The Fund recorded a robust, positive total return of 2.73% in July (C Accumulation GBP). Notable contributions came from Acciona Energias Renovables, Brookfield Renewables Corp., Clearway Energy Inc., Northland Power and XPLR Infrastructure. However, the significant majority of underlying portfolio companies saw share price increases.

A primary driver of momentum for the sector was the finalisation of President Trump’s “One Big Beautiful Bill” (OBBB). Whilst this repeals elements of the Inflation Reduction Act that support clean energy technologies, this was generally better than had been feared and most importantly, it provides clarity for market participants after a period of uncertainty. Critically, operational assets that claim “legacy” credits are not affected by the OBBB, which is important for the Fund given its bias towards platforms of utility-scale, operational assets, as opposed to development-focused companies. Even so, grandfathering rules will protect development projects that begin construction within a specified period. Well-capitalised entities stand a good chance of being able to get development projects into construction-stage and into service in time to benefit from tax credits and production credits before they phase out towards the end of the current Administration. However, they will need to be mindful of new requirements that place limitations on the inclusion of certain foreign components in new projects.

The worst performer was Aquila European Renewables. The company announced it had received a revised offer from its preferred bidder which included a reduction in the scope of the number of assets to be acquired. Aquila stated: “The revised offer would mean a less material proportion of the portfolio would be sold and is expected to lead to a situation which is potentially prejudicial to the marketability of the balance of the portfolio”. As a result, the Board has paused the sales process with the preferred bidder, who is no longer in exclusivity, to explore alternative options.

Following news that the UK government had rejected a zonal pricing model, the listed renewables sector was given a further boost as the Department for Energy Security & Net Zero (DESNZ) announced changes to the now live renewable energy capacity auctions (Allocation Round 7, AR7) which included an increase to the length of Contract for Difference (CfD) contracts from 15 to 20 years for wind and solar technologies, and new rules to allow re-powering projects to enter into CfDs. The capacity secured through AR7, and the strike prices across technologies, will be announced in late 2025 or early 2026.

Gresham House Energy Storage delivered more progress in relation to its 3-year plan by announcing long-term floor agreements on 789MW of projects (74% of the company’s portfolio) with two investment grade counterparties. The floor-pricing agreements come into force once existing tolling agreements with a separate entity (Octopus Energy) expire from 2027 onwards. The agreements help to provide contracted revenue streams for Gresham House (whilst retaining some ability to participate in any upside) and will be critical in enabling the company to re-establish dividend distributions.

Greencoat UK Wind reported poor HY results with generation 14% below budget and a NAV total return of -1.8% that was impacted by lower forecast power prices at the near and long ends of the curve. DESNZ’s Energy Trends have showed that wind resource for the period between March and May 2025 was the lowest for this period since DESNZ’s data series commenced in 2001. It is also interesting to note that Greencoat’s power curve consultant assumes a 1.65x increase in electricity demand by 2050, materially lower than all demand scenarios modelled by the National Energy System Operator, which range from 1.9-2.7x. Post period-end, Greencoat agreed the partial disposal of three wind farms with a total value of £181m, all in line with the 30^th June NAV. Proceeds will be used to reduce gearing and support the ongoing buyback programme. However, with regards to the latter, the rationale for buying back shares over-and-above deploying capital on new investments has become less clear.

During the period, CDPQ received regulatory approvals for its acquisition of Innergex. The Canadian-listed power producer was delisted and removed from the portfolio with cash received at a rate of CAD 13.75 per share. Modest reductions were made to holdings in Brookfield Renewables Corp., Clearway Energy Inc., Foresight Solar, Northland Power and Aquila European Renewables.