The Fund recorded a gain of 4.06% in February (C Accumulation GBP), helping to recover much of the prior month’s loss. While underlying portfolio companies were evenly split in terms of the number of contributors and detractors, an announced takeover of Canadian independent power producer Innergex resulted in the positive contribution from that company (+85% in February, GBP-adjusted) dominating overall performance during the period.

Shortly after posting robust full year results, in which the company’s Free Cash Flow per share of CAD 1.06 exceeded the top end of management’s guidance, Innergex announced it had entered into a definitive agreement to be acquired by Caisse de depot et placement du Quebec for CAD 13.75 per share in cash. The price represents a 58% premium to Innergex’s price immediately preceding the announcement and an 80% premium to the 30-day volume weighted average share price as of 24^th February. The deal is supported by Innergex’s Board and largest shareholder and is anticipated to complete by Q4 2025. Following other companies within the Fund that have been subject to M&A, the news provides further confirmation that portfolios of renewable energy assets and development pipelines are attractive to a variety of potential bidders.

Indeed, the CEO of Brookfield Renewables, which has been actively acquiring listed renewable energy companies (such as French developer Neoen) and direct assets (including stakes in large offshore wind assets in the UK) made it very clear in a recent interview that the gap between public market valuations and private market valuations in the sector is “very large right now” and that the company expected to see investment opportunities. Brookfield Renewables’ full year Trading Update noted that “The outlook for clean power is stronger than ever, with accelerating demand driven by corporate customers on the back of accelerating data centre development and broader electrification, which has only been further enhanced by the new U.S. administration's effort to drive investment… While we see potential for regulatory changes, we do not expect any material adjustments to the policies that have the greatest impact on our business, as these largely have bipartisan support…”. During 2024, the company generated a 16.6% increase in revenue and delivered dividend growth of 5%.

A new position was established in Terna Rete Elettrica Nazionale. Terna is Italy’s national electricity transmission network operator and a natural monopoly. It is Europe’s largest independent transmission grid operator with 75,000km of high voltage transmission lines across Italy. Terna’s core revenue model is driven by regulated grid transmission services and is sensitive to electricity demand rather than price, thereby introducing diversification benefits in the context of the broader portfolio. The company’s 2024-2028 Industrial Plan forecasts growth in its regulated asset base of 8% per annum with grid networks requiring significant investment to facilitate the integration of greater amounts of intermittent renewable energy generation in the supply mix as part of the transition to a lower carbon economy. Terna provides an attractive yield in excess of 4% and plans to grow the distribution by 4% per annum over the same 2024-2028 period.

The Fund continued to add to the position in Canadian independent power producer Northland Power, which now stands at an approximate 4% weighting. In order to maintain prudent allocations across some of the larger holdings in the Fund, modest sales were actioned in Greencoat UK Wind, The Renewable Infrastructure Group, Clearway Energy Inc. and Innergex. The Fund’s small holding in Triple Point Energy Transition was fully removed from the portfolio.