REG - Octopus Renewables - Interim Results to 30 June 2024
16/09/2024 07:00
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RNS Number : 2115E Octopus Renewables Infra Trust PLC 16 September 2024
16 September 2024
LEI: 213800B81BFJKWM2JV13
OCTOPUS RENEWABLES INFRASTRUCTURE TRUST PLC
Interim Results to 30 June 2024
Octopus Renewables Infrastructure Trust plc ("ORIT" or the "Company")
announces its unaudited interim results for the period from 1 January 2024 to
30 June 2024.
Key Highlights
As at 30 June 2024 As at 31 December 2023
(unaudited) (audited)
NAV per Ordinary Share (p) 105.15 106.04
NAV (£ million) 592.8 599.0
Ordinary Share Price (p) 72.0p 90.0
Gross asset value (£ million) 1,098 980
Total value of all investments (£ million) 1,118 1,127
NAV total return since IPO on 10 December 2019 +31.2% +28.6%
· NAV total return in the six months ended 30 June 2024 of +2.0% (30
June 2023: +0.9%).
· Increased target dividend to 6.02p for FY 2024, representing an
increase of 4.0% over FY 2023 in line with inflation (CPI)(1). Targeted
dividends are expected to be fully covered by the operating portfolio's
cashflows.
· Dividend cover for H1 2024 was a comfortable 1.33x, an increase on
the same period in the previous year (30 June 2023: 1.09x).
· At period end, capacity owned stood at 808MW (30 June 2023: 668MW).
· The Company's operating income for the period was £14.6 million
(inclusive of -£4.1 million movement in fair value of investments), with a
profit for the period of £11.3 million.
· EBITDA from the portfolio of operational assets totalled £45.3
million, arising from gross revenue of £68.7 million.
· In June 2024, the Company initiated a share buyback programme with an
initial tranche of up to £10.0 million. As at 30 June 2024, the Company held
1,200,962 shares in Treasury, which were bought by ORIT for c. £0.9 million
at an average price of 73.48 pence per Ordinary Share.
· Dividend per Ordinary Share declared for the period was 3.01p, in
line with the target for H1 2024.
Operational Highlights
· In February 2024, ORIT acquired 100% of a 199MW complex of four newly
constructed solar farms at Ballymacarney, Ireland. This is the largest solar
complex in Ireland.
· Additionally, commissioning tests on a fifth site at the complex are
expected to be completed in Q3 2024, after which point the Company will
acquire the asset.
· In April 2024, ORIT signed a PPA for the Crossdykes wind farm with
Sky UK, which is due to commence in April 2025. This is NAV-accretive when
compared with power price assumptions included in the NAV and resulted in an
uplift of £5.5 million.
· A follow-on investment of £5.9 million was made in the Simply Blue
Group, a floating offshore wind and sustainable fuels developer.
· In June 2024, construction had been completed at the 67MW Breach
solar farm in the UK.
Post Period End
· Progress continued with the capital recycling programme. The Company
completed the sale of the 48MW Ljungbyholm onshore wind farm in Sweden in
August 2024, realising an IRR of 11.3% over the lifetime of the investment.
Since launching the programme, the Company has now generated £161 million of
proceeds through three accretive investment exits. Proceeds from the capital
recycling programme have predominantly been used to partially repay the
Company's short-term debt facility. Following the sale of Ljungbyholm, total
gearing has reduced to 43% as at 13 September 2024(2).
· The Company's share buyback programme has continued post-period, and
as at 11 September 2024 had repurchased c.3.0 million shares since launch for
c.£2.2 million at an average price of 74.33 pence per Ordinary Share.
Phil Austin, Chairman of Octopus Renewables Infrastructure Trust plc,
commented:
"We are pleased that the Company has maintained its trend of robust
operational performance in the context of continued volatile market
conditions. During the period, the Company acquired a large solar complex in
Ireland, signed a NAV-accretive PPA for the Crossdykes onshore wind farm with
Sky UK, and made a follow-on investment of £5.9 million into the Simply Blue
Group, to further develop its large pipeline of offshore wind and sustainable
fuels projects.
"Since the period-end, the Company completed the sale of the Ljungbyholm
onshore wind farm, which marked another significant milestone in our capital
recycling programme, which to date has now generated £161 million of proceeds
through three accretive transactions.
"The recent cut to the base interest rate by the Bank of England is a positive
development for ORIT and those in the investment companies sector and should
begin to ease some of the tough macroeconomic conditions that have presented
headwinds in recent years. The Company's diversification and commitment to its
capital recycling programme, in tandem with these improved conditions, provide
us with an encouraging outlook for the wider renewables trust sector, with
further opportunities to deliver sustainable value to the Company's investor
base."
Results presentation today
There will be a virtual presentation for sell side analysts at 9.30 a.m.
today. Please contact Burson Buchanan for details
on octopus@buchanan.uk.com
For further information please contact:
Octopus Energy Generation (Investment Manager) Via Burson 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)
Burson Buchanan (Financial PR) 020 7466 5000
Charles Ryland, George Beale, Samuel Adams
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. Prior to approximately £30 million of committed investments due to
be made in 2024, the majority of which relates to the acquisition of the fifth
site at the Ballymacarney solar complex in Ireland.
About Octopus Renewables Infrastructure Trust
Octopus Renewables Infrastructure Trust ("ORIT") is a London-listed,
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. As an impact
fund, ORIT is helping accelerate the transition to net zero by investing in
green energy, whilst also contributing to a broader set of UN Sustainable
Development Goals through its impact initiatives. 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 March 2024) across 20 countries and total 4.0GW.
These renewable projects generate enough green energy to power 2.5 million
homes every year, the equivalent of taking over 1.5 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
London-listed 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 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 specialist renewable energy investors in
Europe, Octopus Energy Generation (the "Investment Manager").
Investment Strategy Overview
The full Investment Strategy and Policy can be found on the Company's website
and in its latest Annual Report. 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 150 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 active asset
management and strategic investment allocation, including construction and
developer assets
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 six months ended 30 June 2024 (unaudited)
Financial highlights
-16.9% -11.3% +2.0% +31.2%
Total YTD shareholder Total shareholder return YTD Net Asset Value NAV total return since IPO
return(1, 2) since IPO (-2.6% per ("NAV") total return(1, 2, 3) (+6.2% per annum)(1, 2, 3)
(6 months to June 2023: annum)(1, 2) (6 months to June 2023: (December 2023: +28.6%,
-4.9%) (December 2023: +6.1%, +0.9%(3)) 6.4% per annum)
1.7% per annum)
£593m 105.15p £1,098m £1,118m
NAV(3) NAV per Ordinary Share(3) Gross Asset Value Total value of all
(December 2023: £599m) (December 2023: 106.0p) ("GAV")(1, 4) investments(1, 5)
(December 2023: £980m) (December 2023: £1,127m)
£406m 3.01p 1.33x 4%
Market capitalisation as Dividend per Ordinary H1 2024 Dividend cover(6) 2024 target dividend
at 30 June 2024 Share for H1 2024 in line growth vs 2023
with target(8)
(As at 31 December 2023: (FY 2023: 5.79p in line with (6 months to June 2023: (2023 vs 2022: 10.5%)
£508m) target; FY 2024 target: 1.09x)
6.02p)
Note: The value of investments and income from dividends can fluctuate, and
there is a possibility that investors may not recover the entire amount
originally invested.
46% 8.4%
Total leverage(7) Dividend Yield^(9)
(December 2023: 39%) (December 2023: 6.4%)
(1) These are alternative performance measures ("APMs").
(2) Total returns in sterling, including dividends reinvested.
(3) Net Asset Value is the total value of the Company's assets
minus its liabilities. The Net Asset Value per share is the Net Asset Value
(£m) divided by the total number of voting rights at 30 June 2024, being
563,726,574. Following transactions since the beginning of the share buyback
programme to 30 June 2024, the Company held 1,200,962 shares in Treasury.
(4) "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 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.
(5) "Total value of all 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.
(6) Dividend cover for H1 2024 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.
(7) Total debt drawn (short-term and long-term) as a percentage of
Gross Asset Value.
(8) The dividend 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 is reasonable or achievable.
Investors should note that references in this announcement 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.
(9) Dividend Yield is calculated by dividing the target annual
dividend per share of 6.02p for FY 2024 by the market share price as at 30
June 2024.
Operational and ESG highlights
41 5 808MW
Number of assets as at Number of technologies(11) Capacity owned as at
30 June 2024(10) (at 30-Jun 2023: 5) 30 June 2024(10)
(at 30-Jun 2023: 38) (at 30-Jun 2023: 668MW)
ACTUAL(12)
605GWh 150k 147k
Renewable electricity generated in Estimated equivalent tonnes of CO(2) avoided in H1 2024 Estimated equivalent homes
H1 2024 (H1 2023: not reported) powered for a year
(H1 2023: 628GWh)(14) (H1 2023: not reported)
POTENTIAL(13)
1,394GWh 383k 359k
Potential annual renewable Estimated equivalent tonnes of CO(2) avoided once fully operational Estimated equivalent homes powered for a year once fully operational
electricity generated once fully operational
(at 31-Dec 2023: 1,569GWh) (at 31-Dec 2023: 400k) (at 31-Dec 2023: 384k)
(10) Including the 5 Developer investments and Ljungbyholm onshore
wind farm in Sweden for which the sale was completed post period. It excludes
Harlockstown, the fifth site within the Ballymacarney solar complex in
Ireland, currently under conditional acquisition. Each developer investment
is counted as a single asset.
(11) Including technologies for operational and construction stage
assets and technologies covered through developer investments: onshore wind,
offshore wind, solar, battery storage and hydrogen.
(12) "Actual" KPIs take into account GWh generated by the portfolio
during the reporting period and includes generation from the Ljungbyholm
onshore wind farm for which the sale was completed post period. Calculation
methodologies for "equivalent" KPIs can be found in ORIT's 2024 ESG and
Impact Strateg
(https://www.octopusrenewablesinfrastructure.com/all-reports-publications) y.
(13) All metrics are calculated based on an estimated annual renewable
energy generation of the investment portfolio once fully operational
(including the fifth Irish site under conditional acquisition and excluding
the Ljungbyholm onshore wind farm for which the sale was completed post period
and post publication of the Q2 factsheet) and on the basis of ORIT's equity
stake. For more information on calculation methodologies, please refer to
ORIT's 2024 ESG and Impac
(https://www.octopusrenewablesinfrastructure.com/all-reports-publications) t
Strateg
(https://www.octopusrenewablesinfrastructure.com/all-reports-publications) y.
(14) Restated from 2023 Interim Report.
Company results summary
As at 30-Jun 24 30-Jun 23 30-Jun 22 30-Jun 21 30-Jun 20
Share Price 72.0p 92.5p 108.0p 104.6p 112.2p
NAV £593m £608m £628m £341m £342m
NAV per share 105.2p 107.7p 111.1p 97.3p 97.6p
Total shareholder return -16.4% -9.8% 8.2% -3.0% 12.2%
(on a 12-month basis)
Total shareholder return since IPO -11.3% 6.1% 17.7% 8.8% 12.2%
NAV total return 3.2% 1.9% 20.1% 4.4% -0.4%.
(on a 12-month basis)
NAV total return since IPO 31.2% 27.1% 24.8% 3.9% -0.4%
Portfolio at a glance
Total number of
assets (15 )
41
Total
capacity(15 )
808 MW
(15 ) Including the 5 Developer investments and Ljungbyholm onshore
wind farm in Sweden for which the sale was completed post period. It excludes
Harlockstown, the fifth site within the Ballymacarney solar complex in
Ireland, currently under conditional acquisition. Each developer investment
is counted as a single asset.
Portfolio overview
Technology Country Sites Capacity Average asset life remaining (years) Status Key information
pro-rated by ownership (MW)
Onshore wind Sweden 1 48 27.0 Operational Sale completed post period
France 1 24 28.4 Operational French CfD
UK 1 50 28.7 Operational Corporate PPA
UK 1 23 27.0 Operational Fixed pricing until 2025 and Corporate PPA from Q2 2025
Germany 1 35 28.2 Operational German CfD
Finland 2 71 27.3 Operational Fixed pricing until end of 2025
Offshore wind UK 1 42 24.5 Operational ROC Subsidised
Solar UK 8 123 23.9 Operational ROC Subsidised
UK 1 67 40.0 Operational Operational as of Q2 2024
France 14 120 27.9 Operational FiT Subsidised
Ireland 4 199 39.5 Operational(16) Corporate PPA
Ireland 1 42 40.0 Conditional Acquisition Extension site expected to be acquired 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 agreement Solar/co-located battery storage
Finland n/a n/a n/a Exclusive development services agreement Onshore wind/solar
(16) 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 interim report for
Octopus Renewables Infrastructure Trust plc for the six months ended 30 June
2024 (the "Interim Report").
Continuing the pattern seen across last year, the six-month period has seen
renewable energy investment trusts, including ORIT, trading at discounts to
their Net Asset Value (NAV). Share price performance has been disappointing,
however the past few months have seen some positive developments for the
renewables investment trust sector. With inflation back at or close to target
levels, the Bank of England's recent base interest rate cut in August from
5.25% to 5.0% was the first rate reduction in the UK in over four years. This
has been seen as a positive step by many in the financial sector, with further
cuts expected in the coming months. We would expect falling interest rates to
drive lower bond yields and for returns from investment trusts to become
relatively more attractive, thereby easing the difficult conditions under
which the investment trust sector as a whole has been operating. The above-NAV
asset sales achieved by ORIT and several of our peers demonstrate that the
share price has not been representative of the fundamental value of the
assets, and we hope that macro-economic factors will become a less dominant
influence on the share price. We expect this process to take some time, but
combined with the supportive environment for renewables in Europe in general
(and in particular in the UK following the early announcements from the new
Labour government), we are optimistic about the huge potential for the green
energy sector.
Results
During the 6 months to 30 June 2024, the Company delivered a NAV total return
of 2.0%. Despite this, total shareholder return over the same period was
-16.9%, as share prices across the sector remain at a significant discount to
holding NAVs.
The Company's NAV fell slightly from £599.0 million (106.0 pence per Ordinary
share) to £592.8 million (105.2 pence per Ordinary share). The movement in
NAV during the period was primarily driven by the cash movements at the
Company level, which included dividends paid in the period and holding company
costs including RCF financing costs. These movements were substantially offset
by the return on the portfolio of assets after adjusting for operational
performance, as well as positive movements at the portfolio level related to
power prices and green certificates, macroeconomic changes, and the positive
impact of the Crossdykes PPA and the sale of the Ljungbyholm wind farm.
The Company's operating income for the period was £14.6 million (inclusive of
-£4.1 million movement in fair value of investments), giving rise to a profit
for the period of £11.3 million. This was underpinned by EBITDA from the
portfolio of operational assets totalling £45.3 million, arising from gross
revenues of £68.7 million.
Dividends
The Company made two dividend payments totalling 3.01 pence per ordinary share
for H1 2024, reaching exactly half of its FY 2024 dividend target of 6.02
pence per ordinary share. This is an increase of 4.0% over FY 2023's dividend
and is in line with the increase to the Consumer Price Index (CPI) for the 12
months to 31 December 2023. It 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.
Portfolio performance
During H1 2024, the Company's assets generated 605GWh of renewable
electricity, -17% (-126GWh) below the budget of 732GWh. When accounting for
compensation from curtailments and other events, the adjusted production post
compensation is 651GWh, only -11% (-81GWh) vs budget. The underperformance was
primarily due to lower than expected onshore wind speeds (-35GWh) and solar
irradiance (-10GWh).
Revenues of £68.7 million were achieved in the period, 6% below budget and
total EBITDA across the operating portfolio totalled £45.3 million, 8% below
budget, driven by the lower than budgeted production.
Share buyback programme
In June 2024, noting the significant discount at which the Company's shares
had been trading compared to their NAV, the Company initiated a share buyback
programme with an initial tranche of up to £10 million. As at 30 June 2024,
the Company held 1,200,962 shares in Treasury, which were bought by ORIT for
c.£0.9 million at an average price of 73.48 pence per Ordinary Share.
The repurchases of Ordinary Shares at a discount to NAV has resulted in an
increase in NAV per Ordinary Share as at 30 June 2024 of +0.07 pence per
Ordinary Share. Share buybacks have continued post Period, and the Board is
monitoring the impact of the share buyback programme and will make a decision
on the continuation of it in due course.
Investment activity and capital recycling
A key focus for ORIT during the period has been on the ongoing capital
recycling programme that was initiated in 2023. In July 2024 (post period) the
Company announced the sale of Ljungbyholm onshore wind farm in Sweden which
was completed in August, marking the third milestone of the programme. The
sale delivered an IRR of 11.3% over the lifetime of the investment and a
valuation uplift of £0.8 million or +0.14 pence per Ordinary Share above the
Investment Manager's internal valuation as at 30 June 2024. The transaction
provides further evidence that the current share price discount to NAV is not
reflective of the underlying value of the Company's assets.
Following the completion of the Ljungbyholm sale, the capital recycling
programme has generated proceeds of approximately £161 million. The proceeds
from this most recent sale (€73.7 million) have been used primarily to repay
short-term borrowings, and reduce the Company's overall LTV. Other capital
recycling projects remain in progress.
While the repayment of short-term borrowings remains a strong capital
allocation priority for the Company, selective new investments are being
pursued. During the first half of 2024, a £5.9 million follow-on investment
was made into Simply Blue Group, one of ORIT's developer stakes, as part of
its most recent funding round.
Investments in developers of this nature remain a key strategic priority for
the Company. Firstly, they offer access to future pipeline projects into which
ORIT can invest. Secondly, the Company anticipates higher returns from these
developer investments, which in turn will enhance overall portfolio returns
for investors.
Additionally, during the period, ORIT completed the acquisition of the first
four newly-constructed solar sites totalling 199MW in Dublin, Ireland (the
Ballymacarney solar complex).
Construction and development
In H1 2024, the Company completed the construction of the 67MW Breach solar
farm in the UK, which is now the second largest solar site in ORIT's portfolio
after Fidorfe (68MW, part of the Ballymacarney solar complex), representing
13% of ORIT's solar capacity as at 30 June 2024.
As at 30 June 2024, the construction of the 42MW Harlockstown extension to the
Ballymacarney solar complex had been completed. Under a similar conditional
agreement to the first four sites, Harlockstown will be acquired once all
commissioning tests have been completed which is expected to occur during Q3
2024. With this fifth site, the Ballymacarney solar complex totals 241MW. We
are proud that this flagship investment is currently the largest solar complex
in Ireland, and that it will meet around 2.5% of the national solar target of
8GW by 2030.
The construction of Woburn Road battery storage site (a 12MW/24MWh site in
which ORIT has a 50% stake) is progressing. The construction costs are being
financed by ORIT's joint venture partner, Sky, another fund managed by OEGEN.
ORIT has an option to catch-up on construction costs up to May 2025, a
decision that will be considered as part of the future capital allocation
strategy.
Additionally, ORIT's portfolio of developer investments and development stage
pipeline continues to strengthen with a multitude of renewable energy
projects being advanced across the wind, solar and hydrogen sectors.
The Board is conscious that ORIT's portfolio has become heavily weighted
towards operational assets. Construction remains a core focus for the Company,
both for the higher returns it can offer through capital growth, and for the
greater impact it provides through bringing new renewable generation onto the
grid. Subject to broader capital allocation considerations, it is expected
that future investment activity will prioritise rebalancing the portfolio
towards construction assets as well as potential further investments into
developers.
