Capital Allocation Update & Share Buybacks
4 June 2024
LEI: 213800B81BFJKWM2JV13
Octopus Renewables Infrastructure Trust plc
("ORIT" or the "Company")
Capital Allocation Update & Share Buyback Programme
As noted in the Company's 2023 full-year results, the Board is very aware that discounts to net asset value ("NAV") in the investment companies sector continue to be material and is cognisant of the need both to ensure a sound approach to capital allocation and to manage the discount to NAV at which the Company's shares trade, to maximise shareholder returns. The Board regularly considers all options for capital allocation and has to date prioritised the reduction of short-term borrowings.
In 2023, ORIT launched a capital recycling programme, through which the Company has made two successful disposals. In December 2023 ORIT completed the sale of the Krzecin and Kuslin wind farms (totalling 59MW) in Poland, realising net proceeds of approximately £92 million (7% of the total value of all investments as at 30 September 2023) - a 21% premium over the holding value of the assets at the time of sale. The sale resulted in a +2.8 pence per Ordinary Share uplift over the holding NAV before the disposal and the realisation of an IRR of around 30% over the lifetime of ORIT's investment. ORIT acquired these assets in the construction phase in October 2021, before managing the construction and bringing the wind farms into operation in 2022. The exit of these assets at a NAV-accretive value demonstrated the Company's conservative valuation approach and ORIT's ability to add value through managing construction risk.
In addition, in December 2023 ORIT elected to terminate its option to acquire 175MW of ready-to-build solar projects in Spain. ORIT had originally entered into a conditional acquisition agreement over the sites in 2020, however, having reassessed the projects on a risk-adjusted basis and considering the Company's approach to capital allocation, exiting the option at a value above the holding value was a more attractive proposition than committing to the construction. In doing so, ORIT realised a net gain of £3.0 million over the €2.0 million (c.£1.7 million) initial deposit, or approximately £1.5 million over the £3.2 million holding valuation before exit.
To date the proceeds of these asset disposals have been used by the Company to pay down short-term borrowings. However, the Board notes the significant discount at which the Company's shares are currently trading compared to their NAV and believes, particularly in light of the valuations achieved through the asset sales to date and the work in progress within ORIT's capital recycling programme, that the current share price does not accurately reflect the value of the Company's portfolio.
Accordingly, the Board today announces it will initiate a share buyback programme with an initial tranche of up to £10 million (the "Share Buyback Programme"). The Share Buyback Programme is underpinned by the Company's existing cash resources, strong portfolio cashflow generation and the ongoing capital recycling programme.
The Board evaluates capital allocation on an ongoing basis and with further sale proceeds from the capital recycling programme expected to be received during 2024, the Board will continue to consider all options for further capital allocation, including share buybacks and selected investment into the existing portfolio, depending on prevailing market conditions. Repayment of short term debt remains a strong capital allocation priority for the Company. Alongside this, 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.
Further Information about the Share Buyback Programme
The Company has engaged Peel Hunt LLP as buyback agent in relation to the Share Buyback Programme. The purpose of the Share Buyback Programme is to reduce the issued share capital of the Company and therefore the repurchased Ordinary Shares will either be held in Treasury or cancelled, either immediately or at a later date. The Share Buyback Programme will commence shortly and has no set end date.
Purchases under the Share Buyback Programme will initially be made pursuant to the authority granted to the Company at the annual general meeting held on 16 June 2023 for purchases of Ordinary Shares by the Company in the market for up to 14.99% of the Company's issued share capital. The Company's next annual general meeting will take place on 19 June 2024 (the "2024 AGM") at which the Company will seek shareholders' approval to renew the authority to repurchase shares, and if approved, purchases from the date of the 2024 AGM shall take place pursuant to the renewed authority.
A buyback of Ordinary Shares on any trading day could represent a significant proportion of the daily trading volume in the Ordinary Shares on the London Stock Exchange (and could exceed the 25% limit of the average daily trading volume of the preceding 20 business days as referred to in the Commission Delegated Regulation (EU) No. 2016/1052 on buyback programmes (as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018)).
The Company will announce any market repurchase of Ordinary Shares on the business day following the calendar day on which the repurchase occurred.
The Company is satisfied that it is not currently in a closed period, nor is it party to any inside information which has not previously been disclosed via a Regulatory Information Service.
There is no guarantee that the Share Buyback Programme will be implemented in full or that any Ordinary Shares will be bought back by the Company.
For further information please contact:
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Octopus Energy Generation (Investment Manager) Chris Gaydon, David Bird
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Via Buchanan |
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Peel Hunt (Broker) Liz Yong, Luke Simpson, Huw Jeremy (Investment Banking) Alex Howe, Chris Bunstead, Ed Welsby, Richard Harris, Michael Bateman (Sales)
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020 7418 8900 |
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Buchanan (Financial PR) Charles Ryland, George Beale
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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 premium-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
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
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