Premier Miton Global Renewables Trust — Positioned for sector rebound

Premier Miton Global Renewables Trust (LSE: PMGR)

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GBP1.05

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Market capitalisation

GBP19m

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Premier Miton Global Renewables Trust — Positioned for sector rebound

The imposition of additional taxes on energy companies by UK and European governments in the last quarter of 2022, together with accompanying anticipation, resulted in a very volatile year for the listed renewables sector. Reflecting uncertainty in 2022, Premier Miton Global Renewables Trust’s (PMGR’s) performance has also been volatile. During the last 12 months, the NAV total return was -8.4%, further depressed by exposure to China, now reduced to 3.1% of the portfolio (at end February 2023). The share price total return was -10.4% because of the gearing effect (both returns in sterling to end February 2023). The manager, James Smith, has responded by restructuring the portfolio away from Chinese holdings towards higher-yielding UK and European companies. He believes that the share prices of renewable companies should start to rise as uncertainty around extra taxation is removed and the market acknowledges the industry’s strong fundamentals.

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Investment Companies

Premier Miton Global Renewables Trust

Positioned for sector rebound

Investment trusts
Renewable energy equities

15 March 2023

Price

138.5p

Market cap

£25.3m

AUM

£30.4m

NAV*

168.3p

Discount to NAV

17.7%

*Including income. As at 13 March 2023.

Yield

5.1%

Ordinary shares in issue

18.2m

ZDP shares in issue

14.2m

Code/ISIN

PMGR/GB0033537902

Primary exchange

LSE

AIC sector

Infrastructure Securities

52-week high/low

197.5p

137.5p

NAV* high/low

223.9p

166.3p

*Including income

Net gearing*

32.5%

*As at 31 January 2023

Fund objective

Premier Miton Global Renewables Trust’s (PMGR’s) investment objectives are to achieve high income and realise long-term growth in the capital value of its portfolio. PMGR seeks to achieve these by investing principally in the equity and equity-related securities of companies operating primarily in the renewable energy sectors and other sustainable infrastructure investments. The trust is structurally geared via zero dividend preference shares (ZDPs) maturing in 2025.

Bull points

Exposed to beneficiaries of higher power prices.

Aligns with global shift towards clean power production and energy security.

The only pure-play investment trust focusing on listed renewable energy stocks.

Bear points

Energy markets are volatile and hard to forecast in the wake of Russia’s war in Ukraine.

High structural gearing is inflexible and can be detrimental in a falling market.

PMGR has a small size, which limits liquidity to an extent, and hence better suits investors with a long-term investment horizon.

Analyst

Victoria Chernykh

+44 (0)20 3077 5700

Premier Miton Global Renewables Trust is a research client of Edison Investment Research Limited

The imposition of additional taxes on energy companies by UK and European governments in the last quarter of 2022, together with accompanying anticipation, resulted in a very volatile year for the listed renewables sector. Reflecting uncertainty in 2022, Premier Miton Global Renewables Trust’s (PMGR’s) performance has also been volatile. During the last 12 months, the NAV total return was -8.4%, further depressed by exposure to China, now reduced to 3.1% of the portfolio (at end February 2023). The share price total return was -10.4% because of the gearing effect (both returns in sterling to end February 2023). The manager, James Smith, has responded by restructuring the portfolio away from Chinese holdings towards higher-yielding UK and European companies. He believes that the share prices of renewable companies should start to rise as uncertainty around extra taxation is removed and the market acknowledges the industry’s strong fundamentals.

Three-year cumulative performance

Source: Refinitiv, Edison Investment Research. Note: Total returns in sterling, net of dividends. *Benchmark is S&P Global Clean Energy Index; prior to FY21 it was a broad global infrastructure index.

Why invest in PMGR now?

While energy prices remain elevated relative to their historical levels, the imposed extra levies are still allowing renewable energy companies to generate higher revenues, as their fixed costs remain largely unchanged. Combined with inflation-linked revenues, the sector is positioned to perform very strongly. This is particularly relevant in the UK and Europe, where a large portion of companies’ revenues is inflation linked, providing investors with stable, covered (and often growing) dividends. PMGR’s high exposure to the region aims to capture upside potential, which the manager believes Europe currently presents.

