TIDMORIT
RNS Number : 1367N
Octopus Renewables Infra Trust PLC
21 September 2023
21 September 2023
LEI: 213800B81BFJKWM2JV13
OCTOPUS RENEWABLES INFRASTRUCTURE TRUST PLC
Interim Results to 30 June 2023
Octopus Renewables Infrastructure Trust plc ("ORIT" or the
"Company") is pleased to announce its unaudited interim results for
the period from 1 January 2023 to 30 June 2023.
Key Points
As at 30 June 2023 As at 31 December
2022
(unaudited) (audited)
------------------------------------- ------------------- ------------------
NAV per Ordinary Share (p) 107.67 109.44
Ordinary Share price (p) 92.50 100.00
Target dividend per Ordinary
Share (p) FY2023(2) 5.79 5.24
Net asset value (GBP million) 608 618
Gross asset value (GBP million)(1,3) 1,120 1,073
Total value of all investments
(GBP million) 1,308 1,304
-- Total shareholder return and NAV total return in the period
from IPO in December 2019 of 6.1% (December 2022: 11.6%) and 27.0%
(December 2022: 25.9%) respectively(1)
-- Total shareholder return and NAV total return in the six
months ended 30 June 2023 of -4.9% (6 months to June 2022: -0.2%)
and 0.9% (6 months to June 2022: +11.3%), respectively(1)
-- Increased target dividend to 5.79p for FY 2023, representing
an increase of 10.5% over FY 2022 in line with inflation (CPI)(2).
Targeted dividends are expected to be fully covered by the
operating portfolio's cashflows .
-- In February 2023, the Company successfully refinanced and
increased its multi-currency RCF to GBP270.8m (which was previously
GBP150.0m committed, pre-accordion) at an improved margin of
2.0%.
-- Sarim Sheikh was appointed as an Independent Non-Executive
Director of the Company with effect from 1 June 2023. Mr. Sheikh
has more than 25 years of working in the energy sector across
Europe, Latin America, Africa and Asia.
Operational Highlights
-- The Company continued to diversify its sources of revenue and
added further long-term growth opportunities through the completion
of two transactions during the period.
-- In January 2023 ORIT entered the battery storage market with
the acquisition of a 50% stake in the Woburn Road, a 12MW/24MWh
ready-to-build battery storage project in Bedfordshire, UK.
-- In April 2023 ORIT agreed to invest up to GBP5m into HYRO
Energy Limited (HYRO), a new joint venture between ORIT, Sky (a
fund managed by Octopus Energy Generation) and renewable energy
company, RES. HYRO has been established to develop green hydrogen
electrolysis projects and intends to develop c.700MW of green
hydrogen electrolyser capacity by 2030.
-- During the period the Company completed construction works at
the Cumberhead Onshore Wind Farm in Scotland, with the site fully
operational from 31 March 2023. Significant progress has been made
on the construction of the Breach Solar Farm, which is expected to
complete by the end of September, with energisation expected in Q4
2023.
-- The Company entered into an inflation-linked Power Purchase
Agreement (PPA) with Iceland Foods over the electricity generated
at the Breach Solar Farm. The PPA will cover 14% of Iceland Foods'
electricity needs for its UK stores and will reduce Iceland's
emissions by nearly 22,955 tonnes of CO2 a year, equivalent to
removing 12,590 petrol cars and planting 112,592 trees every
year.
-- At the SPV level, the Company's operational portfolio
generated 578GWh (6 months to June 2022: 403GWh) of electricity,
generating revenue of GBP61.7 million (6 months to June 2022:
GBP38.4 million) in 6 months to June 2023.
-- 76% of forecast operational revenue is fixed (30 June 2022:
58%) for the next two years (up to June 2025).
-- Approximately 55% of the revenues forecast in the period to
30 June 2033 are now explicitly inflation linked (with reference to
UK RPI, French inflation and Polish CPI) (30 June 2022: 51%).
-- As at 30 June 2023, the portfolio comprised 38 assets across
seven countries (UK, France, Ireland, Finland, Poland, Sweden and
Germany) and three technologies, as well as developer investments.
Total capacity, excluding conditional acquisitions, of 668 MW (30
June 2022: 583 MW).
-- Once fully invested, the portfolio has the potential to power
the equivalent of 536,000 homes with clean energy, an estimated
598,000 tonnes of carbon emissions avoided, up from 521,000 homes
and 482,000 tonnes of carbon in 2022, respectively.
Post Period End
-- ORIT has agreed to invest up to GBP2m to set up and fund a
new development business, focused on creating new ground-mounted
solar PV and co-located battery storage assets in the UK. ORIT will
own 100% of the new company, which will benefit from exclusive
development services from BLC Energy Limited ("BLCe").
Phil Austin, Chairman of Octopus Renewables Infrastructure Trust
plc, commented:
"The period under review was a successful half year for ORIT,
considering the volatile market conditions that have affected the
whole subsector. The Company brought another large project through
construction, adding a significant amount of much needed renewable
energy to the Grid. Additionally, ORIT secured a new corporate PPA
with Iceland in 2023, continuing its track record of helping major
corporations transition to net zero, whilst assisting the
decarbonisation ambitions of the UK and Europe.
ORIT has continued to make selected strategic investments from
its pipeline, which have required limited capital commitment whilst
diversifying its portfolio and revenue streams into new areas such
as green hydrogen. The Company's exposure to developers offers both
proprietary pipeline and potential for NAV accretion through
entering into projects at an earlier stage. ORIT's clean energy
portfolio has ensured the avoidance of c.598,000 tonnes of carbon
emissions; a further 16,000 tonnes from last year, through its
energisation of key projects in the portfolio."
Results presentation today
There will be a presentation for sell side analysts at 9.00 a.m.
today. Please contact Buchanan for details on
octopus@buchanan.uk.com
For further information please contact:
Octopus Energy 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:
1. These are alternative performance measures. Definitions of
these and other performance measures used by the Company, together
with how these measures have been calculated, are set out in the
Interim Report.
2. The dividend target stated is a target only and not a profit
forecast. There can be no assurance that it 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.
Accordingly, potential investors should not place any reliance on
this target in deciding whether or not to invest in the Company and
should decide for themselves whether or not the target dividend is
reasonable or achievable. Investors should note that references 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. The first interim dividend
of 1.44 pence per Ordinary Share in respect of the period from 1
January 2023 to 31 March 2023 was paid in June 2023, and the second
interim dividend of 1.45 pence per Ordinary Share in respect of the
period from 1 April 2023 to 30 June 2023 was announced and paid
following the period end.
3. A measure of total asset value including debt held in
unconsolidated subsidiaries, but excluding any outstanding equity
or debt commitments.
4. Total Shareholder return since IPO stated in sterling,
including dividends reinvested, from 9 December 2019 to 30 June
2023 and 31 December 2022 respectively.
5. Fully covered by cash generated in the portfolio of assets,
after deducting holding company costs and debt service. Dividend
cover calculation based on dividends declared for the period.
6. Excludes conditional acquisitions.
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 ("OEGEN") 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 billion of assets under management (AUM)
(as of March 2023) across 15 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
About the Company
Octopus Renewables Infrastructure Trust plc ("ORIT" or the
"Company") is a closed-ended investment company incorporated in
England and Wales.
The Company's investment objective is to provide 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 classifies itself as an impact fund with a core impact
objective of accelerating the transition to net zero through its
investments. ORIT's ordinary shares were admitted to the Official
List of the Financial Conduct Authority and to trading on the
premium listing segment of the main market of the London Stock
Exchange on 10 December 2019.
ORIT is managed by one of the largest renewable energy investors
in Europe, Octopus Energy Generation (the "Investment
Manager").
Highlights
For the six months ended 30 June 2023 (unaudited)
-4.9% +0.9% 5.79p +6.1%
Total YTD shareholder YTD NAV total return Target Dividend per Total shareholder
return(1 3) (1 2 3) Ordinary Share for return since IPO (1.7%
(6 months to June (6 months to June FY 2023 per annum) (1 3)
2022: 2022: +11.3%) (FY 2022: 5.24p) (December 2022(4)
-0.2%) : +11.6%, 3.6% per
annum)
+27.0% 107.7p GBP608m GBP1,120m
NAV total return NAV per Ordinary Net Asset Value ("NAV") Gross Asset Value
since IPO (7.0% per Share(2) ("GAV")(1 5)
annum)(1 2 3 4)
(December 2022: 109.4p) (December 2022: GBP618m)
(December 2022: +25.9%, (December 2022: GBP1,073m)
7.8% per annum)
GBP1,308m 1,801GWh 598k 536k
Total value of all Potential Renewable Estimated tonnes Equivalent homes
investments(1 6) Electricity(7) of carbon avoided(7) powered by clean energy(7)
(December 2022: GBP1,304m) (December 2022: 1,740GWh) (December 2022: 580k) (December 2022: 522k)
(1) These are alternative performance measures
(2) The NAV as at 30 June 2023 is calculated on the basis of
564,927,536 Ordinary Shares in issue
(3) Total returns in sterling, including dividends
reinvested
(4) Restated from December 2022 KPI reported in the FY22 Annual
Report
(5) A measure of total asset value including debt held in
unconsolidated subsidiaries
(6) Total asset value including total debt and equity
commitments
(7) All metrics are calculated based on an estimated annual
production of the whole portfolio once fully constructed. June 23
numbers exclude the contingent acquisition in Spain following the
re-negotiation of the deal.
Alternative Performance Measures ("APMs")
The financial information and performance data highlighted in
footnote 1 above are the APMs of the Company. Definitions of these
APMs together with how these measures have been calculated can be
found in the Interim Report.
Portfolio at a glance
Average asset
Capacity life remaining
Technology Country Sites (MW)* (years) Status Key information
-------------- -------- ----- -------- -------------- ------------ --------------------
Onshore wind Sweden 1 48 28.0 Operational Corporate PPA
-------- ----- -------- -------------- ------------ --------------------
France 1 24 29.4 Operational French CfD
----------------------- ----- -------- -------------- ------------ --------------------
Operational as of
UK 1 50 29.8 Operational Q1 2023
----------------------- ----- -------- -------------- ------------ --------------------
Fixed pricing until
UK 1 23 28.0 Operational end of 2025
----------------------- ----- -------- -------------- ------------ --------------------
Polish CfD from Q3
Poland 2 59 28.2 Operational 2023
----------------------- ----- -------- -------------- ------------ --------------------
Germany 1 35 29.3 Operational German CfD
----------------------- ----- -------- -------------- ------------ --------------------
Fixed pricing until
Finland 2 71 28.3 Operational end of 2025
----------------------- ----- -------- -------------- ------------ --------------------
Offshore wind UK 1 42 25.5 Operational ROC Subsidised
-------------- -------- ----- -------- -------------- ------------ --------------------
Solar PV UK 8 123 24.9 Operational ROC Subsidised
-------- ----- -------- -------------- ------------ --------------------
Expected to be
operational in H2
UK 1 67 40.0 Construction 2023
----------------------- ----- -------- -------------- ------------ --------------------
France 14 120 28.9 Operational FiT Subsidised
----------------------- ----- -------- -------------- ------------ --------------------
Conditional Expected to be
Spain 4 175 35.0 Acquisition operational in 2024
----------------------- ----- -------- -------------- ------------ --------------------
200MW expected to
Conditional be operational in
Ireland 5 242 40.0 Acquisition H2 2023
----------------------- ----- -------- -------------- ------------ --------------------
Expected to be
Battery UK 1 6 35.0 Construction operational in 2024
-------------- -------- ----- -------- -------------- ------------ --------------------
Developers Ireland n/a n/a n/a n/a Floating offshore
wind
-------- ----- -------- -------------- ------------ --------------------
UK n/a n/a n/a n/a Onshore wind
----------------------- ----- -------- -------------- ------------ --------------------
UK n/a n/a n/a n/a Hydrogen
----------------------- ----- -------- -------------- ------------ --------------------
Finland n/a n/a n/a n/a Onshore wind/Solar
PV
----------------------- ----- -------- -------------- ------------ --------------------
Acquired at construction stage
* Pro-rated by ownership
Portfolio at a glance
Onshore wind
Offshore wind
Solar
Battery
Developer
Total number of assets(8) 38
Total capacity(8) 668 MW
(8) Excludes conditional acquisitions
Chair's Statement
Philip Austin MBE
Chair,
Octopus Renewables Infrastructure Trust plc
On behalf of the Board, I am pleased to present the interim
report for Octopus Renewables Infrastructure Trust plc (the
"Company") for the period from 1 January 2023 to 30 June 2023 (the
"Interim Report").
During the first half of 2023 the Company delivered a positive
NAV return of 0.9%, demonstrating resilience despite unfavourable
conditions in the financial markets, relatively low wind speeds and
falling power prices. The high levels of fixed revenues in our
portfolio have protected us from declining power prices in the
market and supported continued strong cash generation. Net cash
flows from operating activities totalled GBP17.8 million in the
period representing dividend cover of 1.1x, net of debt principal
repayments. Excluding scheduled debt amortisation the dividend
cover was 1.7x.
In May 2023 the Company announced the appointment of a new
independent non-executive director, Sarim Sheikh, who joined the
Board with effect from 1 June 2023. Sarim has over 25 years of
experience in the renewables and energy industry working with
General Electric and Shell and is a passionate advocate for energy
transition. I have no doubt that he will be an extremely valuable
member of the Board and we very much look forward to working with
him.
Investment Activity
The Company continued to build on its track record of leadership
and innovation, investing in new business lines to diversify and
broaden its portfolio and generate new options for future
profitable growth. It completed on its first battery storage
investment, a 50% stake in the 12MW Woburn Road battery
construction project in Bedfordshire, UK, and committed to invest
up to GBP5 million into a joint venture, HYRO Energy Limited
("HYRO"), established to develop green hydrogen electrolysis
projects across the UK. HYRO intends to develop c.700MW of green
hydrogen electrolyser capacity by 2030 and its strategy is aligned
with the UK's wider decarbonisation ambitions, with the UK
Government targeting the construction of at least 5GW of green low
carbon hydrogen capacity by 2030.
In keeping with its active approach to power price risk
management the Company also entered into a 10-year power purchase
agreement ("PPA") over the electricity to be generated at Breach
Solar Farm, a 67MW solar PV project currently under construction in
Cambridgeshire, UK. The PPA provides ORIT with a UK inflation (CPI)
indexed price for 100% of Breach's production each year and
provides protection against power prices and inflation.
During the period the Company also secured an amendment and
extension to the existing RCF from a group of four lenders with the
total committed facility increasing to GBP271 million. The
three-year multi-currency facility includes an additional
uncommitted accordion, allowing it to be increased by up to GBP150
million.
Dividends
In line with the Company's progressive dividend policy, the
Board announced an increase in the target dividend to 5.79 pence
per Ordinary Share for 2023, an increase of 10.5% in line with CPI.
The fourth interim dividend of 1.31 pence per Ordinary Share in
respect of the period to 31 December 2022 was announced and paid
during the period.
The first interim dividend of 1.44 pence per Ordinary Share in
respect of the period to 31 March 2023 was paid in May 2023, and
the second, of 1.45 pence per Ordinary Share was announced and paid
following the period end. The dividend for the first half of the
year was fully covered, however dividend cover of 1.1x (after debt
principal repayments) was lower than expected due to the fall in
power prices and below budget output of the wind portfolio in the
first half. In the second half of the year operational revenues and
dividend cover are expected to be boosted by the completion of the
Irish solar acquisitions, as well as including a full six months of
production from the Cumberhead wind farm. The Company is on track
to deliver its dividend target for financial year 2023 of 5.79
pence per Ordinary Share and expects the dividend to be fully
covered by cashflows arising from its portfolio of assets.
Portfolio
Output for the operational performance was below budget in the
period due to unusually low wind speeds, mitigated slightly by the
performance of the solar portfolio. Revenue and EBITDA generation
were also below budget due to the reduced output and significant
drops in power prices, especially in the Nordics, since the end of
2022. However, the output and financial performance show the
significant growth in the portfolio when compared to the same
period last year, with revenues and EBITDA increasing by 61% and
32% respectively.
During the period the Company completed construction works at
the Cumberhead Onshore Wind Farm in Scotland, with the site fully
operational from 31 March 2023. Significant progress has been made
on the construction of the Breach Solar Farm, which is expected to
complete by the end of September, with energisation expected in Q4
2023 subject to National Grid completing connection works on
schedule.
Discount Management
Share prices across the broad infrastructure investment fund
sector are depressed and the Company is trading at a discount to
NAV. Total shareholder return in the period was -4.9%. The Board is
closely monitoring the discount, which at present is more
favourable than most of the renewables peer group, and at this time
the Board continues to believe that there are more attractive NAV
accretive opportunities than buy-backs available for investors; for
example, through repaying debt and potentially delivering capital
growth from development and construction stage investments. The
Board will continue to review all options for managing the discount
to NAV.
Outlook
Despite the challenging current environment, the tailwinds for
the sector remain very strong: there are requirements for net zero,
widespread public support for renewables, and enhanced desires for
better energy security. To capitalise on these tailwinds, and to
re-balance the portfolio towards assets that offer greater
opportunities for capital growth, the Investment Manager has been
reviewing the portfolio to identify candidates for asset sales. The
Company is considering the sale of a small number of assets and is
seeing strong buyer appetite which could result in cash proceeds
being realised and available for reinvestment in the coming months.
Looking further ahead, we expect to be able to raise additional
funds through capital markets once conditions improve, and we
remain confident that there will be a healthy pipeline of projects
to pursue alongside the proprietary pipeline arising from the
Company's development stage investments.
