The Fund recorded a gain of 0.58% in March (C Accumulation GBP), resulting in a marginal negative return for Q1 2025 overall. While a majority of underlying portfolio companies recorded losses in March, M&A activity helped drive outsized positive returns in the Fund’s pureplay Battery Energy Storage Solutions (BESS) exposures whilst the Fund’s largest allocation at the start of the period, Clearway Energy Inc. also contributed meaningfully as a result of strong relative outperformance. Clearway reported FY24 results that exceeded guidance with “excellent performance” across all technologies. The greatest detractors to performance were Greencoat UK Wind, owing to its large weighting rather than the quantum of decline, and US Solar.

In March, Harmony Energy Income, a pureplay owner of operational UK BESS assets, announced a possible cash offer from Foresight Group at 84p/share, which was then trumped by a firm offer from Drax Group at 88p/share. Although Foresight, for example, could still counter with an improved proposal, Drax’s offer has been recommended by Harmony’s Board and represents a significant premium to the levels that the stock has been trading at recently, but a discount to the company’s latest NAV of 92.38p/share. It is worth noting that revenue curves for UK BESS assets have oscillated markedly since the company was launched, which we would argue leads to greater uncertainty around value when compared to the highly contracted cash exposures that are more commonplace across the Fund. The news flow around Harmony and proposed offer prices provided direct and positive read across to BESS peer Gresham House Energy Storage which is also held within the Fund.    

The Fund continued to add to the recently established position in Italian electricity transmission network operator Terna Rete Elettrica Nazionale. The company reported strong FY24 results during March with revenue and EBITDA up 15% and 18%, respectively. The outturn exceeded guidance, which had already been revised higher during the year, and reflected an increase in revenues from Regulated Activities (+16% in FY24). The company’s regulated asset base increased by 10% to €22.5bn. The final dividend of €0.277/share means the company’s overall distribution for FY24 was 17% higher year-on-year. It was interesting to note that Italian electricity consumption increased by 2.2% in 2024 and renewable energy sources achieved a record-high demand coverage of 41.2% (vs. 37.1% in 2023), driven by contributions from hydroelectric and solar generation.

Positions reduced during the period included, among others, Clearway Energy Inc., Innergex, Harmony Energy Income (at a price above the latest offer from Drax), Scatec Solar and VH Global Energy Infrastructure. Shortly after the period end, the takeover of Neoen completed for cash proceeds of €39.85/share.

First quarter distribution announced

Income distributions for the first quarter of 2025, payable in April 2025, amounted to 1.3239p per C Income GBP unit and 1.1643p per I Income GBP unit. The reduction, when compared with the distribution for the same period in 2024, reflects the loss of income from Atlantica Sustainable Infrastructure Capital, which was acquired by Energy Capital Partners in December, and XPLR Infrastructure (ex “NextEra Energy Partners), which removed its dividend. It is anticipated that the Fund will continue to deliver attractive levels of income distributions in 2025, however, the absolute quantum is likely to be lower year-on-year. As at 31^st March, the Fund’s trailing 12-month yield was 6.90% and 6.89% for the C Income GBP and I Income GBP units, respectively.