Revenue management and optimisation
During the period, the Company signed a power purchase agreement (PPA) for
Crossdykes onshore wind farm with Sky UK (the media and telecoms corporation),
set to commence in April 2025. This agreement secures a CPI-linked fixed price
for 69% of Crossdykes' production, resulting in a NAV uplift versus the
merchant power price case. As at 30 June 2024, ORIT's portfolio benefits from
five corporate PPAs with Owens Corning (Ljungbyholm wind farm - this site was
sold post period), Kimberley Clark (Cumberhead wind farm), Microsoft
(Ballymacarney solar complex), Iceland Foods (Breach solar farm) and Sky UK
(Crossdykes wind farm). Four of these corporate PPAs were originated in-house
by the Investment Manager. Overall, with other fixed-price contracts and
subsidies, ORIT's portfolio has 84% of its revenues fixed for the next two
years and 86% post the sale of the Swedish onshore wind farm. In addition, 48%
of revenues are inflation-linked for the next 10 years (50% post the Swedish
sale).
Impact highlights
In 2024, ORIT remains committed to driving forward its operations and
activities in alignment with its ESG & Impact Strategy. In the first half
of the year, c.150 kt CO(2) emissions were avoided across the portfolio. Once
the portfolio is fully operational, it is expected to generate sufficient
electricity to avoid c.383 kt CO(2) per annum, the equivalent of planting
1.9 million trees and powering 359 thousand homes per annum. This is enough
to provide electricity to approximately 10% of all the homes in London. ORIT
also continues to work with its impact partners such as Earth Energy Education
and BizGive to deliver additional initiatives. The budget for these
initiatives is drawn from ORIT's dedicated annual impact budget, which stands
at £340,000 for 2024. This is in addition to the £1,023,000 allocated as
community benefit funds for certain ORIT assets. These initiatives included
more site visits to ORIT's assets, inspiring the next generation with hands-on
learning experiences about renewable energy. Reflecting on our collaboration
with BizGive over the past three years, we have significantly contributed to
positive environmental outcomes beyond the provision of renewable energy,
including initiatives that drive climate action, promote clean energy,
facilitate energy efficiency, and support the circular economy. As we prepare
for the distribution of ORIT's fourth impact programme with BizGive and the
remaining distribution of ORIT's annual impact budget, we remain committed to
building on these successes and driving further impact.
Outlook and conclusion
The Board is encouraged by signs that the challenging macroeconomic
conditions, which have acted as a headwind to the investment trust sector for
many months, are beginning to ease. Despite the continued difficulties in the
financing environment during H1 2024, European investment in renewables has
remained robust, with $34 billion invested across the EU-27, aligning with
levels seen in the previous two periods(17). This underscores the sector's
ability to progress with impactful energy transition investments, supported by
a favourable political and regulatory environment.
ORIT's diversified portfolio has performed relatively robustly, and the
capital recycling programme is delivering on its dual aims of facilitating the
repayment of short-term debt and supporting asset valuations. Moving forward,
ORIT remains committed to investing in real assets that contribute positively
to global renewable energy targets, while delivering healthy risk-adjusted
returns to our investors. Since our IPO in 2019, the Company has provided an
inflation-linked dividend and a Net Asset Value total return of +31.2%.
Meanwhile, the requirements for impactful investment into the energy
transition remain in place, with a supportive political and regulatory
environment also firmly present. The Board therefore sees an encouraging
future outlook for both the Company and the renewable energy sector as a
whole, with continued focus on delivering sustainable value to our investors.
Philip Austin MBE
Chair
Octopus Renewables Infrastructure Trust plc
13 September 2024
(17 ) Source: BNEF Renewable Energy Investment Tracker 2H 2024,
published 27 Aug 2024.
Investment Manager's Report
Investment Manager: Octopus Energy Generation
Octopus Energy Generation ("OEGEN", 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 20 >4.2GW £2.7bn >150
OEGEN AUM as at 30 June 2024(18) countries invested in since 2010(18) capacity managed Solar & wind construction(18) Renewable Energy Professionals
(18 ) 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* is 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.
Company Developments and Capital Allocation
1 £5.9 million £97 million
New investment made during the period Total allocated capital to new investments in the period Total proceeds from capital recycling initiatives since launch
Follow-on investment into developer Simply Blue Group £161 million including post period end sale of Ljungbyholm wind farm
£1,118 million Up to £10 million 46% leverage (as % of GAV)
Total value of all investments(19) Share buyback programme launched in June 2024 with an initial tranche of up to As at 30-Jun 2024, vs 39%
£10 million
31-Dec 2023(20)
(19 ) Leverage as at the date of publication of this report is
42.7% following the sale of Ljungbyholm wind farm prior to approximately £30
million of committed investments due to be made in 2024, the majority of which
relates to the acquisition of the fifth site at the Ballymacarney solar
complex in Ireland.
(20 ) Total asset value including total debt and equity
commitments.
Company Developments during H1 2024
Portfolio activity and capital recycling
199MW Irish Solar Signing of Crossdykes wind PPA with Sky UK, commencing in April 2025 Simply Blue Group, Post-period sale of 48MW Ljungbyholm onshore wind farm, Sweden
follow-on investment
Completion of conditional acquisition of four newly constructed Irish solar The PPA is NAV-accretive when compared with the power price assumptions Invested €7 million (£5.9 million) in floating offshore wind and The sale completed in August 2024 and ORIT realised an IRR of 11.3% over the
sites included in the NAV and resulted in an uplift of £5.5 million. sustainable fuels developer in latest funding round lifetime of its investment.
100% stake Secured CPI-linked fixed price for 69% of Crossdykes' production. Forecast 19% stake
£43million revenue (pro-rata for ORIT's stake) across the 10-year tenor of
Largest solar complex in Ireland the PPA, increasing ORIT's fixed proportion of forecast revenue on a 2-year
look forward basis by 1 percentage point and the forecast inflation-linked
revenue on a 10-year look forward basis by 2 percentage points.
Construction Impact highlights
67MW 42MW £340,000 £1,023,000
Construction completed at Breach solar farm in the UK Construction completed at Harlockstown solar farm in Ireland. Commissioning FY 2024 Impact budget Funding for local communities for specific projects(21)
tests on this fifth site at the Ballymacarney solar complex are expected to be
completed in Q3 2024. The site will be acquired once operational tests are
complete.
(21 ) Separate to the £340,000 Impact budget.
Capital recycling programme
ORIT's capital recycling programme, initiated in 2023 as part of a broader
capital allocation strategy, has continued to be a key focus during this
period. The primary objectives of the programme are to release capital to
repay short-term borrowings, and to provide evidence for the Company's project
NAVs being fair whilst retaining a suitably diversified portfolio.
Since its inception, the programme has completed three transactions generating
c.£161 million in total proceeds, including the proceeds of €73.7 million
from the post-period sale of the Swedish onshore wind farm which was completed
in August 2024.
The assets included in the recycling programme have been carefully selected to
ensure the portfolio remains aligned with the Company's objectives and
balanced in terms of geographical and technology split. While the programme is
ongoing, ORIT has to date accomplished the following components:
The outcomes of the capital recycling programme validate ORIT's asset
valuations, indicating that the share price discount to NAV does not
accurately reflect the Company's intrinsic value.
The capital recycling programme remains in progress and the Company will
provide any update in due course.
Post-period Sale of Swedish onshore wind farm (post period) Exit of Spanish solar projects option Sale of Polish onshore
wind farms
MW capacity 48MW 175MW 59MW
Details ORIT completed the sale of the Ljungbyholm onshore wind farm in Sweden. ORIT ORIT elected to terminate its option to acquire 175MW of ready-to-build solar ORIT completed the sale of the Krzecin and Kuslin onshore wind farms in
acquired the asset in March 2020 and managed the construction phase, projects in Spain. Poland. ORIT acquired the assets when they were in construction in October
successfully bringing the wind farm into operation in June 2021. 2021, before managing the construction and bringing the wind farms into
operation in 2022.
Exit date August 2024 December 2023 December 2023
Rationale 'Sweet spot' size asset for a large pool of investors, combined with strong Opportunity to exit at the agreed price was attractive on a risk-adjusted Highly attractive purchase price offer was received, from a deliverable
operational performance and reduction in exposure to Nordic power prices. basis, taking into account the construction commitment to deliver the counterparty with demonstrable motivation to transact quickly.
projects.
Buyer Financial buyer, DWS Infrastruktur Europa Original developer, Spanish affiliate of Chinese power company Strategic buyer, affiliate of the Polish-based listed multi-energy company,
Orlen S.A.
Proceeds c.£63.8 million c.£4.7 million c.£92 million
NAV uplift vs holding value +0.1 pence per Ordinary Share NAV uplift +0.3 pence per Ordinary Share NAV uplift +2.8 pence per Ordinary Share NAV uplift
vs holding value at 30 Jun 2024 vs holding value at 30 Sep 2023 vs holding value at 30 Sep 2023
Return over lifetime of investment c.11% IRR +0.5 pence per Ordinary Share total NAV uplift c.30% IRR
over the lifetime of ORIT's investment over the lifetime of ORIT's investment over the lifetime of ORIT's investment
Portfolio Breakdown (as at 30 June 2024)
Whole site Remaining
capacity Start of asset life
Technology Country Site name (MW) Phase operations (years) Stake %
Onshore wind UK Cumberhead 50 Operational 31/03/2023 29 100%
France Cerisou 24 Operational 15/11/2022 28 100%
Sweden Ljungbyholm 48 Operational 30/06/2021 27 100%
Saunamaa 34 Operational 28/08/2021 27 100%
Finland Suolokangas 38 Operational 29/12/2021 27 100%
Germany Leeskow 35 Operational 30/09/2022 28 100%
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 20 100%
Penhale 4 Operational 08/03/2013 29 100%
Chisbon 12 Operational 03/05/2015 26 100%
Westerfield 13 Operational 25/03/2015 21 100%
Wiggin Hill 11 Operational 10/03/2015 16 100%
Ottringham 6 Operational 07/08/2013 30 100%
Breach 67 Operational 25/06/2024 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 29 100%
Chalmoux 10 Operational 01/08/2013 29 100%
lovi 1 6 Operational 17/07/2014 30 100%
lovi 3 6 Operational 17/07/2014 30 100%
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 (22) 54 Operational 18/12/2023 39 100%
Fidorfe (22) 68 Operational 18/12/2023 39 100%
Muckerstown (22) 48 Operational 18/12/2023 39 100%
Kilsallaghan (22) 29 Operational 18/12/2023 39 100%
Harlockstown (22) 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%
(22 ) The first four sites listed in Ireland are sometimes (in this
report and elsewhere) collectively referred to as 'the Ballymacarney solar
complex'. The fifth site, Harlockstown, is currently under conditional
acquisition and will be part of the complex once acquired.
Portfolio Breakdown (as at 30 June 2024)
509MW 251MW 42MW 6MW
Across 27 solar plants(23) Across 7 onshore wind farms, including Ljungbyholm (Sweden) Across 1 offshore Across 1 battery storage plant
wind farm
5 84% 48%
Investments in Developers Fixed revenue for the next two years 86% post Swedish onshore wind sale Inflation-linked revenue for the next ten years 50% post Swedish onshore wind
sale
(23) Excludes Harlockstown which is a conditional acquisition.
The figure above shows the portfolio composition broken down by total value of
all investments in accordance with the Company's investment policy as at 30
June 2024 (including the amount committed to the conditional acquisition of
the Irish solar PV and Ljungbyholm onshore wind farm in Sweden for which the
sale was completed post period). The investments are valued on an unlevered
basis and including amounts committed but not yet incurred. Note that the sums
may not add up due to rounding.
£1,118m
Total value of all investments
Figure 4: Portfolio composition broken down by MW of capacity pro rata for
ORIT's ownership (including the capacity of construction assets and
Ljungbyholm onshore wind farm in Sweden for which the sale was completed post
period) on a current invested basis as at 30 June 2024 (and therefore
excluding the Irish solar assets under conditional acquisition).
Figure 5: Portfolio composition broken down by offtaker and O&M providers
as a percentage of total value of all investments(24)
(24) Npower/Axpo: Sites sell ROCs and power to NPower but also have a
price-fixing arrangement with Axpo.
£1,118m
Total value of all investments
Country
UK: 40%
Ireland: 17%
France: 15%
Finland: 11%
Germany: 6%
Sweden: 5%
Developer: 4%
Technology
Solar: 44%
Onshore wind: 39%
Offshore wind: 13%
Developer: 4%
Battery storage: 0.04%
Asset phase
Operational: 96%
Construction: 0.04%
Developer: 4%
Portfolio composition broken down by MW of capacity pro rata for ORIT's
ownership (including the capacity of construction assets and Ljungbyholm
onshore wind farm in Sweden for which the sale was completed post period) on a
current invested basis as at 30 June 2024 (and therefore excluding the Irish
solar assets under conditional acquisition).
808MW
Capacity owned
Country
UK: 39%
Ireland: 25%
France: 18%
Finland: 9%
Sweden: 6%
Germany: 4%
Technology
Solar: 63%
Onshore wind: 31%
Offshore wind: 5%
Battery storage: 1%
Asset phase
Operational: 99%
Construction: 1%
Portfolio composition broken down by offtaker and O&M providers as a
percentage of total value of all investments(24)£1,118m
Total value of all investments
Offtaker
Microsoft: 17%
EDF: 16%
British Gas: 13%
Esti Energi: 11%
Npower/Axpo: 7%
Kimberly Clark: 7%
Alpix: 6%
Owens Corning: 5%
Iceland Foods: 5%
N/A: 4%
OE: 4%
Sky Media: 4%
Having multiple offtakers offers advantages such as risk diversification and
offers local expertise in ORIT's key geographical markets.
O&M provider
Nordex: 22%
Statkraft: 17%
Orsted: 13%
Engie: 11%
Vestas: 11%
PSH: 6%
RES: 5%
SGRE: 5%
Goldbeck: 5%
N/A: 4%
BayWa 1%
A diversified group of O&M providers allows ORIT to leverage competitive
pricing and specialised expertise.
(24) Npower/Axpo: Sites sell ROCs and power to NPower but also have a
price-fixing arrangement with Axpo.
Portfolio performance
Operational portfolio technical and financial performance
During the six-month period ORIT successfully completed the acquisition of
four newly constructed solar farms located in Ireland and the construction of
Breach solar farm in the UK.(25)
This section reports on the performance of the Company's underlying
operational investments and Figure 6 shows the metrics which form part of the
Alternative Performance Measures.
In the six month period ending 30 June 2024, the Company's operational
portfolio generated 605GWh (30 June 2023: 628GWh)(26) of electricity, 17%
below expectations (-126GWh vs budget of 732GWh) predominantly due to
unfavourable wind speeds and grid curtailments which impacted performance
across the onshore wind assets. The adjusted production post compensations
from curtailments and other events is 651GWh, -11% vs budget.
Revenues of £68.7 million were achieved in the period (30 June 2023: £61.7
million), 6% below budget and total EBITDA across the operating portfolio
totalled £45.3 million, 8% below budget (30 June 2023: £40.7 million).
Figure 6: Performance of Company's underlying operational investments
Output Revenue Opex EBITDA
Operational 605GWh £68.7m £23.4m £45.3m
portfolio -17% vs budget -6% vs budget -2% below budget -8% vs budget
-4% vs 2023 +11% vs 2023 10% increase vs 2023 +11% vs 2023
(H1 2023: 628GWh)(26) (H1 2023: £61.7m) (H1 2023: £21.2m) (H1 2023: £40.7m)
Solar 209GWh £25.0m £6.5m £18.5m
-9% vs budget -7% vs budget -2% below budget -8% vs budget
(H1 2023: 146GWh) (H1 2023: £18.1m) (H1 2023: £4.3m) (H1 2023: £13.8m)
Onshore wind 312GWh £22.7m £5.3m £17.4m
-26% vs budget -12% vs budget -12% below budget -11% vs budget
(H1 2023: 409GWh) (H1 2023: £24.2m) (H1 2023: £5.4m) (H1 2023: £18.8m)
Offshore wind 84GWh £21.0m £11.6m £9.4m
+3% vs budget +3% vs budget +3% above budget +3% vs budget
(H1 2023: 73GWh)(26) (H1 2023: £19.1m) (H1 2023: £11.0m) (H1 2023: £8.1m)
Note: Totals may not add up due to rounding
(25 ) The Breach solar farm became operational at the end of June
2024 and therefore its contribution to these results is minimal.
(26 ) Restated from 2023 Interim Report.
Solar
Production:
ORIT's solar portfolio (27 sites across the UK, Ireland and France) generated
209GWh during H1 2024, -9% (-21GWh) vs budget of 230GWh. This is a significant
increase from H1 2023 (H1 2023: 146GWh), owing to the fact that in the period,
the Company acquired the first four sites of the Ballymacarney solar complex
in Ireland, which together generated 76GWh, 36% of the solar portfolio output.
48% of the production losses were due to lower irradiance in Ireland and
France (-10GWh). The remaining 11GWh of underperformance was attributable to a
range of factors, including cable thefts at two sites in France (-2GWh) for
which ORIT is negotiating 100% recovery under the O&M agreement, alongside
curtailment at Ballymacarney (-1GWh) and a reconnection delay at the
Saint-Antonin-du-Var ("SADV") site (-1GWh) as site repowering works following
the fire in 2023 took longer than expected to complete. The panels are being
replaced by better performing alternatives, completion of which is expected in
Q4 2024. The Company anticipates a generation uplift of 7-10%, a +0.8GWh
estimated uplift per year. The incremental output at the site from the
upgraded panels will over the course of around 8 years generate the production
that was lost during the downtime. Other factors in part include growth of
lichen at two sites in France (-1GWh) negatively impacting site efficiency,
which is expected to be resolved in the coming months.
Revenues and EBITDA:
The solar portfolio generated revenues of £25.0 million, -7% vs budget
(£26.9 million) for the 6-month period. This includes £0.4 million received
in respect of insured recoveries on the SADV fire event previously reported.
Excluding the insurance recoveries relating to 2023, received in the period,
78% (£1.8 million) of the total revenue variance arising in the 6-month
period (£1.9 million) related to under production, with the remaining 22%
(£0.5 million) arising due to falling power prices in the UK (the French and
Irish solar portfolios benefit from 100% fixed revenues under feed-in-tariffs
and a corporate PPA respectively).
Operating expenditure amounted to £6.5 million, 2% favourable to budget
(£6.6 million) and the resulting EBITDA was £18.5 million, -8% vs budget
(£20.3 million) as a consequence of the lower revenues achieved.
Figure 7 on page 20 of the Interim Report shows the solar output variance to
budget (GWh) in H1 2024 with the GWh impact of the items listed above and
other technical performance variances.
Onshore wind
Production:
As at 30 June 2024, ORIT's onshore wind portfolio (7 sites across 4 countries
in Europe, including the Swedish asset for which the sale was completed post
period) generated 312GWh of renewable electricity during H1 2024, -26%
(-108GWh) vs budget of 421GWh.
Net of the estimated compensated production for economic curtailments
resulting from negative pricing periods and the UK Balancing Mechanism, the
adjusted production for the period is 355GWh (+14% vs actual production, -16%
or ‑66GWh vs budget). Curtailments of the two Scottish wind sites have been
compensated through Balancing Mechanism payments from National Grid, and the
other sites (mainly the two Finnish wind farms) have been compensated through
contractual protections in their PPAs.
Wind resource was lower than projected for the period, particularly in March
and May 2024, which was the main contributor to the 66GWh production
underperformance, responsible for 43% of the variance (-29GWh). The sites that
have been most affected by lower wind speeds were Cumberhead and the two sites
in Finland.