Philip Austin MBE
Chair
Octopus Renewables Infrastructure Trust plc
20 September 2023
Investment Manager's Report
2 GBP5m GBP1,308m
Investments completed Total allocated capital Total value of all investments
in the period to new investments (includes
future commitments)
Company Developments
During the six-month period to 30 June 2023 the Company
announced the completion of two investments, hosted its first
Capital Markets Event and announced the appointment of an
additional non-executive director. There was strong cash generation
from the portfolio of assets, up 34% on the equivalent period in
2022, driven by successful delivery of projects through
construction, as well as the positive impacts of inflation linked
revenues. NAV return for the year to date was also positive despite
the turbulent economic climate.
Over the period, the Company has continued to diversify its
sources of revenue, and added further long term growth
opportunities. In January 2023 the Company entered the battery
storage market with the acquisition of a 50% stake in the Woburn
Road, a 12MW/24MWh ready-to-build battery storage project in
Bedfordshire, UK. The consideration for the acquisition and the
Company's share of future construction costs is expected to be
approximately GBP5.6 million.
In February 2023 the Company announced that its direct
subsidiary ORIT Holdings II Limited had refinanced and increased
its multi-currency revolving credit facility ("RCF"). The committed
GBP270.8 million RCF (previously GBP246 million) has a three-year
term to February 2026 and can be drawn in GBP, EUR, AUD and USD.
The RCF has an interest rate of 2.0% above SONIA (or equivalent
reference rate for other currencies), an improvement compared with
the previous facility's margin of 2.3%. It also has an uncommitted
accordion feature allowing the RCF to be increased in size by up to
a further GBP150 million. The facility has been provided by a group
of four lenders: National Australia Bank, NatWest, Santander and
Allied Irish Banks.
In March 2023 the Company announced that it had entered into a
PPA with Iceland Foods Limited over the electricity to be generated
at Breach Solar Farm, a c.67MW solar PV project currently under
construction in Cambridgeshire, UK. The PPA provides ORIT with a
10-year UK inflation (CPI) indexed price for 100% of Breach's
production each year and will provide Iceland with green
electricity for its operations in the UK.
On 2 March 2023, the contingent acquisition in the portfolio of
Spanish PV assets was re -- negotiated. From this date, the Company
no longer has an obligation to acquire the assets once they reach
ready to build status, but instead has the option to acquire
them.
In April 2023 the Company announced that it had committed to
invest up to GBP5 million into HYRO Energy Limited ("HYRO"), a new
joint venture between ORIT (co-invested alongside another fund
managed by Octopus Energy Generation) and Renewable Energy Systems
("RES"). HYRO has been established to develop green hydrogen
electrolysis projects in England, Scotland and Wales for industrial
offtake/consumption.
In June 2023, the Company completed on the second tranche of the
follow-on investment announced back in November 2022 of EUR6.25
million (GBP5.4m) into Simply Blue Holdings Limited, the parent
Company of the Simply Blue Group ("SBG"), an Irish developer of
predominantly floating offshore wind projects. The transaction
increases ORIT's ownership to c.19%.
Also in June 2023 the Company hosted its first Capital Markets
Event with the objective to give greater insight on the Company's
activities as well as the future outlook of energy and renewables.
The event was aimed at institutional investors and sell side
analysts and welcomed the participation of external speakers. Among
the topics covered were ORIT's differentiated strategy, its
approach to ESG and construction of assets.
Post period end, in July 2023, the Company announced that it had
agreed to invest up to GBP2 million to set up and fund a new
development business, focused on creating new ground -- mounted
solar PV and co-located battery storage assets in the UK. The
business will benefit from exclusive development services from BLC
Energy Limited, a specialist developer managed by a team of
industry veterans with deep knowledge of the UK electricity grid,
as well as significant experience in securing land for building new
renewable energy projects.
Portfolio Breakdown (as at 30 June 2023)
The Company's portfolio of assets are not segmented by
technology, phase or jurisdiction for the Company's reporting
purposes.
Total
Capacity Start of Remaining
Stake
Technology Country Site name (MW) Current status operations asset life %
------------- -------- --------------------- -------- ----------------------- ---------- ---------- -----
Onshore wind UK Cumberhead 50 Operational 31/03/2023 30 100%
-------- --------------------- -------- ----------------------- ---------- ---------- -----
France Cerisou 24 Operational 15/11/2022 29 100%
-------- ----------------------------------- -------- ----------------------- ---------- ---------- -----
Sweden Ljungbyholm 48 Operational 30/06/2021 28 100%
-------- ----------------------------------- -------- ----------------------- ---------- ---------- -----
Poland Krzecin 19 Operational 08/02/2022 28 100%
----------------------------------- -------- ----------------------- ---------- ---------- -----
Kuslin 40 Operational 31/12/2022 29 100%
-------------------------------------------- -------- ----------------------- ---------- ---------- -----
Finland Saunamaa 34 Operational 28/08/2021 28 100%
----------------------------------- -------- ----------------------- ---------- ---------- -----
Suolokangas 38 Operational 29/12/2021 28 100%
-------------------------------------------- -------- ----------------------- ---------- ---------- -----
Germany Leeskow 35 Operational 30/09/2021 29 100%
-------- ----------------------------------- -------- ----------------------- ---------- ---------- -----
UK Crossdykes 46 Operational 30/06/2021 28 51%
-------- ----------------------------------- -------- ----------------------- ---------- ---------- -----
Offshore
wind UK Lincs 270 Operational 31/10/2013 26 15.5%
------------- -------- --------------------- -------- ----------------------- ---------- ---------- -----
Willburton 2
Solar UK (Mingay Farm) 19 Operational 29/03/2014 21 100%
Abbots Ripton 25 Operational 28/03/2014 31 100%
Ermine Street 32 Operational 29/07/2014 21 100%
Penhale 4 Operational 18/03/2013 30 100%
Chisbon 12 Operational 05/03/2015 27 100%
Westerfield 13 Operational 25/03/2015 22 100%
Wiggin Hill 11 Operational 10/03/2015 17 100%
Ottringham 6 Operational 07/08/2014 31 100%
Breach 67 Construction n.a. n.a. 100%
-------------------------------------------- -------- ----------------------- ---------- ---------- -----
France Charleval 6 Operational 26/03/2013 30 100%
Cuges-les-Pins 7 Operational 17/04/2013 30 100%
Istres 8 Operational 18/06/2013 30 100%
La Verdière 6 Operational 27/06/2013 30 100%
Brignoles 5 Operational 26/06/2013 30 100%
Saint-Antonin-du-Var 8 Operational 28/11/2013 30 100%
Chalmoux 10 Operational 01/08/2013 30 100%
Lovi 1 6 Operational 17/07/2014 31 100%
Lovi 3 6 Operational 17/07/2014 31 100%
Fontienne 10 Operational 02/07/2015 32 100%
Ollieres 1 12 Operational 19/03/2015 32 100%
Ollieres 2 11 Operational 19/03/2015 32 100%
Arsac 2 12 Operational 05/03/2015 19 100%
Arsac 5 12 Operational 30/01/2015 19 100%
-------------------------------------------- -------- ----------------------- ---------- ---------- -----
Ireland Ballymacarney 54 Conditional acquisition H2 2023E 40 100%
Kilsallaghan 29 Conditional acquisition H2 2023E 40 100%
Muckerstown 48 Conditional acquisition H2 2023E 40 100%
Fidorfe 68 Conditional acquisition H2 2023E 40 100%
Harlockstown 42 Conditional acquisition H1 2024E 40 100%
-------------------------------------------- -------- ----------------------- ---------- ---------- -----
Spain Spain I 44 Conditional acquisition 2024E 35 100%
Spain II 44 Conditional acquisition 2024E 35 100%
Spain III 44 Conditional acquisition 2024E 35 100%
Spain IV 44 Conditional acquisition 2024E 35 100%
-------------------------------------------- -------- ----------------------- ---------- ---------- -----
Battery UK Woburn Road 12 Construction n.a. 35 50%
------------- -------- --------------------- -------- ----------------------- ---------- ---------- -----
Developer Ireland Simply Blue n.a. Developer 19%
Finland Nordic Generation n.a. Developer 50%
UK Wind2 n.a. Developer 25%
UK HYRO n.a. Developer 25%
-------- ----------------------------------- -------- ----------------------- ---------- ---------- -----
Portfolio Breakdown (total invested basis)(9)
Country
UK: 36%
France: 14%
Ireland: 14%
Poland: 10%:
Finland: 10%
Germany: 6%
Sweden: 6%
Developer: 3%
Spain: 2%
Technology
Onshore Wind: 45%
Offshore Wind: 12%
Solar: 40%
Developer: 3%
Battery: 0.2%
Asset phase
Operational: 92%
Construction: 6%
Developer: 3%
(9) The numbers above show the portfolio composition broken down
by total invested basis in accordance with the Company's investment
policy (including the amounts committed to the conditional
acquisitions of the Spanish and Irish solar PV assets) as at 30
June 2023. For the Spanish solar PV assets, invested amount is
based on expected purchase price excluding capital expenditure. The
investments are valued on an unlevered basis and including amounts
committed but not yet incurred. Sums may not add up due to
rounding.
Portfolio Performance
Technical and Financial Performance
In the six-month period ending 30 June 2023 the Company's
operational portfolio generated 578GWh (30 June 2022: 403GWh) of
electricity, 13% below expectations predominantly due to
unfavourable wind conditions across the portfolio. Revenues of
GBP61.7 million (30 June 2022: GBP38.4 million) were generated in
the period, 12% below budget, and total EBITDA across the operating
portfolio totalled GBP40.7 million (30 June 2022: GBP30.8
million).
Output has increased by 43% when compared to the same period in
2022 following the acquisition of new investments and the
successful completion of construction assets. As a result, EBITDA
of the portfolio has increased by 32% showing significant growth in
the portfolio.
Operational portfolio KPIs:
578GWh GBP61.7m GBP21.2m GBP40.7m
Output Revenue Opex EBITDA
-13% vs budget -12% vs budget in line with budget -17% vs budget
These KPIs show the financial performance of the Company's
underlying investments and are not included in the Company's income
and profit shown in the Condensed Statement of Comprehensive
Income.
Solar
ORIT's operational solar portfolio (22 sites across the UK and
France) generated 146GWh over the six-month period, in line with
budget. High levels of irradiance seen across the UK over the
period were offset by reduced output in France caused by a fire at
one site, Saint-Antonin-du-Var ("SADV"). The business interruption
suffered from the fire at SADV is expected to be recovered via
insurance.
During the period, the portfolio generated revenues in line with
budget of GBP18.1 million. Favourable variances in operational
expenditure following the implementation of a new fixed-price
O&M contract across the French assets, lower than expected
property taxes and savings on professional fees, resulted in EBITDA
for the six-month period of GBP13.8 million, 3% above budget.
Onshore Wind
Output for the onshore wind portfolio totalled 409GWh for the
six-month period to 30 June 2023, 17% below budget. This reduced
output was predominantly due to poor wind speeds and forced
curtailment, including environmental curtailments at Cerisou for
bat protection, stops for negative pricing in Finland and Germany
and transmission grid constraint management stops under the
National Grid balancing mechanism at Crossdykes. The majority of
these stops are expected to be compensated at the same, or higher,
unit rate than production.
Lower than expected generation coupled with lower power prices
across the Nordics over the period resulted in total revenue
generated by the portfolio of GBP24.2 million, 27% below budget.
Operational expenditure was 6% below budget largely as a result of
higher balancing grid costs at Crossdykes and higher than expected
rent and insurance costs at Leeskow, resulting in total EBITDA of
GBP18.8 million, 31% below budget.
Offshore Wind(10)
The Lincs offshore wind farm has produced 22.7GWh in the period,
4% below budget, due to unfavourable wind conditions. Despite the
reduced output, the offshore wind farm benefitted from higher than
expected power prices, leading to revenues generated over the
period of GBP19.1 million, 3% above budget. Operational expenditure
totalled GBP11.0 million, 7% below budget due to increased O&M
spend in the period, resulting in EBITDA of GBP8.1 million, 2%
below budget.
(10) Figures in paragraph below reflect ORIT's ownership share of Lincs offshore wind farm
Construction at Breach Solar Farm (UK)
Construction on the 67 MW solar farm is underway with EPC works
progressing well and expected to complete shortly, with
energisation expected in Q4 2023. Subject to updates to the grid
connection agreement and planning consent, the site has the
potential to add a 50MW/100MWh battery project co-located to the
solar project. Connection of the solar farm to the transmission
network is dependent on National Grid completing connection works,
which have been delayed. At the date of this report these works are
expected to be completed during Q4, however there is a risk that
they could be delayed further.
Revenues
Figure 1 on page 14 of the Interim Report illustrates the
forecast revenue breakdown by type from 2023 through to 2050. Over
the next 15 years, the portfolio benefits from substantial levels
of fixed-price revenues, offering protection against near-term
wholesale price volatility.
Fixed price revenues arise both from government-backed subsidies
(in the UK, France, Germany and Poland) as well as from power price
hedges, which result from the Investment Manager's active approach
to power price risk management. A demonstration of this during the
period of the latter is the 10-year fixed price corporate PPA
signed between the Breach solar farm (67 MW, UK) and Iceland Foods.
In light of the ongoing uncertainty with regard to inflation, the
Investment Manager has structured this PPA in a way which not only
provides price certainty, but also protection against inflation,
which is relatively uncommon within the corporate PPA market.
Figure 2 on page 15 of the Interim Report illustrates the share
of fixed and variable revenues for the portfolio, including
projects in construction, over the next 24 months. As at 30 June
2023, 76% of ORIT's forecast revenues over the period to 30 June
2025 are fixed (31 December 2022: 68%). The aforementioned
corporate PPA with Iceland Foods has positively contributed to
movements in this metric, as have movements in the wholesale
market.
In addition, 55% of the revenues forecast in the period to 30
June 2033 are now explicitly inflation linked (with reference to UK
RPI, UK CPI, French inflation and Polish CPI).
Market Outlook
The future requirement for larger amounts of clean electricity
generation, coupled with an increasing focus on energy security,
remain robust long-term drivers for the market. We therefore have a
buoyant outlook overall, despite the difficult macro-economic
backdrop which has characterised the first half of 2023.
Inflation has remained high for a prolonged period, and
subsequent rises to central bank interest rates have only had a
moderate impact, though there are now signs that inflation rates
may be softening to more normal target levels. The corresponding
rise in bond yields have put pressure on most real asset
investments, and renewable energy is no exception. While demand for
Renewable Energy Assets remains high, supporting valuations,
investor returns have become relatively less attractive compared to
what is available through generally lower-risk bonds. Higher
discount rates are now feeding through into renewable asset and
portfolio valuations, but for ORIT the impact of this has been
significantly offset by the high degree of inflation-linked
revenue, alongside increases in the expected value of green
certificates produced by the portfolio.
Whilst wholesale power prices have cooled significantly since
the peaks seen in 2022 (a mild European winter and lower Asian
demand has lowered gas prices), they remain relatively high
compared to long term historic averages. This has been helpful to
offset the significant challenges for projects that have been
exposed to inflation in construction costs and a tough supply chain
environment. Nevertheless, in the UK a high-profile offshore wind
project was recently shelved as a result of its CfD contract price
being too low for the project to remain viable and no offshore wind
projects at all bid into the fifth CfD allocation round due to the
cap on prices being too low.
There are also policy changes happening. In Europe, the results
of the European Commission's consultation on electricity market
reform (announced in March) suggest that changes will be
incremental, and the "Fit for 55" initiative continues to drive
support for new renewable generation projects. The EU has also
shown a desire to react to the success of the US Inflation
Reduction Act which is proving a successful way to stimulate
investment through tax incentives. In the UK, the market re-design
process (the Review of Electricity Market Arrangements, or "REMA")
is ongoing and significant reform such as a switch to locational
marginal pricing (as opposed to the existing single national market
price system) is being proposed as an option. Such a change to
market pricing mechanics would require changes to the existing CfD
mechanism and to Corporate PPA markets to ensure new investment
into generation projects is not delayed. Reform of power markets is
necessary as we move to a system dominated by weather-dependent
generation, but the varied pace and direction of policy reform
across different jurisdictions highlights the value of ORIT's
diverse mandate, which allows for flexibility in targeting the most
supportive markets for new investment.
Grid infrastructure remains a long-term challenge applicable to
many jurisdictions. In the UK there is evidence that National Grid
are making concerted attempts to address a backlog of over 200GW of
projects waiting for connections by changing the way that grid
connection applications and queues are handled.
The above factors have meant that market activity in the first
half of 2023 has been somewhat slower than in the equivalent period
in 2022, but transactions are still taking place with strong
competition, new projects are starting construction and there is
still reason to be highly optimistic over the longer term with
respect to the outlook for renewable energy investment. One impact
of the Ukraine war is that it has brought energy security firmly
into focus and this should, over a longer period of time, be a
powerful tailwind for renewables deployment alongside the
requirement to achieve Net Zero targets. Renewables are the
cheapest form of electricity generation and receive widespread
public support. The rapid maturing of batteries as a complementary
technology will also assist with the deployment of intermittent
generation, in addition to storage itself being a route to further
capital deployment in its own right. Green hydrogen offers a route
for renewable electricity to service energy demand which is hard to
electrify directly. We can therefore be confident that there will
be plentiful investment opportunities for players that have the
requisite expertise and resources available to point towards an
increasingly important sector.
