Octopus Renewables Infrastructure Trust to focus on enhanced diversification after solid H1

Sep 27, 2021 03:52 PM ET
  • Octopus Renewables Infrastructure Trust (ORIT) saw its gross possession value (GAV) remain to grow, as it looks optimistically in the direction of future renewables growth post-pandemic.
Octopus Renewables Infrastructure Trust to focus on enhanced diversification after solid H1
Image: Octopus Renewables

In the firm's H1 2021 economic outcomes, it detailed how its GAV has actually grown to ₤ 447 million, a 1.3% rise on its because 31 December 2020 results. Likewise its internet property worth (NAV) complete return since IPO was up by 3.9% throughout the duration, from 2.4% in December.

Its NAV per regular share went to 97.31 p, a decline of 1% over the initial six months of the year, and also its total shareholder return also down somewhat to +9.1% compared with +15.9% in December.

ORIT's NAV was ₤ 341 million, below ₤ 344 million, with the total value of all its investments at ₤ 452 million. These were calculated before the business's successful fundraise in July.

" While COVID-19 has actually continued to impact populations and also economies all over the world, there are environment-friendly shoots of recovery in each of the firm's target markets, which may accelerate governing reform in electricity market," stated Philip Austin MBE, ORIT chairman.

" This rise in economic activity has aggravated work shortages and also supply chain disruptions, resulting in an inflationary atmosphere which we continue to monitor. Growing need for gas has actually additionally brought about extremely solid power costs in each of the markets in which the firm operates."

In spite of an overall strong collection of results, the firm's UK solar portfolio saw outcome 2.9% below budget despite greater than projection irradiance. During the six month duration it produced 59.8 GWh from the portfolio.

This was greatly due to downtime at one website, Abbots Ripton, in Q1 2021 where an overheating problem with a brand name of invertors utilized on website brought about upkeep durations. ORIT knew there was a need to fix or replace some switchgear as well as inverter brands when it got the portfolio, and also has actually now completed 90% of this work.

" Our administration group has actually spent a significant quantity of time as well as initiative resolving the works required to obtain that package performing where it should be, or in many cases, change it," the business's investment supervisor David Bird told Solar energy Portal today. "So our accessibility in the very first 6 months of this year was better than the very same period in the previous year."

Undoubtedly production losses were down by 48% in Q2 2021 on the previous year. This was assisted by the application of the business's asset administration technique, working with O&M partners to reduce action times, Bird added.

The UK portfolio produced ₤ 7.4 million over the very first 6 months of 2021, with this 2.6% listed below budget plan. Operational expense at the same time was ₤ 1.6 million, 1.6% above budget plan due to lawful costs sustained in getting asset life extensions.

For the very first 6 months of 2021, EBITDA was ₤ 5.9 million, 4% down on budget for the duration.

As well as its 123MW of UK solar possessions, ORIT has continued to expand its properties including introducing in July-- just after the outcomes duration-- that it has obtained a portfolio of 5 solar PV sites in Ireland from Statkraft Ireland. These are expected to have a mounted ability of approximately 250MW when they are fully operational in H2 2022.

The overall consideration for this purchase is expected to be between roughly EUR138 million and also EUR145 million (about ₤ 119 million to ₤ 125 million).

Bird highlighted the advantage of the Renewable Electricity Support Scheme (RESS) for the investment, although he did note that offered the dimension of the Irish market the business is likely to concentrate on various other regions in the near term for further diversity.

" The RESS is absolutely a big factor in what makes that specific financial investment eye-catching," he stated. "Ireland hasn't viewed as much solar as the UK has, as well as the renewables industry there has actually been controlled by wind. So we such as the scheme, we think it's attractive, we believe it will certainly aid as a wave of solar is starting around."

By obtaining a project with subsidies in place, ORIT can hedge versus more turbulency in power rates, such as those seen in recent weeks. The business presently has 23 functional assets, one incomplete as well as five conditional procurement possessions, which will certainly provide it 315MW of ability when fully created. Of these, 36% lie in the UK as well as 68% are solar assets.

Currently, 91% of the company's properties benefit from fixed income streams, which are established till December 2023. Over the following 15 years a high number of these will certainly remained to gain from fixed earnings either from aids or power contracts, aiding to hedge against market volatility.

" We fit with our hedging approach," said Bird. "We like having a combination of some subsidised as well as vendor properties in there. So in the Nordic market, for example, we assume it's excellent to be able to have some merchant exposure. We take a kind of a case by situation as well as rather flexible technique, so we do not need to have every single possession shut out for a period of years."

Power costs are anticipated to stay solid in the near term driven by the rebound from COVID-19, prior to softening from 2026 onwards. Average rates are expected to be ₤ 42.78 from 2021-25, claimed ORIT, as well as ₤ 39.12 from 2026-50.

Additional diversity of its portfolio creates among the vital columns of ORIT's technique in the coming months and years. This consists of both geographical range as well as technological, taking a look at markets like Finland and also Poland in addition to evaluating the opportunity of batteries.

" We have actually had a few storage space purchases that we've considered and we remain to take a look at that," said Bird. "Offshore wind is one that we are looking at too, we have actually got this 20% allotment we can do outdoors solar as well as onshore wind, and those are the type of points we could look at making with that."

In very early July, ORIT raised ₤ 150 million with an oversubscribed fundraise, the earnings of which will certainly be utilized to assist expand and expand its portfolio. This develop out will be taken on as part of the supplier Octopus Energy, after ORIT-- which rested within the Octopus Group anyhow-- was acquired by the distributor in March.