TIDMORIT
RNS Number : 6509Y
Octopus Renewables Infra Trust PLC
09 May 2023
9 May 2023
LEI: 213800B81BFJKWM2JV13
Octopus Renewables Infrastructure Trust plc
("ORIT" or the "Company")
Q1 2023 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 31 March 2023 on a cum-income basis is GBP608.6 million or
107.7 pence per Ordinary Share (31 December 2022: GBP618.3 million
or 109.4 pence per Ordinary Share).
Pence per Ordinary
Share
================================= ======================
Audited N AV as at 31-Dec-22 109.4
Power Prices (incl. regulatory
updates) -2.9p
Inflation -0.6p
Unwinding of construction risk
premium +0.4p
Other movements +2.7p
Q4 2022 dividend -1.3p
Unaudited NAV as at 31-Mar-23* 107.7p
================================= ====================
*Totals may not sum exactly due to rounding
Power Prices
ORIT benefits from a high proportion of fixed contracted
revenue, and as at 31 March 2023, approximately 78% of ORIT's
forecast revenue over the 24-month period to 31 March 2025 is fixed
and therefore not exposed to near-term power price fluctuations
(68% over the 24-month period to 31 December 2024 as at 31 December
2022).
In the period since 31 December 2022, forecast wholesale power
prices across Europe have decreased, particularly over the 2023 to
2025 period. This has caused a net reduction in the Company's Net
Asset Value as at 31 March 2023.
Within this net reduction, a decrease in the valuation of
GBP23.5 million resulted from significant reductions to the power
market forward prices applied to forecasts over the 2023 to 2025
period. This decrease would have been significantly higher without
the benefit of the fixed price power sales contracts within the
portfolio. The decrease relates to sites located in Sweden (56%),
Finland (19%) and the UK (25%) where the exposure to variable
pricing is higher. Assets located outside these jurisdictions
(France, Germany, Ireland and Poland) benefit either from 100%
fixed pricing over the 2023 to 2025 period or are subject to prices
capped at levels below the forecast market prices.
The average market capture prices assumed in ORIT's valuations
as at 31 March 2023 are as follows:
Average assumed capture price (excludes subsidy
and fixed price arrangements)
==========================================================
2023 2024 2025
==================================== ====== ===== =====
Sweden, Wind (EUR) Dec-22 132 84 69
Mar-23 61 61 55
=================================== ====== ===== =====
Finland, Wind (EUR) Dec-22 108 46 38
Mar-23 47 41 37
=================================== ====== ===== =====
UK, Solar / Wind
Average (GBP) Dec-22 152 123 114
========================
Mar-23 98 96 105
=================================== ====== ===== =====
*Figures in the above table reflect forecast forward prices,
adjusted for discounts to reflect the lower prices typically
captured by solar and wind generators.
The prices in the above table as at 31 December 2022, which were
used in the Q4 valuations, included a discount to the prevailing
market forwards of 20% over the 2023 to 2025 period, in addition to
the normal discounts to reflect the lower prices typically captured
by solar and wind generators. This discount reflected the volatile
market conditions in late 2022, and the general downward trend in
market forward pricing observed around the turn of the year. Given
the significant reduction in forward prices over Q1 2023, and the
increasing stability in price levels, the Board and the Investment
Manager consider it appropriate to remove the additional discount
applied to forward prices, resulting in a valuation uplift of
GBP7.8 million.
The figures in the table above do not include revenue received
for selling guarantees of origin which are issued to generators to
certify the renewable source of the electricity produced. These
guarantees (typically known as REGOs in the UK, or GOOs in Europe)
have been trading at levels significantly higher than those assumed
in the valuation of the Company's portfolio of assets as at 31
March 2023. Out of prudence the Investment Manager has not revised
the guarantee pricing used in the 31 March 2023 valuations however
should elevated levels continue to be observed the Investment
Manager will review the forecast prices used in future
valuations.
For the period beyond 2025, the 31 March 2023 valuation includes
an equal blend of up to three independent and widely used market
consultants' technology-specific capture price forecasts for each
asset. The impact of updating for the most recent forecasts
received before the valuation date resulted in a valuation impact
of -GBP3.0 million.
Offsetting this, the reduction in forecast power prices over the
short to medium term for GB assets has reduced the expected
liability related to the UK's Energy Generation Levy ("EGL"),
resulting in a valuation uplift of GBP2.3 million.
The net impact of updating for forward prices at 31 March 2023
(-GBP23.5 million), removing the additional forward price discount
(+GBP7.8 million), the reduction in the EGL liability (+GBP2.3
million) and minor updates to long term pricing (-GBP3.0 million),
is a net valuation decrease of -GBP16.4 million or -2.9 pence per
Ordinary Share.
