New additions

There have been three notable additions to the portfolio since our last note in December. Two are European airport operators, reflecting Jean-Hugues’s confidence in Europe (and a desire to diversify the portfolio), while the third is a Canadian renewable energy producer that has limited exposure to the US.

Aena

Figure 8: Aena (EUR)

Source: Bloomberg

Spanish-headquartered Aena is one of the leading global airport operators, handling nearly 370m passengers in 2024. This investment reflects a conviction in the resilience of Spanish tourism – particularly mass tourism – as the company owns the majority (46) of the country’s airports.

Aena also has some international assets. It owns a 51% stake in the UK’s Luton Airport, the majority ownership in six airports in Brazil and further interests in Mexico, Columbia and Jamaica. There is, however, no US exposure, which Jean-Hugues views as positive in the current environment. The stock offers very strong earnings growth while trading at a substantial discount to its historic valuation.

Flughafen Zurich

Figure 9: Flughafen Zurich (CHF)

Source: Bloomberg

Swiss-listed Flughafen owns and operates Zurich Airport, the largest airport in Switzerland and 12th-largest in Europe. Outside the country, it operates airports in Brazil and won the bid to build and operate Noida International Airport in India, for 40 years from its opening, which is expected to occur later in 2025.

Flughafen’s strong balance sheet, less cyclical traffic and exposure to the solid Swiss economy make it a high-quality, defensive purchase. With the opening of Noida, the company’s investment programme should normalise, leading to a sharp increase in free cash flow yield generation, which should allow much higher dividend payments in future.

Brookfield Renewable Partners

Figure 10: Brookfield Renewable Partners (USD)

Source: Bloomberg

Canadian company Brookfield Renewable Partners is one of the world’s largest developers and producers of clean energy. Its portfolio consists of hydroelectric, wind and solar distributed energy and sustainable solutions across five continents.

EGL has previously held the company, but the position was sold several years ago, largely on valuation grounds, after a strong run of performance. However, following a period of share price retrenchment during the last quarter of 2024 and the beginning of this year, Jean-Hugues has reinitiated a position. He says that Brookfield gives EGL international renewables exposure but with minimal exposure to the US (and none to US offshore), noting that Brookfield’s hydroelectric assets are particularly attractive as they are both clean and can provide baseload power.

Jean-Hugues sees significant upside in Brookfield, citing strong development margins and long-term tailwinds from the global power supply-demand imbalance. He believes these factors give Brookfield a long growth runway that is not yet priced into the company’s shares.

Other notable holdings

Exelon

Figure 11: Exelon (USD)

Source: Bloomberg

Headquartered in Chicago, Exelon is the largest regulated utility in the US, serving over 10 million customers through six major subsidiaries in the Midwest and on the East Coast. Since spinning off its generation business in 2022, it has focused on electricity and natural gas distribution.

The company is investing heavily in grid modernisation, with the aims of increasing resilience and automation, enabling a higher share of renewable generation and the increasing demands of electrification. This includes rolling out advanced metering infrastructure, which allows real-time monitoring and billing, and working with local municipalities and states to expand electric vehicle charging networks.

As a regulated, defensive holding, Exelon performed well during the market volatility of early 2025. Recent quarterly results beat expectations on both revenue and earnings, and full-year guidance was reaffirmed.

Sales

Recent exits from the portfolio have included NextEra Energy and Edison International.

NextEra’s unit XPLR Infrastructure announced it was suspending its dividend for an indefinite period; Jean-Hugues feels that paying dividends reflects a degree of maturity in a company’s operation, and saw this as a strong signal to sell.

Southern California Edison (SCE), a subsidiary of Edison International, faced severe exposure to the early 2025 California wildfires – particularly the Eaton and Hurst fires around Los Angeles. Jean-Hugues felt that the full costs of this were difficult to quantify and that this represented a significant level of idiosyncratic risk that was not appropriate for EGL’s portfolio. He decided to exit the position promptly.

