Proposed Combination - Aquila European Renewables
22 December 2023
LEI: 213800B81BFJKWM2JV13
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Octopus Renewables Infrastructure Trust plc
("ORIT" or the "Company")
Proposed Combination with Aquila European Renewables plc
Since the Company's IPO on the London Stock Exchange ("LSE") in December 2019, ORIT has successfully pursued a strategy of investing in renewable energy assets across the UK and Europe, raising aggregate equity capital of £574 million and achieving net asset value ("NAV") total return of 28 per cent. to date1.
The Board of ORIT believes there is now a compelling logic to create one of the largest LSE listed diversified renewable energy investment trusts, through the combination of ORIT and Aquila European Renewables plc ("AERI") (the "Proposed Combination"). The Proposed Combination would be effected by way of a scheme of reconstruction pursuant to section 110 of the Insolvency Act 1986 (the "Section 110 Scheme"). The Board of ORIT believes there is a strong rationale for shareholders of both companies, and that the Proposed Combination could deliver the following benefits:
· A further diversified portfolio of European renewable energy assets, with a combined portfolio net asset value ("NAV") of almost £1 billion and gross asset value ("GAV") of c.£1.6 billion2;
· Complementary portfolios offering increased geographic diversification, with almost no overlap between the two;
· Greater technological diversification, with the combined portfolio including onshore wind, offshore wind, solar PV, hydro, green hydrogen, battery and developers (including floating offshore wind);
· Substantial portfolio of operating assets combined with exposure to construction and development expected to support NAV growth;
· Opportunities to extend ORIT's current capital recycling programme;
· Exposure to ORIT's growing and attractive dividend, with a targeted increase for FY 2023 of 10.5 per cent. in-line with inflation (CPI) and a progressive dividend policy3;
· Creation of one of the largest, LSE-listed diversified renewable energy investment trusts, a FTSE 250 constituent with a combined market capitalisation of c.£745 million4 and expected to offer greater secondary market liquidity;
· Scope to access global equity and debt capital markets more efficiently;
· Portfolio management carried out by ORIT's investment manager, Octopus Energy Generation, a specialist renewable energy fund management team of over 120 professionals; and
· Access to a significant pipeline of projects sourced by Octopus Energy Generation.
The Board of ORIT has sought on several occasions during 2023 to engage with the Board of AERI, with a view to effecting a combination of ORIT and AERI. Approaches were initially made in March and May 2023 ahead of AERI's 2023 annual general meeting and continuation vote, and most recently in November 2023. Over that period, there was no material engagement from AERI on the Proposed Combination, having delayed a substantive response to ORIT's November approach into 2024.
Against this backdrop and the strong rationale for the Proposed Combination, over the past few days, ORIT has consulted with a number of AERI shareholders, receiving support for the Boards of ORIT and AERI to enter substantive discussions regarding the Proposed Combination. Since the shareholder consultation, ORIT has again contacted the Board of AERI to seek to progress discussions regarding the Proposed Combination and looks forward to further expected interaction over the coming weeks.
Further details
As at 21 December 2023, ORIT's shares traded at a 16.3 per cent. discount to its last reported NAV and AERI's shares traded at a 29.3 per cent. discount to its last reported NAV5. The Board of ORIT anticipates that the terms of the Proposed Combination would be set on a FAV6 for FAV basis, to be agreed between ORIT and AERI.
If heads of terms are agreed with AERI, implementation of the Proposed Combination through the Section 110 Scheme would require approval by each company's shareholders, resulting in the voluntary liquidation of AERI and the rollover of its assets into ORIT in exchange for the issue of new shares of ORIT to holders of AERI shares. Octopus Energy Generation will act as the investment manager to the enlarged company.
In accordance with customary practice for schemes of reconstruction pursuant to section 110 of the Insolvency Act 1986 involving investment companies, the City Code on Takeovers and Mergers is not expected to apply to the Proposed Combination via the Section 110 Scheme.
It is emphasised that there can be no certainty that engagement will progress, that heads of terms will be agreed or whether the Proposed Combination will take place at all. Should heads of terms for the Proposed Combination be agreed, further details and a proposed timetable of the Section 110 Scheme will be announced. Agreement of heads of terms for the Proposed Combination will be subject, inter alia, to the Board of ORIT and Octopus Energy Generation completing further due diligence on AERI and its portfolio.
The person responsible for making this announcement is Nadezda Weissert of Apex Listed Companies Services (UK) Limited, the Company Secretary.
Notes:
1. As at close on 21 December 2023. Total returns in sterling, including dividends reinvested.
2. Unaudited net asset values of ORIT and AERI as at 30 September 2023 of £604.6 million and €389.6 million respectively. Unaudited gross asset values of ORIT and AERI as at 30 September 2023 of £1.1 billion and €587.2 million respectively.
3. Target dividend for the current financial year ending 31 December 2023 (FY 2023) of 5.79p per ordinary share, of which 4.34 pence per ordinary share has been declared and paid to date via three quarterly interim dividends. 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.
4. Combined market capitalisation based on individual market capitalisations of ORIT and AERI as at close on 21 December 2023.
5. Derived from ORIT's closing ordinary share price of 89.6 pence on 21 December 2023 and ORIT's unaudited NAV per ordinary share as at 30 September 2023 (107.02 pence) and AERI's Euro denominated closing ordinary share price (AERI LN) of 72.5 cents on 21 December 2023 and AERI's unaudited NAV per ordinary share as at 30 September 2023 (102.61 cents).
6. "FAV" denotes Formula Asset Value, being NAV following adjustments to be agreed between ORIT and AERI.
For further information please contact:
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Octopus Energy Generation (Investment Manager) Chris Gaydon, David Bird |
Via Buchanan |
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Peel Hunt (Financial Adviser and Broker) Liz Yong, Luke Simpson, Huw Jeremy (Investment Banking) Michael Nicholson, Ed Lowe, Ed Beazley (M&A) |
020 7418 8900 |
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Buchanan (Financial PR) Charles Ryland, George Beale, Sam Adams |
020 7466 5000 |
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Apex Listed Companies Services (UK) Limited (Company Secretary) |
020 3327 9720 |
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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 £6.0 billion of assets under management (AUM) (as of September 2023) across 16 countries and total 3.3GW. These renewable projects generate enough green energy to power 2.4 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
Other notices
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated by the Financial Conduct Authority in the UK, is acting exclusively for ORIT and no one else in connection with the matters described in this announcement and will not be responsible to anyone other than ORIT for providing the protections afforded to clients of Peel Hunt nor for providing advice in connection with the matters referred to herein. Neither Peel Hunt nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Peel Hunt in connection with this announcement, any statement contained herein or otherwise.
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