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PREMIER MITON GLOBAL RENEWABLES TRUST PLC Annual Report & Accounts 2021
Chairman’s Statement
for the year to 31 December 2021
Introduction
2021 was a year of consolid-
ation for the Premier Miton
Global Renewables Trust PLC
(the “Trust” / “PMGR”) following
the change of investment
policy, change of name, and
the refinancing of ZDP shares
in late 2020. I am pleased to
report that performance has
remained strong in this first
full year of the new renewable
energy focused portfolio, with
shareholders receiving a high
return, at a similar level to that
in 2020. The total return on net
assets to ordinary shareholders, including dividends, was 26.5%
(2020: 29.5%). The NAV per Ordinary Share increased by 21.4%
to close the year at 210.60p. Based on the share price, ordinary
shareholders saw a total return including dividends of 30.7%
(2020: 31.0%).
ZDP shareholders have likewise benefitted from improved
asset cover.
The global economy remains under a degree of restriction,
although this is less stringent than that seen in 2020. However,
while Covid risks have diminished, geopolitical risks increased
sharply in the early part of 2022, with the Russian invasion of
Ukraine. I am sure all shareholders will share my horror at this
unjustified attack on a sovereign nation state, and the resulting
humanitarian crisis. Our thoughts are with the people of Ukraine,
and we hope for a swift resolution to this needless conflict.
The portfolio has no direct Russian investments, although it has
one investment, Finnish nuclear and hydro generator Fortum,
which has material assets in Russia. Fortum’s share price fell
heavily in response to the invasion, and the Manager has reacted
by reducing the holding substantially.
It is difficult to assess the full economic impacts at this stage,
however unless there is a negotiated and peaceful resolution,
these are likely to be with us for many years. We anticipate
heightened volatility in both equity and commodity markets,
with the possibility of substantially higher energy prices. Further,
we believe that the war in Ukraine will increase global inflationary
pressures.
It is clear that current levels of inflation are entirely inconsistent
with existing levels of interest rates. The financial markets expect
inflation to moderate in 2022, and consistent with this, central
banks have signalled a very gradual normalisation of monetary
policy. Should this scenario prove to be optimistic, with inflation
remaining at higher than targeted levels, it is likely that interest
rates will need to be increased at a faster pace than currently
indicated. The reaction of bond markets and the potential for
higher yields is thus perhaps the key economic risk faced by
equity markets in 2022. This may also change the pattern of
returns within equity markets, with value sectors likely to out-
perform growth in such a scenario.
Performance
The total assets total return, measuring the return on the portfolio
including all income and costs, was 19.8% (2020: 16.5%).
Whilst the portfolio performance measured at the total assets
level was ahead of that achieved in 2020, the net asset return
was slightly below. This results from the refinancing in November
2020 of the Trust’s ZDP shares, on a substantially smaller scale,
and consequent lower level of gearing during 2021 within
PMGR’s structure.
As noted, in October 2020, shareholders approved a change
in the Trust’s investment policy whereby the previous focus on
energy and water, as well as other infrastructure sectors, was
replaced by the new policy to invest in the renewable energy
and other sustainable infrastructure sectors. Consequently,
following a review, the Board has decided to change the Trust’s
performance benchmark from the FTSE Global Core Infrastructure
50/50 Index to the S&P Global Clean Energy Index (the “Index”).
In future we will also refrain from directly quoting or disclosing
any indices other than the S&P Clean Energy Index in order to
be as cost efficient as possible. Whist far from an exact match
to PMGR’s portfolio, as explained below, we feel that this index
is, for the moment, the best we can use to compare how we
are performing within the “green economy“. We will keep this
matter under review.
PMGR’s portfolio is differentiated from the Index, as the Trust
remains primarily an infrastructure investor, with an emphasis
on contracted and regulated underlying revenues. PMGR
focusses its investments on companies that own renewable
energy generation facilities, and other associated infrastructures
such as energy storage and electricity transmission grids. The
Index, while also containing these companies, has exposure to
industrial sectors such as companies manufacturing renewable
energy equipment, for instance wind turbines and solar panels.
The Index also has material weightings to more “tech” oriented
areas such as semiconductors and hydrogen. The Trust has only
marginal exposure to these companies.
PMGR’s performance can therefore be expected to be rather
different from that of the Index in any given year. In 2021, the
first year of comparison to the new Index, I am pleased to report
that PMGR’s total assets total return was over 40% ahead of the
Index, which recorded a negative return in sterling of 22.5%.
This out-performance is a result of several factors. Firstly, while
approximately half of holdings fell in value during the year, in what
was a generally weak market for renewable energy shares, this
Gillian Nott OBE – Chairman