Performance

Figure 12: EGL’s NAV total return relative to benchmark indices, over five years to 31 May 2025

Source: Morningstar, Marten & Co

Figure 13: Cumulative total return performance over periods ending 31 May 2025

	3 months(%)	6 months (%)	1 year (%)	3 years(%)	5 years(%)	From launch1	Volatility2(%)
EGL NAV	9.0	7.1	12.9	15.4	69.6	132.2	15.8
EGL share price	14.3	12.3	21.0	6.9	63.8	174.5	23.2
MSCI World Utilities	2.0	0.1	11.0	13.5	40.4	84.4	14.3
S&P Global Infrastructure	2.9	1.5	13.8	16.7	57.6	72.9	14.3
MSCI World	(4.5)	(3.4)	7.8	36.8	82.2	162.2	13.6
MSCI UK	0.8	7.8	9.7	29.0	76.7	79.5	17.1

Source: Morningstar, Marten & Co. Note 1) EGL was launched on 26 September 2016. Note 2) Volatility is the annualised standard deviation of daily returns over five years.

Up-to-date information on EGL is available on the QuotedData website.

Recent performance from EGL – particularly visible in the three- and six-month periods in Figure 13 – is very encouraging. As shown in Figure 13, one-year NAV performance of 12.9%, as well as being strong in absolute terms, was ahead of both UK and global equities, as measured by the MSCI UK and MSCI World indices, respectively. Shareholders have benefitted even more, with a share price total return of 21.0% over the last 12 months, reflecting a marked narrowing of the discount during the period (see Figure 15 on page 13).

The chart in Figure 12 shows that EGL’s NAV has outperformed both the wider utilities and infrastructure indices over the last five years. This illustrates the benefit of skilled active management in these sectors, with Jean-Hugues able to identify and exploit market inefficiencies. This is even more apparent in Figure 13, which shows very strong outperformance of both EGL’s NAV and share price since its launch in September 2016.

SWOT analysis

Figure 14: SWOT analysis for EGL

Strengths	Weaknesses
Good NAV and share price performance over both the short and long term.	Although fundamentally a bottom-up fund, EGL is subject to market sentiment towards its particular sectors.
Strong record of increasing dividends and commitment from the board for further increases at least in line with inflation.
Opportunities	Threats
Structural increase in energy demand from the AI revolution, which largely needs to be met by companies in EGL’s universe.	The course of the development of AI is uncertain, with potential surprises such as the emergence of DeepSeek, that uses much less energy than other LLMs.
A renewed focus on the opportunities presented by nuclear power.	A single safety incident in the nuclear industry could undermine support.
Still trades at mid-single digit discount to NAV and has been known to trade at a sustained premium rating when market conditions are right.	Potential discount widening, in response to poor performance and/or poorer sentiment towards the utilities and infrastructure sectors.

Source: Marten & Co

Premium/(discount)

EGL has traded at a discount over the past year, within a 9.6% range.

Over the 12-month period ended 31 May 2025, EGL’s shares have traded between a 16.0% and 6.4% discount to NAV. The average over that period was an 11.6% discount. As of publishing, EGL was trading at a 10.2% discount, and it is encouraging to note the recent narrowing. There is the potential for this to close further if market conditions are broadly favourable, most obviously if interest rates and inflation are low and stable, and if AI continues to gain traction, with the associated increase in demand for energy to power it. EGL regularly traded at a premium to NAV as recently as the middle of 2023. Conversely, rising interest rates would clearly be negative for the premium/discount position, as would any setback in the development of AI or, more precisely, any reassessment of the likely future energy needs of the technology, as happened with the emergence of DeepSeek.

Figure 15: EGL premium/(discount) over five years to 31 May 2025

Source: Morningstar, Marten & Co

Share buybacks

After a period of share issuance while the trust was at a premium, the company has consistently bought back shares since it moved to a sustained discount in the middle of 2023, per Figure 16. Over the 12 months to the end of May 2025, these repurchases totalled just under 5 million shares.

Figure 16: EGL share buybacks and issuance

Source: Marten & Co

Dividend

Both quarterly dividend payments for 2025 so far have been for 2.125p per share, 3.7% higher than their 2024 equivalents.

As well as realising capital growth, EGL’s stated aim is to increase dividends at least in line with inflation. Gearing and reserves can be used to augment the portfolio yield if necessary, and the dividend has tended to be uncovered in recent years. For example, in 2024, dividend per share was 8.1p on revenue earnings of 7.2p. Despite this the reserves position remains very healthy, at £95m as of 31 March 2025, which equates to 89p per share.

