TIDMTRIG
RNS Number : 2873I
Renewables Infrastructure Grp (The)
04 August 2023
4 August 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 Interim Results
Highlights for the six months ended 30 June 2023
Healthy cash generation from underlying projects:
o Dividend cover of 1.7 times in the period (30 June 2022: 1.4
times), or 3.0 times before the repayment of project level debt
o Strong inflation linkage, with over 50% of revenues directly
linked to inflation over the next ten years
o Fixed interest rate borrowings across the project
companies
o GBP119m of project level debt principal repaid. Project level
gearing reduced from 38% to 37%
o GBP65m reinvested in construction projects using GBP54m of
surplus cash generated during the period
o The Company's GBP750m RCF as at 30 June 2023 was GBP410m drawn
- expected surplus cashflow to enable the reduction of RCF
borrowings after meeting the Company's investment commitments
Resilient earnings and Net Asset Value ("NAV"):
o Earnings per ordinary share of 1.1p (30 June 2022: 17.9p)
o NAV per ordinary share of 132.2p as at 30 June 2023 (31
December 2022: 134.6p)
o Reduction in NAV driven by increase in discount rate to 7.9%
(31 December 2022: 7.2%) partially offset by an increase in
long-term inflation assumptions
o Increase in discount rates principally reflects higher
interest rates (weighted to the UK) and also includes higher
returning development stage battery storage projects
o NAV reduction also offset by active management initiatives,
including delivering projects through construction and securing
attractive fixed power pricing
o Portfolio valuation of GBP3,671m as at 30 June 2023 (31
December 2022: GBP3,737m)
A technologically and geographically diversified portfolio of
2.8GW of renewable energy assets:
o 1,040,000 tonnes of CO(2) avoided during the period (30 June
2022: 960,000)
o 2,919GWh of clean energy generated during the period (30 June
2022: 2,747GWh)
o Completion of five construction projects in H1, including
solar projects in Spain and an onshore wind farm in Sweden,
commissioning 301MW of new capacity
o 1.7m homes (equivalent) powered with renewable electricity (30
June 2022: 1.6m)
o Below budget generation in the period, predominantly driven by
low wind resource in the UK, partially moderated by portfolio
diversification with the solar portion of the portfolio ahead of
budget
Richard Morse, Chair of TRIG, said:
"TRIG's portfolio continues to generate strong cash flows,
benefiting from its positive inflation correlation, low sensitivity
to interest rate costs, and active management from InfraRed and
RES. The combined investment and operational experience of our
Managers is a competitive advantage, as TRIG continues to play its
part in delivering sustainable energy across several European
markets."
Richard Crawford, Head of Energy Income Funds, InfraRed,
said:
"The Managers continue to drive value through commercial and
technical enhancements, including securing higher power prices and
increased energy output. We prioritise the use of TRIG's strong
cash flow generation to reduce group-wide borrowings. The inflation
linkage within TRIG's revenues and the diversification of our
portfolio across geographies and technologies means we are
well-positioned to deliver shareholder value in a challenging
macro-economic backdrop."
Chairman's Statement
TRIG's portfolio demonstrates its resilience through the
economic cycle, underpinned by the positive inflation correlation
of its revenues and low exposure of its cash flows to rising
interest rates.
Over the next ten years, more than 50% of forecast revenues are
directly linked to inflation through subsidy support mechanisms
providing a natural hedge to increasing return expectations.
Despite these characteristics, we have not been immune to the
sustained trading of share prices at discounts to Net Asset Values,
as seen across the real assets investment company sector. In a
changing macroeconomic environment, we maintain our focus on
capital allocation together with active operational and financial
management.
Earnings in the six months to 30 June 2023 were 1.1p per share.
Underlying portfolio performance remains strong, with cash flows
benefitting from increases in index-linked subsidies as well as the
exposure to wholesale power prices, despite lower than expected
wind resource. Portfolio Valuation has slightly declined as
valuation discount rates have been increased, reflecting the higher
returns environment which is significantly offset by the strong
inflation linkage in the portfolio. As at 30 June 2023, the
portfolio discount rate was 7.9% and the Company's NAV was 132.2p
per share. Further explanation of the Company's financial results
is provided in the Investment Report.
