REG - Octopus Renewables - Q3 2024 Factsheet and Net Asset Value

Octopus Renewables Infrastructure TrustAnnouncement

04/11/2024 07:00

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RNS Number : 7822K  Octopus Renewables Infra Trust PLC  04 November 2024

4 November 2024

 

LEI: 213800B81BFJKWM2JV13

 

Octopus Renewables Infrastructure Trust plc

 

("ORIT" or the "Company")

 

Q3 2024 Factsheet and Net Asset Value

 

The Board of Octopus Renewables Infrastructure Trust plc announces that the
unaudited Net Asset Value ("NAV") of the Company as at 30 September 2024 on a
cum-income basis was £582.7 million or 103.77 pence per Ordinary Share (30
June 2024: £592.8 million or 105.15 pence per Ordinary Share).

 

                                                    Pence per Ordinary Share*  £m
 Unaudited NAV as at 30 June 2024                   105.15                     592.8
 Gain on Sale of Ljungbyholm                        0.11                       0.6
 Power Prices and Green Certificates                (0.09)                     (0.5)
 Inflation and Foreign Exchange ("FX")              (0.41)                     (2.3)
 Dividend paid in the Quarter                       (1.51)                     (8.5)
 Share Buybacks                                     0.11                       (1.7)
 Other movements                                    0.41                       2.3
 Unaudited NAV as at 30 September 2024              103.77                     582.7

 

*Totals may not sum exactly due to rounding

 

Gain on Sale of Ljungbyholm

 

In August 2024, ORIT completed the sale of the Ljungbyholm onshore wind farm
in Sweden to DWS Infrastruktur Europa, a DWS core infrastructure fund, for a
total consideration of approximately €74 million (the "Transaction"). The
Transaction achieved an IRR of approximately 11% over the lifetime of ORIT's
investment and proceeds from the sale were used to partially repay the
short-term debt facility by £64 million. As the end of the period, ORIT had
total gearing (total debt drawn as a % of Gross Asset Value ("GAV"(3))) of
43.2% (30 June 2024: 46.0%).

 

The sale represented a premium of £1.4 million to the prevailing valuation of
Ljungbyholm (as at 30 June 2024), of which £0.8 million was incorporated into
the Net Asset Value as at 30 June 2024, with the additional c.£0.6 million
(representing locked-box interest received between 30 June 2024 and
completion) reflected in the Net Asset Value as at 30 September 2024.

 

ORIT acquired the 48 MW wind farm at pre-construction stage in March 2020,
investing c.€68 million in the project. The Investment Manager, Octopus
Energy Generation, managed the construction phase, successfully bringing the
wind farm into operation in June 2021.

 

The Transaction formed part of the Company's capital recycling programme and
followed the sale of two Polish onshore wind assets in December 2023 and the
divestment of an option over a Spanish solar PV project in January 2024. The
capital recycling programme has now generated approximately £161 million.
 Other capital recycling projects are in progress and the Company will
provide further updates when appropriate.

 

 

Power Prices and Green Certificates

 

ORIT's portfolio is well-shielded from short-term fluctuations in power prices
due to its significant proportion of fixed or contracted revenue. As of 30
September 2024, 85% of ORIT's revenue over the next 24 months was fixed or
contracted through to 30 September 2026 (compared with 84% over the 24-month
period to 30 June 2026).

 

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. 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.

 

In Q3 2024, short-term forward power prices generally declined across the
markets where ORIT's assets are located, with the exception of Finland, where
prices saw a slight increase. Medium to long-term market forecasts remained
generally stable or saw marginal increases across most markets. These changes
resulted in a total net valuation decrease of £0.4 million.

 

Adjustments to short-term forward prices for Green Certificates caused a
slight valuation decrease of £0.1 million, while medium to long-term Green
Certificate prices remained steady. Similar to its power price contracts, ORIT
benefits from a high proportion of fixed Green Certificate revenue in the near
term, reducing the impact of short-term price fluctuations.

 

In total, the updates to Power Price and Green Certificate forecasts led to a
valuation decrease of £0.5 million, equivalent to -0.09 pence per Ordinary
Share.

