REG - Octopus Renewables - Final Results to 31 December 2023
25/03/2024 07:00
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RNS Number : 0520I Octopus Renewables Infra Trust PLC 25 March 2024
Octopus Renewables Infrastructure Trust plc
Final Results to 31 December 2023
Resilient performance with positive NAV total return and significant increase
in FY 2024 dividend target(1)
Octopus Renewables Infrastructure Trust plc ("ORIT" or the "Company") is
pleased to announce its audited results for the 12 months ended 31 December
2023 ("FY 2023").
Financial Highlights
As at 31 December 2023 As at 31 December 2022
(audited) (audited)
NAV per Ordinary Share (p) 106.04 109.44
Ordinary Share price (p) 90.00 100.00
Dividends declared per Ordinary Share (p) 5.79 5.24
Dividend 1.18x 1.77x
Cover
Net asset value (£ million) 599 618
Gross asset value (£ million)(2) 980 1,073
Total value of all investments (£ million) 1,127 1,304
NAV total return in the year +2.1% +12.4%
Ongoing charges ratio 1.16% 1.12%
· Positive NAV total return of +2.1% in FY 2023 (2022: +12.4%)
demonstrates robust performance, with a covered dividend for the year and
increased dividend guidance for FY 2024.
· NAV decreased from £618 million to £599 million during FY 2023,
driven primarily by falling power price and inflation forecasts, together with
increases applied to discount rates.
· The Company achieved a strong NAV total return in the period
since IPO in December 2019 of +28.6% (2022: +25.9%).
· Total shareholder return in FY 2023 was -4.4% (2022: -5.4%)(3),
as share prices across the renewable infrastructure sector continued to fall.
Total shareholder return in the period since IPO in December 2019 was +6.7%
(2022: +11.6%).
· Four dividend payments totalling 5.79 pence per ordinary share
for FY 2023, meeting the FY 2023 dividend target in full and representing a
10.5% increase on FY 2022's dividend, in line with inflation (CPI). The
dividend was fully covered (1.18x) by cashflows.(4)
Operational Highlights
· Three acquisitions completed during the period, totalling c.£7
million:
o Investments into two new technologies: a battery storage asset and a green
hydrogen production development (both joint ventures)
o An investment into a UK-focussed solar and storage developer platform.
· Two strategic disposals completed, as part of the capital
recycling programme. Together, generating a NAV uplift of 3.1 pence per
Ordinary Share, demonstrating the robustness of the Company's valuations and
the continued demand for these assets in the market.
o Two Polish onshore wind farms totalling 59MW were sold for £92 million, a
21% premium over the holding value of the wind farms as at 30 September 2023,
delivering an IRR of approximately 30% over the lifetime of the investment.
o Strategic decision made to terminate an option to acquire four Spanish
solar assets (totalling 175MW) in exchange for a termination payment to the
vendor.
· The Company's operational portfolio produced 1,110 GWh (2022:
1,005 GWh), 14% below target of 1,291 GWh, generating revenue of £117.4
million (2022: £112.0 million), 16% below target of £139.8 million. This
is largely attributable to onshore wind production being 20% below target
(mainly due to low wind speeds), combined with the impact of
lower-than-expected power prices.
· Including the generation and revenues from the Irish solar assets
which were acquired post year-end (see further in this announcement) but from
which the 2023 production accrues to ORIT, total generation was 1,224 GWh and
total revenues were £127.2 million.
· 81% of forecast operational revenue for the two years following
the period end is already fixed (31 December 2022: 68%). Fixes include a
10-year, inflation-linked corporate PPA with Iceland Foods for the Breach
solar farm, and 5-year PPAs for three of ORIT's UK solar farms.
· As at 31 December 2023, the portfolio comprised 37(5) assets
(including developers) across six countries
(UK, France, Ireland, Finland, Sweden and Germany) and five technologies
(solar, onshore wind, offshore wind, battery storage and hydrogen production).
Total asset capacity, excluding conditional acquisitions, totalled
609MW(5) (2022: 662MW).
· Once fully operational, the portfolio has the potential to power
the equivalent of 384,000 homes with clean energy, with an estimated 400,000
tonnes of carbon emissions avoided.
· ORIT currently has 73MW of new renewable generation capacity
under construction, through the Breach solar farm and Woburn Road battery
storage projects, which are expected to become operational in Q2 2024 and Q1
2025 respectively.
Post Period End
· The target dividend for was increased to 6.02p for FY 2024(1), an
increase of 4.0% over FY 2023 and in line with inflation (CPI). This is the
third consecutive year the Company has increased its dividend target in line
with inflation. The FY 2024 dividend target is expected to be fully covered by
cashflows generated from the Company's operating portfolio.(4)
· The Company completed the acquisition of four newly-constructed
operational solar farms located close to Dublin, Ireland, adding 199MW to the
operational portfolio.
· Following the acquisition, ORIT's total capacity of operational
renewable energy assets reached 735MW.
Phil Austin, Chairman of Octopus Renewables Infrastructure Trust plc,
commented:
"ORIT has demonstrated resilience in its FY 2023 performance despite a
challenging backdrop both for the asset class and the investment trust sector
as a whole. The Company generated a positive NAV total return and delivered a
dividend fully covered by operational cashflows, thanks in the main to the
high proportion of fixed revenues which bodes well for future payments.
"The Company achieved successful exits at attractive prices from its Polish
wind assets and from its Spanish solar option, as part of its capital
recycling programme which remains ongoing. It also increased its
diversification through expanding into two new technologies - a battery
storage asset and a green hydrogen production development platform.
"The Company's assets generated 1,110GWh of electricity in FY 2023, an
increase of 10% compared with the previous year, but 14% below target. The
generation increase in 2023 was driven by the contribution from the first full
year of operations at Cerisou (France) and Crossdykes (UK) onshore wind farms,
in addition to the start of operations of Cumberhead (UK) wind farm. This was
offset by the reduced generation after the sale of the Polish wind assets, and
the fact that onshore wind generation was 20% below target, largely due to low
wind speeds across Europe.
"Our Investment Manager has delivered value enhancement through negotiating
optimal energy pricing strategies, and the portfolio now has high quality
corporate PPA partners in Kimberly-Clark, Iceland Foods and Microsoft. The
team continues to manage the final stages of the Breach solar farm
construction, which we expect to be able to confirm completion of in Q2 this
year.
"Despite the market challenges experienced in the investment trust sector in
recent months, the fundamental driving forces behind clean energy investment
are stronger than ever, and we believe that ORIT is very well placed to
continue its contribution to the transition to net zero whilst ensuring an
attractive level of returns for our shareholders."
Results presentation today
There will be a presentation for sell side analysts at 9.00 a.m. today, 25
March 2024. Please contact Buchanan for details on octopus@buchanan.uk.com
For further information please contact:
Octopus Energy Generation (Investment Manager) Via Buchanan
Chris Gaydon, David Bird
Peel Hunt (Broker) 020 7418 8900
Liz Yong, Luke Simpson, Huw Jeremy (Investment Banking)
Alex Howe, Chris Bunstead, Ed Welsby, Richard Harris, Michael Bateman (Sales)
Buchanan (Financial PR) 020 7466 5000
Charles Ryland, George Beale, Sam Adams
octopus@buchanan.uk.com
Apex Listed Companies Services (UK) Limited (Company Secretary) 020 3327 9720
Notes:
1. The dividend target stated is a target only and not a profit
forecast. There can be no assurance that it will be met or that the Company
will make any distributions at all and it should not be taken as an indication
of the Company's expected future results. Accordingly, potential investors
should not place any reliance on this target in deciding whether or not to
invest in the Company and should decide for themselves whether or not the
target dividend is reasonable or achievable. Investors should note that
references to "dividends" and "distributions" are intended to cover both
dividend income and income which is designated as an interest distribution
for UK tax purposes and therefore subject to the interest streaming regime
applicable to investment trusts.
2. A measure of total asset value including debt held in
unconsolidated subsidiaries, but excluding any outstanding equity or debt
commitments.
3. Total Shareholder return since IPO stated in sterling, including
dividends reinvested, from 9 December 2019 to 31 December 2023.
4. Dividend cover is calculated on the basis of actual (in respect of
FY 2023) and expected (in respect of subsequent financial years) total net
operational cash flows from the portfolio after debt service and Company and
intermediate holding company expenses.
5. Excludes conditional acquisitions, and excludes the Polish wind
assets that were sold during the period.
About Octopus Renewables Infrastructure Trust
Octopus Renewables Infrastructure Trust ("ORIT") is a closed-ended investment
company incorporated in England and Wales focused on providing investors with
an attractive and sustainable level of income returns, with an element of
capital growth, by investing in a diversified portfolio of renewable energy
assets in Europe and Australia. ORIT's investment manager is Octopus Energy
Generation.
Further details can be found at www.octopusrenewablesinfrastructure.com
(http://www.octopusrenewablesinfrastructure.com/)
About Octopus Energy Generation
Octopus Energy Generation is driving the renewable energy agenda by building
green power for the future. Its specialist renewable energy fund management
team invests in renewable energy assets and broader projects helping the
energy transition, across operational, construction and development stages.
The team was set up in 2010 based on the belief that investors can play a
vital role in accelerating the shift to a future powered by renewable energy.
It has a 13-year track record with approximately £6.7 billion of assets under
management (AUM) (as of 31 December 2023) across 19 countries and total 3.7GW.
These renewable projects generate enough green energy to power 2.4 million
homes every year, the equivalent of taking over 1.4 million petrol cars off
the road. Octopus Energy Generation is the trading name of Octopus Renewables
Limited.
Further details can be found at www.octopusenergygeneration.com
(http://www.octopusenergygeneration.com/)
About the Company
Octopus Renewables Infrastructure Trust plc ("ORIT" or the "Company") is a
closed-ended investment company incorporated in England and Wales.
The Company's purpose and investment objective is to provide investors with an
attractive and sustainable level of income returns, with an element of capital
growth, by investing in a diversified portfolio of Renewable Energy Assets in
Europe and Australia.
ORIT classifies itself as an impact fund with a core impact objective of
accelerating the transition to net zero through its investments. ORIT's
ordinary shares were admitted to the Official List of the Financial Conduct
Authority and to trading on the premium listing segment of the main market of
the London Stock Exchange on 10 December 2019.
The IPO raised total gross proceeds of £350 million, and subsequently the
Company raised an additional £224 million of equity in two oversubscribed
fundraisings held in July 2021 and December 2021. As a result, ORIT has raised
a total of £574 million to date.
ORIT is managed by one of the largest renewable energy investors in Europe,
Octopus Energy Generation (the "Investment Manager").
Investment Strategy Overview
ORIT seeks to achieve its objectives in four ways:
Diversification of Renewable Assets Inclusion of Construction and Development Active Construction and Asset Management Embedding Impact into Investments
Why we are different
01 Expert management
Our Investment Manager's team of over 135 renewable specialists brings
unrivalled expertise
02 Diversified Portfolio
We manage risk and volatility through geographic diversification across Europe
and the UK and technological diversification
03 Added Value
We seek to enhance returns and promote additionality through strategic
construction allocation
04 Unlocking Optionality
Our developer investments provide access to a proprietary pipeline which we
have the right, but not the obligation to fund. This offers valuable
optionality
05 Sustainable Investing
We prioritise Impact and ESG factors across all our investments. ORIT is an
SFDR Article 9 product, embodying sustainable practices
Highlights
For the year ended 31 December 2023
Financial highlights
-4.4% 6.7% 2.1% 28.6%
Total shareholder return Total shareholder return Net Asset Value ("NAV") NAV total return since
in the year(1, 2) since IPO (1.6% per annum)(1, 2) total return IPO (6.4% per
(2022: -5.4%(3)) (2022: +11.6%, 3.6% per in the year(1, 2, 4) annum)(1, 2, 4)
annum(3)) (2022: +12.4%(3)) (2022: +25.9%, 7.8% per annum)
£599m 106.0p £980m £1,127m
NAV(4) NAV per Ordinary Share(4) Gross Asset Value Total value of all
(2022: £618m) (2022: 109.4p) ("GAV")(1, 5) investments(1, 6)
(2022: £1,073m) (2022: £1,304m)
£508m 5.79p 1.18x 10.5%
Market capitalisation Dividend per Ordinary Dividend cover(7) 2023 dividend growth vs
as at 31 December 2023 Share for FY 2023 In line (2022: 1.77x) 2022
(As at 31 December 2022: with target (2022 vs 2021: 4.8%)
£565m) (FY 2022: 5.24p in line
with target)
39%
Total leverage(8)
(2022: 42%)
Alternative Performance Measures ("APMs")
The financial information and performance data highlighted in footnote (1)
below form part of the APMs of the Company. Definitions of these APMs together
with how these measures have been calculated can be found in the Company's
Annual Report.
(1) These are alternative performance measures.
(2) Total returns in sterling, including dividends reinvested.
(3) Restated from December 2022 KPI reported in the FY 2022
Annual Report.
(4) The Net Asset Value as at 31 December 2023 is calculated on
the basis of 564,927,536 Ordinary Shares in issue.
(5) A measure of total asset value including debt held in
unconsolidated subsidiaries.
(6) Total asset value including total debt and equity
commitments.
(7) Dividend cover for FY 2023 is calculated on the basis of
actual total net operational cash flows from the portfolio after debt service
and Company and intermediate holding company expenses.
(8) Total debt drawn (short-term and long-term) as a percentage of
Gross Asset Value.
Operational and ESG highlights
37(9)/41 ((incl. Irish solar assets)*) 5 609(9)MW/
Number of assets as at 31 December 2023 Number of technologies(10) 808MW( (incl. Irish solar assets)*)
Capacity owned as at 31 December 2023
1,312GWh/ 366k/ 355k/
1,427GWh ((incl. Irish solar assets)*) 402k ((incl. Irish solar assets)*) 379k( (incl. Irish solar assets)*)
Renewable electricity generated in the year(11) Equivalent tonnes of carbon avoided for the year(12) Equivalent homes powered by clean energy for the year(13)
1,569GWh 400k 384k
Potential annual renewable electricity generated once fully operational(14) Estimated annual equivalent tonnes of carbon avoided once fully Estimated annual equivalent homes
operational(12, 14)
(2022: 1,740GWh)
powered by clean energy once fully
(2022: 580k)
operational(13, 14)
(2022: 522k)
(* ) Includes 4 Irish solar assets acquired post year-end
Note: Renewable electricity generated in the year, equivalent tonnes of carbon
avoided for the year and equivalent homes powered by clean energy for the year
are new for the 2023 reporting period.
(9) Excludes: i) Polish wind assets which were sold during FY
2023; ii) the Spanish solar assets, the option over which was terminated in FY
2023; iii) the Irish solar assets which were subject to conditional
acquisition at 31 December 2023 and were acquired shortly after year end. Each
developer investment is counted as a single asset.
(10) Including technologies for operational and construction stage
assets and technologies covered through developer investments: onshore wind,
offshore wind, solar, battery storage and hydrogen.
(11) Calculated using renewable energy generated by the investment
portfolio during the reporting period, proportioned by equity ownership. It
includes generation from the Polish wind assets up to the 30(th) June 2023
locked box date that was applied in the sale transaction.
(12) Calculated using the 2021 International Financial
Institution's approach for Common Default Grid Emission factors
see.https://unfccc.int/sites/default/files/resource/IFITWG_Methodological_approach_to_common_dataset.pdf.
Reference updated in January 2024 from 2019 to 2021 to reflect most recent
emission factors available. Includes generation from the Polish wind assets up
to the 30(th) June 2023 locked box date that was applied in the sale
transaction.
(13) Equivalent homes powered by clean energy are calculated based on
most recent average household electricity usage values provided by Ofgem (UK)
and Odyssee (EU). References and methodology updated in January 2024. Includes
generation from the Polish wind assets up to the 30(th) June 2023 locked box
date that was applied in the sale transaction.
(14) All metrics are calculated based on an estimated annual
renewable energy generation of the investment portfolio once fully operational
(including Irish conditional acquisition and excluding the exited assets in
Poland and Spain) and on the basis of ORIT's equity stake. Metric is based on
"P50" yield assumptions for the next available full operational year,
including degradation that occurs naturally over the assets' lifetimes.
Equivalent tonnes of carbon avoided are calculated using the 2021
International Financial Institution's approach for Common Default Grid
Emission factors
(https://unfccc.int/sites/default/files/resource/IFITWG_Methodological_approach_to_common_dataset.pdf).
Reference updated in January 2024 from 2019 to 2021 to reflect most recent
emission factors available. Equivalent homes powered by clean energy are
calculated based on most recent average household electricity usage values
provided by Ofgem (UK) and Odyssee (EU). References and methodology updated in
January 2024.
Highlights
Company Results Summary
FY23 FY22 FY21 Oct-19
to Dec-20(15)
Share Price as at 31-Dec 90.0p 100.0p 110.8p 113.8p
Profit and total comprehensive income for the year £12.7m £69.8m £34.8m £8.3m
Earnings per share 2.24p 12.36p 8.20p 2.75p
NAV £599.0m £618.3m £577.7m £343.9m
NAV per share 106.0p 109.4p 102.3p 98.3p
Total declared dividend per share 5.79p 5.24p 5.0p 3.18p
Declared dividends per share since IPO 19.21p 13.42p 8.18p 3.18p
Total shareholder return in the year -4.4% -5.4% 1.7% 7.8%
Total shareholder return since IPO 6.7% 11.6% 17.7% 16.0%
NAV total return in the year 2.1% 12.4% 9.3% 2.5%
NAV total return since IPO 28.6% 25.9% 12.1% 2.4%
(15)First accounting period from launch to 31 December 2020.
Key milestones during 2023
1
January 2023
Completed the acquisition of a 50% stake in Woburn Road, a 12MW/24MWh
ready-to-build battery storage project in Bedfordshire, UK
2
February 2023
Refinanced and increased the multi-currency RCF to £270.8m at an improved
margin of 2.0%, extending maturity to February 2026
3
March 2023
Secured a 10-year inflation-linked fixed price PPA for 67MW Breach solar
project in the UK, Breach Solar Farm, which is currently under construction
4
April 2023
Invested into HYRO Energy Limited, ("HYRO") a new joint venture between ORIT,
Sky (a private fund managed by Octopus Energy Generation) and renewable energy
company, RES, to develop green hydrogen electrolysis projects
5
June 2023
Appointment of Sarim Sheikh as an Independent Non-Executive Director of the
Company with effect from 1 June 2023
6
July 2023
Agreed to invest in a new development business, focused on creating new
ground-mounted solar and co-located battery assets in the UK, with exclusive
development services from BLC Energy Limited ("BLCe")
7
September 2023
Announcement of the Cumberhead Wind Farm Community Benefits Fund's first-round
awardees for social initiatives in the Coalburn and Lesmahagow areas (50% of
the Community Fund). The Community Fund is worth a total of £250,000 per year
for 30 years
8
December 2023
HYRO developer platform secures a CfD from the Department for Energy Security
and Net Zero for a 15MW hydrogen electrolyser project
9
December 2023
Completed the sale of the two wind farms in Poland to an affiliate of the
Polish-based listed multi-energy company, Orlen S.A.
10
December 2023
Launch of a voluntary Community Benefits Fund around the two onshore wind
farms in Southwest Finland, Saunamaa and Suolakangas, to support the local
community
11
December 2023
Successful exit from option to acquire 175MW of ready-to-build solar projects
in Spain at above holding value
12
Post-year end
Completed the acquisition of four newly-constructed solar farms in Ireland
totalling 199MW, referred to as the Ballymacarney solar complex. A fifth
(extension) site called Harlockstown is currently under construction
Portfolio at a glance
Geographical overview
Total number of assets(16)
37
Total capacity(16)
609 MW
(16) Excludes: i) Polish wind assets which were sold during FY2023;
ii) the Spanish solar assets, the option over which was terminated in FY2023;
iii) the Irish solar assets which were subject to conditional acquisition at
31 December 2023 and were acquired shortly after year end. Each developer
investment is counted as a single asset.
Portfolio overview
Technology Country Sites Capacity Average asset Status Key information
(MW)(17)
life remaining
(years)
Onshore wind Sweden 1 48 27.5 Operational Corporate PPA
France 1 24 28.9 Operational French CfD
UK 1 50 29.2 Operational Corporate PPA
UK 1 23 27.5 Operational Fixed pricing until end of 2025
Germany 1 35 28.7 Operational German CfD
Finland 2 71 27.8 Operational Fixed pricing until end of 2025
Offshore wind UK 1 42 25.0 Operational ROC Subsidised
Solar UK 8 123 24.4 Operational ROC Subsidised
UK 1 67 40.0 Construction Expected to be operational
in Q2 2024
France 14 120 28.4 Operational FiT Subsidised
Ireland 4 199 40.0 Acquired 1st 4 assets operational since Q4 2023(18)
post-year end
Ireland 1 42 40.0 Conditional Acquisition Fifth site expected to be
operational in Q3 2024
Battery UK 1 6 35.0 Construction Expected to be operational
in Q1 2025
Developers Ireland n/a n/a n/a Developer Floating offshore wind
UK n/a n/a n/a Development pipeline Onshore wind
UK n/a n/a n/a Developer Hydrogen
UK n/a n/a n/a Exclusive development services Solar/co-located battery storage
agreement
Finland n/a n/a n/a Exclusive development services Onshore wind/Solar
agreement
(17) Pro-rated by ownership.
(18) 199MW of construction have been completed while under
conditional acquisition status; ORIT has actively provided oversight of the
construction.
Chair's Statement
Philip Austin MBE
Chair,
Octopus Renewables Infrastructure Trust plc
On behalf of the Board, I am pleased to present this annual report for Octopus
Renewables Infrastructure Trust plc for the year ended 31 December 2023 (the
"Annual Report").
2023 was another interesting year in both the energy markets and investment
trust sector. Whilst the argument for investing in renewable energy is more
compelling than ever given the renewed spotlight on energy security,
affordability and the alignment to global efforts to combat climate change, we
realise that the Company's share price over the year will have been
disappointing to shareholders. Discounts to Net Asset Value have continued to
widen following the end of the year, and the Board is deeply aware of the need
both to ensure a sound approach to capital allocation and to manage the
discount. To date the proceeds of asset disposals have been used by the
Company to reduce the level of short-term borrowings within the Group; with
further sales proceeds expected to be received during 2024, the Board will
consider all options for further capital allocation, including share
buy-backs, depending on the prevailing market conditions at the time.
The difficult macroeconomic conditions which included falling power prices and
a relatively poor year for wind speeds in much of Europe have contributed to a
more challenging year for portfolio performance. Nevertheless, we believe that
ORIT's diversified portfolio, having a high proportion of fixed price revenues
in the near term and strong inflation linkage, showed relative strength over
the year. The Company has succeeded in delivering its target dividend for the
year of 5.79 pence per Ordinary Share and we have also announced an increase
in the Company's target dividend for 2024, marking the third consecutive year
the Company has increased its dividend target in line with inflation.
In addition to the investment activities, we strengthened the Board of
Directors through the recruitment of Sarim Sheikh, an experienced renewables
professional. We also re-designed and launched an improved website that better
serves our investors and other stakeholders, and also delivered a
well-received, inaugural Capital Markets Day in which we highlighted the
Company's strategic objectives and the strength and depth of our team.
I have set out below some of our other notable achievements.
Investment Activity and Capital Recycling
During the year, the Company completed the acquisition of its 50% share in the
12MW/24MWh Woburn Road battery storage construction project(19), alongside
another OEGEN-managed private fund, Sky. The Company also added two exciting
new UK-focussed development companies to the portfolio: a vehicle serviced by
BLC Energy ('BLCe'), which develops ground-mounted solar and co-located
battery storage; and HYRO, a joint venture between ORIT, Sky and the
developer, RES, which will develop green electrolysis projects for industrial
hydrogen supply. These acquisitions now mean that developer investments
represent 3.6% of the Company's portfolio (on a total value of all investments
basis) as at 31 December 2023.
(19) The Woburn Road transaction was signed in June 2022 and
completed in January 2023.
ORIT's investment objective includes delivering an element of capital growth
to investors, and successfully managing assets through construction is one key
way in which this growth can be achieved. However by early 2023, over 90% of
ORIT's portfolio was operational on a total value of all investments basis,
and the Company therefore commenced a strategic capital recycling programme.
Releasing capital from operational assets will allow the company to repay
short‑term debt and potentially reallocate capital to construction or
development stage investments, or other uses which could deliver greater NAV
accretion compared to remaining invested in a fully operational portfolio. In
December the Company completed the sale of its two Polish onshore wind farms
totalling 59MW, delivering an IRR of approximately 30% over the lifetime of
ORIT's investment. In addition, after having renegotiated the contingent
acquisition of the four Spanish solar assets (totalling 175MW) in March 2023
to no longer having an obligation but, instead, an option to acquire the
assets once they reach ready-to-build status, ORIT made the strategic decision
to terminate that option and negotiated a termination payment from the vendor.
Together, these transactions generated a 3.1 pence per Ordinary share NAV
uplift demonstrating the robustness of the Company's valuations and the
continued demand for these assets in the market. Further details are provided
in the capital recycling programme section of the Company's Annual Report.
ORIT is seeing good progress in other capital recycling activities which are
expected to be completed during 2024.
Revenue Management
We have continued to utilise Octopus Energy Generation's expertise to fix
revenues with high quality counterparties at an appropriate level for the
portfolio. Breach Solar Farm was acquired in 2022 without any fixed revenue
arrangement, but in January 2023 ORIT successfully entered into an
inflation-linked PPA with Iceland Foods to power c.14% of the electricity
requirements of their total UK estate of c.1,000 stores. The contract
increased the portfolio's overall fixed revenue percentage on a two-year
look-forward basis by 3 percentage points, and gave rise to a NAV uplift of
1.9% compared to the merchant power price case. The Iceland Foods PPA now sits
alongside other corporate offtake arrangements in the portfolio with Owens
Corning (at Ljungbyholm wind farm), Kimberley Clark (at Cumberhead wind farm)
and Microsoft (at the Ballymacarney solar complex).
Construction
In Q1 2023 the Company completed the construction of the 50MW Cumberhead
onshore wind farm, the largest project in ORIT's onshore wind portfolio. ORIT
has also provided oversight of the construction of the 199MW, four-site
Ballymacarney solar complex in Ireland, which became fully operational in 2023
and was subsequently acquired in February 2024. As at 31 December 2023, 73MW
of capacity (by pro-rata ownership) was still in construction at the 67MW
Breach solar farm and 12MW/24MWh (50% stake) Woburn Road battery storage site.
In addition to this, the Company is monitoring the construction of the 42MW
Harlockstown extension to the Ballymacarney solar complex in Ireland which is
nearing completion, with this site expected to be acquired in Q3 2024
following commencement of full operations.
Portfolio Performance
During 2023 the Company's assets generated 1,110GWh of electricity, an
increase of 10% compared with the previous year, but 14% below budget. The
generation increase in 2023, compared to 2022, was driven by the contribution
from the first full year of operations at Cerisou (France) and Crossdykes (UK)
onshore wind assets, in addition to the start of operations of Cumberhead wind
farm which completed its construction in March 2023. This was offset by the
reduced generation after the sale of the Polish wind assets, and the fact that
onshore wind generation was 20% below budget, largely due to low wind speeds.
Production from solar and offshore wind assets was roughly in line with
expectations. Combined with the impact of declining power prices, the lower
wind speeds meant that as a whole the EBITDA for 2023 was 24% below budget. A
full breakdown of the portfolio's performance is included in the Company's
Annual Report.
Results
During the year NAV fell from £618.3 million (109.4 pence per Ordinary share)
to £599.0 million (106.0 pence per Ordinary share). However, in combination
with the dividends paid during the year, the Company delivered a NAV total
return of 2.1%. The decrease in NAV over the year was driven primarily by
falling power price and inflation forecasts, coupled with increases applied to
discount rates. We have materially mitigated the impact of power price
reduction forecasts through building a portfolio with a high proportion of
fixed power revenues (as at 31 December 2023, 81% of ORIT's revenues for the
two years to 31 December 2025 were fixed price in nature).
Total shareholder return for the year was -4.4%, as share prices across the
sector continued to fall against a backdrop of high inflation and high
interest rates - though we would highlight that the Company's share price
maintained a narrower discount to NAV compared to most of its peers across the
majority of the year.
The Company's operating income for the year was £19.7 million (inclusive of
-£23.0 million movement in fair value of investments), giving rise to a
profit for the year of £12.7 million. This was underpinned by EBITDA from the
portfolio of operational assets totalling £73.8 million, arising from gross
revenues of £117.4 million.
Dividends
The Company made four dividend payments totalling 5.79 pence per ordinary
share for the financial year to 31 December 2023, meeting its FY 2023 dividend
target in full and representing a 10.5% increase on FY 2022's dividend, in
line with inflation. The dividend is fully covered by cashflows arising from
the Company's portfolio of assets. As announced on 18 January 2024, and in
line with the Company's dividend policy, the target for the financial year
from 1 January 2024 to 31 December 2024 is 6.02 pence per Ordinary Share.
This increase of 4.0% over FY 2023's dividend is in line with the increase to
the Consumer Price Index (CPI) for the 12 months to 31 December 2023, and
marks the third consecutive year the Company has chosen to increase its
dividend target in line with inflation. The FY 2024 dividend target is
expected to be fully covered by cashflows generated from the Company's
operating portfolio.
Impact highlights
In 2023, ORIT continued its commitment to its ESG & Impact Strategy,
achieving a total portfolio impact of 366,400 tCO(2)e avoided, directly
contributing to global climate change mitigation. Once the construction
projects mentioned earlier are complete, ORIT's portfolio is expected to
generate sufficient electricity to power 384,000 homes. This generation will
avoid CO(2) emissions of approximately 400 kilo-tonnes per annum, the
equivalent of planting 2 million trees.
The year also saw ORIT allocate over £300,000 from its annual impact budget,
supporting initiatives with Impact Partners such as SUGi, the Good Bee
Company, Earth Energy Education, and BizGive. This budget is in addition to
the c.£600,000 agreed as community benefit funds for some of ORIT's assets.
The impact budget supported the delivery of a number of educational workshops,
job programmes, forest plantings and more.
Outlook
Despite the market challenges experienced in the investment trust sector
during 2023 which have persisted into 2024, the fundamental driving forces
behind clean energy investment are stronger than ever. The successful exit of
the Polish assets has shown that the Company's valuations are robust, and if,
as appears likely, the interest rate cycle has neared its peak, we would
expect the merits of investing in a high-quality, diversified portfolio of
renewable energy assets delivering attractive income to come to the fore once
more.
Finally, at the end of 2023, ORIT announced its desire to explore a
combination with Aquila European Renewables plc. The Board and I believe that
a larger, more liquid combined vehicle would benefit both sets of shareholders
and help address some of the continuing challenges in the investment trust
sector. Whether or not such a combination proceeds, we will continue to review
the options available to the Company to best enable it to deliver on our
investment objective, mindful of the need to act in the interests of
shareholders as a whole.
Strategic Report
The Directors present the Strategic Report for the year ended 31 December 2023
in the Company's Annual Report.
Operating Model, Objectives and KPIs
Structure and operating model
Key facets of the Company are as follows, which should be read together with
the structural representation in the Company's Annual Report.
Listed investment trust: Octopus Renewables Infrastructure Trust plc was
incorporated on 11 October 2019 as a public company limited by shares. The
Company intends to carry on business as an investment trust within the meaning
of section 1158 of the Corporation Tax Act 2010 and was listed on the premium
segment of the main market of the London Stock Exchange on 10 December 2019.
