MIDAS SHARE TIPS: Government infrastructure push helps this renewable …

July 8, 2013 by  
Filed under Solar Energy Tips

By
Joanne Hart

16:43 EST, 6 July 2013


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04:45 EST, 7 July 2013

Investment in infrastructure has become a priority. Chancellor George Osborne has earmarked £100 billion to be spent on it over the next seven years, but many experts believe twice that amount is needed to make sure the UK is properly equipped with roads, railways, homes, schools and other vital components of everyday life.

The key challenge is finding the money for all these schemes. In recent years, several infrastructure funds have been created, investing money from the private sector in a variety of projects.

Most of these funds buy assets that are already up and running. This means turnover is predictable because it is financed by the Government or relies on taxpayer subsidies.

The Renewables Infrastructure Group is looking for £300 million so it can invest in solar parks such as this one at Rhosygilwen, near Cardigan in Pembrokeshire

The Renewables Infrastructure Group is looking for £300 million so it can invest in solar parks such as this one at Rhosygilwen, near Cardigan in Pembrokeshire

This does not entirely solve Britain’s infrastructure problems, but it helps by providing a market for these assets once they are built. For investors, the funds are attractive because they provide generous and stable dividends alongside some capital growth.

The Renewables Infrastructure Group is the latest fund to come to market. Known as TRIG, it intends to raise £300 million by issuing shares at 100p. The firm intends to pay a dividend of 6p in the first year and future payments are expected to increase in line with inflation. For investors looking for long-term secure income, the shares should prove appealing.

As the name suggests, TRIG will invest in renewable energy projects, specifically onshore wind farms and solar parks.

The group will start out with 14 wind farms and four solar parks, capable of powering 150,000 homes. Most of these assets are in the UK but a couple are in France and Ireland.  All are fully operational and all have contracts to provide energy at pre-determined rates for between 15 and 25 years.

Reassuringly, TRIG is managed by two leaders in the field – InfraRed Capital Partners and Renewable Energy Systems.

Expertise: Helen Mahy, formerly of National Grid, will be chairwoman and will oversee purchases

Expertise: Helen Mahy, formerly of National Grid, will be chairwoman and will oversee purchases

InfraRed has been investing in infrastructure for more than 15 years and launched HICL Infrastructure Company, the UK’s first listed infrastructure fund, in 2006. Since then, the company has grown substantially, the shares have risen from 100p to 130p and investors have enjoyed more than six years of generous dividends.

Renewable Energy Systems has been developing renewable energy projects for three decades, pretty much as long as the sector has existed. During that time, it has successfully built wind farms around the world and has a portfolio of projects under construction capable of generating six gigawatts of electricity, enough to power three million homes. 

MIDAS UPDATE

Midas recommended Greencoat UK Wind in February, just after the group announced it was coming to the stock market.

Like TRIG, Greencoat was set up to invest in operational wind farms, but it focuses solely on wind and invests only in the UK.

The shares listed in March at 100p and have risen 6.37 per cent to 106.37p since then.

That is impressive growth for a company that was designed primarily to deliver income. Even so, brokers believe the shares should increase further in price as the business expands and investors continue to favour  high-yielding stocks.

Greencoat owns six wind farms and is expected to add to the portfolio, with some forecasters suggesting the group will double in size over the next three to five years.

The group has had a successful first few months, half-year figures will be unveiled in August and the first dividend payment will be made in September.

Midas verdict: Investors who bought in March have not been disappointed and should hold on to their stock. New investors might be better off going for  TRIG as the shares  will be offered at 100p, so the initial yield will be higher.

Over time, TRIG intends to expand substantially by buying new wind farms and solar parks in the UK and Northern Europe, including Germany and Scandinavia. The company will have first refusal over a pipeline of assets from Renewable Energy Systems, worth about £200 million a year. It does not have to buy all these assets, but it can cherry-pick the best and will also look at farms and parks on offer from other renewable energy groups.

An independent board, chaired by former National Grid executive Helen Mahy, will provide additional industry expertise and ensure that assets are bought at reasonable prices.

Renewable Energy will also subscribe for 20 per cent of TRIG shares, so it will be motivated to make sure the company does well. Feelings run high about onshore wind farms in Britain, but TRIG’s decision to look abroad and to consider both wind and solar give it a variety of investment options.

Moreover, the EU has pledged to generate 20 per cent of its energy from renewable sources by 2020 and this means doubling exposure to wind and solar power over the next seven years.

Onshore wind may not be everyone’s favourite energy source but from an investment perspective, TRIG has several attractions.

The company starts out with a group of ready-built assets so there is no construction risk. These already have long-term contracts in place so TRIG has a fairly good idea about the revenues they will generate and investors can be pretty confident about their dividend income. Further investments will be carefully chosen with a view to delivering long-term stable income.

TRIG shares went on sale on Friday and investors can subscribe for shares until July 22. Allocations will be revealed later that week and trading will start on July 29.

Midas verdict: In today’s low-interest rate, uncertain world, income and stability are in demand. TRIG provides both. A good, long-term buy.

The comments below have not been moderated.

I agree interest rates must go up or this government will face millions of pensions claiming pension credit and benefits plus those in nursing homes will have run out of money and the bovernment will need to pick up that gab too

Carnage and Co have not bothered to think how the millions of pensioners who rely on savings income are going to live
The grey vote will really make this idiotic government aware of its folly in the ballot box

indespair
,

reading, United Kingdom,
07/7/2013 20:01

Surprising how ignorant some people are of the actual outputs of solar panels,we only have a small 3kw array and many many times we have far too much power comming in via the panels and even on days when the sun doesn’t shine we still get a useful boost providing free electric for our home.As we don’t work we can take full advantage of the power available and plan usage of washing machine,dishwasher ect so as to make most use of incoming power.
When I see solar farms it reinforces our decision to install panels on our roof at our expense ,currently been getting £1300 per year for our investment of £8,000 plus all the electric generated .CLearly the amount of power generated by large solar farms contributes massively the our resources without the need to build a large structure,in 20 or 30 years when panels have been superseded perhaps then dismantle,plough site ,can’t get much more environmently friendly can it?

Lewis100
,

Leeds,
07/7/2013 15:12

Solar farms are nothing more than a big con blighting our countryside . Here in Cornwall they are springing up everywhere, Councils are being bribed to give planning permission and farmers are giving up their land for cash incentives. The electricity grid down here is full to capacity and there is nowhere to store any more .none of them have benefited residents a single penny because any power that they generate is sold to the highest bidder .When the subsidies stop they will be left with acres of useless panels and nobody will want to pay the millions of pounds it will cost to either maintain them or restore the land back to how it should be. Solar power in this country will never be efficient enough to power the modern day home.

alfonso55
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Cornwall, United Kingdom,
07/7/2013 13:38

I’m not listening I only want a few extra pennies a week if it means someone loses their home, put interest rates up, the ‘prudent’ can only manage a current account.

m22
,

Ipswich,
07/7/2013 13:29

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