 

Inflation(1) and FX

 

The valuation as at 30 September 2024 includes (i) recent consensus UK
inflation forecasts published by His Majesty's Treasury; and (ii) inflation
forecasts for European countries published by the European Commission.

 

During the quarter, inflation forecasts decreased on average across markets in
which ORIT's assets are located. This update led to a net valuation decrease
of £0.8 million or 0.14 pence per Ordinary Share. The decline was largely
driven by reductions in medium-term forecasts across most markets, partially
offset by an increase to expected outturn inflation for 2024 and 2025 in the
UK. ORIT continues to maintain a high proportion of inflation-linked cash
flows with 50% of revenues over a 10-year period to 30 September 2034
explicitly linked to inflation.

 

In Q3, Sterling appreciated by 1.9% against the Euro, resulting in a gross
valuation decrease of £6.3 million (before currency hedges). However, the
Investment Manager closely monitors currency exposure and uses hedges to
mitigate short-term cash flow volatility. After accounting for currency hedges
at the Company level, the net foreign exchange impact was reduced to -£1.5
million.

 

The combined impact of inflation and foreign exchange movements was a
valuation decrease of £2.3 million or 0.41 pence per Ordinary Share.

 

Dividend(2)

 

The interim dividend (1.51 pence per Ordinary Share or £8.5 million) in
respect of Q2 2024 was paid during the quarter, in line with the Company's
stated dividend target for the financial year from 1 January 2024 to 31
December 2024 of 6.02 pence per Ordinary Share.

 

Share Buybacks

( )

In Q2 2024, the Company announced that it had initiated a share buyback
programme, with an initial tranche of up to £10 million. During Q3 2024,
2,211,540 shares were repurchased by the Company for c.£1.7 million at an
average price of 75.78 pence per Ordinary Share. Following these transactions,
the total number of voting rights in the Company stood at 561,515,034. This
figure has been used as the denominator in the final NAV per Ordinary Share
figure as at 30 September, resulting in a NAV per share uplift. The
acquisition of shares at a discount to NAV has contributed to a net increase
in NAV per Ordinary Share of 0.11 pence during Q3, with a total increase of
0.18 pence since the start of the programme.

 

Other movements

 

An increase of £2.3 million or 0.41 pence per Ordinary Share was recorded
from other valuation movements. Of this movement, the majority reflects an
uplift of £12.5 million related to the expected return on the assets, being
the net present value of future cashflows being brought forward from 30 June
2024 to 30 September 2024. This was partially offset by performance of the
portfolio during Q3 2024 being below budget, a refresh of future Capex and
Opex assumptions for some sites, and fund level costs, which mostly reflects
the Company's operating and transaction costs including RCF interest.

 

Gearing

 

As at 30 September 2024, ORIT had total gearing (total debt drawn as a % of
Gross Asset Value ("GAV"(3))) of 43.2%. The significant reduction in gearing
since 30 June 2024 (46.0%) is primarily due to the proceeds of the Ljungbyholm
sale being directed to reducing the RCF level debt, partially offset by a
small drawdown made in preparation for the completion of the fifth Irish solar
site (which occurred post-period).

 

Notes

 

1              The unaudited 30 September 2024 valuation includes
(i) recent consensus UK inflation forecasts published by HM Treasury in August
2024; and (ii) inflation forecasts for the relevant European countries
published by the European Commission in August 2024.

2              The dividend target stated in this announcement is
a target only and not a profit forecast. There can be no assurance that this
target 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. 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
this target 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.

3              "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.

 

Factsheet

 

The Company's Q3 2024 factsheet has been published today and is available to
download at:

https://www.octopusrenewablesinfrastructure.com/all-reports-publications

 

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, Verity Parker, Samuel Adams

 Apex Listed Companies Services (UK) Limited (Company Secretary)                  020 3327 9720

 

 

Notes to editors

 

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 30 June 2024) across 20 countries and total 4.2GW.
These renewable projects generate enough green energy to power 2.6 million
homes every year, the equivalent of taking over 1.4 million petrol cars off
the road. Octopus Energy Generation is the trading name of Octopus Renewables
Limited.

 

Further details can be found at www.octopusenergygeneration.com
(http://www.octopusenergygeneration.com/)

 

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