Return objective to shareholders: The Company's investment objective is to
provide investors with an attractive and sustainable level of income returns,
with an element of capital growth, by investing in a diversified portfolio of
Renewable Energy Assets in Europe and Australia. Investment into the Ordinary
Shares of the Company is designed to be suitable for institutional investors
and professionally advised private investors. Such an investment may also be
suitable for investors who are financially sophisticated, non-advised private
investors who are capable of evaluating the risks and merits of such an
investment and who have sufficient resources to bear any loss which may result
from such an investment.
ORIT's entities: The Company holds and manages its investments through a
parent holding company, ORIT Holdings II Limited and two holding company
subsidiaries, ORIT Holdings Limited and ORIT UK Acquisitions Limited (together
the "intermediate holding companies"), which in turn hold investments via a
number of Special Purpose Vehicles ("SPVs"). The jurisdictions in which the
SPVs are incorporated is typically determined by the location of the assets,
and further portfolio-level holding companies may be used to facilitate debt
financings or other commercial objectives.
Board of Directors: The Company has an independent board of non-executive
directors, responsible for the determination of the Company's investment
policy and strategy. It has overall responsibility for the Company's
activities including the review of investment activity and performance and the
control and supervision of the Company's service providers, and is also
responsible for the final investment decisions.
Investment Manager: The Company has appointed Octopus AIF Management Limited
("OAIFM") as its Alternative Investment Fund Manager ("AIFM") to provide
portfolio and risk management services to the Company. The AIFM has delegated
the provision of portfolio management services to the Investment Manager,
Octopus Renewables Limited, whose trading name is Octopus Energy Generation
("OEGEN"). OEGEN has day to day portfolio management responsibilities. Further
information on the Investment Manager is provided in the Investment Manager's
Report.
Third-party providers: As an investment trust, the Company does not have any
employees and is reliant on its third-party service providers for some of its
operational and service requirements. Likewise, the project company SPVs
generally do not have any employees and services to those entities (and,
sometimes, the holding companies) are also provided through third-party
providers. Each service provider has an established track record and has in
place suitable policies and procedures to ensure they maintain high standards
of business conduct and corporate governance.
Key dates: The Company has a 31 December financial year end and announces
half-year results in September and full-year results in March. The Company
pays dividends quarterly, targeting payments in February, May, August and
November each year.
Company structure and operating model
·
Octopus AIF Management
Shareholders
Independent Board of Non-Executive Directors Octopus Renewables Infrastructure Trust plc, Company Service Providers
Listed on the premium segment of the
Main Market of the LSE · Broker: Peel Hunt
· Fund Administrator and Company Secretary: Apex Listed Companies
Services
· Depository: BNP Paribas
· Registrar: Computershare
· Auditor: PwC
· PR Advisor: Buchanan
· Tax Advisor: BDO
· Legal: Gowling WLG
AIFM
Investment Manager
Octopus Energy Generation
Debt Providers ORIT Holdings ll Ltd
Revolving
Credit Facility
ORIT Holdings Ltd ORIT UK
Acquisitions Ltd
Debt Providers Non-UK SPVs UK SPVs Asset Service Providers
Short-Term Facility(20) · External Asset Managers
Asset level Debt · Operations & Maintenance ("O&M") contractors
· Engineering, Procurement and Construction ("EPC") contractors
· Specialist consultants
Portfolio investments held in SPVs(21)
(20) Repaid during the year.
(21) Some investments in SPVs may be held indirectly through
portfolio-level holding companies
Investment and asset management process
Origination
Initial phase to identify and secure investment opportunities, involving
comprehensive market research, deal sourcing through industry connections,
initial screening to assess potential investments, rigorous due diligence to
uncover risks and validate the investment's viability, and finally,
negotiation to agree on terms and secure the investment.
Investment
Structuring the investment to balance risk and return, including setting up
financial vehicles like SPVs, arranging financing, and optimising tax
benefits, while aligning with the Company's strategic goals and regulatory
requirements.
Development - Construction (Optional)
As part of its Investment Policy, ORIT can invest at the development or
construction stage of the renewable assets. This may include project planning,
securing necessary permits, managing the construction process, and ensuring
the asset is built to specification and ready for operation.
Asset Management & Value Creation
The Company manages operational assets to maximise performance and value. This
involves operational oversight, regular maintenance, and strategic initiatives
to enhance efficiency and profitability and increase the asset's value over
time. In addition, the Investment Manager looks to enhance revenue strategies
through appropriate PPA structuring and origination.
Ongoing Portfolio Optimisation and Capital Allocation
The Company evaluates its assets regularly, taking into account market
conditions, asset performance, operating cash flows and diversification across
the portfolio. Where appropriate the Company may initiate sales of certain
assets as part of its capital recycling programme.
The Company considers capital management and allocation on an ongoing basis,
including share buy-backs, depending on the prevailing market conditions at
the time.
Objectives and KPIs
The Company's objective is to provide investors with an attractive and
sustainable level of income returns, with an element of capital growth, by
investing in a diversified portfolio of Renewable Energy Assets in Europe and
Australia.
Financial Objectives
Objective KPI Performance commentary Monitoring activities
Sustainable level of income returns 5.79p Since inception the Company has declared a total dividend of 19.21 pence per The Board monitors dividend cover and ratios at each quarterly Board meeting
Ordinary Share, following a progressive dividend policy; each year fully against the targets and makes determinations on the dividends to be paid.
· Provide investors with a dividend of 5.79 pence per Ordinary dividend declared for the year per Ordinary Share, in line with target covered by operational cashflows.
Share for FY23, generated from operational cashflows
The Investment Manager actively manages operational performance of assets on
19.21p The 2023 dividend of 5.79p per Ordinary Share, a 10.5% increase on the 2022 an ongoing basis with actions taken to resolve and mitigate operational
dividend in line with CPI, was fully covered by operational cashflows at the issues.
total dividends declared per Ordinary Share since inception SPV level less costs at the plc and intermediate holding company levels.
Financial performance of assets is reviewed monthly by the Investment Manager.
£73.8m For FY 2024, the Company's dividend target is rising by 4.0% (in line with
CPI) to 6.02 pence per Ordinary Share.(22,23) Operational and financial performance is reviewed quarterly by the Board.
2023 EBITDA from underlying operational assets
EBITDA from operational assets was 24% below budget with the slight increased Any material issues would be highlighted to the Board without delay.
1.18x output compared with the prior year offset by declining power prices across
Europe.
Operational dividend cover
(22 ) Investors should note that references to "dividends" and
"distributions" are intended to cover both dividend income and income which is
designated as an interest distribution for UK tax purposes and therefore
subject to the interest streaming regime applicable to investment trusts.
(23 ) The dividend and return targets stated are targets only and
not profit forecasts. There can be no assurance that these targets will be
met, or that the Company will make any distributions at all, and they should
not be taken as an indication of the Company's expected future results. The
Company's actual returns will depend upon a number of factors, including but
not limited to the Company's net income and level of ongoing charges.
Accordingly, potential investors should not place any reliance on these
targets and should decide for themselves whether or not the target dividend
and target net total shareholder return are reasonable or achievable.
Objective KPI Performance commentary Monitoring activities
Capital preservation with element of growth 106.0p Decrease in NAV driven by falling power price and inflation forecasts, and The Board monitors both the NAV and share price performance and compares with
increases applied to discount rates. other similar investment trusts. A review of performance is undertaken at each
· Provide investors with a net total shareholder return of 7% to NAV per Ordinary Share at 31 Dec 2023
quarterly Board meeting and the reasons for relative under and over
8% per annum over the medium to long-term
The acquisitions in the year include ORIT's first battery storage project performance against various comparators is discussed. The Investment Manager
6.7% total, 1.6% annualised total shareholder return since IPO along with two investments in developer platforms including the first in evaluates and selects investment opportunities to deliver against the
· Generated through a diversified portfolio including construction
hydrogen projects through the HYRO platform, increasing the diversification of investment strategy and policy. Company level budgets are approved annually by
and development assets -4.4% total shareholder return in FY2023 ORIT's portfolio. the Board and actual spend is reviewed quarterly. Transaction budgets are
approved by the Board and potential abort exposure is carefully monitored.
· Cost control and prudent financial management 28.6% total, 6.4% annualised In the year ORIT initiated its capital recycling programme with the sale of
its two onshore wind farms in Poland and opted to terminate its option to
NAV total return since IPO acquire the solar projects in Spain.
2.1% NAV total return in the year Minor increase in the ongoing charges ratio to 1.16% (FY 2022: 1.12%), however
the result is better than expected figure of 1.18% as published in the latest
5 technologies (including hydrogen via developer investment) KID.
6 countries across Europe(24) Transaction costs incurred on acquisitions and sales in the year were below
expectations at 0.3%, compared to the latest KID indication of 0.5%.
3 new acquisitions(25) during FY 2023 across battery storage and developer
investments, and one post-year end with completion of the Ballymacarney Irish
solar complex acquisition
50MW of new capacity connected to the grid (Cumberhead), plus 199MW of
operational Irish solar acquired post year end.
3.1p per Ordinary share NAV uplift from capital recycling programme activities
1.16%
Ongoing charges ratio
0.3%
Transaction costs as percentage of NAV
(24) Including Ireland acquisition post-year end.
(25) Battery storage project (Woburn Road) transaction was signed in
2022 and completed in 2023.
Impact Objectives
Our core impact objective is to accelerate the transition to net zero through
our investments, building and operating a diversified portfolio of Renewable
Energy Assets to help facilitate the transition to a more sustainable future.
Our investments are long-term and therefore require a long-term view to be
taken both in the initial investment decisions and in the subsequent asset
management, adopting long-term and sustainable business practices.
Objective KPI
Performance:
Build and operate a diversified portfolio of Renewable Energy Assets, £1,127 million committed into renewables(26)
mitigating the risk of losses through robust governance structures, rigorous
due diligence, risk analysis and asset optimisation activities to deliver 1,569GWh of potential annual renewable energy generation, 105GWh of which will
investment return resilience be additional generation from constructing assets(27)
37 assets
Financial return metrics are shown in the Financial Objectives table
Planet:
Consider environmental factors to mitigate risks associated with the 400k tCO(2)e avoided(28)
construction and operation of assets, enhancing environmental potential where
possible 55.47 tCO(2)e per MW estimated carbon intensity (direct and indirect)
3.74 tCO(2)e/£m weighted average carbon intensity
553t worth of carbon purchased in Pending Issuance Units
100% investments qualify as sustainable in line with EU Taxonomy(29)
93% generating sites on renewable import tariffs
People:
Evaluate social considerations to mitigate risks and promote a 'Just 0 RIDDORs or equivalent relating to injuries on people(30)
Transition' to clean energy
7,827 students benefitting from social initiatives
>£600,000 per year of community benefit funds
>£300,000 impact budget in 2023
Further information on our ESG & Impact Strategy and performance against
our Impact Objectives can be found in the ESG & Impact section of the
Strategic Report and the Company's ESG & Impact Strategy published on our
website www.octopusrenewablesinfrastructure.com/investors/
(26 ) Amount shown is the total value of all investments, which
excludes the amount committed to assets which have subsequently been sold, and
also includes the impact of valuation movements since commitment.
(27 ) Metric calculated based on an estimated annual production
of the construction portfolio once fully constructed (including the Irish
solar sites acquired post year end).
(28 ) Metrics based on an estimated annual production of the
whole portfolio once fully constructed. Carbon avoided is calculated using the
International Financial Institution's approach for harmonised GHG accounting.
(29 ) 100% of investments are significantly contributing to
climate change mitigation.
(30 ) RIDDOR stands for the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations 2013 and these are reportable incidents to
the UK Health and Safety Executive.
Investment Strategy and Policy
Investment Strategy
The Company will seek to achieve its objectives in four ways:
Diversification: The Company's Investment Policy includes a broad mandate to
invest across different renewable technologies and in different geographies,
reducing concentration of risk in particular to power markets, regulatory
change or weather conditions as well as allowing the Company to access
investments from a large set of opportunities originated by the Investment
Manager.
Inclusion of construction and development: The Company has a diversified
portfolio of operational assets, which generate income, supporting the
Company's dividend. Also investing into Renewable Energy Assets at the
construction ready stage allows the opportunity for greater capital growth
through the successful management of construction risks and delivery of the
asset into operations, as well as increasing the ability to influence social
and environmental benefits. Investments into development stage Renewable
Energy Assets are limited to 5% of GAV and allows the Company access to a
wider range of renewable energy asset investment opportunities.
Active construction and asset management: The Company, via the Investment
Manager, takes an active role in ensuring site safety, in managing
construction risks and in seeking to enhance the value of the portfolio
through maximising generation, optimising the price received for generation,
dynamic risk management and controlling costs as well as longer term value
enhancements such as equipment upgrades or life extension.
Embedding impact into investments: As an Impact Fund the Company ensures that
social and environmental benefits are considered and maximised alongside
financial returns, both at the time of initial investment and throughout the
ongoing management of the portfolio.
Investment Policy
The Company will seek to achieve its investment objective through investment
in renewable energy assets in Europe and Australia, comprising (i)
predominantly assets which generate electricity from renewable energy sources,
with a particular focus on onshore and offshore wind farms and photovoltaic
solar ("solar PV") parks, and (ii) non-generation renewable energy related
assets and businesses (together "Renewable Energy Assets").
The Company may invest in operational, in-construction, construction ready or
development Renewable Energy Assets. In-construction or construction ready
Renewable Energy Assets are assets that have in place the required grid access
rights, land consents, planning and regulatory consents. Development Renewable
Energy Assets comprise projects that do not yet have in place the required
grid access rights, land consents, planning and regulatory consents, as well
as investments into development pipelines and developers ("Development
Renewable Energy Assets").
The Company intends to invest both in a geographically and technologically
diversified spread of Renewable Energy Assets and, over the long-term, it is
expected that investments: (i) located in the UK will represent less than 50
per cent. of the total value of all investments, (ii) in any single country
other than the UK will represent no more than 40 per cent. of the total value
of all investments, (iii) in onshore or offshore wind farms will not exceed 60
per cent. of the total value of all investments, and (iv) in solar PV parks
will not exceed 60 per cent. of the total value of all investments. For the
purposes of this paragraph, investments shall (i) be valued on an unlevered
basis, (ii) include amounts committed but not yet incurred and (iii) include
Cash and Cash Equivalents to the extent not already included in the value of
investments or amounts committed but not yet incurred.
The Company may acquire a mix of controlling and non-controlling interests in
Renewable Energy Assets and may use a range of investment instruments in the
pursuit of its investment objective, including but not limited to equity and
debt investments. A controlling interest is one where the Company's equity
interest in the Renewable Energy Asset is in excess of 50 per cent.
In circumstances where the Company does not hold a controlling interest in the
relevant investment, the Company will secure its shareholder rights through
contractual and other arrangements, to, inter alia, ensure that the Renewable
Energy Asset is operated and managed in a manner that is consistent with the
Company's investment policy.
Investments may be made into Development Renewable Energy Assets, which may be
developers, portfolios and/or pipelines of Development Renewable Energy
Assets, where the relevant investment: (i) includes limited exposure to
Renewable Energy Assets outside Europe and Australia, which at the time of
investment comprises both a minority of the assets in the relevant developer,
portfolio or pipeline by number and value and is less than 1 per cent. of
Gross Asset Value, and/or (ii) may include indirect exposure to ancillary
assets and/or businesses unrelated to renewable energy whose value is de
minimis as at the time of investment. The Company may retain an interest in
any such assets and/or businesses following achievement of construction ready
status.
Investment Restrictions
The Company aims to achieve diversification principally through investing in a
range of portfolio assets across a number of distinct geographies and a mix of
wind, solar and other technologies.
The Company will observe the following investment restrictions when making
investments:
· the Company may invest up to 32.5 per cent. of Gross Asset Value
in one single asset, up to 27.5 per cent. of Gross Asset Value in a second
single asset, and the Company's investment in any other single asset shall not
exceed 20 per cent. of Gross Asset Value, in each case calculated immediately
following each investment.
· the Company's portfolio will comprise no fewer than ten Renewable
Energy Assets.
· no more than 20 per cent. of Gross Asset Value, calculated
immediately following each investment, will be invested in Renewable Energy
Assets which are not onshore or offshore wind farms and solar PV parks.
· no more than 25 per cent. of Gross Asset Value, calculated
immediately following each investment, will be invested in assets in relation
to which the Company does not have a controlling interest.
· no more than 5 per cent. of Gross Asset Value, calculated
immediately following each investment, will be invested in Development
Renewable Energy Assets.
· the Company will not invest in other UK listed closed-ended
investment companies.
· neither the Company nor any of its subsidiaries will conduct any
trading activity which is significant in the context of the Group as a whole;
and
· no investments will be made in fossil fuel assets.
Compliance with the above restrictions will be measured at the time of
investment and non-compliance resulting from changes in the price or value of
assets following investment will not be considered as a breach of the
investment restrictions.
In addition to the above investment restrictions, following the Company
becoming fully invested and substantially fully geared (meaning for this
purpose borrowings by way of long-term structural debt of 35 per cent. of
Gross Asset Value) at the time of an investment or entry into an agreement
with an Offtaker, the aggregate value of the Company's investments in
Renewable Energy Assets under contract to any single Offtaker will not exceed
40 per cent. of Gross Asset Value.
The Company will hold its investments through one or more special purpose
vehicles owned in whole or in part by the Company either directly or
indirectly which will be used as the project company for the acquisition and
holding of a Renewable Energy Asset (an "SPV") and the investment
restrictions will be applied on a look-through basis.
For the purposes of the investment policy, "Gross Asset Value" means the
aggregate of (i) the fair value of the Company's underlying investments
(whether or not subsidiaries), valued on an unlevered basis, (ii) the
Company's proportionate share of the cash balances and cash equivalents of
assets and non-subsidiary companies in which the Company holds an interest and
(iii) other relevant assets and liabilities of the Company (including cash)
valued at fair value (other than third-party borrowings) to the extent not
included in (i) or (ii) above.
Borrowing Policy
The Company may make use of long-term limited recourse debt to facilitate the
acquisition or construction of Renewable Energy Assets to provide leverage for
those specific investments. The Company may also take on long-term structural
debt provided that at the time of drawing down (or acquiring) any new
long-term structural debt (including limited recourse debt), total long-term
structural debt will not exceed 40 per cent. of Gross Asset Value immediately
following drawing down (or acquiring) such debt. For the avoidance of doubt,
in calculating gearing, no account will be taken of any investment in
Renewable Energy Assets that are made by the Company by way of a debt
investment.
In addition, the Company may make use of short-term debt, such as a revolving
credit facility, to assist with the acquisition or construction of suitable
opportunities as and when they become available. Such short-term debt will be
subject to a separate gearing limit so as not to exceed 25 per cent. of Gross
Asset Value immediately following drawing down (or acquiring) any such
short-term debt.
The Company may employ gearing at the level of an SPV, any intermediate
subsidiary of the Company or the Company itself, and the limits on total
long-term structural debt and short-term debt shall apply on a consolidated
basis across the Company, the SPVs and any such intermediate holding entities
(but will not count any intra-Group debt).
In circumstances where these aforementioned limits are exceeded as a result of
gearing of one or more Renewable Energy Assets in which the Company has a
non-controlling interest, the borrowing restrictions will not be deemed to be
breached. However, in such circumstances, the matter will be brought to the
attention of the Board who will determine the appropriate course of action.
Currency and Hedging Policy
The Company can enter into hedging transactions for the purpose of efficient
portfolio management. In particular, the Company may engage in currency,
inflation, interest rates, electricity prices and commodity prices (including,
but not limited to, steel and gas) hedging. Any such hedging transactions will
not be undertaken for speculative purposes.
Cash Management
The Company may hold cash on deposit and may invest in cash equivalent
investments, which may include short-term investments in money market type
funds ("Cash and Cash Equivalents").
There is no restriction on the amount of Cash and Cash Equivalents that the
Company may hold and there may be times when it is appropriate for the Company
to have a significant Cash and Cash Equivalents position. For the avoidance of
doubt, the restrictions set out above in relation to investing in UK listed
closed-ended investment companies do not apply to money market type funds.
Changes to and Compliance with the Investment Policy
Any material changes to the Company's investment policy set out above will
require the approval of shareholders by way of an ordinary resolution at a
general meeting and the approval of the FCA.
In the event of a breach of the investment guidelines and the investment
restrictions set out above, the AIFM shall inform the Board upon becoming
aware of the same and if the Board considers the breach to be material,
notification will be made to a Regulatory Information Service.
Investment Manager's Report
Investment Manager: Octopus Energy Generation.
Octopus Energy Generation (trading name of Octopus Renewables Limited), part
of the Octopus Energy Group, is a specialist clean energy investment manager
with a mission to accelerate the transition to a future powered by renewable
energy.
£6.7bn
OEGEN AUM as at 31 December 2023(31)
19 countries
invested in since 2010(31)
>3.7GW
capacity managed
£2.7bn
Solar & wind construction(31)
>135
Renewable Energy Professionals
(31) Assets under management defined as the sum of Gross Asset Value
and capital committed to existing investments and signed (yet to be completed)
deals and excludes capital available, yet to be deployed. Number of countries
includes countries of assets under management, countries in which asset
investments have been exited, countries of head offices of developer company
investments, and countries of presence for OEGEN origination teams. Solar
& wind construction defined as total committed costs of assets either
currently in construction or constructed under OEGEN management. Some of these
assets are now operational within the portfolio.
Fund Managers
Chris Gaydon
Investment Director 20+ years of experience
Chris joined Octopus Energy Generation as an investment director in 2015 and
is a long-standing member of the OEGEN's Investment Committee and Leadership
Team which has led the growth in OEGEN's fund management business. Having
previously led OEGEN's Investment Team, Chris now focuses on the origination
of acquisition opportunities and fundraising, as well as strategic investments
in related sectors.
Prior to joining the Octopus Group, Chris was a business development director
at Falck Renewables where he had a range of roles, including in M&A and
leading greenfield development in France and Poland. Chris holds a Bachelor of
Commerce (Finance) degree and a Bachelor of Engineering (Chemical) degree from
the University of Sydney.
"This year has seen the team perform well in the face of challenging market
conditions. Construction projects have either reached completion or are making
significant progress, and an attractive PPA was secured at Breach solar farm,
boosting the proportion of fixed revenue in the portfolio. In addition, we
have expanded into new technologies through our inaugural investment into
battery storage as well as via a small investment into hydrogen through the
HYRO development platform. We also made a strategic decision to opt out of the
conditional solar acquisition option in Spain, in line with ORIT's capital
allocation strategy."
David Bird
Investment Director 15+ years of experience
David is an investment director who joined the Octopus Energy Generation team
in 2014 and works full-time on fund management for ORIT. As well as working in
the transaction team leading acquisitions and project finance debt raising in
the UK, France and Ireland, David has previously led the team responsible for
the management of OEGEN's bioenergy investments and has represented Octopus
Energy Generation on a number of industry panels convened by Ofgem, the GB
energy regulator.
Prior to joining the Octopus Group, David was a director at Walbrook Capital,
a boutique investment manager with a particular focus on renewables. He is a
chartered accountant having qualified at EY, and holds a Masters in
Mathematics from Oxford University.
"This year marked the initiation of ORIT's capital recycling programme and it
is gratifying to witness the successful conclusion of the programme's first
disposal in the sale of the two wind farms in Poland. The transaction
demonstrated the market's interest in ORIT's assets, corroborated our
conservative valuations, and proved our ability to add value through the
construction process. The majority of the proceeds from this sale enabled us
to pay off short-term debt. We look forward to reporting further results from
the capital recycling programme in due course.
At the end of 2023 ORIT also announced to the market its ambition to drive a
combination with Aquila European Renewables plc, which we believe would be an
attractive proposition for investors."
Investments and capital recycling programme
3 £7m £97m £1,127m
Investments made during the year(32) Total allocated capital to Total proceeds from Total value of all
Completion of Irish solar assets acquisition post‑year end new investments capital recycling investments
(includes future initiatives during the year
commitments)
Company Developments in 2023
Acquisitions
12MW/24MWh HYRO JV platform Developer platform serviced 199MW Irish Solar
Woburn Road, ready to build battery storage in the UK UK hydrogen developer platform by BLCe Post-year end acquisition of four newly constructed solar sites near Dublin
50% stake 25% stake UK solar and co-located batteries 100% stake
1st battery project investment 1st hydrogen investment 100% stake
Divestments
+2.8 +0.3 Further capital recycling projects ongoing
pence per pence per Ordinary Share
Ordinary Share NAV uplift
NAV uplift Exit of Spanish solar projects option (175MW)
Sale of two operational
Polish wind farms (59MW)
Debt management
39% leverage RCF refinancing Repaid short-term facility
(as % of GAV) Increased size to £270.8m and extended maturity to February 2026, reduced
margin to 2%
As at 31-Dec 2023, vs 42% 31-Dec 2022
(32) Includes the investment into the battery storage asset Woburn
Road which closed within the year in January 2023, with the initial commitment
having been made during 2022.
Revenue management
Signing of Breach solar PPA with Iceland Foods Start of Cumberhead wind PPA with Kimberly Clark Hedging of UK solar revenues
1.9% NAV uplift vs merchant power price case Offtake agreement is forecast to generate £75 million of fixed price revenues PPA with Total Energies for 5 years forecast to generate £14.8 million fixed
across the 10-year tenor of the PPA revenues, and fixed price CfD for 3 years generating £11.2 million fixed
Forecast £55 million in fixed price revenues(33) across the 10-year tenor of
revenues.
the PPA, increasing the fixed proportion of forecast revenues from the group's
operational assets on a 2-year look-forward basis by 3 percentage points Together these increase the proportion of fixed forecast revenues from the
group's operating assets on a 2-year look-forward basis by 4 percentage
points.
Construction
50MW 199MW 73MW 42MW
Construction completed at Cumberhead wind farm Construction completed at Ballymacarney Irish solar complex, under ORIT's 73MW in construction in portfolio (pro-rata by ownership) Construction of the fifth site at the Ballymacarney solar complex is underway.
oversight The site will be acquired once operational
Impact highlights
£300,000 £600,000
Impact budget Funding for local communities for specific projects
(33) This figure and the equivalent figure for the Cumberhead CPPA are
calculated based on P50 production, the fixed price and inflation assumptions.
Capital recycling programme
As announced in 2023, ORIT launched a capital recycling programme through
which the Company intends to sell a number of assets. Recycling assets in this
way also allows the Company to react to changing market conditions, for
example rising debt costs (because ORIT can use proceeds to pay down
short-term debt), and gives the Company further options for capital
allocation.
The assets included in the recycling programme have been selected such that
the portfolio remains balanced, and in order that the Company is able to
deliver on its objectives. Whilst the recycling programme is ongoing, ORIT has
completed the following components:
+2.8 pence per Ordinary Share NAV uplift
vs holding value at 30-Sep 2023
c.30% IRR
over the lifetime of ORIT's investment
Sale of Polish wind assets
In December 2023 ORIT completed the sale of the Krzecin and Kuslin wind farms
(totalling 59MW) in Poland to an affiliate of the Polish-based listed
multienergy company, Orlen S.A., realising net proceeds of approximately £92
million (7% of Total value of all Investments at 30 September 2023) - a 21%
premium over the holding value of the assets at the time of sale. The sale
resulted in a +2.8 pence per Ordinary Share uplift over the holding NAV prior
to the disposal and the realisation of an IRR of around 30% over the lifetime
of ORIT's investment. ORIT acquired these assets when they were in the
construction phase in October 2021, before managing the construction and
bringing the wind farms into operation in 2022. The exit of these assets at a
NAV-accretive value demonstrates ORIT's ability to add value through managing
construction risk, and also underlines the Company's conservative valuation
approach.
+0.3 pence per Ordinary Share NAV uplift
vs holding value at 30-Sep 2023
+0.5 pence per Ordinary Share total NAV uplift
over lifetime of investment
Exit of Spanish solar projects
ORIT elected to terminate its option to acquire 175MW of ready-to-build solar
projects in Spain. Agreements were signed in December 2023, but cash delivery
from the counterparty completed in January 2024.
We had originally entered into a conditional acquisition agreement over the
sites in 2020. However, having reassessed the projects on a risk-adjusted
basis and taking into account the Company's approach to capital allocation,
exiting the option at a value above the holding value was a more attractive
proposition than committing to the construction. In doing so, ORIT realised a
net gain of £3.0 million over the €2.0 million (c.£1.7 million) initial
deposit, or approximately £1.5 million over the £3.2 million holding
valuation prior to exit.
Further initiatives of the capital recycling programme remain in progress and
are expected to conclude in 2024.
Portfolio Breakdown (as at 31 December 2023, including construction assets)
The Company's portfolio of assets and are not segmented by technology, phase
or jurisdiction for the Company's reporting purposes.
Whole site Remaining
capacity Start of asset life
Technology Country Site name (MW) Phase operations (years) Stake %
Onshore wind UK Cumberhead 50 Construction 31/03/2023 29 100%
France Cerisou 24 Operational 15/11/2022 29 100%
Sweden Ljungbyholm 48 Operational 30/06/2021 27 100%
Finland Saunamaa 34 Operational 28/08/2021 28 100%
Suolokangas 38 Operational 29/12/2021 28 100%
Germany Leeskow 35 Operational 30/09/2022 29 100%
UK Crossdykes 46 Operational 30/06/2021 27 51%
Offshore wind UK Lincs 270 Operational 31/10/2013 25 15.5%
Solar UK Wilburton 2 (Mingay) 19 Operational 29/03/2014 20 100%
Abbots Ripton 25 Operational 28/03/2014 30 100%
Ermine Street 32 Operational 29/07/2014 21 100%
Penhale 4 Operational 08/03/2013 29 100%
Chisbon 12 Operational 03/05/2015 27 100%
Westerfield 13 Operational 25/03/2015 21 100%
Wiggin Hill 11 Operational 10/03/2015 16 100%
Ottringham 6 Operational 07/08/2013 31 100%
Breach 67 Construction - 40 100%
France Charleval 6 Operational 26/03/2013 29 100%
Cuges 7 Operational 17/04/2013 29 100%
Istres 8 Operational 18/06/2013 29 100%
La Verdière 6 Operational 27/06/2013 29 100%
Brignoles 5 Operational 26/06/2013 29 100%
Saint Antonin du Var 8 Operational 28/11/2013 30 100%
Chalmoux 10 Operational 01/08/2013 30 100%
lovi 1 6 Operational 17/07/2014 31 100%
lovi 3 6 Operational 17/07/2014 31 100%
Fontienne 10 Operational 02/07/2015 31 100%
Ollieres 1 12 Operational 19/03/2015 31 100%
Ollieres 2 11 Operational 19/03/2015 31 100%
Arsac 2 12 Operational 05/03/2015 18 100%
Arsac 5 12 Operational 30/01/2015 18 100%
Ireland Ballymacarney(34) 54 Acquired post year-end 18/12/2023 40 100%
Fidorfe(34) 68 Acquired post year-end 18/12/2023 40 100%
Muckerstown(34) 48 Acquired post year-end 18/12/2023 40 100%
Kilsallaghan(34) 29 Acquired post year-end 18/12/2023 40 100%
Harlockstown 42 Conditional acquisition - 40 100%
Battery UK Woburn Road 12 Construction - 35 50%
Developer UK (HQ) Wind 2 - Developer - - 25%
UK (HQ) HYRO - Developer - - 25%
Ireland (HQ) Simply Blue - Developer - - 19%
Finland (HQ) Norgen - Developer - - 50%
UK (HQ) BLCe serviced platform - Developer - - 100%
(34) Note that these four sites are sometimes (in this report and
elsewhere) collectively referred to as 'the Ballymacarney solar complex'. The
start of operations dates for these sites relates to the full commercial
operations date, including completion of technical test etc. However,
electricity production started in May 2023 (initially small volumes, before
ramp-up) and revenues have been generated for the benefit of ORIT since this
time through the commissioning phase.
