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Renewables ITs target attractive yields

A number of renewable energy infrastructure investment trusts have come to market this year. They offer attractive yields but are already trading at premiums to net asset value
Renewables ITs target attractive yields

Among the initial public offerings (IPOs) from investment trusts this year, three have come from a new sub sector in the infrastructure sector: renewables. All three issues were very popular, with Greencoat UK Wind (UKW) raising £260m, Bluefield Solar Income Fund (BSIF) raising £130m and The Renewables Infrastructure Group (TRIG) raising £300m. And more IPOs from investment trusts focused on this area are expected during 2013, with names in the frame reported to include Foresight, which already runs a venture capital trust and Enterprise Investment Scheme focused on solar power.

The renewable infrastructure funds are targeting high yields with an element of inflation protection. Greencoat has a target dividend yield of 6 per cent, Bluefield is targeting a dividend of 7p to 9p a year linked to retail prices index (RPI) inflation, starting at 4p in the first financial year, and Renewables Infrastructure is targeting an annualised dividend of 6p a share with the aim of increasing it in line with inflation over the medium term.

Compared with bonds, these levels of income look attractive, especially as they have some inflation protection.

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