The analyst’s view

FY21 and FY22 dividends were fully covered by income and, given ample revenue reserves (c 7.0p per share, almost 1.0x the historical annual dividend), have scope to grow. The manager expects higher income per share for FY23 (7.2p in FY22). The fund is small and highly geared (which potential investors may see in a negative light). The 17.7% discount to NAV remains wider than the three-year average of 9.0%, reflecting investors’ cautious attitude towards the renewable energy sector, as investors value it as bond proxy, but may present a buying opportunity at these levels, should sentiment improve.

The fund manager: James Smith

The manager’s view: Myopia in financial markets continues

Smith believes that the market has an overly pessimistic view of power prices and commodities and that the recent fall in the share prices of listed renewable companies has been overdone. He observes that these companies are valued as bond proxies. He says that the market largely ignores the other two components of the renewable sector’s future returns, aside from yield, namely inflation linking and ongoing elevated power prices.

Power prices are much higher than their long-term historical average and this supports strong revenue and profit generation for renewable energy companies. The UK electricity baseload one-month forward contract, which was £116/MWh on 6 March 2023 (source: Refinitiv), has been very volatile over the past 18 months. While below its 18-month highs, the contract price has seen a significant increase versus the historical level of c £50–60/MWh prior to 2022.

The manager considers the current price level more beneficial for the renewable energy sector, compared to the peak level prices of c £300–£400MWh reached during the last 18 months. Smith explains that it allows the sector to operate profitably and steadily without further government intervention. With gas prices remaining at the current level, other energy sellers, including renewable companies, continue to benefit from higher revenues and largely unchanged input costs.

Smith also argues that the market remains too fixated on rising interest rates, ignoring the strong economics and fundamentals of the renewable energy industry. He believes that the market has discounted higher interest rates correctly (higher discount rates applied to future cash flows reduce the net present value of a company’s share), but ignored sticky high power prices and the benefits of inflation on government feed-in tariffs and historical subsidy schemes.

The UK government is aiming to diversify away from gas into renewable technologies and secure primarily home-based energy supplies. Following the announcements in Q422 regarding the Electricity Generator Levy, the manager believes that the UK government’s climate change policies will remain renewable energy friendly, creating further growth opportunities for the UK renewable energy sector. He says that the government will maintain incentives for large-scale investment in renewable energy required in coming years.

The levy took effect on 1 January 2023 and will run to March 2028 at a rate of 45% on power sales achieved above a threshold of £75/MWh. Power prices remain substantially above this level (month forward baseload contracts are currently priced at £116/MWh). Therefore, renewable generators are still able to achieve healthy prices for their output in comparison to historical wholesale electricity prices, which typically traded in ranges between £40/MWh and £70/MWh. We also note that one of PMGR’s larger holdings, Drax Group, has secured a higher threshold price given that biomass generation costs are currently higher than £75/MWh, and the biomass threshold will be revised periodically to take account for changes in future generation costs.

The EU has proposed a cap on revenue received by ‘inframarginal’ generation, ie generators such as renewables and nuclear with low to zero marginal cost of €180/MWh, although many countries have adopted a lower threshold, with varying rates of tax above that level. Smith believes this is an acceptable compromise between capping excessive prices and maintaining investment incentives.

Smith says that if inflation remains higher than interest rates, resulting in negative real rates, it will benefit renewable energy producers whose revenues are inflation linked, as their returns will be higher than those of bonds. According to the Bank of England, the current Bank rate is 4% and the inflation rate is c 10%. At the end of February, five- and 10-year government bonds yields were 3.6% and 3.8%, respectively. While there is a risk of interest rates rising further, they are unlikely to exceed the rate of inflation, argues Smith. He believes that governments will start loosening their economic policies before interest rates approach inflation rates. The high rate of inflation will benefit UK and European producers with index-linked supply contracts.