Net cash flows from the Company's projects are very healthy,
covering the cash dividend 1.7 times. Operational cash flow
generated in the period before repayment of project-level debt in
the period was GBP264m, representing 3.0 times cover of the
dividend. We are pleased to reconfirm the 2023 dividend target of
7.18p per share (2022: 6.84p per share).
We have applied surplus cash flows from the portfolio to fund
existing construction commitments and in time, as construction
commitments are met, we expect surplus cash flows to reduce
short-term debt. Beyond this, the Investment Manager adopts a
disciplined approach to further capital outlay, where, together
with the Board, it also considers share buybacks alongside
potential new investments as well as disposals to generate cash for
such allocations in seeking the best return for shareholders.
Balance sheet discipline is reflected across the portfolio with
project debt almost entirely fixed rate and fully amortising over
the remaining subsidy periods without refinancing risk. This
protects the portfolio's cash flows from interest rate
movements.
Diversification remains core to TRIG's strategy, and our
operational portfolio continues to expand with the commissioning of
five projects constructed in Sweden and Spain. The development of
our two near-term battery storage projects in the UK continues to
progress well.
TRIG's Managers work both to preserve and enhance the
portfolio's value. This work encompasses both technical
enhancements such as improvements to blade aerodynamics that
increase energy output, and commercial enhancements like the
long-term corporate Power Purchase Agreement TRIG entered into
during the period that helps manage variable power price exposure.
We expect another opportunity to enhance shareholder value will
come from the repowering potential of our older assets beyond that
recognised in the Company's Portfolio Valuation.
Energy policy evolution remains an area of attention. Reviews of
electricity market arrangements are ongoing in the UK and the EU,
including the consideration of wholesale pricing mechanisms, as
expanded upon in the Investment Report.
Klaus Hammer retired from TRIG's Board of Directors in May 2023.
On behalf of the Board, I would like to thank him for his nine
years of service to TRIG's shareholders and broader stakeholders. I
also welcome Selina Sagayam who was appointed to the Board in March
2023. Selina has extensive legal and ESG experience, and she chairs
our newly established ESG Committee. TRIG published its fourth
annual Sustainability Report in May, underscoring our commitment to
responsible investment, which this new committee will oversee.
During the period, Jaz Bains stepped down from the leadership of
the Operations Manager's team. I extend the Board's thanks to Jaz
for his significant contributions to TRIG since its launch in 2013.
He hands over to Chris Sweetman, who has been leading the
day-to-day management as a senior member of the RES team alongside
Jaz since TRIG's IPO. Jaz remains on TRIG's Advisory Committee.
In the ten years since TRIG's IPO, the Company has delivered
shareholders a return of 8.8% p.a.(1) , grown the dividend by 20%
and created the largest diversified portfolio of renewables
infrastructure projects of its peers, spanning six European
countries and four technologies. Looking forward, as countries
across Europe decarbonise to reach net zero emissions by 2050,
renewables remain at the heart of public policy and the opportunity
set is greater than ever. I firmly believe that TRIG's priorities
of diversification, value enhancement and effective capital
allocation will continue to generate resilient returns for our
shareholders.
Richard Morse
Chairman
3 August 2023
1. Annualised NAV total return to 30 June 2023, including dividends paid.
Investment Report
Financial highlights
The Company's portfolio generated strong cash flows in the first
half of 2023. Operational cash flow of GBP264m(2) represents 3
times cover of the GBP87m cash dividend paid to shareholders.
Operational cash flows were used to repay GBP119m portfolio-level
debt. After operating and finance costs, the Company's net cash
flow of GBP145m (H1 2022: GBP107 million) during the period covered
the cash dividend 1.7 times.
Looking forward, cash flows are expected to continue to be
supported by the portfolio's strong inflation linkage and power
price levels above historical averages. This has provided
resilience to valuations in the face of marked increases in nominal
return requirements, with valuations softening only slightly in the
first half of the year as the higher returns required by investors
have been mitigated by higher forecast cash flows. This resilience
can be further demonstrated by looking back over the last 18 months
where valuations have increased due to increases in forecast cash
flows, despite the Company's 1.0% increase in valuation discount
rate applied over this period.
