Falling power prices and slow disposals knock Ecofin US Renewables

The £58m infrastructure fund reports a 6.8% drop in net asset value and delays in selling assets as the board assesses the investment trust's future.

Ecofin US Renewables Infrastructure (RNEW ) has suffered a 6.8% drop in net asset value as the investment trust struggles to offload assets as part of a strategic review.

The fund, which began a review last year after failing to find a merger partner, reported NAV per share at 31 March stood at 79.37 US cents. The news sent the shares 3.8% lower yesterday to 51 cents.

Ecofin Advisors fund managers Edward Russell and Eileen Fargis blamed the fall on lower power price forecasts, which knocked $3.3m from NAV, and an increase in the weighted average discount valuation rate from 7.4% at 31 December to 7.7% at the end of March, which reduced the valuation a further $7.16m. These hits were partially offset by a $2.4m boost from a tax deferral.

The quarterly dividend will continue to be paid at the lower rate of 0.7 cents due to lower revenues and higher-than-usual expenses from the strategic review and the slow progress in bringing the ‘Whirlwind’ asset – a wind farm in Texas that was damaged in a tornado – back into production.

The trust has agreed with American Electric Power, the owner of the Matador substation that was damaged in the bad weather, to restore generation from Whirlwind through a new transmission line to Paducah, another substation owned by AEP.

Although the December re-energisation of Whirlwind was successful and the windfarm has been generating at a slightly reduced voltage, another problem has occurred in recent weeks. Oscillation concerns at the new Paducah line have forced the Texan grid operator to curtail Whirlwind to 25MW versus a 50MW interim capacity level.

It will not be allowed to operate at full power until the issue is fixed and RNEW now expects Whirlwind to return to full production when the newly rebuilt Matador substation comes on-line in either the fourth quarter, or first quarter of 2025.

Trying to get its assets back on track is not the only issue facing the fund managers and the board. As part of the strategic review announce din September, it has been focusing on selling off assets in order to return cash to shareholders and eventually wind up the fund.

Although Marathon Capital has conducted a ‘wide-ranging exercise to identify potential buyers for the portfolio of assets’, there has been little movement on a sale.

The fund confirmed that ‘specific discussions and negotiations are ongoing but have been taking longer than anticipated’.

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