The era of rising interest rates proved challenging for companies in the infrastructure sector, and though share prices experienced a rally in late 2023, along with government bonds, they suffered a setback early this year, with valuations falling between 5% and 10%.
In the renewables industry, the weakness can be attributed to overcapacity, low energy prices and long delays in getting new projects connected to the national grid. Shares yield an average of nearly 7% and trade at an average discount to net asset value (NAV) of 17%, but “power prices are likely to be a headwind”, writes Iain Scouller of brokers Stifel.
“While discounts on many funds appear wide, we think they may not be as wide as they look given our expectations for falls in NAVs at the 31 December 2023 valuation point and the expected headwinds in the year ahead.”
He expects mildly negative NAV returns in