Financing
ORIT debt summary as at 30 June 2023
Short term Long term
Total debt debt
Debt as a % of GAV 46% 17% 29%
------- ----------- -----------
Committed Debt as a % of Total Value
of all Investments 54% 21% 32%
------- ----------- -----------
% Hedged 59% 0% 86%
------- ----------- -----------
Average cost of debt 4.0% 6.7% 2.8%
------- ----------- -----------
10.7
Average remaining term years 1.9 years 14.7 years
------- ----------- -----------
During February, the Company refinanced and increased its
multi-currency RCF. The committed GBP270.8m RCF has a three year
term to 24 February 2026 and can be drawn in GBP, EUR, AUD and USD
and has an interest rate of 2.0% above SONIA. It also has an
uncommitted accordion feature allowing the facility to be increased
in size by up to a further GBP150m.
Summary of ORIT debt facilities as at 30 June 2023:
Short Term Long Term
---------------------- ---------------------------------------------------------------------------
UK Offshore
Asset HoldCo HoldCo FR Solar FR Wind IRE Solar POL Wind GER Wind Wind
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Debt terms
Currency GBP, EUR, GBP or EUR EUR EUR PLN EUR GBP
AUD or EUR
USD
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Facility size GBP270.8m GBP50.0m EUR 125.7m EUR 43.2m EUR 91.0m PLN 318.8m EUR 61.0m GBP110.5m
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Drawn at 30
June 2023 GBP140.4m GBP50.0m EUR 113.4m EUR 43.2m -- PLN 282.3m EUR 59.3m GBP82.3
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Drawn at 30
June 2023
GBPm GBP140.4m GBP50.0m GBP97.3m GBP37.1m -- GBP53.3m GBP50.9m GBP82.3m
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Initial Term
(yrs) 3 1 18 20 20 18 18 15
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Expiry Date 28/02/2026 17/11/2023 31/12/2038 30/09/2042 -- 31/08/2038 30/03/2041 30/09/2032
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Facility date 28/02/2023 15/09/2022 22/01/2021 14/04/2021 -- 30/09/2021 30/09/2022 21/12/2017
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
CfD period: 0.83% - 2023 -
Margin 2.00% 2.50% 1.25% 1.30% Y1-5 1.30% 2.65% 1.75% 2027:
Post CfD
period:
Y6-10 1.4% 2.85% 1.65%
2028 -
Y10+ 1.65% 2043: 1.85%
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Variable interest
% SONIA SONIA EURIBOR EURIBOR EURIBOR WIBOR EURIBOR SONIA
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Hedging
% hedged 0% 0% 85% 90% n/a 75% 100% 85%
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Swap rate n/a n/a -0.12% 0.51% n/a 2.03% 0.12% 1.27%
----------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- -------------
Portfolio Valuation
Regular valuations are undertaken for the Company's portfolio of
assets. The process follows International Private Equity Valuation
Guidelines using a discounted cashflow ("DCF") methodology. DCF is
deemed the most appropriate methodology where a detailed projection
of likely future cash flows is possible. Due to the asset class and
available market data over the forecast horizon, a DCF valuation is
typically the basis upon which renewable assets are traded in the
market. Key macroeconomic and fiscal assumptions for the valuations
are set out in Note 8 to the financial statements.
The fair value of the Company's portfolio of assets as at 30
June 2023 was GBP796.1 million, reflecting acquisitions and capital
injections during the period of GBP64.3 million alongside changes
to economic, wholesale energy and asset specific assumptions and
the return on the portfolio net of distributions. Including the
Company's and its intermediate holding companies' other assets and
liabilities of (-GBP187.9 million), the total portfolio value as at
30 June 2023 is GBP608.2 million (GBP618.3 million as at 31
December 2022) or 107.7 pence per Ordinary Share (109.4 pence per
Ordinary Share as at 31 December 2022).
Figure 3 on page 19 of the Interim Report demonstrates ORIT's
Equity Value Bridge (GBPm).
Investments in the period
During the period, the Company announced new investments
including up to GBP5 million into HYRO Energy Limited, a new joint
venture between ORIT, Sky (a fund managed by Octopus Energy
Generation) and renewable energy company RES. HYRO has been
established to develop green hydrogen electrolysis projects and
intends to develop c.700MW of green hydrogen electrolyser capacity
by 2030.
Elsewhere in the portfolio payments were made in relation to
construction at the Cumberhead Wind Farm and Breach Solar Farm.
There were also consideration payments made in relation to the
developer investments in line with business plans.
Distributions paid out of the portfolio of assets
This relates to the amount of cash paid out of the portfolio of
assets and received by the Company or its intermediate holding
companies in the period ending 30 June 2023.
Economic assumptions
During 2023, there were significant increases in inflation
assumptions based on recent independent economic forecasts and
relevant government announcements. Inflation remains significantly
above 2022 levels. Inflation forecasts for 2023 and 2024 have
decreased slightly across the markets where the Company's portfolio
of assets is located, with the exception of Poland. This has
resulted in a net valuation decrease of GBP5.1 million.
The inflation inputs used to calculate the NAV per Ordinary
Share as at 30 June 2023 has been sourced from: (i) recent
consensus UK inflation forecasts published by His Majesty's
Treasury (May 2023); and (ii) inflation forecasts for European
countries published by the European Commission (May 2023).
During the period, sterling appreciated against the euro by
approximately 3%, leading to a negative valuation impact of GBP8.9
million. Euro-denominated investments comprised 51% of the
portfolio at the period end. 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 GBP2.0
million.
The combined impact of inflation and foreign exchange movements
represents a valuation decrease of GBP13.9 million (excluding the
impact of hedging).
Power prices and Green Certificates
Unless fixed under PPAs or otherwise hedged, the power prices
used in the valuations are based on market forward prices in the
near term, followed by an equal blend of two independent and widely
used market consultants' technology--specific capture price
forecasts for each asset. Previously an equal blend of up to three
market consultants' forecasts had been used, however the number of
forecasts in the blend ranged from one to three. As the market
consultants' forecasts are based on pan-European models, during the
first half of 2023 an exercise to align all markets to the same
number of and basis of forecasts was performed.
Heading into last winter, the key concern for European energy
markets remained gas storage. These concerns were exacerbated by
prolonged outages among the French nuclear fleet across much of
2022, the result of which was increased gas-fired generation in
order to compensate for this shortfall. However, following the end
of winter, European gas storage has realised a much better position
than had been previously expected. This has come as a consequence
of above average temperatures, reducing heating demand and, in
turn, gas demand. The continuing correlation between gas and power
prices meant that power prices, particularly in the near term, fell
as a result.
More recently, French nuclear availability has rallied and
applied further downwards pressure to power markets. European power
markets still, however, remain substantially above the levels seen
prior to Russia's invasion of Ukraine. ORIT's high proportion of
near-term fixed revenues means that its revenues have been
shielded, to a reasonable extent, from the fall in power
prices.
Decreases in the valuation due to updated power price forecasts
were partially offset by moderate increases to the average
longer-term forecasts during the first half of 2023. In addition,
the Company had been applying additional discounts to power price
curves that were in excess of the normal discounts to reflect the
lower prices typically captured by solar and wind generators, to
reflect power price volatility and uncertainty over government
regulations. These have now been removed as this uncertainty has
lifted.
The net impact of updating power price forecasts during the
period led to a valuation decrease of GBP13.8 million.
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.
Overall, the impact of updating power price and green
certificate forecasts has led to a net GBP8.4 million increase in
the value of the portfolio as at 30 June 2023.
Figure 4 on page 21 of the Interim Report shows the portfolio's
forecasted power only generation weighted prices ("Power only GWP")
and the generation weighted prices including subsidies and
additional benefits ("Total GWP") for the period from 2023 to 2050,
expressed in GBP/MWh, real 2023 money. The curves are blended
across the markets which ORIT has invested in, weighted by the
portfolio generation mix and converted into GBP/MWh using the FX
spot rate as at 30 June 2023. On average, the graph shows Power
only GWP of GBP54.74/MWh in the period 2023-2027 and GBP39.35/MWh
in the period 2027-2050. In addition to this, where assets are
eligible to sell green certificates and these are not bundled with
power under PPAs (or otherwise sold at a fixed price), the
valuations assume an average price of GBP5.12 per REGO and EUR4.65
per GOO in the period 2023--2027 and GBP3.62 per REGO and EUR4.11
per GoO in the period 2028-2050.
Construction Risk Premium
A valuation increase of GBP2.6 million resulted from the unwind
of a portion of the construction risk premium included in the
discount rate applied to the Cumberhead Wind Farm and the Breach
Solar Farm, both in the UK, recognising the significant
construction progress made by the end of the period.
As at 30 June 2023, construction at the Cumberhead Wind Farm was
substantially complete with only final commissioning activities
remaining. Breach Solar Farm remains under construction and it is
estimated that further value will be crystallised as the project
become substantially de-risked through the completion of
construction milestones.
Change in discount rates
A range of discount rates are applied in calculating the fair
value of the investments, considering the location, technology and
lifecycle stage of each asset as well as leverage and the split of
fixed and variable revenues. The weighted average discount rate as
at 30 June 2023 is 7.7%, an increase of 0.2% since 31 December
2022. The increase in discount rate over the first half of the
year, reflects that, whilst bond yields have fallen slightly in
Europe, they remain significantly higher than they were at the
start of 2022 and are continuing to increase in the UK.
31-Dec-21 30-Jun-22 31-Dec-22 30-Jun-23
--------------------------------------- --------- --------- --------- ---------
UK Assets
Levered IRR 5.80% 5.90% 7.50% 7.60%
Gross Asset Value (GAV) 174 256 440 470
Leveraged % GAV 0% 15% 19% 17%
--------------------------------------- --------- --------- --------- ---------
European Assets
Levered IRR 7.20% 6.80% 7.50% 7.80%
Gross Asset Value (GAV) 564 568 633 650
Leveraged % GAV 28% 32% 40% 37%
--------------------------------------- --------- --------- --------- ---------
Total Portfolio
Levered IRR 6.80% 6.50% 7.50% 7.70%
Gross Asset Value (GAV) 738 824 1,073 1,120
Leveraged % GAV 22% 24% 31% 29%
--------------------------------------- --------- --------- --------- ---------
Leveraged % GAV (plc - including short
term debt) 22% 24% 42% 46%
--------------------------------------- --------- --------- --------- ---------
Competition for renewable assets has remained high, dampening
the extent to which benchmark rate rises have fed through into
asset discount rates. Nevertheless, the Board and the Investment
Manager considered it appropriate to reflect an increase in the UK
discount rates by 50bps. The impact of the change in discount rates
are discussed further in the section below. The increases to these
discount rates resulted in a decrease of -GBP14.1 million in the
portfolio valuation.
Balance of portfolio return
This refers to the balance of valuation movements in the period
excluding the factors noted above and represents an uplift of
GBP25.3 million.
Of this, GBP25.0 million reflects the net present value of
future cashflows being brought forward from the valuation date used
for the acquisitions to 30 June 2023.
GBP1.0 million of the increase resulted from entering into a
10-year index-linked Power Purchase Agreement between Breach Solar
Farm and Iceland Foods Limited.
These movements were partially offset by financial and technical
performance during the period resulting in a net negative valuation
impact of -GBP3.2 million.
The remaining amount of GBP2.5m relates to the reduction in the
UK Generation Levy liability as a result of the aforementioned
decrease in UK power prices, offset by updating business rates for
UK assets and other smaller adjustments at the project company
level.
Portfolio valuation sensitivities
Figures 5 and 6 on pages 23-24 of the Interim Report show the
impact of changes to the key input assumptions on NAV with the X
axis indicating the impact of the sensitivities on the NAV per
share. The sensitivities are based on the existing portfolio of
assets as at 30 June 2023 as well as cash flows of conditional
acquisitions, and as such may not be representative of the
sensitivities once the Company is fully invested and geared. For
each of the sensitivities shown, it is assumed that potential
changes occur independently with no effect on any other assumption.
As such the sensitivities also do not capture any potential benefit
of a portfolio effect through diversification.
Discount rate
A range of discount rates are applied in calculating the fair
value of the investments, considering the location, technology and
lifecycle stage of each asset as well as leverage and the split of
fixed and variable revenues. A 50bps increase in the levered cost
of equity of the portfolio equates to an increase in the implied
WACC of 0.29%, holding the cost of debt and leverage % constant.
The weighted average discount rate as at 30 June 2023 is 7.7% (31
December 2022: 7.5%). The increase in the discount rate by
approximately 20 basis points is primarily driven by the
aforementioned increase to UK discount rates by approximately
50bps, offset by the unwind of the construction premiums included
in the discount rate applied to the Cumberhead Wind Farm and Breach
Solar Farm. These movements were also partially offset by a
decrease in the underlying discount rate reflecting the greater
proportion of fixed cash flows arising from entering into the Power
Purchase Agreement between Breach Solar Farm and Iceland Foods.
Volumes (Energy Yield)
Each asset's valuation assumes a "P50" level of electricity
output based on yield assessments prepared by technical advisors.
The P50 output is the estimated annual amount of electricity
generation that has a 50% probability of being exceeded - both in
any single year and over the long term - and a 50% probability of
being underachieved. The P50 provides an expected level of
generation over the long term.
The P90 (90% probability of exceedance over a 10-year period)
and P10 (10% probability of exceedance over a 10-year period)
sensitivities reflect the future variability of wind speed and
solar irradiation and the associated impact on output, along with
the uncertainty associated with the long-term data sources used to
calculate the P50 forecast. The sensitivities shown assume that the
output of each asset in the portfolio is in line with the P10 or
P90 output forecast respectively for each year of the asset
life.
Power price curve
As described above the power price forecasts for each asset are
based on a number of inputs. The sensitivity assumes a 10% increase
or decrease in power prices relative to the base case for each year
of the asset life.
Inflation
Sensitivity 1: The sensitivity assumes a 0.5% increase or
decrease in inflation relative to the base case for each year of
the asset life.
Sensitivity 2: The sensitivity assumes a 2.0% increase or
decrease in inflation during 2023/2024 relative to the base case of
the asset.
Foreign exchange
The Company seeks to manage its exposure to foreign exchange
movements to ensure that (i) the sterling value of known future
construction commitments is fixed; (ii) sufficient near term
distributions from non-sterling investments are hedged to maintain
healthy dividend cover; (iii) the volatility of the Company's NAV
with respect to foreign exchange movements is limited; and (iv) all
settlements and potential mark-to-market payments on instruments
used to hedge foreign exchange exposure are adequately covered by
the Company's cash balances and undrawn credit facilities.
Of the portfolio as at 30 June 2023, 51% of the NAV is euro
denominated. Euro hedges are in place for all construction payments
as well as forecast cash generation from all Euro based investments
for the first three years of operations. The sensitivity
highlighted in Figure 6 on page 24 of the Interim Report shows the
impact on NAV per share of a +/- 10% movement in the GBP:EUR
exchange rate.
Financial Review
The financial statements of the Company for the six-month period
ended 30 June 2023 are set out in the Interim Report . These
financial statements have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and the applicable legal
requirements of the Companies Act 2006. In order to continue
providing useful and relevant information to its investors, the
financial statements also refer to the "intermediate holding
companies", which comprise the Company's wholly owned subsidiary,
ORIT Holdings II Limited and its indirectly held wholly owned
subsidiaries ORIT UK Acquisitions Limited and ORIT Holdings
Limited.
Net assets
Net assets have decreased from GBP618.3 million at 31 December
2022 to GBP608.2 million at 30 June 2023, largely due to a decrease
in the fair value of portfolio of assets as described in the
Portfolio Valuation section above.
The net assets of GBP608.2 million comprise the fair value of
the Company's investments of GBP608.7 million and the Company's
current assets balance of GBP1.1 million, offset by GBP1.6 million
of Company liabilities.
Included in the fair value of the Company's investments are net
liabilities of GBP187.5 million (31 December 2022: GBP135.0
million) held in the intermediate holding companies. These comprise
cash (GBP3.8 million), the amortised transaction costs associated
with the revolving credit facility at ORIT Holdings II Limited
(GBP3.4 million) and the positive mark-to-market value of the FX
hedges taken out to minimise the volatility of cashflows associated
with non-UK portfolios (GBP0.6 million), which are offset by bank,
other loans and interest (GBP192.0 million), accrued transaction
costs (GBP1.6 million) and other net liabilities of GBP1.8
million.
Results of the Company
30 June 31 December
2023 2022
GBPm GBPm
------------------------------------------------------------- ------- -----------
Fair value of portfolio of assets 796.1 743.7
Cash held in intermediate holding companies 3.8 4.5
Bank loans and accrued interest held in the intermediate
holding companies (192.0) (128.0)
Fair value of other net assets/(liabilities) in intermediate
holding companies 0.8 (11.4)
------------------------------------------------------------- ------- -----------
Fair value of Company's investments 608.7 608.8
------------------------------------------------------------- ------- -----------
Company's cash 0.3 10.6
Company's other net liabilities (0.7) (1.1)
------------------------------------------------------------- ------- -----------
Net asset value 608.2 618.3
------------------------------------------------------------- ------- -----------
Number of shares 564.9 564.9
------------------------------------------------------------- ------- -----------
Net asset value per share (pence) 107.7 109.4
------------------------------------------------------------- ------- -----------
Income
In accordance with the Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture
Capital Trusts ("SORP") issued in July 2022 by the Association of
Investment Companies ("AIC"), the statement of comprehensive income
differentiates between the 'revenue' account and the 'capital'
account, and the sum of both items equals the Company's profit for
the period. Items classified as capital in nature either relate
directly to the Company's investment portfolio or are costs deemed
attributable to the long-term capital growth of the Company (such
as a portion of the Investment Manager's fee).