Smith believes that the situation in the United States is also favourable, as the government provides tax credits to various renewable subsectors as part of its broader inflation reduction plan. However, producers in the United States tend to sell their power on long-term, fixed-price contracts, so they benefit less from high inflation and are less well positioned than their UK and European counterparts.

The manager’s view on Chinese equities has turned negative over the past 18 months. Despite strong Chinese fundamentals and the rebound in Chinese stocks over the past three months in response to positive news from China on the progress of economic reforms and termination of the zero-COVID policy, the manager remains cautious. He believes the performance of Chinese renewable energy equities will be dampened by geopolitical risks and uncertainty about further developments in US-China relations, and prefers to identify what he believes are better risk/reward opportunities in the developed world.

Over the longer term, Smith expects the large-scale expansion of liquefied natural gas (LNG) and renewable energy capacity in Europe, the United States and globally, but this will take time and is unlikely to reduce prices in the near future. Smith believes that due to the complexity, scale and lengthy construction periods of LNG infrastructure, energy prices are likely to remain elevated until price-supply equilibrium is achieved.

Asset allocation

Current portfolio positioning

PMGR invests across a broad range of renewable energy-focused market areas (see Exhibit 3), with a particular focus on renewable energy developers and yield companies (or yieldcos) and funds. While both these categories broadly cover businesses that own and operate renewable energy generation facilities, the principal difference is that the developers take on construction risk, while the yieldcos (which, as the name suggests, have a focus on providing income to investors) buy pre-existing assets.

The major portfolio shift over the past 11 months was the c 14pp reduction in Chinese holdings (Exhibit 1). Chinese companies were a good contributor to the FY21 performance, but in the current environment the manager finds better risk/reward opportunities elsewhere. He also reduced US exposure, as he prefers to invest in UK and European companies, as their revenues have better inflation linkage, compared to US sector peers.

Exhibit 1: Portfolio geographic exposure (% unless stated)

Portfolio end-February 2023

Portfolio end-February 2022

Change (pp)

United Kingdom

34.2

31.0

3.2

Europe (ex UK)

29.9

17.3

12.6

Global

20.6

18.2

2.4

North America

8.5

12.3

(3.8)

China

3.1

17.1

(14.0)

Latin America

2.0

2.0

0.0

India

0.0

0.8

(0.8)

Cash

1.9

1.3

0.6

100.0

100.0

Source: Premier Miton Global Renewables Trust, Edison Investment Research

The manager has added to UK and European assets, particularly within the yieldcos and funds space. This segment was up 12.6pp over the past 12 months (see Exhibit 3). Four UK listed companies (three of which are yieldcos) are currently in the top 10 holdings. The largest holding is Greencoat UK Wind (UKW), which performed strongly over the past 12 months. Drax Group (the second top holding), a UK-based former coal-fired power generator that has switched to using wood pellets (biomass) for electricity production, has attracted negative publicity, but Smith believes biomass has a key role to play in the energy transition, and that Drax operates in compliance with all relevant legislation. PMGR’s top 10 holdings (Exhibit 2) accounted for about half of total assets, around the same level as at end-February 2022.

Exhibit 2: Top 10 holdings (as at 28 February 2023)

Company

Sector

Country

Portfolio weight %

28 February 2023

28 February 2022

Greencoat UK Wind

Yieldcos & funds

United Kingdom

6.5

5.4

Drax Group

Biomass generation and production

United Kingdom

6.2

7.1

NextEnergy Solar Fund

Yieldcos & funds

United Kingdom

6.2

5.1

RWE

Renewable energy developers

Europe (ex UK)

5.9

5.7

Aquila European Renewables Income Fund

Yieldcos & funds

Europe (ex UK)

5.2

N/A

Atlantica Sustainable Infrastructure

Yieldcos & funds

Global

5.2

4.6

Octopus Renewables Infrastructure Trust

Yieldcos & funds

Europe (ex UK)

5.1

N/A

Grenergy Renovables

Renewable energy developers

Global

4.0

2.5

Iberdrola

Renewable focused utilities

Global

4.0

N/A

Harmony Energy Income Trust

Energy storage

United Kingdom

3.9

N/A

Top 10 (% of holdings)

52.0

52.3

Source: Premier Miton Global Renewables Trust, Edison Investment Research. Note: N/A when not in the top 10 holdings at 28 February 2022.