Portfolio Breakdown (as at 31 December 2023, including construction assets)
310MW/509MW 251MW 42MW 6MW 5
Across 23 solar plants/across 27 solar plants including 4 Irish solar farms Across 7 onshore wind farms Across 1 offshore Across 1 battery Investments in Developers
wind farm storage plant
£1,127m
Total value of all investments
Country
UK: 40%
Ireland: 17%
France: 16%
Finland: 11%
Germany: 6%
Sweden: 6%
Developer: 4%
Technology
Solar: 44%
Onshore wind: 39%
Offshore wind: 13%
Developer: 4%
Battery storage: 0.2%
Asset phase
Operational: 92%
(34% from assets acquired at construction)
Construction: 6%
Developer: 4%
609MW
Capacity owned
Country
UK: 51%
France: 24%
Finland: 12%
Sweden: 8%
Germany: 6%
Technology
Solar: 51%
Onshore wind: 41%
Offshore wind: 7%
Battery storage: 3%
Asset phase
Operational: 88%
Construction: 12%
Portfolio performance
Operational portfolio technical and financial performance
This section reports on the performance of the Company's underlying
operational investments. The metrics which form part of the Alternative
Performance Measures are detailed in the Company's Annual Report.
For the financial year ending 31 December 2023, the Company's operational
portfolio generated 1,110GWh of electricity (2022: 1,005GWh), -14% vs budget
(-175GWh), largely due to grid curtailments and lower wind speeds which
impacted performance across the onshore wind assets.
Revenues of £117.4 million were achieved in the year (2022: £112.0m), -16%
vs budget, as the benefit of our increased output compared to 2022, was offset
by declining power prices across Europe. Opex of £43.6 million (2022:
£35.7m) was incurred in the year, 1% adverse to budget. The resulting total
EBITDA, across ORIT's operational portfolio, was £73.8 million (2022:
£76.3m), -24% vs budget.
2023 was the first full operational year for the onshore wind assets Cerisou
in France (24MW), for which ORIT managed the construction, and Crossdykes in
the UK (23MW pro-rata for ORIT's stake), which ORIT acquired in November 2022.
Cumberhead in the UK completed construction works and became fully operational
from 31 March 2023. The two Polish assets which were sold during the year to
31 December 2023 had a locked box date for the transaction of 30 June 2023.
On 1 February 2024, we successfully completed the acquisition of four newly
constructed solar farms located in Ireland and the pre-commissioning net
revenues, arising in 2023, have been secured for the benefit of ORIT. The
performance of these assets includes production and revenues generated since
May 2023 during the commissioning phase.
Including the performance from the Irish solar sites related to FY 2023, the
portfolio generated 1,224GWh during 2023, with revenues of £127.2 million and
EBITDA of £82.3 million.
Output Revenue Opex EBITDA
Operational portfolio 1,110GWh £117.4m £43.6m £73.8m
-14% vs budget -16% vs budget 1% adverse to budget -24% vs budget
+10% vs 2022 +5% vs 2022 22% increase vs 2022 -3% vs 2022
(2022: 1,005GWh) (2022: £112.0m) (2022: £35.7m) (2022: £76.3m)
Operational portfolio incl. post-year end acquisition of Irish solar 1,224GWh £127.2m £44.9m £82.3m
+10% vs above (115GWh) +8% vs above (£9.8 million) 3% increase vs above +11% vs above (£8.5 million)
+22% vs 2022 +14% vs 2022 (£1.3 million) +9% vs 2022
26% increase vs 2022
Solar (excluding Irish portfolio) 275GWh £35.2m £9.2m £26.0m
-1% vs budget -2% vs budget 3% adverse to -2% vs budget
(2022: 292GWh) (2022: £33.7m) budget (2022: £25.4m)
(2022: £8.3m)
Onshore wind 682GWh £42.7m £12.0m £30.7m
-20% vs budget -34% vs budget 4% favourable to -42% vs budget
(2022: 565GWh) (2022: £51.3m) budget (2022: £43.8m)
(2022: £7.5m)
Offshore wind 152GWh £39.5m £22.4m £17.0m
-1% vs budget +2% vs budget 6% adverse to -2% vs budget
(2022: 148GWh) (2022: £27.0m) budget (2022: £7.1m)
(2022: £19.9m)
Note: Totals may not add up due to rounding
Solar
The operational solar portfolio (22 sites across the UK and France(35))
generated 275GWh during 2023, -1% vs budget (‑3GWh). Higher than expected
irradiance (+12GWh) across both portfolios was offset by marginal production
losses due to site efficiency across the entire portfolio (-5GWh), as well as
outages of -10GWh, of which -8GWh (80% of lost production due to outages) was
due to a fire at one site in France, Saint-Antonin-du-Var ("SADV"). The
overwhelming majority of the revenue losses in 2023 due to the SADV fire are
expected to be recovered from insurance. Excluding the impact of the SADV
fire, the adjusted production of the portfolio would be 1% above budget
(+5GWh).
The solar portfolio generated revenues of £35.2 million for 2023, -2% vs
budget (£0.8 million). 23% of the variance to budget was due to under
production (£0.2 million), the remaining 77% was due to movement in energy
prices in the UK portfolio (£0.6 million) which is exposed to merchant
prices (the French solar portfolio benefits from 100% fixed revenues under
feed-in-tariffs). Revenues arising under fixed price contracts represented 84%
of total revenue from the UK and French solar portfolios for the year.
The portfolio realised an EBITDA of £26.0 million, -2% vs budget (£0.5
million) as a consequence of lower revenues, offset by savings on opex of 3%
(£0.3 million) in the French portfolio due to lower than expected O&M and
utilities costs. Total opex amounted to £9.2 million.
(35) Excluding Irish assets.
Onshore wind
In 2023, ORIT's onshore wind portfolio (9 sites across 6 countries in Europe,
including the Polish assets for the first 6 months to 30 June 2023(36))
generated 682GWh of renewable electricity, -20% (170 GWh) vs budget. This
underperformance can be primarily attributed to lower than projected wind
speeds (48% of the budget variance, 81GWh), with other main contributors being
externally imposed site curtailments due to negative pricing periods or
transmission grid constraints, (26% of the variance, 45GWh) and slower than
expected post-construction ramp-up at Cumberhead wind farm (15% of the
variance, 26GWh).
The projects benefit from various compensation schemes which protect the
portfolio from exposure to externally imposed curtailments and from
performance falling below the contracted thresholds under their turbine,
operating and maintenance agreements. The portfolio received compensation for
51GWh of lost production, of which 20GWh has been received in the year with
the remainder yet to be paid. This results in an adjusted production for the
year of 734GWh (+8% vs actual production, -14% vs budget).
The 50MW Cumberhead wind farm became operational mid-way through the year. We
had budgeted production for 2023 to be 98GWh, whereas actual production was
59GWh. Of the 39GWh shortfall, 26GWh (67%) can be attributed to the slower
than expected ramp-up time for the site to reach full operational capacity,
compensation against these production losses are under negotiation with the
turbine supplier. Since November 2023, Cumberhead is part of the National Grid
Balancing Mechanism scheme, and received compensation towards 4GWh (11%) of
curtailed production. The remaining 13GWh (33%) variance to the budgeted
production was due to the low wind speeds experienced.
Other main contributors to the reduced portfolio generation were the sites in
Finland and Germany, which suffered forced curtailment due to negative pricing
periods, resulting in a loss of 33GWh of production. This risk has been
actively managed by ORIT, securing compensation that is expected to recover
the equivalent of 27GWh.
The portfolio generated a total revenue of £42.7 million for 2023, -34% vs
budget (£22.4 million). Lower than expected production accounted for 61%
(£13.7 million) of the revenue decrease. A decrease in average power prices
vs budget in the Nordic region accounted for the remaining 39% (£8.8 million)
with £8.2 million attributable to Ljungbyholm, Sweden. Across France,
Germany, Poland, and the UK, the average power prices achieved were in line
with, or higher than, budget after accounting for revenues received for forced
curtailment.
The portfolio realised an EBITDA of £30.7 million, -42% vs budget (£22.0
million), as a consequence of the lower revenues achieved by the portfolio.
Overall opex amounted to £12.0 million, 4% favourable to budget (£0.4
million underspend).
(36) The two Polish assets which were sold during the year to 31
December 2023 had a locked box date for the transaction of 30 June 2023.
Offshore wind
The offshore wind portfolio (made up in entirety by ORIT's 15.5% stake of the
Lincs asset), produced 152GWh in 2023, ‑1% vs budget (-2GWh). Favourable
wind conditions (+2GWh), were offset by lower availability due to a number of
generator repairs being required (-3GWh).
Lincs generated revenues of £39.5 million, +2% vs budget (£0.9 million).
This was due to higher than budgeted average pricing across the various income
streams (£1.2 million), being partially offset by the lower production (£0.3
million).
EBITDA for 2023 totalled £17.0 million, -2% vs budget (£0.3 million), due to
additional Opex offsetting the revenue increase. Opex was £22.4 million, 6%
adverse to budget (£1.2 million), driven by increased O&M spend in the
year.
Asset management
Octopus Energy Generation actively manages the assets and follows a proactive
approach of identifying and mitigating risks to secure long-term performance
of its growing and increasingly diverse global portfolio of renewable energy
assets.
Case studies: 2023 solar asset management initiatives to deliver and manage
global growth and standardisation:
Scalable global asset management standards Development of standards and best practices to ensure consistent high Example: During 2023, OEGEN solar asset management team worked in partnership
standards of safety, asset performance, regulatory compliance. with Quintas Energy on ORIT UK solar portfolio to develop the Octopus Solar
Standards ("OSS") platform, a scalable platform for managing risk and
deploying strategy on global renewable energy portfolios and assuring the best
overall return on investment for investors. The platform has been successfully
implemented on the UK fleet and OEGEN is running a pilot project in 2024 for
the French portfolio alongside WPO (the asset manager).
Health, Ensuring health, safety & wellbeing is one of OEGEN's key values. This is Example: OEGEN hosted a H&S best practice full day seminar where all core
safety and wellbeing achieved by promoting a positive safety culture through collaboration, sharing counterparties on ORIT's solar portfolio (operations and asset managers)
best practices and implementing robust processes from tracking of information attended an in-person workshop focused on knowledge sharing and building a
to mitigating risk and investigating incidents. safety culture alongside their peers from other OEGEN-managed assets. The nine
counterparties who attended covered OEGEN's operations in solar across Europe
as well as the UK. The workshop was successful in sharing best practices and
identifying key areas for improvement with following on workstreams taking
place to help tackle industry challenges such as skills shortages in
renewables. This event has been considered as the first of its kind and was
highly rated by all the participants.
Smart management of maturing assets Maintaining performance of the portfolio as it matures following a Example: Following a small fire at Saint-Antonin-du-Var where degradation of
conservative and systematic approach consisting of a bespoke component risk the back of the panels had occurred, OEGEN negotiated replacement of the
strategy and standardisation solution for revamping. OEGEN carefully evaluates entire site's panels and installation of these from the manufacturer. The new
considerations between deferring capital expenditure for as long as feasible panels will not only resolve the historic degradation but also increase the
and implementing technical solutions to revamp the fleet in due course. installed capacity by 10%.
Expertise covers component risk assessment, asset health monitoring,
contingency planning, strategic spares management and engineering
capabilities.
Supply chain resilience Development of standards and best practices to ensure consistent high Example: The Investment Manager team has been proactively managing the supply
standards of safety, asset performance, regulatory compliance. chain risk across ORIT's UK solar portfolio and is the first player in the
market to have set up centralised spare parts platform with incomparable
levels of optimisation alongside RES. RES is responsible for storing in a
centralised warehouse an agreed stock of critical components (not included as
part of the on-site spare parts) regularly required to be replaced and usually
only available on long-lead times. The components are dispatched to site
within 48 hours of order placement. This initiative has been estimated to have
saved c.£400k in 2023 through avoiding interruption to operations.
Opportunistic improvements Invest opportunistically in technical or commercial solutions that could boost Example: The Investment Manager conducted a technical programme across ORIT's
the performance of the assets above the base case. The focus remains firmly on French solar portfolio to improve grid reliability with a new technology
mitigating downside risks and opportunistic improvements will be pursued only implemented between the site and the grid operator to allow rapid
where there is a compelling business case, and any downside risks can be communication and instant disconnections, which is expected to result in a
effectively mitigated. slight cost reduction for the portfolio.
Construction and development portfolio
Alongside operational assets investments that drive predictable cashflows and
support the dividend, ORIT values investments in construction and development
assets in order to actively participate in increasing the supply of renewable
energy generation portion, drive a cleaner future and deliver opportunities
for capital growth for investors.
Construction ORIT was set up with the ability to invest in assets at the construction
phase, leveraging the specialist skills and track record of the Investment
Manager in this area.
Investing into construction creates the opportunity to deliver Net Asset Value
growth from the reduction in discount rate which comes through successfully
managing construction risks. If managed well, it costs less to acquire a
ready-to-build project and fund the construction costs than it does to acquire
a fully operational project.
Investing at the construction stage also delivers greater positive impact, as
new clean generation capacity is added to the power network.
Construction achievements As at 31 December 2023, ORIT has invested in 7 assets at construction of which
5 have been completed (including the Polish wind farms exited during the year)
representing 181MW and resulting in a £14.8 million uplift to Net Asset Value
since inception.
Additionally, ORIT committed to 5 solar assets in construction in Ireland,
subject to the sites becoming operational. The first four sites, totalling
199MW, were completed and brought into operation during 2023 with ORIT
acquiring them post year end. The fifth additional site is under construction
and expected to become operational and be acquired by ORIT later this year.
The Investment Manager has actively provided oversight of the construction
across these sites.
The key achievement during the year was the completion the completion of the
Cumberhead wind farm construction of 50MW, the largest onshore windfarm asset
of ORIT's portfolio delivering a NAV uplift from December 2022 of +2.3 pence
per Ordinary Share. See the case study included within the Company's Annual
Report.
181MW
constructed
199MW
construction oversight
Status Technology Country Site name Capacity (MW, pro-rata for ORIT ownership) Date of acquisition Date of operations
Operational Onshore wind Sweden Ljungbyholm 48 Mar-2020 Jun-2021
Operational Onshore wind France Cerisou 24 Oct-2020 Nov-2022
Operational Onshore wind UK Cumberhead 50 Sep-2021 Mar-2023
Exited Onshore wind Poland Krzecin 19 Oct-2021 Feb-2022
Exited Onshore wind Poland Kuslin 40 Oct-2021 Dec-2022
Construction Solar UK Breach 67 Jun-2022 Expected Q2 2024
Construction Battery Storage UK Woburn Road 6 Jan-2023 Expected Q1 2025
Operational, acquired post‑year end Solar Ireland Ballymacarney 54 n.a. Dec-2023(37)
Operational, acquired post‑year end Solar Ireland Kilsallaghan 29 n.a. Dec-2023(37)
Operational, acquired post‑year end Solar Ireland Muckerstown 48 n.a. Dec-2023(37)
Operational, acquired post‑year end Solar Ireland Fidorfe 68 n.a. Dec-2023(37)
Construction, acquired post‑year end Solar Ireland Harlockstown 42 n.a. Expected Q3 2024
(37) Note that these four sites are sometimes (in this report and
elsewhere) collectively referred to as 'the Ballymacarney solar complex'.
Sites passed all of their final technical compliance requirements in December
2023, but started exporting electricity from May 2023.
Construction case study: Cumberhead wind farm
ORIT successfully built the largest onshore windfarm of its portfolio, which
operates on a subsidy-free basis, having secured a PPA with a trusted partner,
and adds a genuine impact to the community through its community benefits
fund.
The 50MW, 12-turbine Cumberhead wind farm provides an example of ORIT
delivering a state-of-the-art renewable energy asset. The project engages
actively and extensively with the local community, bringing tangible benefit
to people in its vicinity, and through a PPA with Kimberley-Clark it is
helping a large corporate organisation to decarbonise its manufacturing
activities. The wind farm provides a high quality model for further deployment
of subsidy-free, onshore wind which does not rely on huge economies of scale
for financial viability.
Cumberhead produces clean energy equivalent to the usage of over 69,000 homes
and runs a £250,000 per year community benefits fund which will remain in
place for the lifetime of the asset, equivalent to a total £7.5 million of
funding to support an estimated 100+ community initiatives.
The project is sited in one of the best areas of Scotland for wind resource -
some turbines benefit from average wind speeds in excess of 9m/s - and has
been exporting electricity since March 2023. ORIT acquired Cumberhead as a
ready‑to-build project in September 2021, before managing its construction,
and the project is the largest onshore wind site in the Company's portfolio,
representing 20% of its total onshore wind capacity at 31 December 2023.
Construction portfolio
As at 31 December 2023, the portfolio contained 73MW (pro-rata by ownership
stake) of in-construction projects, and another conditionally-acquired 42MW in
Ireland remains in construction (the fifth 'add-on' solar site to the
Ballymacarney solar complex).
A summary of the construction progress is set out below:
Breach solar (67MW): The on-site construction phase of the solar farm was
successfully completed by October 2023, and the site is now only awaiting its
connection to the National Grid substation. National Grid has been delayed and
the outage date to allow the connection works has been pushed back to April
2024. Delays to grid connections at the hands of network operators are not
uncommon, and whilst frustrating in that connection will be later than
forecast, the project will not be required to pay any penalties under the
corporate PPA due to the construction contingency time that was factored into
the offtake agreement.
Woburn Road battery storage (12MW/24MWh, with ORIT owning a 50% stake): This
project is owned 50/50 alongside Sky, another OEGEN-managed fund. To date ORIT
has invested c.£0.4 million. ORIT has entered into an agreement with Sky
whereby Sky is covering the entirety of the construction costs of c.£11
million until such time that ORIT elects to catch up. In the event that ORIT
opts not to do so, then ORIT's stake would transfer to Sky.
Whilst the majority of on-site work has yet to commence, the construction
phase has seen significant progress, with the signing of construction
contracts for the battery supply and installation, balance of plant and
connection works, as well as the O&M contract. These contracts were put in
place in parallel with the development of a battery ESG procurement policy at
OEGEN level.
Harlockstown solar (42MW): Near the four-site 199MW Ballymacarney solar
complex in Ireland (which became operational in 2023), a fifth 'add-on' site
of 42MW (Harlockstown) is currently under construction. Under a similar
arrangement to the first four sites, ORIT will acquire this project once it
becomes fully operational, which is currently expected to occur during Q3
2024.
Developers portfolio
Investments in developers offer future opportunities at construction-ready
stage for ORIT to invest in and support professionals who are actively
contributing to creating new capacity for clean energy sources. Investing in
developers provides valuable optionality for future expansion. ORIT will have
preferential access to fund construction-ready sites arising from these
development pipelines.
Developer investments overview
As at 31 December 2023, ORIT's portfolio of developer investments comprises
five companies - representing 4% of total value of all investments - with a
combined pipeline of 33GW of renewable energy generation projects.
· 19% stake ORIT first invested in Simply Blue in August 2021 for a c.12% stake, with
later increases of its stake to 15.5% and then 19% through follow-on
· Floating offshore wind investments. ORIT invested alongside Sky (a private fund managed by Octopus
Energy Generation) through a joint venture.
· UK and Europe
In 2023, Simply Blue achieved a number of significant milestones in a
challenging year for the global offshore wind market, which has met headwinds
from increased capex and financing costs and resulting slowdown in development
activity. In particular, Simply Blue received marine consent for its Erebus
project in Wales, secured a development partnership with EDF for its Irish
projects, and secured Orsted as development partner for Salamander project in
Scotland.
· 25% stake In December 2021, ORIT agreed to provide up to £10 million in development
funding for 9 newly formed joint venture onshore wind farms for which Wind2 is
· Onshore wind providing development services. ORIT's investment was through a joint venture
with Sky (see above).
· UK
In 2023, the Wind2 team made good progress in the development of the projects.
As at the end of 2023, the projects under development totalled c. 900MW, with
four projects at pre-application stage, three in pre-scoping stage, and one
having submitted its planning application.
· 100% stake ORIT entered into a development services agreement with BLC Energy to fund up
to £2m for the development of solar and battery storage projects in the UK,
· Solar and battery storage through a vehicle called Trio Power Limited.
· UK In 2023, the BLC Energy team originated c.500MW pipeline, of which c.100MW has
heads of terms signed and grid applications submitted.
· 50% stake In April 2022, ORIT co-invested with Sky (see above) through a joint venture.
· Solar and onshore wind The Norgen development team had a successful 2023, bringing seven new projects
into the approved development pipeline, including three solar projects
· Finland totalling 428MW and four onshore wind projects totalling 237MW. This is in
addition to the two projects acquired under exclusivity terms during the
initial transaction. The committed funding has now all been allocated to
projects and Norgen is working through the various stages of development to
bring these projects to ready-to-build stage.
· 25% stake ORIT agreed to invest up to £5 million into HYRO Energy Limited ("HYRO"), a
JV between ORIT and Sky (see above) and the global developer company, RES.
· Green hydrogen production HYRO has been established to develop green electrolysis projects in England,
Scotland and Wales for industrial offtake/consumption, and one project has
· UK secured a government-backed CfD.
Market outlook
Commentary ORIT's position and opportunity
Clean energy transition: broad picture Despite the current macroeconomic environment (see below), there is deep ORIT is very well placed to capitalise on the investment and impact
opportunity for investment in the clean energy transition. Russia's invasion opportunity, given its broad mandate across technologies and geographies,
of Ukraine put a spotlight on energy security and has accelerated investment: including ability to invest in pre-construction assets and developers in order
USD 659bn(38) was invested in renewable power generation globally in 2023, to capture value across the entire life cycle and to contribute new renewable
11% higher in real terms than 2022, and 27% higher than 2021. To reach net capacity. OEGEN as its manager has extensive links into numerous markets as
zero by 2050, the International Energy Agency estimates that clean energy well as a deep pool of expertise in its team.
investment - including in grids, energy efficiency and other sectors alongside
power generation - needs to increase from USD 1.8tn in 2023 to USD 4.5tn per
year by 2030. Tailwinds are strong and gathering momentum: COP28 saw a pledge
signed by 118 countries to triple renewables by 2030, and as a general rule
public and political support is present across geographies.
Macro-economic environment We are still in a world of elevated interest rates and high inflation, Like our peers, higher discount rates have put downward pressure on ORIT's
following the post-pandemic rising demand and the supply impact caused by NAV, and high interest rates have driven share prices to trade at discounts to
Russia/Ukraine and other global events. This has hampered fund raising for NAV. High inflation is a double-edged sword: it is broadly a benefit to ORIT
listed investment funds, but transactions in the renewable energy sector have given our relatively high proportion of inflation-linked revenues, although it
continued to take place. These include the recent completion of three very has - and will - also feed into higher construction costs for future projects.
large recent solar deals: Schroders Greencoat-managed funds' purchase of the
c.500MW Toucan Energy UK solar portfolio, plus Lightsource bp's sales of a ORIT's forecast inflation-linked revenues on a 10-year look forward basis have
294MW Italian portfolio and a 247MW UK portfolio. Pricing has been consistent remained high: 51% as at 31 December 2023 (vs 53% as at 31 December 2022).
with holding valuations, or even in excess of expectations, as ORIT has been Breach solar farm's inflation-linked CPPA contributed positively to this
able to demonstrate first hand through its sales of the Polish wind assets at metric, partially offsetting the sale of the Kuslin and Krzecin Polish onshore
a significant premium to holding value. wind farms which has meant that the projects' inflation-linked CfD revenues no
longer contribute to the portfolio's inflation-linked revenues.
For construction projects, the macroeconomic conditions have not been helpful
(causing high capex and supply chain difficulties), and some developers may Overall we expect the supply of ready-to-build projects to increase as
have been holding back projects in order to wait for more opportune times to governments seek to accelerate permitting and grid connection processes, and
sell. There has still been a flow of projects coming to market, however, and developers are required to sell projects to generate cash to fund future
this can be expected to expand as conditions improve further. pipeline.
Outlook in the UK The general picture for investing in the energy transition in the UK remains The UK is ORIT's largest single market (40% of total value of all investments
favourable, notwithstanding some challenges and uncertainty as a general at 31 December 2023), and OEGEN is an experienced manager across all
election approaches. technologies here. ORIT has also proven that it is not reliant on the CfD
mechanism or other revenue support schemes, and has demonstrated its ability
After a disappointing 2023 CfD auction (no offshore wind bids) owing to to source corporate PPAs which can provide long-term revenue certainty.
pricing parameters which failed to account for inflation in equipment and
construction costs, the UK government responded with a more feasible set of In the event of market design changes being implemented in the longer term
initial parameters for the 2024 round which were met favourably by the (for example locational zonal pricing), ORIT is well placed: its manager OEGEN
industry. It remains to be seen whether the detailed budget allocation allows has successfully navigated policy and market changes many times before, and
sufficient new projects to come forward. has deep insight (especially through the wider Octopus Energy group) regarding
the latest thinking amongst policy and decision makers.
Whilst grid backlogs remain, concerted pressure from across industry resulted
in an announcement in the government's Autumn Statement outlining an action ORIT's focus on diversification reduces the risk associated with any one
plan that aims to release many gigawatts of capacity from the connections country's regulatory changes.
queue and cut average connections delays from five years to six months. This
should flow through into allowing more projects to reach ready-to-build
status. Further measures have been announced as part of the 2024 Spring
Budget.
The same Autumn Statement also removed the 45% Electricity Generator Levy for
new projects, and was seen favourably by the industry in contrast to Rishi
Sunak's announcement earlier in the year which watered-down several net zero
policies.
In March 2024 the UK Government launched a second consultation on its Review
of Electricity Market Arrangements, which includes proposals to split the
national electricity market into a number of different price zones, similar to
existing arrangements in the Nordic markets.
Outlook in Europe Europe benefits from the same climate-related tailwinds as the UK, albeit with ORIT and its manager hold deep experience in numerous European energy markets
a range of levels of policy and regulatory support across jurisdictions. There (in Europe outside of the UK, ORIT has investments in five countries, and
is widespread development activity across Europe and there will continue to be OEGEN in 12). ORIT is well positioned to invest in assets across the value
volumes of new projects to invest in, across various technologies. chain, as well as in more developers who are exploiting opportunities in these
markets.
As in the UK, cost increases and in some cases regulatory delays have
increased the time expected for offshore wind projects, particularly floating, Offshore wind remains a key technology in the energy system of the future, and
to reach ready to build stage. A number of strategic investors, particularly floating turbines will be required to meet deployment targets. ORIT will be
those from oil and gas backgrounds, have refocused their business plans to able to consider providing additional working capital to developers to the
reduce the level of investment in green technologies. extent necessary.
Power prices and green certificates Electricity prices at the front end of the forward curves (the next 2-3 years) The Annual Report presents the Company's forecast revenues, categorised by
have trended down across 2023 showing day-ahead and forward prices in the price structure, through to 2050.
markets where ORIT has merchant exposure over this time. This decline is a
result of very high gas storage levels following a warm 2022/23 winter, ORIT has a high proportion of fixed revenues (81% for the two years up to
coupled with drops in industrial gas and electricity consumption and a French 31 December 2025) so is well protected from near- and medium-term price falls
nuclear fleet whose availability is much improved relative to its performance in forward curves and advisor price forecasts. We take an active approach to
across 2022. revenue risk management and will continue to do so as the portfolio evolves.
Fixed subsidies are a large contributor, but we also look to secure fixed PPAs
Across 2023, European power demand fell by 3% as a result of the success of for power sales. In FY 2023, the Breach PPA that was signed increased the
demand reduction strategies as well as industrial response to high retail portfolio's overall fixed revenue percentage on a two-year look-forward basis
prices. Of particular note is Germany, where demand fell 5% year-on-year, by 3 percentage points.
driven by the demand reductions from its industrial sector.
The portfolio's exposure to wholesale power prices is limited due to fixed
As a result of the above, followed by the mild end to the year, gas storage price PPAs (with corporate and utility offtakers) which the Investment Manager
levels stood at record levels going into 2024, ensuring a bearish end to the has originated, as well as government-backed subsidies across the UK, France
year for the European power market. Geopolitical events in the Middle East and Germany.
continue to pose a supply risk to the market, but the fact that the start of
the conflict had such a limited impact on power prices evidences the healthy As at 31 December 2023, all of ORIT's fixed revenues are fixed on a
position in which the market ended 2023. pay-as-produced basis, meaning that unlike as is required for baseload hedges,
ORIT is not exposed to the risk of having to buy power on the market at
Prices for the short-medium term future are still expected to remain well expensive prices to top up the solar or wind generation profile to a baseload
above the long-term (pre-Russia and pre-Covid) historic average, mainly due to shape.
i) the dependence on international Liquified Natural Gas (LNG), the price of
which rose sharply following sanctions on imports from Russia; ii) delays to As at 31 December 2023, 50% of the portfolio's value is derived from fixed
the deployment of offshore wind, and iii) a significant amount of price price revenues, and 50% is from variable price revenues. The portfolio's
support arising from demand growth from expanding electrification (cars, variable revenues are concentrated in the medium and longer term forecast,
heating and industry) towards 2030. meaning that movement in wholesale power price forecasts will have a more
muted impact on portfolio-level NPV than would be the case if variable
During Q1 2024 near term power prices on forward markets continued to fall, revenues were distributed evenly across the modelled horizon.
which is expected to put downward pressure on valuations.
Compared to 12 months prior, the proportion of ORIT's forecast fixed price
revenues on a 24-month look forward basis has increased from 68% to 81%. Key
to this has been the Investment Manager's continued proactivity with securing
hedges for a number of its assets, including a 10-year, inflation-linked
corporate PPA secured for the Breach solar farm. Other factors which have
increased this metric include 5-year PPAs secured for three of ORIT's UK solar
farms, 3-year PPAs secured for another three of ORIT's UK solar farms, as well
as the drop in wholesale electricity price forecasts across the year. The
successful sale of the Kuslin and Krzecin Polish onshore wind farms decreased
ORIT's forecast fixed revenues deriving from subsidies.
The proportion of ORIT's forecast variable revenues increases in the
medium-long-term as subsidies and PPAs expire (noting that we will continue to
actively hedge our variable power revenues). In the late 2020s, ORIT's
merchant exposure derives primarily from GB and Finland, while into the 2030s
and 2040s, GB is the market to which ORIT is most exposed.
Investment Trust landscape Share price discounts to NAV across the investment trust world have remained ORIT's discount to NAV has stayed consistently shallower than most of its
wide, in parallel with base interest rates (and gilt yields) remaining high. peers, throughout the year. We have been proactive in asset recycling and we
Across the renewables investment trust sector, discounts to NAV of 10-25% have also announced at the end of 2023 a carefully-considered strategic proposal to
been pervasive throughout 2023, and these have widened since the end of the combine with Aquila European Renewables plc (39)
year. Fundraising has therefore not been possible, and this will remain the
case until interest rates have fallen and share prices return to levels higher
than NAV: something which could take until the end of 2024 or longer. In the
meantime, we expect to see more asset sales as a means to recycle capital (the
Company sold its Polish wind assets in 2023), and others have also embarked on
a similar strategy this year. There is also the possibility of consolidation
amongst funds if the market capitalisation of smaller funds continues to fall.
(38) Source: From the International Energy Agency report
https://www.iea.org/reports/world-energy-investment-2023/overview-and-key-findings
(39) ORIT announced it is seeking to combine with Aquila European
Renewables plc ("AERI"), through a scheme of reconstruction under which AERI
would be liquidated and AERI shareholders would receive new shares in ORIT in
exchange for their AERI shares. ORIT's Board believes there is a strong
rationale for the transaction for both sets of shareholders. There can be no
certainty that engagement will progress, that heads of terms will be agreed or
whether the proposed combination will take place.