The Company's Net Asset Value as at 30 June 2023 was 132.2p per
share (31 December 2022: 134.6p per share) and the Company's
Portfolio Valuation was GBP3,671 million. Earnings for the period
were 1.1p per share (H1 2022: 17.9p).
This resilient underlying financial performance has been the
result of:
- Continued active financial and operational management of TRIG's portfolio, including:
-- The delivery through construction into operations of four
solar projects in Spain and one onshore wind farm in Sweden.
-- Fixing power prices for several projects at attractive
prices, including the signing of a ten-year corporate power
purchase agreement, which secured an attractive fixed tariff for
Blary Hill onshore wind farm.
- Reintroduction of historical feed-in tariffs on older solar
projects thereby reversing the retroactive changes introduced by
the French Government.
- Increases in index-linked subsidies and strong wholesale power
prices flowing through to revenues.
- Fixed interest rate borrowings across the project companies
and limited refinancing risk across the project debt in the
portfolio, largely removing sensitivity to recent increases in
interest rates.
- Strong pricing performance of Renewable Energy Guarantees of
Origin certificates ("REGOs") in the UK and Guarantees of Origin
certificates ("GoOs") in the EU, resulting in increased forecast
revenues.
This has been partly offset by below budget generation,
predominantly driven by low wind resource in the UK relative to
long-term forecasts.
Macroeconomic movements included:
- Decreases in short- and medium-term power price forecasts
across the markets where TRIG has investments, which reduced the
Portfolio Valuation by 3.5p per share. However, relative to
historical norms, power prices remain elevated following the
substantial increases seen in 2022. The decreases in 2023
significantly reduce the impact of the windfall taxes introduced in
2022 on the Company's NAV.
- The portfolio's weighted average discount rate has increased
by 0.7% to 7.9%. This is mostly due to the Investment Manager
increasing valuation discount rates for projects, by an average of
0.5% (UK +0.8%, EU +0.3%). This increase of 0.5% has reduced the
Portfolio Valuation by 5.7p per share in the period. This reflects
the increased return expectations for the portfolio whilst
recognising the movement in government bond yields, particularly in
the UK where there have been fewer renewables transactions on which
to base valuations.
- The valuation impact of the higher discount rate was
substantially mitigated by increased near-term and longer-term
inflation assumptions, which have increased the Portfolio Valuation
by 3.9p per share as these inflation assumptions flow into revenue
forecasts through index-linked subsidies and indirectly increase
power price forecasts. Over 50% of the Company's forecasted
revenues over the next ten years benefit from subsidy regimes with
a direct link to inflation indices.
Greater detail on these movements can be found in the 'Valuation
of the portfolio' section of the 2023 Interim Report.
Responsible management of the balance sheet is a key focus for
the Company's Board and Managers, informing their approach to
capital allocation in consideration of the current macroeconomic
environment. In the current market context, managing short-term
borrowings on its RCF (see below) and meeting the Company's
construction commitments are the primary uses of excess cash flows
from the portfolio.
The Company's underlying gearing at asset level continues to
amortise and will be repaid debt during the remaining period of
government subsidy and revenue support mechanisms.
TRIG utilises a RCF, which is used to make new investments and
is repaid from surplus cash flows, equity fund raises or disposal
proceeds. The RCF which was refinanced in February 2023, has total
funding capacity of GBP750m and matures in December 2025. As at 30
June 2023, the RCF was drawn GBP410m, remaining broadly level over
the period. Surplus investment cash flows have been used to fund
the Company's construction activities during the period.
In H1 2023 construction spend of GBP65m was largely met by
surplus operational cash flows generated of GBP54m. Committed spend
on construction is reducing as projects come out of build, so it is
expected that the construction commitments which are GBP150m over
the next three years will be exceeded by surplus operational cash
flows.
Investment highlights
TRIG consistently benefits from a large and diversified
portfolio with investments spread across different geographies,
technologies and revenue types to mitigate risk.