The main contributors to the remaining underperformance were main bearing
failures at the two Finnish sites (-12MWh) - see case studies below for
further detail - and early life teething issues at Cumberhead (-9GWh) which
have since been resolved. ORIT expects the majority of this lost production at
the three sites to be compensated under the turbine O&M agreements, and
negotiations are ongoing.
Revenues and EBITDA:
The onshore wind portfolio delivered a total revenue of £22.7 million for the
six-month period, -12% vs budget (£25.6 million). Lower-than-expected
production was the driver behind the revenue decrease vs budget (£4.4
million), this was partially offset through receipt of grid and economic
curtailment compensations across the sites (£1.5 million).
Operational expenditure totalled £5.3 million, 12% favourable to budget
(£6.0 million); the key factor being Cumberhead securing full business rates
relief for the 2024/25 year (£0.6 million). The resulting EBITDA was £17.4
million, -11% vs budget (£19.7 million), due to the lower than anticipated
revenues.
Figure 8 on page 21 of the Interim Report shows the onshore wind output
variance to budget (GWh) in H1 2024 with the GWh impact of the items listed
above and other technical performance variances.
Offshore wind
Production:
The offshore wind portfolio (made up entirely by ORIT's 15.5% stake of the
Lincs asset), produced 84GWh in H1 2024, +5% vs budget (+4GWh) of 80GWh.
Favourable wind conditions (+7GWh) were offset by marginally lower
availability
(-2GWh) due to main component failures. Four generators and three gearboxes
were replaced in the period at the site across the 75 turbines. The ongoing
proactive generator repair programme will assist in mitigating lost production
going forward. ORIT is currently in discussions with Orsted regarding
potential recoveries.
Revenues and EBITDA:
Lincs generated revenues of £21.0 million, +3% vs budget (+£0.6 million).
This was primarily due to the higher-than-budgeted production. The average
power prices achieved throughout the period were in line with budget.
Operational expenditure totalled £11.6 million, 3% higher than budgeted
(£11.3 million), due to a marginally higher-than-expected inflationary
O&M increase in Q1. This resulted in EBITDA of £9.4 million, +3% vs
budget (+£0.3 million).
Figure 9 on page 22 of the Interim Report shows the offshore wind output
variance to budget in H1 2024 with the GWh impact of wind speed and turbine
availability listed above.
Asset management
Octopus Energy Generation actively manages ORIT's assets and follows a
proactive approach of identifying and mitigating risks to secure the long-term
performance of its growing and increasingly diverse global portfolio of
renewable energy assets.
Case study:
H1 2024 wind asset management initiatives to deliver and manage high
performance:
Advanced asset monitoring Use of advanced monitoring techniques to pre- emptively enhance project Example: A new service called Skyspecs has been launched whereby ORIT asset
performance data is analysed automatically to identify underperforming turbines, turbines
with components running hotter than they should be, and to pinpoint any
turbines that are not accurately aligned with the wind. At the Cumberhead
onshore wind farm, this system detected a northing offset (an issue whereby a
turbine cannot accurately identify which way it is pointing). Directional
signals are important for the management of loads on turbines in order to
ensure they reach their design life. This was quickly resolved with the site
operations team. Without this advanced monitoring system it would have been
impossible to detect the issue.
Enhancements to wind turbine blade upgrades Modifications to selected wind turbine blades, to increase production Example: At Ljungbyholm wind farm, blade modifications to certain turbines
were made by applying add-on serrations. This allowed a production curtailment
to be lifted whilst ensuring the wind farm does not exceed its permitted noise
emission levels, thereby enhancing the generation performance of the site. The
additional production which would otherwise have been lost due to curtailment
is estimated to be worth over €2m across the lifetime of the asset on a net
present value basis.
Proactive management of turbine bearing failures Steps taken to minimise site- wide performance losses at earliest Example: Following the failure of two turbine main bearings at the Finnish
opportunities wind sites, OEGEN acted swiftly and leveraged its strong relationship with
senior management to drive the O&M contractor to install additional
monitoring systems. These systems have been put in place to prevent further
issues and ensure optimal performance. Furthermore, OEGEN has proactively
agreed on the replacement of all remaining bearings from the same batch, with
completion scheduled for later this year, thereby mitigating any potential
risks and reinforcing the reliability of operations.
Construction and development portfolio update
ORIT is an Impact Fund with a core objective to accelerate the transition to
net zero through its investments in building and operating a diversified
portfolio of renewable energy assets. Central to ORIT's strategy is the
principle of additionality-actively increasing renewable energy capacity. By
investing in construction assets and developer companies, ORIT not only
supports existing infrastructure but also expands the sector's capacity. This
ensures ORIT's investors directly contribute to new renewable energy projects,
driving the energy landscape towards net zero.
Construction overview
Construction achievements As at 30 June 2024, ORIT has a construction track record of 448MW of renewable
capacity built across 12 sites, comprising 267MW from solar sites and 181MW
from onshore wind sites.(27) These construction efforts have contributed a
total £15.8 million uplift to Net Asset Value since inception, through the
yield compression recognised when the assets are de‑risked upon moving from
construction phase to operational phase.
This report includes a case study on Ballymacarney, the largest solar complex
in Ireland at 199MW across its first four sites. ORIT oversaw the construction
before acquiring the sites in February 2024 upon completion of their
commissioning tests.
Construction update in the period The key achievement during the period was the connection to the grid of the
67MW Breach solar farm, which was followed by the commencement of its 10-year
PPA with Iceland Foods. Construction was completed in time for the original
energisation date in October 2023, though connection was pushed to Q2 2024 due
to delays from National Grid. Construction was managed by a dedicated OEGEN
construction manager, with the support of an external owner's engineer.
The construction at Harlockstown (42MW), the fifth site at the Ballymacarney
solar complex, was completed during the period. Commissioning tests are
ongoing and expected to be completed in Q3 2024. The site will be acquired
once all tests are complete.
Construction portfolio 6MW of capacity is under construction, corresponding to ORIT's 50% share of
the Woburn Road battery storage asset. The construction costs are fully
covered by ORIT's JV partner, Sky, another fund managed by OEGEN. Completion
is anticipated in Q1 2025, and ORIT has until May 2025 to choose to contribute
its share of the costs. If ORIT decides not to do so, its stake will transfer
to Sky.
(27) Note that this includes assets that have now been sold by ORIT
(i.e. the Polish wind assets sold in FY 2023 totalling 59MW)
Figure 10: Assets invested in at construction stage
Capacity (MW,
pro-rata for Date of Start of
Site name Technology Country ORIT ownership) acquisition operations Status
Ljungbyholm Onshore wind Sweden 48 Mar-2020 Jun-2021 Operational(28)
Cerisou Onshore wind France 24 Oct-2020 Nov-2022 Operational
Cumberhead Onshore wind UK 50 Sep-2021 Mar-2023 Operational
Krzecin Onshore wind Poland 19 Oct-2021 Feb-2022 Exited
Kuslin Onshore wind Poland 40 Oct-2021 Dec-2022 Exited
Breach Solar UK 67 Jun-2022 Jun-2024 Operational
Woburn Road Battery Storage UK 6 Jan-2023 Expected Q1 2025 Construction
Ballymacarney (Ballymacarney solar complex) Solar Ireland 54 Feb-2024 Dec-2023 Operational
Kilsallaghan Solar Ireland 29 Feb-2024 Dec-2023 Operational
(Ballymacarney solar complex)
Muckerstown (Ballymacarney solar complex) Solar Ireland 48 Feb-2024 Dec-2023 Operational
Fidorfe (Ballymacarney solar complex) Solar Ireland 68 Feb-2024 Dec-2023 Operational
Harlockstown (Ballymacarney solar complex) Solar Ireland 42 Feb-2024 Aug-2024, acquisition Operational, conditional acquisition(29)
expected in Q3 2024
(28) The sale of Ljungbyholm wind farm completed during August 2024.
(29) Page 40 of the 2023 Annual Report in the corresponding
construction track record table should have read "conditional acquisition"
instead of "acquired post year-end" for Harlockstown. Other mentions of
Harlockstown in the 2023 Annual Report correctly mention the conditional
acquisition status.
Case Study: Ballymacarney Solar Complex
ORIT's risk-managed acquisition of the largest solar complex in Ireland
Overview The 199MW Ballymacarney solar complex outside Dublin, Ireland, was acquired by
ORIT in February 2024, and provides an example of ORIT's strategic approach to
renewable energy investments. This landmark project - which is currently the
largest solar farm in Ireland - was sourced through a strong relationship with
Statkraft and selected due to its alignment with ORIT's investment criteria,
including having a high quality developer and being of large scale. The
complex also provides an attractive revenue profile due to a long-term PPA
with a blue-chip offtaker, Microsoft, which has been put in place.
Project Delivery and Risk Management ORIT acquired the asset on a conditional basis: the purchase was agreed
pre-construction, but with completion of the acquisition taking place once the
post-construction commissioning tests had been successfully carried out.
However, ORIT negotiated the ability to be able to actively monitor the
construction process during the build phase. OEGEN provided proactive
oversight and stringent monitoring throughout the 15 month construction
period, including regular site inspections, reporting from a technical
advisor, and close collaboration with Statkraft to ensure quality construction
practices were followed and risks were mitigated.
This right of oversight - which is a different approach compared to typical
post-construction acquisitions - ensured adherence to high construction
standards. ORIT expects this will pay benefits over the long term through high
quality performance and the minimising of operational issues.
Challenges and Mitigation Prudent contracting protected ORIT from challenges such as delays from local
planning authorities and EirGrid (the grid operator in Ireland). These delays
were managed by Statkraft under the contractual arrangements, with no impact
on ORIT. A detailed set of testing requirements at commissioning, which were
required to be passed prior to acquisition of the sites, ensured delivery of
high-quality assets.
Takeaways The time spent to agree prudent contractual arrangements at acquisition
significantly de-risked this project for ORIT. Secondly, high quality partners
are valuable, and we expect to be able to leverage this for future pipeline
opportunities.
Impact The Ballymacarney project contributes significantly to Ireland's renewable
energy targets. It is expected to generate the equivalent of around 2.5% of
households demand, and also meets around 2.5% of the national solar target of
8GW by 2030(30). The project is expected to deliver robust performance, with
high-quality construction ensuring reliable and efficient long-term
operations. The project includes a community benefit fund of €2/ MWh
produced, expected to be approximately €400k per year for 15 years,
supporting local development and illustrating ORIT's commitment to creating
positive local impact.
Conclusion The Ballymacarney solar complex stands as a landmark project in Ireland's
renewable energy landscape. ORIT's strategic and proactive involvement ensured
the acquisition of a high-quality asset with an appropriate risk profile,
contributing to both national energy goals and local community benefits. There
is also an additional fifth site ('Harlockstown', 42MW) for which construction
was completed in March 2024 and that will connect into the same complex. ORIT
will acquire this site once it has passed its commissioning tests, expected in
Q3 2024. With the Harlockstown site, the complex reaches a total capacity of
241MW.
(30) Source: Ireland Climate Action Plan,
https://www.gov.ie/en/publication/67104-climate-action-plan/
Developers portfolio
Developer investments overview
Simply Blue 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
investments. ORIT invested alongside Sky (a private fund managed by Octopus
Energy Generation) through a joint venture.
· 19% stake
The latest funding was provided in June 2024, in which ORIT provided €7
· Floating offshore wind million (structured as a convertible loan) to enable Simply Blue to continue
developing its large pipeline of offshore wind and sustainable fuels projects
· UK and Europe whilst it seeks to raise long-term strategic funding to bring these projects
through to the construction-ready stage.
Wind2 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 providing development services. ORIT's investment was through a joint
venture with Sky (see above).
· 25% stake
The Wind2 team continued to progress the development of the projects during
· Onshore wind the first half of 2024. Extended discussions with landowners have taken longer
than anticipated on several sites, but a case officer has been appointed to
· UK manage the planning application for one project in Scotland. As at end of H1
2024, the projects under development totalled c.900MW across wind, solar and
BESS, with three projects at pre‑application stage, four in pre-scoping
stage, and one submitted to planning and awaiting determination.
BLC Energy ORIT entered into a development services agreement with BLC Energy to fund up
to £2 million for the development of solar and battery storage projects in
the UK, through a vehicle called Trio Power Limited.
· 100% stake In H1 2024, the BLC Energy team originated several new English solar projects
bringing the total pipeline under development to c.600MW across solar &
· Solar and battery storage BESS. Of the current pipeline, c.400MW has heads of terms signed and grid
applications submitted.
· UK
Nordic Generation In April 2022, ORIT co-invested with Sky (see above) through a joint venture.
The Norgen development team had a successful first half to 2024, progressing
its pipeline of nine secured projects, whilst also identifying various new
· 50% stake pipeline and strategic opportunities in the market. As at end of H1 2024, the
projects under development totalled c.1GW across wind and solar, with two
· Solar and onshore wind projects having submitted planning applications, 6 at pre‑application stage,
and one project on hold pending municipality approval to progress
· Finland pre‑application activities. Application determination decisions are
anticipated on the first project in Q4 2024.
HYRO 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.
HYRO was established to develop green electrolysis projects in England,
Scotland and Wales for industrial offtake/ consumption. It is currently
· 25% stake progressing with the Northfleet hydrogen production project, which was awarded
a contract in the UK Government's first hydrogen allocation support round
· Green hydrogen production ("HAR1") in December 2023. It is expected to complete the detailed design
phase and reach ready-to-build status in 2025. HYRO has also entered two
· UK projects into the second round ("HAR2"), with outcomes expected in Autumn
2024.
Market outlook
Commentary ORIT's position and opportunity
Clean energy transition: broad picture The global political and regulatory landscape continues to be highly ORIT is well positioned to play a role in the sector, given its technological
supportive of the energy transition. As well as the global Paris Agreement, and geographical mandate, and ability to invest in developers as well as
national policies and regulatory frameworks such as the European Green Deal generating assets. Investment in the energy transition in UK and Europe
and the Inflation Reduction Act in the US look to underpin efforts to move amounted to around 20% of the global $1.8 trillion in 2023, and generally
towards net zero, the delivery of which will not be possible without progressive policies in these geographies mean that it is that opportunities
accelerated investment from current levels. Global investment in the energy will remain plentiful. ORIT is also able invest in operational assets as well
transition hit a record $1.8 trillion in 2023, climbing 17% from a year as in pre-construction assets and developers, in order to capture value across
earlier(31). Around a third of this was in renewable energy. In order to align the entire life cycle and to contribute new renewable capacity. OEGEN as
with a Paris-aligned net zero scenario, BNEF estimates that global energy Investment Manager has extensive links into numerous markets as well as a deep
transition investment needs to average $4.84 trillion per year between 2024 pool of expertise in its team.
and 2030 - i.e. around triple the $1.8 trillion spent in 2023.
Macro- economic environment We are now returning to more normal inflation rates globally. Inflation in the The August 2024 rate cut in the UK was from 5.25% to 5%, so interest rates
UK had fallen to 2% by June 2024, compared with 4% at the end of 2023, and in remain high compared with levels prior to Russia's invasion of Ukraine.
the US it is at around 3%. Bank base rates are now stabilised or starting to Consensus is that further rate cuts will be gradual across many months, and
be cut: in August 2024 the Bank of England cut interest rates for the first this is reflected in bond yields which, whilst significantly down from 2023
time in four years and the European Central Bank cut rates in June 2024 for and 2024 highs, remain above the levels seen at the turn of the year.
the first time since 2019. A rate cut in the US is still awaited, though is Therefore any relief to the pressure on NAV discounts (for ORIT and its peers)
expected to be imminent following recent comments from the chair of the may also take time to be realised. Lower inflationary pressure should help
Federal Reserve. development of new construction projects as will an increasingly supportive
renewables policy and regulatory outlook in the UK (see below).
There has been a reasonably steady flow of recent M&A activity with
assets, particularly through capital recycling programmes as funds look to The recent high levels of inflation have emphasised the attractiveness of
release capital and prove holding values. These have included GLIL's ORIT's high level of inflation-linked revenues. ORIT has continued to maintain
acquisition of a 50% stake in a 112MW UK solar portfolio (Jul 2024), Downing's the portfolio's protection against inflation, having signed a 10-year
purchase of a 35MW solar project from NextEnergy (Jun 2024), and three sales CPI-linked fixed price PPA between Crossdykes and Sky UK in Q2 2024. While the
from TRIG inclusive of its 15.2% stake in a 330MW offshore wind farm to acquisition of the Irish solar portfolio (with a 15 year fixed price PPA with
Equitix. In private markets Aviva sold a 175MW portfolio of UK onshore wind Microsoft) has positively contributed to the portfolio's fixed revenue base,
projects to CKI Infrastructure for around £350m. Some larger developers and the resulting increase in revenues which are not inflation-linked has resulted
integrated platforms of operational and earlier-stage assets have attracted in a slight decrease in ORIT's forecast inflation-linked revenues. On a
eye-catching valuations, including Brookfield's reported €6 billion 10-year look forward basis, this stands at 48% as at 30 June 2024 (vs 51% as
acquisition of French renewables developer Neoen, and KKR's c.€2.8bn at 31 December 2023).
takeover of German wind and solar operator Encavis.
Outlook in the UK The UK remains a favourable market for renewable energy investments, and even With a significant portion of its investments in the UK, including three
more so following the formation of the new Labour government in July 2024 and developer investments focused on the UK market, ORIT is poised to benefit from
the policy measures that it has rapidly implemented. Incoming Prime Minister the government's strong support for renewable energy initiatives (the UK is
Keir Starmer has said that by 2030 the government will aim to more than double ORIT's largest single market, 40% of total value of all investments at 30 June
onshore wind (to 35GW), more than treble solar (to 50GW) and quadruple 2024).
offshore wind (to 55GW). Specific actions announced include:
The positive recent policy changes will support the industry and ORIT expects
1. Increased budget for the upcoming 'AR6' CfD round: a record total an acceleration is new projects coming to market over the coming years, as
support budget for projects of £1.5bn represents a seven-fold increase on the well as greater potential for CfD support for ready to build assets developed
2023 AR5 budget; by Wind2 and BLCe.
2. Onshore wind planning reform: the government has lifted the de facto In the event of market design changes being implemented in the longer term
ban on onshore wind in England; and (through REMA or otherwise), ORIT is well placed: its manager OEGEN has
successfully navigated policy and market changes many times before, and has
3. GB Energy: Labour has created a national energy company backed up with deep insight (especially through the wider Octopus Energy group) regarding the
£8.3bn of state funds over five years, with early initiatives including an latest thinking amongst policy and decision makers.
offshore wind development partnership with The Crown Estate and investment in
UK supply chains.
Significant progress is also being made to reduce grid connection delays, with
an intent to cut average delays from five years to six months. A key part of
this has been a proposal to reform the management of the connections queue, in
order to prioritise ready-to connect projects.
The Review of Electricity Market Arrangements (REMA) process is ongoing, with
a potential for moving to a zonal pricing system for electricity in the long
term under consideration.
Outlook in Europe Europe's concerted policy efforts and market conditions have positioned it at ORIT and its manager hold deep experience in numerous European energy markets
the forefront of renewable energy adoption and investment over the last few (in Europe outside of the UK, ORIT has investments in 5 countries, and OEGEN
years. The European Green deal was implemented in 2020 and is a set of policy in 12). ORIT is well positioned to invest in assets across the value chain, as
initiatives with the aim of making the EU carbon neutral by 2050. well as in more developers who are exploiting opportunities in these markets.
