The risk indicator assumes you keep the Shares for the recommended holding period of 5 years.
The summary risk indicator is a guide to the level of risk of this product compared to other products. It shows how likely it is that theproduct will lose money because of movements in the markets or because we are not able to pay you.
We have classified this product as 4 out of 7, which is a medium risk class.
This rates the potential losses from future performance at a medium level, and poor market conditions could impact our capacity to pay you.
The value of the shares is sensitive to changes in legislation and UK Government policy relating to benefits, tax based or otherwise, provided to operators of renewable energy projects and assets.
Purchasing shares does not include any protection from future market performance so you could lose some or all of your investment.
Performance Information
The main factors that affect the performance of the Fund are:
- the weather conditions in the UK and other factors that affect the energy output of solar and wind assets;
- the power prices in the UK energy markets;
- the ability of the Investment Adviser to identify and secure further acquisitions; and
- the economic and market conditions in the UK.
Since the Shares began trading in July 2013, the Fund has delivered an annualised shareholder total return of 9.5% per annum with an annualised volatility of 13.7%. For comparison, over the same period, the broader UK equity market, the FTSE All Share, returned 5.3% per annum, with an annualised volatility of 15.4%.
To examine evidence for the longer-term performance of the fund, we backfilled the performance of the product with UK energy sectors; and UK Infrastructure sectors. This data set was dynamically reweighted based on available data to give a full daily performance history going back to the 1st January 1999.
Our ex-ante moderate performance scenario is an annualised return of 8.1% over the recommended holding period of five years. We have used this return in our reduction in yield calculations in the ‘What are the Costs?’ section below.
Over a rolling five-year period, the proxy had an average annualised daily volatility of 16.5% over rolling five-year periods. However, during periods of stress in the energy markets, the one-year volatility of the proxy temporarily increased to 36.4%.
What could affect my return positively?
Specific factors that affect returns positively would be favourable weather for the solar and wind assets to generate energy, the ability of the Investment Adviser to carry out the investment objective effectively through negotiating beneficial power sales contracts, careful due diligence and acquisition of sites with good meteorological conditions, and the ability of the Company to effectively raise capital in the future. A broad factor that would contribute to positive returns would be overall good trading conditions for the UK renewable energy markets. Maintaining good financing terms within the underlying special purpose vehicles will also benefit future performance. In addition, external factors such as improvements in the valuation of UK equities, and UK Utilities and Electricity markets is also likely to benefit the product too. These factors have been positively correlated to the proxy’s performance, with stronger correlation during larger market movements. The proxy’s most favourable performance over a one-year period was 57.1%. Over the longer recommended holding period of five-years, we identified the favourable rolling five-year performance of the proxy to be 21.1% per annum.
What could affect my return negatively?
Specific factors that affect returns negatively would be poor energy output of assets through unfavourable weather conditions and/or systematic faults in PV panels or other necessary equipment; failure to achieve the investment objective; unforeseen falls in power prices; and a change in public attitude for renewable energy. Unfavourable regulatory changes to the UK renewable energy sector will likely affect returns negatively and falling valuations in global financial markets and UK equity markets would also likely be linked to lower returns. The proxy’s least favourable performance over a rolling one-year period was -31.6%; and over longer periods, the proxy had a minimum five-year rolling return of 0.6% per year.
What could happen in severely adverse market conditions?
During Covid-19, the Company experienced a loss of 26.4% of shareholder value between January 2020 and March 2020, before recovering in February 2021. Using the longer history of the proxy prior to 2013, the proxy experienced a loss of 37.3% between June 2001 to January 2003. The proxy recovered back to its June 2001 level in Oct 2004. Under severely adverse market conditions, the value of the Product is likely to fall by similar amounts relative to the scale of the market crash. During such periods of stress, there is a risk that the capital value of an investment in the Company’s shares could reduce significantly, potentially down to zero.