In the six-month period ending 30 June 2023, the Company's
operating income was GBP9.1 million (HY 22: GBP68.5 million),
including interest income of GBP12.9 million (HY 22: GBP10.8
million), dividends received of GBP9.8 million (HY 22: GBP11
million) and net loss on the movement of fair value of investments
of GBP13.6 million (HY 22: gain of GBP46.7 million). The operating
expenses included in the statement of comprehensive income for the
period were GBP3.6 million (HY 22: GBP4.3 million). These comprise
GBP2.8 million Investment Manager fees (HY 22: GBP2.8 million) and
GBP0.7 million operating expenses (HY 22: GBP1.5 million). The
details on how the Investment Manager's fees are charged are as set
out in Note 13 to the financial statements.
Ongoing charges
The ongoing charges ratio ("OCR") is a measure, expressed as a
percentage of average net assets, of the regular, recurring annual
costs of running the Company. It has been calculated and disclosed
in accordance with the AIC methodology, as annualised ongoing
charges (i.e., excluding acquisition costs and other non-recurring
items) divided by the average published undiluted Net Asset Value
in the period. For the year ended 31 December 2022, the ratio was
1.12% and it is anticipated that the full-year ratio for the year
ended 31 December 2023 will remain at a similar level.
Dividends
During the period, interim dividends totalling GBP15.5 million
were paid (1.31p per share paid in respect of the quarter to 31
December 2022 in February 2023 and 1.44p per share paid in respect
of the first quarter of 2023 in May 2023).
Post period end, a further interim dividend of 1.45p per share
(totalling GBP8.2 million) was declared on 7 August 2023 and paid
on 1 September 2023 in respect of the quarter to 30 June 2023 to
shareholders recorded on the register on 17 August 2023. As such,
dividends totalling GBP16.3 million have been paid in respect of
the six-month period under review. These dividends are fully
covered from the operational cash flows of the underlying
portfolios.
Dividend cover - operational cash flows (portfolio level)
Six-month period ending 30 June 2023
Actual
June 2023
GBPm
----------------------------------------------------------------- ---------
Operational cash flows excluding Irish Solar
UK Solar 7.8
French Solar 6.0
Swedish Wind 3.2
Finnish Wind 4.2
Polish Wind 5.1
French Wind 1.7
UK Wind 3.1
German Wind 1.5
UK Offshore Wind 8.1
----------------------------------------------------------------- ---------
40.7
Interest payable on external debt
French Solar, Polish Wind, French Wind, German Wind, UK Offshore
Wind (4.5)
----------------------------------------------------------------- ---------
Operational cash flow pre debt amortisation 36.2
Company and intermediate holding company level expenses (8.1)
----------------------------------------------------------------- ---------
Net cash flow from operating activities pre debt amortisation 28.1
Dividends paid in respect of the period 16.3
----------------------------------------------------------------- ---------
Portfolio level operational cash flow dividend cover pre debt
amortisation 1.72
----------------------------------------------------------------- ---------
External debt amortisation
French Solar, Polish Wind, French Wind, German Wind, UK Offshore
Wind (10.3)
----------------------------------------------------------------- ---------
Net cash flow from operating activities 17.8
Dividends paid in respect of the period 16.3
----------------------------------------------------------------- ---------
Portfolio level operational cash flow dividend cover 1.1
----------------------------------------------------------------- ---------
Impact Report
As at 30 June 2023
GBP1,308m 1,801GWh 536k
Total value of all Potential renewable Equivalent homes powered
investments - all electricity by clean energy(11)
committed into renewables
598k 2,935k 328k
Estimated tonnes of Equivalent new trees Equivalent cars off the
carbon avoided(12) required to avoid the road to avoid the same carbon(14)
same carbon(13)
All metrics are calculated based on ORIT's share of the
estimated annual production of the whole portfolio once fully
constructed, including the conditional Irish acquisition but
excluding the conditional acquisition in Spain.
(11) Homes Powered is based on latest regional average household
consumption in the region of production
(12) Carbon avoided is calculated using the International
Financial Institution's approach for harmonised GHG accounting
(13) Trees equivalent is based on UK Woodland and Peatland carbon statistics
(14) Equivalent cars is calculated using a factor for displaced
cars derived from the UK government GHG Conversion Factors for
Company reporting
Foreword
In the first half of 2023, the world witnessed a stark and
sobering reality as global air and ocean temperatures reached
unprecedented new highs, as reported by the Copernicus Climate
Change Service in July(15) . This intensifies the urgency for
ensuring that governments' commitments to decarbonisation are met.
As the growth of renewable energy further accelerates, we recognise
the pivotal role it can play in realising our vision of a net zero
society.
With November's COP28(16) summit on the horizon, we draw
inspiration from the lessons of the previous year's summit, in
particular emphasising the need for immediate action and the vital
importance of safeguarding vulnerable communities and promoting a
"Just Transition". The July 2023 European heatwave and the impact
of the subsequent wildfires are a clear indication of the urgency
of this situation. COP28 marks the conclusion of the first formal
assessment of countries' progress towards achieving the targets set
by the Paris Agreement(17) (known as "the Global Stocktake").
ORIT's investors play a crucial role in this collective endeavour,
driving lasting positive change through investments in renewable
infrastructure and development companies. Our Investment Strategy
is designed not only to maximise financial returns but also to
foster a Just Transition, ensuring that communities are not left
behind in the shift to a low-carbon economy. Through educational
initiatives as outlined in the "People" case study of this impact
report, ORIT actively contributes to the well-being and empowerment
of the communities we serve.
ORIT's responsibilities also extend to the protection of
biodiversity at our sites. A report from the Intergovernmental
Science-Policy Platform on Biodiversity and Ecosystem Services
(IPBES) described the protection of biodiversity against loss and
the mitigation of climate change as "mutually supporting goals"(18)
. The climate change and ecological emergencies are interconnected
and must be addressed in parallel. Biodiversity restoration is an
intrinsic part of society's journey to successfully limiting
emissions and adapting to climate impacts. Restoration enhances
carbon sequestration, promotes ecosystem resilience, and supports
sustainable practices. We aim to reduce our ecological footprint
and, wherever possible, actively enhance biodiversity. ORIT's
commitments to restoring natural spaces and promoting sustainable
land management, whilst they could appear modest individually,
collectively make a meaningful contribution to national initiatives
aimed at protecting biodiversity.
The perception of biodiversity restoration within the industry
is undergoing a significant shift, transitioning from mere
ecological concern to a crucial aspect of risk management. The loss
of biodiversity threatens the health of ecosystems that provide
other services to the economy. Even by the World Bank's
conservative estimates, the degradation of these natural processes
could see global GDP reduce by $2.7 trillion/year compared to
projected levels by 2030. ORIT embraces the emerging regulations
aimed at addressing these unaccounted risks, such as the Taskforce
on Nature-related Financial Disclosures (TNFD), that has now gone
through final consultation stages. We are pleased to provide an
initial overview of the biodiversity dependencies that influence
ORIT's portfolio alongside the proactive measures we have in place
to mitigate these risks.
(15)
https://climate.copernicus.eu/july-2023-global-air-and-ocean-temperatures-reach-new-record-highs
(16) COP28: The 28th Conference of the Parties (COP28) is a
major international gathering where countries meet to address
global environmental issues, focusing on climate change. It's a key
event under the United Nations and shapes efforts to tackle climate
change through negotiations and agreements.
(17) Paris Agreement: The Paris Agreement, established in 2015
under the UNFCCC, unites nations in combatting climate change by
setting goals to limit global temperature rise, striving to keep it
under 2 degrees Celsius above pre-industrial levels, with an even
more ambitious target of 1.5 degrees Celsius.
(18)
https://www.ipbes.net/sites/default/files/2021-06/20210609_workshop_report_embargo_3pm_CEST_10_june_0.pdf
This interim impact report touches on some of the ESG and impact
related initiatives that have occurred during the period and we are
excited to share further information with ORIT's investors in our
2023 Annual Report. As stewards of positive change, ORIT's Impact
Strategy continues to evolve in line with the needs of society and
the environment. I am proud to share that ORIT's sustained efforts
have resulted in ORIT being shortlisted as a finalist for "Best
Impact Fund" in Investment Week's 2023 Sustainable Investment
Awards. We look forward to continuing to create meaningful and
lasting positive impact for our investors through these investment
endeavours.
Philip Austin
Impact Strategy
ORIT is an impact fund with a core impact objective to
accelerate the transition to net zero through its investments,
building and operating a diversified portfolio of Renewable Energy
Assets.
ORIT enables individuals and institutions to invest directly
into a portfolio of Renewable Energy Assets which generates a yield
through renewable energy generation. The renewable energy generated
supports the transition to net zero by replacing unsustainable
energy sources with clean power. This intended outcome is the
Company's core impact objective.
The ability to invest in Renewable Energy Assets is a powerful
tool, which not only enables people to invest in line with their
values, but also drives change; facilitating the transition to a
more sustainable future. More information on this "Theory of
Change" can be found in the Company's Impact Strategy.
The Impact Strategy also considers all of ORIT's activities
through three lenses - Performance, Planet and People - to ensure
that our activities integrate ESG risks and bring to life
additional impact opportunities. The Impact Strategy defines ESG
and Impact as:
-- ESG - a vital risk management approach to identify and
mitigate a range of potential issues to protect, and hopefully
enhance, the long-term value of our investments
-- Impact - what an investment does to the environment or society
The Company makes long-term investments that require a long-term
view to be taken both in initial investment decisions and in
subsequent asset management; adopting lasting and sustainable
business practices. Beyond the core objective of accelerating the
transition to net zero, ORIT seeks to generate additional impact
through Performance, Planet and People impact initiatives.
More details and background information related to the Company's
Impact Strategy including information on our four impact themes of
Stakeholder engagement, Equality and Wellbeing, Innovation and
Sustainable momentum can be found in the separately published
Impact Strategy.
Performance
Impact Objective: Build and operate a diversified portfolio of
Renewable Energy Assets, mitigating the risk of losses through
robust governance structures, rigorous due diligence, risk analysis
and asset optimisation activities to deliver investment return
resilience and the maximum amount of green electrons.
GBP1,308m 1,801GWh 38
Total value of investments of potential annual Assets
- committed into renewable energy
renewables generation, 1,421GWh
of which has and will be
additional generation
from construction assets(19)
Delivering the investment objective
The Board views the Impact Strategy as integral to the delivery
of the core investment objective, and not as a cost to the Company.
ESG processes and policies are a prudent risk management tool that
improve the financial performance of the Company while reducing
risks. The ultimate aim is to maximise the number of green
electrons produced by the portfolio.
(19) Metric calculated based on an estimated annual production
of the portfolio once fully constructed, including the conditional
Irish acquisition but excluding the conditional acquisition in
Spain.
Integration into the investment cycle
Every investment ORIT makes is assessed against our Performance,
Planet and People framework through an ESG scoring matrix. This
ensures that our investments adhere to ORIT's ESG Policy and
minimum scoring threshold for investment approval, which all
transactions met in the period.
Aligning to Sustainable Regulatory Disclosures
-- Task Force on Climate-related Financial Disclosures
ORIT is a supporter of the recommendations of the Task Force on
Climate-related Financial Disclosures and makes a TCFD disclosure
in the Annual Report.
-- Sustainable Finance Disclosures Regulation ('SFDR')
ORIT is classified as an Article 9 Product. The core sustainable
investment objective of the Company is to accelerate the transition
to net zero through its investments, building and operating a
diversified portfolio of Renewable Energy Assets to help facilitate
the transition to a more sustainable future. This directly
contributes to climate change mitigation. ORIT's SFDR - related
disclosures, including its Principal Adverse Impact statement is
available on its website.
-- EU Taxonomy
ORIT has an aim of 100% EU Taxonomy aligned investments. A
formal breakdown of ORIT's investments alignment to the EU
Taxonomy's environmental objectives and "Do no significant Harm"
criteria will be included in the Annual Report.
Performance initiatives
Delivering investment performance is fundamental to the Impact
Strategy, supporting the transition to net zero and to being an
impact fund. Asset optimisation initiatives, alongside robust ESG
risk management, aim to improve financial resilience and overall
performance of the Company.
Projects
Our Investment Manager works with key partners to mitigate
production risks and maximise performance of ORIT's operational
assets. Production losses are investigated through a root cause
analysis, delivering appropriate actions that improve technical
performance. This active management approach has mitigated
potential performance risks for ORIT over this period.
Project Outcome
---------------------------------------------------------- ----------------------------------------------------------
Reduced repair times at Ottringham: Following strong A four-year extension to the O&M contract term will help
performance by an O&M, OEGEN has extended facilitate smooth running of operations
their contract term, including enhanced terms on remedial at the 6MWp site. Enhanced terms for remediation
works. timeframes will require the O&M to fix all
material outages within four days. This new clause will
minimise downtime at the site, improving
overall performance.
Stakeholder Engagement
---------------------------------------------------------- ----------------------------------------------------------
Capacity Market scheme at Cumberhead: ORIT applied for the Successfully obtained short-term (2023-2024) and
Scottish wind farm to participate long-term (2026-2042) Capacity Market Agreements,
in the Capacity Market scheme. securing additional injection of revenue over the asset's
lifetime. This scheme with the grid
will additionally support the green transition of the
UK's electricity supply.
Sustainable Momentum
---------------------------------------------------------- ----------------------------------------------------------
Improved analytics across the wind portfolio with i4see An advanced analytics software, i4see, is currently being
rolled out across the wind portfolio
to facilitate identification of underperformance in
turbines that may not otherwise be found.
Access to this data allows for enhancements to be
implemented that aim to optimise production
and reduce the downtime of the assets.
Innovation
---------------------------------------------------------- ----------------------------------------------------------
Planet
Impact Objective: Consider environmental factors to mitigate
risks associated with the construction and operation of assets,
enhancing environmental potential where possible.
598k 84%
Equivalent tCO2 avoided(20) Generating sites on renewable import tariffs
(20) Metrics based on an estimated annual production of the
whole once fully constructed, including the conditional Irish
acquisition but excluding the conditional acquisition in Spain.
Carbon avoided is calculated using the International Financial
Institution's approach for harmonised GHG accounting
Maximise our positive environmental impact
ORIT recognises the fundamental role that renewable energy plays
in meeting net zero emissions targets, with an inherently positive
impact on the environment. Investing in Renewable Energy Assets
enables investors to generate returns from this transition to a
cleaner future and directly support climate change ambitions. On
admission to the London Stock Exchange ("LSE"), ORIT was awarded
the LSE's Green Economy Mark(21) , recognising the Company as a
significant contributor to the transition to a zero-carbon economy.
This prestigious recognition continues to be awarded to ORIT every
year, underscoring ORIT's consistent commitment to environmental
sustainability and its ongoing contributions to the green
economy.
(21) The Green Economy Mark identifies London-listed companies
and funds that generate between 50% and 100% of total annual
revenues from products and services that contribute to the global
green economy.
Carbon measurement and reporting
In its 2022 Annual Report, ORIT disclosed its third measurement
of its carbon footprint. Throughout 2023, ORIT is collaborating
with outsourcers and contractors to enhance data collection methods
for more precise measurements. As the company's portfolio expands,
ORIT is committed to reducing its relative emissions through
stakeholder engagement and proactive asset management.
Case Study:
ORIT Planet Case Study: Assessing Biodiversity Risk
Loss and/or depletion of biodiversity is increasingly being
recognised as an issue of risk rather than corporate
responsibility. Frameworks, such as the Taskforce of Nature-related
Financial Disclosures (TNFD), which encourage the disclosure of
biodiversity risk for investors, are expected to form part of a new
wave of regulations aimed at reorientating capital flow towards
nature positive solutions.
ORIT's "Planet" objective already aims to consider and mitigate
biodiversity risks associated with the construction and operation
of assets.
What is biodiversity risk?
Biodiversity risk is informed by "dependencies" and
"impacts":
-- Dependency on biodiversity: A decline in ecosystem services
(e.g. pollination) can create physical risk to businesses that
depend on them, leading to cost increases or loss of revenue.
-- Impact on biodiversity: Negative impacts on biodiversity
caused by a business's activities can create regulatory risk (e.g.
environmental non-compliance leading to fines) or reputational
risks (e.g. environmental misconduct leading to decreased brand
value).
ORIT already mitigates its "impact on biodiversity" risk by:
-- Ensuring a robust HSE management system is in place across
its assets and associated third parties, monitoring environmental
incidents, and sharing learnings where appropriate to minimise
frequency of future incidents.
-- Managing assets in line with the Investment Manager's
biodiversity mission statement(22) and policies, ensuring
environmental impacts are assessed by ecologists, and implementing
site-specific mitigation measures as part of normal land-management
services.
-- Implementing additional biodiversity initiatives at the sites
that support local ecosystem services, such as beehives and
wildflower meadows (see case study in the Interim Report ).
Measuring "dependency on biodiversity" is not a new concept, but
the systematic approach to quantifying and assessing these
dependencies has gained prominence in recent years due to the
increasing recognition of the importance of biodiversity
conservation and sustainable development. Frameworks like TNFD and
supporting tools (such as WWF's Biodiversity Risk Filter(23) and
ENCORE(24) ) have been developed to help institutions measure these
dependencies. Sectors differ in their dependencies due to their
different business activities. For example, an agricultural
business will have a dependency on pollination ecosystem services
whereas a telecommunications business might not.