The EU elections that took place in June 2024 saw a broad shift to the right Offshore wind remains a key technology in the energy system of the future, and
on the political make-up of the parliament, and there are now some concerns floating turbines will be required to meet deployment targets. ORIT will be
that Europe might be on the verge of weakening its climate ambitions. However able to consider providing additional working capital to developers to the
the outcome of the French parliamentary elections in July avoided a victory extent necessary, as demonstrated by its €7m follow-on investment into
for the parties most opposed to renewable development. More generally the move Simply Blue Group in June 2024.
towards renewables has significant momentum, and the first half of 2024 saw
over half of electricity generation in the EU coming from renewables for the ORIT's focus on diversification also reduces the risk associated with any one
first time(32). Following the end of the period, German authorities ruled out country's regulatory changes.
a move to zonal pricing in Germany as part of wider market reforms.
Power prices and green certificates 2024 began with power markets trending in a clear downwards direction, driven The portfolio's exposure to wholesale power prices is limited due to fixed
by warm weather in the majority of Europe, alongside a decline in carbon price PPAs (with corporate and utility offtakers) which the Investment Manager
prices. A partial recovery in forward power prices was driven by stronger LNG has originated, as well as governmentbacked subsidies across the UK, France
demand from Asia, outages at LNG facilities as well as geopolitical concerns. and Germany.
Of particular note was the prevalence of negative spot prices across Europe ORIT continues to maintain a high proportion of fixed revenues (84% for the
during the period, following a trend of increasing frequency over the past few two years up to 30 June 2026) so is well protected from near- and medium-term
years. Negative prices occurred most often in the Netherlands and Germany, price falls in forward curves and advisor price forecasts. ORIT's Investment
driven by a rising volume of inflexible rooftop solar capacity. Strong nuclear Manager takes an active approach to revenue risk management and will continue
availability in France exacerbated the issue given nuclear plants cannot to do so as the portfolio evolves, through a combination of government support
easily ramp down their generation, while high rainfall early in the quarter mechanisms and fixed-price PPAs. From a valuation perspective, 53% of the
meant that there was strong production at run-of-river hydro plants across portfolio's value is derived from fixed price revenues, and 47% is from
Europe. variable price revenues, an increase in the former of 3% from 6 months ago
primarily due to the acquisition of the Irish solar portfolio and the
Crossdykes-Sky UK PPA.
All of ORIT's fixed revenues remain fixed on a 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 expensive prices to top up the
solar or wind generation profile to a baseload shape.
Detail on forecast power (and green certificate) pricing in markets relevant
to ORIT's assets is provided later in this Interim Report.
Investment Trust landscape Continuing the pattern seen in 2023, there has been further downward pressure ORIT has continued to be proactive in asset recycling (see the capital
on investment trust share prices thus far in 2024. This has been particularly recycling programme section within the Investment Manager's Report later),
acute for renewables focused investment trusts. We do, however, expect this achieving sales either at or above holding valuations, which would suggest
pressure to begin to ease now that interest rates are starting to come down, that the share price discounts to NAV are not reflective of the true value of
but it will still be some time before equity markets re-open for fundraising. the assets. The Company also initiated a share buyback programme in June 2024
In the meantime, we have seen asset sales activity as trusts look to recycle with an initial tranche of up to £10 million. Since the start of the
capital, and a number of share buy-backs and tender offers as a means of programme, the repurchases of Ordinary Shares at a discount to NAV has
returning capital to shareholders at NAVaccretive valuations. resulted in an increase in NAV per Ordinary Share of +0.07 pence.
There has been increased consolidation activity amongst investment trusts in ORIT has also explored strategic options including the possible combination
general and real estate vehicles, however whilst some smaller niche energy with Aquila European Renewables plc, though this process came to an end in May
efficiency or emerging markets vehicles have sought to wind down, we have yet 2024.
to see consolidation activity amongst the renewables trusts.
Despite the challenging macro environment, ORIT has continued to increase
dividends in line with inflation, and we believe the trust is well positioned
to grow further once equity markets re-open to allow new fundraising by the
sector.
(31 ) Source: BNEF - Energy Transition Investment Trends 2024
(32)
https://www.cleanenergywire.org/news/eu-surpasses-50-renewable-power-share-first-time-first-half-2024?
Financing
As part of a disciplined capital allocation strategy, the Company remains
focused on its debt management prioritising the reduction of relatively
expensive short-term debt. This is being achieved through a combination of
repayment using proceeds from asset sales, alongside negotiating a
re-financing of a portion of the existing RCF drawn balance with lower cost,
longer-term debt secured against the portfolio of assets.
During the 6 months to 30 June 2024, total leverage increased from 39% to 46%.
This subsequently reduced to 43%(33) following the proceeds of the Ljungbyholm
sale being used to pay down RCF borrowings after the end of the period. ORIT's
outstanding debt can be grouped under the following two categories:
(i) Short-term Debt:
As at 30 June 2024, ORIT had £196.2 million drawn on its RCF (out of a total
available £270.8m total facility size). The Company's RCF is considered
short-term in nature as it is primarily used for working capital and near-term
funding. It allows a high degree of flexibility with the ability to draw,
repay and re-borrow funds as needed. As there is less certainty over timing of
RCF drawings and repayments, the interest rate is variable and linked to
benchmark rates, leading to fluctuating borrowing costs.
Short-term financing increased by £66.2 million during the period following
completion of the acquisition of the first four sites of the Ballymacarney
solar complex, which was partially funded through the RCF. However, following
completion of the sale of the Ljungbyholm onshore wind farm in Sweden
(post-period event), the net proceeds were used to partially repay the RCF by
£64 million during September 2024, resulting in a balance of approximately
£134 million.
(33 ) Prior to approximately £30 million of committed investments
due to be made in 2024, the majority of which relates to the acquisition of
the fifth site at the Ballymacarney complex in Ireland.
(ii) Long-term Debt:
At the project level, ORIT has a number of structured term loan facilities in
place, amounting to a total drawn debt balance of £308.5 million. Debt at
this level is considered long-term as it is typically used for funding
specific investments and has a fixed term with scheduled principal payments
(amortisation) over the life of the loan. Given that the repayment profiles
for these loans are predictable, the Company uses hedging in order to fix
interest rates, reducing the overall risk exposure for long-term debt
significantly. The Company's term loans are 91% hedged on average.
In the period, long-term financing increased following the acquisition of the
first four sites of the Ballymacarney solar complex. 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. The increase in
term-loan debt was partially offset following scheduled amortisation payments
amounting to £22.2 million.
To date, the proceeds of disposals have been used to reduce the Company's
level of short-term borrowings and related exposure to high variable interest
rates (the all-in rate on the RCF at 30 June 2024 was 7.25%). Repayment of
short-term debt remains a strong capital allocation option for the Company but
alongside further asset sales, the Company has been progressing discussions
with its existing revolving credit facility lenders regarding the potential to
put in place a new debt facility against some of the UK operational assets
that have long-term fixed and contracted revenue streams. Any such new debt
facility would be expected to benefit from a lower interest rate than the
revolving credit facility borrowings it would replace.
Following the sale of Ljungbyholm wind farm, and assuming that the
aforementioned new debt facility of c. £100 million is put in place, the RCF
balance is expected to reach levels below £50 million by the end of 2025.
Should no further asset sales or refinancing opportunities 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. Given the high interest rate
environment, the Board and Investment Manager would like to reduce total
gearing levels to below 40%, which the Company considers to be a reasonable
long-term gearing level. Although there will be periods where gearing exceeds
this level, the Company would not exceed this for prolonged periods of time.
ORIT debt summary as at 30 June 2024:
Total Debt Short-Term Debt Long-Term Debt
Debt as a % of GAV 46% 18% 28%
Committed debt as a % of Total value of all investments 47% 18% 29%
% Hedged 56% 0% 91%
Average cost of debt 4.4% 7.3% 2.6%
Average remaining term (years) 9.6 1.7 14.6
Summary of ORIT debt facilities as at 30 June 2024:
Short-Term Long-Term
UK Offshore
Asset HoldCo FR Solar FR Wind IRE Solar(34) GER Wind Wind
Debt Terms
Currency GBP or EUR EUR EUR EUR EUR GBP
Term loan £270.8m €125.7m €43.2m €80.6m €61.0m £110.5m
Drawn at 30 June 2024 £196.2m €98.3m €42.7m €80.6m €55.8m £71.7m
Drawn at 30 June 2024 £m £196.2m £83.3m £36.2m £67.5m £47.3m £71.7m
Initial Term (years) 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
Y1-5 1.30% 2017-2022: 1.45%
Margin 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% 100% 100% 85%
Swap rate n/a -0.12% 0.51% 3.07% 0.12% 1.27%
(34) During the period, 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%. Upon completion of the fifth
site, the hedging % will be calculated against the total facility bringing the
total hedged % below 100% (but will still represent a minimum of at least 75%
hedged).
In calculating the Company's NAV, quarterly valuations are undertaken for the
Company's underlying 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 8 to the financial
statements.
Including the Company's and its intermediate holding companies' net
liabilities (which mostly comprises Holding Company debt and cash), the total
NAV as at 30 June 2024 is £592.8 million or 105.2 pence per Ordinary Share.
The key valuation drivers are shown in Figure 11 of the Interim Report:
Figure 11 on page 33 of the Interim Report shows the ORIT Net Asset Value
Bridge (£m)
Movements in the fair value of the underlying portfolio of assets
1 Gain on Holding Value
As previously mentioned, post-period the Company signed a conditional
agreement to sell the Ljungbyholm onshore wind farm in Sweden for a
consideration of €73.7 million. The valuation of Ljungbyholm had been
updated in line with the agreed sales price, which was known as at 30 June
2024. plus interest payable by the vendor up to the 30 June 2024. This
represented a valuation uplift of £0.8 million or +0.14 pence per Ordinary
Share above the Investment Manager's internal valuation as at 30 June 2024,
which includes the latest macroeconomic and power price assumptions available
as at that date which are consistent with the assumptions used in the
valuations of ORIT's other portfolio of assets. The final proceeds, which
include additional interest up to the completion date of €0.7 million will
result in a further uplift in the second half of the financial year.
2 Construction risk premium
A valuation increase of £0.9 million resulted from the unwind of a portion of
the construction risk premium included in the discount rate applied to the
Breach Solar Farm, to reflect that construction activity is substantially
complete following being connected to National Grid during Q2 2024. The
remaining construction risk premium applied to this asset is expected to be
unwound in the second half of 2024 following completion of commissioning
activities.
3 New PPAs
During the period, as part of the Investment Manager's active revenue
management strategy, the Crossdykes onshore wind farm in Lanarkshire,
Scotland, signed a PPA with Sky UK, who will purchase 69% of the output at a
CPI-linked fixed price for a period of 10 years from 1 April 2025. The PPA is
NAV-accretive when compared with the power price assumptions included in the
NAV and resulted in an uplift of £5.4 million or +0.98 pence per Ordinary
Share.
4 Power Prices and Green Certificates
The net impact of updating power price and green certificate forecasts was a
£1.9 million increase in the value of the portfolio as at 30 June 2024.
Power prices
Where prices are not fixed under power price agreements 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. The power prices used in the valuations include the relevant 'capture
price' discount to baseload prices derived from the independent market
consultants' forecasts, and do not include any further discounts. For wind
assets, where site-level technological and geographical characteristics can
contribute greatly to variability between sites, a site-specific capture price
forecast is used in order to more accurately forecast expected cash generation
per project.
Over the year, the price forecasts used in valuations saw a drop in the short
term as a result of movements in forward prices. In the medium and longer
term, the advisors' long term price forecasts saw movements as a result of
revisions to commodity price forecasts, EV and electrolyser demand and
renewable buildout, however, were broadly stable. Updating power price
forecasts during the year led to a valuation decrease of -£1.1 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. Green certificate forecasts
used in the valuations are based on market forward prices in the near term
(which are updated quarterly), followed by a single longer term third-party
forecast (which is refreshed by the market consultant annually). This single
forecast used to value the green certificates is provided by one of the market
consultants used for the blended power price curve. The market forecast that
has been reflected in the valuations as at 30 June was refreshed during the
second quarterly valuation cycle of 2024.
Historically, a limited number of advisors have produced green certificate
forecasts. Over the past year, as demand for green certificates has been high
and the value attributed to them have increased, a larger quantity of both
REGO and GoO forecasts are now available. As a result, the Investment Manager
will assess the suitability and robustness of forecasts provided by other
market consultants, in order to consider incorporating a blend of two
forecasts (in line with the methodology on power prices).
Overall, updating green certificate forecasts has led to a net increase of
£3.0 million in the value of the portfolio as at 30 June 2024.
5 Changes in economic assumptions
The combined impact of inflation and foreign exchange movements represents a
net nil impact on the portfolio valuation as at 30 June 2024 (including the
impact of FX hedging).
Inflation
Over the first half of 2024, inflation forecasts have remained broadly flat on
average. Whilst inflation forecasts for outturn 2024 have decreased on average
across the jurisdictions that ORIT's portfolio of assets are located in,
inflation forecasts over the following years (2025 to 2028) have increased
slightly. There has been no change to long-term inflation assumptions.
This has resulted in a net valuation increase of £0.7 million.
The inflation inputs used to calculate the NAV per Ordinary Share as at 30
June 2024 have been sourced from: (i) recent consensus UK inflation forecasts
published by His Majesty's Treasury (May 2024); and (ii) inflation forecasts
for European countries published by the European Commission (May 2024).
Foreign Exchange ("FX")
During the period, sterling appreciated against the euro by approximately
2.2%, leading to a negative valuation impact of £8.3 million.
Euro-denominated investments comprised 50% of the portfolio at the year end.
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 FX reduces to
-£0.7 million.
6 Balance of portfolio return
This refers to the balance of portfolio valuation movements in the period
excluding the factors noted above and represents an increase of £14.9
million.
Of this, £23.7 million reflects the net present value of future cashflows
being brought forward from the valuation date used for the acquisitions to 30
June 2024.
These movements were partially offset by financial and technical performance
during the period resulting in a net negative valuation impact of -£2.6
million.
The remaining amount relates to adjustments to the project company level
forecasts, which resulted in an overall net decrease of -£6.3 million. The
majority of this balance relates to adjustments to forecast settlement
payments related to recently completed construction sites (Breach Solar farm
and Cumberhead wind farm) and minor changes to expected Operating Costs at
some sites.
Movements in the fair value of the plc and Holding Companies
7 Dividend paid in the period
Interim dividends totalling £16.7 million in respect of Q4 2023 and Q1 2024
were paid during the six-month period to 30 June 2024.
8 plc and Holding Company running costs
Running costs of the plc and Holding Companies totalling £13.5 million were
paid during the quarter, mostly comprising RCF interest and financing costs,
management fees and general running costs.
9 Share buybacks
Since the start of the share buyback programme, the repurchase of Ordinary
Shares at a discount to NAV has resulted in an increase in NAV per Ordinary
Share of +0.07 pence per Ordinary Share.
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, inflation appears to
have stabilised and rate cuts have now been announced in both the UK and
Europe. Despite this backdrop, competition for renewable assets has remained
high and the Company has successfully delivered three asset sales (Polish
wind, Spanish solar and Swedish wind investments), all at a premium to, or in
line with, the most recently calculated holding values, giving confidence in
the Investment Manager's valuation assumptions.
As a result, no changes have been made to the discount rates applied to ORIT's
portfolio of assets during the period.
In line with expectation, the weighted average discount rate has remained
broadly in line with prior periods, decreasing slightly by 0.2% to 7.0% versus
the most recently published weighted average discount rate of 7.2% as at 31
December 2023. The primary reasons for the marginal decrease in the overall
blended rate is the inclusion of the Irish solar portfolio which attracts a
relatively low discount rate given its highly fixed revenue profile, the
derisking of the portfolio through the signature of the Crossdykes 10-year PPA
(which now attracts a lower discount rate due its higher proportion of fixed
revenues) as well as unwind of the construction risk premium included in the
discount rate for Breach solar farm.
30-Jun-24 31-Dec-23
UK Assets
Levered IRR 7.5% 7.5%
Gross Asset Value (GAV) (£m) 463 491
Asset Leverage %GAV 16% 17%
European Assets
Levered IRR 6.7% 6.9%
Gross Asset Value (GAV) (£m) 634 488
Asset Leverage %GAV 38% 36%
Total Portfolio
Levered IRR 7.0% 7.2%
Gross Asset Value (GAV) (£m) 1,098 980
Asset Leverage %GAV 28% 26%
Fund Leverage %GAV 18% 13%
Total Leverage %GAV 46% 39%
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.
Weighted average discount rate as at 30 June 2024 7.0%
(i) Return expected on the Company's investments into development stage assets +0.4%
(ii) Return enhancement associated with the Company's FX hedging programme +0.4%
(iii) Increase in return associated with the additional leverage from the RCF +0.5%
Adjusted average discount rate as at 30 June 2024 8.2%
Portfolio valuation sensitivities
Figure 12 below 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
30 June 2024 including 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.
Figure 12 on page 38 of the Interim Report shows NAV sensitivities per
Ordinary Share (including Conditional Acquisitions)
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 (Energy Yield P90/P10)
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 for a 2-year period 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 30 June 2024, 50% 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.
Power Prices and Green Certificates
Power Prices Landscape
As described in the Market Outlook section, over the first two months of 2024,
power and gas markets showed a clear bearish trend, driven by warm weather in
the majority of Europe. The mild weather helped European gas storage levels
remain well above seasonal norms throughout the first quarter. Forwards power
prices began to trend upwards again in March, primarily due to Asian LNG
demand increasing. This increased LNG demand also came at a time in which
outages occurred at facilities in Qatar, the US, Malaysia and Australia, as
well as maintenance at Norwegian production facilities. Overall across the
first half of 2024, near-term UK and European power prices generally trended
slightly downwards.
The carbon market (which is inherently linked to power prices) remained
volatile over the period, with the warm weather in January and February
putting downward pressure on EUA European (carbon credit) prices. The weak gas
prices over this period also reinforced the economics behind coal-to-gas
switching, further decreasing EUA prices.
The EUA market saw a rally across April, likely driven by speculative trading.
The increase in gas prices over the same period will have offered some support
to EUA prices as well. The outcome of the European elections provided
downwards pressure on EUA prices, given the success of the far right parties.
The UKA (UK carbon credit) market is less impacted by speculative trading
given the relative lack of liquidity of UKAs when compared with EUAs. The UKA
market rallied with the announcement of the general election, with the
expectation that a new Labour government would limit the supply of free
allowances to industry, which the previous Conservative government had
increased last year.
Figure 13 in the Interim Report shows the evolution of forward pricing in
three of ORIT's key markets: the general trend is a decline in prices over the
12 months from June 2023 to June 2024.
( )
Day-ahead spot power prices followed a similar trend to the forwards power
market, as can be seen in Figure 14 in the Interim Report. A noteworthy
development over H1 2024 seen in day-ahead power prices was the frequency of
negative pricing. A case study on the causes and impacts of negative pricing
can be found in the Interim Report.
Figure 14 on page 41 of the Interim Report shows 2023-24 day-ahead prices.(36)
(36) Sources: N2EX, Nordpool.
