Page 35 - DIY Investor Magazine | Issue 39
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 The weighted average discount across all my positions was 5.9% at the end of September, compared to 5.7% in June, 4.7% in March, and 4.0% at the end of 2022 - a little wider each quarter.
Trading-wise, I added to both Bluefield Solar and Gresham House Energy Storage in the last quarter. Earlier in the year, I topped up HICL, Bellevue Healthcare, HgCapital, Keystone, and the Vanguard global tracker.
Here are some quick thoughts on my holdings, including a more detailed look at the three infrastructure/renewable trusts that I own.
JPMorgan Global Growth & Income remains the stand-out performer; Smithson and Keystone have fallen back to roughly break even after their strong start to the year. Fundsmith and Lindsell Train slipped back but to a lesser extent. RIT Capital Partners bought back about 5% of its shares, adding roughly 1% to its NAV.
A small part of my portfolio but one I topped up most recently after some big share price declines; I believe some of the falls are justified due to interest rates, but discounts on many of these trusts look excessive, especially those with longer track records.
HICL Infrastructure sold nearly 10% of its portfolio and issued £150m of long-term debt; its shares sit on a very wide 26% discount with the flat dividend in recent years not helping.
Some of its assets paused shareholder distributions in recent years but seem to be restarting. Dividend cover was 1.03 x last year and I might add to it if it continues to improve; it needs to hit 1.1 x before any increase is entertained.
Gresham House Energy Storage (GRID) has taken a
real beating – from the only renewable trust trading at a premium to a hefty 28% discount due in part to slow investor communication.
Revenues from energy storage aren’t subsidised and so are far more variable than other renewables. From dividend cover of 1.3 x in 2021, in H1 2023 it was just 0.6 x.
Many new projects have taken longer to complete than expected and shareholders haven’t really been kept up-to-date; however, its interim results indicated that little needs to be done before the projects are ‘energised’, increasing overall battery capacity by 60%.
Ben Guest, GRID’s lead manager, seems confident that higher revenues from servicing the National Grid and energy trading will return, but warns shareholders will need to get used to their cyclical nature.
I only recently came across Modo Energy which publishes monthly figures for the UK battery storage industry, and clearly shows the variation in the revenue earned per month by the typical battery storage firm.
The total UK battery storage market is reckoned to be around 3,000MW so GRID has a 20% market share, down from the 30% it had for the last few years.
Although I am annoyed at the slow investor communication, I’m culpable as well. I knew monthly revenues would be volatile, although I didn’t appreciate how much, and I should have paid closer attention to industry data to get a better feel for this. Three of the five directors took part in the placing in May,
and have been investing since; Gresham House, the trust’s management firm, and Guest remain major shareholders, which is good to see.
GRID’s placing was to build out a new project in the US, and it may dispose of a few smaller UK sites to complete the funding and avoid using its eye-wateringly expensive loan facility.
I did buy a little more GRID last week after its half-year results were released; it’s a complicated situation there, but intriguing. Bluefield Solar Income‘s recent results were more serene, with an 8.6p dividend; cover is around two times, thanks to the strategy of fixing power prices between a few months and a few years ahead, and should remain so for the next year or two. Debt has risen a bit at Bluefield, and with a massive pipeline equivalent to one and a half times the capacity of the current portfolio, some assets may be sold off either before or after construction. If energy storage assets are retained Bluefield’s revenue profile could become much more volatile.
Bluefield’s discount of 16% is narrower than most other renewables trusts; of the three, I have the most confidence in its management team so I can see myself adding to this position again.
Nov 2023
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