Three European companies are represented in the top 10, namely RWE and two funds, Octopus Renewables Infrastructure Trust (ORIT) and Aquila European Renewables Income Fund (AERI). While listed in the UK, ORIT and AERI operate in Europe, and also add to the yieldcos and funds segment of PMGR. The manager added to both positions over the past few months on share price weakness, as he believes both funds have solid portfolios and their share prices are likely to rebound. Other new entries into the top 10 are Spanish renewable energy generator Iberdrola, as its share performed strongly over the past year, and Smith considers it to be a growing renewable business, and Harmony Energy Income Trust, an energy storage company.

Exhibit 3: Portfolio sector exposure (% unless stated)

Portfolio end-February 2023

Portfolio end-February 2022

Change (pp)

Yieldcos & funds

38.7

26.0

12.6

Renewable energy developers

29.7

28.9

0.7

Renewable focused utilities

9.8

14.4

(4.5)

Energy storage

7.9

7.1

0.7

Biomass generation and production

6.2

8.4

(2.2)

Electricity networks

2.4

2.7

(0.4)

Renewable technology and service

2.4

2.2

0.2

Waste to energy

1.2

6.1

(4.9)

Liquidation portfolio

0.0

0.8

(0.8)

Renewable financing and energy efficiency

0.0

0.0

0.0

Carbon markets

0.0

2.0

(2.0)

100.0

100.0

Source: Premier Miton Global Renewables Trust, Edison Investment Research

Yieldcos and funds is the largest segment and Smith expects these companies to continue to generate stable income for PMGR, despite the current uncertain environment. Renewable-focused utilities, energy storage and biomass generation and production remain sizeable segments of the portfolio and jointly account for c 30% of the fund, although the weighting has been reduced as the manager added to yieldcos.

Performance and discount

Following PMGR’s strong performance in the 12 months to end-February 2022, the year to end-February 2023 has been more challenging, with NAV and share price total returns lagging the MSCI AC World Index (Exhibit 4).

Exhibit 4: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

Benchmark*
(%)

MSCI AC World
(%)

CBOE UK All Cos (%)

28/02/19

(2.4)

2.5

16.8

3.3

1.6

29/02/20

14.7

9.2

10.9

8.8

(2.1)

28/02/21

32.8

31.3

(12.7)

19.6

2.8

28/02/22

11.7

23.9

(14.7)

12.8

16.7

28/02/23

(10.4)

(7.9)

4.1

2.2

8.2

Source: Refinitiv. Note: All % on a total return basis in pounds sterling. *Benchmark is S&P Global Clean Energy Index; prior to FY21 it was a broad global infrastructure index.

While the fund does not construct its portfolio with reference to any index, during 2021 it adopted a new performance benchmark, the S&P Global Clean Energy Index. Over the 12 months to end-February 2023, PMGR has underperformed the index, as shown in Exhibit 5.

Exhibit 5: Investment trust performance to 28 February 2023

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

Note that the index returns for periods of more than one year in Exhibits 5, 6 and 7 also include the trust’s benchmark prior to FY21, which was a broad global infrastructure index. The index, like PMGR’s portfolio, consists of listed companies involved in the generation and supply of renewable energy, although in terms of constituents the two are very different, with the index having higher exposure to the United States and to companies at the technology/components end of the renewables value chain.

There are three main reasons for PMGR’s underperformance over the past 12 months relative to the (new) benchmark and MSCI AC World Index: Chinese positions detracted materially and the holding in the Finnish generator Fortum was sold in the period at a substantial discount to the level at which it started the calendar year. Fortum’s Russian investments, accounting for approximately 20% of profits, caused its share price to fall sharply. Following the Fortum sale, PMGR’s portfolio has no investment exposure to Russia. Finally, US holdings detracted more than their European counterparts, as their revenues’ inflation linkage is weaker.