( )
Generation-weighted and time-weighted prices
The combination of forward market prices and independent long-term power price
forecasts described above, together with the PPAs which the Investment Manager
has executed, make up the portfolio's forecasted power only generation
weighted price ("Power only GWP"). The generation weighted price for a
specific technology and location reflects the actual power price that such
generation can expect to earn. It differs from the time-weighted average price
due to its generation profile and the impact of other generation that is
likely to be generating at the same time. The generation weighted price
including subsidies and additional benefits ("Total GWP") is derived by
including subsidies and additional benefits, such as green certificates. The
Power Only GWP and Total GWP for the period to 2050 are shown in Figure 15
below. 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 30 June 2024. On average,
the graph shows power only GWP of £52.49/MWh in the period 2024-2028 and
£43.74/MWh in the period 2029-2050. Over the short and medium term, the
movements in the power-only GWP are primarily driven by the acquisition of
Ballymacarney (with its 15-year Microsoft PPA), with the Crossdykes-Sky UK PPA
also having an impact in the shorter term. In the longer term, the change is
driven by the addition of the Irish solar capture price forecast in the
portfolio due to the acquisition of Ballymacarney.
Figure 15 on page 42 of the Interim Report shows generation-weighted prices.
Figure 16: Capture price discounts assumptions
Value Market Technology Units 2025-2029 2030-2034 2035-2039 2040-2044 2045-2050
Baseload price GB £/MWh (real 2024) 76 73 70 66 65
Capture price discount GB Solar % -10% -19% -23% -25% -25%
Capture price discount GB Onshore Wind % -9% -19% -23% -25% -26%
Capture price discount GB Offshore Wind % -8% -18% -22% -24% -25%
Baseload price FR EUR/MWh (real 2024) 66 79 79 77 72
Capture price discount FR Onshore Wind % -10% -11%
Capture price discount FR Solar % -40% -40% -40% -42%
Baseload price SE4 EUR/MWh (real 2024) 49 49 44 43 42
Capture price discount SE4 Onshore Wind % -11% -18% -22% -24% -25%
Baseload price FI EUR/MWh (real 2024) 62 59
Capture price discount FI Onshore Wind % -17% -20% -21% -19% -19%
Baseload price DE EUR/MWh (real 2024) 85 86 84 79
Capture price discount DE Onshore Wind % -24% -27%
Baseload price I-SEM EUR/MWh (real 2024) 92 89 84 84 85
Capture price discount I-SEM Solar % -21% -23%
(37) Values are not shown where the relevant asset has no merchant
exposure in 3 or more years in the relevant period.
Case Study
Understanding Negative Prices in European Power Markets
Negative power prices have been seen more and more frequently across European
power markets recently.
Recent Trends
In the GB market negative pricing occurred very little as recently as 2022,
but has become more common in 2023 and 2024 to date.
Figure 17 on page 44 of the Interim Report shows negative power price hours in
the GB market.
The picture in the rest of Europe has been more stark this year..Not only has
the frequency of negative pricing increased, the severity of these negative
prices has also increased. A notable example of this occurred in July 2023,
where prices in Germany, the Netherlands, and Austria reached -500 EUR/ MWh,
the lowest price permitted by European market design.
Negative pricing also has an impact on capture factors(38) for merchant
assets.
(38) An asset's capture factor expresses the ratio between the assets
capture price and the baseload price.
Understanding the Drivers of Negative Pricing
Negative prices occur when high renewable energy output coincides with low
demand. However, in order to better understand what has been happening
recently and form a view on the longer term, it is critical to develop a more
detailed understanding of both the supply and demand sides.
In any given hour, generators bid into the day-ahead market at the price which
they are willing to be paid to be dispatched. Simplifying things somewhat,
these generators are then ranked in order of price, and the price for that
hour is set by the most expensive generator which is dispatched to meet
demand.
On the supply side, different types of generators are incentivised to bid into
the day-ahead market at different prices, dependent on the specific
circumstances of a given generator.
'Shallow' negative pricing, where prices are a small amount below zero, is
driven by the below bidding behaviours setting prices:
● Renewable generators pricing in the opportunity cost of lost green
certificates.
● Assets with limited flexibility accounting for additional start-up
and ramp-up costs.
'Deeper' negative pricing (more negative than -10 EUR/MWh, for instance) can
be driven by the following bidding behaviours:
● Cogeneration assets that produce heat as well as power may need to
account for the opportunity cost of lost revenue from heat production.
● Subsidy schemes such as the RO in GB provide generators with a fixed
£/MWh, so these assets will price in the opportunity cost of this lost
subsidy. This can lead to negative prices in the region of value of the lost
subsidy e.g. c. £70/MWh for an asset with a ROC multiple of 1.
On the demand side, one factor influencing the frequency of negative pricing
is reduced demand following the 2022 gas price crisis, which has persisted
longer than some expected. We expect this demand destruction to be temporary
rather than structural. Extremely low demand is required for assets bidding
into the market at the price floor to act as the price-setting generator.
Extremely low demand is, to an extent, a recent phenomenon. To better
understand this, the Dutch market provides useful context, noting that ORIT
does not own any assets in this market. The Netherlands experienced a 25%
year-on-year increase in solar capacity across 2023, with over half of the new
installations being residential rooftop solar. Rooftop solar generation cannot
be controlled by the system operator, and acts as negative demand for the
purposes of power price formation. The Dutch market has observed some of the
most frequent negative pricing recently as a result and this also has a
knock-on impact to other markets due to how interconnected European power
markets are.
Where demand is sufficiently low such that the market's price floor is reached
(-500 EUR/MWh in European markets), it is important to understand the key
behaviours driving this behaviour:
● Some assets are unable to shut down for non-technical reasons and so
bid at the market's price floor in order to ensure that they are the last
assets to be curtailed during periods of low demand.
● Where assets benefit from generous CfD subsidies which pay
regardless of how negative the spot price is, these assets will bid at the
market's price floor.
Impact on ORIT's Assets' Performance
Broadly speaking, our assets' exposure to negative pricing depends on how
well-hedged the portfolio is. It is also important that our assets are valued
using third-party long-term price forecasts which already factor in negative
pricing.
ORIT's active management of the portfolio has ensured that our portfolios are
well protected from negative prices in the near-term. Recent examples include:
● PPAs and operational procedures which enable curtailment in order to
protect against negative prices. Of particular note is an example from ORIT's
Finnish wind farms which is explained in further detail below
● Execution of the 10-year corporate PPA between Crossdykes wind farm
and Sky UK Limited
● Acquisition of Ballymacarney solar farm with its 15-year Microsoft
PPA
Fixed price PPAs such as those mentioned above mean that assets are no longer
exposed to negative prices in the same way.
Many of ORIT's assets with revenues from government support schemes are also
substantially protected from negative pricing in the medium-term. For example,
the French solar portfolio receives a fixed price in all periods, and the
Cerisou wind farm in France is paid based on a deemed amount of generation,
provided it successfully turns off during negative price periods.
The Investment Manager will continue to seek to hedge revenues under
attractive structures and prices in order to manage the portfolio's exposure
to wholesale prices and, in doing so, manage its exposure to negative prices
as well.
It is important to note that the specific terms of the PPA will govern the
extent to which the asset is protected from negative prices, highlighting the
importance of specialist expertise such as that provided by the Investment
Manager's Energy Markets Team.
Ongoing Mitigation - Case Study
Where an asset has ongoing exposure to merchant power prices, the key mitigant
to negative price exposure is being able to proactively curtail production in
response to these prices. An excellent example of this was seen in November
2023, where a trader's error within the Finnish market resulted in 10
consecutive hours of spot prices at -€500k/MWh. Saunamaa and Suolakangas
(ORIT's Finnish wind farms) have a high degree of hedged output, but with some
merchant exposure. We successfully carry out curtailment for these assets
during this and the other periods of negative pricing and, thanks to the
hedges which were in place, made €27k across this period rather than losing
in excess of €250k if the sites had not been curtailed. Both sites will
continue to proactively curtail in response to negative pricing.
Future Outlook
In the short-term, negative prices (including deeper negative prices) are
likely to persist and may even become more prevalent in European power
markets, as renewables deployment continues.
Pricing which is at or close to €0/MWh is a feature of a
renewables-dominated electricity system, however, the consensus view is that
the frequency of negative pricing will stabilise over the long-term. The below
analysis from one of the advisors used for ORIT's power price forecasts shows
the proportion of hours which they believe will be negative, or close to zero,
in their forecast. These negative price hours are taken into account in the
forecasts used in ORIT's valuations.
Period GB Finland SE4 I-SEM Germany France
2024-2030 4% 6% 4% 2% 6% 5%
2031-2035 12% 17% 9% 13% 13% 11%
2036-2040 17% 16% 13% 19% 13% 13%
2041-2045 17% 12% 15% 21% 17% 15%
2046-2050 16% 10% 16% 20% 21% 18%
Importantly, deeper negative prices are forecast to become insignificant. The
below table shows the same analysis, but looking at the % of hours where
prices are more negative than -€10/MWh.
Period GB Finland SE4 I-SEM Germany France
2024-2030 0.00% 0.01% 0.05% 0.00% 0.05% 0.00%
2031-2035 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2036-2040 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2041-2045 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Key reasons for this more positive outlook:
● For new projects, subsidies offering high degrees of protection
against negative prices are gradually being phased out to discourage
production during negative pricing periods. This shift aims to reduce the
frequency of negative prices by aligning production incentives with market
conditions. A good example of this is the German market, where the CfD subsidy
for new projects has been restructured over time to reduce incentives for
bidding behaviour which is likely to lead to sustained periods of negative
pricing.
● Increased deployment of battery storage and other sources of
flexible demand
● Demand recovery in the short-term as the effects of the 2022-23
energy crisis unwind
● Increases in demand more generally over the medium and long-term,
driven by electrification of heat and transport, new sources of demand such as
green hydrogen and e-fuel production, and increased data centre demand from AI
processing
All of the above are also factors which will support capture factors going
forward.
While negative pricing presents challenges and requires careful management,
the Investment Manager is confident that our proactive hedging strategies and
operational procedures put us in an excellent position to manage these risks
for ORIT going forward.
Portfolio revenue forecasts
Figure 19 presents ORIT's forecast revenues (on both a proportion-of-the-whole
(top) and absolute revenue (bottom) basis), categorised by price structure,
through to 2050. The revenues are categorised as fixed, via either subsidy or
fixed price PPA, or variable, deriving from the sale of power on a merchant
basis or other revenue streams, such as green certificates.
Figure 19 on page 48 of the Interim Report shows fixed vs variable revenue
forecast (as at 30 June 2024).(39)
The portfolio's variable revenues are concentrated in the medium and longer
term forecast, meaning that movement in wholesale power price forecasts will
have a more muted impact on portfolio-level NAV than would be the case if
variable revenues were distributed evenly across the modelled horizon, due to
the time value impact of discounting.
Compared to the prior 6 months, the proportion of ORIT's forecast fixed price
revenues on a 24-month look forward basis has increased from 81% to 84%. Some
highlights over this six month period have been Crossdykes' 10 year,
inflation-linked fixed PPA with Sky UK and Ballymacarney's 15 year fixed price
PPA with Microsoft. In addition, the forwards market has remained volatile
across H1 this year and a moderate reduction in forecast variable power
revenues has also contributed to the portfolio's increased proportion of fixed
revenues.
The post-period sale of Ljungbyholm further increases the proportion of ORIT's
forecast fixed revenues. On a 24-month look forward basis, Ljungbyholm's sale
increases this from 84% to 86%.
The proportion of ORIT's forecast variable revenues increases in the medium to
long-term as subsidies and PPAs expire (noting that ORIT will continue to
actively hedge its 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 currently most exposed.
ORIT has also focussed on securing a high proportion of revenues that are
inflation-linked - see Figure 20 below. As at 30 June 2024, 48% of revenues
over the next 10 years are inflation-linked (50% post the Swedish onshore wind
sale).
(39) Fixed price revenues derive from either subsidies, such as
ROCs ("Fixed - subsidy") or from power prices fixed under PPAs ("Fixed -
Power"). Variable revenues derive from merchant or uncontracted power revenues
("Variable - power") or from other sources of variable revenue, such as the
ROC recycle ("Variable - other").
Figure 20 on page 49 of the Interim Report shows Inflation-linked revenue
forecast (as at 30 June 2024).
Green Certificates forecasts
Revenues from green certificates make up around 2% of the portfolio's revenues
over the ten-year period to 30 June 2034.
The Guarantees of Origin (GoOs) are issued by the Association of Issuing
Bodies (AIB), who operate a standardised system for the issuance and
management of GoOs across Europe. Although standardised, each GoO is
distinguished by country and technology, with some regions commanding small
premiums due to consumer preferences for locally sourced GoOs. For instance,
Pexaquote currently lists 2024 Dutch wind GoOs at a higher price than general
AIB GoOs. However, local pricing for GoOs is not considered material across
the European countries that ORIT's assets are located. Additionally, due to
the illiquid nature of local markets, advisors do not yet provide
country-specific forecasts, except for the UK. In the UK, where REGOs are
exclusively applicable, specific pricing is available and therefore has a
separate price forecast to the European countries.
Figure 21 on page 49 of the Interim Report shows GoO price forecast.
Figure 22 on page 49 of the Interim Report shows REGO price forecast.
Financial Review
The financial statements of the Company for the period ended 30 June 2024 are
set out within the Interim 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 £599.0 million as at 31 December 2023 to
£592.7 million as at 30 June 2024, largely due to modest increases in the
portfolio valuation offset by costs at the plc and Holding Company level and
the payment of dividends.
The net assets comprise the fair value of the Company's investments of £582.7
million (2023: £592.1m) and the Company's cash balance of £11.8 million
(2023: £10m), offset by £1.7 million (2023: £3.1m) of Company's other net
liabilities.
Included in the fair value of the Company's investments are net liabilities of
£184.1 million (2023: liabilities of £113.9m) held in the intermediate
holding companies. These comprise assets of cash £7.3 million (2023:
£13.2m), the positive mark-to-market value of the FX hedges taken out to
minimise the volatility of cashflows associated with non-UK portfolios of
£6.1 million (2023: £2.3m), other debtors of £3.4 million (2023: £2.4m)
and offset by amortised transaction costs associated with bank loans of £1.5
million (2023: £1.9m), the principal and interest outstanding on the bank
loans of £198.5 million (2023: £131.3m), and other liabilities of £1.2
million (2023: £2.4m) predominantly relating to accrued transaction costs not
yet paid and outstanding VAT liabilities.
Results as at 30 June 2024
30 June 2024 31 December 2023
£m £m
Fair value of portfolio of assets 766.7 706.0
Cash held in intermediate holding companies 7.3 13.2
Bank loans and accrued interest held in the intermediate holding companies -198.5 -131.3
Fair value of other net assets/(liabilities) in intermediate holding companies 7.2 4.2
Fair value of Company's investments 582.7 592.1
Company's cash 11.8 10.0
Company's other net liabilities -1.7 -3.1
Net asset value as at 31 December 592.8 599.0
Number of shares (excluding treasury shares) (million) 563.7 564.9
Net asset value per share (pence) 105.2 106.0
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 six-month period ending 30 June 2024, the Company's operating income
was £18.9 million (HY 23: £9.1m), including interest income of £12.9
million (HY 2023: £12.9m), dividends received of £6 million (HY 23: £9.8m)
and net loss on the movement of fair value of investments of £4.1 million (HY
23: loss of £13.6m). The operating expenses included in the statement of
comprehensive income for the year were £3.5 million (HY 23: £3.6m). These
comprise £2.8 million Investment Manager fees (HY 23: £2.8m), and other
operating expenses of £0.7 million (HY 23: £0.7m). The details on how the
Investment Manager's fees are charged are set out in Note 13 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% and it is anticipated that the full-year ratio for the year ended 31
December 2024 will be 1.18%.
Dividends
During the year, interim dividends totalling £16.7 million were paid (1.45p
per share paid in respect of the quarter to 31 December 2023 (paid in
February 2024) and 1.50p per share in respect of the first quarter of 2024
(paid in May 2024).
Post year end, a further interim dividend of 1.51p per share was paid on 30
August 2024 in respect of the quarter ending 30 June 2024 to shareholders
recorded on the register on 16 August 2024.
Dividend cover - operational cash flows (portfolio level)
For the first half of 2024, the Company's net cash flows from operations, pre
debt amortisation of £32.3 million, and post external debt amortisation of
£22.0 million supported the payment of £17.0 million dividends to
shareholders for the period, resulting in a dividend coverage of 1.90x and
1.30x respectively. ORIT's key portfolio characteristics of diversification,
high proportion of fixed revenues and inflation-linkage help maintain a
growing, covered dividend. Following the sale of the Ljungbyholm wind farm,
full year dividends based on the stated target of 6.02 pence per share, are
expected to be more than fully covered despite the reduced expected cash flows
in the second half of the year.
Six-month period ending 30 June 2024
£ million unless stated 6 months to 6 months to
30 June 2024
30 June 2023
Operational cash flows
UK Solar 9.5 7.8
French Solar 5.2 6.0
Swedish Wind (30-Jun-24 metric includes lock-box interest only)(41) 2.3 3.2
Finnish Wind 5.4 4.2
Polish Wind - 5.1
French Wind 1.3 1.7
German Wind 1.8 1.5
UK Wind 6.0 3.1
UK Offshore Wind 9.4 8.1
Irish Solar 3.8 -
44.8 40.7
SPV level taxes
French Solar, Finnish Wind, Polish Wind, UK Offshore Wind(42) -1.3 -
Interest payable on external debt
French Solar, Polish Wind, French Wind, German Wind, UK Offshore Wind -4.2 -4.5
Operational cash flow pre debt amortisation 39.3 36.2
Company and intermediate holding company level income and expenses(43) 1.0 -4.4
Interest and fees payable on RCF -7.5 -3.7
Net cash flow from operating activities pre debt amortisation 32.9 28.1
Dividends paid in respect of year 17.0 16.3
Portfolio level operational cash flow dividend cover pre debt amortisation 1.9x 1.7x
External debt amortisation
French Solar, Polish Wind, French Wind, German Wind, UK Offshore Wind -10.3 -10.3
Net cash flow from operating activities 22.6 17.8
Dividends paid in respect of year 17.0 16.3
Portfolio level operational cash flow dividend cover 1.33x 1.09x
(41 ) Given the sale of the Ljungbyholm wind farm which completed
post-period with an economic transfer date of 31 December 2023, the headline
dividend cover does not include any operational cash flows related to the
asset however it does include accrued 'locked box' interest between
31 December 2023 and 30 June 2024.
(42) Taxes falling due on operational asset trading profits (e.g.
Corporation Tax in the UK).
(43) Company and intermediate holding company level income and
expenses includes receipt of favourable mark-to-market movements on foreign
currency forward contracts.
ESG & Impact Report
As at 30 June 2024
ACTUAL(44)
£1,118m 605GWh 147k
Total value of sustainable investments as at 30 June 2024 Renewable electricity generated in H1 2024 Estimated equivalent homes powered for a year
(incl. total debt and equity commitments) (H1 2023: 628GWh)(46) (H1 2023: not reported)
- 100% investments committed into renewables
(at 31-Dec 2023: £1,127m)
150k 0.7m 76k
Estimated equivalent tonnes of CO(2) avoided in H1 2024 Estimated equivalent new trees required to avoid same CO(2) in H1 2024 Estimated equivalent cars off the road to avoid same CO(2) in H1 2024
(H1 2023: not reported) (H1 2023: not reported) (H1 2023: not reported)
POTENTIAL(45)
1,394GWh 359k
Potential annual renewable electricity generated once fully operational Estimated annual equivalent homes powered for a year once fully operational
(at 31-Dec 2023: 1,569GWh) (at 31-Dec 2023: 384k)
383k 1.9m 194k
Estimated equivalent tonnes of CO(2) avoided once fully operational Estimated equivalent new trees required to avoid same CO(2) once fully Estimated equivalent cars off the road required to avoid same CO(2) once fully
operational operational
(at 31-Dec 2023: 400k)
(at 31-Dec 2023: 2.0m) (at 31-Dec 2023: 203k)
(44) "Actual" KPIs take into account GWh generated by the portfolio
during the reporting period and includes generation from the Ljungbyholm
onshore wind farm for which a sale agreement has been signed post period.