The Investment Manager takes a careful and considered approach
to portfolio composition. New investments are appraised alongside
alternative uses of the Company's surplus cash flows, in particular
reducing RCF borrowings and the consideration of share
buybacks.
The Managers' successful delivery of development and
construction projects through to operations is a key driver to
create value for shareholders. Several significant milestones were
reached during the period, including the commissioning of the four
Cadiz solar projects in Spain and the Grönhult onshore wind farm in
Sweden. Adding 301MW of operational capacity to the portfolio,
these projects strengthen and further diversify the Company's
revenues. Approximately half of the construction risk premia across
these investments has been released and reflected in an increase in
the valuation of these investments. The remaining construction risk
premia will be released as the energy yield and operational
performance is further evidenced in steady state operations.
TRIG's ongoing construction projects also continued to progress
well during the period. The first turbines were erected at Ranasjö
and Salsjö (Twin Peaks) onshore wind farms in Sweden where
operational take-over is scheduled for 2024.
Works are also being progressed to maximise the value of TRIG's
existing assets. Repowering development works have commenced for
the 38MW Altahullion wind farm in Northern Ireland. An agreement
was also reached during the period to commence development work
which leverages the grid connection and land space at the Cadiz
solar projects through the addition of onshore wind, a process
known as 'co-location'.
The development of the four two-hour duration battery storage
projects acquired in late 2022 has also progressed well. The 74MW
Ryton project, is expected to reach the Final Investment Decision
("FID") stage post period end. Additionally, a follow-on loan was
added to the Phoenix mezzanine debt investment to enable our
partner, Akuo, to build 25MW of new battery storage capacity at
sites on Corsica and La Reunion.
The Investment Manager also considers opportunities to secure
greater value for shareholders through divestments where a third
party may attribute greater value to a project than recognised in
the Portfolio Valuation. There may be selective opportunities to
adjust the portfolio's composition by rotating out of certain
assets and into diversifying, and potentially higher returning,
opportunities.
Current outstanding commitments
The Company has outstanding investment commitments (for
construction activities) of GBP146m relating to the Swedish onshore
wind construction projects (Ranasjö and Salsjö), and two of the UK
battery storage projects (Ryton and Drakelow), set out in the table
below by expected due date. Further information is detailed on page
18 of the 2023 Interim Report. The Company's GBP750m committed RCF
was drawn GBP410m as at 30 June 2023.
H2 2023 2024 2025 Total
Outstanding commitments
(GBPm) 44 72 30 146
------- ---- ---- -----
Revenue profile
TRIG benefits from diversification across several power markets,
with projects in Great Britain, the Single Electricity Market
(Northern Ireland and the Republic of Ireland), the main
continental European power market (France and Germany), the Nordic
market (Sweden) and the Iberian market (Spain).
TRIG's portfolio cash revenues, as well as benefitting from
wholesale power prices, have substantial medium-term protection
from movements in power prices as the portfolio receives a high
proportion of its revenue from government subsidies such as
Feed-in-Tariffs ("FiTs"), Contracts for Difference ("CfDs"),
Renewable Obligation Certificates ("ROCs") or from selling
electricity generated via Power Purchase Agreements ("PPAs") with
fixed prices or from other hedges, together referred to as fixed
revenues.
The Group(3) receives a portion of its revenues in Euros; 42% of
the portfolio by value is invested in Euro-denominated assets. The
Group employs foreign exchange hedging to significantly mitigate
the cash flow and valuation exposure to this risk, as expanded upon
in the 'Valuation of the portfolio' section.
The Investment Manager implements the Company's foreign exchange
hedging policy through Sterling-Euro swaps for up to four years
forward. As a result of the interest rate differential between UK
and the Eurozone, forward foreign exchange contracts over the next
four years have been struck at levels better, in Sterling terms,
compared to the foreign exchange rate as at 30 June 2023 and used
in the Portfolio Valuation.
Principal risks and uncertainties
TRIG's principal risks, approach to risk management and
counterparty exposures are unchanged to those set out in section
3.4 of the Company's 2022 Annual Report - Risks and Risk
Management. Updates against the principal risks are summarised
below.
