REG - Downing Renew& Infra - Net Asset Value and Operational Update

Downing Renewables & Infrastructure TrustAnnouncement

27/11/2023 07:00

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RNS Number : 6660U  Downing Renewables & Infrastructure  27 November 2023

27 November 2023

 

Downing Renewables & Infrastructure Trust plc

Net Asset Value and Operational Update

 

The Board of Downing Renewables & Infrastructure Trust plc (the "Company"
or "DORE") is pleased to announce the Company's unaudited Net Asset Value
("NAV") as at 30 September 2023.

 

Net Asset Value as at 30 September 2023

 

The Company's unaudited NAV was £217.1 million or 118.7 pence per share as at
30 September 2023. This is an increase of 0.6% from the Company's NAV per
share as at 30 June 2023 (217.0 million or 118.0 pence per share). The NAV is
presented after the payment of the dividend of 1.345 pence per share,
equivalent to £2.5 million in aggregate, in respect of the period from 1
April 2023 to 30 June 2023.

 

The movement in NAV during the quarter was attributable to several factors:

 

-     Portfolio performance (+£4.7m, +2.5pps);

-     Update to the long-term power price forecasts (-£6.4m, -3.5pps);

-     Other movements including FX movement and dividend (+£1.8m,
+1.2pps).

 

As at 30 September the Company's GAV was £328.3 million (30 June 2023:
£319.4 million).

As announced on 16 November, the dividend in respect of the period from 1 July
2023 to 30 September 2023 of 1.345 pence per Ordinary Share has been declared
and will be paid to shareholders on the register on 1 December 2023 on or
around 29 December 2023.

Operational Performance

During the period, energy generation was higher than expected for the
portfolio, largely due to the hydropower portfolio experiencing strong water
inflows as a result of rainfall levels being much higher than the base case
expectation. Generation in the wind and solar assets were below budget as a
result of lower than expected availability.

 

Operating profit was lower than budgeted, due to lower generation in the solar
and wind portfolios and lower-than-expected power prices in the Nordic region
off the back of higher-than-expected rainfall.

 

Power Prices and Inflation

 

The decrease in forecast future power prices caused a £6.4 million (-3.5pps)
decrease in NAV, with the majority of the impact felt in the Swedish
hydropower and wind portfolios.

 

The power price forecasts used in the Company's valuation are set out below in
GBP (real 2023). Where prices are in Euros they are converted back to GBP for
the purposes of comparison.

 

Figure 1: Comparison of weighted average forecast realised prices in the UK
(real - 2023)

 

 

Figure 2: Comparison of weighted average forecast realised prices in Sweden
(real - 2023). Prices converted to GBP for comparison purposes.

 

 

 

 

 

Inflation assumptions for 2024 have been updated to reflect recently available
government forecasts, with UK RPI at 3.46% and Swedish RPI increasing to 4.6%.
The UK inflation assumption from 2025-2030 remains at 3%, declining to 2.25%
from 2030. The Swedish inflation assumption from 2025 remains at 2%, which is
reflective of the Swedish central bank's target inflation rate.

 

Discount rates

 

There have been no material movements in our discount rates for the period.
Project BlueSea (see below) was brought into the portfolio with a discount
rate of 7.1%, reducing the weighted average discount rate of the portfolio
from 7.8% to 7.7%. Other project discount rates have not been changed.

 

Recent deployment and acquisitions

In July 2023, DORE completed the acquisition of Project BlueSea, a Swedish
Electricity Distribution System Operator for £7 million. This regulated
electricity distributor delivers 16-18 GWh per annum of electricity through
medium and low voltage lines to its c.1,500 domestic and business customers in
Stromsund, northern Sweden. The acquisition was funded using drawings from the
Company's RCF.

Greater than expected earnings in this investment in the period leading up to
acquisition resulted in an uplift of £0.1m to the Company's portfolio value.

