TIDMORIT
RNS Number : 4044I
Octopus Renewables Infra Trust PLC
07 August 2023
7 August 2023
LEI: 213800B81BFJKWM2JV13
Octopus Renewables Infrastructure Trust plc
("ORIT" or the "Company")
Q2 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 30 June 2023 on a cum-income basis was GBP608.2 million or
107.67 pence per Ordinary Share (31 March 2023: GBP608.5 million or
107.73 pence per Ordinary Share).
Pence per
Ordinary
Share*
Unaudited NAV as at 31-Mar-23 107.73
========================================= ==========
Power Prices and Green Certificates 4.78
Inflation and FX -0.54
Changes in Discount
Rates -2.59
Q1 2023 Dividend -1.45
Other movements -0.26
Unaudited NAV as at 30-Jun-23 107.67
========================================= ==========
*Totals may not sum exactly due to rounding
Power Prices and Green Certificates
In the period since 31 March 2023, forecast wholesale power
prices across the UK and Europe have decreased in the short to
medium term, with average longer-term forecasts increasing versus
those used in the prior quarter. Green certificates (Renewable
Energy Guarantees of Origin ("REGOs") in the UK and Guarantees of
Origin ("GoOs") in European markets) are sold by generators to
guarantee that purchased electricity is from a 'green' source.
Prices for green certificates have seen a significant increase over
the past few years which had not previously been reflected in the
valuations but this has now been updated in line with third-party
forecasts. Further detail on the price forecasts used in the
valuations of the Company's portfolio of assets will be included in
the Interim Report covering the six months ended 30 June 2023.
ORIT benefits from a high proportion of fixed or contracted
revenue (78% over the 24-month period to 30 June 2025, as at 30
June 2023), which limits ORIT's exposure to variability in
short-term pricing to some assets located in Sweden, Finland and
the UK. Assets located outside these jurisdictions (France,
Germany, Ireland and Poland) benefit either from 100% fixed pricing
over the 2023 to 2025 period and beyond or are subject to prices
capped at levels below the forecast market prices.
The net valuation impact of updating for recent power price and
green certificate forecasts was an increase of +GBP27.0 million or
+4.8 pence per Ordinary Share.
Inflation and FX
Since the end of Q1 2023, short-term inflation assumptions have
remained broadly stable across the European markets where the
Company's portfolio of assets is located, with the exception of
Poland where inflation has continued to increase. In the UK,
inflation forecasts have softened with consensus reports, as at May
2023, reporting decreases versus the prior forecast period.
Updating the most recent inflation forecasts(1) resulted in a net
decrease in the valuation of GBP1.9 million.
The Company benefits from significant levels of inflation
protection via revenue from government support schemes in the UK,
France and Poland, with approximately 58% of the revenue forecast
to be received by the Company's current portfolio of assets in the
ten years ending 30 June 2034 now explicitly inflation-linked.
During the quarter, sterling appreciated against the euro,
leading to a negative valuation impact of GBP5.3 million. The
Investment Manager regularly reviews the level of euro exposure and
utilises hedges, with the objective of minimising variability in
shorter term cash flows. After the impact of currency hedges held
at Company level are taken into account, the loss on foreign
exchange reduces to GBP1.2 million.
The combined impact of inflation and foreign exchange movements
was a valuation decrease of GBP3.1 million or 0.5 pence per
Ordinary Share.
Discount rates
In line with the higher interest rate environment in the UK
where interest rates, including long-term expectations, have
increased over the past 6 months, the Board and the Investment
Manager consider it appropriate to reflect a further increase of
0.5% in the discount rates applied to UK assets. The increase to
the UK discount rates resulted in a valuation decrease of -GBP14.6
million or -2.6 pence per Ordinary Share. No changes to non-UK
discount rates have been made, reflecting the more stable long term
rate expectations in those markets.
This increase in UK discount rates was partially offset by the
reduction in the risk premium applied to assets in construction as
they meet specific milestones, resulting in a weighted average
levered equity discount rate implied across the portfolio of
7.7%.
Other movements
A decrease of GBP1.5 million was recorded from other valuation
movements.
This reflects the net present value of future cashflows being
brought forward from 31 March 2023 to 30 June 2023, offset by the
Company's operating and transaction costs, and net performance in
the underlying portfolios.
Construction at the c.67MW Breach Solar Farm in Cambridgeshire,
UK is progressing well with Civil Works completed by 30 June 2023,
and is expected to achieve operational status on schedule during Q4
2023. Progress against construction milestones has resulted in a
valuation gain of +GBP0.3 million or +0.1 pence per Ordinary Share
in the quarter through reduction in the risk premium applied to the
discount rate.
Dividend
The interim dividend (-GBP8.2 million or -1.45 pence per
Ordinary Share) in respect of Q1 2023 was also paid in the quarter,
in-line with the Company's stated dividend target for the financial
year from 1 January 2023 to 31 December 2023 of 5.79 pence per
ordinary share(2)
Notes
1 The 30 June 2023 valuation includes (i) recent consensus UK
inflation forecasts published by HM Treasury in May 2023; and (ii)
inflation forecasts for the relevant European countries published
by the European Commission in May 2023.
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.
Factsheet
The Company's Q2 2023 factsheet is available to download at:
https://octopusrenewablesinfrastructure.com/investors/
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 March 2023) across 13 countries and total 3.2GW. These
renewable projects generate enough green energy to power 2.3
million homes every year, the equivalent of taking over 1.2 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
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