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20 Mar, 2008

Andrew Moffat, who manages the CIS UK Income with Growth Trust at Co-operative Investments, says a revolution occurring in the world's electricity supply could help power investor returns, even through a recession.

He said that as countries continue to develop global demand for electricity will inevitably rise but issues with supply could result in an electricity shortfall by 2015.

However, Moffat believes that companies developing new generation plants in emerging countries can continue to grow despite an economic downturn due to this rapid growth in demand for power.  

He said companies tackling this future shortfall will be well positioned to deliver strong performances. 'Power companies are not dependent on economic growth in the same way as consumer stocks, so can deliver performance even in the event of a recession.'

International Power, who the manager says is paying an attractive yield, is one of his favourite picks. 'International Power is benefiting from the worldwide energy problem.  It already keeps the lights on in 20 countries and is developing its business in emerging economies where supply is struggling to keep pace with demand.'

Scottish & Southern Energy is also top of his list and makes up one of the top ten holdings in the Income with Growth Trust. 'Scottish & Southern Energy is committed to improving efficiency at its power generation plants in the UK as well as growing its wind power business in line with the Government's drive to boost energy from renewable,' he said.

'The yield on Scottish and Southern Energy is not huge but that is not how I play the portfolio. I prefer to buy stocks which are yielding around 2.5-3% that are growing strong underlying dividends.'

With regards to the banking crisis Moffat said he feels the UK is experiencing fairly unprecedented times and warns that the complexity of the banking system means there well be more to come.

He also issued a note of caution regarding interest rates saying that while they remained low during 2007 he foresees a rise this year.

His predictions for the FTSE 100 were similarly negative saying they could fall as low as 5200.

According to Lipper, the CIS UK Income with Growth Trust returned 44.3% over a three year period to the end of January, compared to a peer group average of 32%.


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