Monday, 1 June 2015

Review: Infinis Energy

windfarm_rainbow
The pot of gold?
Source

Not having anything to buy or sell means there is time to look at the current DIY Income Investor portfolio and catch up with some of the developments of the constituent holdings.

Infinis Energy (LSE:INFI) is a new company and describes itself as 'the UK's leading independent generator of renewable power'. It currently has a whacking great forecast yield of over 10%: is this an alarm bell or a contrarian opportunity?

I like the idea of Infinis - it's all about sustainable power, clean energy and renewables. Infinis sell energy based on the methane from landfill sites and on-shore wind farm generation.  Interestingly, they have recently exited from hydroelectric generation, in order to help to fund their announced programme of wind farm projects.

The yield was over 9% when I bought INFI a year ago - indicating that the Market was skeptical about the prospects. Since then the price has spiked up and then dropped by a total of around 15%. Given the unexpected growth in US fracking and huge drop in the price of oil, this is perhaps a surprisingly good result. 

The preliminary annual results for 2014/15 were published recently: they make interesting reading - especially if you enjoy acronyms like LFG, RO, CfD, NFFO, ROCs, LECs, etc.  (A video interview is available here.) This area of commercial activity is clearly quite complex, as renewable power seems to be only as commercially viable as the Government (encouraged by the EU) wants it to be. The change in regulatory regime seems to imply that things are set to become more unpredictable.

As far as I can tell, the performance of the past year seems to be pretty solid, although it seems that the wind didn't blow as much as it should have. Costs and debt seem to be under control. The final dividend is confirmed, as is the 'dividend policy' (whatever that is).

But - as with all 'annual accounts' - the potential downside is buried a little below the surface. The major shareholder (near-70% owner, no less) wants to sell. What does that tell us Little Guys/ (as opposed to Big Guy Hands) Well, to me it just looks like Terra Firma want to bank their return on a canny 10-bagger start-up investment. For that size of a holding I'm guessing that the only realistic approach is a trade sale - possible to an existing generator or a new (probably foreign) entrant to the market. 

So, can we see the current yield situation as the Market figurative holding its breath - waiting to see what happens? If so, that might be an opportunity: with the whacking big dividend, this is not a 'fire sale' and therefore the sale price may well be at a premium to the current price. Subsequently, the dividend policy may well change.

My conclusion: buy some more for a short term gain and review then.

Update 9/6/15: The Yahoo Finance review is more negative: they think the divi is too high, but meant to bolster the price while they attract a buyer.


I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

5 comments:

  1. I nearly bought Infinis ages ago when it was yielding about 7% (see my brief review from June last year, if you're interested: http://bit.ly/1I4m6qy. Also includes a note about the "dividend policy").

    I like it as a company. However, it is clearly finding times tough at the moment. I did not realise that Terra Firma was looking to extract itself from the company. I think you're right though. I suspect it is just to cash in rather than because of doubts about Infinis' future.

    I will have another look into the numbers shortly. Thanks for reminding me to take another look!

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    1. Interesting blog, Dividend Drive.

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    2. Thanks, Sisyphus. I have only been writing up my thoughts/ideas for about 18 months. Your site was one of the first I bumped into when I was looking to start blogging.

      I had a look at Infinis before my recent purchase (not written up yet) of Stock Spirits. The numbers made me a little uncomfortable for Infinis at the moment. We will see! It is potentially an opportunity. But there is an awful lot of uncertainty around it!

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  2. Seeing as Landfill gas which they use to generate most power is now on the decline in the UK, I would certainly look quite closely at how steep the drop of is.

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    1. You might have missed it but I did sell in October 2015 http://www.the-diy-income-investor.com/2015/10/when-its-time-to-sell-portfolio-sale.html

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