Calculation methodologies for "equivalent" KPIs can be found in ORIT's 2024
ESG and Impact Strategy.
(45) All metrics are calculated based on an estimated annual renewable
energy generation of the investment portfolio once fully operational
(including the fifth Irish site under conditional acquisition and excluding
the Ljungbyholm onshore wind farm for which the sale was completed post period
and post publication of the Q2 factsheet) and on the basis of ORIT's equity
stake. For more information on calculation methodologies, please refer to
ORIT's 2024 ESG and Impact Strategy.
(46) Restated from 2023 Interim Report.
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 Strateg
(https://cdn.prod.website-files.com/64a55577b7ba05bd07aebc7c/6601b2e2baa27abc6ef4fcc1_ORIT%20ESG%20%26%20Impact%20Strategy%20Report%20-%20vf%20interactive.pdf)
y.
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.
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.
£1,118m 41 100%
Total value of sustainable investments as at 30 June 2024 Assets Of investments adhere to ORIT's ESG Policy and all transactions in the period
met ORIT's minimum ESG matrix threshold
(incl. total debt and equity commitments) (at 31-Dec 2023: 37)
(at 31-Dec 2023: 100%)
- 100% investments committed into renewables(47)
(at 31-Dec 2023: £1,127m)
605GWh 1,394GWh 825GWh
Renewable electricity generated in H1 2024 Potential annual renewable electricity generation once fully operational Potential annual renewable electricity generation from assets where ORIT has
invested and committed at construction
(H1 2023: 628GWh)(48) (at 31-Dec 2023: 1,569GWh)
(at 31-Dec 2023: 982GWh)
Regulatory Disclosures
ORIT is a supporter of the recommendations of the Task Force on
Climate-related Financial Disclosures ("TCFD") and makes a TCFD disclosure in
the Annual Report.
ORIT is classified as an Article 9 product under the EU Sustainable Finance
Disclosure Regulation ("SFDR"). ORIT's most recent SFDR-related disclosures,
including its Principal Adverse Impact Statement is available on its website.
The breakdown of ORIT's investments' alignment to the EU Taxonomy can be
found in the Annual Report.
(47) Total asset value including total debt and equity commitments.
(48) Restated from 2023 Interim Report
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.
Project Outcome
Recycling old panels: Active engagement with a recycling company to ensure the This initiative is expected to prevent 500 tonnes of waste from ending up in
sustainable disposal or reuse of panel components. landfill.
Sustainable Momentum
Sustainable transformer upgrade: Transformers at Breach Solar Farm now utilise biobased ester oils instead of
conventional mineral oils. This innovative approach not only enhances the
ORIT is committed to integrating sustainable technologies into its operations. efficiency of the transformers but also aligns with ORIT's commitment to
Each inverter station at Breach Solar Farm is equipped with a transformer. environmental stewardship.
Traditionally, transformers use mineral oils; however, the Investment Manager
has taken a significant step forward by incorporating the latest advancements Sustainable Momentum
in the field transformers.
Fire risk mitigation at ORIT's French ground-mount sites: Enhanced safety This proactive approach prevented any operational shutdowns, safeguarding over
measures have been implemented to ensure continuous operation when fire risk €550k in potential revenue by ensuring the sites remained fully operational.
is high during summer months.
Innovation
Planet
Impact Objective: Consider environmental factors to mitigate risks associated
with the construction and operation of assets, enhancing environmental
potential where possible.
ACTUAL(49)
150k 0.7m 76k
Estimated annual equivalent tonnes of CO(2) avoided in H1 2024 Estimated equivalent new trees required to avoid same CO(2) in H1 2024 Estimated equivalent cars off the road to avoid the same CO(2) in H1 2024
(H1 2023: not reported) (H1 2023: not reported) (H1 2023: not reported)
91% 2
Generating sites on renewable import tariffs Environmental incidents (minor, and not resulting in any lasting material
effects)
(at 31-Dec 2023: 93%)
(at 31-Dec 2023: 4)
POTENTIAL(50)
383k 1.9m 194k
Estimated equivalent tonnes of CO(2) avoided once fully operational Estimated equivalent new trees required to avoid same CO(2) once fully Estimated equivalent cars off the road required to avoid same CO(2) once fully
operational operational
(at 31-Dec 2023: 400k) (at 31-Dec 2023: 2.0m) (at 31-Dec 2023: 203k)
Maximising ORIT's positive environmental impact
ORIT recognises the fundamental 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) avoided by the
renewable energy generated during the year.
ORIT's LSE's Green Economy Mark(51) demonstrates the Company's significant
contribution to the transition to a zero-carbon economy.
Carbon measurement and reporting
In its 2023 Annual Report, ORIT disclosed its fourth measurement of its carbon
footprint. Throughout 2024, the Investment Manager continues to collaborate
with ORIT's outsourcers and contractors to enhance data collection methods for
more precise measurements. As the Company's portfolio expands, ORIT is
committed to reducing its relative emissions through stakeholder engagement
and proactive asset management. As at 30th June 2024, there were 91% of
generating sites on renewable energy tariffs. The slight reduction since 31st
December 2023 is attributed to the acquisition of the four Irish solar sites,
which at this present time are not on a renewable energy tariff. The four
solar sites share the same electricity import, and have been considered as one
site for the purpose of this calculation.
49 "Actual" KPIs take into account GWh generated by the portfolio during
the reporting period and includes generation from the Ljungbyholm onshore wind
farm for which a sale agreement has been signed post period. Calculation
methodologies for "equivalent" KPIs can be found in ORIT's 2024 ESG and Impact
Strategy.
50 All metrics are calculated based on an estimated annual renewable
energy generation of the investment portfolio once fully operational
(including the fifth Irish site under conditional acquisition and excluding
the Ljungbyholm onshore wind farm for which the sale was completed post period
and post publication of the Q2 factsheet) and on the basis of ORIT's equity
stake. For more information on calculation methodologies, please refer to
ORIT's 2024 ESG and Impact Strategy.
51 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.
Case Study: BizGive environmental impact retrospective
Over the past three years, ORIT has collaborated with BizGive to identify and
support charities and organisations aligned with ORIT's impact objectives.
Through three funding cycles, ORIT has donated £130,000 to projects achieving
significant environmental outcomes in areas of climate action, energy
efficiency, promotion of clean energy, and the circular economy. Below is a
detailed breakdown of the initiatives supported during these funding cycles.
ORIT's fourth impact programme with BizGive will allocate a further £50,000
of funding. Applications for funding have been open during the reporting
period, closing in August. Distributions will be made before year-end.
Climate Sisters, Women's Environmental Network ("Wen") ORIT funded the Climate Sisters project to engage women in climate action. Six
workshops reached 250 women, empowering them to advocate for environmental
policies within their communities. This included marginalised groups, ensuring
diverse voices in climate policy discussions.
Ashden City Region Network, Ashden With £10,000 from ORIT, the Ashden City Region Network supported mayoral
combined authorities in reducing carbon emissions and tackling fuel poverty
through virtual workshops that facilitated best practices sharing.
Food Justice Wen Forum Events, Women's Environmental Network ORIT's funding supported two high-impact Food Justice Wen Forum events that
raised awareness about food and climate justice, showcasing the Just FACT
"Blueprint Publication" and the Feminist Green New Deal food justice policy
paper.
Cambridge Hands on Science Summer Roadshow, Cambridge Hands on Science (CHaOS) The Cambridge Hands on Science Summer Roadshow saw 100 students from the
University of Cambridge carry out school visits to 7,300 children. The visits
promoted STEM (Science, Technology, Engineering, Maths) education through
hand-on sustainability theme experiments to inspire future generations to
contribute to environmental protection.
Diversifying Climate Leadership National Project, Citizens UK ORIT's £10,000 funding developed 45 community leaders from underrepresented
communities to organise local climate justice campaigns, addressing issues
like public transport and home energy efficiency.
Under-represented Student Scholarship Opportunity, East of England Energy ORIT provided a small scholarship for two students to study an MSc in Energy
Group Engineering at the University of East Anglia, UK. These students had
previously been unable to attend due to financial constraints, their
disadvantaged backgrounds, and racial discrimination. These two students have
now successfully enrolled in the course.
Championing Clean Energy, Aspire Oxfordshire Community Enterprise Ltd This charity was established to convene and engage partners in designing an
inclusive recruitment pathway into retrofit for Oxfordshire, focusing on
education, training, and employment recommendations. They contribute to
inclusive climate action and support Oxfordshire's inclusive economy, economic
development, and green skills agendas.
Home Energy for New Scots, The Welcoming Association With £9,524, ORIT supported energy efficiency measures in 76 households,
reducing energy consumption and bills. The project also provided energy advice
to vulnerable new local residents.
Portsmouth Library of Things and Repair Café, Share (Portsmouth) The Portsmouth Library of Things and Repair Café, funded by ORIT, improved
home insulation and energy savings for 49 households. The project provided
access to tools and workshops that supported residents in making
energy-efficient improvements.
Generation Retrofit Advisor Training Bootcamps, Generation UK ORIT's £10,000 funding trained 16 individuals as retrofit advisors,
supporting the green transition by improving the energy efficiency of
buildings and promoting sustainable practices.
Zink Energy Advice and Support, The Zink Project CIO ORIT's funding provided fuel vouchers and energy management support,
delivering 223 appointments to address long-term energy issues and reducing
the need for foodbank services.
Selsey Care Shop, Selsey Community Forum The charity runs an extensive proactive telephone and face to face service
offering debt advice and counselling to alleviate fuel poverty, through the
promotion of energy efficiency.
Community Grants, Connector Media CIC ORIT allocated £1,000 to supply emergency aid to 150 refugee families,
helping them manage energy-related challenges and improve overall wellbeing.
Championing Clean Energy, Cumbria Action for Sustainability ORIT funded a community-led project in Cumbria, UK, to raise awareness and
promote the adoption of clean energy and energy efficiency solutions. This
initiative included community engagement events, resource packs, and thermal
imaging training.
Green Doctors, Groundworks UK ORIT has donated £12,500 to Green Doctors to upskill their team in England
and Wales. Green Doctors provide free energy advice to help residents reduce
bills, improve wellbeing, and save energy. The funding trained officers and
senior Green Doctors for retrofitting assessments and saving households more
money. Each Green Doctor conducts over 500 visits annually, saving households
£350 on average by promoting energy efficiency.
The Upper Eden Renewable Energy Programme, The Neighbourhood Project CIC ORIT funded this programme to support community-led renewable energy projects
in Upper Eden, reducing carbon emissions and promoting local engagement in
clean energy initiatives. This was achieved through community awareness
efforts, including information sharing, engaging community talks and workshops
whilst supporting the Renewables Action Group.
Empowering Girls Through Tech for Good, Girls into Coding Community Interest ORIT allocated £7,100 to develop renewable energy-themed robotics kits for
Group girls, organising workshops to educate them about renewable energy
technologies and inspire careers in sustainability.
Blythe Turbine Vawt, University of Aberdeen The Blythe Turbine Vawt project installed and innovative hybrid wind and solar
turbine at a local secondary school, educating students about renewable energy
technologies and promoting environmental awareness.
Craftbar, Convenience Gallery CIC ORIT invested £2,000 in Craftbar, delivering 12 workshops to educate 198
participants on sustainable making and circular design, promoting the reuse of
materials and reducing waste.
Girls Innovating to Reduce Waste Through Tech, Girls into Coding Community ORIT supported workshops for girls on reducing waste through technology,
Interest Company developing educational modules and robotics kits themed around the circular
economy to raise awareness about sustainable practices.
Impact Tracking
Who? How much? What? Impact themes
Women & marginalised groups £130,000 Climate action Equality & Wellbeing
Socio-economic disadvantaged students and children Energy efficiency Stakeholder Engagement
Migrants, LGBTQ+ communities and vulnerable groups Promotion of clean energy Innovation
Educationally disadvantaged individuals Circular economy Sustainable Momentum
People
Impact Objective: Evaluate social considerations to mitigate risks and promote
a 'Just Transition' to clean energy.
148 51 0
Students benefitting from social initiatives Estimated full-time equivalent RIDDORs(52)
(H1 2023: 327) ("FTE") jobs created (at 31-Dec 2023: 0)
(H1 2023: 232)
(52 ) RIDDOR: Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations.
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's statement on principal adverse impacts can be found on its website,
octopusrenewablesinfrastructure.com; see '2023 ORIT PAI Statement' in the
Publications section.
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.
The Investment Manager employs specialist Health, Safety and Environment
('HSE') consultants and additionally has employed a Head of Health and Safety
to ensure that robust risk oversight and a proactive approach are embedded
into ORIT's model of investing and managing assets.
This integration is achieved through:
● Technical compliance standards
● Diligence and benchmarking of contractors
● Audits and ongoing oversight
● Data collection and continuous improvement
Even with minority stakes, performance is tracked through board meeting
attendance. The Investment Manager monitors various accident and incident
classifications, including those reportable to the UK Health & Safety
Executive (RIDDORs) or equivalent local bodies. International incidents
comparable to RIDDORs are flagged under our statutory reporting guidance to
ensure a consistent approach wherever possible outside the UK. HSE incidents
are investigated by the in‑house Asset Management Team and third-party HSE
advisors. Root cause analysis, lessons learned, and necessary procedural
changes are ensured.
RIDDORs Lost time injuries Near misses Personal injuries Minor equipment
(>7 days) damage incidents
0 0 9 1 (first aid) 15
The overall safety performance was positive during the reporting period, with
no significant risks to highlight. There was one minor first-aid injury to
report across the portfolio, as well as nine near misses, fifteen damage-only
incidents, and 2 environmental incidents. The environmental incidents
reported were minor and did not result in any lasting material effects.
Incidents have been satisfactorily resolved, and applicable lessons have been
learned.
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.
The Company's Board is made up of a complementary mixture of social
backgrounds, gender diversity and ethnicity. The Company' complies with the
FCA's diversity targets on the representation of women and ethnic minorities:
● At least 40% of the board should be women.
● At least one of the senior board positions or Senior Independent
Director ("SID") should be a woman.
● At least one member of the board should be from an ethnic minority
background excluding white ethnic groups (as set out in categories used by the
Office for National Statistics).
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 ● 51 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
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 ● £1,203,000 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 ● £340,000 annual impact budget.
expands, these impact partnerships are designed to create a more significant
and lasting impact across a diverse range of beneficiaries. Applicability of ● 148 students benefitting from social initiatives.
community initiatives will be determined on a portfolio-by-portfolio basis.
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. ● 147k estimated equivalent number of homes powered by ORIT's
This not only aims to lower energy bills but also to enhance energy security assets(53).
in regions with ORIT's assets.
(53) Metric based on actual production generated by ORIT's assets
during the reporting period.
People initiatives
Alongside keeping people safe, ORIT considers our potential impact on people.
People initiatives contribute to solutions to engage communities and promote a
"Just Transition" to clean energy.
Case Study: Inspiring the Next Generation
Sustainable Momentum
ORIT has a goal to inspire the next generation by teaching them about
renewable energy and why it is important to the world they will grow up in.
ORIT understands it has a unique opportunity to have an impact by using its
sites and engineers as valuable teaching resources. For the third year now,
ORIT has partnered with its asset managers and Earth Energy Education, an
organisation that specialises in educational site visits and school workshops
to inspire the next generation of engineers and scientists and foster a
passion for renewable energy.
In June, ORIT and Earth Energy Education organised workshops and site visits
to Chisbon Solar Farm with St Andrews Primary School and Engaines Primary
School. The events hosted 148 students in years 1 and 6 to learn about
renewable energy sources, how they work, why they are important to our future,
and the biodiversity efforts done on the sites. Earth Energy Education
conducted a comprehensive workshop, focusing on the importance of renewable
energy and the transition from fossil fuels. The day began with an
introduction to the fundamentals of solar energy, demonstrating how solar
panels generate direct current (DC) and how it can be converted to alternating
current (AC) using an inverter. The students experimented with energy sticks
and simple circuits, enhancing their understanding of electricity flow.
There was also a hands-on activity with solar cells where the students tried
to bring buzzers, lights, and motors to life while simultaneously learning
about the reliability challenges of renewable energy.
At the solar farm, the students engaged in hands-on activities, including
estimating the number of solar panels and understanding the role of combiner
boxes and inverters. Using mapping compasses, they learned why the panels face
south and discussed the earth's rotation. The visit also included a
biodiversity segment where the students conducted a bug hunt among blooming
wildflowers and observed active beehives, gaining insights into the site's
ecosystem. The experience concluded with a reminder about the importance of
wise energy use and the potential for careers in renewable energy.
Activities such as these provide young students with real-world exposure to
renewable energy technology, sparking curiosity and interest in the
behind-the-scenes workings of the sector. By understanding how renewable
energy works and why it is important from a young age, ORIT hopes to inspire
the next generation of leaders to incorporate sustainable practices in their
future lifestyle or pursue careers in the renewable energy sector.
Efforts like this can also help mitigate "climate anxiety" in younger
generations. Climate anxiety is a distress related to concerns about the
impacts of climate change and is becoming prevalent in younger generation,
with the strongest proven treatment being "taking action"(54). Learning about
how renewable energy works and the potential careers in the sector can help
the students acknowledge how much progress is being made to mitigate climate
change and understand how they can help in the future.
The workshops and site visits provided the students with a practical
understanding of renewable energy and its challenges, inspiring future
generations to contribute to a sustainable planet.
Impact Tracking
Who? How much? What? Impact themes
Students from St Andrews Primary School and Engaines Primary School 148 students across 4 visits during June, 2024 Site visits Stakeholder Engagement
Hands-on workshops Equality and Wellbeing
(54)
https://www.health.harvard.edu/blog/is-climate-change-keeping-you-up-at-night-you-may-have-climate-anxiety-202206132761
UN SDG specific contributions for Performance, Planet and People
2 - Zero Hunger
2.1 - End hunger and ensure access by all people, in particular the poor and
people in vulnerable situations, including infants, to safe, nutritious and
sufficient food all year round
ORIT's funding supported two high-impact Food Justice Wen Forum events that
raised awareness about food and climate justice.
4 - Quality Education
4.1, 4.5 & 4.7 - Provide free, quality education leading to effective
learning outcomes that can also promote sustainable development. Implement
this whilst eliminating gender disparities and ensuring equal access to all
levels of education
Partnership with the Good Bee Company and Earth Energy Education to provide
free education programmes and site visits to local schools. Funding of
multiple charities through BizGive supporting projects that drive STEM
learning, climate action, biodiversity conservation, and community renewables.
5 - Gender Equality
5.5 - Ensure women's full and effective participation and equal opportunities
for leadership at all levels of decision-making in political, economic and
public life
ORIT funded initiatives that engage women or girls in Climate Action or STEM
subjects (Wen and girls into Coding). ORIT's Investment Manager has a robust
Diversity, Equity and Inclusion policy.
7 - Affordable and Clean Energy
7.1, 7.2 & 7.3 - By 2030, ensure universal access to affordable, reliable
and modern energy services, increase the share of renewable energy in the
global energy mix, and increase the global rate of energy efficiency 7.a -
Cooperation with regards to research and investment in clean energy
infrastructure and technology
Provided renewable energy to the grid and provided renewable investment
opportunities. Construction underway to add renewable energy capacity.