Timeline of current key activities
Report date 31 December 2023
Activity MW pro-rata for ORIT's stake Key information H1 2023 H2 2023 H1 2024 H2 2024 H1 2025
Investments Woburn Road 6MW 12MW/24MWh site
Harlockstown (Ballymacarney) 42MW Long-term PPA
HYRO n.a. Developer (hydrogen)
BLCe n.a. Developer (solar/co‑located battery)
Construction Cumberland 50MW Corporate PPA
Breach 67MW 10y fixed CPPA
Woburn Road 6MW 12MW/24MWh site
Ballymacarney 199MW Long-term PPA
(first 4 sites)
Harlockstown (Ballymacarney) 42MW Long-term PPA
Capital recycling programme Polish wind sale 59MW 2 onshore wind sites
Spanish solar option termination 175MW 175MW, construction
Further capital recycling Confidential, in progress
Reinvestment of proceeds Short-term debt repayment and other capital allocation opportunities
Counterparty risk
The Investment Manager monitors this risk closely and carries out qualitative
and quantitative due diligence on counterparties before they are appointed
and, where possible, seeks to obtain extensive warranty protection on all
contracts. Exposure to counterparties is reviewed by the Investment Manager on
a quarterly basis. Information on the Company's exposure to offtakers and
O&M providers as at 31 December 2023 is included in the Company's Annual
Report.
As detailed within the Company's Annual Report, reliance on third-party
counterparties is a principal risk to the Company. In the current economic
climate, there is an increased risk associated with service providers
defaulting on contractual obligations or suffering an insolvency event, and
this can impact the performance of the portfolio of assets and ultimately the
Company.
Offtaker by total value of all investments (40)
EDF: 25%
Microsoft: 17%
British Gas: 13%
Esti Energi: 11%
Npower/Axpo: 7%
Kimberly Clark: 7%
Alpix: 6%
Owens Corning: 6%
Octopus Energy: 4%
N/A: 4%
Having multiple offtakers offers advantages such as risk diversification and
offers local expertise in ORIT's key geographical markets.
(40) Npower/Axpo: Sites sell ROCs and power to NPower but also have a
price-fixing arrangement with Axpo.
O&M providers by total value of all investments
Nordex: 23%
Statkraft: 17%
Orsted: 13%
Engie: 11%
Vestas: 11%
PSH: 6%
RES: 5%
SGRE: 5%
Goldbeck: 4%
N/A: 4%
BayWa 1%
A diversified group of O&M providers allows ORIT to leverage competitive
pricing and specialised expertise.
Financing and risk management
During the year total leverage decreased from 42% to 39% (41) made up of 26%
long-term debt and 13% short-term RCF drawings. In December 2023, the £50
million short-term facility was repaid in full. Post-year end the Company has
increased its leverage to fund the acquisition of four newly constructed solar
farms located in Ireland. The total acquisition cost of €160.6 million was
in part financed using a €80.6 million debt facility provided by Allied
Irish Banks and La Banque Postale and part financed by drawing down £66.2
million on the RCF.
During February 2023, the Company refinanced and increased its multi-currency
RCF. The committed £270.8 million RCF has a three-year term and can be drawn
in GBP, EUR, AUD and USD and has an interest rate of 2.0% above SONIA. It also
has an uncommitted accordion feature allowing the facility to be increased in
size by up to a further £150 million.
During the second half of 2023, the Company used proceeds raised from the sale
of Polish wind assets and exit of Spanish solar project, to repay its £50
million short-term facility with Natwest and partially repay its outstanding
RCF balance.
Should no further asset sales take place, and all cash flows not required to
pay the Company's costs and continue growing the dividend were used to pay
down debt, the Company's gearing is expected to fall to around 20% of GAV over
a ten-year period.
(41) Leverage has been calculated as a percentage of GAV.
ORIT debt summary as at 31 December 2023:
Total Short-Term Debt Long-Term Debt
Debt as a % of GAV 39% 13% 26%
Committed debt as a % of Total value of all investments 47% 17% 30%
% Hedged 58% 0% 89%
Average cost of debt 3.9% 7.2% 2.1%
Average remaining term (years) 10.1 2.2 14.1
Summary of ORIT debt facilities as at 31 December 2023:
Short-Term Long-Term
Asset HoldCo FR Solar FR Wind IRE Solar(42) GER Wind UK Offshore Wind
Debt Terms
Currency GBP or EUR EUR EUR EUR EUR GBP
Term loan £270.8m €125.7m €43.2m €91.5m €61.0m £110.5m
Drawn at 31 December 2023 £130.0m €102.9m €42.9m - €57.5m £75.5m
Drawn at 31 December 2023 £m £130.0m £89.2m £37.2m - £49.8m £75.5m
Initial Term (yrs) 3 18 20 20 18 15
Expiry Date Feb-26 Dec-38 Sep-42 Jun-42 Mar-41 Sep-32
Facility date Nov-20 Jan-21 Apr-21 Jul-21 Sep-22 Dec-17
Margin Y1-5 1.30% 2017-2022: 1.45%;
2.0% 1.25% 1.30% Y6-10 1.40% 0.83%-1.75% 2023-2027: 1.65%
Y10+ 1.65% 2028-2032: 1.85%
Variable interest % SONIA EURIBOR EURIBOR EURIBOR EURIBOR SONIA
Hedging
% hedged - 85% 90% n/a 100% 85%
Swap rate n/a -0.12% 0.51% n/a 0.12% 1.27%
(42) Post-period end ORIT acquired four Irish solar farms. The total
acquisition cost of €161m was in part financed using a €80.6m debt
facility provided by Allied Irish Banks and La Banque Postale. This facility
is 100% hedged at an interest rate of 3.07%.
As well as the interest rate hedging associated with the Company's borrowings,
foreign exchange hedging has been implemented to limit the impact of exchange
rate movements on the cashflows and valuation of the Company. On an unhedged
basis, the value of the Company's portfolio of assets declined by £6.1
million during the year as a result of foreign exchange movements. However the
value of the FX hedging instruments increased by £4.0 million during the
period, thereby offsetting approximately two thirds of the underlying
valuation movement.
Portfolio Valuation
£599m 106.0p £980m £1,127m
Net Asset Value NAV per Ordinary Share Gross Asset Value Total value of all investments
(2022: £618m) (2022: 109.4p) (2022: £1,073m) (2022: £1,304m)
Regular valuations are undertaken for the Company's portfolio of assets. The
process follows International Private Equity Valuation Guidelines using a
discounted cashflow ("DCF") methodology. DCF is deemed the most appropriate
methodology where a detailed projection of likely future cash flows is
possible. Due to the asset class, availability of market data and the ability
to project the asset's performance over the forecast horizon, a DCF valuation
is typically the basis upon which renewable assets are traded in the market.
Key macroeconomic and fiscal assumptions for the valuations are set out in
Note 9 to the financial statements.
Valuation bridge for the year
The fair value of the Company's portfolio of assets as at 31 December 2023 was
£706.0 million, reflecting acquisitions and capital injections during the
year of £68.0 million and disposal proceeds of £97.2 million alongside
changes to economic, wholesale energy and asset specific assumptions and the
return on the portfolio net of distributions. Including the Company's and its
intermediate holding companies' net liabilities of £106.9 million, the total
net asset value as at 31 December 2023 is £599.0 million or 106.0 pence per
Ordinary Share.
1 Investments in the year
During the year, the Company announced new investments including up to £5
million into HYRO Energy Limited, a new joint venture between ORIT, Sky (a
fund managed by Octopus Energy Generation) and renewable energy company RES.
HYRO has been established to develop green hydrogen electrolysis projects and
intends to develop c.700MW of green hydrogen electrolyser capacity by 2030.
The Company has also agreed to invest up to £2 million into a development
platform serviced by BLC Energy limited, to set up and fund a new development
business, focused on creating new ground-mounted solar and co-located battery
storage assets in the UK. This new venture intends to target an initial
pipeline of over 350MW of projects and ORIT will have the exclusive right to
provide further funding to bring the initial pipeline to ready-to-build status
between 2025 and 2029.
Elsewhere in the portfolio payments were made in relation to construction at
the Cumberhead Wind Farm and Breach Solar Farm. There were also payments made
in relation to the developer investments in line with existing commitments to
business plans.
2 Distributions paid out of the portfolio of assets
This relates to the amount of cash paid out of the portfolio of assets and
received by the Company or its intermediate holding companies in the year
ending 31 December 2023.
3 Asset Disposals and holding value movement
As previously mentioned, the Company completed the disposal of the Krzecin and
Kuslin onshore wind farms in Poland and the ready-to-build solar project
option over Antequera in Spain. The net proceeds generated from the sales
(approximately £92.0 million for the Polish asset and £5.2 million for the
Spanish asset) have resulted in a positive impact on NAV of approximately +2.8
pence per and +0.3 pence per Ordinary Share respectively.
4 Economic assumptions
Over the course of 2023, inflation forecasts have moderated compared to the
prior year. Forecasts have decreased on average in Europe while remaining
broadly flat across the UK. This has resulted in a net valuation decrease of
£4.8 million.
The inflation inputs used to calculate the NAV per Ordinary Share as at 31
December 2023 has been sourced from: (i) recent consensus UK inflation
forecasts published by His Majesty's Treasury (November 2023); and (ii)
inflation forecasts for European countries published by the European
Commission (November 2023).
During the year, sterling appreciated against the euro by approximately 2.3%,
leading to a negative valuation impact of £6.1 million. Euro-denominated
investments comprised 52% of the portfolio at the year end.
The combined impact of inflation and foreign exchange movements represents a
valuation decrease of £10.8 million (excluding the impact of hedging).
The Investment Manager regularly reviews the level of euro exposure and
utilises hedges, with the objective of minimising variability in shorter term
cash flows. After the impact of currency hedges held at Company level are
taken into account, the loss on foreign exchange reduces to £2.1 million.
5 Power prices and Green Certificates
Unless fixed under PPAs or otherwise hedged, the power prices used in the
valuations are based on market forward prices in the near term, followed by an
equal blend of two independent and widely used market consultants'
technology-specific capture price forecasts for each asset.
Europe's power market, while remaining higher than historic norms, has seen a
clear downward trend across 2023. For further details, please see the "Power
Prices and Green Certificates" section within the Investment Manager's Report.
ORIT's high proportion of near-term fixed revenues means that its revenues
have been shielded, to a reasonable extent, from the fall in power prices,
particularly over the short to medium term.
Updating power price forecasts during the year led to a valuation decrease of
£31.4 million.
Green certificates (Renewable Energy Guarantees of Origin ("REGOs") in the UK
and Guarantees of Origin ("GoOs") in European markets) are sold by generators
to guarantee that purchased electricity is from a 'green' source. Prices for
green certificates have been reflected in the valuations and been updated in
line with third-party forecasts. Overall, updating green certificate forecasts
has led to a net increase of £25.5 million in the value of the portfolio as
at 31 December 2023.
The net impact of updating power price and green certificate forecasts was a
£5.9 million decrease in the value of the portfolio as at 31 December 2023.
The power prices used in the valuations as at December 2023 include the
relevant 'capture price' discount to baseload prices derived from the
independent market consultants forecasts, and do not include any further
discounts. The power prices used in the valuations as at December 2022 had
included additional prudential discounts in the first few years of the
forecasts, reflecting the elevated and volatile nature of forward markets at
that time.
Revenues
The portfolio's forecasted power only generation weighted prices ("Power only
GWP") and the generation weighted prices including subsidies and additional
benefits ("Total GWP") for the period from 2024 to 2050 are shown in the
Company's Annual Report. The curves are blended across the markets in which
the portfolio's generation assets are located, weighted by the portfolio
generation mix and converted into £/MWh using the FX spot rate as at 31
December 2023. On average, the graph shows Power only GWP of £53.17/MWh in
the period 2024-2028 and £40.57/MWh in the period 2029-2050. The decrease in
the power-only GWP, most notably seen in the near-term, comes as a result of
the electricity forwards markets which have fallen across 2023.
6 Construction risk premium
A valuation increase of £2.6 million resulted from the unwind of a portion of
the construction risk premium included in the discount rate applied to the
Cumberhead Wind Farm and the Breach Solar Farm, both in the UK, recognising
the significant construction progress made by the end of the year. As at 31
December 2023, construction at the Cumberhead Wind Farm was completed.
Breach Solar Farm has completed construction however, the site is still
awaiting a grid connection from National Grid. It is expected that the
remaining construction risk premium will be unwound as the project becomes
derisked through the completion of its grid connection.
7 Change in discount rates
A range of discount rates are applied in calculating the fair value of the
investments, considering the location, technology and lifecycle stage of each
asset as well as leverage and the split of fixed and variable revenues.
Although a high-inflationary environment remains in the UK and Europe and bond
yields continue to be elevated versus pre-2022 levels, competition for
renewable assets has remained high, dampening the extent to which benchmark
rate rises have fed through into asset discount rates. Although UK and
European bond yields have decreased since highs of mid-2023, the Board and the
Investment Manager considered it appropriate to reflect an increase in the UK
discount rates by 0.5% and European discount rates by 0.25% during 2023. The
change in discount rates resulted in a decrease of -£21.3 million in the
portfolio valuation.
Despite increases to the discount rates applied to ORIT's portfolio of assets,
the weighted average discount rate has decreased over the course of the year
by 0.3% to 7.2% as at 31 December 2023. The primary reason for the decrease in
the overall blended rate is due to the derisking of the portfolio through the
Spanish and Polish disposals (which attracted a higher discount rate due to
their relative risk profiles) as well as unwind of the construction risk
premiums included in the discount rates for construction assets. The increases
in underlying discount rates were also offset by a decrease in the underlying
discount rate reflecting the greater proportion of fixed cash flows arising
from entering into hedging arrangements across the portfolio of assets.
The weighted average discount rate does not include any contribution from the
following, each of which would be expected to increase the return achieved on
the Company's portfolio of assets: (i) the return expected on the Company's
investment into development stage assets, which are not valued on a discounted
cashflow basis; (ii) the return enhancement associated with the Company's FX
hedging programme; (iii) the increased return associated with the additional
leverage from the RCF.
31-Dec-23 31-Dec-22
UK Assets
Levered IRR 7.5% 7.5%
Gross Asset Value (GAV) (£m) 491 440
Asset Leverage %GAV 17% 19%
European Assets
Levered IRR 6.9% 7.5%
Gross Asset Value (GAV) (£m) 488 633
Asset Leverage %GAV 36% 40%
Total Portfolio
Levered IRR 7.2% 7.5%
Gross Asset Value (GAV) (£m) 980 1,073
Asset Leverage %GAV 26% 30%
Fund Leverage %GAV 13% 13%
Total Leverage %GAV 39% 42%
8 Balance of portfolio return
This refers to the balance of valuation movements in the year excluding the
factors noted above and represents an increase of £49.4 million.
Of this, £52.3 million reflects the net present value of future cashflows
being brought forward from the valuation date used for the acquisitions to 31
December 2023.
£1.4 million of the increase resulted from entering into fixed price
arrangements such as a 10-year index-linked Power Purchase Agreement between
Breach Solar Farm and Iceland Foods Limited and 5-year fixed price Power
Purchase Agreements across part of the UK Solar portfolio with Total Energies.
Also during the year, ORIT benefitted from being awarded T-1 and T-4 Capacity
Market contracts at the Cumberhead site, and the signing of a 3-year direct
marketing agreement at Leeskow, resulting a combined uplift of £1.9 million.
Over the course of 2023, the holding valuations of the options to buy the
Irish solar portfolio and build the Spanish solar farms increased by £4.6
million as the probability of acquisition for the Irish portfolio and exit for
the Spanish portfolio became increasingly more certain.
These movements were partially offset by financial and technical performance
during the year resulting in a net negative valuation impact of -£3.5
million. The net performance of the underlying portfolio was slightly down on
average primarily due to low wind speeds. Additionally, a further -£5.6
million decrease was recognised due to updating for an updated wind yield
assessment for the Ljungbyholm wind farm following its first two years of
operations.
The valuations were also updated to reflect the delay in grid connection at
Breach Solar Farm and the delay in the operational start date for Cumberhead,
resulting in a combined valuation impact of -£2.9 million.
The remaining amount relates to other smaller adjustments at the project
company level, which resulted in an increase of £1.1 million.
Portfolio valuation sensitivities
The Company's Annual Report shows the impact of changes to the key input
assumptions on NAV with the x axis indicating the impact of the sensitivities
on the NAV per share. The sensitivities are based on the existing portfolio of
assets as at 31 December 2023. The Annual Report also includes cash flows of
conditional acquisitions, and as such may not be representative of the
sensitivities once the Company is fully invested and geared.
For each of the sensitivities shown, it is assumed that potential changes
occur independently with no effect on any other assumption. As such the
sensitivities also do not capture any potential benefit of a portfolio effect
through diversification.
1 Discount rate (levered cost of equity)
A range of discount rates are applied in calculating the fair value of the
investments, considering the location, technology and lifecycle stage of each
asset as well as leverage and the split of fixed and variable revenues.
2 Volumes
Each asset's valuation assumes a "P50" level of electricity output based on
yield assessments prepared by technical advisors. The P50 output is the
estimated annual amount of electricity generation that has a 50% probability
of being exceeded - both in any single year and over the long-term - and a 50%
probability of being underachieved. The P50 provides an expected level of
generation over the long-term.
The P90 (90% probability of exceedance over a 10-year period) and P10 (10%
probability of exceedance over a 10-year period) sensitivities reflect the
future variability of wind speed and solar irradiation and the associated
impact on output, along with the uncertainty associated with the long-term
data sources used to calculate the P50 forecast. The sensitivities shown
assume that the output of each asset in the portfolio is in line with the P10
or P90 output forecast respectively for each year of the asset life.
3 Power price curve
As described above the power price forecasts for each asset are based on a
number of inputs. The sensitivity assumes a 10% increase or decrease in power
prices relative to the base case for each year of the asset life.
4 Inflation
Sensitivity 1: The sensitivity assumes a 0.5% increase or decrease in
inflation relative to the base case for each year of the asset life.
Sensitivity 2: The sensitivity assumes a 2.0% increase or decrease in
inflation during 2024/2025 relative to the base case of the asset.
5 Foreign exchange
The Company seeks to manage its exposure to foreign exchange movements to
ensure that (i) the sterling value of known future construction commitments is
fixed; (ii) sufficient near term distributions from non-sterling investments
are hedged to maintain healthy dividend cover; (iii) the volatility of the
Company's NAV with respect to foreign exchange movements is limited; and (iv)
all settlements and potential mark-to-market payments on instruments used to
hedge foreign exchange exposure are adequately covered by the Company's cash
balances and undrawn credit facilities.
Of the portfolio as at 31 December 2023, 52% of the NAV is euro denominated.
Euro hedges are in place for all construction payments as well as forecast
cash generation from all Euro based investments for the first three years of
operations. The sensitivity applied above shows the impact on NAV per share of
a +/- 10% movement in the GBP:EUR exchange rate.
Financial Review
The financial statements of the Company for the year ended 31 December 2023
are set out in the Company's Annual Report. These financial statements have
been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and the applicable
legal requirements of the Companies Act 2006. In order to continue providing
useful and relevant information to its investors, the financial statements
also refer to the "intermediate holding companies", which comprise the
Company's wholly owned subsidiary, ORIT Holdings II Limited and its indirectly
held wholly owned subsidiaries ORIT UK Acquisitions Limited and ORIT Holdings
Limited.
Net assets
Net assets have decreased from £618.3 million as at 31 December 2022 to
£599.0 million as at 31 December 2023, largely due to a decrease in the fair
value of portfolio of assets as described in the Portfolio Valuation section
above.
The net assets comprise the fair value of the Company's investments of £592.1
million (2022: £608.8m) and the Company's cash balance of £10.0 million
(2022: £10.6m), offset by £3.1 million (2022: £1.1m) of Company's other net
liabilities.
Included in the fair value of the Company's investments are net liabilities of
£113.9 million (2022: liabilities of £135.0m) held in the intermediate
holding companies. These comprise assets of cash £13.2 million (2022:
£4.5m), the positive mark-to-market value of the FX hedges taken out to
minimise the volatility of cashflows associated with non-UK portfolios of
£2.3 million (2022: £8.0m), other debtors of £2.4 million (2022: nil) and
offset by amortised transaction costs associated with bank loans of £1.9
million (2022: £2.0m), the principal and interest outstanding on the bank
loans of £131.3 million (2022: £128.0m), and other liabilities of £2.4
million (2022: £5.5m) predominantly relating to accrued transaction costs not
yet paid and outstanding VAT liabilities.
Results as at 31 December
2023 2022
£m £m
Fair value of portfolio of assets 706.0 743.7
Cash held in intermediate holding companies 13.2 4.5
Bank loans and accrued interest held in the intermediate holding companies -131.3 -128.0
Fair value of other net assets/(liabilities) in intermediate holding companies 4.2 -11.4
Fair value of Company's investments 592.1 608.8
Company's cash 10.0 10.6
Company's other net liabilities -3.1 -1.1
Net asset value as at 31 December 599.0 618.3
Number of shares 564.9 564.9
Net asset value per share (pence) 106.0 109.4
Income
In accordance with the Statement of Recommended Practice: Financial Statements
of Investment Trust Companies and Venture Capital Trusts ("SORP") issued in
July 2022 by the Association of Investment Companies ("AIC"), the statement of
comprehensive income differentiates between the 'revenue' account and the
'capital' account, and the sum of both items equals the Company's profit for
the year. Items classified as capital in nature either relate directly to the
Company's investment portfolio or are costs deemed attributable to the
long‑term capital growth of the Company (such as a portion of the Investment
Manager's fee).
In the financial year ending 31 December 2023, the Company's operating income
was £19.7 million (2022: £77.9m), including interest income of £25.9
million (2022: £23.1m), dividends received of £16.8 million (2022: £17.3m)
and net loss on the movement of fair value of investments of £23.0 million
(2022: £37.6m gains). The operating expenses included in the statement of
comprehensive income for the year were £7.1 million (2022: £8.1m). These
comprise £5.6 million Investment Manager fees (2022: £5.7m), transaction and
abort costs of £0.1 million (2022: £1.3m) and other operating expenses of
£1.4 million (2022: £1.1m). The details on how the Investment Manager's fees
are charged are set out in Note 17 to the financial statements.
Ongoing charges
The ongoing charges ratio ("OCR") is a measure, expressed as a percentage of
average net assets, of the regular, recurring annual costs of running the
Company. It has been calculated and disclosed in accordance with the AIC
methodology, as annualised ongoing charges (i.e. excluding acquisition costs
and other non-recurring items) divided by the average published undiluted Net
Asset Value in the year. For the year ended 31 December 2023, the ratio was
1.16% (2022: 1.12%).
Dividends
During the year, interim dividends totalling £31.9 million were paid (1.31p
per share paid in respect of the quarter to 31 December 2022 in February 2023
(2022: March), 1.44p per share in respect of the first quarter of 2023 paid in
June 2023 (2022: May) and 1.45p per share paid in respect of the second and
third quarters of 2023 in September 2023 and December 2023 respectively (2022:
August and November).
Post year end, a further interim dividend of 1.45p per share was paid on 23
February 2024 in respect of the quarter ending 31 December 2023 to
shareholders recorded on the register on 9 February 2024. As such, dividends
totalling £32.7 million have been paid in respect of the year under review.
These dividends are fully covered from the operational cash flows of the
underlying portfolios.
Dividend cover - operational cash flows (portfolio level)
Year ended 31 December
2023 2022
£m
£m
Operational cash flows
UK Solar 14.8 13.7
French Solar 11.2 11.7
Swedish Wind 4.4 8.8
Finnish Wind 7.1 15.9
Polish Wind 4.9 12.1
French Wind 3.1 1.3
German Wind 3.0 0.7
UK Wind 8.2 5.0
UK Offshore Wind 17.0 7.1
Irish Solar 8.5 -
82.2 76.3
SPV level taxes
French Solar, Finnish Wind, Polish Wind, UK Offshore Wind(43) -2.8 -
Interest payable on external debt
French Solar, Polish Wind, French Wind, German Wind, UK Offshore Wind -7.9 -4.0
Operational cash flow pre debt amortisation 71.5 72.3
Company and intermediate holding company level expenses -10.1 -7.0
Interest and fees payable on RCF and short-term facility -12.3 -2.6
Net cash flow from operating activities pre debt amortisation 49.1 62.7
Dividends paid in respect of year 32.7 29.6
Portfolio level operational cash flow dividend cover pre debt amortisation 1.5x 2.1x
External debt amortisation
French Solar, Polish Wind, French Wind, German Wind, UK Offshore Wind -10.4 -10.2
Net cash flow from operating activities 38.7 52.5
Dividends paid in respect of year 32.7 29.6
Portfolio level operational cash flow dividend cover 1.18x 1.77x
(43) Taxes falling due on operational asset trading profits (e.g.
Corporation Tax in the UK).
The headline dividend cover metric only takes into account 6 months of
operational cash flow from the Polish wind farms following their sale in the
second half of the year.
Additionally the above metric does not include any proceeds related to gains
on either Spanish solar and Polish wind sales (with the exception of any cash
received or paid as a result of breaking hedging arrangements). The dividend
cover metric below includes cash realised from sale proceeds in excess of the
previous holding values.
2023 2022
£m £m
Net cash flow from operating activities 38.7 52.5
Gain on asset sales/exits (above previous holding value) 11.1 -
Net cash flow from operating activities 49.8 52.5
Dividends paid in respect of year 32.7 29.6
Portfolio level operational cash flow dividend cover 1.52x 1.77x
Subject to the timing of potential further asset sales, dividend cover in 2024
is expected to increase compared with 2023 as Cumberhead wind farm and the
first four sites of the Irish Solar portfolio contribute a full year of
operational cash flow, and Breach solar farm commences operations. Cash
generated by the operations of ORIT's current portfolio, net of all debt
service including scheduled principal repayments, is expected to be sufficient
to cover the dividend over the next 5 years.
ESG & Impact
As at 31 December 2023
ESG & Impact Strategy
ORIT is an impact fund with a core impact objective to accelerate the
transition to net zero through its investments, building and operating a
diversified portfolio of Renewable Energy Assets.
ORIT enables individuals and institutions to engage with the energy
transition. The renewable energy generated from ORIT's portfolio of assets
supports the transition to net zero by replacing unsustainable energy sources
with clean power. This intended outcome is the Company's core impact
objective.
The ESG & Impact Strategy considers all of ORIT's culture, values and
activities through three lenses: Performance, Planet and People - to ensure
that ORIT's activities integrate ESG risks and bring to life additional impact
opportunities.
For a more in-depth understanding of ORIT's ESG & Impact Strategy,
encompassing definitions of ESG and Impact, along with detailed insights into
four impact themes (Stakeholder engagement, Equality and wellbeing,
Innovation, and Sustainable momentum), please refer to the separately
published ESG & Impact Strategy.
Stewardship and Engagement
The Investment Manager manages ORIT's investments in line with its Engagement
and Stewardship Policy. Where ORIT has 100% ownership stakes, the Investment
Manager has direct control of the underlying assets, usually through
directorship services. As well as decision making oversight, the Investment
Manager carries out service reviews on each material third-party service
provider. In circumstances where ORIT does not hold a controlling interest in
the relevant Investee Company, the Investment Manager will secure shareholder
rights through contractual and other arrangements, to, inter alia, ensure that
the renewable energy asset or portfolio company is operated and managed in a
manner that is consistent with ORIT's investment and ESG Policy. The
Investment Manager will always take up portfolio investment Board seats,
attend Board meetings and will directly use its influence to monitor and
support investee companies on relevant matters to galvanise other shareholders
in line with ORIT's ESG Policies.
ORIT aims for investment-specific active stewardship, regardless of ownership
percentage. The Company consistently exercises shareholder rights, overseeing
approval and reserved matters. The ORIT Board receives regular reports on
investee performance, including environmental and social issues. The
Investment Manager collaborates on industry risks to drive positive
stewardship outcomes with various stakeholders.
The initiatives and case studies presented in the ESG & Impact section of
the Annual Report and the separately published ESG & Impact Report provide
examples of the application of the Engagement and Stewardship Policy.
The Investment Manager's full Engagement and Stewardship Policy can be viewed:
https://a.storyblok.com/f/154679/x/5eeb87e6d3/oegen-engagement-and-stewardship-policy-june-2023-vf.pdf
Performance
Impact Objective: Build and operate a diversified portfolio of Renewable
Energy Assets, mitigating the risk of losses through robust governance
structures, rigorous due diligence, risk analysis and asset optimisation
activities to deliver investment return resilience and the maximum amount of
green energy.
£1,127m 37
Total value of sustainable investments - Assets
100% investments committed into (2022: 36 assets)
renewables(44)
(2022: £1,304m)
1,569GWh 1,312GWh
Potential annual renewable energy Renewable energy generated in the year
generation, 105GWh of which will be
additional generation from construction
Assets(45)
(2022: 1,740GWh, 669GWh)
100% UN SDGs(46)
Of investments adhere to ORIT's ESG Policy and all transactions in the year
met ORIT's minimum ESG matrix threshold
(44) Total asset value including total debt and equity commitments.
(45) Reductions observed between ORIT's 2022 vs. 2023 potential
renewable energy production and equivalent impact KPIs are driven in part by
the sale of the Polish onshore wind farms midway through 2023, and by a change
in the methodology for calculating potential generation, which now accounts
for expected degradation across the portfolio.
(46) More detail on how ORIT has contributed to these UN SDGs is
included in the separately published ORIT Impact Report.
Regulatory Disclosures
The TCFD disclosures can be found in the Risk and Risk Management Statement
section of the Annual Report.
ORIT is classified as an Article 9 product under the EU Sustainable Finance
Disclosure Regulation ("SFDR") regulation. Please refer to the Annual Report
and to the ORIT website for ORIT's SFDR disclosures.
The Investment Manager is keeping up with recent developments in new
regulatory frameworks aimed at increasing transparency in environmental and
social factors. This includes the Taskforce for Nature-related Financial
Disclosures ("TNFD") and the UK's Sustainable Disclosure Requirements ("SDR").
Recognising the complexity and the depth of insight required to meet the TNFD
standards, the Investment Manager has concentrated on understanding both
direct operational dependencies and those within ORIT's supply chain. Initial
analysis indicates that primary dependencies likely to significantly impact
the portfolio's direct operations are integrated into ORIT's current risk
management frameworks (refer to the Company's 2023 Interim Report).
Furthermore, a summary of the Investment Manager's analysis regarding supply
chain dependencies is detailed in the separately published ESG & Impact
Report. This foundational phase of research is essential for establishing a
solid base for comprehensive TNFD disclosure, an ambition ORIT is dedicated to
achieving.
The Company supports "anti-greenwashing" efforts and expects to start making
the necessary disclosures in relation to SDR from 30 June 2024. An initial
review of the different investment labels and their criteria, the Investment
Manager expects ORIT to qualify for the "Sustainability Focus" label. Products
with these labels are those that invest in assets that are environmentally
and/or socially sustainable, determined using robust and evidence-based
standards. An example the FCA gives in this category is a fund that invests in
assets that contribute to climate change mitigation or adaptation.
Performance initiatives
Delivering investment performance is fundamental to the ESG &
Impact Strategy, to supporting the transition to
net-zero, and to being an impact fund. Asset optimisation initiatives and
robust ESG risk management aim to improve financial resilience and overall
performance of the Company, maximising the amount of green electricity the
Company generates.
Our Investment Manager works with key partners to mitigate production risks
and maximise performance of ORIT's operational assets. Examples of projects
that contributed to this objective are laid out in the separately published
ORIT ESG & Impact Report.