Chinese holdings are now 3.1% of the portfolio (at end-February 2023) versus 22.3% at end-September 2021, and the manager intends to reduce this to less than 3% of the portfolio. Smith has switched to developed markets, which he believes offer better rewards versus their risks.

Exhibit 6: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to benchmark

(3.0)

(0.2)

(9.7)

(14.0)

71.3

48.2

57.1

NAV relative to benchmark

4.1

5.8

0.0

(11.6)

93.1

67.0

55.7

Price relative to MSCI AC World

(7.1)

(8.1)

(24.2)

(12.3)

(3.6)

(3.9)

(16.8)

NAV relative to MSCI AC World

(0.3)

(2.5)

(16.1)

(9.9)

8.7

8.3

(17.6)

Price relative to CBOE UK All Cos

(9.7)

(13.5)

(31.1)

(17.2)

2.3

15.2

27.6

NAV relative to CBOE UK All Cos

(3.2)

(8.3)

(23.6)

(14.9)

15.4

29.8

26.5

Source: Refinitiv, Edison Investment Research. Note: Data to end-February 2023. Geometric calculation.

Exhibit 7: NAV performance versus benchmark over three years

Source: Refinitiv, Edison Investment Research

In Exhibit 8 we present PMGR alongside a group of peers drawn from several AIC sectors, all focused to some extent on renewable energy, utilities and/or infrastructure.

Although it is the smallest fund in the peer group (as measured by market capitalisation; by total assets including ZDPs it is of a similar size to Jupiter Green), PMGR ranks third by NAV total return performance over three years (out of 16 funds). This strong relative performance has been achieved by the manager following the mandate’s switch in late 2020 from infrastructure to global renewable infrastructure companies. The lower relative ranking over five years (six of 12 funds) arguably reflects a period underperformance for the trust in 2018, and the environmental funds’ greater exposure to renewable energy technology over the entire five-year period, as PMGR lags the likes of Ecofin Global Utilities & Infrastructure, Bluefield Solar Income Fund, Foresight Solar Fund and JLEN Environmental Assets Group – all of which are focused renewable energy trusts.

Exhibit 8: Selected peer group as at 14 March 2023*

% unless stated

Market cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Ongoing
charge

Perf.
fee

Discount
(cum-fair)

Net
gearing

Dividend
yield

Premier Miton Glbl Renewables Trust

25.3

(8.4)

52.3

74.1

143.6

1.7

No

(17.7)

133

5.1

Impax Environmental Markets

1,251.7

2.6

53.6

74.8

244.2

0.8

No

(4.5)

102

0.9

Jupiter Green

49.5

4.7

33.8

40.4

130.5

1.6

No

(8.1)

100

0.0

Menhaden Resource Efficiency

74.6

(10.2)

17.6

49.4

1.8

Yes

(29.5)

100

0.1

Ecofin Global Utilities & Infra

239.9

6.1

34.9

94.3

1.4

No

1.6

113

3.6

Bluefield Solar Income Fund

828.5

23.3

44.0

77.7

1.0

No

(4.6)

100

5.9

Foresight Solar Fund

655.1

24.1

49.2

63.5

1.1

No

(14.8)

100

5.7

Gore Street Energy Storage Fund

496.8

16.8

49.0

1.6

Yes

(10.2)

100

6.3

Greencoat UK Wind

3,622.8

13.4

25.8

54.2

0.9

No

(6.4)

129

6.1

Gresham House Energy Storage

863.4

36.7

77.5

1.2

No

7.0

100

4.7

JLEN Environmental Assets Group

758.1

32.6

46.9

74.3

1.2

No

(6.9)

100

7.2

NextEnergy Solar

612.4

23.5

35.4

58.0

1.0

No

(13.9)

123

6.2

Octopus Renewables Infrastructure

532.7

12.3

25.8

1.2

No

(13.7)

100

4.8

Renewables Infrastructure Grp

2,974.4

19.1

39.2

74.4

0.9

No

(10.8)