Inflation
Since the end of Q4 2022, short-term inflation assumptions have
decreased in the UK and Poland and increased further across the
European markets where the Company's portfolio of assets is
located, resulting in a net decrease in the valuation of -GBP3.0
million or -0.6 pence per Ordinary Share. The 31 March 2023
valuation includes (i) recent consensus UK inflation forecasts
published by HM Treasury in February 2023; and (ii) inflation
forecasts for the relevant European countries published by the
European Commission in February 2023. The Company benefits from
significant levels of inflation protection via revenues from
government support schemes in the UK, France and Poland, with
approximately 56% of the revenues forecast to be received by the
Company's current portfolio of assets in the ten years ending 31
March 2034 now explicitly inflation-linked.
Construction
During Q1 2023, construction at the Cumberhead wind farm in
Scotland was substantially complete with all turbines achieving
energisation by the quarter-end, with only final commissioning
activities ongoing. Progress against construction milestones has
resulted in a valuation gain of +GBP2.3 million or +0.4 pence per
Ordinary Share in the quarter through reduction in the risk premium
applied to the discount rate.
Construction at the Breach Solar Farm is progressing well and is
expected to achieve operational status during Q4 2023, however no
construction premium has been unwound during Q1 as civil works, a
key milestone, is due to complete in Q2. Since inception, the ORIT
portfolio has delivered construction gains of approximately
+GBP14.5 million.
Other movements
A gain of +GBP15.0 million or +2.7 pence per Ordinary Share was
recorded from other valuation movements. Of this, GBP11.0 million
reflects the net present value of future cashflows being brought
forward from 31 December 2022 to 31 March 2023. The remaining
GBP4.0 million relates primarily to asset performance and the
signature of the NAV-accretive PPA between Breach Solar Farm and
Iceland Foods, offset by movements in FX (incorporating the impact
of hedging), Company operating costs and transaction costs.
The interim dividend (-GBP7.4 million or -1.3 pence per Ordinary
Share) in respect of Q4 2022 was also paid in the quarter.
Portfolio Update
Following the end of the period, ORIT has agreed to invest up to
GBP5m into HYRO Energy Limited, ("HYRO") a new joint venture
between ORIT (co-invested alongside another fund managed by Octopus
Energy Generation, Sky (ORI SCSp)("Sky")) and Renewable Energy
Systems ("RES"). RES is the world's largest independent renewable
energy company active in onshore and offshore wind, solar, green
hydrogen, energy storage and transmission and distribution.
HYRO has been established to develop green hydrogen projects in
England, Scotland and Wales for industrial offtake/consumption.
Factsheet
The Company's Q1 2023 factsheet is available to download at:
https://octopusrenewablesinfrastructure.com/investors/
Phil Austin, Chairman of Octopus Renewables Infrastructure Trust
plc, commented:
"Market conditions across the UK and Europe continue to be
challenging driven by power price and inflation fluctuations. The
Investment Manager continues to demonstrate its expertise, strength
and depth of experience, minimising the impact through hedging the
portfolio with fixed power price contracts; with some jurisdictions
benefiting from 100% fixed pricing. It means greater certainty for
ORIT as it isn't as exposed to short-term peaks and troughs,
causing limited impact to the NAV.
"We are delighted to announce that during the period
construction at Cumberhead was substantially completed. All
turbines achieved energisation by the quarter-end, which will bring
significant renewable energy to Kimberly-Clark and its many UK
leading consumer brands, helping them decarbonise their UK business
and transition to net zero."
For further information please contact:
Octopus E nergy Generation (Investment Manager) Via Buchanan
Chris Gaydon, David Bird
Peel Hunt (Broker)
Liz Yong, Luke Simpson, Huw Jeremy (Investment
Banking)
Alex Howe, Chris Bunstead, Ed Welsby, Richard Harris,
Michael Bateman (Sales) 020 7418 8900
Buchanan (Financial PR)
Charles Ryland, Hannah Ratcliff, George Beale 020 7466 5000
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
closed-ended investment company incorporated in England and Wales
focused on providing investors with an attractive and sustainable
level of income returns, with an element of capital growth, by
investing in a diversified portfolio of renewable energy assets in
Europe and Australia. ORIT's investment manager is Octopus Energy
Generation.
Further details can be found at
www.octopusrenewablesinfrastructure.com
About Octopus Energy Generation
Octopus Energy Generation is driving the renewable energy agenda
by building green power for the future. Its London-based, leading
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 12-year track record
with approximately GBP6.0 billion of assets under management (AUM)
(as of January 2023) across 13 countries and total 3.2GW. These
renewable projects generate enough green energy to power 2 million
homes every year, the equivalent of taking over 800,000 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
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