The trend of recent years of steadily increasing dividend payouts has continued, with the first two quarterly payments in 2025, each of 2.125p, being 3.7% higher than their equivalents in 2024. Based on the latest share price, the current yield is 3.9%. Although lower than at the time of our last note in December, this is a reflection of EGL’s strong share price performance since then. We remain confident that the target yield will be met, with EGL’s investment income growth remaining strong.

Figure 17: EGL revenue income and dividend by financial year

Source: Ecofin Global Utilities and Infrastructure Trust

Fund Profile

Further information regarding EGL can be found on the manager’s website:

Ecofin Global Utilities and Infrastructure Trust Plc is a UK investment trust listed on the main market of the London Stock Exchange (LSE). The trust invests globally in the equity and equity-related securities of companies operating in the utility and other economic infrastructure sectors. EGL is designed for investors who are looking for a high level of income, would like to see that income grow, and wish to preserve their capital and have the prospect of some capital growth as well.

On 1 October 2024, Redwheel completed the purchase of the assets of Ecofin Advisors, the investment manager of EGL. The Ecofin team has relocated to Redwheel’s offices, but there are otherwise no changes to the investment strategy, process or Ecofin brand. Also effective from 1 October, the investment management fee was reduced to 0.9% p.a. of NAV on the first £200mn; 0.75% above £200m and up to £400m; and 0.6% thereafter.

Reflecting its capital preservation objective, EGL does not invest in start-ups, small businesses or illiquid securities, as these may involve significant technological or business risk. Instead, it invests primarily in businesses in developed markets, which have “defensive growth” characteristics: a beta less than the market average; dividend yield greater than the market average; forward-looking EPS growth; and strong cash-flow generation.

It also operates with a strict definition of utilities and infrastructure, as follows:

• electric and gas utilities and renewable operators and developers – companies engaged in the generation, transmission and distribution of electricity, gas, liquid fuels and renewable energy;
• transportation – companies that own and/or operate roads, railways, and airports; and
• water and environment – companies operating in the water supply, wastewater, water treatment and environmental services industries.

EGL does not invest in telecommunications companies or companies that own or operate social infrastructure assets funded by the public sector (for example, schools, hospitals or prisons).

No formal benchmark

EGL does not have a formal benchmark and is not constructed with reference to any index.

EGL does not have a formal benchmark, and its portfolio is not constructed with reference to an index. However, for the purposes of comparison, the MSCI World Utilities Index and the S&P Global Infrastructure Index are the global indices deemed the most appropriate by the manager. The company also supplies data for the MSCI World Index and the All-Share Index in its own literature for general interest. We consider the MSCI World Utilities to be the most relevant – although it should be noted that this index has a strong bias towards US companies and excludes transportation services and some environmental services that EGL invests in.

Bull vs bear case

Figure 18: Bull vs bear case for EGL

Aspect	Bull case	Bear case
Performance	Strong relative and absolute performance. EGL is well positioned for this to continue, as it is invested in structural growth areas; albeit many of its investments also have defensive qualities.	Performance is negatively impacted in periods of higher inflation and interest rates, due to the very long-term revenue streams of the companies invested in, and in some cases their relatively high levels of debt. However, revenues should catch up in such an environment, albeit with a time lag.
Dividends	Strong track record of increases, which the board are committed to continuing.	Increases potentially not sustainable if conditions change. The current dividend is uncovered by revenues (by 0.9p per share in 2024), but there are ample distributable reserves (89p per share).
Outlook	Structural increase in energy demand looks set to continue. Despite some recent change in political rhetoric, much of this is still likely to be met by nuclear and renewables.	Any global slowdown puts pressure on politicians to scale back climate commitments, to the detriment of the renewables sector. AI is also a new and rapidly evolving technology that is ripe for disruption, e.g. DeepSeek.
Discount	EGL still trades at a discount which could narrow further and potentially move to a premium rating, where it has been in the past for a sustained period. This could come about from inflation and interest rates subsiding and from beneficial long-term structural growth themes within clean power generation, particularly for AI.	The discount could widen significantly due to circumstances beyond EGL’s control, as happened in mid-2023. This could be caused by higher interest rates or any newsflow perceived as negative for the underlying assets.

Source: Marten & Co