Clean Infrastructure KYP

https://www.neiinvestments.com/documents/Quarterly%20commentary/Qua...

NEI Clean Infrastructure Fund
Q3 2022 Commentary

Fund commentary
The third quarter was quite volatile due to mixed developments at the macro and sector levels. At a high level, sharply
rising interest rates, Italian elections, a poorly communicated mini budget in the UK and no end in sight to the war in
Ukraine were powerful headwinds. Furthermore, rising gas prices drove higher electricity prices, especially in Europe,
which is positive for renewables given their lower cost but is creating uncertainties about potential windfall taxes across
the European sector.
However, the U.S. Inflation Reduction Act (IRA) is a positive game changer for the entire renewables value chain as it
gives 10-year visibility to the sector and expands tax incentives to storage, nuclear, green hydrogen, with substantial
value creation opportunities for renewables companies.
In accordance with National Instrument 81-102, the Fund’s performance is not disclosed as the Fund has been a reporting issuer for less than a year.
Inception date of Fund: March 1, 2022.
Against this mixed backdrop, the majority of companies in the Fund reported fundamentally a solid second quarter with
positive earnings revisions, unlike the broader market. Higher power prices continue to lift cash flows for companies
with open positions or rolling hedges. Developers are also reporting setting higher long-term power prices as buyers
want predictability on top of the fact that renewables are much cheaper than thermal power.
In terms of decarbonisation impact at the end of the quarter, CO2 emissions are over 75% lower per CAD1mn invested
in the fund compared to CAD1mn invested in the MSCI World Utilities Index.
The top five contributors included Constellation Energy (U.S.), Sunrun (U.S.), Renova (Japan), BKW (Switzerland), Nextera
(U.S.).
The top five detractors included China Longyuan (China), Orsted (Denmark), Atlantica Sustainable (U.S.), Enel (Italy),
Terna (Italy).
Outlook
The sub-advisor expects the IRA to add to an inflection point in U.S. electricity demand, and demand for decarbonised
electricity in particular, into a growth phase for a sector that has seen no demand growth for over a decade. Once all the
details about the implementation of the IRA are known, they foresee developers to start announcing numerous new
projects and enhance the value of existing projects by taking advantage of more attractive incentives. They also believe
that the case for green hydrogen will be much easier to make opening the door for renewables developers to capture a
bigger share of the pie, by selling an end product rather than a commoditized electron.
Fundamentals for renewables development are strong given the acceleration of demand driven by the need to
substitute gas and coal for economic reasons (renewables are cheaper) and to ensure security of supply. Moreover,
renewables costs are declining on the back of falling commodity costs such as steel, copper and logistics costs. This
bodes well for competitiveness and development margins.
The European energy policy remains in flux with high level of uncertainties about electricity prices, price setting
mechanism and potential windfall taxes. This is keeping a lid on the sector pending clarity.

Interest rates are the biggest near-term risk for the sector as elevated levels in the US and Europe deflate the present
value of cash flows and could create an air-pocket by delaying non-time sensitive projects until rates come back down.
High yield spreads have also risen which tends to put pressure on yieldcos’ share prices.
In conclusion, the sub-advisor is positive about the underlying drivers for the renewables sector given the cost
competitiveness, strategic value to ensure security of supply and a supportive IRA. Yet macro and local headwinds are
creating unhelpful volatility in the near term.
This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment,
financial, tax or similar matters. The views expressed herein are subject to change without notice as markets change over time. For complete
information about a mutual fund managed by NEI Investments, please refer to the fund's simplified prospectus and/or Fund Facts which can be
downloaded at www.neiinvestments.com.
Series F units are only available to investors who participate in eligible fee-based programs with their registered dealers that have entered into a
Series F Distribution agreement with NEI Investments.
Series I have high minimum investment requirements and are typically aimed at institutional investors (such as pension plans) or investors making
large investments in the fund. Funds in these series generally have lower management fees than the retail series of the same fund.
Information herein is believed to be reliable but NEI does not warrant its completeness or accuracy. Views expressed regarding a particular security,
industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking
statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking
information or expectations. Do not place undue reliance on forward-looking information.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the
prospectus before investing. The performance data provided assumes reinvestment of distributions only and does not take into account sales,
redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual fund securities
are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the
fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be
returned to you. Past performance may not be repeated.
NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. (“NEI LP”). Northwest & Ethical Investments Inc. is the general
partner of NEI LP and a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is the sole limited partner of the NEI LP. Aviso is a whollyowned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by
the five Provincial Credit Union Centrals and The CUMIS Group Limited.
For more performance related information about a mutual fund managed by NEI Investments, please visit the prices and performance page on
neiinvestments.com.
The S&P Global Infrastructure Index (“Index”) and associated data are a product of S&P Dow Jones Indices LLC, its affiliates and/or their licensors
and has been licensed for use by Northwest & Ethical Investments L.P.. © 2022 S&P Dow Jones Indices LLC, its affiliates and/or their licensors. All
rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more
information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s
Financial Services LLC (“SPFS”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Neither S&P
Dow Jones Indices LLC, SPFS, Dow Jones, their affiliates nor their licensors (“S&P DJI”) make any representation or warranty, express or implied,
as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and S&P DJI shall have no liability
for any errors, omissions, or interruptions of any index or the data included therein

You need to be a member of Brock Shores Financial #ImprovingFutures to add comments!

Join Brock Shores Financial #ImprovingFutures

Comments

Timothy Ross December 12, 2022 at 8:09pm

https://www.neiinvestments.com/documents/Quarterly%20commentary/Qua...

