital growth for shareholders. With a holistic approach to investment and asset management, TRIG is well positioned for growth. The next decade will not be anything like the last and our strategy is designed to thrive in a new era.

Important information

Risk factors you should consider prior to investing:

• The value of investments and the income from them can fall and investors may get back less than the amount invested.
• Past performance is not a guide to future results.
• Company selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Other important information:

Issued by InfraRed Capital Partners, Investment Manager to The Renewables Infrastructure Group Limited (“TRIG”)

 

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