Downing Renew& Infra - Market Update
17/10/2022 07:00
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RNS Number : 0161D Downing Renewables & Infrastructure 17 October 2022
17 October, 2022
Downing Renewables & Infrastructure Trust plc
("DORE" or the "Company")
Market Update
The Board notes the UK Government's proposal to introduce a "cost-plus-revenue
limit" on renewable generators and the European Commission's proposal for
price caps for renewable generators. Accordingly, the Company wishes to
provide the following update with respect to the forecast revenues for the
periods 2023-2025 and 2026-2035 that were used for its 30 June 2022 valuation
(updated where appropriate for actual fixed price arrangements entered into
since that date).
The Company is not issuing any guidance on how these proposals may be
implemented or the effect of them on the valuation of its assets.
A copy of this announcement with charts included is available at
www.doretrust.com (http://www.doretrust.com/)
UK revenues
Approximately 59% of the Company's revenues over the period 2023-2025 are
forecast to come from its UK portfolio, decreasing to 46% in the period
2026-2035.
The Company is forecast to derive c.4% of its 2023 total revenues from
merchant power sales in the UK (sales at day ahead prices on the wholesale
market). Only c.16% of the forecast UK revenues (9% of total revenues) are
derived from merchant power sales in the period 2023-2025 and for the period
2026-2035, the proportion is 29% (14% of total revenues).
The split of forecast revenues for the Company's UK portfolio is shown in
figures 1 and 2 below. This snapshot illustrates the Company's policy of
hedging near term power sales to fix prices and reduce exposure to price
volatility.
Figure 1: UK revenue mix 2023-2025
In the period 2023-2025, 59% of the forecast UK revenues are derived from
subsidies and the balance (25%) of the non-merchant UK revenues (shown as
"fixed revenues other") derive from fixed price long term sales arrangements
for energy supplied directly to customers (private wire arrangements) and
other fixed price arrangements such as pay-as-produced power price hedging.
These figures equate to 34% and 15%, respectively, of the Company's total
revenues in that period.
Figure 2: UK revenue mix 2023-2035
Figure 3, below, sets out the price forecasts for the Company's UK sales of
electricity, whether through merchant sales or through fixed price
arrangements, over the period to 2035. This is shown against the blended
baseload price forecasts as at 31 December 2021, 31 March 2022 and 30 June
2022.
The weighted average forecast price for the sale of energy in the Company's UK
portfolio is £82/MWh for the period 2023-2025 and £76/MWh for the period
2026-2035.
Figure 3: Weighted average forecast price for sale of energy in UK (nominal
- June 2022)
The weighted average forecast price is the price forecast to be achieved by
the relevant generators net of capture price discount and all route-to-market
cost and fees (including the fixed price arrangements).
Euro revenues
Approximately 41% of the Company's revenues over the period 2023-2025 are
forecast to come from its Swedish portfolio, increasing to 54% in the period
2026-2035. Swedish power sales are denominated in Euro.
The Company's Euro power price exposure is spread across 20 assets in 3 price
zones in Sweden. The weighted average forecast price for the Euro portfolio
is €53/MWh for the period 2023-2025 and €58/MWh for the period 2026-2035.
The Company notes that from 1 January 2023 the consultant price forecasts
for all price zones are less than the European Commission's proposed
€180/MWh cap for the life of the projects (noting that the European
Commission recommended that the cap should end in March 2023). Should the
cap be introduced from 30 September 2022 there would be an immaterial impact
(less than 0.01%) on NAV as a result of the hydropower revenues arising in the
SE4 price zone in southern Sweden that were factored into the valuation model
at 30 June 2022.
Please note that, as for the UK, the portfolio weighted average forecast price
is the price forecast to be achieved by the relevant generators net of capture
price discount and all route-to-market cost and fees. Set out in the graph
below is the evolution of this forecast and also the baseload forecast pricing
over the period to 2035 for each of the SE2, SE3 and SE4 price zones. There
are no material subsidies for the Company's Swedish assets.
Figure 4: Power price forecasts for Sweden (nominal - June 2022)
ENDS
Contact details:
Downing LLP - Investment Manager to the Company +44 (0)20 3954 9908
Tom Williams
Singer Capital Markets - Joint Corporate Broker to the Company +44 (0)20 7496 3000
Robert Peel, Alaina Wong, Asha Chotai (Investment Banking)
Sam Greatrex, Alan Geeves, James Waterlow, Paul Glover (Sales)
Winterflood Securities Limited - Joint Corporate Broker to the Company +44 (0)20 3100 0000
Neil Morgan, Verity Wilson (Corporate Finance)
Darren Willis, Andrew Marshall (Sales)
TB Cardew - Public relations advisor to the Company +44 (0)20 7930 0777
DORE@tbcardew.com (mailto:DORE@tbcardew.com)
Ed Orlebar +44 (0)7738 724 630
Tania Wild +44 (0)7425 536 903
About Downing LLP:
Downing is a sustainable investment manager established in London in 1986. We
currently manage £1.8 billion of assets under a broad range of investment
mandates across our funds, investment trusts and tax-efficient products. As a
certified B Corporation, we are focused on creating a sustainable future and
our key investment areas are renewable energy, infrastructure, property and
healthcare.
Downing has a proven track record in renewables and since 2010 has made more
than 175 investments totalling more than £700 million into solar, wind, hydro
and battery storage.
About Downing Renewables & Infrastructure Trust plc (DORE):
DORE is a closed-end investment trust that aims to provide investors with an
attractive and sustainable level of income, with an element of capital growth,
by investing in a diversified portfolio of renewable energy and infrastructure
assets in the UK and Northern Europe. DORE has been awarded the London Stock
Exchange's Green Economy Mark in recognition of its contribution to the global
'Green Economy'.
The Board classifies DORE as a sustainable fund with a core objective of
accelerating the transition to net zero through its investments, compiling and
operating a diversified portfolio of renewable energy and infrastructure
assets to help facilitate the transition to a more sustainable future. The
Company believes that this directly contributes to climate change mitigation.
DORE's strategy, which focuses on diversification by geography, technology,
revenue and project stage, is designed to increase the stability of revenues
and the consistency of income to shareholders. For further details please
visit www.doretrust.com (http://www.doretrust.com/)
LEI: 2138004JHBJ7RHDYDR62
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