In addition, in a macroeconomic environment with elevated
inflation and rising interest rates, the correlation of portfolio
returns to inflation and the Company's approach to long-term,
fixed-rate and amortising structural debt are key risk
mitigants.
Regulation and taxation
The risk of government or regulatory support for renewables
changing adversely.
In 2022, prolonged high power prices saw governments across
Europe intervening in energy markets, including through the
introduction of 'windfall' taxes and levies on generators to, in
the first instance, help fund financial support to ease the cost of
electricity to end users. In the UK, the Electricity Generator Levy
is in place until 2028. In the EU, many of these levies expired on
30 June 2023, with several countries not extending the period of
application, including Germany. There remains a risk that further
intervention may result if electricity prices were to increase
significantly again; however, the price levels that have
historically triggered intervention are not taken into account in
the valuation of the Company's portfolio.
As detailed under Market Developments, the UK and EU governments
are also assessing options to reform electricity markets, including
how the wholesale electricity price is set and whether new
long-term revenue support contracts should be made available to
existing generators. TRIG's approach to diversify political and
regulatory risk across jurisdictions helps to reduce the impact on
the portfolio from individual risks at the national level.
Power prices
The risk of electricity prices falling or not increasing as
expected.
Power prices have been particularly volatile since 2020, with
periods of very low pricing experienced during the Covid pandemic
and very high prices since the outbreak of the conflict in
Ukraine.
Power prices trended lower during the first half of 2023 but
remain elevated compared to historical levels. A combination of
infra-marginal power price caps implemented in Europe and the
Electricity Generator Levy in the UK reduced sensitivity to this
change. Near-term forwards are now at levels consistent with, or
below, government intervention thresholds.
There has been little change in the long-term fundamentals of
power prices in the period, leading to limited movements in
long-term power price forecasts compared to those as at 31 December
2022 in most geographies. We are yet to see the increase in supply
chain costs and cost of capital flow through into forecasters'
renewables deployment and electricity demand assumptions.
The valuation of the Company's portfolio overlays market derived
forward prices to a blend of cannibalised power price forecast
curves produced by three independent forecasters.
Production performance
The risk that portfolio electricity production falls short of
expectations.
Weather resource was below budget in the period, particularly
wind in the UK and Ireland. The overall shortfall against budget
was moderated by portfolio diversification, particularly the solar
portion of the portfolio which was ahead of budget for the period.
Portfolio diversification has been enhanced in the period with the
commissioning of the Cadiz solar projects in Spain and the Grönhult
onshore wind farm in Sweden. Further, operational partners across
the portfolio, including RES, continue to develop energy yield
value enhancements to improve energy output.
Market developments
UK
In February 2023, the UK government published a summary of
responses to the Autumn 2022 Review of Electricity Market
Arrangements consultation, and at the same time reinforced the
current pay-as-clear price setting mechanism as the most
appropriate. One of the key areas which is subject to ongoing
debate is the market structure and whether there remains one price
across the whole of Great Britain, or there is a move to locational
pricing with the island split into either several price zones or
hundreds of price nodes.
A move to locational pricing may result in merchant power price
revenues received by projects nearer demand centres increasing; but
projects further from demand centres may see electricity offtake
pricing fall. Should locational pricing be adopted, it is unlikely
to be beneficial for most wind farms which tend to be in remote
areas, although transitional arrangements may be adopted which
could mitigate this risk.
A number of studies are currently underway in relation to the
different market structures being considered. One such study has
indicated that a move to locational pricing might result in savings
for consumers; another indicates that locational pricing would be
more expensive. In both cases, each study highlights significant
unquantified risks with overhauling the market structure. It is
also important to continue to appeal to wind farm developers and
financiers, with signs already that wind farm development is
reducing due to economic pressures. Further studies are expected to
be published during the summer and a second industry consultation
is expected in the autumn.
