A 10% yield and building batteries at solar sites

Minesh Shah, managing director at the Renewables Infrastructure Grp (LSE:TRIG), talks to ii’s Dave Baxter about performance, big risks and opportunities over the next 12 months, the abandoned merger with HICL, and TRIG’s attitude towards consolidation.

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Dave Baxter, senior fund content specialist at interactive investor: Hello and a very warm welcome back to our Insider Interviews series. I’m Dave Baxter here at ii, and today I’m joined by Minesh Shah, managing director at the Renewables Infrastructure Group. Minesh, many thanks for joining today.

Minesh Shah, managing director at the Renewables Infrastructure Group: Thanks very much for having me. 

Dave Baxter: So, let’s talk about performance. The trust has really rebounded pretty strongly this year, but that’s following quite a few difficult years. What’s driven the recovery so far and should we expect more of the same? 

Minesh Shah: What’s been one of the key themes for the world in 2026 is the escalation of the conflict in the Middle East. It’s really reminded people as to the role renewable energy and energy storage serves in our ecosystem, and that the energy transition is here to stay and needs to accelerate. 

It’s also fed through into higher revenues in the sector through higher power prices and higher inflation. So, I think here, a reminder of why people invested in this sector in the first place, i.e. renewable energy will be a large part of our economies going forward, as well as improved underlying performance of the company, have both sought to grow investor confidence. 

Dave Baxter: I guess it’s a bizarre way to look at it, but do you have any concern that maybe complacency about the need for energy independence, renewables, that kind of thing, will creep back in if we do see hopefully resolution in the Middle East?

Minesh Shah: With the energy transition, I think people believe in it for different reasons. For some, it’s about energy sovereignty, energy independence. For others, it’s actually about energy affordability, and for some it is about decarbonisation. And in different parts of the political spectrum, each one of those three, the Energy Trilemma, will have different prominence. 

But I think what everyone can agree on is that the energy transition is here and it does need to happen, and renewables and energy storage will play a large part in that. 

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Dave Baxter: What are the big risks and opportunities for the fund in the next 12 months? 

Minesh Shah: When we’re in a high rates environment, investors do have a lot of choice as to where they can invest their capital and achieve attractive returns. 

In that context, TRIG delivering a 10% dividend yield, I still think benchmarks really well. And the strategy we have to drive returns over and above that with some capital growth, particularly through our development pipeline, where we’re seeing investment opportunities well into the mid-teens in terms of returns, I think will allow TRIG to benchmark well when investors are screening the sector. 

Dave Baxter: Investors may well be tempted by the juicy, pretty high dividend yield, but they’ll also be interested to know what’s going to go on with dividend cover and whether those payments can continue to increase. What should they expect? 

Minesh Shah: Yes, so dividend cover is at a healthy level, 1.1 times on a net basis. If you add back the repayment of debt capital, it’s well over two times covered. So, we’re very comfortable with that because of where the balance sheet is.

Earlier this year, we set out very clearly our priority with respect to the dividend is to continue to grow dividend cover. And as that grows, then the choice is available to the board as to whether to allocate that additional retained cash towards reinvestment, towards buy back of stock, or towards increasing the dividend. But that’s a capital allocation decision for the board at that time. 

Dave Baxter: We’ve seen huge consolidation among investment trusts and in the renewable space. A big story last year was TRIG planned to merge with HICL Infrastructure PLC Ord (LSE:HICL), but that was eventually abandoned in the face of shareholder opposition. How does TRIG stand now in the consolidation space? 

Minesh Shah: What that episode showed is that our board at TRIG is open to ideas as to how to create value for their shareholders. Now that could be being consolidated, it could be being a consolidator, but I think for us, if we look at consolidation, then it’s like any investment activity. Is it aligned to your strategy? Do you like the quality of the assets that you’re looking at? Can there be a meeting of minds over price? And then finally, is the right allocation of capital? And it’s really only once all four of those factors are ticked that you can move forward. 

Dave Baxter: I imagine you have to be quite careful about the mix of assets. If you’re simply merging two equity trusts, then one can sell the shares and kind of refresh and so on. 

Minesh Shah: Yeah, that’s why I started with ‘is it aligned to our strategy?’ Our strategy is very clear, diversified by technology and geography, a resilient balance sheet, and a sustainable dividend. And while we have that, not everyone in the sector does. 

Dave Baxter: Looking beyond technology, what shifts might we expect in the portfolio? Would you, for example, look to change the geographic mix within the fund? 

Minesh Shah: Yeah, we’re comfortable with a geographic mix. It’s about 60/40 UK/rest of Europe. And it’s moved between 50/50, and two-thirds/one-third. And we’re comfortable with it being in that space. The benefit of being across all those geographies is we can pivot depending on where we see the best opportunities.

Right now, one of the fantastic investment opportunities is building batteries that are co-located with our solar plants in Spain. Because what we’re seeing in Spain is that there’s so much solar on the system that at lunchtime, the price is near zero because every solar plant is generating. But in Spain, everyone still goes home and has dinner at 8pm when the sun has set, and so the electricity price goes really high.

By building batteries alongside our solar sites, we can take the electricity in the middle of the day and then sell it at dinner, buy from the grid overnight and sell at breakfast. And that’s all we’ll keep doing. Buy at lunch, sell at dinner, buy overnight, sell at breakfast, and we’re seeing potential returns in the teens. So, that’s an example of how we can be flexible with the geographies we have.

But the fundamentals of TRIG will remain. It’s a large operating base, a large base of operational assets. Very much the ones we’re adding to it are at the development construction stage where we have that expertise across the two managers. Infrared with its investment expertise, but actually TRIG is unique in having two managers and sitting alongside us is Rez, who have been in renewables for 40-plus years, effectively among the founding fathers of the sector, and they are expert in taking these projects from development through construction and into good operations. 

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Dave Baxter: And finally, our usual question, do you have skin the game?

Minesh Shah: Yes, absolutely I do. The other members of my investment committee do. The investment manager at Infrared does, and its parent or son, Life of Canada, also does. And for my part, I hold most of my shares on interactive investor.

Dave Baxter: Minesh, many thanks for your time.

Minesh Shah: Thank you for having me.

Dave Baxter: And thank you for watching. As always, I hope you found it useful and interesting. Do let us know what you think in the comments and if you’re a fan, hit the like button and the subscribe button. Thanks and take care.