The Investment Manager has carried out an initial analysis to
explore the potential dependencies that renewable energy
technologies in ORIT's portfolio face.
(22) https://a.storyblok.com/f/154679/x/02325cb1f1/biodiversity-statement.pdf
(23) https://riskfilter.org/biodiversity/home
(24) ENCORE is a tool developed by the Natural Capital Finance
Alliance in partnership with UNEP-WCMC. The tool highlights the
most material nature capital assets of specific sub-industries and
production processes.
(https://encore.naturalcapital.finance/en/explore?tab=dependencies)
The WWF and Encore tools have highlighted climate regulation,
flood and storm protection and mass stabilisation and erosion
control as high materiality dependencies for solar and wind assets.
This suggests that the degree of protection offered by these
ecosystem services are critical and irreplaceable for the continued
generation of wind and solar energy. Whilst the degree of
protection offered will vary based on the exact location of the
assets, the Investment Manager is confident that these risks are
reflected in their current risk mitigation strategy, with
mitigation measures already considered (see Table 1).
Table 1: Solar and wind biodiversity dependencies against ORIT's
existing considerations.
Biodiversity dependency Existing consideration
-------------------------------------------- -----------------------------------------------
Climate regulation: Nature regulates ORIT's sustainable objective is to accelerate
the climate through mechanisms like the transition to a net zero future,
carbon sequestration, ocean circulation, mitigating the effects of climate change.
and the water cycle, which help maintain ORIT considers the impacts of climate
a stable environment for life. The impact change as part of normal risk management,
of these processes on renewable energy as outlined in ORIT's TCFD disclosure
production can be significant, as wind in the latest Annual Report.
and solar rely on specific weather patterns
and climatic conditions.
-------------------------------------------- -----------------------------------------------
Flood and storm protection: Natural Flood risk is usually assessed as part
and planted vegetation offer flood and of the site's feasibility assessment
storm protection by providing shelter, and permitting process. Mitigation measures
and reducing or weakening the intensity implemented where necessary and insurance
and impact of floods and storms. cover secured.
-------------------------------------------- -----------------------------------------------
Mass stabilisation and erosion control: For solar, spot inspections would be
Ground movement, landslides and subsidence included in site visits to identify
could damage solar and wind sites, impact any movement to panel structures. If
the longevity of the site, equipment there is movement the structures can
alignment, and have health and safety be re-enforced.
implications. Wind farms with potential subsidence
risk undergo stability assessments.
For instance, wind sites on peatland
conduct annual peat slide assessments
to identify areas of concern. Risk assessment
and monitoring plans are established
during the early phases of the wind
project. In the UK, these assessments
follow guidelines outlined by SEPA and
EA, while other EU countries comply
with regulations from their local authorities.
-------------------------------------------- -----------------------------------------------
The Investment Manager remains committed to evaluating the
biodiversity risks connected with ORIT's assets, with a focus on
aligning these assessments with the guidelines outlined by the
TNFD. Initial analysis suggests that the primary dependencies that
may significantly impact the portfolio are accounted for in current
risk management processes. Following TNFD guidelines for additional
disclosures is expected to improve transparency, standardization,
and facilitate a better understanding of the portfolio's
biodiversity risk exposure.
Planet Initiatives
Maximising the Company's positive contribution to the
environment is core to the Impact Strategy. Planet initiatives
contribute to solutions to combat climate change.
Nurturing Nature at Chisbon Solar Farm, a photographic case
study.
Chisbon Solar Farm in Clacton on Sea demonstrates the
integration of renewable energy technology and environmental
conservation. This 12 MWp site, previously arable agricultural
land, has been transformed into a thriving solar farm with a focus
on enhancing biodiversity. By introducing new bees into the
ecosystem and promoting sustainable land management, Chisbon
showcases how renewable energy projects can contribute positively
to nature and provide valuable educational opportunities for local
schools.
Ecological Enhancements:
Once dominated by monoculture crops, Chisbon now features a rich
ecosystem thanks to thoughtful ecological enhancements. A blend of
conservation wildflower seeds was sown to attract wildlife, and
local tree and hedgerow species were planted to expand species
diversity and strengthen the site boundary.
Bee Integration and Impact:
In January 2023, Chisbon introduced four beehives, with bees
successfully introduced in May 2023. Thriving wildflower meadows
help sustain the bees, enabling efficient pollination of
surrounding plant life. This integration will continue to support
ecosystem services in the local area.
Sustainable Land Management:
Chisbon embraces sustainable land management practices,
primarily employing organic methods and minimizing herbicide use
for weed control. This commitment to eco-friendly practices ensures
minimal ecological impact.
Environmental Education Initiatives:
Chisbon also serves as an educational hub, hosting visits for
local schools. During a visit in May 2023, 60 students from Years 5
and 6 engaged in activities focused on solar farm features and
biodiversity. They observed beehives and learned about site
management and biodiversity conservation from the Landowner.
Conclusion:
Chisbon Solar Farm clearly demonstrates coexistence of renewable
energy and environmental stewardship. Its efforts to enhance
biodiversity through bee integration, sustainable land management,
and educational initiatives set an example for other renewable
energy projects on how renewable energy initiatives can further
contribute towards a greener future.
Who? How much? What? Impact Theme
------------- ---------------------------------- ------------------------------------------ --------------------
Chisbon Solar Sustainable Momentum
Farm * 4 beehives * Ecological Enhancement
* 16.9 Ha of wildflowers * Bee Integration and Impact
* 400m of hedgerow with trees * Sustainable Land Management
* 60 students * Environmental Education Initiatives
------------- ---------------------------------- ------------------------------------------ --------------------
UN SDG specific contributions
7 Affordable and clean energy
SDG 7.2 & 7a Increase renewable energy in the mix and
stimulate investments into the renewable sector:
Provided renewable energy to the grid and provided renewable
investment opportunities. Construction underway to add renewable
energy capacity.
13 Climate Action
SDG 13.1 Strengthen resilience and adaptive capacity to climate
related hazards and natural disasters:
Technical due diligence carried out on all new investments.
Biodiversity and habitat management plans proposed for most sites
as planning requirement. Physical climate change risks considered
and mitigated (e.g., flood risk mitigation strategy) and transition
risks forecasted (e.g., low power price scenarios).
15 Life on Land
SDG 15.1 & 15.5 Conserve ecosystems and threatened species
and take action to reduce the loss of biodiversity and degradation
of habitats:
Threatened and non-threatened species monitored through
ecological surveys and biodiversity plans. Additional biodiversity
initiatives implemented beyond planning requirement, such as the
integration of beehives at Chisbon.
People
Impact Objective: Evaluate social considerations to mitigate
risks and promote a 'Just Transition' to clean energy.
327 232 0
Students benefits
from Estimated full-time RIDDORs
social initiatives equivalent ("FTE")
jobs created
Managing our impact on society
Investing in renewable energy yields benefits for individuals
and society as a whole. By investing into climate change
mitigation, investors are helping to prevent one of the biggest
threats of our time. Climate change impact is having a growing
impact on society in the fields of peace, security and defence. As
Jean-Pierre Lacroix, Under-Secretary-General for Peace Operations,
said "environmental degradation and extreme weather events -
amplified by climate change - have increasingly challenged the
United Nations peace operations' ability to carry out their
mandates."
It is also important that the Company mitigates any potential
adverse impacts and risks to people as the Company invests,
constructs and operates our portfolio of renewable assets. ORIT has
clear policies and governance structures to achieve this. Some
social factors that ORIT and our Investment Manager consider to be
the most important during due diligence and ongoing monitoring of
assets include:
-- Health and safety
-- Social licence
-- Local employment
-- Diversity and inclusion
ORIT's statement on principal adverse impacts can be found on its website here: https://uploads - ssl.webflow.com/64a55577b7ba05bd07aebc7c/64c0125d37e5f743fe905f4a_2023063 0 Principle Adverse Impacts Statement 2022 Annex 1.pd f
Health and Safety Approach
ORIT recognises its health and safety responsibilities and
keeping people safe remains its highest priority. ORIT has put
arrangements in place with its Investment Manager to ensure that
health and safety risks are managed effectively.
The Investment Manager employs specialist Health, Safety and
Environment ('HSE') consultants and additionally has employed a
Head of Health and Safety to ensure that health and safety
procedures are embedded into ORIT's model of investing and managing
assets.
This integration is achieved through:
-- Technical compliance standards
-- Diligence and benchmarking of contractors
-- Audits and ongoing oversight
-- Data collection and continuous improvement
Where minority stakes in businesses are held, the Investment
Manager still tracks performance via Board meeting attendance.
The Investment Manager actively tracks and monitors various
accident and incident classifications from events where there is a
statutory requirement to report to the UK Health & Safety
Executive (RIDDORs) or other local government bodies. This includes
incidents classified as accidents, near misses, dangerous
occurrences, and general safety observations.
Where accidents occur on overseas assets that would merit
reporting as a RIDDOR if they were to occur in the UK, we flag them
as "RIDDOR-like" events. All notifications of HSE incidents are
investigated by the Investment Manager's in--house asset management
team and where necessary the 3rd-party HSE advisor and the
Investment Manager ensure that out-sourced HSE managers close out
all incidents with root cause analysis and establish lessons
learned and where necessary change processes and procedures. Where
weaknesses in underlying procedures and systems are identified, the
HSE advisor works with businesses to implement appropriate
remedies.
Lost time injuries Minor equipment
RIDDORs (>7 days) Near misses Personal injuries damage incidents
------- ------------------ ----------- ----------------- -----------------
0 0 11 3 8
------- ------------------ ----------- ----------------- -----------------
The overall safety performance was positive during the reporting
period, with no significant risks to highlight. There were three
minor first-aid injuries to report across the portfolio, as well as
eleven near misses, eight damage-only incidents, and four
environmental incidents. Incidents have been satisfactorily
resolved, and applicable lessons have been learned.
Diversity and Inclusion
Equality and wellbeing are fundamental to ORIT's impact
ambitions. This is reflected in our Company policies and in the way
that the Company operates externally, through understanding the
approach that our third party providers take to diversity and
inclusion, and suggesting ways to improve this wherever
possible.
The Company's Board is made up of a complementary mixture of
social backgrounds, gender diversity and ethnicity. The Company'
complies with the FCA's diversity targets on the representation of
women and ethnic minorities:
-- At least 40% of the board should be women.
-- At least one of the senior board positions or Senior
Independent Director (SID) should be a woman.
-- At least one member of the board should be from an ethnic
minority background excluding white ethnic groups (as set out in
categories used by the Office for National Statistics).
The Investment Manager shares ORIT's values and places diversity
and inclusion at the heart of them, which is demonstrated through
the initiatives implemented. The Investment Manager provides
directors to the underlying subsidiary companies and ensures
diversity is considered when appointing them.
People initiatives
Alongside keeping people safe, ORIT considers our potential
impact on people. People initiatives contribute to solutions to
engage communities and promote a "Just Transition" to clean
energy.
Case Study:
Educational Outreach
ORIT is committed to educational outreach, recognising the
importance of engaging with the local community and maximising the
potential of its sites as valuable learning resources. To achieve
this goal, ORIT partnered with its asset managers and Earth Energy
Education, an organization that specialises in educational site
visits, in-school workshops, and bespoke resources to inspire the
next generation of scientists and engineers and foster a sense of
pride towards local solar or wind farms.
ORIT and Earth Energy Education organised workshops and site
visits to Chisbon solar farm and Westerfield Solar Farm. The events
welcomed over 200 students from nearby primary schools, including
Alresford Primary, All Saints Church of England, Micklenton
Primary, Burford Primary, and St John the Evangelist Primary. The
participating students, from years 4-6, learned about renewable
energy sources and how they work, the environmental benefits, and
the efforts made to support biodiversity on the sites. As part of
the programme, the students were invited to participate in
interactive sessions on electricity generation, encouraging greater
engagement with the subject.
"Thank you so much for the wonderful experiences you gave my
class this week. They were the most excitable I have seen in a long
time. They loved using the solar circuits and they were amazed by
the energy stick when we created a class circuit. The trip was
brilliant. Please thank all the staff at the site for making it as
safe as possible for the class. They loved seeing the biodiversity
at the green power station. We would love to do it again next year
if this is possible."
Teacher from Alresford Primary
ORIT's outreach also included a STEM live webinar. Volunteers
from ORIT's Investment Manager shared insights into their
respective careers. The audience comprised of year groups 7-12 from
Wadebridge and Woodroffe schools. The webinar aimed to provide an
inclusive perspective on various career opportunities in the energy
sector, encouraging students to consider careers in finance,
science and engineering.
In collaboration with OX2 (ORIT's asset manager in Sweden), two
site visits took place in May at Ljungbyholm wind farm. The events
catered to 100 twelve-year-olds from Ljungbyholmsskolan,
Pårydsskolan, and Hagbyskolan schools. The students were
accompanied by two wind turbine engineers from Nordex, who provided
insights into the workings of the wind turbines.
The site visit included a presentation on renewable energy and
wind power, a tour of the wind farm and other educational
activities. These activities included a "Wind Power Quiz" where the
winners were able to name a turbine, an exercise estimating the
length of a wind turbine blade, and a session around the logistics
behind ow wind turbines are built. The classes received LEGO kits
of wind turbines as souvenirs. Feedback from the schools after the
visit was positive, with some students even expressing their
aspiration to become wind power technicians in the future.
The positive response from students and teachers highlights the
significance of such initiatives in creating awareness about clean
energy and inspiring the next generation into green jobs. ORIT
plans to continue investing in educational outreach, hoping to
expand their impact in the future.
Impact Tracking
Who? How much? What? Impact Theme
-------------------------- --------- ------------- -----------------------
Students from Micklenton 327 Site Visits Innovation
Primary, Burford Primary, Workshops Equality and Wellbeing
St John the Evangelist STEM Webinar
Primary, Alresford
Primary,
All Saints Church
of England
Primary, Wadebridge
School, Woodroffe
School,
Ljungbyholmsskolan,
Parydsskolan and
Hagbyskolan.
-------------------------- --------- ------------- -----------------------
UN SDG specific contributions
4 Quality Education
4.1 and 4.7 Provide free, quality education leading to relevant
and effective learning outcomes that can also promote sustainable
development:
Partnership with asset managers and Earth Energy Education to
provide free education programmes and site visits to local
schools.
Funding of multiple charities through BizGive to promote STEM
learning and a deeper understanding of renewable energy.
8 Decent Work and Economic Growth
8.5 Provide full and productive employment and decent work for
all:
Extensive Health and Safety measures ensures employees are not
exposed to risk.
Interim Management Report
The Directors are required to provide an Interim Management
Report in accordance with the Financial Conduct Authority ("FCA")
Disclosure Guidance and Transparency Rules ("DTR"). The Chair's
Statement and the Investment Manager's Report in this interim
report provide details of the important events which have occurred
during the period and their impact on the financial statements. The
following statements on principal risks and uncertainties, related
party transactions, going concern and the Directors' Responsibility
Statement below, together constitute the Interim Management Report
for the Company for the six months ended 30 June 2023. The outlook
for the Company for the remaining six months of the year ending 31
December 2023 is discussed in the Chair's Statement and the
Investment Manager's Report.
Risk and Risk Management
The Company's approach to risk governance and its risk review
process are set out in the risks and risk management section of the
2022 Annual Report. The principal risks to the achievement of the
Company's objectives are unchanged from those reported on pages 100
to 106 of the 2022 Annual Report, with the key principal risks
being:
-- Changes to inflation and interest rates - the Company's
investments are partially index linked and therefore changes to
inflation rates will impact the Company' cashflows. Changes in
interest rates may affect the valuation of the investment portfolio
by impacting the valuation discount rate and also impact the cost
of financing available to the Company. This continues to be a
heightened risk in the current macro-economic environment.
-- Power prices - the risk that the income and value of the
Company's investments may be adversely impacted by changes in the
prevailing market prices of electricity and prices achievable for
off-taker contracts. Given the nature of the investments,
valuations are sensitive to movements in power prices. To mitigate
the impact of this risk, the Investment Manager has fixed 76% of
revenues to 30 June 2025.
-- Risks associated with borrowing - the use of leverage may
increase the volatility of the Company NAV, may significantly
increase the Company's investment risk and could lead to an
inability to meet financial obligations. Risks include refinancing
risk, covenant breaches, over-gearing and possible enhanced loss on
poor performing assets.
-- Asset specific risks - circumstances may arise that adversely
affect the performance of the relevant Renewable Energy Asset.
These include health and safety, grid connection, material damage
or degradation, equipment failures and environmental risks.
The experience of the Company's Investment Manager and the
diversification of the Company's portfolio continue to be the key
mitigation for these risks. The Performance section of the Impact
Report details examples of specific projects that the Investment
Manager has undertaken to mitigate some of these risks in the
period.
Task Force on Climate-related Financial Disclosures ("TCFD")
The Financial Conduct Authority ("FCA") issued a rule, effective
for periods beginning on or after January 2021, for UK premium
listed companies to start to report against the TCFD, with other
companies to follow. Whilst not currently mandated to make a TCFD
disclosure, being excluded as an Investment Trust, ORIT supports
the TCFD's aims and objectives and has decided to voluntarily
report in line to adopt best practice disclosures. Material climate
-- related financial disclosures can help support investment
decisions as we move towards a low-carbon economy. The Company is
acutely aware of the risks of climate change and through its
investment mandate, believes it is well placed to contribute to
solutions and harness the opportunities that arise from a
transition to net zero. However, no company is isolated from
climate change, and the disclosures below outline the
climate-related risks ORIT faces.