EU
Shortly following their consultation in February 2023, the
European Commission proposed a number of possible reforms to power
markets. Discussion of the reforms remains ongoing. These reforms
indicate a desire to improve electricity pricing visibility for
generators and customers through greater use of power purchase
agreements with government guarantees, by strengthening power
markets through grid infrastructure investment, by increasing the
use of two-way Contracts for Difference for new build renewable
projects, and in doing so protecting retail consumers.
Outlook
During a period of continued geopolitical and macroeconomic
uncertainty, the Company's portfolio has again demonstrated its
inherent resilience through strong cash generation. The strength of
the Company's prudent capital structure, the inflation correlation
within its revenue streams, and distinct investment strategy
continues to be underscored in the current volatile market.
The opportunity to deliver higher returns from progressing
late-stage development and construction assets means that the
Company is well positioned to continue its track record of
delivering income and capital growth. The active management of the
portfolio includes the consideration of disposals where
complementary to the Company's overall strategy.
The Managers' implementation of the Company's strategy through
their approach to portfolio diversification, value enhancement and
capital allocation seeks to maximise returns for shareholders.
InfraRed's differentiated investment capabilities combined with
RES' operational excellence, stand the Company in good stead to
deliver a real value proposition to shareholders.
2. Operational cash flow generated is reconciled to the cash
flow statements as follows: Cash flow from investments GBP171.3m
less Company (including its immediate subsidiaries TRIG UK and TRIG
UK I) expenses GBP26.1m plus project level debt repayments
GBP119.1m
3. The Company, TRIG UK, TRIG UK I and its portfolio of investments are known as the "Group"
Operations Report
Operational performance
H1 2023 Electricity H1 2023 Variance
Production to budget
(GWh)(*)
Onshore GB 583 (21%)
------------------ ------------------- ----------------
Ireland 131 (18%)
---------------------------- ------------------- ----------------
France 329 (6%)
---------------------------- ------------------- ----------------
Scandinavia 353 (7%)
---------------------------- ------------------- ----------------
Offshore GB 703 (7%)
------------------ ------------------- ----------------
Germany 400 (7%)
---------------------------- ------------------- ----------------
Solar GB, France, Spain 455 2%
------------------ ------------------- ----------------
Total 2,954 (9.3%)
------------------- ----------------
* Includes compensated production due to grid curtailments, and
other availability warranties and insurance
Overall, wind resource in most of the jurisdictions in which
TRIG invests across Europe has been below budget in the period. The
impact of a particularly poor wind resource period in the UK and
Ireland has been moderated by the diversification of the portfolio
in regions such as France, Germany and Sweden, where the negative
variance to budget has been less, and the inclusion of solar in the
portfolio, which outperformed budget.
Onshore wind
GB
Production in the GB region was adversely affected across the
region by very low wind in the half year period. During this time a
number of major component exchanges were undertaken so to minimise
the lost production during the associated downtime compared to
undertaking works when wind levels are more normal.
New Operations & Maintenance ("O&M") contracts were
signed for three more of the seven UK and Ireland projects which
were competitively tendered in 2022. These contracts leverage
TRIG's portfolio size and purchasing power whilst capturing
site-specific technical requirements.
A ten-year corporate PPA was signed to secure fixed revenue at
an attractive price at TRIG's first subsidy-free wind farm in the
GB region, Blary Hill.
Northern Ireland & Republic of Ireland
Generation in the region, which constitutes 4% of the portfolio,
was below budget due to a mixture of low wind and major component
replacements at older sites.
France
Sites in the north of France performed well, driven by strong
wind resource and high availability. This was offset by
below-budget production at the southern sites, which experienced a
significant number of high wind events requiring preventative shut
downs during Q1. Vannier, which completed construction in H2 2022,
performed on budget.
Repowering activities on the four older southern sites continue,
with grid connection secured for Claves in the period. Major
components continue to be replaced to enable the projects to
maximise the benefit from current high power pricing ahead of
decommissioning and repowering. Dismantling of the first site is
expected to commence in late 2024.
Sweden
Production was 7% under budget, due to low wind compared to
long-term averages. Jädraås and the newly constructed Grönhult are
located in different regions of Sweden, adding diversification to
the production within the country.
