Wind and solar assets investor Octopus Renewables Infrastructure Trust (ORIT) reported a ‘very strong’ total shareholder return for the seven and a half months since its incorporation in mid-October, even after the pandemic-induced economic slump drove a material fall in power prices.
Furthermore, ORIT insisted it is pursuing a renewable energy assets pipeline of ‘around £3.8 billion’ and assured its portfolio benefits from ‘a high level of fixed, contracted revenues which should offer some downside protection should there be a prolonged period of low power prices’.
DEPLOYMENT DRAG
A compelling play on the global move towards a carbon neutral future, ORIT raised £350 million through an oversubscribed IPO in December priced at 100p.
While net asset value per share reduced from 98p at IPO to 97.6p as of 30 June, this reflected the slightly slower than anticipated deployment of funds, which meant returns from investments were lower than the company’s costs for the period.
‘However, despite the reduction in energy demand and drops in short and medium term power prices due to the COVID-19 pandemic, the beneficial timing of our IPO and recent transactions has enabled the vast majority of the recent energy price falls to be incorporated into the prices paid for investments, shielding the company from significant valuation falls that have been seen across the market,’ explained ORIT.
‘Total shareholder return has been “very strong” delivering a 12.2% return over the six and a half months from IPO,’ added ORIT, whose shares traded at a plump 15% premium to NAV as at 30 June and remain north of the issue price at 109.5p.
On 21 August, ORIT paid an interim dividend of 1.06p for the period from IPO to 30 June, in line with the dividend target at IPO of a 3% annualised yield, equating to 3.18p for the 2020 financial year. ORIT is targeting an annualised yield of 5% for fiscal 2021 and expects to pay dividends out quarterly from now on too.
REASSURING DIVERSITY
Focused on providing an attractive and sustainable level of income returns, with an element of capital growth, ORIT is amassing a diversified portfolio of renewable energy assets in Europe and Australia.
ORIT’s ability to invest in the UK, wider Europe and Australia allows the trust to take advantage of reduced correlation in power prices. It has the ability to invest in a range of technologies, principally solar and onshore wind, while its broad geographical scope diversifies the influence of weather patterns and prevents reliance on any single regulatory regime for renewables.
In March, ORIT acquired the Ljungbyholm Wind Farm in Sweden from OX2, a leading developer and constructor of renewable energy projects in Scandinavia, as well as a portfolio of eight subsidised, operational solar PV sites in the UK whose performance was boosted by the UK’s sunniest month on record in May.
After the half-year end, ORIT also invested in a portfolio of operating solar PV assets across France which benefit from feed-in tariffs and will therefore receive a fixed price for their energy output for the next 12.5 years.
THE CHAIRMAN’S TAKE
Phil Austin, chairman of ORIT, was ‘very pleased to report that solid progress has been made since IPO, deploying 59% of net proceeds as at 30 June 2020, and following the latest acquisition of solar PV assets the company has now committed 75% of net IPO proceeds.'
Austin insisted the board ‘remains confident that despite the uncertainty caused by the COVID crisis there continue to be many opportunities that are attractive to ORIT and consistent with its investment policy.
‘ORIT is currently pursuing a pipeline of around £3.8 billion and we are confident that the balance of IPO proceeds will be fully committed during the autumn.’