Case Study: Addressing and mitigating ESG risks, including human rights risks
within BESS assets
Equality & Wellbeing
Stakeholder Engagement
ORIT is committed to acting ethically and with integrity in all its business
dealings and relationships associated with its battery energy storage system
(BESS) assets. ORIT recognises its responsibility specifically regarding its
supply chain and operations, and the Investment Manager is dedicated to taking
the necessary steps to engage with and influence its partners to prevent any
adverse impacts and mitigate against any risks related to ESG issues.
BESS assets will be vital to achieving a green transition by facilitating
greater access to renewable energy and reducing the world's dependence on
fossil fuels. However, BESS supply chains still present significant ESG risks
that must be managed. The extraction and refining of raw materials needed for
battery applications has been connected to adverse impacts, such as
biodiversity loss, pollution, forced labour, violations of Indigenous rights
and corruption, while the manufacturing and operation of BESS raises concerns
around climate change and safety. Moreover, poor visibility and lack of
transparency within battery supply chains makes it a challenge to address
these issues.
The presence of these impacts and the risk that ORIT's activities may be
contributing to them has led the Investment Manager to develop and implement a
tailored ESG policy and processes for its BESS assets. The Investment Manager
is working in collaboration with Infyos, an ESG technology company
specialising in battery supply chains and sustainability, and will use
Infyos's software platform to manage, monitor and improve ORIT's BESS ESG
performance.
The policy ensures
1. Responsible sourcing principles are firmly integrated into all
investment decisions
2. Assets are operated to reduce their impact on biodiversity and climate
The Investment Manager is able to enact positive change across the industry on
behalf of ORIT through wider industry collaboration and engagement
As part of the recently launched BESS ESG Policy, the Investment Manager has:
· conducted a detailed risk assessment of its BESS assets and their
supply chain using Infyos's proprietary risk and supply chain models to
identify the most significant ESG risks on an ongoing basis;
· strengthened its due diligence framework in line with industry
best practice, including the OECD Guidelines for Multinational Enterprises and
Guidance for Responsible Business Conduct, to address and mitigate the most
significant risks identified above; and
· incorporated an in-depth assessment of supplier risk and ESG
performance, as well as bespoke mitigation actions plans, into the project
procurement and supplier management process via the Infyos Platform to ensure
all potential and actual impacts are identified, avoided and/or addressed on
an ongoing basis.
In addition, the Investment Manager will:
· develop controls to ensure the assets are managed in a safe and
efficient manner to reduce their impact on biodiversity and the environment,
including at the end of life;
· digitally map its high-risk material supply chains using the
Infyos Platform to ensure more accurate and granular data related to potential
and actual impacts; and
· engage with industry bodies and suppliers to promote greater
transparency in the battery supply chain and integrate best practice across
the industry.
For more information on how ORIT is addressing Human Rights risks, including
modern slavery and human trafficking, please refer to ORIT's Modern Slavery
Statement available on its website.
Impact tracker
Who? How much? What? Impact Theme
BESS supply chain ORIT's current BESS New BESS Equality and
assets: 6MW(47) procurement policy Wellbeing
Alignment to Stakeholder
OECD Guidelines Engagement
for Multinational
Enterprises and
Guidance for
Responsible Business
Conduct
Reduced risk of
adverse impact in
ORIT supply chain
(47) Represents the capacity of ORIT's existing BESS asset, Woburn
Road.
Planet
Impact Objective: Consider environmental factors to mitigate risks associated
with the construction and operation of assets, enhancing environmental
potential where possible.
400k 55.47t 553t
Estimated annual equivalent tCO(2)e avoided once fully operational(48) CO(2)e per MW estimated carbon Worth of carbon purchased in
(2022: 580k) intensity (direct and indirect) Pending Issuance Units
(2022: 8.48t)
100% 93% 4
Investments qualify as sustainable in line with EU Taxonomy Generating sites on renewable Environmental incidents
(2022: 100%) import tariffs(49) (2022: 0)
(2022: 87%)
UN SDGs 2.0m 203k
Equivalent new trees required to avoid same carbon(48) (2022: 2.9m) Equivalent cars off the road required to avoid same carbon(48) (2022:318k)
Based on actual annual renewable energy generation during the year
366k 1.8m 186k
Equivalent tCO(2)e avoided Equivalent new trees required to avoid same carbon Equivalent cars off the road required to avoid same carbon
.
Further information on the KPIs can be found in the separately published ESG
& Impact Report. All KPIs with no reference to 2022 are new for the 2023
reporting period.
(48) Based on potential annual renewable energy generation once fully
operational.
(49) As at 31 December 2023.
Maximising ORIT's positive environmental impact
ORIT recognises the critical role that renewable energy plays in meeting net
zero emissions targets, with an inherently positive impact on the environment.
This is demonstrated by the equivalent tCO(2)e avoided by the renewable energy
generated during the year.
Figures for carbon avoided use country-specific grid intensity factors, which
are updated on a periodic basis to reflect the changing composition of the
grid's energy sources. Increasing renewable capacity on the grids in which
ORIT's assets are located has resulted in a reduction in the tCO(2)e avoided
per MWh of renewable energy generated.
ORIT's LSE's Green Economy Mark(50) demonstrates the Company significant
contribution to the transition to a zero-carbon economy.
The Investment Manager can also confirm that 100% of ORIT's assets directly
contribute to or enable climate change mitigation in line with the EU Taxonomy
criteria. The EU Taxonomy is a classification system for sustainable
activities designed to help investors identify "green" environmentally
friendly activities. This is aimed to demonstrate investments that are
sustainable; ones that make a substantial contribution to climate change
mitigation or adaptation, while avoiding significant harm to other
environmental objectives and complying with minimum safeguarding standards.
The Company assesses % of Taxonomy-aligned activities through turnover
reflecting the share of revenue from green activities of investee companies.
More information on the Investment Manager's screening and assessment approach
can be found in ORIT's ESG & Impact Strategy.
Turnover £107.94 m 100% Aligned 0% Not Aligned 0% Not Eligible
As part of ORIT's approach to maximise positive environmental impact, ORIT
will review and adopt relevant industry standards alongside initiatives to
reduce its own carbon footprint.
The four recorded environmental incidents were minor. Three of the recorded
incidents were in relation to very small amounts of oil/fuel leakage. In each
case, the required mitigation response was deployed and the events had no
lasting negative impacts. The final environmental incident was in relation to
the discovery of a dead bat at one of ORIT's sites. Following environmental
monitoring of bat activity on site, extended curtailment was implemented to
ensure adequate protection.
Carbon measurement and reporting
In 2023 the Investment Manager on behalf of the Company engaged with
Altruistiq to help calculate and validate the Greenhouse Gas ("GHG") emissions
footprint for ORIT. ORIT has quantified and reported organisational GHG
emissions in line with the iCI and ERM Greenhouse Gas Accounting and Reporting
Guide for the Private Equity Sector (2022). This methodology was developed to
complement both the World Resources Institute's Greenhouse Gas Protocol
Standards and the Partnership for Carbon Accounting Financials' Standard for
the financial industry. This approach consolidates the organisational boundary
according to the operational control approach. For more information on the
carbon footprint methodology and definitions for terms used in this section,
please refer to ORIT's ESG & Impact Strategy.
The Company, as a legal entity, has no direct employees, owned or leased real
estate, or direct assets, and therefore the Company has no Scope 1 or 2
emissions. Scope 1 and 2 emissions for the portfolio arise mainly from on-site
fuel combustion and imported electricity. The majority of emissions are Scope
3. For the portfolio, Scope 3 emissions largely stem from purchased goods and
services alongside indirect activities like waste management, transportation,
and travel. For the Company, they relate to purchased services acquired, such
as legal and investment management services.
(50) The Green Economy Mark identifies London-listed companies and
funds that generate between 50% and 100% of total annual revenues from
products and services that contribute to the global green economy.
Scope Portfolio Emissions Company Emissions (tCO(2)e) Total Emissions (tCO(2)e) % of Total
(tCO(2)e)
1 - Direct Emissions 223.45 - 223.45 0.6
2 - Indirect Emissions (market-based)(51) 728.98 - 728.98 2.0
3 - Indirect Emissions 36,012.16 83.58 36,095.74 97.4
- Fuel & Energy Related Activities 410.22 - 410.22 1.1
- Purchased Goods and Services 34,687.11 83.58 34,770.69 93.9
- Travel and Transport(52) 749.03 - 749.03 2.0
- Waste 165.80 - 165.80 0.4
Total 36,964.59 83.58 37,048.17
ORIT's overall carbon intensity was calculated to be 55.47 tCO(2)e per MW.
ORIT's weighted average carbon intensity ("WACI") for the year was calculated
to be 3.74tCO(2)e/£m revenue(53).
The following table separates ORIT's carbon emissions into UK and non-UK based
emissions in line with the Streamlined Energy and Carbon Reporting framework
("SECR").
2023 2022 2021
UK Emissions Non-UK Emissions UK Emissions Non-UK Emissions UK Emissions Non-UK Emissions
Scope 1 tCO(2)e 218.0 5.4 0.0 0.6 0.0 0.0
Scope 2 Market based tCO(2)e 126.5 602.5 0 885.2 0.0 5.0
Location based tCO(2)e 342.1 471.3 190.4 836.5 192.2 62.4
Energy consumption MWh(54) 11,221.7 2,550.1 1,568.4 2,724.9 905.2 1,150.5
Scope 3 tCO(2)e 29,262.2 6,749.9 5,706.4 1,261.4 710.9 1,500.7
(51) Using a location-based approach, ORIT's portfolio Scope 2
emissions equate to 813.39tCO(2)e.
(52) This category includes upstream transportation and distribution,
employee commuting, business travel and contractor travel.
(53) A market-based approach as used to calculate the WACI. The WACI
using a location-based approach is equal to 3.62tCO(2)e/£m revenue.
(54) The uplift in energy consumption MWh is partially due to greater
capture of on-site fuel consumption reported alongside electricity
consumption.
The Investment Manager has disclosed the different categories of data points
used to calculate the Company's carbon footprint to transparently convey both
the quality and accuracy of the carbon footprint reported. The table below
shows the split between the defined(55) categories of data:
Real data Estimated data Proxy data
(44% total) (49% total) (7% total)
Actual activity data = 9% Estimated activity data = 40% Proxy activity data = 7%
Actual spend data = 35% Estimated spend data = 9% Proxy spend data = 0%
In 2023, the Investment Manager worked together with the ORIT's investee
companies and carbon consultant to create a bespoke template to support the
reporting of carbon-related data, and the attribution of more specific
emission factors for the calculation of emissions. It is positive to see that
these efforts have led to a marked improvement in the quality of ORIT's carbon
footprint in 2023.
Whilst the percentage of estimated data has remained relatively consistent,
"proxy" estimations have decreased from 25% of total data in 2022, to 7% in
2023, whilst "real data" has almost doubled year-on-year, from 22.5% to 44%.
As such, the Investment Manager has high confidence in 93% of the datapoints
provided (compared to 75% in 2022).
Furthermore, whilst actual activity data appears lower than expected at 9% of
total data in 2023, this is in part due to greater capture of actual
service-related spend data during this reporting period, which cannot be
captured through weight- or volume-based data. The Investment Manager is
cognizant of the potential for bias in the calculation of data quality, and
will continue to refine the methodology to present data quality in the most
appropriate format.
Carbon reduction
The Company's aim is to reduce its emissions through stakeholder engagement
and proactive management of its assets. As the Company improves data quality,
especially for assets in construction, the Investment Manager will continue to
explore opportunities to reduce emissions associated with embodied carbon.
The carbon intensity metric based on the MW capacity of the portfolio has
increased significantly since 2022. Changes in the carbon intensity are
dependent on factors such as the operational and construction split of assets,
whereby construction assets typically display higher carbon footprints than
operational assets. The 2023 increase is primarily driven by activities and
purchases for the construction of Cumberhead wind farm and Breach solar farm.
2023 2022 2021
55.47 tCO(2)e/MW 8.48 tCO(2)e/MW 5.23 tCO(2)e/MW
It is also important to note that even within construction projects of a
similar size, there may be still large variations in related carbon emissions.
Factors such as foundation type, location and supplier can have very
significant implications on an asset's footprint. The Investment Manager
expects ORIT's carbon intensity per MW to reduce once the portfolio is fully
operational.
(55) Please refer to ORIT's ESG & Impact Strategy for definitions
of these terms.
Carbon offsetting
Whilst carbon reduction remains the priority in ORIT's carbon strategy, ORIT
does still commit to offsetting any residual direct emissions relating to its
Scope 1 and 2 emissions.
Last year, ORIT purchased 400 tonnes worth of carbon in "Pending Issuance
Units"(56). These units have been secured both to future-proof ORIT's carbon
units in light of increasing prices and low availability of "Woodland Carbon
Units"(57) and also to support new woodland creation in the UK. In 2023, the
Investment Manager purchased an additional 553 PUIs to cover the emissions
relating to ORIT's 2023 Scope 1 and 2 emissions.
Supporting the planting of new UK woodland helps plant new trees today, but
these woodlands do not deliver "offset" credits immediately. Only once the
woodland biomass has grown sufficiently will its carbon credits be verified
and converted from ex-ante PIUs to ex-post WCUs. Only then can only then be
used as official offsets.
In recognition of the carbon impact of ORIT's operations, ORIT has decided to
invest in a UK woodland carbon project that will capture 953 tonnes worth of
CO(2) over the next 31 years. The units are derived from a "Forest Carbon"
project in Acheilidh, Tain, Highlands. The new native broadleaf woodland is
expected to deliver all 953 tonnes of carbon by 2055 and 75% of its carbon
units by 2050.
The Board will reassess if the purchase of additional PIUs will be necessary
on a year-to-year basis.
The growing trees will also provide wider co-benefits beyond climate
mitigation, including water quality improvements, habitat creation,
employment, and cleaner air. Through ORIT's support for UK woodland creation,
the Company is helping the country to meet its long-term international climate
targets in a way that also benefits wider society and nature.
Planet initiatives
Maximising the Company's positive contribution to the environment is core to
the ESG & Impact Strategy. Planet initiatives contribute to solutions to
combat climate change. Projects undertaken in the year are outlined in the
separately published ESG and Impact Report.
(56) A Pending Issuance Unit ("PIU") is effectively a 'promise to
deliver' a Woodland Carbon Unit in future, based on predicted sequestration.
It is not 'guaranteed' and cannot be used to report against UK-based emissions
until verified. However, it allows companies to plan to compensate for future
emissions or make credible statements in support of woodland creation.
(57) A Woodland Carbon Unit ("WCU") is a tonne of CO(2)e which has
been sequestered in a Woodland Carbon Code-verified woodland. It has been
independently verified, is guaranteed to be there, and can be used by
companies to report against emissions or to use in claims of carbon neutrality
or Net Zero emissions.
Case Study: Empowering communities for climate justice - Citizens UK
Diversifying Climate Leadership National Project
Sustainable Momentum
Stakeholder Engagement
ORIT engaged with Citizens UK, a prominent community organising alliance, to
deliver the "Diversifying Climate Leadership National Project" with the aim of
addressing local climate issues and empowering a diverse range of individuals
underrepresented in the climate sector.
Through this project, ORIT and Citizens UK aimed to address the following
objectives as the initial scoping phase of their broader climate justice
campaign:
1. Local climate advocacy and representation: Bring about change on local
climate issues, emphasising campaigns led by local communities to ensure
relevance.
2. Building power and addressing inequalities: Seek commitments from
various civil society leaders from diverse backgrounds to build power and
simultaneously provide improved representation and perspective of local needs
in climate campaigns.
3. Empowering civil society leaders: Deliver a training course for civil
society leaders embedded into local organisations, equipping them with the
skills to lead successful climate justice campaigns within their communities.
The project was a huge success. Citizens UK delivered a comprehensive 5-part
training course, attracting over 100 attendees from 5 regions in the first
session, fostering regional representation and diverse participation.
Trained leaders initiated impactful community organising, addressing key
issues such as housing repair, transport improvements and the revitalisation
of green spaces.
Following the completion of the training, a National Climate Team consisting
of 15 members was formed, and the pivotal inclusion of "Climate Justice" into
Citizens UK's core agenda marked a significant achievement. This outcome
signifies that ORIT's pilot project successfully facilitated the sustained
emphasis on climate change as a central issue within the priorities of
Citizens UK.
For more information on the project, please visit the Citizens UK website(58).
"New climate leader in Greater Manchester, Rev Ian Rutherford: "I've always
been passionate about taking action on climate, but it's never really been a
priority at Citizens UK until now. The training I did has galvanised local
people to be ambitious for change and to do something about it. There's not
only more local climate campaigns happening now but a dedicated national team.
I'm really excited about what we can achieve."
(58 ) https://www.citizensuk.org/campaigns/climate-justice/
Impact tracking
Who? How much? What? Impact Theme
Citizens UK 50,000 5 regions Provided a grant to support the delivery of 5-part training programme for Sustainable momentum
members.
local civil society leaders, providing them with the necessary skills to
15 members of a National Climate Team deliver effective climate justice initiatives in their communities. This Stakeholder Engagement
project's success also resulted in Citizens UK incorporating "Climate Justice"
as a key priority in their organisation's agenda
People
Impact Objective: Evaluate social considerations to mitigate risks and promote
a 'Just Transition' to clean energy.
7,827 7,849 0
Students benefitting from Direct beneficiaries from the RIDDORS (or equivalent)
social initiatives projects funded through the (2022: 1)
(2022: 396 students) BizGive platform
(2022: 7,536)
169 UN SDGs
Estimated FTE jobs created
Managing our impact on society
Investing in renewable energy has natural positive impacts on people and for
the wider society by benefitting the economy. By channelling capital towards
"homegrown renewables" ORIT is also contributing to energy security,
preventing future energy crises resulting from reliance on unsustainable
global fossil fuel markets.
It is also vital the Company mitigates any possible negative impacts and risks
to people as the Company invests, constructs, and operates our portfolio of
renewable assets. ORIT has clear policies and governance structures to achieve
this. Some social factors that ORIT and our Investment Manager consider to be
the most important during due diligence and ongoing monitoring of assets
include:
· Health and safety
· Diversity and inclusion
· Promoting a Just Transition (workers, community and customers)
ORIT also supports initiatives that contribute to solutions to engage
communities and promote a "Just Transition" to clean energy (see "People
Initiatives" section below).
Health and safety approach
ORIT recognises its health and safety responsibilities and keeping people safe
remains its highest priority. ORIT has put arrangements in place with its
Investment Manager to ensure that health and safety risks are managed
effectively.
Our Investment Manager employs specialist HSE consultants and additionally has
employed a Head of Health and Safety to ensure that health and safety
procedures are embedded into our model of investing and managing assets.
This integration is achieved through:
· Technical Compliance Standards
· Diligence and benchmarking of contractors
· Audits and ongoing oversight
· Continuous Improvement
Where minority stakes in businesses are held, the Investment Manager still
tracks performance via Board meeting attendance.
Our Investment Manager actively tracks and monitors various accident and
incident classifications from events where there is a statutory requirement to
report to the UK Health & Safety Executive (RIDDORs) or other local
government bodies. This includes incidents classified as accidents, near
misses, dangerous occurrences, and general safety observations. Where
accidents occur on overseas assets that would merit reporting as a RIDDOR if
they were to occur in the UK, we flag them as "RIDDOR-like" events. All
notifications of HSE incidents are investigated by the Investment Manager's
in-house asset management team and where necessary the third-party HSE advisor
and the Investment Manager ensure that out-sourced HSE managers close out all
incidents with root cause analysis and establish lessons learned and where
necessary change processes and procedures. Where weaknesses in underlying
procedures and systems are identified, the HSE advisor works with businesses
to implement appropriate remedies.
RIDDORs Lost time injuries Near misses Personal injuries Minor equipment damage incidents
(>7 days)
0 2 14 10 first aid 23
The organisation's safety performance during the year has been positive, with
no significant risks to highlight. All incidents were investigated, and
appropriate actions were taken.
Diversity and inclusion
Equality and wellbeing are fundamental to ORIT's impact ambitions. This is
reflected in our Company policies and in the way that the Company operates
externally, through understanding the approach that our third-party providers
take to diversity and inclusion, and suggesting ways to improve this wherever
possible.
The Investment Manager provides directors to the underlying subsidiary
companies and ensures diversity is considered when appointing them.
Board Investment Manager
The Company's Board is made up of a complementary mixture of social The Investment Manager shares ORIT's values and places diversity and inclusion
backgrounds, gender diversity and ethnicity. The Company' complies with the at the heart of them, which is demonstrated through initiatives implemented in
FCA's diversity targets on the representation of women and ethnic minorities: 2023. These initiatives include:
· At least 40% of the board should be women. · Recruitment Enhancements: Established hiring guidelines and
unconscious bias training; diversified candidate pools through broader job
· At least one of the senior board positions or Senior Independent advertising and inclusive job descriptions.
Director (SID) should be a woman.
· Workplace Attractiveness: Updated parental leave policies for
· At least one member of the board should be from an ethnic diverse family structures; proactive monitoring of gender pay gaps.
minority background excluding white ethnic groups (as set out in categories
used by the Office for National Statistics). · Promotion Process Reforms: Revised promotion process for greater
transparency and decision-making diversity at the team level.
· Workplace Adjustments: Implemented necessary adjustments and
encouraged open communication for supporting diverse workplace needs.
· Focus on Neurodiversity: Established a neurodiversity group,
planning manager training on neurodiversity for 2024.
· Internship Programs: Successful participation in the Octopus
Energy Equality Internship, leading to full-time roles for several interns.
Promoting a "Just Transition"
A "Just Transition" refers to the equitable distribution of benefits in the
shift to clean energy. ORIT actively engages with workers, local communities
and customers, focusing on job creation, community benefits and fair access to
green energy.
Strategy's aim: Performance KPIs:
Workers - Job Creation Enhance socio-economic distribution and equity by supporting the creation of · 169 estimated FTE jobs supported
decent jobs through ORIT's partners and subcontractors. This is achieved by
their commitment to adhere to standards of equal opportunities, workplace best · 20% local
practices, diversity, and inclusion, coupled with a focus on promoting local
employment opportunities.
Community - Engagement, Voice and Benefit Empower local communities by establishing avenues for benefits such as through · Over £600,000 per year of community benefit funds
community benefit schemes, educational engagement with local schools via
workshops and site visits, and support of local charities. As ORIT's portfolio · 7,827 students benefitting from social initiatives
expands, these impact partnerships are designed to create a more significant
and lasting impact across a diverse range of beneficiaries. Applicability of · 7,849 direct beneficiaries from the projects funded through the
community initiatives will be determined on a portfolio-by-portfolio basis. BizGive platform.
Proactively engaging with communities and stakeholders from the outset, ORIT
aims to secure social license for its investments, particularly in extending
the operational lifespan of its assets.
Customers - Affordable Green Energy Deliver societal benefits by supplying affordable, clean energy to the grid. · 354,880 Equivalent number of homes powered by ORIT's assets(59).
This not only aims to lower energy bills but also to enhance energy security
in regions with ORIT's assets.
People initiatives
Alongside keeping people safe, ORIT considers its potential impact on people.
People initiatives contribute to solutions to engage communities and promote a
"Just Transition" to clean energy. ORIT exhibits a variety of social
considerations across its assets and beyond, utilising the experience and
approach developed by our Investment Manager to maximise benefits. Projects
undertaken in the year are outlined in the separately published ESG &
Impact Report.
(59) Metric based on actual production generated by ORIT's assets
during the year.
Case Study: Community Benefits at ORIT's wind farms
Equality & Wellbeing
ORIT's wind farms collectively stand to provide over £600,000 a year to its
local communities as part of their community benefit funds. At the heart of
ORIT's community benefit programme, Cumberhead and Crossdykes wind farms stand
out for their significant annual contributions, amounting to £249,900 and
£322,000 respectively. These funds are directed towards a myriad of
community-centric projects through open grantmaking, which includes support
for local education, infrastructure, and environmental stewardship.
Cumberhead
With an annual provision of £249,900, Cumberhead community benefit fund
promises substantial support over the site's 30-year lifespan. This fund will
benefit the communities within the South Lanarkshire Council area, with 50% of
the funds directly attributed to the Council's Renewable Energy Fund and the
remaining 50% available to community council areas of Coalburn and Lesmahagow
through bi-annual award rounds. September 2023 marked the fund's inaugural
round, and the fund saw four awardees from six applications, disbursing
c£45,000, which represents 40% of the year's allowance for Coalburn and
Lesmahagow.
The Cumberhead community benefit fund beneficiaries highlight the fund's
diverse impact:
· Three Valleys Women's Walking Football Club received funding for
equipment and professional coaching to support its aim of encouraging women
into physical activity, enhancing mental health, and building supportive
social networks.
· Lesmahagow Development Trust, awarded for infrastructure
improvements at the Fountain Community Centre, demonstrates the fund's
commitment to enhancing community facilities and services.
· OutLET: Play Resource was supported to employ a new staff member
for its Youth Foresters Programmes, promoting youth development and outdoor
education.
· Coalburn Men's Shed received a grant towards running costs and
equipment, showcasing the fund's impact in promoting mental and physical
well-being through community engagement.
Crossdykes
The Crossdykes community benefit fund contributes £7,000 per installed
megawatt annually, directly benefiting the surrounding communities within the
council areas of Eskdalemuir, Langholm, Ewes & Westerkirk, Lockerbie,
Middlebie & Waterbeck, and North Milk. This fund has three schemes to
address a wide array of community needs and has distributed £348,000 in 2023
alone.
The Open Grant Funding Scheme is dedicated to larger community projects across
various sectors aimed at enhancing community development and rural
regeneration, combating poverty, advancing education and health, and enriching
lives through the arts, heritage, culture, and science. It promotes active
participation in sports, improves living conditions through recreational
facilities, and supports environmental protection efforts to combat climate
change, benefit nature and animal welfare. The fund provides relief for those
affected by age, ill-health, disability, or financial hardship, a holistic
approach to community support and sustainable development.
An example is the £30,000 grant made to the D&G HandyVan project. This
funding enabled the charity, which aids vulnerable populations in Dumfries and
Galloway by providing home repairs and improvements, to extend its reach and
efficiency through the purchase of a new van. This purchase underscores the
project's commitment to aiding those in need while contributing positively to
climate action efforts. For more details, see
https://www.foundationscotland.org.uk/our-impact/case-studies/dg-handyvan-goes-electric-to-benefit-local-community
As well as the open grant scheme the Community Council Small Grants Scheme
allocates up to £5,000 per year to each community council within the benefit
area, enabling them to swiftly respond to smaller local needs.
The Education and Training Bursaries scheme offer £2,000 annually to each of
the five community councils for distribution as bursaries, aimed at improving
access to education and training opportunities.
Saunamaa and Suolakangas
ORIT extended this voluntary initiative to its Saunamaa and Suolakangas wind
farms in Finland in December 2023, contributing €30,000 to support local
projects, a practice less common in Finland compared with the UK. These funds
will be distributed following the review and selection of successful
applicants by a community panel.
Together, these funding streams provide a holistic and responsive framework
for community development. The extension of such initiatives to Finnish wind
farms underscores ORIT's commitment to community development beyond the UK,
promoting a model for renewable energy projects to contribute positively to
local communities globally.
Impact tracker
Who? How much? What? Impact Theme
Communities near: Annual commitments of: - Funding that supports local needs and priorities Equality & Wellbeing
- Crossdykes - £322,000 - Shared benefits with communities, providing a just transition
- Cumberhead - £249,900
- Saunamaa and Suolakangas - €30,000
Risk and Risk Management
Risk Appetite
The Board is ultimately responsible for defining the level and types of risk
that the Company considers appropriate. In the context of the Company's
strategy, risk appetite is aligned to the Investment Policy and this provides
the framework for how capital will be deployed to meet the Company's
investment objective. The limits set out in the Investment Policy represent
the amount of risk the Company is willing to take and the constraints that the
Board determines that the Investment Manager must adhere to on behalf of the
Company. This covers the principal risks the Company faces including, amongst
other things, the level of exposure to power prices, financing risks and
investment risks. Beyond this, risk limits and tolerances are monitored and
set by the AIFM as part of the AIFM's risk management services. These are
documented in the AIFM's Risk Management Policy for the Company covering
credit, liquidity, counterparty, operational and market risks. Adherence to
these risk limits is reported regularly to the Board through the quarterly
AIFM risk management report.
Principal risks and uncertainties
The Company has carried out a robust assessment of its principal and emerging
risks and the procedures in place to identify any emerging risks are described
below.
Procedures to identify principal or emerging risks:
Well managed risks are key to generating long-term shareholder returns. The
purpose of the risk management framework and policies adopted by the Company
is to identify risks and enable the Board to respond to risks with mitigating
actions to reduce the potential impacts should the risk materialise.
The Board regularly reviews the Company's risk matrix, with a focus on
ensuring appropriate controls are in place to mitigate each risk. The
experience and knowledge of the Board is important, as is advice received from
the Company's service providers.
The following is a description of the procedures for identifying principal
risks that each service provider highlights to the Board on a regular basis.
1. Alternative Investment Fund Manager ("AIFM"): The Company has appointed
Octopus AIF Management Limited to be the Alternative Investment Fund Manager
of the Company (the "AIFM") for the purposes of UK AIFM Directive.
Accordingly, the AIFM is responsible for the portfolio management of the
Company and for exercising the risk management function in respect of the
Company. As part of this the AIFM has put in place a Risk Management Policy
which includes stress testing procedures and risk limits. As part of this risk
management function, the AIFM maintains a register of identified risks
including emerging risks likely to impact the Company. This is updated
quarterly following discussions with the Investment Manager and highlighted to
the Board.
2. Investment Manager: Portfolio Management has been delegated by the AIFM
to the Investment Manager. There is a comprehensive due diligence process in
place to ensure that potential investments are screened against the Company's
objectives, and that financial and economic analysis is conducted alongside a
full risk analysis. Any potential transaction must be granted approval in
principle ("AIP") by the Octopus Energy Generation Investment Committee
("OEGEN IC") and the due diligence budget signed off by the Board. Once due
diligence and negotiations of final terms are substantially complete, the
final proposal including the risk analysis will be presented to OEGEN IC for a
decision on whether the Company should proceed with investment, subject to
approval from the Board. The Investment Manager also provides a report to the
Board at least quarterly on asset level risks, industry trends and insight to
future challenges in the renewable sector including the regulatory, political
and economic changes likely to impact the renewables sector.
3. Broker: The Broker provides regular updates to the Board on Company
performance advice specific to the Company's sector, competitors and the
investment company market whilst working with the Board and Investment Manager
to communicate with shareholders.
4. Company secretary and auditors: Brief the Board on forthcoming
legislation/regulatory change that might impact on the Company. The auditors
also have specific briefings at least annually.
Procedure for oversight
The Audit and Risk Committee undertakes a review at least three times a year
of the Company's risk matrix and a formal review of the risk procedures and
controls in place at the AIFM and other key service providers to ensure that
emerging (as well as known) risks are adequately identified and - so far as
practicable - mitigated.
During the year, the Audit and Risk Committee have added additional principal
risks covering the impact on Company performance of asset sales (and other
capital recycling) processes, and the impact on Company performance of
corporate M&A and other growth initiatives. The Company reviews the risk
matrix on a quarterly basis and revises risk scores as appropriate.
Principal risks
The Board considers the following to be the principal and other risks faced by
the Company along with the potential impact of these risks and the steps taken
to mitigate them.
Economic, political and climate risks
Income and value of the Company's investments may be affected by future
changes in the economic and political environment, alongside risks associated
with climate change.
Risk Potential Impact Mitigation
Inflation and interest rates The revenue and expenditure of the Company's investments are frequently Inflation and interest rate assumptions are reviewed and monitored regularly
partially index-linked and therefore any discrepancy with the Company's by the AIFM and the Investment Manager in the valuation process. Assumptions
inflation expectations could impact positively or negatively on the Company's are set by the Valuations Consistency Group and valuations approved by the
cashflows. AIFM.