Our TCFD approach is detailed on pages 107 and 131 of the 2022
Annual Report. The Company is pleased to confirm that it has
included climate-related financial disclosures aligned with the
four recommendations and the eleven recommended disclosures
provided in the TCFD's 2021 report 'Implementing the
Recommendations of the Task Force on Climate-related Financial
Disclosures', which included additional guidance for Asset Owners
and Asset Managers.
Appointment of new non-executive Director
In May 2023 the Company announced the appointment of a new
independent non-executive director, Sarim Sheikh, who joined the
Board with effect from 1 June 2023. Sarim has over 25 years of
experience in the renewables and energy industry working in Europe,
Latin America, Africa, and Asia with General Electric & Shell.
Sarim has deep domain expertise in energy markets, and technology
(onshore/ offshore wind, solar, hydro, biomass) from various
commercial, business development, projects, and operational
roles.
Sarim has served as chair/non-executive director on boards of
several listed and non-listed companies in the Netherlands,
Croatia, Oman, and Pakistan and on non-profit boards. Under his
leadership, his company was awarded the Pakistan Stock Exchange's
'Top Companies Award' for corporate governance, financial
performance, shareholder value, and sustainability.
Sarim is a passionate advocate for energy transition and holds
an MBA from London Business School.
Sarim was hired following a recruitment process for which the
Board appointed an external recruitment consultancy, Nurole Ltd.
Nurole Ltd has no other connection with the Company and is
considered independent.
Related party transactions
The Company's AIFM is considered a related party under the
Listing Rules. Under the Management Agreement, the AIFM receives
from the Company a management fee of 0.95% per annum of Net Asset
Value up to and including GBP500 million and 0.85% per annum of Net
Asset Value in excess of GBP500 million, payable quarterly in
arrears. No performance fee or asset level fees are payable to the
Investment Manager under the Management Agreement.
Details of the amounts paid to the Company's AIFM and the
Directors during the period are included in the Note 13 to the
Interim Financial Statements.
Going concern
The Directors, in their consideration of going concern, have
reviewed comprehensive cash flow forecasts prepared by the
Company's Investment Manager which are based on prudent market data
and believe, based on these forecasts, that it is appropriate to
prepare the financial statements of the Company on the going
concern basis.
In arriving at their conclusion that the Company has adequate
financial resources, the Directors were mindful that the Group had
unrestricted cash of GBP4.1 million as at 30 June 2023 and
available headroom on its revolving credit facility ("RCF") of
GBP131 million. The Company's net assets at 30 June 2023 were
GBP608.2 million and total expenses for the period were GBP3.6
million, which when annualised, represented approximately 1.2% of
average net assets during the period. At the date of approval of
this document, based on the aggregate of investments and cash held,
the Company has substantial operating expenses cover.
The Company receives revenue in the form of dividends and
interest from its portfolio of assets. These revenues are derived
from the sale of electricity through power purchase agreements in
place with large and reputable providers of electricity to the
market. A prolonged and deep market decline could lead to falling
values to the underlying business or interruptions to cashflow,
however the Directors do not foresee any immediate material risk to
the Company's investment portfolio and income from underlying
assets. The Directors are also satisfied and are comfortable that
the Company would continue to remain viable under downside
scenarios, including decreasing government regulated tariffs and a
decline in long term power price forecasts.
In instances where underlying investments have external debt
finance, the covenants associated with these facilities have been
tested and are not expected to be breached, even in downside
scenarios.
The major cash outflows of the Company are the payment of
dividends and commitments payable for construction projects and
contingent acquisitions. In November 2023, the GBP50 million short
term debt facility falls due for repayment and will be funded by
the RCF. The covenants of the RCF have been tested over the next
12-24 months and are not expected to be breached, even in downside
scenarios. Plausible downside scenarios include a decrease in
wholesale energy prices, or a decrease in output. While in some
downside scenarios, the headroom available on the RCF will be
lower, the Directors remain confident that the Company has
sufficient cash balances and headroom in the RCF held by an
intermediate holding company, in order to fund the commitments
detailed in note 15 to the financial statements, should they become
payable.
Having performed the assessment of going concern, the Directors
considered it appropriate to prepare the financial statements of
the Company on a going concern basis.
Responsibility Statement of the Directors
The Directors acknowledge responsibility for the interim results
and approve this Interim Report. The Directors confirm that to the
best of their knowledge:
a) the condensed financial statements have been prepared in
accordance with IAS 34 "Interim Financial Reporting" and give a
true and fair view of the assets, liabilities and financial
position and the profit of the Company as required by the FCA's
Disclosure Guidance and Transparency Rules. DTR 4.2.4R;
b) the interim management report, included within the Chair's
Statement and Investment Manager's Report, includes a fair review
of the information required by DTR 4.2.7R and DTR 4.2.8R.
This responsibility statement has been approved by the
Board.
Philip Austin
Chair
20 September 2023
Financial Statements
Condensed Statement of Comprehensive Income
For the six-month period For the six-month period
ended ended
30 June 2023 30 June 2022
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----- -------- -------- -------- -------- -------- --------
Investment income 3 22,661 -- 22,661 21,813 -- 21,813
Movement in fair value
of investments -- (13,621) (13,621) -- 46,734 46,734
------------------------------------- -------- -------- -------- -------- -------- --------
Total net income 22,661 (13,621) 9,040 21,813 46,734 68,547
------------------------------------- -------- -------- -------- -------- -------- --------
Investment management fees 4 (2,109) (703) (2,812) (2,118) (706) (2,824)
Other expenses (612) (104) (716) (636) (729) (1,365)
Net finance income 42 -- 42 49 -- 49
Net foreign exchange losses -- (29) (29) -- (132) (132)
------------------------------------- -------- -------- -------- -------- -------- --------
Profit/(loss) before taxation 19,982 (14,457) 5,525 19,108 45,167 64,275
------------------------------------- -------- -------- -------- -------- -------- --------
Taxation 5 (184) 184 -- (297) 297 --
------------------------------ ----- -------- -------- -------- -------- -------- --------
Profit/(loss) and total
comprehensive income for
the period 19,798 (14,273) 5,525 18,811 45,464 64,275
------------------------------------- -------- -------- -------- -------- -------- --------
Earnings/(loss) per Ordinary
share (pence) - basic and
diluted 7 3.50p (2.53p) 0.97p 3.33p 8.05p 11.38p
------------------------------ ----- -------- -------- -------- -------- -------- --------
The 'Total' column of this statement is the profit and loss
account of the Company and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies. All expenses are
presented as revenue items except 25% of the investment management
fee, which is charged as a capital item within the Statement of
Comprehensive Income. Costs incurred on aborted transactions are
charged as capital items within the Statement of Comprehensive
Income.
All revenue and capital items in the above statement derive from
continuing operations.
The accompanying notes are an integral part of these financial
statements.
Condensed Statement of Financial Position
As at As at
31 December
30 June 2023 2022
(unaudited) (audited)
Notes GBP'000 GBP'000
--------------------------------------------- ------ -------------- -------------
Non-current assets
Investments at fair value through profit
or loss 8 608,697 608,799
--------------------------------------------- ------ -------------- -------------
Current assets
--------------------------------------------- ------ -------------- -------------
Trade and other receivables 855 775
Cash and cash equivalents 282 10,603
--------------------------------------------- ------ -------------- -------------
1,137 11,378
--------------------------------------------- ------ -------------- -------------
Current liabilities: amounts falling due
within one year
Trade and other payables (1,585) (1,917)
--------------------------------------------- ------ -------------- -------------
(1,585) (1,917)
--------------------------------------------- ------ -------------- -------------
Net current (liabilities)/assets (448) 9,461
--------------------------------------------- ------ -------------- -------------
Net assets 608,249 618,260
--------------------------------------------- ------ -------------- -------------
Capital and reserves
--------------------------------------------- ------ -------------- -------------
Share capital 9 5,649 5,649
Share premium account 217,283 217,283
Special reserve 10 339,500 339,500
Capital reserve 23,642 37,915
Revenue reserve 22,175 17,913
--------------------------------------------- ------ -------------- -------------
Equity attributable to owners of the Company 608,249 618,260
--------------------------------------------- ------ -------------- -------------
Net assets per Ordinary Share (pence) 11 107.67p 109.44p
--------------------------------------------- ------ -------------- -------------
The unaudited interim financial statements were approved by the
Board of Directors and authorised for issue on 20 September 2023
and were signed on its behalf by:
Philip Austin
Chair
The accompanying notes are an integral part of these interim
financial statements. Incorporated in England and Wales with
registered number 12257608.
Condensed Statement of Changes in Equity
For the period ended 30 June 2023 (Unaudited)
Share Total
Share premium Special Revenue Capital shareholders'
capital account reserve reserve reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------ -------- -------- -------- -------- -------- --------------
Opening equity as at 1 January
2023 5,649 217,283 339,500 17,913 37,915 618,260
Profit and total comprehensive
income/ (expense) for the
period -- -- -- 19,798 (14,273) 5,525
Dividends paid 6 -- -- -- (15,536) -- (15,536)
------------------------------- ------ -------- -------- -------- -------- -------- --------------
Closing equity as at 30
June 2023 5,649 217,283 339,500 22,175 23,642 608,249
--------------------------------------- -------- -------- -------- -------- -------- --------------
For the period ended 30 June 2022 (Unaudited)
Share Total
Share premium Special Revenue Capital shareholders'
capital account reserve reserve reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------ -------- -------- -------- -------- -------- --------------
Opening equity as at 1 January
2022 5,649 217,283 339,500 12,751 2,506 577,689
Profit and total comprehensive
income for the period -- -- -- 18,811 45,464 64,275
Dividends paid 6 -- -- -- (14,463) -- (14,463)
------------------------------- ------ -------- -------- -------- -------- -------- --------------
Closing equity as at 30
June 2022 5,649 217,283 339,500 17,099 47,970 627,501
--------------------------------------- -------- -------- -------- -------- -------- --------------
The Company's distributable reserve consists of the special
reserve, capital reserve attributable to realised gains and revenue
reserve.
The accompanying notes are an integral part of these financial
statements.
The issued capital and reserves are fully attributable to the
shareholders of the Company.
Condensed Statement of Cash Flows
For the For the
six-month six-month
period ended period ended
30 June 30 June
2023 2022
(unaudited) (unaudited)
Notes GBP'000 GBP'000
----------------------------------------------------- ------ ------------ ------------
Operating activities cash flows
Profit before taxation 5,525 64,275
Adjustments for:
Movement in fair value of investments 8 13,621 (46,734)
Investment income from investments 3 (22,661) (21,813)
----------------------------------------------------- ------ ------------ ------------
Operating cash flow before movements in working
capital (3,515) (4,272)
------------------------------------------------------------- ------------ ------------
Changes in working capital:
Increase in trade and other receivables (80) (60)
Decrease in trade payables (332) (37)
Distributions from investments 8 9,800 17,121
----------------------------------------------------- ------ ------------ ------------
Net cash flow from operating activities 5,873 12,752
------------------------------------------------------------- ------------ ------------
Investing activities cash flows
Costs associated with acquiring the portfolio
of assets (658) (67,173)
------------------------------------------------------------- ------------ ------------
Net cash flow used in investing activities (658) (67,173)
------------------------------------------------------------- ------------ ------------
Financing activities cash flows
Dividends paid to Ordinary Shareholders 6 (15,536) (14,463)
----------------------------------------------------- ------ ------------ ------------
Net cash flow used in financing activities (15,536) (14,463)
------------------------------------------------------------- ------------ ------------
Net (decrease)/increase in cash and cash equivalents (10,321) (68,884)
------------------------------------------------------------- ------------ ------------
Cash and cash equivalents at start of period 10,603 93,946
------------------------------------------------------------- ------------ ------------
Cash and Cash equivalents at end of period 282 25,062
------------------------------------------------------------- ------------ ------------
Notes to the Condensed Unaudited Financial Statements
For the period ended 30 June 2023
1. General information
Octopus Renewables Infrastructure Trust plc ("ORIT" or the
"Company") is a Public Company Limited by Ordinary Shares
incorporated in England and Wales on 11 October 2019 with
registered number 12257608. The Company is a closed--ended
investment company with an indefinite life. The Company commenced
its operations on 10 December 2019 when the Company's Ordinary
Shares were admitted to trading on premium segment of the London
Stock Exchange. The Directors intend, at all times, to conduct the
affairs of the Company as to enable it to qualify as an investment
trust for the purposes of section 1158 of the Corporation Tax Act
2010, as amended.
The registered office and principal place of business of the
Company 6th Floor, 125 London Wall, London, EC2Y 5AS.
The Company's investment objective is to provide 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.
The interim condensed unaudited financial statements of the
Company (the "interim financial statements") are for the six--month
period ended 30 June 2023 and comprise only the results of the
Company, as all of its subsidiaries are measured at fair value
through profit or loss following the amendment to IFRS 10 as
explained below in Note 2. The comparatives shown in these interim
financial statements refer to the six-month period ended 30 June
2022 and as at 31 December 2022.
The Company has appointed Octopus AIF Management Limited to be
the alternative investment fund manager of the Company (the "AIFM")
for the purposes of Directive 2011/61/EU of the European Parliament
and of the Council on Alternative Investment Fund Managers.
Accordingly, the AIFM is responsible for the portfolio management
of the Company and for exercising the risk management function in
respect of the Company. The AIFM has delegated portfolio management
services to Octopus Renewables Limited (trading as Octopus Energy
Generation), the Company's Investment Manager (the "Investment
Manager").
Apex Listed Companies Services (UK) Limited (the
"Administrator") provides administrative and company secretarial
services to the Company under the terms of the Administration
Agreement between the Company and the Administrator. During the
year 2022, Apex Group plc acquired Sanne Fund Services (UK) Limited
and subsequently the name of the Company's Administrator and
Company Secretary changed from Sanne Fund Services (UK) Limited to
Apex Listed Companies Services (UK) Limited.
The annual financial statements of the Company for the year
ended 31 December 2022 were approved by the Directors on 28 March
2023 and are available on the Company's website
https://octopusrenewablesinfrastructure.com/.
2. Basis of preparation
The interim financial statements included in this report have
been prepared in accordance with UK-adopted international
accounting standard IAS 34 Interim Financial Reporting and the
applicable requirements of the Companies Act 2006. The interim
financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and
financial liabilities at fair value through profit or loss.
The interim financial statements have also been prepared as far
as is relevant and applicable to the Company in accordance with the
Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts ("SORP")
issued in July 2022 by the Association of Investment Companies
("AIC").
The interim financial statements are presented in sterling,
which is the Company's functional currency and are rounded to the
nearest thousand, unless otherwise stated. The accounting policies,
significant judgements, key assumptions and estimates are
consistent with those used in the latest audited financial
statements to 31 December 2022 and should be read in conjunction
with the Company's annual audited financial statements for the year
ended 31 December 2022.
Going concern
The Directors, in their consideration of going concern, have
reviewed comprehensive cash flow forecasts prepared by the
Company's Investment Manager which are based on prudent market data
and believe, based on these forecasts, that it is appropriate to
prepare the financial statements of the Company on the going
concern basis.
In arriving at their conclusion that the Company has adequate
financial resources, the Directors were mindful that the Company
had unrestricted cash of GBP0.28 million as at 30 June 2023 and
available headroom on its RCF of GBP131 million. The Company's net
assets at 30 June 2023 were GBP608.2 million and total expenses for
the period were GBP3.6 million, which when annualised, represented
approximately 1.2% of average net assets during the period. At the
date of approval of this document, based on the aggregate of
investments and cash held, the Company has substantial operating
expenses cover.
The Company receives revenue in the form of dividends and
interest from its portfolio of assets. These revenues are derived
from the sale of electricity through power purchase agreements in
place with large and reputable providers of electricity to the
market. A prolonged and deep market decline could lead to falling
values to the underlying business or interruptions to cashflow,
however the Directors do not foresee any immediate material risk to
the Company's investment portfolio and income from underlying
assets. The Directors are also satisfied and are comfortable that
the Company would continue to remain viable under downside
scenarios, including decreasing government regulated tariffs and a
decline in long-term power price forecasts.
During the period, the Company's intermediate holding company
successfully refinanced its RCF to an increased facility of
GBP270.8 million and extended its term to February 2026. In
November 2023, the GBP50 million short term debt facility falls due
for repayment and will be funded by the RCF. The covenants of the
RCF have been tested and are not expected to be breached, even in
downside scenarios.
Plausible downside scenarios include a decrease in wholesale
energy prices, or a decrease in output. While in some downside
scenarios, the headroom available on the RCF will be lower, the
Directors remain confident that the Company has sufficient cash
balances and headroom in the RCF held by an intermediate holding
company, in order to fund the commitments detailed in note 15 to
the financial statements, should they become payable.
As such, the Directors are satisfied that the Company has
sufficient resources to continue to operate for the foreseeable
future, a period of not less than 12 months from the date of this
report. Accordingly, they continue to adopt the going concern basis
in preparing these financial statements.
Critical accounting judgements, estimates and assumptions
The preparation of the interim financial statement requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying
assumptions are reviewed regularly on an on--going basis. Revisions
to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected. There
have been no changes to the significant estimates, judgements and
assumptions to those set out on pages 191 to 194 of the 2022 Annual
Report; a summary of these is provided below.
