Since the start of 2024, the share prices of the nine Infrastructure Investment Companies (IICs) and of the 22 Renewable Energy Infrastructure Funds (REIFs) have been, generally, uninspiring – and have failed to recover the losses of 2023. The sharp rise in interest rates from 2021 has undermined the sector, especially since the yield on “risk-free” 10-year gilts has risen appreciably.
The change of government in the UK will also have some implications for the sector, with some relaxation expected of planning approvals for new onshore wind and solar plants in England. Moreover, with inflation now back within its prescribed 2% target, further interest rate cuts by the Bank of England are widely expected, which – once implemented – seem likely to boost sector valuations.
As such, the NAVs of many stocks may rise, as lower discount rates are applied. Even so, 3i Infrastructure has managed to grow its NAV during 2023/24 – it rose from 336.2p per share to 362.3p per share. Less successfully, SEEIT’s NAV fell by almost 10% in 2023/24 – from 101.5p per share to 90.5p per share.
Perhaps inevitably, there have been sector casualties, mainly on the back of adverse continuation votes. Asian Energy Impact, whose shares – due, principally, to the controversial RUMS generation project in India – were suspended for almost 11 months, is being liquidated. Aquila Energy Efficiency, Digital 9 Infrastructure and Triple Point Energy Transition are being wound down.
Currently, all 30 stocks – Asian Energy Impact’s share listing has now been removed – are trading at a discount to their NAV. The average IIC is trading at a 23% discount (on an unweighted basis) to its NAV; the comparable discount (also on an unweighted basis) for the REIFs is now 32%. Not surprisingly, there are now several share buyback programmes under way.
For the sector’s two bellwether stocks, the dividend record is fine – 3i Infrastructure is projecting a 6.3% rise per share in 2024/25, while Greencoat UK Wind’s recent dividend record has impressed. For many others, maintaining dividends, in nominal terms, has been a challenge. In HICL’s case, it has flagged a very modest nominal dividend increase for 2025/26, its first since 2018/19.
Dividend payments have also been effectively suspended – for most of this year at least – by Gresham House Energy Storage and Harmony Energy Income, the two GB-exposed Battery Energy Storage Systems (BESS) stocks. The former’s deep profit-warning announcement in early February shocked the BESS subsector – it still has to recover.
The average prospective dividend yield (on an unweighted basis) for the IICs is currently 5.6%; the comparable figure (also on an unweighted basis) for the REIFs is 6.6%. The latter yield reflects both the sharp decline in recent months of the share prices of many REIFs, along with the probable passing of a 2024 dividend by two BESS stocks.