Changes in interest rates may affect the valuation of the investment portfolio It is expected that a natural hedge may occur where higher interest rates are
by impacting the valuation discount rate and could also impact returns on cash also accompanied by higher inflation rates due to subsidies being inflation
deposits and the cost of borrowing. linked.
In the event that actual inflation differs from forecasts or projected levels, The Company can utilise interest rate swaps or fixed rate financing to
the profitability of the Company may be impaired leading to reduced returns to mitigate interest rate risks.
shareholders.
Increased inflation and a higher cost of living can adversely impact investor
appetite.
Foreign currency The Company's functional currency is Sterling, but some of the Group's The principal mitigation is through the Company's hedging policy which seeks
investments are based in countries whose local currency is not Sterling. to minimise the volatility of cash flows in non‑GBP currencies. The RCF can
also be drawn in multiple currencies to allow the matching of debt and the
Therefore, changes in foreign currency exchange rates may affect the value of underlying assets.
the investments due to adverse changes in currencies.
The Investment Manager monitors foreign exchange exposures using short and
long-term cash flow forecasts.
The Company's portfolio concentrations and currency holdings are monitored
regularly by the Board, the AIFM and the Investment Manager.
All FX hedges are held within the intermediate holding companies.
Government policy changes The Company's investments in Renewable Energy Assets are remunerated by both The Company holds a diversified portfolio of Renewable Energy Assets and so it
government support schemes and private PPAs - the terms of these may be is unlikely that all assets will be impacted equally by a change in
impacted by government changes or policy or even terminated in certain legislation.
circumstances. This would adversely impact the value of the Company's
investments. There is also strong public demand for support of the renewables market to hit
"net zero" carbon emission targets.
Geopolitical risks Events in Ukraine and the impact of sanctions placed on Russia and affiliated The Investment Manager undertakes extensive due diligence on all
countries may impact the target returns of the Company. counterparties prior to conducting business with them and will fully comply
with all sanctions. As part of this review, all counterparty due diligence has
The Company engages third-party contractors to oversee the day-to-day been reviewed and confirmed that the Group's current counterparties are not
operations of the assets. If any of these contractors are impacted by the materially impacted by recent events or by the new sanctions.
events in Russia and Ukraine, or by the current sanctions imposed on Russia,
this may impact the performance of the assets, and ultimately the target The Investment Manager will remain agile to the changing geopolitical
returns of the Company. environment and will continue to evolve and reassess appropriate mitigation
strategies.
Assets located in nearby jurisdictions may be impacted by the conflict.
Mitigations for power prices as well as for cyber security are described
The conflict may lead to increased volatility of power prices and hence below.
valuations. Heightened power prices may lead to an increased risk of political
intervention to regulate prices or impose windfall taxes.
The conflict may lead to an increased risk of cyber attacks.
Risks associated with climate change Climate related risks relate to transition risks and physical risks. The Investment Manager has engaged with third party advisors on how climate
related risks are being modelled in long-term power price forecasts. There are
The prominent transition risk relates to oversupply of renewables over time, likely to be opportunities associated with the transition to a low carbon
which may cause downward pressure on long-term power price forecasts setting future including growth in the market, government interventions and technology
lower capture prices, including the risks associated with periods of negative advancements that could counterbalance the transition risks of climate change
power prices and power price volatility. This could ultimately lead to a on the Company.
shortfall in anticipated revenues to the Company.
The Board and the Investment Manager periodically assess the Company's
The prominent physical risks relate to long‑term changes to weather portfolio of assets for potential transition risks within the jurisdictions
patterns, which could cause a material adverse change to an asset's energy that it currently operates. The Investment Manager works with third-party
yield from that expected at the time of investment. asset managers to ensure an appropriate level of equipment spares to minimise
downtime associated with damaged equipment.
Physical risks associated with acute and chronic temperature change could lead
to flooding, storms, and high winds. This could damage equipment and force There is growing demand for consistent, comparable, reliable, and clear
operational downtime resulting in reduced revenue capability and profitability climate related financial disclosure from many participants in financial
of the portfolio of assets. markets. The Board, AIFM and Investment Manager have included TCFD as part of
the Company's ESG & Impact Strategy.
Company: operational risks
Risk that target returns and Company objectives are not met over the longer
term.
Risk Potential Impact Mitigation
Deployment A deterioration of the investment pipeline may impact the ability to commit The Company has an experienced Investment Manager with good presence and
and deploy capital into suitable opportunities in the expected time frame. strong relationships in the renewables market. The investment mandate is
Competition in the infrastructure market remains strong which could limit the diversified giving a broad landscape of opportunities.
ability of the Company to acquire assets in line with target returns or incur
abort costs where transactions are unsuccessful. The Board and Investment Manager oversee the investment pipeline and abort
exposure and frequently monitor its progress in relation to Company targets.
Both deployment risks could ultimately impact shareholder returns. This risk naturally reduces as the amount of capital to deploy falls. Low
levels of 'dry powder' currently and during 2023 have meant this risk is and
has been less relevant recently.
Capital recycling through asset sales Selling assets could have an impact on the ongoing dividend target and other The Company has an experienced Investment Manager within the sector and the
investment policy limits. It could also result in the loss of receipt of Investment team has a good understanding of the M&A market and investor
anticipated cash flows impacting dividend cover. landscape. Certain assets have been identified by the Investment Manager as
being potentially available and appropriate for sale by the Company.
Unsuccessful transactions could also result in abort costs, and potentially
also impact Company reputation. The Investment Manager has an Investment Committee to approve asset sales in
principle and sign off transaction budgets. These costs are reported to the
board. Reliance is placed on due diligence reports prepared by professionals
appointed by the Investment Manager and therefore the Company could claim for
losses if necessary.
Reliance on third-party service providers The Board has contractually delegated to third-party service providers day to Each contract was entered into after full and proper consideration of the
day management of the Company. A deterioration in the performance of any of quality and cost of services offered, including the financial control systems
the key service providers including the Investment Manager, AIFM and in operation in so far as they relate to the affairs of the Company. All of
Administrator could have an impact on the Company's performance and there is a the above services are subject to ongoing oversight by the Board and, where
risk that the Company may not be able to find appropriate replacements should applicable, the AIFM and the performance of the key service providers is
the engagement with the service providers be terminated. reviewed on a regular basis. The Board, through the Management Engagement
Committee monitors key personnel risks as part of its oversight of the AIFM
and Investment Manager and the Company's key service providers report
periodically to the Board on their control procedures.
Valuations Valuation of the portfolio of assets is based on financial projections and The Investment Manager has significant experience in the valuation of
estimations of future results. Actual results may vary significantly from the renewable assets and conducts a quarterly valuations process.
projections, which may reduce the profitability of the Company leading to
reduced returns to shareholders. The AIFM has a valuations committee separate to the Investment Manager to
provide valuations consistency on macro assumptions and to provide oversight
and challenge to the valuations.
The Board and AIFM review the valuations provided quarterly and they are
audited annually.
Dividend cover and ratios monitored by the Investment Manager and reported to
the AIFM.
ESG policy Material ESG risks may arise such as slave labour in the supply chain, health ESG is embedded in the investment cycle with a formal ESG matrix including a
and safety, unfair advantage, bribery, corruption and environmental damage. If minimum target ESG score required for approval of any new investments. Ongoing
the Company fails to adhere to its public commitments as stated in its ESG operational and construction ESG risk management is reviewed periodically by
Policy and ESG & Impact Strategy, this could result in shareholder the Investment Manager, who work closely with service providers on ESG and
dissatisfaction and adversely affect the reputation of the Company. impact standards reporting.
ESG Policy signed off and reviewed by the Board.
Conflicts of interest The appointment of the AIFM is on a non-exclusive basis and each of the AIFM The AIFM and Investment Manager have clear conflicts of interest and
and Investment Manager manages other accounts, vehicles and funds pursuing allocation policies in place. Transactions where there may be potential
similar investment strategies to that of the Company. This has the potential conflicts of interest are overseen by the Investment Manager's conflicts
to give rise to conflicts of interest. committee, an independent fairness opinion on valuation is commissioned, and
as with all transactions, the Board has final approval rights. The Board, AIFM
Board and counterparties conflicts. and Investment Manager are responsible for establishing and regularly
reviewing procedures to identify, manage, monitor and disclose conflicts of
interests relating to the activities of the Company. These procedures are more
fully described in the Company's prospectus dated 10 June 2021.
Conflict of interest policies in place both at Board level and under the
Listing Rules.
Board effectiveness and compensation Inappropriate or inadequate Board composition left unidentified through a poor The Broker and Investment Manager were involved in the initial selection of
Board evaluation process could lead to poor decision making and adversely the Board. The Nomination Committee is responsible for ongoing monitoring of
affect the reputation of the Company or result in a financial loss. Board composition. Board effectiveness is also reviewed externally every
3 years.
Board compensation structures may encourage risk taking that is not aligned to
Company strategy and risk appetite or may lead to an inability to retain External benchmark surveys are undertaken on Board remuneration via the
knowledgeable Board members. Remuneration Committee and ratified at the Annual General Meeting.
The FCA announced new rules for listed companies in the UK in July 2022 to
report on the diversity of Boards and Executive Management, with new board
targets on a comply or explain basis. The Board composition now meets the FCA
criteria.
Trading at a discount to NAV The Ordinary Shares may trade at a discount to NAV and shareholders may be The Company's Broker monitors the market situation and reports regularly on
unable to realise their investments through the secondary market at NAV which the status, along with demographics and changes in shareholder register.
could lead to a loss of market confidence in the Board and/or Investment Regular shareholder communications and marketing roadshows undertaken to
Manager. ensure updated information is available to the market/shareholders. The Board
has put in place a discount control policy and has the option of a share
A failure to adapt to changing investor demands could reduce the demand for buyback if the Board believes it to be in shareholders' interests as a means
shares and widen the discount further. of correcting any imbalance between the supply of and demand for the Ordinary
Shares. The Company also has the ability to hold treasury shares to mitigate
this risk.
Corporate M&A and other growth initiatives Unsuccessful corporate M&A activity could impact Company reputation, and The Company has an experienced Investment Manager within the sector meaning
lead to abort costs in the event of an unsuccessful transaction. External that Investment team has a good understanding of the M&A market and
growth activity is partially driven by external market factors. investor landscape. In addition, the Company's broker provides independent
support for corporate M&A activity taking into account target performance,
investor sentiment and market conditions.
Cyber security Attempts may be made to access the IT systems and data used by the Investment Cyber security policies and procedures implemented by key service providers
Manager, Administrator and other service providers through a cyber-attack or are reported to the Board and AIFM periodically to ensure conformity. The
malicious breaches of confidentiality that could impact the Company reputation Investment Manager has a robust 3 lines of defence risk model in place in
or result in financial loss. place to implement, check and audit technology controls. Thorough third-party
due diligence is carried out on all suppliers engaged to service the Company.
All providers have processes in place to identify cyber security risks and
apply and monitor appropriate risk plans.
Portfolio of assets: operational risks
Risk that the portfolio underperforms and, as a result, the target returns,
and Company objectives are not met over the longer-term.
Risk Potential Impact Mitigation
Power prices The income and value of the Company's investments may be adversely impacted by The Investment Manager has a specific Energy Markets Team that monitors energy
changes in the prevailing market prices of electricity and prices achievable price forecasts and puts in place mitigating strategies. This could be through
for off-taker contracts. There is a risk that the actual prices received vary the use of short-term PPA contracts to fix the electricity prices where
significantly from the model assumptions, leading to a shortfall in possible, or to hedge the exposure of fluctuating electricity prices through
anticipated revenues to the Company. derivative instruments. Model assumptions are based on quarterly reports from
a number of independent established market consultants to inform on the
electricity prices over the longer-term.
Construction Construction project risks associated with the risk of inaccurate assessment The Investment Manager monitors construction carefully and reports frequently
of a construction opportunity, delays or disruptions which are outside the to the Board and AIFM. The Investment Manager undertakes extensive due
Company's control, changes in market conditions, and the inability of diligence on construction opportunities and has in place clear approval
contractors to perform their contractual commitments could impact Company processes for any material construction cost overruns and contingency spend.
performance.
Development Development project risks associated with delays, increases in costs or The Company's maximum exposure to development is limited to 5% of GAV.
ultimate failure to deliver the expected assets to construction ready status.
The Investment Manager monitors progress of development projects carefully and
ensures all costs are managed appropriately. A clear approval processes is in
place for any material project cost overruns and contingency spend. Cost and
progress analysis of development projects is reported frequently to the Board
and AIFM. The Investment Manager also monitors exposure to any one developer
to ensure this is kept within reasonable limits.
Asset-specific risks, including production and HSE risks Circumstances may arise that adversely affect the performance of the relevant The Company's experienced Investment Manager oversees and manages asset and
renewable energy asset. These include health and safety, grid connection, site level issues. Third-party O&M contractors are engaged to carry out
material damage or degradation, equipment failures and environmental risks. regular preventative maintenance and a level of spares is maintained from
diversified manufacturers. The Investment Manager uses established
relationships with relevant DNOs and works closely with them to maintain grid
connection.
A SH&E Director is employed by the Investment Manager to oversee and
advise on the HSE system for renewable assets. The Company has in place
insurance to cover certain losses and damage.
Contractor default risk In the current economic climate, there is also an increased risk that service The Company and the Investment Manager will seek to mitigate the Company's
providers default on their contractual obligations or suffer an insolvency exposure to contract default risk through carrying out qualitative and
event. quantitative due diligence on counterparties.
Compliance and regulatory risks
Failure to comply with relevant regulatory changes, tax rules and obligations
may result in reputational damage to the Company or have a negative financial
impact.
Risk Potential Impact Mitigation
Noncompliance with FCA, Listing Rules, UK AIFM Directive, MAR and investment Failure to comply with any relevant regulatory rules including Section 1158 of The Board monitors compliance and regulatory information provided by the
trust eligibility conditions the Corporation Tax Act, the rules of the FCA, including the Listing Rules and Company Secretary, the AIFM and Investment Manager on a quarterly basis and
the Prospectus Rules, Companies Act 2006, MAR, UK AIFM Directive, Accounting the assessment of regulatory risks forms part of the Board's risk management
Standards, GDPR and any other relevant regulations could result in financial framework. All parties are appropriately qualified professionals and ensure
penalties, loss of investment trust status, legal proceedings against the that they keep informed with any developments or updates to the legislation.
Company and/or its Directors or reputational damage.
Financial risks
Various types of risk associated with financing and liquidity. Further
financial risks are detailed in Note 16 of the financial statements.
Risk Potential Impact Mitigation
Risks associated with borrowing can impact on Company performance The Company's investment policy involves the use of long-term and short-term The Board monitors debt covenants, gearing limits appropriate to the Company
debt. The use of leverage may increase the volatility of the Net Asset Value, and reviews any debt facilities before financial close. Portfolio allocations
may significantly increase the Company's investment risk and could lead to an are monitored on an ongoing basis by the AIFM to ensure compliance with
inability to meet financial obligations. borrowing policy and limits stated in the investment policy.
The Company may be unable to obtain borrowing facilities at appropriate levels The Company has the ability to enter into hedging transactions in relation to
impacting returns. interest rates for the purpose of efficient portfolio management to protect
the Company from fluctuations of interest rates. Read more above in interest
Risks include refinancing risk, covenant breaches, poor management of assets rate, currency and power price risks.
and liabilities, over-gearing and possible enhanced loss on poor performing
assets.
Task Force on Climate-related Financial Disclosures ("TCFD")
The TCFD, established in December 2015 by the Financial Stability Board, was
tasked with reviewing how the financial sector could take account of climate
related issues. In 2017, the TCFD published its recommendations for consistent
climate-related financial risk disclosures across Governance, Strategy, Risk
Management, and Targets & Metrics. Eleven recommendations across these
four pillars were prescribed for companies to provide information to
investors, lenders, insurers, and other stakeholders. The TCFD recommends that
all organisations provide climate-related disclosures in their annual report
and accounts, providing a framework to help companies assess the risks and
opportunities associated with climate change.
Following this, the Financial Conduct Authority ("FCA") issued a rule,
effective for periods beginning on or after January 2021, for UK premium
listed companies to start to report against the TCFD, with other companies to
follow. Whilst not currently mandated to make a TCFD disclosure, being
excluded as an Investment Trust, ORIT supports the TCFD's aims and objectives
and has decided to voluntarily report in line to adopt best practice
disclosures. Material climate-related financial disclosures can help support
investment decisions as we move towards a low-carbon economy. The Company is
acutely aware of the risks of climate change and through its investment
mandate, believes it is well placed to contribute to solutions and harness the
opportunities that arise from a transition to net zero. However, no company is
isolated from climate change, and the disclosures below outline the
climate-related risks ORIT faces.
Statement of Compliance
The Company is pleased to confirm that it has included within its TCFD report
climate-related financial disclosures aligned with the four recommendations
and the eleven recommended disclosures provided in the TCFD's 2021 report
'Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures', which included additional guidance for Asset Owners
and Asset Managers.
Ensuring accountability and responsibility by board and management
Oversight and management of climate-related risks and opportunities is
integrated within the Governance framework of the Company.
The ORIT Board has full responsibility for managing the Company. On behalf of
the Company, the Board has appointed Octopus AIF Management ("OAIFM") as the
Alternative Investment Fund Manager ("AIFM"). Whilst overall risk management
of the Company is retained by OAIFM, portfolio management has been delegated
to Octopus Energy Generation (OEGEN) as the Investment Manager. Climate risk
analysis and management falls within the scope of portfolio management on a
day-to-day basis.
Section 172 of the Companies Act 2006
The Board as the governing body of the Company, shapes the strategy and
objectives and seeks to ensure performance and long-term success by
considering all its stakeholders' interests.
During the year under review, the Board believes that it has acted in good
faith and fulfilled its obligations under Section 172 of the Companies Act
2006 to promote the success of the Company for the benefit of all shareholders
while also considering the interests of other stakeholders and the
environmental impact of the Company's operations.
As a closed-ended investment company, the Company has no direct employees.
However, the Investment Manager assesses the impact of the Company's
activities on other stakeholders, in particular local communities,
sub-contractors and end customers, recognising that its investments in
Renewable Energy Assets make a positive contribution to the transition to a
cleaner future.
Section 172(1) Statements: Reference
The likely consequences of any decision in the long-term The Board has set out long-term objectives for the Company and targets a net
total shareholder return of 7% to 8% per annum over the medium to long-term.
The Board receives regular updates through weekly meetings with the Investment
Manager. Additionally Board members convene at least four times a year to
discuss matters related to items (a)-(f) of section 172. Once a year, the
Board collaborates with the Investment Manager and other key advisers to
evaluate the Company's strategic position, including capital allocation and
risk management. Throughout the year, the Board actively considers
shareholders' views to inform its decision-making process.
See also Operating Model, Objectives and KPIs section, the Chair's Statement,
and Stakeholder Engagement section in the Company's Annual Report.
The interests of the Company's employees As a closed-ended investment company, the Company has no direct employees.
However, the Investment Manager assesses the impact of the Company's
activities on other stakeholders.
The Board monitors People related KPI's on health and safety, diversity and
inclusion collected directly from contractors of the investee companies within
the investment portfolio, that are reported in the Company's publications.
See also People reporting of the Impact section within the Annual Report and
find more details on the separately published ESG & Impact Report.
Additional KPIs can be found in the Principle Adverse Impact statement on the
website.
The need to foster the Company's business relationships with suppliers, The Board recognises the importance of fostering the Company's business
customers and others relationships with suppliers, customers, and other essential stakeholders for
preserving long‑term shareholder value and takes their respective interests
into consideration where relevant as part of the decision-making process. The
Board evaluates the performance of the service providers annually through the
Management Engagement Committee.
See also Stakeholder Engagement section and the Directors' Report, both
contained in the Company's Annual Report.
The impact of the Company's operations of the community and environment This aspect continues to be integral to the Company's strategic ambitions
through its core impact initiative of accelerating the transition to net zero
through its investments, building and operating a diversified portfolio of
Renewable Energy Assets. Environmental and community considerations, including
the impact on nature, are specifically embedded in the Company's Planet and
People Impact objectives respectively. The Board is responsible for the sign
off of the Company's ESG & Impact Policy and Strategy.
See also ESG & Impact section of the Annual Report and the separately
published ESG & Impact Report and ESG & Impact Strategy document.
The desirability of the Company maintaining a reputation for high standards of The Board aims to meet or exceed the standards expected of a listed company
business conduct investing in Renewable Energy Assets. This is achieved with the help of the
Investment Manager which is responsible for ensuring that the Company's
investments are managed to a high standard of business conduct. The Company
has obtained a copy of the Investment Manager's, Company
Secretary's, Administrator's and Broker's anti-bribery policies and procedures
and is satisfied that these are adequate for the purposes of the Company. The
Investment Manager seeks to ensure asset level service providers have
appropriate policies in place.
See also Stakeholder Engagement section and Human Rights section, both
contained in the Company's Annual Report.
The need to act fairly as between members of the Company The Board aims to act fairly between the Company's members, by seeking to
ensure effective communication is provided to all Shareholders. Reporting
materials are made available to the public and the Board encourages
Shareholders to attend the Annual General Meeting. Procedures and policies are
in place in case conflicts of interest arise.
See also Stakeholder Engagement section and Corporate Governance Statement,
both contained within the Company's Annual Report.
Stakeholder Engagement
Details of the Company's engagement with key stakeholders is set out below.
The Board is aware of the need to foster the Company's business relationships
with suppliers, customers and other key stakeholders through its stakeholder
management activities as described below. The Board believes that positive
relationships with each of the Company's stakeholders are important to support
the Company's long-term success. The table below outlines the stakeholders
that the Board has identified as key, the specific engagement methods used and
key activities within the reporting period.
Stakeholders How ORIT has communicated and engaged
Shareholders The Board looks to attract long-term investors in the Company and in doing so,
it has sought out regular opportunities to communicate with shareholders
whether from the regular reporting on the Company's activities and market
announcements and the website or specific initiatives.
Key communication methods include:
· Annual and Interim reports
· Dedicated ORIT website
· Corporate LinkedIn Page
· Quarterly factsheets
· Investor roadshows and presentations
· Dialogue with shareholders
· Occasional events (Capital Market)
· Regular market announcements
· Annual General Meetings
· Dedicated email address for shareholder enquiries
· Proxy voting guidelines
For example, Board members have had opportunities to meet with key
stakeholders during key Company events in 2023 at the Capital Markets Day and
the Cumberhead Opening Event.
Separately, the Investment Manager actively participates in roadshows to meet
with the Company's key shareholders after the release of the annual and
interim results. The Investment Manager also meets with shareholders on an ad
hoc basis following key announcements. Shareholders' views are regularly
collected throughout the year by the Investment Manager and the Corporate
Broker. Shareholders' views are considered by the Board to assist the Board's
decision-making process.
In 2023, the Company enhanced its engagement with shareholders via its
Consumer Duty Guide, its rebranded website providing new content and a
glossary, and the launch of its corporate LinkedIn page.
The Board invites shareholders to attend the forthcoming Annual General
Meeting to be held on 19 June 2024 or to contact the Company through its
dedicated email address for shareholder enquiries.
AIFM and Investment Manager The most significant service provider for the Company's long-term success is
the AIFM who has engaged the Investment Manager for the purpose of providing
investment management services to the Company. The Board regularly monitors
the Company's investment performance in relation to its objectives, investment
policy and strategy. The Board receives and reviews regular reports and
presentations from both the AIFM and Investment Manager and seeks to maintain
regular contact to maintain a constructive working relationship.
The Board receives regular reports from the Investment Manager and maintains
ongoing dialogue between scheduled meetings. Representatives of the Investment
Manager attend Board meetings. The Investment Manager's remuneration is based
on the NAV of the Company which aligns their interests with those of
shareholders.
A description of the Investment Manager's role, along with that of the AIFM,
can be found in the Directors' Report which is included in the Company's
Annual Report.
Company Service Providers To build and maintain strong working relationships, the Company's key service
providers are invited to attend quarterly Board meetings to present their
respective reports. This enables the Board to exercise effective oversight of
the Company's activities. The Board also has in place a Management Engagement
Committee that meets annually to review service provider performance. Further
information on the Management Engagement Committee can be found in the
Corporate Governance Statement within the Company's Annual Report.
The Company's external auditors attend at least two Audit and Risk Committee
meeting per year. The Chair of the Audit and Risk Committee maintains regular
contact with the auditors, Investment Manager and Administrator to ensure that
the audit process is undertaken effectively.
The Board has also spent time engaging with the Company's key service
providers outside of scheduled Board meetings to develop its working
relationship with those service providers and ensure the smooth operational
function of the Company.
Asset Service Providers The Investment Manager has an experienced asset management team who actively
manage asset level service providers including third-party asset managers,
Operations & Maintenance ("O&M") contractors, Construction Managers,
Owners Engineers, suppliers, HSE contractors and Landowners.
Communications with service providers are managed across a variety of
platforms to ensure focus on day-to-day operational performance of the assets.
The Investment Manager undertakes quarterly meetings with external asset
managers to review performance against service provisions, weekly calls with
all operators and formal annual contract reviews. The Investment Manager
actively engages asset service providers to seek innovative solutions to
reduce the downtime of our assets. An example of this is outlined within the
Company's Annual Report.
Health and safety is a business-critical function and our Investment Manager
positively influences the safety performance of our service providers by
monitoring accidents, incidents and unsafe conditions at site.
Our Investment Manager actively manages the investments in-construction assets
through a risk prevention oversight model and by maintaining strong
relationships with the Owners Engineering teams. There is daily communication
with the Owners Engineering teams during the critical stages of construction.
Debt Providers As at 31 December 2023, the Company's wholly owned subsidiary, ORIT Holdings
II Limited, had a Revolving Credit Facility ("RCF") provided by a group of
four lenders, Allied Irish Banks, National Australia Bank, NatWest and
Santander. Regular communications with each lender alongside the provision of
data for formal semi-annual reporting and covenant testing requirements is
undertaken by the Investment Manager. The RCF was extended and refinanced in
February 2023. During the period, the Company agreed an extension in the
maturity date of its subsidiary's £50 million short-term facility provided by
NatWest to align with expected receipt of proceeds from the Polish assets
sale. The facility was repaid in full in December 2023.
The Investment Manager ensures that asset level debt providers are provided
with data and information in line with debt agreements and undertakes all
covenant testing requirements.
Community ORIT actively engages and aims at empowering local communities by establishing
avenues for benefits such as through community benefit schemes, educational
engagement with local schools via workshops and site visits, and support of
local charities.
See People section of the Impact Report in the Company's Annual Report.
Philip Austin MBE
Chair,
Octopus Renewables Infrastructure Trust plc
22 March 2024
Statement of Directors' Responsibilities
Statement of directors' responsibilities in respect of the financial
statements
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the financial
statements in accordance with UK-adopted international accounting standards.
Under company law, directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the company and of the profit or loss of the company for that period. In
preparing the financial statements, the directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will continue in
business.
The directors are responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the company's transactions and
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the
company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
Each of the directors, whose names and functions are listed in the Corporate
Governance Statement confirm that, to the best of their knowledge:
· the company financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit of the
company; and
· the Directors' Report includes a fair review of the development
and performance of the business and the position of the company, together with
a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board
Philip Austin MBE
Chair
22 March 2024
Financial Statements
Statement of Comprehensive Income
Year ended 31 December 2023 Year ended 31 December 2022
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Investment income 4 42,694 - 42,694 40,307 - 40,307
Movement in fair value of investments 9 - -22,976 -22,976 - 37,603 37,603
Total net income/(expense) 42,694 -22,976 19,718 40,307 37,603 77,910
Investment management fees 5 -4,232 -1,411 -5,643 -4,284 -1,428 -5,712
Other expenses 5 -1,368 -107 -1,475 -1,132 -1,280 -2,412
Net finance income 126 - 126 51 - 51
Net foreign exchange losses - -29 -29 - -1 -1
Profit/(loss) before taxation 37,220 -24,523 12,697 34,942 34,894 69,836
Taxation 6 -364 364 - -515 515 -
Profit/loss and total comprehensive income/(expense) for the year 36,856 -24,159 12,697 34,427 35,409 69,836
Earnings per Ordinary Share (pence) - basic and diluted 8 6.52p -4.28p 2.24p 6.09p 6.27p 12.36p
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies. All expenses are presented as revenue items except 25% of the
investment management fee, which is charged as a capital item within the
Statement of Comprehensive Income. Costs incurred on aborted transactions and
investment acquisitions are charged as capital items within the Statement of
Comprehensive Income.
All revenue and capital items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of these financial statements.
Statement of Financial Position
As at As at
31 December 31 December
2023 2022
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 9 592,121 608,799
Current assets
Trade and other receivables 10 143 775
Cash and cash equivalents 10,012 10,603
10,155 11,378
Current liabilities: amounts falling due within one year
Trade and other payables 11 -3,237 -1,917
-3,237 -1,917
Net current assets 6,918 9,461
Net assets 599,039 618,260
Capital and reserves
Share capital 12 5,649 5,649
Share premium account 12 217,283 217,283
Special reserve 13 339,500 339,500
Capital reserve 13,756 37,915
Revenue reserve 22,851 17,913
Total shareholders' funds 599,039 618,260
Net assets per Ordinary Share (pence) 14 106.04p 109.44p
The financial statements in the Company's Annual Report were approved by the
Board of Directors and authorised for issue on 22 March 2024 and were signed
on its behalf by:
Philip Austin MBE
Chair
The accompanying notes are an integral part of these financial statements.
Incorporated in England and Wales with registered number 12257608
Statement of Changes in Equity
Year ended 31 December 2023
Note Share Share premium account Special reserve Revenue reserve Capital reserve Total shareholders' funds
capital
£'000
£'000
£'000
£'000
£'000
£'000
Opening equity as at 1 January 2023 5,649 217,283 339,500 17,913 37,915 618,260
Profit/(loss) and total comprehensive income/(expense) for the year - - - 36,856 -24,159 12,697
Dividends paid 7 - - - -31,918 - -31,918
Closing equity as at 31 December 2023 5,649 217,283 339,500 22,851 13,756 599,039
Year ended 31 December 2022
Note Share Share premium account Special reserve Revenue reserve Capital reserve Total shareholders' funds
capital
£'000
£'000
£'000
£'000
£'000
£'000
Opening equity as at 1 January 2022 5,649 217,283 339,500 12,751 2,506 577,689
Profit and total comprehensive income for the year - - - 34,427 35,409 69,836
Dividends paid 7 - - - -29,265 - -29,265
Closing equity as at 31 December 2022 5,649 217,283 339,500 17,913 37,915 618,260
The Company's distributable reserve consists of the special reserve, capital
reserve attributable to realised gains and revenue reserve.
The accompanying notes are an integral part of these financial statements.
The issued capital and reserves are fully attributable to the shareholders of
the Company.