Key estimation: Fair value estimation for investments at fair
value
The Company's investments at fair value are not traded in active
markets. Fair value is calculated by discounting at an appropriate
discount rate future cash flows expected to be received by the
Company's intermediate holdings. The discounted cashflow models use
observable data, to the extent practicable. However, the key inputs
require management to make estimates. Changes in assumptions about
these factors could affect the reported fair value of
investments.
The discount rates used in the valuation exercise represent the
Investment Manager's and the Board's assessment of the rate of
return in the market for assets with similar characteristics and
risk profile. The discount rates are reviewed quarterly and
updated, where appropriate, to reflect changes in the market and in
the project risk characteristics. Details of the areas of
estimation in the calculation of fair value are disclosed in Note
8.
Key judgement: Equity and debt investment in ORIT Holdings II
Limited
The evaluation of the performance of the Company's investments
is done for the entire portfolio on a fair value basis, as is the
reporting to the key management personnel and to the investors. In
this case, all equity, derivatives and debt investments form part
of the same portfolio for which the performance is evaluated on a
fair value basis together and reported to the key management
personnel in its entirety.
As such, the Directors have satisfied themselves that the equity
and debt investments into its direct wholly owned subsidiary, ORIT
Holdings II Limited, share the same investment characteristics and,
therefore, constitute a single asset class for IFRS 7 disclosure
purposes.
Key judgement: Basis of non-consolidation
The Company has adopted the amendments to IFRS 10 which states
that investment entities should measure all of their subsidiaries
that are themselves investment entities at fair value (in
accordance with IFRS 9 Financial Instruments: Recognition and
Measurement, and IFRS 13 Fair Value Measurement). Being investment
entities, ORIT and its wholly owned direct subsidiary, ORIT
Holdings II Limited are measured at fair value as opposed to being
consolidated on a line--by-line basis, meaning their cash, debt and
working capital balances are included in the fair value of
investments rather than the Group's current assets.
The Directors believe the treatment outlined above provides the
most relevant information to investors.
3. Investment income
For the six-month period For the six-month period
ended ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
----------------------------- -----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --------- -------- -------- --------- -------- --------
Dividend income from investments 9,800 -- 9,800 11,000 -- 11,000
Interest income from investments 12,861 -- 12,861 10,813 -- 10,813
--------------------------------- --------- -------- -------- --------- -------- --------
Total investment income 22,661 -- 22,661 21,813 -- 21,813
--------------------------------- --------- -------- -------- --------- -------- --------
4. Operating expenses
For the six-month period For the six-month period
ended ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
----------------------------- -----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------- -------- --------- -------- --------
Investment management
fees 2,109 703 2,812 2,118 706 2,824
Directors' fees 101 -- 101 93 -- 93
Company's auditor fees:
- in respect of audit
services 90 -- 90 95 -- 95
Other operating expenses 421 104 525 448 729 1,177
------------------------- --------- -------- -------- --------- -------- --------
Total operating expenses 2,721 807 3,528 2,754 1,435 4,189
------------------------- --------- -------- -------- --------- -------- --------
Further details on the Investment Manager's agreement have been
provided in Note 13.
The Company has no employees. Full detail on Directors' fees is
provided in note 13. The Directors' fees exclude employer's
national insurance contribution which is included as appropriate in
other operating expenses. There were no other emoluments.
5. Taxation
(a) Analysis of charge/(credit) in the period
For the six-month period For the six-month period
ended ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
----------------------------- -----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- -------- -------- --------- -------- --------
Corporation tax 184 (184) -- 297 (297) --
---------------------------- --------- -------- -------- --------- -------- --------
Tax charge/(credit) for the
period 184 (184) -- 297 (297) --
---------------------------- --------- -------- -------- --------- -------- --------
(b) Factors affecting total tax charge for the period:
The effective UK corporation tax rate applicable to the Company
for the period is 22% (2022: 19%). The tax charge/ (credit) differs
from the charge/(credit) resulting from applying the standard rate
of UK corporation tax for an investment trust company. The
differences are explained below:
For the six-month period For the six-month period
ended ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
----------------------------- -----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- ---------- ------- -------- -------- ---------
Profit/(loss) before taxation 19,982 (14,457) 5,525 19,108 45,167 64,275
--------------------------------- -------- ---------- ------- -------- -------- ---------
Corporation tax at 22% (2022:
19%) 4,396 (3,181) 1,215 3,631 8,582 12,213
Effects of:
Expenses not deductible for
tax purposes -- 2,997 2,997 -- -- --
Income not taxable (2,156) -- (2,156) (2,090) (8,879) (10,969)
Dividends designated as interest
distributions (2,058) -- (2,058) (1,244) -- (1,244)
Movement in deferred tax not
recognised 2 -- 2 -- -- --
--------------------------------- -------- ---------- ------- -------- -------- ---------
Total tax charge/(credit)
for the period 184 (184) -- 297 (297) --
--------------------------------- -------- ---------- ------- -------- -------- ---------
6. Dividends
For the six-month period For the six-month period
ended ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
----------------------------- -----------------------------
Pence per Revenue Pence per Revenue
Ordinary reserve Total Ordinary reserve Total
Share GBP'000 GBP'000 Share GBP'000 GBP'000
------------------------- ---------- -------- ------- ---------- -------- -------
Q4 2022 Dividend - paid
24 February 2023 (2021:
4 March 2022) 1.31 7,401 7,401 1.25 7,062 7,062
Q1 2023 Dividend - paid
2 June 2023 (2022: 27
May 2022) 1.44 8,135 8,135 1.31 7,401 7,401
------------------------- ---------- -------- ------- ---------- -------- -------
Total 2.75 15,536 15,536 2.56 14,463 14,463
------------------------- ---------- -------- ------- ---------- -------- -------
On 7 August 2023, the Company declared an interim dividend in
respect of the period from 1 April 2023 to 30 June 2023 of 1.45
pence per Ordinary Share, paid on 1 September 2023 to Shareholders
on the register at 18 August 2023. On that record date, the number
of Ordinary Shares in issue was 564,927,536 and the total dividend
paid to Shareholders amounted to GBP8,191,449 million. The dividend
has not been included as a liability at 30 June 2023.
7. Earnings per Ordinary Share
Earnings per Ordinary Share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of Ordinary Shares in issue during the period as
follows.
For the six-month period For the six-month period
ended ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
----------------------------- -----------------------------
Revenue Revenue Total Revenue Capital Total
----------------------------------- -------- ---------- ------- --------- --------- -------
Profit/(loss) attributable
to the equity holders of the
Company (GBP'000) 19,798 (14,273) 5,525 18,811 45,464 64,275
Weighted average number of
Ordinary Shares in issue (000) 564,928 564,928 564,928 564,928 564,928 64,275
----------------------------------- -------- ---------- ------- --------- --------- -------
Earnings/(loss) per Ordinary
Share (pence) - basic and diluted 3.50p (2.53p) 0.97p 3.33p 8.05p 11.38p
----------------------------------- -------- ---------- ------- --------- --------- -------
There is no difference between the weighted average Ordinary or
diluted number of Shares.
8. Investments at fair value through profit or loss
As set out in note 2, the Company accounts for its interest in
its wholly owned direct subsidiaries as an investment at fair value
through profit or loss.
a) Summary of valuation
As at As at
31 December
30 June 2023 2022
(unaudited) (audited)
GBP'000 GBP'000
-------------------------------------------------------- ------------ -----------
Opening balance 608,799 485,417
Portfolio of assets acquired 658 79,194
Additional investment in intermediate holding companies -- 4,386
Distributions received from investments (9,800) (38,108)
Investment income 22,661 40,307
Movement in fair value of investments (13,621) 37,603
-------------------------------------------------------- ------------ -----------
Total investments at the end of the period/year 608,697 608,799
-------------------------------------------------------- ------------ -----------
b) Reconciliation of movement in fair value of portfolio of
assets
The table below shows the movement in the fair value of the
Company's investments. These assets are held through intermediate
holding companies.
As at As at
31 December
30 June 2023 2022
(unaudited) (audited)
GBP'000 GBP'000
------------------------------------------------------- ------------ -----------
Opening balance 743,714 485,417
Portfolio of assets acquired 64,344 209,666
Distributions received (20,140) (40,129)
Movement in fair value 8,231 88,760
------------------------------------------------------- ------------ -----------
Fair value of portfolio of assets at the end of the
period/year 796,149 743,714
------------------------------------------------------- ------------ -----------
Cash held in intermediate holding companies 3,837 4,509
Bank loans held in intermediate holding companies (190,408) (127,200)
Fair value of other net assets in intermediate holding
companies (881) (12,224)
------------------------------------------------------- ------------ -----------
Fair value of Company's investments at the end of
the period/year 608,697 608,799
------------------------------------------------------- ------------ -----------
c) Investment (losses)/gains in the period/year
As at As at
31 December
30 June 2023 2022
(unaudited) (audited)
GBP'000 GBP'000
-------------------------------------- ------------ -----------
Movement in fair value of investments (13,621) 37,603
-------------------------------------- ------------ -----------
Fair value of portfolio of assets
The Investment Manager has carried out fair market valuations of
the investments as at 30 June 2023.
The Directors have satisfied themselves as to the methodology
used, the discount rates applied and the valuation. All investments
are in Renewable Energy Assets and are valued using a discounted
cash flow methodology. The Company's holding of an investment
represents its interest in both the equity and debt instruments of
the investment. The equity and debt instruments are valued as a
whole using a blended discount rate and the value attributed to the
equity instruments represents the fair value of future dividends
and equity redemptions in addition to any value enhancements
arising from the timing of loan principal and interest receipts
from the debt instruments, while the value attributed to the debt
instruments represents the principal outstanding and interest due
on the loan at the valuation date.
The weighted average costs of capital applied to the portfolio
of assets ranges from 5.5% to 9.1%.
The following economic assumptions were used in the discounted
cash flow valuations:
As at 30 June 2023 As at 31 December 2022
------------------------------ ----------------------------- -----------------------------
UK - long-term inflation 6.2% during 2023, declining 6.7% during 2023, declining
rate to 3.00% to 3.00% in 2027 and then
(year-on-year) in 2027 and then to 2.25% to 2.25% from 2030 onwards.
from 2030
onwards.
------------------------------ ----------------------------- -----------------------------
UK - long-term inflation 9.1% during 2023, declining 9.8% during 2023, declining
rate (annual average) to 3.00% in 2027 and then to 3.00% in 2027 and then
to 2.25% from 2030 onwards. to 2.25% from 2030 onwards.
------------------------------ ----------------------------- -----------------------------
UK - corporation tax 19.00% to April 2023; 25.00% 19.00% to April 2023; 25.00%
rate thereafter. thereafter.
------------------------------ ----------------------------- -----------------------------
Sweden - long-term inflation
rate 2.00% 2.00%
Sweden - corporation
tax rate 20.60% 20.60%
France - long-term inflation
rate 2.00% 2.00%
France - corporation
tax rate 25.00% 25.00%
Poland - long-term inflation
rate 2.50% 2.50%
Poland - corporation
tax rate 19.00% 19.00%
Finland - long-term inflation
rate 2.00% 2.00%
Finland - corporation
tax rate 20.00% 20.00%
Euro/sterling exchange
rate 1.1654 1.1277
Zloty/sterling exchange
rate 5.1648 5.3009
Energy yield assumptions P50 case P50 case
------------------------------ ----------------------------- -----------------------------
Other key assumptions include:
Power Price Forecasts
Unless fixed under PPAs or otherwise hedged, the power price
forecasts used in the valuations are based on market forward prices
in the near-term, followed by an equal blend of up to three
independent and widely-used market expert consultants' relevant
technology-specific capture price forecasts for each asset.
Asset Lives
The length of the period of operations assumed in the valuation
is determined on an asset-by-asset basis taking into account the
lease agreements, permits or planning permissions in place as well
as any extension rights, renewal regimes or wider policy
considerations, together with the technical characteristics of the
asset.
Decommissioning Costs
Where applicable, the present value of the estimated costs to
restore the land back to its original use are included in the
valuations as a cash outflow at the end of the asset life.
Fair value of intermediate holding companies
The other net assets in the intermediate holding companies
substantially comprise working capital balances, therefore the
Directors consider the fair value to be equal to the book values.
The sensitivity to unobservable inputs is based on management's
expectation of reasonable possible shifts in these inputs. The
valuation sensitivity of each assumption is shown in Note 12.
9. Share capital
As at 30 June 2023 As at 31 December 2022
(unaudited) (audited)
-------------------------- --------------------------
Nominal value Nominal value
Allotted, issued and fully Number of of shares Number of of shares
paid: shares (GBP) shares (GBP)
----------------------------- ----------- ------------- ----------- -------------
Opening balance 564,927,536 5,649,275 564,927,536 5,649,275
----------------------------- ----------- ------------- ----------- -------------
Allotted following admission
to LSE
Movement - - - -
----------------------------- ----------- ------------- ----------- -------------
Closing balance 564,927,536 5,649,275 564,927,536 5,649,275
----------------------------- ----------- ------------- ----------- -------------
10. Special reserve
As indicated in the Company's prospectus dated 19 November 2019,
following admission of the Company's Ordinary Shares to trading on
the London Stock Exchange, the Directors applied to the Court and
obtained a judgement on 18 February 2020 to cancel the amount
standing to the credit of the share premium account of the
Company.
As stated by the Institute of Chartered Accountants in England
and Wales ("ICAEW") and the Institute of Chartered Accountants in
Scotland ("ICAS") in the technical release TECH 02/17BL, The
Companies (Reduction of Share Capital) Order 2008 SI 2008/1915
("the Order") specifies the cases in which a reserve arising from a
reduction in a company's capital (i.e., share capital, share
premium account, capital redemption reserve or redenomination
reserve) is to be treated as a realised profit as a matter of law.
The Order also disapplies the general prohibition in section 654 on
the distribution of a reserve arising from a reduction of capital.
The Order provides that if a limited company having a share capital
reduces its capital and the reduction is confirmed by order of
court, the reserve arising from the reduction is treated as a
realised profit unless the court orders otherwise.
The amount of the share premium account cancelled and credited
to the Company's special distributable reserve is GBP339,500,000,
which can be utilised to fund distributions to the Company's
Shareholders, which can be utilised to fund distributions by way of
dividends to the Company's shareholders.
11. Net assets per Ordinary Share (pence)
As at As at
31 December
30 June 2023 2022
(unaudited) (audited)
------------------------------------------- ------------ -----------
Total shareholders' equity (GBP'000) 608,249 618,260
Number of Ordinary Shares in issue ('000) 564,928 564,928
------------------------------------------- ------------ -----------
Net asset value per Ordinary Share (pence) 107.67p 109.44p
------------------------------------------- ------------ -----------
12. Financial instruments by category
The Company held the following financial instruments at fair
value at 30 June 2023. There have been no transfers of financial
instruments between levels of the fair value hierarchy. There are
no non-recurring fair value measurements.
As at 30 June 2023 (unaudited)
----------------------------------------------------
Financial
Financial assets at Financial
assets at fair value liabilities
amortised through profit at amortised
cost or loss cost Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- --------------- ------------- --------
Non-current assets
Equity Investments at fair value
through profit or loss -- 608,697 -- 608,697
Current assets
Trade and other receivables 855 -- -- 855
Cash and cash equivalents 282 -- -- 282
--------------------------------- ---------- --------------- ------------- --------
Total assets 1,137 608,697 -- 609,834
--------------------------------- ---------- --------------- ------------- --------
Current liabilities
Trade and other payables -- -- (1,585) (1,585)
--------------------------------- ---------- --------------- ------------- --------
Total liabilities -- -- (1,585) (1,585)
--------------------------------- ---------- --------------- ------------- --------
Net assets 1,137 608,697 (1,585) 608,249
--------------------------------- ---------- --------------- ------------- --------
As at 31 December 2022 (audited)
----------------------------------------------------
Financial
Financial assets at Financial
assets at fair value liabilities
amortised through profit at amortised
cost or loss cost Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- --------------- ------------- --------
Non-current assets
Investments at fair value through
profit or loss -- 608,799 -- 608,799
Current assets
Trade and other receivables 775 -- -- 775
Cash and cash equivalents 10,603 -- -- 10,603
---------------------------------- ---------- --------------- ------------- --------
Total assets 11,378 608,799 -- 620,177
---------------------------------- ---------- --------------- ------------- --------
Current liabilities
Trade and other payables -- -- (1,917) (1,917)
---------------------------------- ---------- --------------- ------------- --------
Total liabilities -- (1,917) (1,917)
---------------------------------- ---------- --------------- ------------- --------
Net assets 11,378 607,799 (1,917) 618,260
---------------------------------- ---------- --------------- ------------- --------
The above table provides an analysis of financial instruments
that are measured subsequent to their initial recognition at fair
value as follows:
Level 1: fair value measurements Level 2: fair value measurements Level 3: fair value measurements
are those derived from are those derived from are those derived from
quoted prices (unadjusted) inputs other than quoted valuation techniques that
in active markets for prices included within include inputs to the asset
identical assets or liabilities; Level 1 that are observable or liability that are not
for the asset or liability, based on observable market
either directly (i.e., data (unobservable inputs).
as prices) or indirectly
(i.e., derived from prices);
and
---------------------------------- --------------------------------- ---------------------------------
There were no Level 1 or Level 2 assets or liabilities during
the period. There were no transfers between Level 1 and 2, Level 1
and 3 or Level 2 and 3 during the period. In the table above,
financial instruments are held at carrying value as an
approximation to fair value unless stated otherwise.
Reconciliation of Level 3 fair value measurement of financial
assets and liabilities
An analysis of the movement between opening to closing balances
of the investments at fair value through profit or loss is given in
Note 8.