In June 2023, DORE signed an agreement to acquire the Company's first grid
services asset, Mersey, with completion subject to receiving approval from
OFGEM. Approval was granted on 23 October and the transaction was completed on
31 October. Mersey is a UK-based, fully operational 200 MVAr shunt reactor
purchased for £11.0 million. The impact of the Mersey acquisition is not
included within the September NAV.

 

Update on hydropower portfolio upgrade and entry into frequency markets

 

Downing Hydro AB ("DHAB") is working to upgrade its hardware and software
systems to enable up to 25 of the existing 28 hydropower sites to participate
in the Swedish Frequency Containment Reserve ("FCR") market.

 

As at mid-November 2023 the physical installations were completed at eight
sites. Work proceeds on certain software, administrative, registration and
pre-qualification processes, which need to be completed before the assets can
participate in the FCR markets.

 

Capital allocation and delivering value for shareholders

The Board continues to keep the Company's share price discount to NAV and
capital allocation approach under close review and to date has balanced
accretive acquisitions and revenue optimisation initiatives with employing its
share buyback.

The Company has benefitted in particular from its hydropower aggregation,
modernisation and revenue optimisation strategy and has further opportunities
to expand its investment in this strategy with the aim of increasing overall
portfolio returns. The Company has also secured opportunities to construct
battery storage projects on land owned by the hydropower facilities at
projected returns in excess of other investments held by the Company and in
excess of equivalent projects in the UK.

In light of the potential value to the Company of: (1) these investment
opportunities; (2) reducing borrowings under the RCF; and (3) the value
created through ongoing share buybacks, the Company is in the very early
stages of considering potential co-investors for its existing Swedish
hydropower assets.

Tom Williams, Partner, Head of Energy and Infrastructure at Downing LLP,
commented: "We are pleased with the Company's performance in the third quarter
and to have further diversified the portfolio by adding grid services income
to the revenue mix. We are particularly pleased with the progress of the
hydropower portfolio upgrades which we hope will see us entering the frequency
containment markets for our first project by the end of the year,
demonstrating our ability to build out our energy platforms and add value to
existing assets. DORE's focus on maximising returns and value for shareholders
remains sharp in identifying accretive opportunities both within the current
portfolio and expanding pipeline."

 

 

ENDS

 

 

 

Contact details:

 Downing LLP - Investment Manager to the Company                     +44 (0)20 3954 9908

 Tom Williams

 Singer Capital Markets - Joint Corporate Broker                     +44 (0)20 7496 3000

 Robert Peel, Alaina Wong, Jalini Kalaravy (Investment Banking)

 Sam Greatrex, Alan Geeves, James Waterlow, William Gumpel (Sales)

 Winterflood Securities Limited - Joint Corporate Broker             +44 (0)20 3100 0000

 Neil Morgan (Corporate Finance)

 Darren Willis, Andrew Marshall (Sales)

 TB Cardew - Public relations advisor to the Company                 +44 (0)20 7930 0777

 Ed Orlebar                                                          +44 (0)7738 724 630 / +44 (0)7425 536 903

 Tania Wild                                                          DORE@tbcardew.com (mailto:DORE@tbcardew.com)

 

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' and also in 2022 DORE won 'Renewables Fund of the Year' at the
Sustainable Investment Awards.

 

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

 

About Downing LLP

 

Downing is a responsible investment manager established in London in 1986. We
currently manage £1.9 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 focussed on creating a sustainable future, our
key investment areas are renewable energy, infrastructure, property and
healthcare.

 

Downing has c.50 professionals dedicated to renewable energy and
infrastructure and a proven track record in renewables. Since 2010, Downing
has made more than 175 investments and has over c. £760 million of assets
under management in solar, wind, hydro and battery storage technology.

 

This announcement is not for publication or distribution, directly or
indirectly, in or into the United States of America. This announcement is not
an offer of securities for sale into the United States. The securities
referred to herein have not been and will not be registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold in the
United States, except pursuant to an applicable exemption from registration.
No public offering of securities is being made in the United States.

 

For further details please visit www.downing.co.uk
(http://www.downing.co.uk/)

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