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Renewable energy
Posted: 15 May 2017 18:20:37(UTC)

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Hi all,

I'm looking to find ways to diversify my portfolio, and have seen that there are a few renewable energy trusts that seem to provide reliable income. I generally shy away from trusts that sit on large premiums, but I wonder if it can be justified in these uncertain times. Has anyone dipped into these; and if so, are you happy to overpay?

chubby bunny
Posted: 15 May 2017 18:52:10(UTC)

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The VT UK Infrastructure Income fund may be of interest to you. It holds most of the big 'environmental' infrastructure trusts and targets a yield of 5% after charges. In their March factsheet they say, 'The Fund participated in four placements at significantly lower premiums than secondary market trading levels before the placements were announced'.
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Ludditeme on 15/05/2017(UTC), dlp6666 on 14/08/2017(UTC)
Posted: 15 May 2017 20:04:15(UTC)

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This discussion might be of interest to you.

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Ludditeme on 15/05/2017(UTC), dlp6666 on 14/08/2017(UTC)
Mr Helpful
Posted: 18 May 2017 10:58:08(UTC)

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We currently hold :-

Solar : FSFL, BSIF
Wind : UKW

One concern that will be found in researching renewables, is that if it were not for the generous Gov't Subsidies, then these generators would be substantially loss-making.
Future Govt's may move those subsidy goal-posts.

We therefore have not gone overboard with our weightings.
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Ludditeme on 18/05/2017(UTC), dlp6666 on 14/08/2017(UTC)
Posted: 18 May 2017 15:32:10(UTC)

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If you want to diversify with a single extra investment then I suppose something like VT UK Infrastructure might do the job, but I've tended to steer clear of funds-of-funds like this seems to be simply because you are paying two sets of charges - the charges on some of the underlying ITs are plenty high enough already without adding an extra 0.75% on the top.

If they have managed to acquire some of their investments at a lower premium then that's good for yield, but really most of their investments are probably already yielding rather more than the fund's 5% target anyway even at standard pricing.
Posted: 18 May 2017 16:39:06(UTC)

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I like thoughts of renewable energy trusts but like others I do worry about the subsidies which are dependant on the whims of governments. To me there feels an increasing number of climate change deniers in the current government - as there are in the US government.

As a result - having being looking at this area recently - I preferred TRIG as 15% is invested in France and the Republic of Ireland - and they appeared to be looking at Germany. That still doesnt make it brilliant but it might have a place in a diversified portfolio - so for me its a 5% holding type of thing.

You might want to look at something like INPP for a similar income feel (I worry about PPI being a subsidy and prone to political interference).

Lastly - I also wonder how all these infrastructure trusts will do when interest rates start to rise.
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Mr Helpful on 19/05/2017(UTC)
Captain Slugwash
Posted: 12 August 2017 17:19:20(UTC)

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Interesting article on wind farms.

My favourite line on subsidies....

'This top-up of nearly 100 per cent over the wholesale price – funded, of course, from consumer bills – makes wind farms very attractive, at least until they wear out (by which time developers hope to have sold them on to naive pension funds and investment trusts).'
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North Star on 13/08/2017(UTC), winki on 14/08/2017(UTC)
Joe Soap
Posted: 12 August 2017 22:57:41(UTC)

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You could hedge your bets on renewables versus conventional and buy into Siemens or GE? Win/win whatever happens.
Posted: 20 August 2017 16:00:18(UTC)

Joined: 20/08/2017(UTC)
Posts: 3

Hi There,

First, a word about discounts and premiums. A discount is only good if you think it will decrease in future. Similarly, a premium is only bad if you think it will descrease in future. Now ask yourself, on what basis do you think the premium/discount will change in future? All I know is that I don't know. :-)

Second, asset allocation is about: age, ambition, and risk appetite. Most portfolios should be full of: shares, bonds, property, and cash, or collective investments based on them.

Renewable Energy shares, should be seen in the same light as: infrastructure, leasing, and diversified investments. They are useful for income and stability, but should not exceed about 25% of your portfolio.

Being strongly asset-backed, renewable energy shares have low volatility - look at the 12 month maximum and minimum. Often they yield about 5%pa. Beware anything offering significantly more than this - it could be a basket case. Who today believes they are going to see a 30% dividend income from Carillion?

The typical renewable energy business model is to make around a 10% return on equity, with half of that coming out as a dividend, and the other half going back in for more sites. All things being equal we should expect to get 5% income today, and for it to grow at 5%pa - no wonder they are attractive.

Think of this. When we are all driving electric cars, where is all that electricity going to come from? Despite the hour by hour unpredictability of sunshine and wind, my guess is that much of it will come from renewable sources.

Remember though, keep your renewable energy investments in proportion.

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