Business Model & Risks

TRIG is a Guernsey-registered investment company, which has an independent board of directors and whose shares are listed on the London Stock Exchange. As at 31/12/2016, TRIG owned a portfolio of 53 renewable energy infrastructure projects in the UK, Ireland and France.

The Company seeks to protect and enhance the income from and value of the existing portfolio through active management and sourcing of new investments which increase the diversity and scale of the portfolio. TRIG benefits from the expertise of the market-leading Investment and Operations Managers appointed by the Company.

The Company has a 31 December year-end, announcing interim results in August and full year results in February. The Company targets to pay quarterly dividends normally in March, June, September and December.

Group Structure

TRIG’s group structure, including management structure and key service providers, is illustrated below:

 

The Company is a self-managed Alternative Investment Fund under the European Union’s Alternative Investment Fund Managers Directive. The Company has a board of four independent non-executive directors whose role is to manage the governance of the Company in the interests of shareholders and other stakeholders. In particular, the Board approves and monitors adherence to the Investment Policy, determines risk appetite of the Group, sets Group policies and monitors the performance of the Investment Manager, the Operations Manager and other key service providers. The Board meets a minimum of four times per year for regular Board meetings and there are a number of ad hoc meetings dependent upon business requirement. In addition the Board has four committees covering Audit, Nominations, Remuneration and Management Engagement. 

The Board takes advice from the Investment Manager, InfraRed, as well as from the Operations Manager, RES, on matters concerning the market, the portfolio and new investment opportunities. Day-to-day management of the Group’s portfolio is delegated to the Investment Manager and the Operations Manager, with investment decisions within agreed parameters delegated to an Investment Committee constituted by senior members of the Investment Manager.

The key roles of the Investment Manager and the Operations Manager are set out below:

Investment Manager (InfraRed) Operations Manager (RES)
  • Monitoring financial performance against Group targets and forecasts
  • Advising the Board on investment strategy and portfolio composition to achieve the desired target returns within the agreed risk appetite
  • Sourcing, evaluating and implementing the pipeline of new investments for the portfolio
  • Managing the investment cash flows from the Group’s investments
  • Minimising cash drag (having un-invested cash on the balance sheet) and improving cash efficiency generally
  • Managing the process and analysis for semi-annual valuations of the Group’s portfolio submitted to the Board for approval
  • Ensuring good financial management of the Group, having regard to accounting, tax and debt covenants
  • Hedging non-sterling investments
  • Managing the Company’s investor reporting and investor relations activities
  • Day-to-day monitoring and oversight of the operations of the Group’s portfolio of investments
  • Appointment of directors to each project company board
  • Monitoring of service providers to project investment companies
  • Facilitation of early resolution of operational issues as they arise, including performance and disputes
  • Management of project-level financing including implementation and project-level debt covenants
  • Management of power sales strategy including power purchase agreements
  • Assisting on technical and commercial due diligence of projects being evaluated for acquisition by the Group
  • Seeking of cost savings through contract variations and extensions
  • Project level Sustainability co-ordination including community relations and compliance with regulations affecting project companies 

Other key service providers to the TRIG Group include Canaccord Genuity Limited and Liberum Capital Limited as joint brokers, Tulchan Communications LLP as financial public relations advisers, Carey Olsen as legal advisers as to Guernsey law, Norton Rose Fulbright LLP as legal advisers as to English law, Capita Registrars (Guernsey) Limited as registrars, Deloitte LLP as auditors, and Royal Bank of Scotland plc and National Australia Bank Limited as lenders to the Group via the revolving acquisition facility.

The Board reviews the performance of all key service providers on an annual basis.

Making New Portfolio Investments

When seeking to acquire an investment, the proposition is subject to a two-stage process: it is considered and recommended by an Advisory Committee which includes representatives of both the Investment Manager and the Operations Manager. It is then fully assessed by the Investment Committee of the Investment Manager which, for investments within the Manager’s delegated authority (with agreed limits set by the Board), gives the final approval before an investment may proceed. These committees may meet on a number of occasions before an investment is acquired by the Group. Commercial and technical due diligence is undertaken by the Investment Manager with support from the Operations Manager on aspects such as energy yield assessment, off-take contract arrangements, maintenance and other operational costs. Third party legal and technical due diligence is commissioned as appropriate to support the acquisition. 

An important characteristic of the Group is that it is well-positioned to acquire assets from its Managers, in particular RES in relation to which TRIG enjoys a right of first offer for onshore wind and solar assets developed in the UK and Northern Europe. With no representatives from RES on the Investment Committee, decisions on acquisitions from RES under the Company’s Right of First Offer Agreement are taken at arms’ length from the Operations Manager, while any acquisitions from other funds managed by InfraRed would require prior unanimous recommendation by the Advisory Committee and also approval by TRIG’s independent board, together with an independent valuation, as well as utilising prudent internal conflict management procedures established at InfraRed.

Risks

The Board believes that TRIG is well-positioned with its diverse portfolio strategy and its experienced management, provided by InfraRed and RES, to benefit from the long-term returns available from renewables infrastructure as well as to mitigate and/or make adjustments for the risks it is most likely to confront in its industry. 

While there are a range of factors monitored by the Managers, the Board considers that the key elements of risk impacting on the future performance of the operating assets in which the Company invests are (1) portfolio energy yield variability; (2) movements in wholesale power prices and (3) adverse regulatory change.

(1) Portfolio energy yield:

This is the risk that portfolio electricity production consistently falls short of expectations.

The Board believes the variability encountered from the energy sources of wind and solar will be mitigated – both naturally by the tendency for weather conditions to even out over time and via the Company’s diversification policy, both by geography and technology. 

(2) Wholesale electricity prices:

This is the risk that electricity prices will fall or that they will not recover as expected over the life of the portfolio.

The impact of any adverse movements in forecast wholesale power prices is partially mitigated by a majority of the Company’s project-level revenues being derived from fixed power purchase agreements, feed-in tariffs and renewable obligation certificates. An oversupply of fossil fuels tends to lead to a soft market in these commodities which in turn may reduce wholesale power prices. Conversely, there is also the opportunity for future upside over the longer term once production and demand come into balance. The Company may also continue to invest in projects that provide fixed-type revenues, such as projects with feed-in-tariffs or contract-for-difference mechanisms. 

(3) Regulatory:

This is the risk of government and regulatory support for renewables changing and adversely affecting the performance of the portfolio.

As TRIG invests in predominantly operating assets (and with an allocation limit of 15% of portfolio value to pre-operational projects), TRIG carries few risks associated with the planning and commissioning of projects. This is an important risk mitigant as governments seek to reduce costs as deployment targets approach realisation, and manage down the level of incentives available for potential new developments. The main government-related risk to TRIG is the enactment of regulations or tax changes that might affect income from existing electricity generating projects. The Company focuses on investment in markets where the Government shows long-term commitment to sustainable renewables support schemes.

For further details on risk factors, please refer to the Company's prospectus publications and report and accounts available here in the Investor Relations section.