Premier Miton Global Renewables Exceeds New Benchmark
Premier Miton Global Renewables rises above the new reference – Premier Miton Global Renewables (PMGR) released its annual results for the 12 months to December 31, 2021. During this time, the trust reached a share price full return of 30.7% and a NAV total return of 26.5%. Total return performance, including revenue and costs, was 19.8%, well above the trust’s new benchmark, the S&P Global Clean Energy Indexwhich generated a negative of 22.5%.
PMGR notes that its wallet differentiates itself from the index, as the trust remains primarily an infrastructure investor, with an emphasis on contractual and regulated underlying income. PMGR focuses its investments on companies that own renewable energy generation facilities and other associated infrastructure such as energy storage and electricity transmission networks, while the index, while also containing these companies, is exposed to industrial sectors such as companies manufacturing renewable energy equipment, for example. wind turbines and solar panels.
The index also has material weightings in more “tech” oriented areas such as semiconductors and hydrogen. The Trust has only marginal exposure to these companies. It can therefore be expected that the performance of PMGR will be quite different from that of the index in any given year.
Income and dividends
Following the news 2025 ZDP With the share issue being significantly smaller than the ZDP share which matured in November 2020, a net redemption of £16 million was made in November 2020. This reduced the overall size of the business and therefore the revenue-generating capacity, resulting in reduced net income in 2021.
Earnings yield per common share in 2021 was 7.43p, a reduction of 20.3% compared to 2020, and is broadly consistent with the reduction in portfolio size offset to a lesser extent by underlyings dividend growth.
In February 2021, following a review, the Read our guide to Boards and Directors" class="glossary_term">plank said it expected sufficient revenue for 2021 to support a dividend of at least 7.0p per share. With this in mind, the board declared three interim dividends for 2021 of 1.75 pence per ordinary share during the year. The board has now declared a fourth interim dividend of 1.75p, to bring the total dividend for the year to 7p, fully covered by income.
The company notes that the lower dividend is offset by lower financing charges due to a reduced ZDP issue size, which equates to savings of £0.61m or 3.3p per ordinary share in 2021 relative to 2020. ZDP financing costs are deducted from capital, so by themselves do not affect the level of revenue. The portfolio’s underlying earnings remain healthy.
On the positive side, established long-term trends are working in its favour, in particular the electrification of the global economy whereby electricity is increasingly replacing the use of fossil fuels in heating, transport and processes. industrial. Furthermore, a combination of political and cost factors should ensure that electricity generated from renewable sources continues to increase its market share compared to electricity generated from fossil fuels.
2021 has seen a significant increase in the cost of fossil fuels used to generate electricity. What worries Europeans the most is the significant increase in the price of gas, which has in turn pushed up electricity prices, and thus further increased the cost advantages of renewable energy generation. The cost of carbon emissions has also increased, and carbon pricing is being imposed in new places, including the United States and China. As fossil fuel prices may decline over the next few years, we believe carbon pricing will become the primary tool for recognizing the external cost of fossil fuels, with positive implications for the growth of the renewable energy sector. .
The main headwinds we expect in 2022, like the rest of the market, are the end of ultra-loose monetary policy and rising interest rates. Markets are already pricing in higher rates, but in the event that rates are expected to rise at a faster pace due to stubbornly higher inflation, then stock and bond markets may face challenges.
That said, given the very high levels of public debt around the world, we think central banks will have little choice but to ensure that real yields remain negative, with inflation above nominal rates. This will be a positive backdrop for equity investing.
Politically and economically, China appears to pose a higher risk than it has for some time. The real estate sector is overstretched and its national economy seems to be slowing down. Furthermore, its underlying environmental problem of overreliance on fossil fuels could become a future financial headache as its export destinations begin to impose carbon border adjustment tariffs on its exports. We therefore expect the Chinese renewable energy sector to remain attractive; however, this is an area that your board and manager will monitor on an ongoing basis.
The Russian invasion of Ukraine caused a sharp increase in the market volatility. Despite this, I think the portfolio is relatively well placed relative to the stock markets in general. Renewables should see politics tangible assets. In theory it is made up of things like brand values and the value of patents." class="glossary_term">Good will because, being a source of domestic energy, it reinforces the security of supply. However, should energy prices become too high, there is a danger of direct political intervention. The manager and the board of directors monitor the situation with the aim of keeping risk at appropriate levels, while reacting to investment opportunities.
Overall, we believe that the number of attractive investment opportunities in the renewable energy sector will continue to grow and that the outlook for the Company therefore remains encouraging.
PMGR: Premier Miton Global Renewables rises above new benchmark
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