The Fund recorded a 5.34% decline in January (C Accumulation GBP). Returns from underlying portfolio companies were mixed however, with a number of positive contributors including (but not limited to) Downing Renewables & Infrastructure, HA Sustainable Infrastructure, Acciona Energias, Meridian Energy and Clearway Energy Inc.. The main detractors from performance included NextEra Energy Partners (now called XPLR Infrastructure), The Renewables Infrastructure Group, Bluefield Solar, Greencoat UK Wind and Innergex. There did not appear to be any trends in performance among companies with similar geographic focus, country of listing, or underlying focus in terms of power generation type.

NextEra Energy Partners, which changed its name to XPLR Infrastructure during the period, negatively surprised the market in January by indefinitely suspending its dividend. Consensus had been to expect a dividend rebasing at some point in 2025 (possibly later) in order to provide flexibility for buying out Convertible Equity Portfolio Financings due in coming years and supporting future growth capex, rather than a full suspension. The move, along with a rebranding to XPLR Infrastructure, reflects a shift in strategy to prioritise retained cashflows for reinvestment rather than high distributions. Management believes this will yield double-digit returns, supported by credit rating affirmations. The dividend suspension and uncertainty around possible timing of reintroduction, has made the stock less attractive to income-focused investors such as ourselves. XPLR’s portfolio of contracted solar and wind assets, representing the third largest producer of wind and solar energy in the US (according to S&P Global), remains valuable for the US energy mix and its ambitions in AI domination. It may take time for investors to recognise this embedded value and for the shareholder base to adjust.

Elsewhere in the portfolio, UK Battery Storage owner, Gresham House Energy Storage, provided an end of year Trading Update which pointed to general improvement in financial performance. The company expects operational revenues of £42m and EBITDA of £29m for full year 2024. This would represent 12% EBITDA growth year-on-year and a 69% EBITDA margin. Encouragingly, the company reiterated that it would look to reinstate dividend distributions in 2025 while noting that revenues will be two-thirds contracted once all tolling agreements are in place. Looking forward, the company sees tailwinds from the launch of Quick Reserve, which provides a new revenue stream for assets that can provide reserve power volume on a fast response time (within one minute). It is useful to note that the DENZ 2030 Action plan published in December confirmed it will prioritise technologies that are deliverable within the 2030 timeframe. The plan calls for 29-35GW of Battery Energy Storage Solutions vs. 4.7GW installed today.

Greencoat UK Wind announced a 4.7% reduction in its Q4 NAV driven largely by a revision to P50 production estimates. After a protracted period of lower-than-expected generation volumes and poor wind resource against budget, this seems a necessary adjustment. Greencoat sold a 40% interest in Dalquhandy and Douglas West onshore wind farms at the prevailing NAV of £41m, corroborating valuation. A final 2.5p quarterly dividend was declared (thereby meeting guidance for 2024) with dividend cover of 1.3x. The 2025 dividend target has been set at 10.35p/+3.5%, which is in line with the 2024 Retail Price Index exit rate.

The Fund continued to add to the position in Canadian independent power producer Northland Power, deploying some of the capital proceeds received following the takeover of Atlantica Sustainable Infrastructure Capital. Northland Power represents an approximate 3.5% weighting in the portfolio and offers an attractive dividend yield - in excess of 7% on a trailing twelve-month basis - and the increased allocation will in part help to replace Atlantica’s income contribution going forward.

Positions in Aquila European Renewables and Triple Point Energy Transition were reduced during the period. Sales were actioned in order to keep position sizes in check within the context of the broader portfolio.