Downing Renewa. Regulatory News (DORE)

17 October, 2022

Downing Renewables & Infrastructure Trust plc 

("DORE" or the "Company")

Market Update

The Board notes the UK Government's proposal to introduce a "cost-plus-revenue limit" on renewable generators and the European Commission's proposal for price caps for renewable generators. Accordingly, the Company wishes to provide the following update with respect to the forecast revenues for the periods 2023-2025 and 2026-2035 that were used for its 30 June 2022 valuation (updated where appropriate for actual fixed price arrangements entered into since that date).

The Company is not issuing any guidance on how these proposals may be implemented or the effect of them on the valuation of its assets.

A copy of this announcement with charts included is available at www.doretrust.com

UK revenues

Approximately 59% of the Company's revenues over the period 2023-2025 are forecast to come from its UK portfolio, decreasing to 46% in the period 2026-2035. 

The Company is forecast to derive c.4% of its 2023 total revenues from merchant power sales in the UK (sales at day ahead prices on the wholesale market). Only c.16% of the forecast UK revenues (9% of total revenues) are derived from merchant power sales in the period 2023-2025 and for the period 2026-2035, the proportion is 29% (14% of total revenues).

The split of forecast revenues for the Company's UK portfolio is shown in figures 1 and 2 below. This snapshot illustrates the Company's policy of hedging near term power sales to fix prices and reduce exposure to price volatility.

Figure 1: UK revenue mix 2023-2025

In the period 2023-2025, 59% of the forecast UK revenues are derived from subsidies and the balance (25%) of the non-merchant UK revenues (shown as "fixed revenues other") derive from fixed price long term sales arrangements for energy supplied directly to customers (private wire arrangements) and other fixed price arrangements such as pay-as-produced power price hedging. These figures equate to 34% and 15%, respectively, of the Company's total revenues in that period.

Figure 2: UK revenue mix 2023-2035

Figure 3, below, sets out the price forecasts for the Company's UK sales of electricity, whether through merchant sales or through fixed price arrangements, over the period to 2035. This is shown against the blended baseload price forecasts as at 31 December 2021, 31 March 2022 and 30 June 2022.

The weighted average forecast price for the sale of energy in the Company's UK portfolio is £82/MWh for the period 2023-2025 and £76/MWh for the period 2026-2035.

Figure 3: Weighted average forecast price for sale of energy in UK (nominal - June 2022)

The weighted average forecast price is the price forecast to be achieved by the relevant generators net of capture price discount and all route-to-market cost and fees (including the fixed price arrangements).

Euro revenues

Approximately 41% of the Company's revenues over the period 2023-2025 are forecast to come from its Swedish portfolio, increasing to 54% in the period 2026-2035. Swedish power sales are denominated in Euro.

The Company's Euro power price exposure is spread across 20 assets in 3 price zones in Sweden. The weighted average forecast price for the Euro portfolio is €53/MWh for the period 2023-2025 and €58/MWh for the period 2026-2035. The Company notes that from 1 January 2023 the consultant price forecasts for all price zones are less than the European Commission's proposed €180/MWh cap for the life of the projects (noting that the European Commission recommended that the cap should end in March 2023). Should the cap be introduced from 30 September 2022 there would be an immaterial impact (less than 0.01%) on NAV as a result of the hydropower revenues arising in the SE4 price zone in southern Sweden that were factored into the valuation model at 30 June 2022.

Please note that, as for the UK, the portfolio weighted average forecast price is the price forecast to be achieved by the relevant generators net of capture price discount and all route-to-market cost and fees. Set out in the graph below is the evolution of this forecast and also the baseload forecast pricing over the period to 2035 for each of the SE2, SE3 and SE4 price zones. There are no material subsidies for the Company's Swedish assets.

Figure 4: Power price forecasts for Sweden (nominal - June 2022)

ENDS

Contact details:

About Downing LLP:

Downing is a sustainable investment manager established in London in 1986. We currently manage £1.8 billion of assets under a broad range of investment mandates across our funds, investment trusts and tax-efficient products. As a certified B Corporation, we are focused on creating a sustainable future and our key investment areas are renewable energy, infrastructure, property and healthcare.

Downing has a proven track record in renewables and since 2010 has made more than 175 investments totalling more than £700 million into solar, wind, hydro and battery storage.

About Downing Renewables & Infrastructure Trust plc (DORE):

DORE is a closed-end investment trust that aims to provide investors with an attractive and sustainable level of income, with an element of capital growth, by investing in a diversified portfolio of renewable energy and infrastructure assets in the UK and Northern Europe. DORE has been awarded the London Stock Exchange's Green Economy Mark in recognition of its contribution to the global 'Green Economy'.

The Board classifies DORE as a sustainable fund with a core objective of accelerating the transition to net zero through its investments, compiling and operating a diversified portfolio of renewable energy and infrastructure assets to help facilitate the transition to a more sustainable future. The Company believes that this directly contributes to climate change mitigation.

DORE's strategy, which focuses on diversification by geography, technology, revenue and project stage, is designed to increase the stability of revenues and the consistency of income to shareholders. For further details please visit www.doretrust.com

LEI: 2138004JHBJ7RHDYDR62