Renewable energy is more than solar panels and wind farms – and this trust offers cheap access

As interest rates and inflation eases, the sector is set for a revival

When you hear the words renewable energy it’s tempting to think of sprawling wind farms and industrial solar parks. But there’s much more to it, from hydropower to hydrogen, geothermal to biomass and energy from waste. And that’s before we’ve considered the businesses that service and maintain these enterprises.
Much of the sector has had a torrid time since the pandemic, as rising interest rates and inflation have made financing costs for these often highly capital-intensive businesses unaffordable and forced them to put new projects on hold. A political backlash hasn’t helped either.
But with both rates and inflation now falling, many of the world’s best investors are betting these companies are poised to enjoy a renaissance, aided anew by a concerted effort among the world’s governments to strengthen the push towards net-zero.
A relatively rare beast in the area, and one that would benefit handsomely from a revival, is HA Sustainable Infrastructure Capital. This US company, which until earlier this year was a real estate investment trust (Reit), is a renewables investor. It takes debt and equity stakes in a wide range of projects in America that are facilitating the energy transition.
The business, referred to as Hasi, after its stock market ticker, decided to drop its Reit status for tax reasons and to give it greater flexibility to invest in a growing range of new sustainable technologies.
These are areas in which it has invested some of its $13bn of managed assets, including residential solar power, storage projects connected to the grid and renewable natural gas plants.
Hasi’s shares are owned by some of the world’s best portfolio managers, all ranked among the top 3pc of the more than 10,000 equity managers tracked by financial publisher Citywire based on their risk-adjusted performance. Their conviction has meant Hasi has been awarded an AAA-rating from Citywire Elite Companies, which rates companies according to smart-money backing.
Among the seven Elite managers backing Hasi is Patric Lindqvist, who counts the company as the second biggest holding in his £1.3bn Handelsbanken Hållbar Energi fund.
Lindqvist said: “Hasi is a unique and at the same time diversified investment into climate change, playing in niche financing of smaller energy-efficiency projects for highly creditworthy companies and institutions.”
For him, Hasi represents a solid long-term investment in opportunities around the energy transition, marked out by a dividend that has risen 6.5pc each year on an annualised basis over the past decade. It also has an ambitious target of generating a total shareholder return of up to 13pc a year.
Hasi’s shares are available through most major UK stockbrokers, but prospective buyers should be sure to fill out the right forms to minimise dividend withholding tax and check with their provider about any additional dealing charges.
One of the pluses of Hasi is that its wide range of investments, which include sustainable transport and ecological restoration projects, mean that it is not exposed to any single technology or energy source.
It also invests in partnership with others, earlier this year agreeing a $2bn joint investment venture with fellow American asset management giant KKR, for example. Its investment grade credit rating also means its own financing costs are attractive.
As an investor active in the US market, it stands to benefit from the boost to new green energy ventures provided by the Inflation Reduction Act, which Donald Trump is not expected to revoke if elected for a second term as president despite the impression given by some of his rhetoric.
Hasi has consistently grown its assets, revenues and profits in recent years and, as at the end of 2023, had a project pipeline of more than $5bn. Net asset value is forecast to grow by more than 5pc annually in the three financial years to the end of 2026, while annualised earnings per share growth of 8.5pc is predicted by analysts over the same period.
The shares have gained almost 25pc so far this year but remain below highs reached at the beginning of 2021. Based on forecast price-to-earnings multiples the stock is trading in the bottom fifth of its 10-year valuation range. Changing hands for just 13.2 times next year’s forecast earnings with a prospective dividend yield of just almost 5pc, we agree with the top managers that are betting the shares represent good value.
Questor says: buy
Ticker: NYSE:HASI
Share price: $34.43
Miles Costello is a contributing journalist for Citywire Elite Companies
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