Octopus Energy Regulatory News (ORIT)

7 August 2023

LEI: 213800B81BFJKWM2JV13

Octopus Renewables Infrastructure Trust plc

("ORIT" or the "Company")

Q2 2023 Factsheet and Net Asset Value

The Board of Octopus Renewables Infrastructure Trust plc announces that the unaudited Net Asset Value ("NAV") of the Company as at 30 June 2023 on a cum-income basis was £608.2 million or 107.67 pence per Ordinary Share (31 March 2023: £608.5 million or 107.73 pence per Ordinary Share).

\* Totals may not sum exactly due to rounding

Power Prices and Green Certificates

In the period since 31 March 2023, forecast wholesale power prices across the UK and Europe have decreased in the short to medium term, with average longer-term forecasts increasing versus those used in the prior quarter. 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. Further detail on the price forecasts used in the valuations of the Company's portfolio of assets will be included in the Interim Report covering the six months ended 30 June 2023.

ORIT benefits from a high proportion of fixed or contracted revenue (78% over the 24-month period to 30 June 2025, as at 30 June 2023), which limits ORIT's exposure to variability in short-term pricing to some assets located in Sweden, Finland and the UK. Assets located outside these jurisdictions (France, Germany, Ireland and Poland) benefit either from 100% fixed pricing over the 2023 to 2025 period and beyond or are subject to prices capped at levels below the forecast market prices.

The net valuation impact of updating for recent power price and green certificate forecasts was an increase of +£27.0 million or +4.8 pence per Ordinary Share.

Inflation and FX

Since the end of Q1 2023, short-term inflation assumptions have remained broadly stable across the European markets where the Company's portfolio of assets is located, with the exception of Poland where inflation has continued to increase. In the UK, inflation forecasts have softened with consensus reports, as at May 2023, reporting decreases versus the prior forecast period. Updating the most recent inflation forecasts1 resulted in a net decrease in the valuation of £1.9 million.

The Company benefits from significant levels of inflation protection via revenue from government support schemes in the UK, France and Poland, with approximately 58% of the revenue forecast to be received by the Company's current portfolio of assets in the ten years ending 30 June 2034 now explicitly inflation-linked.

During the quarter, sterling appreciated against the euro, leading to a negative valuation impact of £5.3 million. 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 £1.2 million.

The combined impact of inflation and foreign exchange movements was a valuation decrease of £3.1 million or 0.5 pence per Ordinary Share.

Discount rates

In line with the higher interest rate environment in the UK where interest rates, including long-term expectations, have increased over the past 6 months, the Board and the Investment Manager consider it appropriate to reflect a further increase of 0.5% in the discount rates applied to UK assets. The increase to the UK discount rates resulted in a valuation decrease of -£14.6 million or -2.6 pence per Ordinary Share. No changes to non-UK discount rates have been made, reflecting the more stable long term rate expectations in those markets.

This increase in UK discount rates was partially offset by the reduction in the risk premium applied to assets in construction as they meet specific milestones, resulting in a weighted average levered equity discount rate implied across the portfolio of 7.7%.

Other movements

A decrease of £1.5 million was recorded from other valuation movements.

This reflects the net present value of future cashflows being brought forward from 31 March 2023 to 30 June 2023, offset by the Company's operating and transaction costs, and net performance in the underlying portfolios.

Construction at the c.67MW Breach Solar Farm in Cambridgeshire, UK is progressing well with Civil Works completed by 30 June 2023, and is expected to achieve operational status on schedule during Q4 2023. Progress against construction milestones has resulted in a valuation gain of +£0.3 million or +0.1 pence per Ordinary Share in the quarter through reduction in the risk premium applied to the discount rate.

Dividend

The interim dividend (-£8.2 million or -1.45 pence per Ordinary Share) in respect of Q1 2023 was also paid in the quarter, in-line with the Company's stated dividend target for the financial year from 1 January 2023 to 31 December 2023 of 5.79 pence per ordinary share2

Notes

1 The 30 June 2023 valuation includes (i) recent consensus UK inflation forecasts published by HM Treasury in May 2023; and (ii) inflation forecasts for the relevant European countries published by the European Commission in May 2023.

2 The dividend target stated in this announcement is a target only and not a profit forecast. There can be no assurance that this target 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. The Company's actual returns will depend upon a number of factors, including but not limited to the Company's net income and level of ongoing charges. Accordingly, potential investors should not place any reliance on this target and should decide for themselves whether or not the target dividend is reasonable or achievable. Investors should note that references in this announcement 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.

Factsheet

The Company's Q2 2023 factsheet is available to download at:

https://octopusrenewablesinfrastructure.com/investors/

For further information please contact:

Notes to editors

About Octopus Renewables Infrastructure Trust

Octopus Renewables Infrastructure Trust ("ORIT") is a closed-ended investment company incorporated in England and Wales focused on providing investors with an attractive and sustainable level of income returns, with an element of capital growth, by investing in a diversified portfolio of renewable energy assets in Europe and Australia. ORIT's investment manager is Octopus Energy Generation.

Further details can be found at www.octopusrenewablesinfrastructure.com 

About Octopus Energy Generation

Octopus Energy Generation is driving the renewable energy agenda by building green power for the future. Its London-based, leading specialist renewable energy fund management team invests in renewable energy assets and broader projects helping the energy transition, across operational, construction and development stages. The team was set up in 2010 based on the belief that investors can play a vital role in accelerating the shift to a future powered by renewable energy. It has a 12-year track record with approximately £6.0 billion of assets under management (AUM) (as of March 2023) across 13 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