Q1 2023 Factsheet and Net Asset Value
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 £608.6 million or 107.7 pence per Ordinary Share (31 December 2022: £618.3 million or 109.4 pence per Ordinary Share).
|
|
Pence per Ordinary Share |
|
|
Audited NAV 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 £23.5 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 (€) |
Dec-22 |
132 |
84 |
69 |
|
Mar-23 |
61 |
61 |
55 |
|
|
Finland, Wind (€) |
Dec-22 |
108 |
46 |
38 |
|
Mar-23 |
47 |
41 |
37 |
|
|
UK, Solar / Wind Average (£) |
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 £7.8 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 -£3.0 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 £2.3 million.
The net impact of updating for forward prices at 31 March 2023 (-£23.5 million), removing the additional forward price discount (+£7.8 million), the reduction in the EGL liability (+£2.3 million) and minor updates to long term pricing (-£3.0 million), is a net valuation decrease of -£16.4 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 -£3.0 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 +£2.3 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 +£14.5 million.
Other movements
A gain of +£15.0 million or +2.7 pence per Ordinary Share was recorded from other valuation movements. Of this, £11.0 million reflects the net present value of future cashflows being brought forward from 31 December 2022 to 31 March 2023. The remaining £4.0 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 (-£7.4 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 £5m 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:
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Octopus Energy Generation (Investment Manager) Chris Gaydon, David Bird
|
Via Buchanan |
|
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 |
|
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 £6.0 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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