100

5.1

SDCL Energy Efficiency Income

959.0

7.2

27.4

0.9

No

(18.2)

100

5.6

Utilico Emerging Markets

423.2

6.4

14.3

10.8

64.1

1.4

No

(14.5)

103

3.4

Simple average (16 funds)**

898.0

13.1

39.2

62.2

145.6

1.2

(10.4)

106.9

5.2

PMGR rank in peer group

16

15

3

6

2

2

14

1

9

Source: Morningstar, Edison Investment Research. Note: *Performance as at 28 February 2023 based on ex-par NAV. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (100=ungeared). ** Median for dividend yield.

PMGR ranks 15th (of 16 peers) by NAV total return performance over the past year. During this period. the Chinese holdings and the subsequent repositioning of the portfolio away from China affected the relative performance. The manager has purchased a number of new European and UK holdings, and added to existing ones on lower valuations, by using dips in their share prices during volatile periods in FY22. Smith is confident that the portfolio is well positioned to capture the upside, should the cautious market sentiment turn due to the robust industry fundamentals. In addition, he expects the c 40% weighting of yieldcos to add to the total return and provide stable income to the fund.

Ongoing charges (1.7% for FY22) are above average, while the 5.1% dividend yield is in line with the group as a whole, and the highest among the equity funds by some margin. PMGR’s gearing, at c 33% of net assets, is the highest in the table above, although we note that it is hard to make a meaningful comparison given that, particularly among the yieldcos, companies can either carry debt at the parent company or project level, and this is not always consolidated.

To an extent reflecting its smaller size, relative to most peers, PMGR has the 14th widest discount to NAV, versus a peer group average discount of 10.4%. In a volatile 2022, with governments’ actions to tackle persistent inflation, stubbornly high energy prices, the war in Ukraine and slowing global growth, the discount has fluctuated from virtually zero to c 19%. During the first two months of 2023 the discount has been wider than 10%, as the sentiment towards renewable energy equities remains subdued. The current discount is above the one-year average (12.4%) and above the three-year average of 9.0%.

Exhibit 9: Five year % discount to NAV at par (diluted)

Source: Refinitiv, Edison Investment Research

If, as Smith expects, the renewed focus on energy security causes a reassessment of the renewable energy sector (which sold off in 2022 due to uncertainty about how governments would deal with this crisis and is currently under pressure as interest rates keep climbing), PMGR’s discount could return to the lower end of the 0–10% range that persisted for most of 2021.

Dividends: Rebased but covered, with scope to grow

Exhibit 10: Dividend history since FY17

Source: Bloomberg, Edison Investment Research

PMGR aims to reward its shareholders with a high income in the form of dividend payments in addition to long-term capital growth. Dividends are paid quarterly, in broadly equal amounts.

For FY22, four equal dividends of 1.75p have been declared, totalling 7.0p (consistent with FY21; FY20: three dividends at 2.5p and a fourth at 2.7p, totalling 10.2p). Although the total dividend per share was rebased during FY21 compared to the prior years, ZDP financing costs also fell. Consequently, the overall outcome for shareholders of the dividend cut and cost reduction during FY21 was slightly positive (+0.2p per share). The company intends to pay the fourth interim dividend for FY22 on 31 March 2023.

The FY22 dividends were fully covered by income (7.24p per share). At end-FY22, PMGR’s revenue reserve stood at c £1.2m, sufficient to cover the FY22 annual dividend by c 1.0x (c £1.2m at end-FY21). The company also has £7.5m of special distributable reserves (c 5.2x cover of FY22 dividend). Based on the current share price and the FY22 total dividends, PMGR currently yields 5.1%.

