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IICS/REIFS – NAV discounts and the ill wind from Denmark

09 Sep 2025 / Insight

By Nigel Hawkins

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Executive summary

  • Since the start of 2024, the share prices of the eight Infrastructure Investment Companies (IICs) and of the 18 Renewable Energy Infrastructure Funds (REIFs) have been generally weak – and, conspicuously, have failed to recover the losses of 2023. Undoubtedly, high interest rates have undermined the sector – and there is no certainty that they will fall significantly. Not only has this situation adversely affected NAVs, but the comparison with “risk-free” 10-year gilts is stark – the latter are currently yielding an attractive 4.8%.
  • Sector sentiment has not been helped by the ca.£7bn rights issue announced by the EU’s largest offshore wind operator, Denmark’s Orsted; it has faced serious issues relating to its US operations off New England. Following the rights issue announcement, Orsted’s shares plunged by almost a third, a reaction that has undermined the valuations of many other renewable energy stocks.
  • Over the past six months, there has been significant corporate activity in the sector. British Columbia Investment Management (BICM) acquired BBGI for just over £1bn at a price that was close to BBGI’s latest NAV. Harmony Energy Income has also exited the sector, having been bought by Foresight Group for £210m. Downing Renewables and Infrastructure seems set to follow suit, following a recommended bid of £175m from Bagnall Energy.
  • Less satisfactorily, there are Managed Wind-Downs (MWD). While Triple Point Energy Transition is now delisted, five other MWDs are currently being undertaken. Aquila Energy Efficiency, Aquila European Renewables, Digital 9 Infrastructure, Ecofin US Renewables Infrastructure and VH Global Energy Infrastructure are all intent on selling their assets and on maximising shareholder value on realisation.
  • NAVs of many sector stocks have fluctuated of late and some, notably Digital 9 Infrastructure, have plummeted ‒ from 79.3p per share at December 2023 to just 34.4p per share at December 2024. On the upside, 3i Infrastructure has managed to grow its NAV during 2024/25 – it rose from 362.3p per share to 386.2p. Cordiant Digital Infrastructure has also bucked the trend, with a 9.3% increase in EBITDA in 2024/25 compared with 2023/24.
  • Currently, all 26 stocks ‒ except for Downing Renewables and Infrastructure, the target of a recommended bid ‒ are trading at a significant discount to their NAV. The average IIC is trading at an 18% discount (on an unweighted basis) to its NAV; the comparable discount (also on an unweighted basis) for the REIFs is ca.30% (in both cases, stocks in MWD have been excluded). Not surprisingly, there are now many share buyback schemes under way.
  • For the sector’s two bellwether stocks, the dividend record is fine – 3i Infrastructure is projecting a reassuring 6.3% rise in its dividend per share in 2025/26, while Greencoat UK Wind’s recent dividend record has impressed. For many others, maintaining dividends, in nominal terms, has been a real challenge. In HICL’s case, it has flagged a distinctly modest 1.2% dividend increase for 2025/26, its first such increase since 2018/19.
  • The average prospective dividend yield (on an unweighted basis) for the IICs currently is 6.4%; the comparable figure (also on an unweighted basis) for the REIFs is almost 8% (in both cases, stocks in MND have been excluded). The REIFs yield clearly reflects the sharp decline in recent years of their share prices.

 

Infrastructure/Renewable Energy Funds

Background

Within the now 26-strong Infrastructure Investment Companies (IICs) and Renewable Energy Infrastructure Funds (REIFs) sector, most of the constituents have floated within the past decade, with many IPOs undertaken in the lead-up to COVID-19. Subsequently, however, it has been distinctly quiet on the IPO front, as sector NAVs have fallen back, due mainly to persistent higher interest rates. Instead, many REIFs, in particular, are seeking either to sell themselves, or at least some of their key assets.

Sector fundraising, via the equity markets, has been almost non-existent of late. Instead, for most of the IICs, consolidation has been to the fore – the debt-laden Digital 9 Infrastructure is an exception, as it is in Managed Wind Down (MWD).

For most REIFs, retrenchment has been very much the order of the day – not surprisingly, share buybacks have been popular among the leading stocks. Moreover, aside from Hydrogen Capital Growth, which is in Managed Realisation (MR), there are four REIFs in MWD, excluding Triple Point Energy Transition, whose liquidation has now been completed – surprisingly quickly and without serious problems.

