Higher power prices lift UK yieldco performance

Two of the UK’s listed environmental infrastructure funds say an uptick in power prices has had a positive impact on their interim results.

While weak rates weighted on performance during the first half of 2016, short-term electricity prices picked up in June, John Laing Environmental Fund (JLEN) noted yesterday, boosting its Net Asset Value by more than 16 percent over the three months since 30 March.

The company was valued at £252.9 million ($331.8 million; €293 million) on 30 June, compared to £216.9 million as at end of March.

The Renewables Infrastructure Group (TRIG), which bills itself as the largest UK-listed renewables investment company, also acknowledged “a welcome increase in short-term prices […] during recent months” in its interim statement.

That assertion, however, comes after a prolonged period of low power prices “affecting earnings, portfolio value and net asset value”, though TRIG chairman Helen Mahy said this impact had been partially offset by “foreign exchange gains, reduced corporation tax rate assumptions and reductions in valuation discount rates as strong demand for renewables infrastructure continues”.

Both funds remained cautious. Citing an “established market consultant”, JLEN warned the short-term improvement would likely be dampened by a slight reduction in forecasts for longer-term energy prices.

Increases in dividends, NAV resilience and the fortunes of the renewables sector as a whole would likewise depend on a “more definitive resumption in growth in power prices,” TRIG said.

This is the first set of results reported by the two funds since the UK voted to exit the EU on 23 June. While noting that more analysis was deserved, both said the decision would not choke off the tailwinds currently propelling Britain’s renewables market.

“We are confident that the EU Referendum vote and the associated government leadership changes in the UK should affect neither the imperative for clean energy across the UK and Europe nor the long-term support schemes for TRIG's portfolio of operating projects,” Mahy said.