Statement of Cash Flows
Note Year ended Year ended
31 December 2023
31 December 2022
£'000
£'000
Operating activities cash flows
Profit before taxation 12,697 69,836
Adjustments for:
Movement in fair value of investments 9 22,976 -37,603
Investment income from investments 4 -42,694 -40,307
Share issue abort costs - 404
Operating cash flow before movements in working capital -7,021 -7,670
Changes in working capital:
Decease/(increase) in trade and other receivables 632 -325
Increase/(decrease) in trade payables 1,320 -207
Distributions from investments 9 41,979 38,108
Net cash flow generated from operating activities 36,910 29,906
Investing activities cash flows
Costs associated with acquiring the portfolio of assets 9 -5,583 -83,580
Net cash flow used in investing activities -5,583 -83,580
Financing activities cash flows
Dividends paid to Ordinary Shareholders 7 -31,918 -29,265
Costs in relation to issue of shares - -404
Net cash flow used in financing activities -31,918 -29,669
Net decrease in cash and cash equivalents -591 -83,343
Cash and cash equivalents at start of year 10,603 93,946
Cash and Cash equivalents at end of year 10,012 10,603
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2023
1. General information
Octopus Renewables Infrastructure Trust plc ("ORIT" or the "Company") is a
Public Company Limited by Ordinary Shares incorporated in England and Wales
on 11 October 2019 with registered number 12257608. The Company is a
closed‑ended investment company with an indefinite life. The Company
commenced its operations on 10 December 2019 when the Company's Ordinary
Shares were admitted to trading on the premium segment of the main market of
the London Stock Exchange. The Directors intend, at all times, to conduct the
affairs of the Company as to enable it to qualify as an investment trust for
the purposes of section 1158 of the Corporation Tax Act 2010, as amended.
The registered office and principal place of business of the Company is 6th
Floor, 125 London Wall, London, EC2Y 5AS.
The Company's investment objective is to provide investors with an attractive
and sustainable level of income returns, with an element of capital growth, by
investing in a diversified portfolio of Renewable Energy Assets in Europe and
Australia.
The audited financial statements of the Company (the "financial statements")
are for the year ended 31 December 2023 and comprise only the results of the
Company, as all of its subsidiaries are measured at fair value in accordance
with IFRS 10. The comparatives shown in these financial statements refer to
the year ended 31 December 2022.
The Company has appointed Octopus AIF Management Limited to be the alternative
investment fund manager of the Company (the "AIFM") for the purposes of the
Alternative Investment Fund Managers Regulations 2013 and the Commission
Delegated Regulation (EU) No 231/2013 of 19 December 2012 (as it applies in
the UK by virtue of the European Union (Withdrawal) Act 2018). Accordingly,
the AIFM is responsible for the portfolio management of the Company and for
exercising the risk management function in respect of the Company. The AIFM
has delegated portfolio management services to Octopus Renewables Limited
(trading as Octopus Energy Generation), the Company's Investment Manager (the
"Investment Manager").
Apex Listed Companies Services (UK) Limited (the "Administrator") provides
administrative and company secretarial services to the Company under the terms
of the Administration Agreement between the Company and the Administrator.
2. Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards.
The financial statements have also been prepared as far as is relevant and
applicable to the Company in accordance with the Statement of Recommended
Practice: Financial Statements of Investment Trust Companies and Venture
Capital Trusts ("SORP") issued in July 2022 by the Association of Investment
Companies ("AIC").
The financial statements are prepared on the historical cost basis, except for
the revaluation of investments measured at fair value through profit or loss.
The principal accounting policies adopted are set out below. These policies
are consistently applied.
The financial statements are presented in Sterling, which is the Company's
functional currency and are rounded to the nearest thousand, unless otherwise
stated. They have been prepared on the basis of the accounting policies,
significant judgements, key assumptions and estimates as set out below.
Going concern
The Directors, in their consideration of going concern, have reviewed
comprehensive cash flow forecasts prepared by the Company's Investment Manager
which are based on market data and believe, based on those forecasts, the
assessment of the Company's subsidiary's banking facilities and the assessment
of the principal risks described in this report, that it is appropriate to
prepare the financial statements of the Company on the going concern basis.
In arriving at their conclusion that the Company has adequate financial
resources, the Directors were mindful that the Group had unrestricted cash of
£23 million as at 31 December 2023 (2022: £11m) and available headroom on
its revolving credit facility ("RCF") of £141 million (2022: £169m). The
Company's net assets at 31 December 2023 were £599 million (2022: £618m) and
total expenses for the year ended 31 December 2023 were £7.1 million (2022:
£8.0m), which represented approximately 1.2% (2022:1.3%) of average net
assets during the year. At the date of approval of this document, based on the
aggregate of investments and cash held, the Company has substantial operating
expenses cover.
The Company receives revenue in the form of dividends and interest from its
portfolio of assets. These revenues are derived from the sale of electricity
through power purchase agreements in place with large and reputable providers
of electricity to the market. A prolonged and deep market decline could lead
to falling values to the underlying business or interruptions to cashflow,
however the Directors do not foresee any immediate material risk to the
Company's investment portfolio and income from underlying assets. The
Directors are also satisfied and are comfortable that the Company would
continue to remain viable under downside scenarios, including a decline in
long-term power price forecasts.
In instances where underlying investments have external debt finance, the
covenants associated with these facilities have been tested and are expected
to be compliant, even in downside scenarios.
The major cash outflows of the Company are the payment of dividends,
commitments payable for construction projects and contingent acquisitions and
the repayment of the short-term facility which was fully repaid at year end.
During the year, the Company's intermediate holding company successfully
refinanced its RCF to an increased facility of £270.8 million and extended
its term to February 2026. The covenants of the RCF have been tested and are
expected to be compliant, even in downside scenarios. Plausible downside
scenarios include a decrease in wholesale energy prices, a decrease in output
and an increase in the discount rate applied to the underlying cash flow
forecasts. While in some downside scenarios, the headroom available on the RCF
will be lower, the Directors remain confident that the Company has sufficient
cash balances, and headroom in the RCF held by an intermediate holding company
in order to fund the commitments detailed in note 19 to the financial
statements, should they become payable.
Having performed the assessment of going concern, the Directors considered it
appropriate to prepare the financial statements of the Company on a going
concern basis. The Company has sufficient financial resources and liquidity
and is well placed to manage business risks in the current economic
environment and can continue operations for a period of at least 12 months
from the date of these financial statements.
Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed regularly on an on-going basis. Revisions
to accounting estimates are recognised in the period in which the estimates
are revised and in any future periods affected. Significant estimates,
judgements and assumptions for the period are set out as follows:
Key estimation and uncertainty: Fair value estimation for investments at fair
value
The Company's investments at fair value are not traded in active markets. Fair
value is calculated by discounting at an appropriate discount rate future
cash flows expected to be received by the Company's intermediate holdings.
The discounted cashflow models use observable data, to the extent
practicable. However, the key inputs require management to make estimates.
Changes in assumptions about these factors could affect the reported fair
value of investments.
The discount rates used in the valuation exercise represent the Investment
Manager's and the Board's assessment of the rate of return in the market for
assets with similar characteristics and risk profile. The discount rates are
reviewed quarterly and updated, where appropriate, to reflect changes in the
market and in the project risk characteristics.
Unless fixed under PPAs or otherwise hedged, the power prices used in the
valuations are based on market forward prices in the near term, followed by an
equal blend of up to two independent and widely used market consultants'
technology-specific capture price forecasts for each asset. Power prices are
updated quarterly in line with the release of updated forecasts. There is an
inherent uncertainty in future wholesale electricity price projection.
Electricity output is based on specifically commissioned yield assessments
prepared by technical advisors. Each asset's valuation assumes a "P50" level
of electricity output, which is the estimated annual amount of electricity
generation that has a 50% probability of being exceeded - both in any single
year and over the long‑term - and a 50% probability of being underachieved.
The P50 provides an expected level of generation over the long-term.
Short to medium-term inflation assumptions used in the valuations are based on
third party forecasts. In the longer-term, an assumption is made that
inflation will increase at a long-term rate. The estimates and assumptions
that are used in the calculation of the fair value of investments is disclosed
in Note 9.
The impact of physical and transition risks associated with climate change is
assessed on a project by project basis and factored into the underlying cash
flows as appropriate. Further details can be found in the Impact Report.
Further considerations on currency risks, interest rate risks, power price
risks, credit risks, and liquidity risks are detailed in Note 16.
Key judgement: Equity and debt investment in ORIT Holdings II Limited
The Company classifies its investments based on its business model for
managing those financial assets and the contractual cash flow characteristics
of the financial assets. The portfolio of assets is managed, and performance
is evaluated on a fair value basis.
The Company is primarily focused on fair value information and uses that
information to assess the assets' performance and to make decisions. The
Company has not taken the option to irrevocably designate any equity
securities as fair value through other comprehensive income. The contractual
cash flows of the Company's debt securities are solely principal and interest,
however, these securities are not held for the purpose of collecting
contractual cash flows. The collection of contractual cash flows is only
incidental to achieving the Company's business model's objective.
Consequently, all investments are measured at fair value through profit or
loss.
The Company considers the equity and loan investments to share the same
investment characteristics and risks and they are therefore treated as a
single unit of account for fair value purposes (IFRS 13) and a single class
for financial instrument disclosure purposes (IFRS 9). As a result, the
evaluation of the performance of the Company's investments is done for the
entire portfolio on a fair value basis, as is the reporting to the key
management personnel and to the investors. In this case, all equity,
derivatives and debt investments form part of the same portfolio for which the
performance is evaluated on a fair value basis together and reported to the
key management personnel in its entirety.
Key judgement: Basis of non-consolidation
The Company has adopted the amendments to IFRS 10 which states that investment
entities should measure all of their subsidiaries that are themselves
investment entities at fair value (in accordance with IFRS 9 Financial
Instruments: Recognition and Measurement, and IFRS 13 Fair Value Measurement).
Under the definition of an investment entity, the Company should satisfy all
three of the following tests:
i. the Company obtains funds from one or more investors for the purpose
of providing those investors with investment management services;
ii. the Company commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income,
or both; and
iii. the Company measures and evaluates the performance of substantially
all of its investments on a fair value basis.
In assessing whether the Company meet the definition of an investment entity
set out in IFRS 10 the Directors note that:
i. the Company has multiple investors and obtains funds from a diverse
group of shareholders who would otherwise not have access individually to
invest in renewable energy infrastructure investments due to high barriers to
entry and capital requirements;
ii. the Company intends to hold its investments for the remainder of
their useful lives for the purpose of capital appreciation and investment
income. The portfolio of assets are expected to generate renewable energy
output for 30 to 40 years from their relevant commercial operation date and
the Directors believe the Company is able to generate returns to the investors
during that period; and
iii. the Company measures and evaluates the performance of all of its
investments on a fair value basis which is the most relevant for investors in
the Company. Management use fair value information as a primary measurement to
evaluate the performance of all of the investments and in decision making.
The Directors are of the opinion that the Company meets all the typical
characteristics of an investment entity and therefore meets the definition set
out in IFRS 10. The Directors are satisfied that investment entity accounting
treatment appropriately reflects the Company's activities as an investment
trust.
The Directors have also satisfied themselves that the Company's wholly owned
direct subsidiary, ORIT Holdings II Limited, meets the characteristics of an
investment entity. ORIT Holdings II Limited has one investor, ORIT, however,
in substance ORIT Holdings II Limited is investing the funds of the investors
of ORIT on its behalf and is effectively performing investment management
services on behalf of many unrelated beneficiary investors.
Being investment entities, ORIT and its wholly owned direct subsidiary, ORIT
Holdings II Limited are measured at fair value as opposed to being
consolidated on a line-by-line basis, meaning their cash, debt and working
capital balances are included in the fair value of investments rather than the
Group's current assets.
The Directors believe the treatment outlines above provides the most relevant
information to investors.
New standards, interpretations and amendments
A number of new standards, amendments to standards are effective for the
annual periods beginning after 1 January 2024. None of these are expected to
have a significant effect on the measurement of the amounts recognised in the
financial statements of the Company. The Company intends to adopt the
standards and interpretations in the reporting period when they become
effective and the Board does not anticipate that the adoption of these
standards and interpretations in future periods will materially impact the
Company's financial results in the period of initial application although
there may be revised presentations to the financial statements and additional
disclosures.
New standards and amendments issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Company's financial statements
are disclosed below. These standards are not expected to have a material
impact on the entity in future reporting periods and on foreseeable future
transactions.
Amendments to IAS 1 Presentation of Financial Statements-Classification of
Liabilities as Current or Non‑current
The amendments to IAS 1 clarify that the classification of liabilities as
current or non-current is based on rights that are in existence at the end of
the reporting period, specify that classification is unaffected by
expectations about whether an entity will exercise its right to defer
settlement of a liability, explain that rights are in existence if covenants
are complied with at the end of the reporting period, and introduce a
definition of 'settlement' to make clear that settlement refers to the
transfer to the counterparty of cash, equity instruments, other assets or
services. The amendments are applied retrospectively for annual periods
beginning on or after 1 January 2024, with early application permitted.
Amendments to IAS 1 Presentation of Financial Statements-Non‑current
Liabilities with Covenants
The amendments specify that only covenants that an entity is required to
comply with on or before the end of the reporting period affect the entity's
right to defer settlement of a liability for at least twelve months after the
reporting date (and therefore must be considered in assessing the
classification of the liability as current or noncurrent). Such covenants
affect whether the right exists at the end of the reporting period, even if
compliance with the covenant is assessed only after the reporting date (e.g. a
covenant based on the entity's financial position at the reporting date that
is assessed for compliance only after the reporting date). The amendments are
applied retrospectively for annual reporting periods beginning on or after 1
January 2024. Earlier application of the amendments is permitted.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures-Supplier Finance Arrangements
The amendments add a disclosure objective to IAS 7 stating that an entity is
required to disclose information about its supplier finance arrangements that
enables users of financial statements to assess the effects of those
arrangements on the entity's liabilities and cash flows. In addition, IFRS 7
was amended to add supplier finance arrangements as an example within the
requirements to disclose information about an entity's exposure to
concentration of liquidity risk. The amendments, which contain specific
transition reliefs for the first annual reporting period in which an entity
applies the amendments, are applicable for annual reporting periods beginning
on or after 1 January 2024. Earlier application is permitted.
Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
The amendments to IFRS 16 add subsequent measurement requirements for sale and
leaseback transactions that satisfy the requirements in IFRS 15 to be
accounted for as a sale. The amendments require the seller-lessee to determine
lease payments or revised lease payments such that the seller-lessee does not
recognise a gain or loss that relates to the right of use retained by the
seller-lessee, after the commencement date. The amendments are effective for
annual reporting periods beginning on or after 1 January 2024. Earlier
application is permitted. If a seller-lessee applies the amendments for an
earlier period, it is required to disclose that fact.
3. Significant accounting policies
a) Financial instruments
Financial assets and financial liabilities are recognised on the Company's
Statement of Financial Position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised
when the contractual rights to the cash flows from the instrument expire or
the asset is transferred, and the transfer qualifies for derecognition in
accordance with IFRS 9 Financial Instruments: Recognition and Measurement.
Financial assets
As an investment entity, the Company is required to measure its investments
its wholly owned direct subsidiaries at fair value through profit or loss
('FVTPL'). As explained in note 2, the Company has made a judgement to fair
value both the equity and debt investment in its subsidiary together.
Subsequent to initial recognition, the Company measures its investments on a
combined basis at fair value in accordance with IFRS 9 Financial Instruments:
Recognition and Measurement and IFRS 13 Fair Value Measurement.
Trade receivables, loans and other receivables that are non-derivative
financial assets and that have fixed or determinable payments that are not
quoted in an active market are classified as financial assets at amortised
cost. These assets are measured at amortised cost using the effective
interest method, less allowance for expected credit losses. The Company has
assessed IFRS 9's expected credit loss model and does not consider any
material impact on these financial statements.
They are included in current assets, except where maturities are greater than
12 months after the year end date in which case they are classified as
non-current assets.
Regular purchases and sales of investments are recognised on the trade date -
the date on which the Company commits to purchase or sell the investment.
Financial assets at FVTPL are initially recognised at fair value. Transaction
costs are expensed as incurred within the Statement of Comprehensive Income.
Financial assets are derecognised when the rights to receive cash flows from
the investments have expired or the Company has transferred substantially all
risks and rewards of ownership.
Subsequent to initial recognition, all financial assets and financial
liabilities at FVTPL are measured at fair value. For investments held at
early stage or at planning development stage, these are valued at cost and
assessed for any impairment.
Gains and losses arising from changes in the fair value of the 'financial
assets at FVTPL' category are presented in the Statement of Comprehensive
Income within Movements in fair value of investments in the period in which
they arise.
Income from financial assets at FVTPL is recognised in the Statement of
Comprehensive Income within investment income when the Company's right to
receive payments is established.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
The Company's financial liabilities include trade and other payables and other
short-term monetary liabilities which are initially recognised at fair value
and subsequently measured at amortised cost using the effective interest rate
method.
Financial liabilities are initially measured at fair value, net of transaction
costs. Financial liabilities are subsequently measured at amortised cost using
the effective interest method, with interest expense recognised on an
effective interest rate method.
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or they expire.
Ordinary Shares are classified as equity. An equity instrument is any contract
that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs. Direct issue
costs are charged against the value of ordinary share premium.
b) Taxation
Investment trusts which have approval under Section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains. The Company has
successfully applied and has been granted approval as an Investment Trust by
HMRC.
Irrecoverable withholding tax is recognised on any overseas income on an
accrual basis using the applicable rate of taxation for the country of origin.
The underlying intermediate holding companies and project companies in which
the Company invests provide for and pay taxation at the appropriate rates in
the countries in which they operate. This is taken into account when assessing
the value of the subsidiaries.
c) Segmental reporting
The Board is of the opinion that the Company is engaged in a single segment of
business, being investment in renewable energy infrastructure assets to
generate investment returns whilst preserving capital. The financial
information used by the Board to manage the Company presents the business as a
single segment.
d) Investment income
Investment income comprises interest income and dividend income received from
the Company's subsidiaries. Interest income is recognised in the Statement of
Comprehensive Income using the effective interest method. Dividend income is
recognised when the Company's entitlement to receive payment is established.
e) Expenses
All expenses are accounted for on an accrual basis. In respect of the analysis
between revenue and capital items presented within the Statement of
Comprehensive Income, all expenses are presented as revenue items except as
follows:
Investment Management fees
As per the Company's investment objective, it is expected that income returns
will make up the majority of ORIT's long‑term return. Therefore, based on
the estimated split of future returns (which cannot be guaranteed), 25% of the
investment management fee is charged as a capital item within the Statement of
Comprehensive Income.
Abort costs
Costs incurred on aborted transactions are charged as capital items within the
Statement of Comprehensive Income.
f) Foreign currency
Functional currency and presentation currency
The financial statements are presented in Pounds Sterling which is the
Company's functional and presentation currency. The Board of Directors
considers Sterling the currency that most faithfully represents the economic
effect of the underlying transactions, events and conditions. Sterling is the
currency in which the Company measures its performance and reports its
results, as well as the currency in which it receives subscriptions from its
investors.
Transactions and balances
Transactions denominated in foreign currencies are translated into Sterling at
actual exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the year end are reported at
the rates of exchange prevailing at the year end. Any gain or loss arising
from a change in exchange rates subsequent to the date of the transaction is
included as an exchange gain or loss to capital or revenue in the Statement of
Comprehensive Income as appropriate. Foreign exchange movements on investments
are included in the Capital account of the Statement of Comprehensive Income.
g) Cash and Cash Equivalents
Cash and cash equivalents includes deposits held with banks and other
short-term deposits with original maturities of three months or less. It is a
highly liquid investment and readily convertible to a known amount of cash,
and carries an insignificant risk of changes in value.
h) Dividends payable
Dividends payable to equity shareholders are recognised in the financial
statements when they have been approved by shareholders and become a liability
of the Company. Interim dividends payable are recognised in the period in
which they are paid.
4. Investment income
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Dividend income from investments 16,800 - 16,800 17,250 - 17,250
Interest income from investments 25,894 - 25,894 23,057 - 23,057
Total investment income 42,694 - 42,694 40,307 - 40,307
5. Operating expenses
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fees 4,232 1,411 5,643 4,284 1,428 5,712
Directors' fees 209 - 209 186 - 186
Company's auditors' fees:
- in respect of audit services 376 - 376 190 - 190
Other operating expenses 783 107 890 756 1,280 2,036
Total operating expenses 5,600 1,518 7,118 5,416 2,708 8,124
Further details on the Investment Manager's agreement have been provided in
Note 17.
In addition to the fees disclosed above, £163,500 (2022: £210,100) is
payable to the Company's auditors in respect of audit services provided to
unconsolidated subsidiaries and therefore is not included within the Company's
expenses above.
Included within other operating costs is an amount of £107,000 (2022:
£1.28m) relating to transaction costs associated with the acquisition of
portfolio of assets and abort costs.
The Company has no employees. Full detail on Directors' fees is provided in
Note 17. The Directors' fees exclude employer's national insurance
contribution which is included as appropriate in other operating expenses.
There were no other emoluments.
6. Taxation
(a) Analysis of charge/(credit) in the year
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Corporation tax 364 -364 - 515 -515 -
Tax charge/(credit) for the year 364 -364 - 515 -515 -
(b) Factors affecting total tax charge/(credit) for the year:
Per the enactment of the Finance Act 2021, the rate of UK corporation tax was
increased from 19% to 25% since April 2023. The effective UK corporation tax
rate applicable to the Company for the year is 23.5% (2022: 19%). The tax
charge/(credit) differs (2022: differs) from the charge/(credit) resulting
from applying the standard rate of UK corporation tax for an investment trust
company. The differences are explained below:
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Profit/(loss) before taxation 37,220 -24,523 12,697 34,942 34,894 69,836
Corporation tax at 23.5% (2022: 19%) 8,747 -5,763 2,984 6,639 6,630 13,269
Effects of:
Expenses not deductible for tax purposes - 5,399 5,399 - -7,145 -7,145
Income not taxable -3,948 - -3,948 -3,278 - -3,278
Dividends designated as interest distributions -4,437 - -4,437 -2,852 - -2,852
Movement in deferred tax not recognised 2 - 2 6 - 6
Total tax charge/(credit) for the year 364 -364 - 515 -515 -
The Directors are of the opinion that the Company has complied with the
requirements for maintaining investment trust status for the purposes of
section 1158 of the Corporation Tax Act 2010. This allows certain capital
profits of the Company to be exempt from UK tax. Additionally, the Company may
designate dividends wholly or partly as interest distributions for UK tax
purposes. Interest distributions are treated as tax deductions against taxable
income of the Company so that investors do not suffer double taxation on their
returns.
The financial statements do not directly include the tax charges for any of
the Company's intermediate holding companies or subsidiaries as these are held
at fair value. Each of these companies are subject to taxes in the countries
in which they operate.
The Company has an unrecognised deferred tax asset of £10,071 (2022: £8,117)
based on the excess unutilised operating expenses of £40,284 (2022: £32,470)
at the prospective UK corporation tax rate of 25% (2022:19%). A deferred tax
asset has not been recognised in respect of these operating expenses and will
be recoverable only to the extent that the Company has sufficient future
taxable revenue.
7. Dividends
The dividends reflected in the financial statements for the year are as
follows:
Year ended 31 December 2023 Year ended 31 December 2022
Pence per Ordinary Revenue reserve Total Pence per Ordinary Revenue reserve Total
Share
£'000
£'000
Share
£'000
£'000
Q4 2022 Dividend - paid 24 February 2023 (2022: 4 March 2022) 1.31 7,401 7,401 1.25 7,062 7,062
Q1 2023 Dividend - paid 2 June 2023 (2022: 27 May 2022) 1.44 8,135 8,135 1.31 7,401 7,401
Q2 2023 Dividend - paid 1 September 2023 (2022: 26 August 2022) 1.45 8,191 8,191 1.31 7,401 7,401
Q3 2023 Dividend - paid 1 December 2023 (2022: 25 November 2022) 1.45 8,191 8,191 1.31 7,401 7,401
Total 5.65 31,918 31,918 5.18 29,265 29,265
The dividend relating to the year/period, which is the basis on which the
requirements of Section 1159 of the Corporation Tax Act 2010 are considered is
detailed below:
Year ended 31 December 2023 Year ended 31 December 2022
Pence per Ordinary Revenue reserve Total Pence per Ordinary Revenue reserve Total
Share
£'000
£'000
Share
£'000
£'000
Q1 2023 Dividend - paid 2 June 2023 (2022: 27 May 2022) 1.44 8,135 8,135 1.31 7,401 7,401
Q2 2023 Dividend - paid 1 September 2023 (2022: 26 August 2022) 1.45 8,191 8,191 1.31 7,401 7,401
Q3 2023 Dividend - paid 1 December 2023 (2022: 25 November 2022) 1.45 8,191 8,191 1.31 7,401 7,401
Q4 2023 Dividend - paid 23 February 2024 (2022: 24 February 2023) 1.45 8,191 8,191 1.31 7,401 7,401
Total 5.79 32,708 32,708 5.24 29,604 29,604
On 29 January 2024 the Company declared an interim dividend of 1.45p per
Ordinary Share in respect of the three months to 31 December 2023, a total of
£8.2 million. The ex-dividend date was 8 February 2024, the record date was
9 February 2024, and the dividend was paid on 23 February 2024.
8. Earnings per Ordinary Share
Earnings per Ordinary Share is calculated by dividing the profit/(loss)
attributable to equity shareholders of the Company by the weighted average
number of Ordinary Shares in issue during the year as follows:
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Profit/(loss) attributable to the equity holders of the Company (£'000) 36,856 -24,159 12,697 34,427 35,409 69,836
Weighted average number of Ordinary Shares in issue (000) 564,928 564,928 564,928 564,928 564,928 564,928
Earnings per Ordinary Share (pence) - basic and diluted 6.52p -4.28p 2.24p 6.09p 6.27p 12.36p
There is no difference between the weighted average Ordinary or diluted number
of Shares.
9. Investments at fair value through profit or loss
As set out in Note 2, the Company accounts for its interest in its wholly
owned direct subsidiary as an investment at fair value through profit or loss.
a) Summary of valuation
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Opening balance 608,799 485,417
Portfolio of assets acquired - 79,194
Additional investment in intermediate holding
companies 5,583 4,386
Distributions received from investments -41,979 -38,108
Investment income 42,694 40,307
Movement in fair value of investments -22,976 37,603
Total investments at the end of the year 592,121 608,799
The additional investment in the intermediate holding companies include
acquisition costs associated with the purchase of the portfolio of assets
totalling £2.1 million (2022: £3.2m), which have been expensed to the profit
and loss in these companies and £3.4 million (2022: £1.2m) of other expenses
paid by the Company on behalf of the intermediate holding companies.
b) Reconciliation of movement in fair value of the Company's investments
The table below shows the movement in the fair value of the Company's
investments. These assets are held through intermediate holding companies.
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Opening balance 608,799 485,417
Portfolio of assets acquired 65,224 209,666
Asset disposal -91,817 -
Distributions received -37,489 -40,129
Movement in fair value 161,253 88,760
Fair value of portfolio of assets at the end of the year 705,970 743,714
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Cash held in intermediate holding companies 13,209 4,509
Bank loans held in intermediate holding companies -130,043 -127,200
Fair value of other net assets/(liabilities) in intermediate holding companies 2,985 -12,224
Fair value of Company's investments at the end of the year 592,121 608,799
On 6 December 2023, the Company announced the completion of the sale of the
Krzecin and Kuslin wind farms (totalling 59MW) in Poland, realising net
proceeds of approximately £92 million (7% of Total value of all Investments
at 30 September 2023) - a 21% premium over the holding value of the assets at
the time of sale. The disposal is for 100% of ORIT's share.
c) Investment (loss)/gains in the year
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Movement in fair value of investments -22,976 37,603
(Loss) / gains on investments -22,976 37,603
Of the total distributions received from investments, £23.9 million (2022:
£10.7m) relates to income originated from the Company's UK investments and
£16.3 million (2022: £29.4m) relates to income originated from its European
investments.
Fair value of portfolio of assets
The Investment Manager has carried out fair market valuations of the
investments as at 31 December 2023.
The Directors have satisfied themselves as to the methodology used, the
discount rates applied and the valuation. All operational investments are in
renewable energy assets and are valued using a discounted cash flow
methodology. As explained in note 3a, the equity and debt instruments are
valued as a whole. This is done using a blended discount rate and the value
attributed to debt investments represents their face value, with the residual
value attributed to equity investments. The weighted average costs of capital
applied to the portfolio of assets ranges from 5.6% to 8.6%. For development
and early-stage assets, investment values are held at cost or Price of Recent
Investment.
The following assumptions were used in the discounted cash flow valuations:
As at 31 December 2023 As at 31 December 2022
UK RPI (year-on-year) 3.7% during 2024, declining to 3.00% in 2028 and then to 2.25% from 2030 6.7% during 2023, declining to 3.00% in 2087 and then to 2.25% from 2030
onwards onwards.
UK RPI (annual average) 4.4% during 2024, declining to 3.00% in 2028 and then to 2.25% from 2030 9.8% during 2023, declining to 3.00% in 2028 and then to 2.25% from 2030
onwards onwards
UK - corporation tax rate 25.00% 19.00% to April 2023; 25.00% thereafter
Sweden - long-term inflation rate 2.00% 2.00%
Sweden - corporation tax rate 20.60% 20.60%
France - long-term inflation rate 2.00% 2.00%
France - corporation tax rate 25.00% 25.00%
Poland - long-term inflation rate - 2.50%
Poland - corporation tax rate - 19.00%
Finland - long-term inflation rate 2.00% 2.00%
Finland - corporation tax rate 20.00% 20.00%
Germany - long-term inflation rate 2.00% 2.00%
Germany - corporation tax rate 15.83% 15.83%
Euro/sterling exchange rate 1.1539 1.1277
Zloty/sterling exchange rate - 5.3009
Energy yield assumptions P50 case P50 case
Other key assumptions include:
Power Price Forecasts
Unless fixed under PPAs or otherwise hedged, the power price forecasts used in
the valuations are based on market forward prices in the near-term, followed
by an equal blend of two independent and widely-used market expert
consultants' relevant technology-specific capture price forecasts for each
asset, see the Market Outlook section and the Portfolio valuation section
respectively within the Company's Annual Report.
Asset Lives
The length of the period of operations assumed in the valuation is determined
on an asset-by-asset basis taking into account the lease agreements, permits
or planning permissions in place as well as any extension rights, renewal
regimes or wider policy considerations, together with the technical
characteristics of the asset.
Decommissioning Costs
Where applicable, the present value of the estimated costs to restore the land
back to its original use are included in the valuations as a cash outflow at
the end of the asset life.
Fair value of intermediate holding companies
The other net assets in the intermediate holding companies substantially
comprise working capital balances, therefore the Directors consider the fair
value to be equal to the book values. The sensitivity to unobservable inputs
is based on management's expectation of reasonable possible shifts in these
inputs.
The valuation sensitivity of each assumption is shown in Note 15.
10. Trade and other receivables
As at As at
31 December 2023 31 December 2022
£'000 £'000
Other receivables 143 775
Total 143 775
11. Trade and other payables
As at As at
31 December 2023 31 December 2022
£'000 £'000
Accrued expenses 3,237 1,917
Total 3,237 1,917
12. Share capital
Year ended Year ended
31 December 2023 31 December 2022
Nominal Nominal
Number of value of Number of value of
Allotted, issued and fully paid: shares shares (£) shares shares (£)
Opening balance 564,927,536 5,649,275 564,927,536 5,649,275
Allotted following admission to LSE
Share issuance - - - -
Closing balance 564,927,536 5,649,275 564,927,536 5,649,275
As at 31 December 2023, the Company had total share premium of £217.3 million
(2022: £217.3m).
13. Special reserve
As indicated in the Company's prospectus dated 19 November 2019, following
admission of the Company's Ordinary Shares to trading on the London Stock
Exchange, the Directors applied to the Court and obtained a judgement on
18 February 2020 to cancel the amount standing to the credit of the share
premium account of the Company.
