A windy day

On a recent holiday with my family, I found myself close to the site of a wind farm in which we invest. The chance to take a first-hand look at the company in action was too appealing to miss – at Newton, on-the-ground visits such as this are a key part of our research and due diligence process.

I made a short video blog of my visit, you can watch it below:

At the wind farm, as you can see in the video, I had the chance to meet some key individuals in person – not just senior management, but also the engineers who service the assets and oversee their day-to-day operations. For example, I met one of the asset managers who explained some of the engineering challenges involved in managing a site such as this one. I also had an interesting chat with the CEO and one of the company’s non-executive directors on the importance of the board providing good challenge to the management team.  

Furthermore, meetings like these provide not just a chance to glean information on one specific company, but an opportunity to hear wide-ranging information on the whole industry, from the challenges faced by the component manufacturers to the effect of renewable-energy assets on the utility markets.

Wind farms such as these ones benefit from strong government subsidy support (as much as 50%), which helps ensure the cash flows are stable, with little sensitivity to the economic cycle – helping them to pay a sustainable dividend to investors. The other 50% of revenues from these assets comes from selling the power generated into the wholesale market. While the power generation does vary on a day-to-day basis, it is fairly stable over the long term.

It’s only when you visit sites such as these first hand that you fully appreciate the scale and complexity of these projects. It reiterated to me the diversification these robust, ‘haven-like’ assets might bring to a portfolio. The wind doesn’t care whether we are in a recession or not; these turbines will continue to turn and generate power on a fairly consistent basis, regardless of the economic backdrop.

Authors

Paul Flood

Head of mixed assets investment