This pronounced reversal has seen the optimism of the early 2020s drained from the sector, as the significant premia over NAVs, at which most stocks then traded, converted into heavy discounts. There are exceptions, although even the highly rated 3i Infrastructure is trading at a discount of ca.10% currently.

Whereas, previously, equity markets generally welcomed fundraises, this is no longer the case, with few of the 26 stocks under review seeking – actively at any rate – to raise new funds. In the current climate, very few have a realistic chance of securing substantial new funds from equity markets.

Instead, under strong institutional shareholder pressure, the focus has moved sharply to share buybacks, which have been undertaken by many of the leading REIFs. With few attractive investment opportunities – at current market valuations – undertaking share buybacks is the obvious safe option.

Even so, the larger IICs ‒ such as 3i Infrastructure, the sector’s outlier – continue to prosper, albeit at somewhat lower valuations. Similar comments apply to both Cordiant Digital Infrastructure and Pantheon Infrastructure, both relative newcomers to the sector.

The two largest REIFs ‒ Greencoat UK Wind and TRIG ‒ are also well-placed; especially the former, which is focused, almost entirely, on UK wind generation. TRIG, however, with considerable EU investment, has faced some challenges: its solar load factor in 2024 in GB and France was a paltry 11%.

The heavy discounts to NAV at which some stocks are trading ‒ notably those applying to Digital 9 Infrastructure and to Hydrogen Capital Growth, at a near 70% discount in each case ‒ sum up the poor market sentiment. Even some REIFs, with decent operating records, find that the market is currently applying discounts of ca.30% on their stock.

Undoubtedly, high interest rates, which may not come down in line with market expectations, and their impact in driving up discount rates, have cut valuations ‒ a scenario to which markets have reacted accordingly. There is a widespread belief, often expressed by frustrated IIC/REIF executives, that it is macroeconomic factors that are driving NAV discounts. After all, when the yield on ultra-safe government gilts is above 4.5%, as is the case currently, yields on IICs/REIFs, which have to reflect the various risks to which they are exposed, are driven higher.

Given this background, sector casualties have been inevitable, mainly brought about by failed Continuation Votes from disenchanted shareholders, which generally lead to the sale of core assets and eventual liquidation.

Aside from Atrato Onsite Energy, which was taken over at the end of last year by the Brookfield/RAIM joint venture, five sector stocks – Aquila Energy Efficiency, Aquila European Renewables, Digital 9 Infrastructure, Ecofin US Renewables Infrastructure, and VH Global Energy Infrastructure ‒ have entered MWD. To date, only Triple Point Energy Efficiency has completed the MWD process ‒ with surprising ease ‒ and it has subsequently been delisted.

By contrast, SDCL Efficiency Income, which is also planning to sell off surplus assets – for the prime purpose of generating cash – is faced with owning a wide portfolio of assets, many of which are subject to detailed contractual obligations. In fact, SDCL Efficiency Income has managed to sell its United Utilities’ renewable energy business at a price that broadly equated to that paid on its acquisition in 2022. However, its intended sale of Onyx has been derailed by the profound uncertainty caused by the US government’s planned tariff changes.

Among the IICs, Digital 9 Infrastructure struggled to sell its core Verne Global business, completion of which was finally confirmed in a pivotal RNS announcement in March 2024. It is now engaged in selling off its remaining assets, effectively its 48% stake in Arqiva, which is faced with many uncertainties in the UK broadcasting market ‒ a poignant end to the dreams that its founders cherished when undertaking Digital 9 Infrastructure’s IPO in March 2021 and subsequently raising more than £900m of equity funds.

Gore Street Energy Storage recently faced down a Continuation Vote, but other similar initiatives are expected in the sector. It should be noted that, even Greencoat UK Wind, the REIF sector bellwether, faced a Continuation Vote at its AGM in April 2024, with only 11% of its shareholders voting against the motion. For those REIFs, with larger share price discounts to NAV, the number of dissentients may be markedly higher.

Among the larger renewable energy players, shares in Orsted, the EU’s leading renewable energy business, were rocked by its ca.£7bn right issues announcement – way ahead of market expectations. The US government ordered work to be stopped on the Revolution Wind plant, which was 80% complete. The damage to Orsted’s share price is highlighted below.

 


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