As stated by the Institute of Chartered Accountants in England and Wales
("ICAEW") and the Institute of Chartered Accountants in Scotland ("ICAS") in
the technical release TECH 02/17BL, The Companies (Reduction of Share Capital)
Order 2008 SI 2008/1915 ("the Order") specifies the cases in which a reserve
arising from a reduction in a company's capital (i.e., share capital, share
premium account, capital redemption reserve or redenomination reserve) is to
be treated as a realised profit as a matter of law. The Order also disapplies
the general prohibition in section 654 on the distribution of a reserve
arising from a reduction of capital. The Order provides that if a limited
company having a share capital reduces its capital and the reduction is
confirmed by order of court, the reserve arising from the reduction is treated
as a realised profit unless the court orders otherwise.
The amount of the share premium account cancelled and credited to the
Company's Special reserve is £339.5 million, which can be utilised to fund
distributions by way of dividends to the Company's shareholders.
14. Net assets per Ordinary Share (pence)
As at As at
31 December 2023
31 December 2022
Total shareholders' equity (£'000) 599,039 618,260
Number of Ordinary Shares in issue ('000) 564,928 564,928
Net asset value per Ordinary Share (pence) 106.04p 109.44p
15. Financial instruments by category
As at 31 December 2023
Financial Financial Financial Total
assets at
assets at
liabilities at amortised
£'000
amortised
fair value
cost
cost
through
£'000
£'000
profit or loss
£'000
Non-current assets
Investments at fair value through profit or loss - 592,121 - 592,121
Current assets
Trade and other receivables 143 - - 143
Cash and cash equivalents 10,012 - - 10,012
Total assets 10,155 592,121 - 602,276
Current liabilities
Trade and other payables - - -3,237 -3,237
Total liabilities - - -3,237 -3,237
Net assets 10,155 592,121 -3,237 599,039
As explained in Note 3a, the Company values its investments as a whole. In the
tables above of the total figure of £592.1 million for financial assets at
fair value through profit or loss, £513.3 million relates to the face value
of debt investments. Investments at fair value through profit and loss takes
into account additions and disposals in the year, see the section entitled
Investments and Capital Recycling Programme in the Company's Annual Report.
As at 31 December 2022
Financial Financial Financial Total
assets at assets at liabilities at £'000
amortised fair value amortised
cost through cost
£'000 profit or loss £'000
£'000
Non-current assets
Investments at fair value through profit or loss - 608,799 - 608,799
Current assets
Trade and other receivables 775 - - 775
Cash and cash equivalents 10,603 - - 10,603
Total assets 11,378 608,799 - 620,177
Current liabilities
Trade and other payables - - -1,917 -1,917
Total liabilities - - -1,917 -1,917
Net assets 11,378 608,799 -1,917 618,260
As explained in Note 3a, the Company values its investments as a whole. In the
table above of the total figure of £608.8 million for financial assets at
fair value through profit or loss, £506.5 million relates to the face value
of debt investments.
In the tables above, the fair value of the financial instruments that are
measured at amortised cost do not materially differ from their carrying
values.
IFRS 13 requires the Company to classify its investments in a fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS 13 establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The three levels of
fair value hierarchy under IFRS 13 are as follows:
Level 1: fair value measurements are those derived from quoted prices Level 2: fair value measurements are those derived from inputs other than Level 3: fair value measurements are those derived from valuation techniques
(unadjusted) in active markets for identical assets or liabilities quoted prices included within Level 1 that are observable for the asset or that include inputs to the asset or liability that are not based on observable
liability, either directly (i.e., as prices) or indirectly (i.e., derived market data (unobservable inputs)
from prices)
As at 31 December 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Investments at fair value through profit or loss - - 592,121 592,121
Total financial assets - - 592,121 592,121
As at 31 December 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Investments at fair value through profit or loss - - 608,799 608,799
Total financial assets - - 608,799 608,799
There were no Level 1 or Level 2 assets or liabilities during the year. There
were no transfers between Level 1 and 2, Level 1 and 3 or Level 2 and 3 during
the year.
Included within investments at fair value through profit or loss is an amount
of £20 million in relation to derivative option in Ireland associated with
the conditional acquisition in Ireland (2022: £5.0m relating to two
derivative options associated with the conditional acquisitions in Spain and
Ireland) recognised in an intermediate holding company.
Reconciliation of Level 3 fair value measurement of financial assets and
liabilities
An analysis of the movement between opening to closing balances of the
investments at fair value through profit or loss (all classified as Level 3)
is given in Note 9.
The fair value of the investments at fair value through profit or loss
includes the use of Level 3 inputs. Refer to Note 9 for details on the
valuation methodology.
Valuation Sensitivities (including conditional acquisitions)
Discount rate
The discount rate is considered the most significant unobservable input
through which an increase or decrease would have a material impact on the fair
value of the investments at fair value through profit or loss.
An increase of 0.50% in the discount rate (levered cost of equity) would cause
a decrease in total portfolio value of 6.0p per Ordinary Share (5.6%
decrease) and a decrease of 0.50% in the discount rate would cause an increase
in total portfolio value of 6.5p per Ordinary Share (6.1% increase).
Inflation rate
The sensitivity of the investments to movement in inflation rates is as
follows:
A decrease of 0.50% in inflation rates would cause a decrease in total
portfolio value of -4.4p per Ordinary Share (4.2% decrease) and an increase in
inflation rates would cause an increase in total portfolio value of 4.8p per
Ordinary Share (4.5% increase).Power price
Wind and solar assets are subject to movements in power prices. The
sensitivities of the investments to movement in power prices are as follows:
A decrease of 10% in power price would cause a decrease in the total portfolio
value of 9.7p per Ordinary Share (9.2% decrease) and an increase of 10% in
power price would cause an increase in the total portfolio value of 9.7p per
Ordinary Share (9.1% increase).
Generation
Wind and solar assets are subject to power generation risks. The sensitivities
of the investments to movement in level of power output are as follows:
The fair value of the investments is based on a "P50" level of power output
being the expected level of generation over the long‑term. An assumed "P90"
level of power output (i.e. a level of generation that is below the "P50",
with a 90% probability of being exceeded) would cause a decrease in the total
portfolio value of -19.6p per Ordinary Share (18.5% decrease). An assumed
"P10" level of power output (i.e. a level of generation that is above the
"P50", with a 10% probability of being achieved) would cause an increase in
the total portfolio value of 19.0p per Ordinary Share (17.9% increase).
Foreign exchange
The sensitivity of the investments to movement in FX rates is as follows:
An increase of 10% in FX rates would cause an increase in total portfolio
value of 1.3p per Ordinary Share (1.2% increase) and a decrease of 10% in FX
rates would cause a decrease in total portfolio value of 1.3p per Ordinary
Share (1.2% decrease).
Of the portfolio as at 31 December 2023, 52% (2022: 59%) of the NAV is
denominated in non-sterling currencies.
16. Financial risk management
The Company's activities expose it to a variety of financial risks; including
foreign currency risk, interest rate risk, power price risk, credit risk and
liquidity risk. The Board of Directors has overall responsibility for
overseeing the management of financial risks, however the review and
management of financial risks are delegated to the AIFM. Each risk and its
management are summarised below.
(i) Currency risk
Foreign currency risk is defined as the risk that the fair values of future
cashflows will fluctuate because of changes in foreign exchange rates. The
Company seeks to manage its exposure to foreign exchange movements to ensure
that (i) the sterling value of known future construction commitments is
fixed; (ii) sufficient near term distributions from nonsterling investments
are hedged to maintain healthy dividend cover; (iii) the volatility of the
Company's NAV with respect to foreign exchange movements is limited; and (iv)
all settlements and potential mark-to market payments on instruments used to
hedge foreign exchange exposure are adequately covered by the Company's cash
balances and undrawn credit facilities.
The portfolio of assets in which the Company invests all conduct their
business and pay interest, dividends and principal in sterling, with the
exception of the euro and zloty-denominated investments which at 31 December
2023 comprised 46% (2022: 48%) and 0% (2022: 11%) of the total value of all
investments respectively. The valuation sensitivity to FX rates is shown in
Note 15.
(ii) Interest rate risk
The Company's interest rate risk on interest bearing financial assets is
limited to interest earned on cash and loan investments into project
companies, which yield interest at a fixed rate. The portfolio's cashflows are
continually monitored and reforecast, both over the near future and the
long-term, to analyse the cash flow returns from investments.
The Group may use borrowings to finance the acquisition of investments and the
forecasts are used to monitor the impact of changes in borrowing rates against
cash flow returns from investments as increases in borrowing rates will reduce
net interest margins. The Group's policy is to ensure that interest rates are
sufficiently hedged to protect the Group's net interest margins from
significant fluctuations when entering into material medium/ long-term
borrowings. This includes engaging in interest rate swaps or other interest
rate derivative contracts.
The Company's interest and non-interest bearing assets and liabilities are
summarised below:
As at 31 December 2023
Interest Non-interest
bearing bearing Total
£'000 £'000 £'000
Assets
Cash and cash equivalents - 10,012 10,012
Trade and other receivables - 143 143
Investments at fair value through profit or loss 513,280 78,841 592,121
Total assets 513,280 88,996 602,276
Liabilities
Trade and other payables - -3,237 -3,237
Total liabilities - -3,237 -3,237
As at 31 December 2022
Interest Non-interest
bearing bearing Total
£'000 £'000 £'000
Assets
Cash and cash equivalents - 10,603 10,603
Trade and other receivables - 775 775
Investments at fair value through profit or loss 506,482 102,317 608,799
Total assets 506,482 113,695 620,177
Liabilities
Trade and other payables - -1,917 -1,917
Total liabilities - -1,917 -1,917
In the tables above, the interest bearing asset value for investments at fair
value through profit or loss relates to the face value of debt investments.
(iii) Power Price risk
The wholesale market price of electricity and gas is volatile and is affected
by a variety of factors, including market demand for electricity and gas, the
generation mix of power plants, government support for various forms of power
generation, as well as fluctuations in the market prices of commodities and
foreign exchange. Whilst some of the Company's renewable energy projects
benefit from fixed prices, others have revenue which is in part based on
wholesale electricity and gas prices. The Investment Manager continually
monitors energy price forecast and aims to put in place mitigating strategies,
such as hedging arrangements or fixed PPA contracts to reduce the exposure of
the Company to this risk.
Further information on the impact of power prices over the year is provided in
the Portfolio Valuation section of the Investment Manager's report contained
in the Company's Annual Report.
(iv) Credit risks
Credit risk is the risk that a counterparty of the Group will be unable or
unwilling to meet a commitment that it has entered into with the Group. The
credit standing of subcontractors is reviewed, and the risk of default
estimated for each significant counterparty position. Monitoring is on-going,
and year end positions are reported to the Board on a quarterly basis. The
Group's largest credit risk exposure to a project at 31 December 2023 was to
Goldbeck Solar Limited on Breach Solar representing 1% of the portfolio by
total value of all investments (2022: 6%).
The Group 's investments enter into Power Price Agreements ("PPA") with a
range of providers through which electricity is sold. The largest PPA provider
to the portfolio at 31 December 2023 was EDF who provided PPAs to projects in
respect of 25% of the portfolio by total value of all investments (2022:
Npower: 18%).
Credit risk also arises from cash and cash equivalents, derivative financial
instruments and deposits with banks and financial institutions. The Company
and its subsidiaries mitigate their risk on cash investments and derivative
transactions by only transacting with major international financial
institutions with high credit ratings assigned by international credit rating
agencies.
The Company has assessed IFRS 9's expected credit loss model and does not
consider any material impact on these financial statements. No trade and other
receivables balances are credit-impaired at the reporting date.
The Company's commitment in respect of its conditional acquisition in Ireland
is accounted for partly as a derivative option and partly for the pre
commissioning revenues in an intermediate holding company.
(v) Liquidity risks
Liquidity risk is the risk that the Group may not be able to meet its
financial obligations as they fall due. The AIFM and the Board continuously
monitor forecast and actual cashflows from operating, financing, and investing
activities to consider payment of dividends, repayment of trade and other
payables or funding further investing activities. The Group ensures it
maintains adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
The Group's investments are generally in private companies, in which there is
no listed market and therefore such investment would take time to realise, and
there is no assurance that the valuations placed on the investments would be
achieved from any such sale process.
Financial assets and liabilities by maturity at the year are shown below:
31 December 2023
Less than More than
1 year 1-5 years 5 years Total
£'000 £'000 £'000 £'000
Assets
Investments at fair value through profit or loss - - 592,121 592,121
Trade and other receivables 143 - - 143
Cash and cash equivalents 10,012 - - 10,012
Liabilities
Trade and other payables -3,237 - - -3,237
6,918 - 592,121 599,039
31 December 2022
Less than More than
1 year 1-5 years 5 years Total
£'000 £'000 £'000 £'000
Assets
Investments at fair value through profit or loss - - 608,799 608,799
Trade and other receivables 775 - - 775
Cash and cash equivalents 10,603 - - 10,603
Liabilities
Trade and other payables -1,917 - - -1,917
9,461 - 608,799 618,260
Capital management
The Company's capital management objective is to ensure that the Company will
be able to continue as a going concern while maximising the return to equity
shareholders. The Company's investment objective is to provide investors with
an attractive and sustainable level of income returns, with an element of
capital growth, by investing in a diversified portfolio of Renewable Energy
Assets in the UK, Europe and Australia.
The Company considers its capital to comprise ordinary share capital, special
reserve and retained earnings. The Company is not subject to any externally
imposed capital requirements. The Company's total share capital and reserves
shown in the Statement of Financial Position are £599.0 million (2022:
£618.3m).
The Company has implemented an efficient financing structure that enables it
to manage its capital effectively. The Company's capital structure comprises
equity only (refer to the statement of changes in equity).
The Company's direct subsidiary, ORIT Holdings II Limited, has a £270.8
million revolving credit facility with Allied Irish Banks, National Australia
Bank, NatWest and Santander. The facility was £130.0 million drawn at 31
December 2023 (2022: £77.2m).
The Board, with the assistance of the Investment Manager, monitors and reviews
the Company's capital on an ongoing basis.
· Share capital represents the 1 penny nominal value of the issued
share capital.
· The share premium account arose from the net proceeds of issuing
new shares.
· The capital reserve reflects any increases and decreases in the
fair value of investments which have been recognised in the capital column of
the Statement of Comprehensive Income.
17. Related party transactions
During the year, interest totalling £25.9 million (2022: £23.1m) was earned,
in respect of the long-term interest-bearing loan between the Company and its
subsidiaries. At the year end, no interest earned was outstanding.
AIFM and Investment Manager
The Company has appointed Octopus AIF Management Limited to be the Alternative
Investment Fund Manager of the Company (the "AIFM") for the purposes of
Directive 2011/61/EU of the European Parliament and of the Council on
Alternative Investment Fund Managers. Accordingly, the AIFM is responsible for
the portfolio management of the Company and for exercising the risk management
function in respect of the Company. The AIFM has delegated portfolio
management services to Octopus Renewables Limited (trading as Octopus Energy
Generation), the Company's Investment Manager.
The AIFM is entitled to a management fee of 0.95% per annum of Net Asset Value
of the Company up to £500 million and 0.85% per annum of Net Asset Value in
excess of £500 million, payable quarterly in arrears. No performance fee or
asset level fees are payable to the AIFM under the Management Agreement.
During the year, the Investment management fee charged to the Company by the
AIFM was £5.64 million (2022: £5.71m), of which £2.83 million (2022:
£1.45m) remained payable at the year end date.
During the year, the Company entered into one transaction in the ordinary
course of business with Octopus Energy, part of the same group as the
Investment Manager. The transaction related to the signing of a 1-year
physical, indexed PPA for Ottringham solar farm in the UK. The nominal value
of the transaction was £1.7 million.
Directors
The Company is governed by a Board of Directors (the "Board"), all of whom are
independent and non-executive. During the year, the Board received fees for
their services of £209,300 (2022: £186,000) and were paid £6,400 (2022:
£7,900) in expenses. As at the year end, there were no outstanding fees
payable to the Board.
The Directors had the following shareholdings in the Company, all of which
were beneficially owned.
Ordinary Ordinary Ordinary
Shares as at date
Shares as at
Shares as at
of this report
31 December 2023
31 December 2022
Philip Austin MBE(60) 165,518 165,518 165,518
James Cameron 65,306 65,306 65,306
Elaina Elzinga - - -
Audrey McNair(61) 50,437 50,437 51,383
Sarim Sheikh - - -
(60 ) With effect from 23 November 2021, Mr. Austin's shares have
been held jointly with Mrs. J Austin, a PCA of Mr. Austin.
(61 ) Ms McNair's husband holds 20,991 shares of the total
holding displayed in this table.
18. Subsidiaries, joint ventures and associates
As a result of applying Investment Entities (Amendments to IFRS 10, IFRS 12
and IAS 27), no subsidiaries have been consolidated in these financial
statements. The Company's subsidiaries, joint ventures and associates are
listed below:
Name Category Place of Registered Ownership
business
Office(62)
interest
ORIT Holdings II Limited Direct Intermediate Holdings UK A 100%
ORIT Holdings Limited Intermediate Holdings UK A 100%
ORIT UK Acquisitions Limited Intermediate Holdings UK A 100%
Abbots Ripton Solar Energy Limited Project company UK A 100%
Chisbon Solar Farm Limited Project company UK A 100%
Jura Solar Limited Project company UK A 100%
Mingay Farm Limited Project company UK A 100%
NGE Limited Project company UK A 100%
Sun Green Energy Limited Project company UK A 100%
Westerfield Solar Limited Project company UK A 100%
Wincelle Solar Limited Project company UK A 100%
Heather Wind AB Project company Sweden B 100%
Solstice 1A GmbH Portfolio-level Holdings Germany C 100%
SolaireCharleval SAS Project company France D 100%
SolaireIstres SAS Project company France D 100%
SolaireCuges-Les-Pins SAS Project company France D 100%
SolaireChalmoux SAS Project company France D 100%
SolaireLaVerdiere SAS Project company France D 100%
SolaireBrignoles SAS Project company France D 100%
SolaireSaint-Antonin-du-Var SAS Project company France D 100%
Centrale Photovoltaique de IOVI 1 SAS Project company France D 100%
Centrale Photovoltaique de IOVI 3 SAS Project company France D 100%
Arsac 2 SAS Project company France D 100%
Arsac 5 SAS Project company France D 100%
SolaireFontienne SAS Project company France D 100%
SolaireOllieres SAS Project company France D 100%
Eylsia SAS Portfolio-level Holdings France E 100%
CEPE Cerisou Project company France F 100%
Cumberhead Wind Energy Limited Project company UK A 100%
ORIT Irish Holdings 2 Limited Portfolio-level Holdings UK A 100%
ORIT Irish Holdings Limited Portfolio-level Holdings UK A 100%
Nordic Power Development Limited Portfolio-level Holdings UK A 100%
Saunamaa Wind Farm Oy Project company Finland H 100%
Vöyrinkangas Wind Farm Oy Project company Finland H 100%
ORI JV Holdings Limited Portfolio-level Holdings UK A 50%
ORI JV Holdings 2 Limited Portfolio-level Holdings UK A 50%
Simply Blue Energy Holdings Limited Portfolio-level Holdings Ireland I 19%
South Kilbraur Wind Farm Limited Project company UK J 25%
Windburn Wind Farm Limited Project company UK J 25%
Wind 2 Project 2 Limited Project company UK J 25%
Wind 2 Project 5 Limited Project company UK J 25%
Wind 2 Project 3 Limited Project company UK J 25%
Kirkton Wind Farm Limited Project company UK J 25%
Bwlch Gwyn Wind Farm Limited Project company UK J 25%
Wind 2 Project 6 Limited Project company UK J 25%
Lairdmannoch Energy Park Limited Project company UK J 25%
ORI JV Holdings 3 Limited Portfolio-level Holdings UK A 50%
Nordic Renewables Limited Portfolio-level Holdings UK A 50%
Nordic Renewables Holdings 1 Limited Portfolio-level Holdings UK A 50%
ORI JV Holdings 4 Limited Portfolio-level Holdings UK A 50%
ORI JV Holdings 5 Limited Portfolio-level Holdings UK A 51%
ORI JV Holdings 5 Holdco Limited Portfolio-level Holdings UK A 51%
ORI JV Holdings 6 Limited Portfolio-level Holdings UK A 50%
ORIT Lincs Holdco Limited Portfolio-level Holdings UK A 100%
ORI Lincs Holdings Limited Portfolio-level Holdings UK A 50%
Clyde SPV Limited Portfolio-level Holdings UK K 50%
Blota Germany GmbH Portfolio-level Holdings Germany L 100%
Blota GP GmbH Portfolio-level Holdings Germany L 100%
UKA Windenergie Leeskow GmbH Portfolio-level Holdings Germany M 100%
UGE Leeskow Eins GmbH & Co. KG Umweltgerechte Energie Portfolio-level Holdings Germany M 100%
Infrastrukturgesellschaft Leeskow mbH & Co. KG Project company Germany M 100%
Burwell 11 Solar Limited Project company UK A 100%
Crossdykes WF Limited Project company UK N 51%
UK Green Investment Lyle Limited Portfolio-level Holdings UK K 50%
Lincs Wind Farm (Holding) Limited Portfolio-level Holdings UK O 15.5%
Lincs Wind Farm Limited Project company UK P 15.5%
HYRO Energy Limited Portfolio-level Holdings UK Q 25%
Green Hydrogen 11 Limited Project company UK Q 25%
Green Hydrogen 2 Limited Project company UK Q 25%
Green Hydrogen 3 Limited Project company UK Q 25%
Green Hydrogen 4 Limited Project company UK Q 25%
Green Hydrogen 5 Limited Project company UK Q 25%
Gridsource (Woburn Rd) Limited Project company UK A 50%
Haaponeva SPC Oy Project company Finland G 50%
BHill SPC Oy Project company Finland G 50%
Luola S SPC Oy Project company Finland G 50%
Mikkeli S SPC Oy Project company Finland G 50%
Eero S SPC Oy Project company Finland G 50%
S Tuuli SPC Oy Project company Finland G 50%
KNorgen SPC Oy Project company Finland G 50%
Trio Power Limited Portfolio-level Holdings UK A 100%
(62) Registered offices:
A - Uk House, 5th Floor, 164-182 Oxford Street, London, United Kingdom,
W1D 1NN
B - Lilla Nygatan 1, 111 28 Stockholm, Sweden
C - Maximilianstraße, 3580539 München, Germany
D - 52 Rue de la Victoire 75009, Paris, France
E - 4 Rue de Marivaux, 75002 Paris, France
F - Z.I de Courtine, 330 rue du Mourelet, 84000. Avignon, France
G - c/o Nordic Generation Oy, Tekniikantie 14, 02150 ESPOO
H - Teknobulevardi 3-5, 01530 Vantaa, Finland
I - Woodbine Hill, Kinsalebeg, Youghal, Co. Cork, Ireland
J - Wind 2 Office, 2 Walker Street, Edinburgh, Scotland, EH3 7LB
K - 8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8
7AG
L - c/o Ashurst LLP, OpernTurm, Bockenheimer Landstraße 2-4, 60306
Frankfurt
M - Dorfstraße 20a, 18276 Lohmen
N - 58 Morrison Street, Edinburgh, United Kingdom, EH3 8BP
O - 5 Howick Place, London, United Kingdom, SW1P 1WG
P - 13 Queens Road, Aberdeen, Scotland, AB15 4YL
Q - Beaufort Court, Egg Farm Lane, Kings Langley, United Kingdom, WD4 8LR
As shown in Annual Report, ORIT Holdings II Limited is the only direct
subsidiary of the Company. All other subsidiaries are held indirectly.
19. Guarantees and other commitments
The Company guarantees the foreign exchange hedges entered into by its
intermediate holding companies to enable it to minimise its exposure to
changes in underlying foreign exchange rates.
As at 31 December 2023, the Company has guarantees in respect of the future
investment obligations associated with the Breach Solar plant totalling £4.1
million (2022: £41.5m).
As at 31 December 2023 the Company's subsidiaries had future investment
obligations totalling £175.6 million (2022: £111.2m) relating to its wind
farms post construction, solar farm in construction and its conditional
acquisitions in Ireland. The intermediate holding companies have provided
guarantees in respect of these commitments.
20. Contingent acquisition
On 26 July 2021 an intermediate holding company, ORIT Holdings Limited,
entered into a Share Purchase Agreement ("SPA") for the acquisition of a 100%
interest in a portfolio of five solar PV assets in Ireland. As at 31 December
2023, the acquisition of the five sites were conditional upon the sites
becoming fully operational. The total consideration for the five sites was
estimated at €185‑€193 million (c. £160.6 million to £167 million)
which is payable on completion, apart from deferred consideration in respect
of the fifth site. The Company has secured a fully amortising debt facility of
up to €114 million (c. £98.8 million) from Allied Irish Banks plc and La
Banque Postale to part finance the acquisition of the operational sites and a
further pre agreed debt facility up to €25.8 million to acquire the fifth
site. A derivative asset of £20 million (2022: £3.3m) has been recognised
in respect of this transaction as at 31 December 2023 in an intermediate
holding company.
21. Post-year end events
On 29 January 2024 the Company declared an interim dividend in respect of the
three months ended 31 December 2023 of 1.45 pence per Ordinary Share for £8.2
million based on a record date of 9 February 2024 and ex-dividend date of
8 February 2024 and the number of Ordinary Shares in issue being 564,927,536.
This dividend was paid on 23 February 2024.
On 2 February 2024 the Company announced that it has completed the conditional
acquisition of four newly-constructed solar farms located close to Dublin,
Ireland following the sites becoming operational in December 2023. The solar
complex totals 199MW and was acquired from Statkraft Ireland Limited, which
developed and constructed the projects under ORIT's oversight. The total
acquisition cost of €160.6 million was in part financed using a €80.6
million drawdown from the debt facility provided by Allied Irish Banks and La
Banque Postale.
Other Information
Alternative Performance Measures
In reporting financial information, the Company presents alternative
performance measures, "APMs", which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company. The APMs presented in this report are shown below:
Performance of Company's underlying operational investments
Output Revenue Opex EBITDA
1,110GWh £117.4 million £43.6 million £73.8 million
Operational portfolio (2022: 1,005GWh) (2022: £112.0m) (2022: £35.7m) (2022: £76.3m)
275GWh £35.2 million £9.2 million £26.0 million
Solar (excluding Irish portfolio) (2022: 292GWh) (2022: £33.7m) (2022: £8.3m) (2022: £25.4m)
682GWh £42.7 million £12.0 million £30.7 million
Onshore wind (2022: 565GWh) (2022: £51.3m) (2022: £7.5m) (2022: £43.8m)
152GWh £39.5 million £22.4 million £17.0 million
Offshore wind (2022: 148GWh) (2022: £27.0m) (2022: £19.9m) (2022: £7.1m)
Gross asset value (GAV)
The Company's gross assets comprise the net asset values of the Company's
Ordinary Shares and the debt held in unconsolidated subsidiaries
As at As at
31 December 2023 31 December 2022
£million £million
NAV a 599.0 618.3
Debt b 381.3 454.3
Total GAV a + b 980.3 1,072.6
Total value of all investments
A measure of committed asset value including total debt and equity commitments
As at As at
31 December 2023 31 December 2022
£million £million
GAV a 980.3 1,072.6
Commitments on existing portfolio b 19.1 68.3
Commitments on conditional acquisitions c 173.4 177.0
GAV before adjusting for cash available for commitments (a+b+c) = d 1,172.8 1,317.9
Less Company and holding company assets e -23.1 -1.7
Less asset level cash f -22.6 -15.5
Total value of all investments d + e + f 1,127.1 1,304.2
Total return since IPO
A measure of performance since IPO that includes both income and capital
returns. This takes into account capital gains and reinvestment of dividends
(where beneficial) paid out by the Company into the Ordinary Shares of the
Company on the ex-dividend date.
31 December 2023 Share price NAV
Value at IPO (10 December 2019) - pence a 100.00 98.00
Value at 31 December 2023 - pence b 90.00 106.04
Benefits of reinvesting dividends - pence d -1.09 2.26
Dividends paid since IPO - pence c 17.76 17.76
Total return (b+c+d)÷a -1 6.7% 28.6%
Annualised total return 1.6% 6.4%
31 December 2022(63) Share price NAV
Value at IPO (10 December 2019) - pence a 100.00 98.00
Value at 31 December 2022 - pence b 100.00 109.44
Benefits of reinvesting dividends - pence d -0.52 1.8
Dividends paid since IPO - pence c 12.11 12.11
Total return (b+c+d)÷a -1 11.6% 25.9%
Annualised total return 3.6% 7.8%
Total return for the year
A measure of performance for the year that includes both income and capital
returns. This takes into account capital gains and reinvestment of dividends
paid out by the Company into the Ordinary Shares of the Company on the
ex-dividend date.
31 December 2023 Share price NAV
Value at 31 December 2022 - pence a 100.00 109.44
Dividends paid to 31 December 2022 - pence b 12.11 12.11
Value plus dividends paid to 31 December 2022 - pence a + b = c 112.11 121.55
Value at 31 December 2023 - pence d 90.00 106.04
Benefits of reinvesting dividends - pence e -0.57 0.35
Dividends paid in the year - pence f 5.65 5.65
Total return [(b+d+e+f) ÷c]-1 -4.4% 2.1%
31 December 2022(63) Share price NAV
Value at 31 December 2021 - pence a 110.80 102.26
Dividends paid to 31 December 2021 - pence b
Value plus dividends paid to 31 December 2021 - pence a + b = c
Value at 31 December 2022 - pence d 100.00 109.44
Benefits of reinvesting dividends - pence e -0.76 1.25
Dividends paid in the year - pence f 5.18 5.18
Total return (b+d+e+f)÷c -1 -5.4% 12.4%
(63) Restated from December 2022 KPI reported in the FY22 Annual Report
(Discount)/Premium to NAV
The amount, expressed as a percentage, by which the share price is less or
more than the NAV per Ordinary Share.
As at As at
31 December 2023 31 December 2022
NAV per Ordinary Share - pence a 106.04 109.44
Share price - pence b 90.00 100.00
(Discount)/Premium (b÷a)-1 -15.1% -8.6%
Ongoing charges ratio
A measure, expressed as a percentage of average net assets, of the regular,
recurring annual costs of running the Company per Ordinary Share. This has
been calculated and disclosed in accordance with the AIC methodology.
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Average NAV a 605,111 611,342
Annualised expenses b 7,011 6,844
Ongoing charges ratio (b÷a) 1.16% 1.12%
Financial Information
This announcement does not constitute the Company's statutory accounts. The
financial information for 2023 is derived from the statutory financial
statements for 2023, which will be delivered to the Registrar of Companies.
The statutory accounts for 2022 have been delivered to the Registrar of
Companies. The auditors have reported on the 2022 and 2023 accounts; their
reports were unqualified and did not include a statement under Section 498(2)
or (3) of the Companies Act 2006.
The Annual Report for the year ended 31 December 2023 was approved on 22 March
2024. The full Annual Report can be accessed via the Company's website at:
https://octopusrenewablesinfrastructure.com/investors/
The Annual Report will be submitted to the National Storage Mechanism and will
shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated information under the Disclosure Guidance
and Transparency Rules of the FCA.
Annual General Meeting ("AGM")
The AGM of Octopus Renewables Infrastructure Trust plc will be held at 6(th)
Floor, 125 London Wall, London EC2Y 5AS on 19 June 2024 at 10:00a.m.
Even if shareholders intend to attend the AGM, all shareholders are encouraged
to cast their vote by proxy and to appoint the "Chair of the Meeting" as their
proxy. Details of how to vote, either electronically, by proxy form or through
CREST, can be found in the Notes to the Notice of AGM in the Annual Report.
Shareholders are invited to send any questions for the Board or the Investment
Manager in advance by email to oritcosec@apexfs.group
(mailto:oritcosec@apexfs.group) by close of business on 17 June 2024.
25 March 2024
END
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