The fair value of the investments at fair value through profit
or loss includes the use of Level 3 inputs. Refer to Note 8 for
details on the valuation methodology.
Valuation Sensitivities
Discount rate
The discount rate is considered the most significant
unobservable input through which an increase or decrease would have
a material impact on the fair value of the investments at fair
value through profit or loss.
An increase of 0.5% in the discount rate (levered cost of
equity) would cause a decrease in total portfolio value of 8.0
pence per Ordinary Share and a decrease of 0.5% in the discount
rate would cause an increase in total portfolio value of 7.3 pence
per Ordinary Share.
Inflation rate
The sensitivity of the investments to movement in inflation
rates is as follows:
A decrease of 0.5% in inflation rates would cause a decrease in
total portfolio value of 6.3 pence per Ordinary Share and an
increase of 0.5% in inflation rates would cause an increase in
total portfolio value of 6.7 pence per Ordinary Share.
Power price
Wind and solar assets are subject to movements in power prices.
The sensitivities of the investments to movement in power prices
are as follows:
A decrease of 10% in power price would cause a decrease in the
total portfolio value of 11.8 pence per Ordinary Share and an
increase of 10% in power price would cause an increase in the total
portfolio value of 11.7 pence per Ordinary Share.
Generation
Wind and solar assets are subject to power generation risks. The
sensitivities of the investments to movement in level of power
output are as follows:
The fair value of the investments is based on a "P50" level of
power output being the expected level of generation over the
long-term. An assumed "P90" level of power output (i.e. a level of
generation that is below the "P50", with a 90% probability of being
exceeded) would cause a decrease in the total portfolio value of
24.1 pence per Ordinary Share and an assumed "P10" level of power
output (i.e. a level of generation that is above the "P50", with a
10% probability of being achieved) would cause an increase in the
total portfolio value of 23.4 pence per Ordinary Share.
Foreign exchange
The sensitivity of the investments to movement in FX rates is as
follows:
A decrease of 10% in FX rates would cause a decrease in total
portfolio value of 2.5 pence per Ordinary Share and an increase of
10% in inflation rates would cause an increase in total portfolio
value of 2.5 pence per Ordinary Share.
Of the portfolio as at 30 June 2023, 51% of the NAV is
denominated in non-sterling currencies.
13. Related party and key advisor transactions
During the period, interest totalling GBP12.9 million was
earned, in respect of the long-term interest-bearing loan between
the Company and its subsidiaries. At the period end, the full
amount was outstanding.
AIFM and Investment Manager
The Company has appointed Octopus AIF Management Limited to be
the Alternative Investment Fund Manager of the Company (the "AIFM")
for the purposes of Directive 2011/61/EU of the European Parliament
and of the Council on Alternative Investment Fund Managers.
Accordingly, the AIFM is responsible for the portfolio management
of the Company and for exercising the risk management function in
respect of the Company. The AIFM has delegated portfolio management
services to Octopus Renewables Limited (trading as Octopus Energy
Generation), the Company's investment manager (the "Investment
Manager").
The AIFM is entitled to a management fee of 0.95% per annum of
Net Asset Value of the Company up to and including GBP500 million
and 0.85% per annum of Net Asset Value in excess of GBP500 million,
payable quarterly in arrears. There are no performance fee or asset
level fees are payable to the AIFM under the Management
Agreement.
During the period, the management fee charged to the Company by
the AIFM was GBP2,109,000, of which GBP1,404,000 remained payable
at the period end date.
Directors
The Company is governed by a Board of Directors (the "Board"),
all of whom are independent and non-executive. During the period,
they received fees for their services of GBP96,333 and were paid
GBP6,147 in expenses. As at the period end, there were no
outstanding fees payable to the Board.
The Directors had the following shareholdings in the Company,
all of which were beneficially owned.
Ordinary
Shares as Ordinary
at Shares as
date of this at
report 30 June 2023
------------------- ------------- -------------
Philip Austin MBE* 165,518 165,518
James Cameron 65,306 65,306
Elaina Elzinga - -
Audrey McNair** 50,437 51,383
Sarim Sheikh*** - -
------------------- ------------- -------------
* with effect from 23 November 2021, Mr. Austin's shares have
been held jointly with Mrs. J Austin, a PCA of Mr. Austin
** with effect from 8 August 2023, Mrs. McNair's shares have
been held jointly with Mr. McNair, a PCA of Mrs. McNair.
*** Appointed 1 June 2023
14. Subsidiaries
As a result of applying Investment Entities (Amendments to IFRS
10, IFRS 12 and IAS 27), no subsidiaries have been consolidated in
these financial statements. The Company's subsidiaries as at 30
June 2023 are listed below:
Place of Registered Ownership
Name Category business Office* interest
------------------------------------------------- ---------------------- ---------- ----------- ---------
ORIT Holdings Limited Intermediate Holdings UK A 100%
ORIT Holdings II Limited Intermediate Holdings UK A 100%
ORIT UK Acquisitions Limited Intermediate Holdings UK A 100%
Abbots Ripton Solar Energy Limited Project company UK A 100%
Chisbon Solar Farm Limited Project company UK A 100%
Jura Solar Limited Project company UK A 100%
Mingay Farm Limited Project company UK A 100%
NGE Limited Project company UK A 100%
Sun Green Energy Limited Project company UK A 100%
Westerfield Solar Limited Project company UK A 100%
Wincelle Solar Limited Project company UK A 100%
Heather Wind AB Project company Sweden B 100%
Portfolio-level
Solstice 1A GmbH Holdings Germany C 100%
SolaireCharleval SAS Project company France D 100%
SolaireIstres SAS Project company France D 100%
SolaireCuges-Les-Pins SAS Project company France D 100%
SolaireChalmoux SAS Project company France D 100%
SolaireLaVerdiere SAS Project company France D 100%
SolaireBrignoles SAS Project company France D 100%
SolaireSaint-Antonin-du-Var SAS Project company France D 100%
Centrale Photovoltaique de IOVI 1 SAS Project company France D 100%
Centrale Photovoltaique de IOVI 3 SAS Project company France D 100%
Arsac 2 SAS Project company France D 100%
Arsac 5 SAS Project company France D 100%
SolaireFontienne SAS Project company France D 100%
SolaireOllieres SAS Project company France D 100%
Portfolio-level
Eylsia SAS Holdings France E 100%
CEPE Cerisou Project company France F 100%
Cumberhead Wind Energy Limited Project company UK A 100%
Portfolio-level
ORIT Irish Holdings 2 Limited Holdings UK A 100%
Portfolio-level
ORIT Irish Holdings Limited Holdings UK A 100%
Copernicus Windpark Sp. Z.o.o Project company Poland G 100%
Forthewind Sp. Z.o.o Project company Poland G 100%
Portfolio-level
Nordic Power Development Limited Holdings UK A 100%
Saunamaa Wind Farm Oy Project company Finland H 100%
Vöyrinkangas Wind Farm Oy Project company Finland H 100%
Portfolio-level
ORI JV Holdings Limited Holdings UK A 50%
Portfolio-level
ORI JV Holdings 2 Limited Holdings UK A 50%
Portfolio-level
Simply Blue Energy Holdings Limited Holdings Ireland I 15.5%
South Kilbraur Wind Farm Limited Project company UK J 25%
Windburn Wind Farm Limited Project company UK J 25%
Wind 2 Project 2 Limited Project company UK J 25%
Wind 2 Project 5 Limited Project company UK J 25%
Wind 2 Project 3 Limited Project company UK J 25%
Kirkton Wind Farm Limited Project company UK J 25%
Bwlch Gwyn Wind Farm Limited Project company UK J 25%
Wind 2 Project 6 Limited Project company UK J 25%
Wind 2 Project 4 Limited Project company UK J 25%
Portfolio-level
ORI JV Holdings 3 Limited Holdings UK A 50%
Portfolio-level
Nordic Renewables Limited Holdings UK A 50%
Portfolio-level
Nordic Renewables Holdings 1 Limited Holdings UK A 50%
Portfolio-level
ORI JV Holdings 4 Limited Holdings UK A 50%
Portfolio-level
ORI JV Holdings 5 Limited Holdings UK A 51%
Portfolio-level
ORI JV Holdings 5 Holdco Limited Holdings UK A 51%
Portfolio-level
ORI JV Holdings 6 Limited Holdings UK A 50%
Portfolio-level
ORIT Lincs Holdco Limited Holdings UK A 100%
Portfolio-level
ORI Lincs Holdings Limited Holdings UK A 67%
Portfolio-level
Clyde SPV Limited Holdings UK K 50%
Portfolio-level
Blota Germany GmbH Holdings Germany L 100%
Portfolio-level
Blota GP GmbH Holdings Germany L 100%
Portfolio-level
UKA Windenergie Leeskow GmbH Holdings Germany M 100%
UGE Leeskow GmbH & Co. KG Project company Germany M 100%
Umweltgerechte Energie Infrastrukturgesellschaft
Leeskow mbH & Co. KG Project company Germany M 100%
Burwell 11 Solar Limited Project company UK A 100%
Crossdykes WF Limited Project company UK N 51%
Portfolio-level
UK Green Investment Lyle Limited Holdings UK K 50%
Portfolio-level
Lincs Wind Farm (Holding) Limited Holdings UK O 15.5%
Lincs Wind Farm Limited Project company UK P 15.5%
Portfolio-level
Hyro Energy Limited Holdings UK Q 25%
Green Hydrogen 1 Limited Project company UK Q 18.75%
Green Hydrogen 2 Limited Project company UK Q 18.75%
Green Hydrogen 3 Limited Project company UK Q 18.75%
Green Hydrogen 4 Limited Project company UK Q 18.75%
Green Hydrogen 5 Limited Project company UK Q 18.75%
Gridsource (Woburn Rd) Limited Project company UK A 50%
* Registered offices:
A - Uk House, 5th Floor, 164-182 Oxford Street, London, United
Kingdom, W1D 1NN
B - Lilla Nygatan 1, 111 28 Stockholm, Sweden
C - Maximilianstraße, 3580539 München, Germany
D - 52 Rue de la Victoire 75009, Paris, France
E - 4 Rue de Marivaux, 75002 Paris, France
F - Z.I de Courtine, 330 rue du Mourelet, 84000. Avignon,
France
G - Wojska Polskiego 24-26, 75-712 Koszalin,
H - Teknobulevardi 3-5, 01530 Vantaa, Finland
I - Woodbine Hill, Kinsalebeg, Youghal, Co. Cork, Ireland
J - Wind 2 Office, 2 Walker Street, Edinburgh, Scotland, EH3
7LB
K - 8 White Oak Square, London Road, Swanley, Kent, United
Kingdom, BR8 7AG
L - c/o Ashurst LLP, OpernTurm, Bockenheimer Landstraße 2-4,
60306 Frankfurt
M - Dorfstraße 20a, 18276 Lohmen
N - 58 Morrison Street, Edinburgh, United Kingdom, EH3 8BP
O - 5 Howick Place, London, United Kingdom, SW1P 1WG
P - 13 Queens Road, Aberdeen, Scotland, AB15 4YL
Q - Beaufort Court, Egg Farm Lane, Kings Langley, United
Kingdom, WD4 8LR
ORIT Holdings II Limited is the only direct subsidiary of the
Company. All other subsidiaries are held indirectly.
15. Guarantees and other commitments
The Company guarantees the foreign exchange hedges entered into
by its intermediate holding companies to enable it to minimise its
exposure to changes in underlying foreign exchange rates.
As at 30 June 2023, the Company has guarantees in respect of the
future investment obligations associated with the Breach Solar
plant totalling GBP7.6 million (2022: GBP41.5 million).
16. Post period end events
Post period end in July 2023 the Company announced that it had
agreed to invest up to GBP2 million to set up and fund a new
development business, focused on creating new ground-mounted solar
PV and co-located battery storage assets in the UK. The business
will benefit from exclusive development services from BLC Energy
Limited, a specialist developer managed by a team of industry
veterans with deep knowledge of the UK electricity grid, as well as
significant experience in securing land for building new renewable
energy projects.
On 7 August 2023 the Company declared an interim dividend in
respect of the three months ended 30 June 2023 of 1.45 pence per
Ordinary Share for GBP8.2 million based on a record date of 18
August 2023 and ex-dividend date of 17 August 2023 and the number
of Ordinary Shares in issue being 564,927,536. This dividend was
paid on 01 September 2023.
17. Status of this report
These interim financial statements are not the Company's
statutory accounts for the purposes of section 434 of the Companies
Act 2006. They are unaudited. The unaudited interim financial
report will be made available to the public at the registered
office of the Company.
The report will also be available in electronic format on the
Company's website,
https://octopusrenewablesinfrastructure.com/.
The interim financial report was approved by the Board of
Directors on 20 September 2023.
Other Information
Alternative Performance Measures
In reporting financial information, the Company presents
alternative performance measures, "APMs", which are not defined or
specified under the requirements of IFRS. The Company believes that
these APMs, which are not considered to be a substitute for or
superior to IFRS measures, provide stakeholders with additional
helpful information on the performance of the Company. The
Directors assess the Company's performance against a range of
criteria which are viewed as particularly relevant for closed-end
investment companies. The APMs presented in this report are shown
below:
Gross asset value (GAV)
The Company's gross assets comprise the net asset values of the
Company's Ordinary Shares and the debt held in unconsolidated
subsidiaries
As at As at
31 December
30 June 2023 2022
GBPmillion GBPmillion
---------- ------ ------------ -----------
NAV a 608.2 618.3
Debt b 511.9 454.3
---------- ------- ------------ -----------
Total GAV a + b 1,120.1 1,072.6
---------- ------- ------------ -----------
Total value of all investments
A measure of committed asset value including total debt and
equity commitments
As at As at
31 December
30 June 2023 2022
GBPmillion GBPmillion
---------------------------------------- ---------- ------------ -----------
GAV a 1,120.1 1,072.6
Commitments on existing portfolio b 11.0 68.3
Commitments on conditional acquisitions c 199.2 177.0
---------------------------------------- ----------- ------------ -----------
(a+b+c) =
GAV excluding cash d 1,330.3 1,317.9
---------------------------------------- ----------- ------------ -----------
Less Company and holding company
assets e 4.1 (1.7)
Less asset level cash f (26.1) (15.5)
---------------------------------------- ----------- ------------ -----------
Total value of all investments d + e + f 1,308.3 1,304.2
---------------------------------------- ----------- ------------ -----------
Total return since IPO
A measure of performance since IPO that includes both income and
capital returns. This takes into account capital gains and
reinvestment of dividends (where beneficial) paid out by the
Company into the Ordinary Shares of the Company on the ex-dividend
date.
30 June 2023 Share price NAV
------------------------------------- ------------------- ----------- ------
Value at IPO (10 December 2019)
- pence a 100.00 98.00
Value at 30 June 2023 - pence b 92.50 107.67
Benefits of reinvesting dividends
- pence d (1.30) 1.92
Dividends paid in the year - pence c 14.86 14.86
------------------------------------- -------------------- ----------- ------
Total return [(b+c+d)÷a]-1 6.1% 27.0%
------------------------------------- -------------------- ----------- ------
Annualised total return 1.7% 7.0%
----------------------------------------------------------- ----------- ------
31 December 2022 Share price NAV
------------------------------------- ------------------- ----------- ------
Value at IPO (10 December 2019)
- pence a 100.00 98.00
Value at 31 December 2022 - pence b 100.00 109.44
Benefits of reinvesting dividends
- pence d - 1.8
Dividends paid in the period - pence c 12.11 12.11
------------------------------------- -------------------- ----------- ------
Total return [(b+c+d)÷a]-1 12.1% 25.9%
------------------------------------- -------------------- ----------- ------
Annualised total return 3.8% 7.8%
----------------------------------------------------------- ----------- ------
YTD total returns
A measure of performance for the year to date that includes both
income and capital returns. This takes into account capital gains
and reinvestment of dividends (where beneficial) paid out by the
Company into the Ordinary Shares of the Company on the ex-dividend
date.
30 June 2023 Share price NAV
----------------------------------- ------------------- ----------- ------
Value at 1 January 2023 - pence a 100.00 109.44
Value at 30 June 2023 - pence b 92.50 107.67
Benefits of reinvesting dividends
- pence d (0.15) 0.03
Dividends paid in the year - pence c 2.75 2.75
----------------------------------- -------------------- ----------- ------
Total return [(b+c+d)÷a]-1 -4.9% 0.9%
----------------------------------- -------------------- ----------- ------
31 December 2022 Share price NAV
----------------------------------- ------------------- ----------- ------
Value at 1 January 2022 - pence a 110.80 102.26
Value at 31 December 2022 - pence b 100.00 109.44
Benefits of reinvesting dividends
- pence d 0.35 0.26
Dividends paid in the year - pence c 5.18 5.18
----------------------------------- -------------------- ----------- ------
Total return [(b+c+d)÷a]-1 -4.8% 12.3%
----------------------------------- -------------------- ----------- ------
(Discount)/Premium to NAV
The amount, expressed as a percentage, by which the share price
is more than the NAV per Ordinary Share.
As at As at
31 December
30 June 2023 2022
------------------------------- -------------- ------------ -----------
NAV per Ordinary Share - pence a 107.67 109.44
Share price - pence b 92.50 100.00
------------------------------- --------------- ------------ -----------
Discount (b ÷a)-1 -14.1% -8.6%
------------------------------- --------------- ------------ -----------
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END
IR EAFNEALLDEAA
(END) Dow Jones Newswires
September 21, 2023 02:00 ET (06:00 GMT)
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