Member Info for jerry004

So that is basically Brookfield valuing and buying that asset at an 8.5% discount rate, no?

The interim numbers are from 31 Dec. The commentary does state that any effects of the current crisis are not in the numbers.

I am thinking maybe an LTAF like Schroders as a potential buyer. Though they might be tempted to offer units in lieu of cash?

No idea really whether this is likely. but thought I'd look into it in case I need to make the above decision at some point.

Timbob. I thought the same thing about the 85% of net income rule, and this does apply. However after more digging I have concluded that the net income number is not the same as the free cash number used for the dividend cover calculation. For example net income nets to account for depreciation, as one example, which could lower the net income number but not the dividend cover number.

I'm not trying to be negative, the 85% number will provide a floor to any dividend cut, but that floor may beiwer than what we have today.

Also if you extrapolate from the stated discount rates in the accounts to take into the discount, you get maybe 11.5% based on today's share price. This is the anticipated future annual return. The divi is higher than this, which implies a gradual drop in NAV is built in (unless there is some potential asset growth that is not accounted for in these numbers).

That is my take, I have endeavoured to explain my logic, so make of it what you will.

That may be true. But they still have to pay out 85% on net income, which is not the same as accounting profit.

However, your point is important because, I now see that that 85% floor is potentially lower than what they are currently paying out. (Gemini did give me a number, but I don't know whether to trust it).

My understanding is that contracts costs such as amortising debt is deductable, and maintenance etc. but after than what you are left is net income

It does not apply to total return, so realised capital gains are exempt, hence their capital recycling scheme.

However the debt/ GAV (and possibly debt/ market cap) will need to be gotten back under 50% before there can be any buybacks.

It's something of a narrow set of rails this thing is running on at the moment.

I still hold a fair chunk of it mind.

The yield cannot drop in favour of buybacks as they have to distribute 85% of income, to retain investment trust tax status.

My suspicion was that there were short sellers buying back before they got commited to paying the dividends.

Not sure why all this discussion is happening here, as BSIF has already been though all this. They proposed a conversion to, effectively, an operating company that would then cut the dividend to grow , but shareholders roundly rejected this.

Thus the whole trust is now up for sale in combination with the management company. If an offer comes in and enough shareholders vote to accept it, sale of shares at the offer price will be compulsory.

At least that is how I understand it.

Regarding UK IT trusts not allowing a dividend cut.

That may be true, but this is CI-based and thus not a UK IT. Hence those dividend payout regs do not apply.

There maybe something in the company rules that apply mind.

When I think about the NAV dropping I look at the ticker for inxg on Google finance. It would be surprising if nesf didn't track long duration index linked gilts (with a bit of a lag).

I am however perplexed as to why the recent sale of a solar asset by ORIT to a Japanese investor has not lifted spirits in the sector somewhat.

The return from inflation-linked government bonds has not remotely matched inflation over the past few years either (see INXG). HICL is a higher return proxy for ILGs, and will move with both inflation and real yields.

Response to the consultation from the trade body, energyUK.

https://www.energy-uk.org.uk/wp-content/uploads/2023/11/Energy-UK-Letter-RO-Call-for-Evidence-.pdf

Preference shares must be redeemed at par under any change of control.

Not sure how a merger works with that requirement in place.

Investors need to make their own mind up about the potential risks from Reform. The chances of them getting in are largely unknowable. They have threatened to effectively remove subsidies by imposing equivalent taxes, and the consequences if they do that should be pretty obvious. However, one has to try and factor in the unintended consequences of their other stated policies, and indeed how many of their plans would get implemented in the face of reality. For example they say they want UK pension funds to own 50% of UK infrastructure. Fat chance of that happening if they set a precedent for the

effective removal of long term contracts depending on future politicial mood

It is not a simply a matter of buying back shares from currently available revenue. NAV has fallen recently due to lower forecasts for future energy prices. This has brought gearing ratios rather close to 50%, which is their stipulated maximum. I presume there will be something in their debt covenants which would likely get triggered if buybacks took that number over 50%.

Recipients of the dividends have the option to use them to buy discounted shares should they wish. I imagine most people who bought this got it for the income.

Surely the lack of buybacks is the 48.5% gearing approaching their loan covenant threshold

No buy backs due to 48% gearing vs a policy maximum of 50%

I have read what I can on this, and I am not sure now that the 1Mil nil rate band applies to AIM shares.

It might just be 50% relief (i.e. 20% tax) on everything in AIM?

Parts of the relevant texts are not at all clear on this matter