The Fund recorded a loss of 3.07% in November (C Accumulation GBP). The market environment was characterised by heightened volatility across global capital markets.

At the start of November, the British government launched a consultation targeting the basis of indexation for Renewable Obligation (RO) and Feed-in-Tariff schemes. The initiative’s purpose is to reduce policy costs and there have been two proposals put forward. The first is to move to a CPI-based indexation model from 2026, instead of the existing framework that would see higher RPI-based indexation continue until 2030, at which point a transition to CPI-based indexation takes effect. The second, more punitive, proposal would freeze RO buyout prices at the April 2026 level with no future uplift occurring until a “shadow price” index of the 2002 RO buyout price inflated at CPI “catches up” with the April 2026 RO buyout price. Inflation expectations imply this point would be reached in the mid-2030s, after which indexation would be re-established in line with CPI. However, most RO-accredited assets would have seen final subsidy scheme payments by then, with the last RO payments running to 2037.

The consultation was unexpected (a similar consultation having occurred as recently as 2023) and was seemingly one of many flags flown by the government in the lead up to the Autumn budget. Companies with exposure to renewable energy generation assets located in the UK updated the market as to their NAV sensitivity to both proposals. Solar names stand to be most impacted by any change to subsidy indexation owing to higher RO multiples accredited to solar generation assets and greater proportionate geographic exposure to the UK. In contrast, greater geographic and asset diversification means the implementation of either proposal would not be overly detrimental to the NAVs of entities such as The Renewables Infrastructure Group.

The consultation closed in early December, and the outcome should be forthcoming in a timely manner. A scenario where neither proposal is carried forward should not be altogether ruled out, particularly as the likely savings are modest and any change to such frameworks (i.e. “moving the goalposts”) is likely counterproductive to the government’s intention to incentivise the private sector to support its infrastructure development ambitions. The cohort of London-listed renewable energy generators held within the Fund were weak in November and Bluefield Solar Income, Foresight Solar and NextEnergy Solar were among the notable detractors to performance.

The main detractor to performance was Canadian independent power producer Northland Power, which recorded a -32.1% (GBP-adj.) total return in November following publication of a Trading Update for the first nine months of the year. Despite some challenges, including poor wind resource and production levels at wind farms located in the North Sea off the German coast, the company guided towards an unchanged financial outlook for the full year. However, the newly installed CEO reduced the company’s target payout ratio to 40% (from 60%) to better align with peers and provide ammunition to fund growth initiatives while maintaining an investment grade credit rating. Whilst we acknowledge the company’s assertion that they are “seeing opportunities better than anything seen in the last 5 years”, as income-focused investors the revision to the payout ratio provides a source of frustration, and echoes similar moves made by sector peers in recent years to prioritise growth.

Positive contributors were limited to Clearway Energy Inc., Greencoat Renewables, Gresham House Energy Storage, Terna Rete-Elettrica, and HA Sustainable Infrastructure Capital. The latter recorded a total return of 23.0% (GBP-adj.) driven by “exceptional” Q3 results in which the company delivered strong performance across key metrics including investment volumes, growth in managed assets and recurring net investment income. Guidance for adjusted earnings per share growth of 8-10% until FY 2027 (inclusive) was reiterated and earnings for 2025 are anticipated to be at the upper end of this range.

During the month, positions including Clearway Energy Inc., Gresham House Energy Storage, HA Sustainable Infrastructure Capital, and Northland Power were reduced. All had benefitted from recent strong positive share price momentum and helpfully, the sale of Northland Power occurred ahead of the sizeable correction (noted above) and adds to a material reduction in the position over recent months, with sales executed towards the year-to-date highs. A retracement in the share price of Spain’s electricity transmission network operator Redeia afforded an opportunity to further build the position, which was originally established in September.