Fund profile: Unique focus on listed renewables

Premier Miton Global Renewables Trust has been part of the Premier (now Premier Miton) stable for almost 20 years, ever since the 2003 rollover of the Legg Mason International Utilities Trust. Initially known as Premier Utilities Trust, it changed its name to Premier Energy & Water Trust (PEWT) in 2008 and subsequently to Premier Global Infrastructure Trust (PGIT) in late 2017. PGIT’s mandate built on that of PEWT, investing in equity and equity-related securities of companies operating in the energy and water sectors generally, as well as other generic infrastructure investments. In October 2020, reflecting a gradual shift in focus towards the renewable energy segment of the infrastructure universe, PGIT’s shareholders voted in favour of proposals to change its name to Premier Miton Global Renewables Trust (PMGR) and its investment remit to a more targeted investment proposition dedicated to renewable energy and sustainable infrastructure investments. The trust has been managed since 2012 by James Smith.

PMGR sits in the AIC’s Infrastructure Securities sector, a peer group for funds that invest in infrastructure shares. There is currently no sector for funds investing in renewable energy shares, underlining the differentiation of the trust’s approach. While it is hard to find an equity benchmark to reflect PMGR’s diversified global approach, since FY21 the trust has measured its performance against the S&P Global Clean Energy Index (previously it used a broad global index of infrastructure shares).

The trust’s official investment objective is to achieve a high income and to realise long-term growth in the capital value of its portfolio. PMGR pays dividends quarterly. The trust is geared via ZDPs (see below).

Gearing: Structural use of ZDPs

PMGR’s use of ZDPs as gearing (see our initiation note for more details) has the advantage of eliminating annual interest coupons, with the redemption value of the ZDPs instead hopefully being covered by the trust’s higher investment returns (as a result of the gearing effect) over the life of the ZDP issue, although it also carries the potential risk of being highly geared in a falling market. The 2025 ZDP issue was smaller than previous issues, with £14.2m shares issued at 100p – equivalent to c 50% gearing – on 30 November 2020. The 2025 ZDPs have a redemption price of 127.61p, equivalent to a gross redemption yield of 5.0% at issue. Based on the NAV of both the ZDPs and the ordinary shares (cum income) at 31 December 2022, PMGR’s gearing represents 48.4% of net assets (39.0% at 31 December 2021). Given the ZDPs are a sterling liability, the manager may use currency hedging to offset any sterling underweight in the portfolio and is currently substantially hedged on the portfolio’s euro exposure.

Capital structure, life of the company and ownership

PMGR is an investment trust with two classes of share: ordinary shares and ZDPs, which it has used throughout its existence to provide gearing.

PMGR has an indefinite life, subject to a five-yearly continuation vote, the next of which is due in 2025. At the March 2020 vote, more than 99% of votes cast were in favour of continuation. As shown in Exhibit 11, PMGR’s ordinary shares have a high level of retail ownership on platforms such as Hargreaves Lansdown, Interactive Investor, AJ Bell and Halifax Share Dealing (which together account for around half of the share base). Average daily trading volume on the London Stock Exchange over the past 12 months (Exhibit 12) was c 22.5k ordinary shares, or c 0.1% of the share base.

Exhibit 11: Major shareholders

Exhibit 12: Average daily volume

Source: Bloomberg, as at 28 February 2023

Source: Refinitiv. Note: 12 months to 28 February 2023.

Exhibit 11: Major shareholders

Source: Bloomberg, as at 28 February 2023

Exhibit 12: Average daily volume

Source: Refinitiv. Note: 12 months to 28 February 2023.

General disclaimer and copyright

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Premier Miton Global Renewables Trust and prepared and issued by Edison, in consideration of a fee payable by Premier Miton Global Renewables Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Newmont Corporation — Re-evaluating prospects with respect to guidance

Newmont’s Q4/FY22 results, released on 23 February, exhibited stronger production than we had anticipated, albeit accompanied by costs that failed to decline as much as we had hoped. Nevertheless, both production and costs for the full year met the company’s guidance to within its usual tolerance range of ±5%. In addition to its Q4/FY22 results, Newmont also provided updated medium-term guidance for production, costs and capex to FY27 to reflect recent inflationary pressures within the industry, and this note updates both our forecasts and valuation to reflect the company’s updated guidance. In the meantime, Newmont’s potential merger with Newcrest clearly remains alive, with the potential to transform the company if it is successfully brought to fruition.

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