Offshore wind
GB
Production was 9% below budget again due to low wind resource
relative to long-term averages. Production was also adversely
impacted at Beatrice by array cable issues which required some
curtailment. Additional monitoring is planned to gather the
required data to support the removal of this curtailment.
Improved terms were secured on a major O&M contract for one
asset in the region, which will amount to significant savings over
a period of ten years.
Proactive end of warranty inspections and negotiations across
TRIG's offshore wind portfolio continue to maximise the long-term
performance and value of these assets.
Germany
Production was 7% below budget, largely due to low wind resource
and a grid outage at Merkur in Q1.
Leading edge protection works are being progressed at Merkur
over the summer to protect the long-term integrity of the blades.
These works are being conducted under warranty by the turbine
provider and include protection against lost revenue.
At Gode 1, the grid operator has constructed and commissioned a
new offshore substation for future neighbouring windfarms. In the
years leading up to project completion, this will provide an
alternative export route for Gode 1 in the event of an outage on
its main substation, thereby reducing the risk of future grid
losses. It also provides an alternative import route, which can be
used to reduce downtime following grid outages.
Solar
GB, France & Spain
The solar portfolio outperformed budget, reinforcing the
benefits of a diverse portfolio.
Within Spain, generating ahead of their takeover date in Q1, the
four solar projects in Cadiz performed well, resulting in
above-budget production in the period. The other Spanish solar
project Valdesolar maintained very high availability and its
production was on budget in the period.
Within GB, a major panel replacement programme is underway at
Parsonage following a successful warranty claim. The newer, more
efficient modules are expected to improve future performance.
Manufacturer Exposure
It is important to work with a range of suppliers, and TRIG's
portfolio is well diversified across a range of different models
and vintages of wind and solar technology. TRIG has exposure to
many different equipment manufacturers, with Siemens Gamesa
Renewable Energy (SGRE) being the largest of these on a Portfolio
Valuation basis. Issues with equipment inevitably occur from time
to time across different manufacturers. The Company has not been
materially impacted by these due to contractual protections in
place and repairs / correction works being carried out. This
includes a range of different contract types, some of which are
long-term and all-inclusive, providing protection against
expenditure and downtime. End-of-Warranty inspections are also
pro-actively conducted, providing time for any issues to be
rectified ahead of expiry. The combination of visibility across the
TRIG portfolio, and RES's market awareness allows the Operations
Manager to identify potential issues in advance and focus in on
monitoring the areas with the greatest potential risks.
Construction
Arenosas, Malabrigo, El Yarte and Guita, the four Spanish solar
projects located in Cadiz, successfully reached operations in Q1
2023. These projects significantly increase the size of TRIG's
operational solar portfolio and strengthen its technological and
geographical diversification. The independent Owner's Engineer will
continue to be closely involved in the projects until the end of
the construction warranty period, to ensure any defects are
captured under the warranty and thereby protect long-term
quality.
Following first export in October 2022, commissioning activities
at the Swedish onshore windfarm Grönhult were completed in the
period. The site achieved operational takeover in Q2 2023,
culminating with a well-attended inauguration ceremony in June.
Swedish windfarms Ranasjö and Salsjö remain on target to take
over in 2024. Turbine component deliveries are ongoing with the
first turbines now erected. On- and off-site electrical works are
progressing with energisation expected later this year.
Development
Design and procurement works on the first of the four storage
development projects are well advanced with contracts expected to
be placed and ground works commenced later this year. Activities on
the latter projects will ramp up in line with their grid connection
dates.
Health & safety
Delivering high quality health and safety within the
construction and operational portfolio is the top priority. The
portfolio's asset managers promote a strong safety culture through
a pro-active approach utilizing safety drills, training days,
internal and external audits and other activities which complement
core safety frameworks. The Operations Manager continues to engage
with the asset managers to ensure sharing of best practice and
lessons learned across the portfolio.
In H1 2023 a very low incident rate was achieved, with two Lost
Time Accidents.