Supported initiatives that promote clean energy through BizGive.
8 - Decent Work and Economic Growth
8.5 - Provide full and productive employment and decent work for all
Extensive Health and Safety measures ensures employees are not exposed to
risk. Supply chain analysis and strengthened policies to ensure labour rights
upheld across ORIT's suppliers.
9 - Industry, Innovation and Infrastructure
9.2 & 9.4 - Promote sustainable industrialisation and upgrade/retrofit
infrastructure to make them sustainable
Investment into development, operational and construction assets have helped
support jobs. Site upgrades and works have significantly reduced production
losses, actively supporting the production of more green power and helping
ORIT's assets perform more efficiently.
10 - Reducing Inequalities
10.2 - By 2030, empower and promote the social, economic and political
inclusion of all, irrespective of age, sex, disability, race, ethnicity,
origin, religion or economic or other status
ORIT embodies this target in their everyday business practices as well as
through their funding to the Diversifying Climate Leadership National Project.
12 - Responsible Consumption and Production
12.5 & 12.7 - By 2030, substantially reduce waste generation through
prevention, reduction, recycling reuse while also promoting procurement
practices that are sustainable, in accordance with national policies and
priorities
ORIT has funded two organisations with waste reduction at their core and
actively promotes waste reduction and sustainable procurement practices in its
everyday operations.
13 - Climate Action
13.1 - Strengthen resilience and adaptive capacity to climate related hazards
and natural disasters.
13.3 - Improve education, awareness-raising and human and institutional
capacity on climate change mitigation, adaptation, impact reduction and early
warning
Technical due diligence carried out on all new investments. Biodiversity and
habitat management plans proposed for most sites as planning requirement.
Physical climate change risks considered and mitigated (e.g. flood risk
mitigation strategy) and transition risks forecasted (e.g. low power price
scenarios).
Through many of its initiatives, ORIT strives to increase education and
awareness related to climate change and impact reduction.
15 - Life on Land
15.5 - Take urgent and significant action to reduce the degradation of natural
habitats, halt the loss of biodiversity and, by 2020, protect and prevent the
extinction of threatened species
Threatened and non-threatened species monitored through ecological surveys and
biodiversity plans. Additional biodiversity initiatives implemented beyond
planning requirement.
Interim Management Report
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Chair's Statement and the Investment
Manager's Report in this Interim Report provide details of the important
events which have occurred during the period and their impact on the financial
statements. The following statements on principal risks and uncertainties,
related party transactions, going concern and the Directors' Responsibility
Statement ("DRS") below, together constitute the Interim Management Report for
the Company for the six months ended 30 June 2024. The outlook for the Company
for the remaining six months of the year ending 31 December 2024 is discussed
in the Chair's Statement and the Investment Manager's Report.
Risk and Risk Management
The Company's approach to risk governance and its risk review process are set
out in the risks and risk management section of the 2023 Annual Report. The
principal risks to the achievement of the Company's objectives are unchanged
from those reported in the 2023 Annual Report, with the key principal risks
being:
● Changes to inflation and interest rates - the Company's investments
are partially index-linked and therefore changes to inflation rates will
impact the Company's cashflows. Changes in interest rates may affect the
valuation of the investment portfolio by impacting the valuation discount rate
and also impact the cost of financing available to the Company. This continues
to be a heightened risk in the current macro-economic environment.
● Power prices - the risk that the income and value of the Company's
investments may be adversely impacted by changes in the prevailing market
prices of electricity and prices achievable for off-taker contracts. Given the
nature of the investments, valuations are sensitive to movements in power
prices. To mitigate the impact of this risk, the Investment Manager has fixed
84% of revenues to 30 June 2026.
● Risks associated with borrowing - the use of leverage may increase
the volatility of the Company NAV, may significantly increase the Company's
investment risk and could lead to an inability to meet financial obligations.
Risks include refinancing risk, covenant breaches, over-gearing and possible
enhanced loss on poor performing assets.
● Asset specific risks - circumstances may arise that adversely affect
the performance of the relevant renewable energy asset. These include health
and safety, grid connection, material damage or degradation, equipment
failures and environmental risks.
The experience of the Company's Investment Manager and the diversification of
the Company's portfolio continue to be the key mitigation for these risks. The
Company's 2023 ESG & Impact Report, published on 24 March 2024, details
examples of specific projects that the Investment Manager has undertaken to
mitigate some of these risks in the period.
Task Force on Climate-related Financial Disclosures ("TCFD")
The FCA issued a rule, effective for periods beginning on or after January
2021, for UK listed companies to start to report against the TCFD, with other
companies to follow. Whilst not currently mandated to make a TCFD disclosure,
as investment trusts are currently excluded from the requirement, ORIT
supports the TCFD's aims and objectives and voluntarily reports in line with
the rule to help ensure 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. Our
TCFD approach is detailed on pages 92 to 109 of the 2023 Annual Report. The
Company is pleased to confirm that it has included 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.
Related party transactions
The Company's AIFM is considered a related party under the Listing Rules.
Until 31 July 2024, the Company had appointed Octopus AIF Management Limited
("OAIFM") to be the alternative investment fund manager of the Company for the
purposes of Directive 2011/61/EU of the European Parliament and of the Council
on Alternative Investment Fund Managers. Accordingly, OAIFM was responsible
for the portfolio management of the Company and for exercising the risk
management function in respect of the Company. OAIFM delegated portfolio
management services to Octopus Renewables Limited (trading as Octopus Energy
Generation), the Company's Investment Manager (the "Investment Manager").
On 31 July 2024, the Company appointed Octopus Energy AIF Management Limited
("OEAIFM") to be the alternative investment fund manager of the Company
("AIFM") for the purposes of Directive 2011/61/EU of the European Parliament
and of the Council on Alternative Investment Fund Managers. Accordingly from
31 July 2024, OEAIFM is responsible for the portfolio management of the
Company, for exercising the risk management function in respect of the
Company, and for the administration of the Company. The AIFM has delegated
portfolio management services to the Investment Manager and administration
services to Apex Listed Companies Services (UK) Limited (the "Administrator").
There have been no changes to the portfolio fund management team or fee
arrangements as a result of the change of AIFM. OEAIFM receives from the
Company a management fee of 0.95% per annum of Net Asset Value up to and
including £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 Investment Manager under the Management
Agreement.
Details of the amounts paid to the Company's former AIFM and the Directors
during the period are included in the Note 13 to the Interim Financial
Statements.
Going concern
The Directors have reviewed comprehensive cash flow forecasts prepared by the
Company's Investment Manager which are based on prudent market data and
believe, based on these forecasts, that it is appropriate to prepare the
financial statements of the Company on a going concern basis.
In arriving at their conclusion that the Company has adequate financial
resources to continue in operational existence for the foreseeable future, the
Directors were mindful that the Group had unrestricted cash of £23.02 million
as at 30 June 2024 and available headroom on its RCF of £74.8 million. The
Company's net assets at 30 June 2024 were £593 million and total expenses for
the period were £2.79 million, which, when annualised, represented
approximately 1.18% of average net assets during the period. 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 Directors have fully considered each of the Company's investments. The
Directors do not foresee any immediate material risk to the Company's
investment portfolio and income from underlying SPVs. A prolonged and deep
market decline could lead to falling values to the underlying business and
interruptions to cash flow, however the Company currently has more than
sufficient liquidity to meet any future obligations.
The covenants of the RCF have been tested and are not expected to be breached,
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 15 to the financial statements, should they
become payable.
The Directors continue to adopt the going concern basis of accounting in
preparing the unaudited financial statements while recognising that the
Articles of Association of the Company require a continuation vote at every
fifth Annual General Meeting ("AGM"). As per Article 163 of the Articles of
Association, the Board will propose that shareholders pass an ordinary
resolution in 2025 on the continuation of the Company, with the AGM expected
to be around June 2025. Shareholders will be consulted on this topic, together
with the Company's broker.As such, the Directors are satisfied that the
Company has sufficient resources to continue to operate for the foreseeable
future, a period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in preparing these
financial statements.
Responsibility Statement of the Directors
The Directors acknowledge responsibility for the interim results and approve
this Interim Report. The Directors confirm that to the best of their
knowledge:
a) the condensed financial statements have been prepared in accordance
with IAS 34 "Interim Financial Reporting" and give a true and fair view of the
assets, liabilities and financial position and the profit of the Company as
required by the FCA's Disclosure Guidance and Transparency Rules. DTR 4.2.4R;
b) the interim management report, included within the Chair's Statement
and Investment Manager's Report, includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R.
This responsibility statement has been approved by the Board.
Philip Austin MBE
Chair
13 September 2024
Financial Statements
Condensed Statement of Comprehensive Income
For the six-month period ended For the six-month period ended
30 June 2024
30 June 2023
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Investment income 3 18,724 - 18,724 22,661 - 22,661
Movement in fair value of investments - (4,106) (4,106) - (13,621) (13,621)
Total net income 18,724 (4,106) 14,618 22,661 (13,621) 9,040
Management fees 4 (2,062) (687) (2,749) (2,109) (703) (2,812)
Other expenses (728) - (728) (610) (104) (714)
Net finance income 159 - 159 42 - 42
Net foreign exchange losses - - - - (29) (29)
Profit/(loss) before taxation 16,093 (4,793) 11,300 19,984 (14,457) 5,525
Taxation 5 (171) 171 - (184) 184 -
Profit/(loss) and total comprehensive income for the period 15,922 (4,622) 11,300 19,798 (14,273) 5,525
Earnings/(loss) per Ordinary share (pence) - basic and diluted 7 2.82p (0.82p) 2.00p 3.50p (2.53p) 0.97p
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 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.
Condensed Statement of Financial Position
Notes As at As at
30 June 2024 (unaudited)
31 December 2023 (audited)
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 8 582,665 592,121
Current assets
Trade and other receivables 138 143
Cash and cash equivalents 11,822 10,012
11,960 10,155
Current liabilities: amounts falling due within one year
Trade and other payables (1,839) (3,237)
(1,839) (3,237)
Net current assets 10,121 6,918
Net assets 592,786 599,039
Capital and reserves
Share capital 9 5,649 5,649
Share premium account 217,283 217,283
Special reserve 10 338,613 339,500
Capital reserve 9,134 13,756
Revenue reserve 22,107 22,851
Total shareholders' funds 592,786 599,039
Net assets per Ordinary Share (pence) 11 105.15p 106.04p
The unaudited interim financial statements were approved by the Board of
Directors and authorised for issue on 13 September 2024 and were signed on its
behalf by:
Philip Austin MBE
Chair
The accompanying notes are an integral part of these interim financial
statements. Incorporated in England and Wales with registered number 12257608.
Condensed Statement of Changes in Equity
For the period ended 30 June 2024 (Unaudited)
Notes Share Share premium account Special reserve Revenue reserve Capital reserve Total shareholders' funds
£'000
£'000
£'000
£'000
£'000
capital
£'000
Opening equity as at 1 January 2024 5,649 217,283 339,500 22,851 13,756 599,039
Shares bought back and held in treasury 12 - - (883) - - (883)
Costs on share buybacks - - (4) - - (4)
Profit and total comprehensive income/(expense) for the period - - - 15,922 (4,622) 11,300
Dividends paid 6 - - - (16,666) - (16,666)
Closing equity as at 30 June 2024 5,649 217,283 338,613 22,107 9,134 592,786
For the period ended 30 June 2023 (Unaudited)
Notes Share Share premium account Special reserve Revenue reserve Capital reserve Total shareholders' funds
£'000
£'000
£'000
£'000
£'000
capital
£'000
Opening equity as at 1 January 2023 5,649 217,283 339,500 17,913 37,915 618,260
Profit and total comprehensive income/(expense) for the period - - - 19,798 (14,273) 5,525
Dividends paid 6 - - - (15,536) - (15,536)
Closing equity as at 30 June 2023 5,649 217,283 339,500 22,175 23,642 608,249
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.
Condensed Statement of Cash Flows
Notes For the For the
six-month period ended
six-month period ended
30 June 2024
30 June 2023
(unaudited)
(unaudited)
£'000
£'000
Operating activities cash flows
Profit before taxation 11,300 5,525
Adjustments for:
Movement in fair value of investments 8 4,106 13,621
Investment income from investments 3 (18,724) (22,661)
Operating cash flow before movements in working capital (3,318) (3,515)
Changes in working capital:
Increase in trade and other receivables 5 (80)
Decrease in trade payables (1,398) (332)
Distributions from investments 8 24,627 9,800
Net cash flow from operating activities 19,916 5,873
Investing activities cash flows
Costs associated with acquiring the portfolio of assets (553) (658)
Net cash flow used in investing activities (553) (658)
Financing activities cash flows
Dividends paid to Ordinary Shareholders 6 (16,666) (15,536)
Shares bought back and held in treasury 12 (883) -
Costs on share buybacks (4) -
Net cash flow used in financing activities (17,553) (15,536)
Net increase/(decrease) in cash and cash equivalents 1,810 (10,321)
Cash and cash equivalents at start of period 10,012 10,603
Cash and Cash equivalents at end of period 11,822 282
Notes to the Condensed Unaudited Financial Statements
For the period ended 30 June 2024
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 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 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 interim condensed unaudited financial statements of the Company (the
"interim financial statements") are for the six-month period ended 30 June
2024 and comprise only the results of the Company, as all of its subsidiaries
are measured at fair value through profit or loss following the amendment to
IFRS 10 as explained below in Note 2. The comparatives shown in these interim
financial statements refer to the six-month period ended 30 June 2023 and as
at 31 December 2023.
Until 31 July 2024, the Company had appointed Octopus AIF Management Limited
("OAIFM") to be the alternative investment fund manager of the Company for
the purposes of Directive 2011/61/EU of the European Parliament and of the
Council on Alternative Investment Fund Managers. Accordingly, OAIFM was
responsible for the portfolio management of the Company and for exercising the
risk management function in respect of the Company. OAIFM delegated portfolio
management services to Octopus Renewables Limited (trading as Octopus Energy
Generation), the Company's Investment Manager (the "Investment Manager").
On 31 July 2024, the Company appointed Octopus Energy AIF Management Limited
("OEAIFM") to be the alternative investment fund manager of the Company for
the purposes of Directive 2011/61/EU of the European Parliament and of the
Council on Alternative Investment Fund Managers. Accordingly from the 31 July
2024, OEAIFM is responsible for the portfolio management of the Company, for
exercising the risk management function in respect of the Company and the
administration of the Company. OEAIFM has delegated portfolio management
services to the Investment Manager and administration services to Apex Listed
Companies Services (UK) Limited (the "Administrator").
Apex Listed Companies Services (UK) Limited provides administrative and
company secretarial services to the Company under the terms of the
Administration Agreement between the Company and the Administrator.
The annual financial statements of the Company for the year ended 31 December
2023 were approved by the Directors on 22 March 2024 and are available on the
Company's website https://octopusrenewablesinfrastructure.com/.
2. Basis of preparation
The interim financial statements included in this report have been prepared in
accordance with UK-adopted international accounting standard IAS 34 Interim
Financial Reporting and the applicable requirements of the Companies Act 2006.
The interim financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and financial
liabilities at fair value through profit or loss.
The interim 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 interim financial statements are presented in sterling, which is the
Company's functional currency and are rounded to the nearest thousand, unless
otherwise stated. The accounting policies, significant judgements, key
assumptions and estimates are consistent with those used in the latest audited
financial statements to 31 December 2023 and should be read in conjunction
with the Company's annual audited financial statements for the year ended 31
December 2023.
Going concern
The Company continues to adopt the going concern basis in the preparation of
the interim financial statements for the reasons set out in the Interim
Management Report.
Critical accounting judgements, estimates and assumptions
The preparation of the interim financial statement 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. There have been no changes to
the significant estimates, judgements and assumptions to those set out on
pages 162 to 164 of the 2023 Annual Report; a summary of these is provided
below.
Key estimation: 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. Details of the areas of
estimation in the calculation of fair value are disclosed in Note 8.
Key judgement: Equity and debt investment in ORIT Holdings II Limited
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.
As such, the Directors have satisfied themselves that the equity and debt
investments into its direct wholly owned subsidiary, ORIT Holdings II Limited,
share the same investment characteristics and, therefore, constitute a single
asset class for IFRS 7 disclosure purposes.
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).
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 outlined above provides the most relevant
information to investors.
3. Investment income
For the six-month period ended For the six-month period ended
30 June 2024 (unaudited) 30 June 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Dividend income from investments 6,000 - 6,000 9,800 - 9,800
Interest income from investments 12,724 - 12,724 12,861 - 12,861
Total investment income 18,724 - 18,724 22,661 - 22,661
4. Operating expenses
For the six-month period ended For the six-month period ended
30 June 2024 (unaudited) 30 June 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fees 2,062 687 2,749 2,109 703 2,812
Directors' fees 123 - 123 101 - 101
Company's auditor fees:
- in respect of audit services 145 - 145 90 - 90
Other operating expenses 460 - 460 421 104 525
Total operating expenses 2,790 687 3,477 2,721 807 3,528
Further details on the AIFM agreement have been provided in Note 13.
The Company has no employees. Full detail on Directors' fees is provided in
Note 13. The Directors' fees exclude employer's national insurance
contribution which is included as appropriate in other operating expenses.
There were no other emoluments.
5. Taxation
(a) Analysis of charge/(credit) in the period
For the six-month period ended For the six-month period ended
30 June 2024 (unaudited) 30 June 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Corporation tax 171 (171) - 184 (184) -
Tax charge/(credit) for the period 171 (171) - 184 (184) -
(b) Factors affecting total tax charge for the period:
The effective UK corporation tax rate applicable to the Company for the period
is 25% (2023: 22%). The tax charge/(credit) 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:
For the six-month period ended For the six-month period ended
30 June 2024 (unaudited)
30 June 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Profit/(loss) before taxation 16,093 (4,793) 11,300 19,982 (14,457) 5,525
Corporation tax at 25% (2023: 22%) 4,023 (1,198) 2,825 4,396 (3,181) 1,215
Effects of:
Expenses not deductible for tax purposes - 1,027 1,027 - 2,997 2,997
Income not taxable (1,500) - (1,500) (2,156) - (2,156)
Dividends designated as interest distributions (2,351) - (2,351) (2,058) - (2,058)
Movement in deferred tax not recognised (1) - (1) 2 - 2
Total tax charge/(credit) for the period 171 (171) - 184 (184) -
6. Dividends
For the six-month period ended For the six-month period ended
30 June 2024 (unaudited)
30 June 2023 (unaudited)
Pence per Ordinary Revenue reserve Total Pence per Ordinary Revenue reserve Total
Share
£'000
£'000
Share
£'000
£'000
Q4 2023 Dividend - paid 23 February 2024 (2022: 23 February 2023) 1.45 8,191 8,191 1.31 7,401 7,401
Q1 2024 Dividend - paid 31 May 2024 (2023: 2 June 2023) 1.50 8,475 8,474 1.44 8,135 8,135
Total 2.95 16,666 16,665 2.75 15,536 15,536
On 5 August 2024, the Company declared an interim dividend in respect of the
period from 1 April 2024 to 30 June 2024 of 1.51 pence per Ordinary Share,
paid on 30 August 2024 to Shareholders on the register at 16 August 2024. On
that record date, the number of Ordinary Shares in issue was 562,405,740 and
the total dividend paid to Shareholders amounted to £8.5 million. The
dividend has not been included as a liability at 30 June 2024.
