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Renewable infrastructure trusts: not too pricey just yet?

A renewed focus on fossil fuel alternatives has helped translate into a good run for the renewable energy infrastructure trusts in recent months. While many equities (and other assets) have been in freefall, trusts in the Association of Investment Companies’ Renewable Energy Infrastructure sector have largely posted some decent share price returns so far in 2022. But of course there’s a catch, with such trusts now looking pricey relative to their own recent history.

Winterflood data from 25 April shows that a good number of trusts sat on much bigger share price premiums to net asset value (NAV) than the 12-month average. Take Downing Renewables & Infrastructure (DORE), which commanded a premium of 8.1 per cent versus a 12-month average of just 1.1 per cent, or Ecofin US Renewables Infrastructure (RNEW) on 8.6 per cent versus a 12-month average of 1.8 per cent. It’s a similar story for other broad renewable names like VH Global Sustainable Energy Opportunities (GSEO) and arguably more extreme for a handful of more targeted plays. Take the 36.1 per cent premium on Gresham House Energy Storage (GRID) versus a 15.5 per cent 12-month average, or the Greencoat UK Wind (UKW) premium of 16.8 per cent against an average of 9.3 per cent over the previous year.

This is arguably part of the game when it comes to all manner of infrastructure, given the income they promise and a perceived low correlation to the likes of equities. In the generalist infrastructure space, for example, double-digit premiums are stubbornly persistent on names such as BBGI Global Infrastructure (BBGI) and HICL Infrastructure (HICL). Which brings us back to the usual question of what exactly is justified in the price.

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