A selection of proactive health & safety measures from the
period are included below:
- Members of the Board visited Broxburn storage project in
Scotland. Alongside the Managers they met with the site Operations
& Maintenance and Asset Management teams, and reviewed the
measures taken to mitigate inherent safety risks of a storage
project
- Project company directors continued to visit and undertake
safety walks at both operational and construction projects,
including the Cadiz and Ranasjö & Salsjö construction sites,
where they met with the on-site teams
- Welfare facilities were installed at four GB solar sites,
providing improved workplaces for technicians. A full roll-out is
planned following good feedback
- One of TRIG's offshore wind projects provided assistance when
a crew member on a local fishing vessel became critically ill. The
wind farm's medic responded to the emergency call and attended to
the patient until the coastguard arrived
- In recognition of the additional risks relating to major,
non-standard works on offshore wind projects, 24-hour enhanced
safety supervision has been put in place for the ongoing Merkur
blade protection work
- Safety drills and emergency response exercises were undertaken
at several assets both and on and offshore, with bad weather days
used as opportunities for further training and familiarisation with
vessel cranes, lifting procedures, use of gangways and fire and
first aid procedures
Enhancements
As Operations Manager, RES is dedicated to enhancing the
operational performance to increase the 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 the individual project
and portfolio levels.
Enhancements secured during the first half of 2023 included:
Commercial enhancements:
- TRIG entered into a corporate Power Purchase Agreement at
Blary Hill onshore wind farm for a ten-year period on
pay-as-produced terms. This provides TRIG with long-term price
security and improves value on a risk-adjusted basis.
- Two GB Solar sites qualified for UKPN Flexibility Regime, to
enable voluntary compensated curtailment at times of excess
generation relative to demand.
- A significant reduction in the cost of a core operations
maintenance contract for an offshore wind farm was achieved
following extensive negotiations alongside investment partners,
improving upon the investment case. There were no material changes
to contract scope.
- A framework agreement for inverter spares has been signed
across eight GB solar projects that will reduce downtime for
long-lead time items and enables TRIG to leverage the portfolio
effect. Avoided downtime estimated at GBP500k over the 15-year
contract term.
- FID reached for the installation of additional battery storage
at a hybrid solar and battery project within the Phoenix portfolio.
TRIG provided financing through the addition of a follow-on
loan.
Blade improvements:
- Following trials at two GB wind farms of aerodynamic
improvements to turbine blades, a package is being rolled out
across four more sites in the GB wind portfolio, totalling 59MW of
generation capacity. The package also includes a suite of software
upgrades to maximise the additional energy yield gained from
equipment installations and will be initially implemented at one of
the trial sites with the upgrades already installed.
- Across the wider portfolio, application is being investigated,
with technical due diligence for aerodynamic blade upgrades being
progressed at two joint venture projects.
Wind turbine software enhancements:
- The wake steering and collective control trial at Altahullion
in Northern Ireland has been completed, with testing concluded on
three of the four elements. This enhancement is an innovative
retrofitted upgrade to increase production and reduce turbine
loads. The reduction in loads has been verified by an independent
assessment demonstrating an increase in the remaining life of
turbine components.
- Validation of a suite of yield-enhancing software upgrades at
Garreg Lwyd wind farm in Wales has been completed following
implementation in 2021, confirming a >1% increase in the energy
yield.
- Results from implementation of a pitch and yaw optimization
tool at Gode demonstrated an 0.2% yield uplift.
- Life extension work also continues across TRIG's onshore wind
and solar projects in the UK and Ireland. Key milestones in the
period include extensions to planning consents at Meikle Carewe and
Earlseat onshore wind farms.
Directors' Statement of Responsibilities
We confirm that to the best of our knowledge:
1. The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting; and
2. The Chairman's Statement and the Managers' Report meets the
requirements of an Interim Managers' Report, and includes a fair
review of the information required by
a. DTR 4.2.7R, being an indication of important events during
the first six months and description of principal risks and
uncertainties for the remaining six months of the year; and
b. DTR 4.2.8R, being the disclosure of related parties' transactions and changes therein.
By order of the Board
Richard Morse
Chairman
3 August 2023
Publication of documentation
The above information is an extract from TRIG's 2023 Interim
Report. The Interim 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/ .
This information is provided by RNS, the news service of the
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