NEI Clean Infrastructure Fund
Q3 2022 Commentary

Fund commentary
The third quarter was quite volatile due to mixed developments at the macro and sector levels. At a high level, sharply
rising interest rates, Italian elections, a poorly communicated mini budget in the UK and no end in sight to the war in
Ukraine were powerful headwinds. Furthermore, rising gas prices drove higher electricity prices, especially in Europe,
which is positive for renewables given their lower cost but is creating uncertainties about potential windfall taxes across
the European sector.
However, the U.S. Inflation Reduction Act (IRA) is a positive game changer for the entire renewables value chain as it
gives 10-year visibility to the sector and expands tax incentives to storage, nuclear, green hydrogen, with substantial
value creation opportunities for renewables companies.
In accordance with National Instrument 81-102, the Fund’s performance is not disclosed as the Fund has been a reporting issuer for less than a year.
Inception date of Fund: March 1, 2022.
Against this mixed backdrop, the majority of companies in the Fund reported fundamentally a solid second quarter with
positive earnings revisions, unlike the broader market. Higher power prices continue to lift cash flows for companies
with open positions or rolling hedges. Developers are also reporting setting higher long-term power prices as buyers
want predictability on top of the fact that renewables are much cheaper than thermal power.
In terms of decarbonisation impact at the end of the quarter, CO2 emissions are over 75% lower per CAD1mn invested
in the fund compared to CAD1mn invested in the MSCI World Utilities Index.
The top five contributors included Constellation Energy (U.S.), Sunrun (U.S.), Renova (Japan), BKW (Switzerland), Nextera
(U.S.).
The top five detractors included China Longyuan (China), Orsted (Denmark), Atlantica Sustainable (U.S.), Enel (Italy),
Terna (Italy).
Outlook
The sub-advisor expects the IRA to add to an inflection point in U.S. electricity demand, and demand for decarbonised
electricity in particular, into a growth phase for a sector that has seen no demand growth for over a decade. Once all the
details about the implementation of the IRA are known, they foresee developers to start announcing numerous new
projects and enhance the value of existing projects by taking advantage of more attractive incentives. They also believe
that the case for green hydrogen will be much easier to make opening the door for renewables developers to capture a
bigger share of the pie, by selling an end product rather than a commoditized electron.
Fundamentals for renewables development are strong given the acceleration of demand driven by the need to
substitute gas and coal for economic reasons (renewables are cheaper) and to ensure security of supply. Moreover,
renewables costs are declining on the back of falling commodity costs such as steel, copper and logistics costs. This
bodes well for competitiveness and development margins.
The European energy policy remains in flux with high level of uncertainties about electricity prices, price setting
mechanism and potential windfall taxes. This is keeping a lid on the sector pending clarity.

Interest rates are the biggest near-term risk for the sector as elevated levels in the US and Europe deflate the present
value of cash flows and could create an air-pocket by delaying non-time sensitive projects until rates come back down.
High yield spreads have also risen which tends to put pressure on yieldcos’ share prices.
In conclusion, the sub-advisor is positive about the underlying drivers for the renewables sector given the cost
competitiveness, strategic value to ensure security of supply and a supportive IRA. Yet macro and local headwinds are
creating unhelpful volatility in the near term.
This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment,
financial, tax or similar matters. The views expressed herein are subject to change without notice as markets change over time. For complete
information about a mutual fund managed by NEI Investments, please refer to the fund's simplified prospectus and/or Fund Facts which can be
downloaded at www.neiinvestments.com.
Series F units are only available to investors who participate in eligible fee-based programs with their registered dealers that have entered into a
Series F Distribution agreement with NEI Investments.
Series I have high minimum investment requirements and are typically aimed at institutional investors (such as pension plans) or investors making
large investments in the fund. Funds in these series generally have lower management fees than the retail series of the same fund.
Information herein is believed to be reliable but NEI does not warrant its completeness or accuracy. Views expressed regarding a particular security,
industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking
statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking
information or expectations. Do not place undue reliance on forward-looking information.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the
prospectus before investing. The performance data provided assumes reinvestment of distributions only and does not take into account sales,
redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual fund securities
are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the
fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be
returned to you. Past performance may not be repeated.
NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. (“NEI LP”). Northwest & Ethical Investments Inc. is the general
partner of NEI LP and a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is the sole limited partner of the NEI LP. Aviso is a whollyowned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by
the five Provincial Credit Union Centrals and The CUMIS Group Limited.
For more performance related information about a mutual fund managed by NEI Investments, please visit the prices and performance page on
neiinvestments.com.
The S&P Global Infrastructure Index (“Index”) and associated data are a product of S&P Dow Jones Indices LLC, its affiliates and/or their licensors
and has been licensed for use by Northwest & Ethical Investments L.P.. © 2022 S&P Dow Jones Indices LLC, its affiliates and/or their licensors. All
rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more
information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s
Financial Services LLC (“SPFS”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Neither S&P
Dow Jones Indices LLC, SPFS, Dow Jones, their affiliates nor their licensors (“S&P DJI”) make any representation or warranty, express or implied,
as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and S&P DJI shall have no liability
for any errors, omissions, or interruptions of any index or the data included therein
Timothy Ross December 12, 2022 at 8:07pm

https://www.neiinvestments.com/documents/FundProfile/EN_NEI_CIF%20S...

https://www.neiinvestments.com/documents/FundProfile/EN_NEI_CIF%20Sales%20Tool.pdf
Timothy Ross December 12, 2022 at 8:07pm

https://www.neiinvestments.com/pages/prices-and-performance/profile...

Fund Profile - NEI Investments

This reply was deleted.