7. Earnings per Ordinary Share
Earnings per Ordinary Share is calculated by dividing the profit attributable
to equity shareholders of the Company by the weighted average number of
Ordinary Shares in issue during the period as follows.
For the six-month period ended For the six-month period ended
30 June 2024 (unaudited)
30 June 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
Profit/(loss) attributable to the equity holders of the Company (£'000) 15,922 (4,622) 11,300 19,798 (14,273) 5,525
Weighted average number of Ordinary Shares in issue (000) 564,806 564,806 564,806 564,928 564,928 564,928
Earnings/(loss) per Ordinary Share (pence) - basic and diluted 2.82p (0.82p) 2.00p 3.50p (2.53p) 0.97p
There is no difference between the weighted average Ordinary or diluted number
of Shares.
8. 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 subsidiaries as an investment at fair value through profit or
loss.
a) Summary of valuation
As at As at
30 June 2024 31 December 2023
(unaudited) (audited)
£'000 £'000
Opening balance 592,121 608,799
Portfolio of assets acquired - -
Additional investment in intermediate holding companies 553 5,583
Distributions received from investments (24,627) (41,979)
Investment income 18,724 42,694
Movement in fair value of investments (4,106) (22,976)
Total investments at the end of the period/year 582,665 592,121
b) Reconciliation of movement in fair value of portfolio of assets
The table below shows the movement in the fair value of the Company's
investments. These assets are held through intermediate holding companies.
As at As at
30 June 2024 31 December 2023
(unaudited) (audited)
£'000 £'000
Opening balance 705,970 608,799
Portfolio of assets acquired 87,566 65,224
Asset Disposal - (91,817)
Distributions received (41,596) (37,489)
Movement in fair value 14,784 161,253
Fair value of portfolio of assets at the end of the period/year 766,724 705,970
Cash held in intermediate holding companies 7,262 13,209
Bank loans held in intermediate holding companies (196,243) (130,043)
Fair value of other net assets in intermediate holding companies 4,922 2,985
Fair value of Company's investments at the end of the period/year 582,665 592,121
c) Investment gains/(losses) in the period/year
Period ended 30 June 2024 Year ended 31 December 2023
(unaudited) (audited)
£'000 £'000
Movement in fair value of investments (4,106) (22,976)
Fair value of portfolio of assets
The Investment Manager has carried out fair market valuations of the
investments as at 30 June 2024.
The Directors have satisfied themselves as to the methodology used, the
discount rates applied and the valuation. All investments are in renewable
energy assets and are valued using a discounted cash flow methodology. The
Company's holding of an investment represents its interest in both the equity
and debt instruments of the investment. The equity and debt instruments are
valued as a whole using a blended discount rate and the value attributed to
the equity instruments represents the fair value of future dividends and
equity redemptions in addition to any value enhancements arising from the
timing of loan principal and interest receipts from the debt instruments,
while the value attributed to the debt instruments represents the principal
outstanding and interest due on the loan at the valuation date.
The weighted average costs of capital applied to the portfolio of assets
ranges from 6.3% to 8.0%.
The following economic assumptions were used in the discounted cash flow
valuations:
As at As at
30 June 2024 31 December 2023
UK - long-term inflation rate 3.20% during 2024, declining to 3.00% in 2029 and then to 2.25% from 2030 3.70% during 2024, declining to 3.00% in 2028 and then to 2.25% from 2030
(year-on-year) onwards onwards
UK - long-term inflation rate (annual average) 3.60% during 2024, declining to 3.00% in 2029 and then to 2.25% from 2030 4.40% during 2024, declining to 3.00% in 2028 and then to 2.25% from 2030
onwards onwards
UK - corporation tax rate 25.00% 25.00%
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%
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 1.1796 1.1539
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 up to three independent and widely-used market expert
consultants' relevant technology-specific capture price forecasts for each
asset.
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 12.
9. Share capital
As at 30 June 2024 (unaudited) As at 31 December 2023 (audited)
Allotted, issued and fully paid: Number of shares Nominal value of shares Number of treasury shares Nominal value of shares in treasury (£) Number of shares Nominal value of shares Number of treasury shares Nominal value of shares in treasury (£)
with voting rights (£)
with voting rights (£)
Opening balance 564,927,536 5,649,275 - - 564,927,536 5,649,275 - -
Shares bought back and held in treasury (1,200,962) (12,010) 1,200,962 12,010 - - - -
Closing balance 563,726,574 5,637,265 1,200,962 12,010 564,927,536 5,649,275 - -
During the six months ended 30 June 2024, the Company issued no ordinary
shares (31 December 2023: nil).
During the six months ended 30 June 2024, the Company bought back to hold in
treasury 1,200,962 shares (31 December 2023: nil) at a total cost of
£887,000 (31 December 2023: nil).
Since 30 June 2024 and up to 11 September 2024, a further 1,811,444 ordinary
shares have been bought back to hold in treasury at a total cost of
£1,356,551.
10. 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 distributable reserve is £338,613,000, which can be
utilised to fund distributions to the Company's Shareholders, which can be
utilised to fund distributions by way of dividends to the Company's
shareholders.
11. Net assets per Ordinary Share (pence)
As at As at
30 June 2024 31 December 2023
(unaudited) (audited)
Total shareholders' equity (£'000) 592,786 599,039
Number of Ordinary Shares in issue ('000) 563,727 564,928
Net asset value per Ordinary Share (pence) 105.15p 106.04p
12. Financial instruments by category
The Company held the following financial instruments at fair value at 30 June
2024. There have been no transfers of financial instruments between levels of
the fair value hierarchy. There are no non-recurring fair value measurements.
As at 30 June 2024 (unaudited)
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
Equity Investments at fair value through profit or loss - 582,665 - 582,665
Current assets
Trade and other receivables 138 - - 138
Cash and cash equivalents 11,822 - - 11,822
Total assets 11,960 582,665 - 594,625
Current liabilities
Trade and other payables - - (1,839) (1,839)
Total liabilities - - (1,839) (1,839)
Net assets 11,960 582,665 (1,839) 592,786
As at 31 December 2023 (audited)
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 - 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
The above table provides an analysis of financial instruments that are
measured subsequent to their initial recognition at fair value 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 from market data (unobservable inputs).
prices); and
There were no Level 1 assets or liabilities during the period. There were no
transfers between Level 1 and 2, Level 1 and 3 or Level 2 and 3 during the
period. In the table above, financial instruments are held at carrying value
as an approximation to fair value unless stated otherwise.
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 is given in Note 8.
The fair value of the investments at fair value through profit or loss
includes the use of Level 3 inputs. Refer to Note 8 for details on the
valuation methodology.
Valuation Sensitivities
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 0.5% in the discount rate (levered cost of equity) would cause
a decrease in total portfolio value of 6.5 pence per Ordinary Share and a
decrease of 0.5% in the discount rate would cause an increase in total
portfolio value of 5.9 pence per Ordinary Share.
Inflation rate
The sensitivity of the investments to movement in inflation rates is as
follows:
A decrease of 0.5% in inflation rates would cause a decrease in total
portfolio value of 4.1 pence per Ordinary Share and an increase of 0.5% in
inflation rates would cause an increase in total portfolio value of 4.4 pence
per Ordinary Share.
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 9.6 pence per Ordinary Share and an increase of 10% in power price
would cause an increase in the total portfolio value of 9.5 pence per Ordinary
Share.
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 19.5 pence per Ordinary Share and 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 19.0 pence per Ordinary Share.
Foreign exchange
The sensitivity of the investments to movement in FX rates is as follows:
A decrease of 10% in FX rates would cause a decrease in total portfolio value
of 1.5 pence per Ordinary Share and an increase of 10% in inflation rates
would cause an increase in total portfolio value of 1.5 pence per Ordinary
Share.
Of the portfolio as at 30 June 2023, 51% of the NAV is denominated in
non-sterling currencies.
13. Related party and key advisor transactions
During the period, interest totalling £12.7 million (30 June 2023: £12.9
million) was earned, in respect of the long-term interest-bearing loan between
the Company and its subsidiaries. At the period end, the full amount was
outstanding.
AIFM and Investment Manager
Until 31 July 2024, the Company had appointed Octopus AIF Management Limited
("OAIFM") to be the alternative investment fund manager of the Company for the
purposes of Directive 2011/61/EU of the European Parliament and of the Council
on Alternative Investment Fund Managers. Accordingly, OAIFM was responsible
for the portfolio management of the Company and for exercising the risk
management function in respect of the Company. OAIFM delegated portfolio
management services to Octopus Renewables Limited (trading as Octopus Energy
Generation), the Company's Investment Manager (the "Investment Manager").
On 31 July 2024, the Company appointed Octopus Energy AIF Management Limited
("OEAIFM") to be the alternative investment fund manager of the Company for
the purposes of Directive 2011/61/EU of the European Parliament and of the
Council on Alternative Investment Fund Managers. Accordingly from the 31 July
2024, OEAIFM is responsible for the portfolio management of the Company, for
exercising the risk management function in respect of the Company and the
administration of the Company. OEAIFM has delegated portfolio management
services to the Investment Manager and administration services to Apex Listed
Companies Services (UK) Limited (the "Administrator").
OEAIFM is entitled to a management fee of 0.95% per annum of Net Asset Value
of the Company up to and including £500 million and 0.85% per annum of Net
Asset Value in excess of £500 million, payable quarterly in arrears. There
are no performance fee or asset level fees are payable to OEAIFM under the
Management Agreement. OEAIFM in turn pays the Investment Manager from the
management fees.
During the period, the management fee charged to the Company by Octopus AIF
Management Limited was £2,062,000 (30 June 2023: £2,109,000), of which
£1,381,000 (30 June 2023: £1,404,000) remained payable at the period end
date.
Directors
The Company is governed by a Board of Directors (the "Board"), all of whom are
independent and non-executive. During the period, they received fees for their
services of £123,000 (30 June 2023: £96,333) and were paid £3,439 (30 June
2023: £6,147) in expenses. As at the period 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
Shares as at Shares as at
date of this report 30 June 2024
Philip Austin MBE* 165,518 165,518
James Cameron 65,306 65,306
Elaina Elzinga - -
Audrey McNair** 50,437 50,437
Sarim Sheikh 279 279
* with effect from 23 November 2021, Mr. Austin's shares have been
held jointly with Mrs. J Austin, a PCA of Mr. Austin
** Ms McNair's husband holds 20,991 shares of the total holding
displayed in this table
14. Subsidiaries
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 are listed below:
Place of Registered Ownership
Name Category business Office* 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%
Elysia SAS Portfolio-level Holdings France D 100%
CEPE Cerisou Project company France E 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 F 100%
Vöyrinkangas Wind Farm Oy Project company Finland F 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 G 19%
South Kilbraur Wind Farm Limited Project company UK H 25%
Windburn Wind Farm Limited Project company UK H 25%
Wind 2 Project 2 Limited Project company UK I 25%
Wind 2 Project 5 Limited Project company UK H 25%
Wind 2 Project 3 Limited Project company UK I 25%
Kirkton Wind Farm Limited Project company UK H 25%
Bwlch Gwyn Wind Farm Limited Project company UK I 25%
Wind 2 Project 6 Limited Project company UK H 25%
Lairdmannoch Energy Park Limited Project company UK H 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 J 50%
Blota Germany GmbH Portfolio-level Holdings Germany K 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 Project company Germany N 100%
Infrastrukturgesellschaft Leeskow mbH & Co. KG Project company Germany M 70%
Burwell 11 Solar Limited Project company UK A 100%
Crossdykes WF Limited Project company UK O 51%
UK Green Investment Lyle Limited Portfolio-level Holdings UK J 50%
Lincs Wind Farm (Holding) Limited Portfolio-level Holdings UK P 15.50%
Lincs Wind Farm Limited Project company UK Q 15.50%
Gridsource (Woburn Rd) Limited Project company UK A 50%
Trio Power Limited Portfolio-level Holdings UK A 100%
Ballymacarney Renewable Energy Limited Project company Ireland R 100%
Hyro Energy Limited Portfolio-level Holdings UK S 25%
Green Hydrogen 11 Limited Project company UK S 25%
Green Hydrogen 2 Limited Project company UK S 25%
Green Hydrogen 3 Limited Project company UK S 25%
Green Hydrogen 4 Limited Project company UK S 25%
Green Hydrogen 5 Limited Project company UK S 25%
Haaponeva SPC Oy Project company Finland T 50%
BHill SPC Oy Project company Finland T 50%
Luola S SPC Oy Project company Finland T 50%
Mikkeli S SPC Oy Project company Finland T 50%
Eero S SPC Oy Project company Finland T 50%
S Tuuli SPC Oy Project company Finland T 50%
KNorgen SPC Oy Project company Finland T 50%
* 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 54, 80538, München, Germany
D - 22 Rue de Palestro, 75002 PARIS
E - Z.I de Courtine, 115 rue du Mourelet, 84000. Avignon, France
F - Lapinlahdenkatu 1 C 00180 Helsinki Finland
G - Woodbine Hill, Kinsalebeg, Youghal, Co. Cork, Ireland
H - Wind 2 Office, 2 Walker Street, Edinburgh, Scotland, EH3 7LB
I - Linden House Wrexham Road, Mold Business Park, Mold, Wales, CH7 1XP
J - 8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG
K - Lorenzgasse 2a, 01662 Meißen
L - c/o Ashurst LLP, OpernTurm, Bockenheimer Landstraße 2-4, 60306 Frankfurt
M - Dr.-Eberle-Platz 1, 01662 Meißen
N - Dorfstraße 20a, 18276 Lohmen
O - 58 Morrison Street, Edinburgh, United Kingdom, EH3 8BP
P - 5 Howick Place, London, United Kingdom, SW1P 1WG
Q - 13 Queens Road, Aberdeen, Scotland, AB15 4YL
R - 70 Sir John Rogerson's Quay, Dublin 2, Ireland
S - Beaufort Court, Egg Farm Lane, Kings Langley, Hertfordshire, United
Kingdom, WD4 8LR
T - c/o Nordic Generation Oy Tekniikantie 14 02150 Espoo Finland
As shown in Annual Report, ORIT Holdings II Limited is the only direct
subsidiary of the Company. All other subsidiaries are held indirectly.
15. 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 30 June 2024, the Company has guarantees in respect of the future
investment obligations associated with the Breach Solar plant totalling £2
million (31 December 2023: £4.1 million).
As at 30 June 2024 the Company's subsidiaries had future investment
obligations totalling £42.4 million (31 December 2023: £175.6m) 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.
16. Post period end events
Post period on 27th August 2024, the intermediate holding company ORIT
Holdings Limited completed the sale of Heather Wind AB in Sweden and received
a consideration of approximately £63 million.
On 5 August 2024, the Company declared an interim dividend in respect of the
period from 1 April 2024 to 30 June 2024 of 1.51 pence per Ordinary Share,
paid on 30 August 2024 to Shareholders on the register at 16 August 2024. On
that record date, the number of Ordinary Shares in issue was 562,405,740 and
the total dividend paid to Shareholders amounted to £8.5 million. The
dividend has not been included as a liability at 30 June 2024.
On 31 July 2024, the Company appointed Octopus Energy AIF Management Limited
("OEAIFM") to be the alternative investment fund manager of the Company for
the purposes of Directive 2011/61/EU of the European Parliament and of the
Council on Alternative Investment Fund Managers.
The share buyback programme that was announced in June 2024 has continued post
period.
17. Status of this report
These interim financial statements are not the Company's statutory accounts
for the purposes of section 434 of the Companies Act 2006. They are unaudited.
The unaudited interim financial report will be made available to the public at
the registered office of the Company.
The report will also be available in electronic format on the Company's
website, https://octopusrenewablesinfrastructure.com/.
The interim financial report was approved by the Board of Directors on
13 September 2024.
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 Directors assess the Company's performance against a range of
criteria which are viewed as particularly relevant for closed-end investment
companies. The APMs presented in this report are shown below:
Performance of Company's underlying operations investments
Output Revenue Opex EBITDA
Operational portfolio 30 June 2024: 605GWh 30 June 2024: 30 June 2024: 30 June 2024:
(30 June 2023: £68.7 million £23.4 million £45.3 million
628GWh)(55) (30 June 2023: (30 June 2023: (30 June 2023:
£61.7 million) £21.2 million) £40.7 million)
Solar 30 June 2024: 209GWh 30 June 2024: 30 June 2024: 30 June 2024:
(30 June 2023: 146GWh) £25.0 million £6.5 million £18.5 million
(30 June 2023: (30 June 2023: (30 June 2023:
£18.1 million) £4.3 million) £13.8 million)
Onshore wind 30 June 2024: 312GWh 30 June 2024: 30 June 2024: 30 June 2024:
(30 June 2023: 409GWh) £22.7 million £5.3 million £17.4 million
(30 June 2023: (30 June 2023: (30 June 2023:
£24.2 million) £5.4 million) £18.8 million)
Offshore wind 30 June 2024: 84GWh 30 June 2024: 30 June 2024: 30 June 2024:
(30 June 2023: 73GWh)(1) £21.0 million £11.6 million £9.4 million
(30 June 2023: (30 June 2023: (30 June 2023:
£19.1 million) £11.0 million) £8.1 million)
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
30 June 2024 31 December 2023
£million £million
NAV a 592.8 599.0
Debt b 504.7 381.3
Total GAV a + b 1,097.5 980.3
(55) Restated from 2023 Interim Report.
Total value of all investments
A measure of committed asset value including total debt and equity commitments
As at As at
30 June 2024 31 December 2023
£million £million
GAV a 1,097.5 980.3
Commitments on existing portfolio b 15.5 19.1
Commitments on conditional acquisitions c 36.9 173.4
GAV excluding cash (a+b+c) = d 1,149.9 1,172.8
Less Company and holding company assets e (22.3) (23.1)
Less asset level cash f (10.1) (22.6)
Total value of all investments d + e + f 1,117.5 1,127.1
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.
30 June 2024 Share price NAV
Value at IPO (10 December 2019) - pence a 100.00 98.00
Value at 30 June 2024 - pence b 72.00 105.15
Benefits of reinvesting dividends - pence d (4.02) 2.74
Dividends paid in the year - pence c 20.70 20.70
Total return (b+c+d)÷a) -1 11.3% 31.2%
Annualised total return (2.6%) 6.2%
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 in the period - pence c 17.76 17.76
Total return (b+c+d)÷a) -1 6.7% 28.6%
Annualised total return 1.6% 6.4%
Total return for the year
A measure of performance for the year to date 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.
30 June 2024 Share price NAV
Value at 31 December 2023 - pence a 90.00 106.04
Dividends paid to 31 December 2023 - pence b 17.76 17.76
Value plus dividends paid to 31 December 2023 - pence a + b = c 107.76 123.80
Value at 30 June 2024 - pence d 72.00 105.15
Benefits of reinvesting dividends - pence e (3.16) 0.47
Dividends paid in the year - pence f 2.95 2.95
Total return (b+d+e+f)÷c) -1 -16.9% 2.0%
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%
(Discount)/Premium to NAV
The amount, expressed as a percentage, by which the share price is more than
the NAV per Ordinary Share.
As at As at
30 June 2024 31 December 2023
NAV per Ordinary Share - pence a 105.15 106.04
Share price - pence b 72.00 90.00
Discount (b÷a)-1 -31.5% -15.1%
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.
Period ended Year ended
30 June 2024 31 December 2023
Average NAV a 591,331 605,111
Annualised expenses b 6,992 7,011
Discount (b÷a)-1 1.18% 1.16%
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