Stifel turns positive on UK renewable funds after market crash

  • Mar 26, 2020
  • Oil Capital

Broker Stifel has turned positive on the UK’s listed renewable funds, which are now trading at a discount to net asset value following the recent market turmoil.

Stifel pointed out that, with the slide in equity markets, the funding window has now closed for the seven companies it covers.

It bases this on the assumption the businesses won’t want to raise cash at a discount to NAV as the process would be dilutive.

In the meantime, Stifel’s analysts reckons the respective debt facilities are “robust” and it adds that equity issuance should be able to resume once markets normalise.

“We have been negative on the sector in recent months on concerns about falling power prices and high premium valuations to NAV,” the broker said in a note to clients.

“Whilst the sector has some sensitivity to the economic backdrop through power prices, the sun will continue to shine and wind will continue to blow.

“Therefore, cashflows and dividends should be relatively robust, compared to many other equity sectors in this environment.

“Following the sharp de-rating and with many funds trading on sizeable discounts to historic NAV, we upgrade the sector to positive and change the recommendations on the funds accordingly.”

Three of the seven firms covered - Bluefield Solar (LON:BSIF), Foresight Solar LON:FSFL), and NextEnergy Solar (LON:NESF) – have zero funding commitments (see Stifel table above).

Greencoat Renewables (LON:GRP) and Greencoat UK Wind (LON:UKW) have pledged to invest £27mln and £244mln in new projects, while JLEN Environmental Asset Group (LON:JLEN) and The Renewables Infrastructure Group (LON:TRIG) have commitments of £22mln and £350mln respectively.

“Following the savage de-rating, the sector looks attractive in terms of valuations and robust in terms of dividends compared to many equity sectors. The wind will blow and the sun will continue to shine.”

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