Octopus Renewables Infrastructure Trust (LSE:ORIT) — 2023 Annual results investor presentation

0:01 Good afternoon, ladies and gentlemen. Welcome to the OCTOPUS Renewables Infrastructure Trust twenty twenty three Annual Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted any time using the Q and A tab situated on the right hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company will most grateful for your participation. And I'd now like

0:33 to hand over to the team from OCTOPUS Renewables INFRASTRUCTURE TRUST. Good afternoon. Good afternoon, and welcome once again, everyone, to the twenty twenty three annual results presentation for OCTOPUS Renewables Infrastructure Trust PLC or ORIT. My name is David Bird, and I'm an investment director at OCTOPUS Energy Generation. And alongside my colleague, Chris Caden, I'm one of the lead managers of ORIT. We're also joined today by our colleague, Jen Legg, who is a portfolio manager in our team, leading on a wide range of fund management activities. And Jen will cover the valuation section today. We consider ORIT to be the most genuinely diversified investment trust in the FTSE two fifty, and that diversification is particularly important in protecting investors against concentrations of risk, smoothing volatility of cash flows, and also bringing greater opportunity.

1:29 ORIT has a progressive dividend policy and an established track record of growing the dividend in line with inflation. And indeed, in January of this year, ORIT's board announced a further increase in the dividend target for financial year 2024, once again in line with inflation. The dividend has been fully covered by operational cash flows. ORIT sits as part of a sector which is set for dramatic growth over the coming years. Around $1,700,000,000,000 per annum needs to be spent in Europe to decarbonize the economy, and with the breadth of our mandate, we feel that ORIT is particularly well placed to capitalize on that huge opportunity. ORIT's portfolio has now reached genuine scale with eight zero eight megawatts of clean electricity generation across six countries and five technologies, as well as five developer investments.

2:28 During 2023, that portfolio generated 1,110 gigawatt hours of clean generation with further growth in output set to come from newly operational assets. That generation in 2023 was enough to avoid 366,000 tons of carbon dioxide emissions, and that's the equivalent to planting around 1,800,000 new trees. The company delivered a positive NAV total return in the year of 2.1%, despite very challenging market conditions. And although shareholder return was minus 4.4, that was driven by discounts and NAV widening across the entire sector. ORIT paid out a fully covered dividend in line with the target for 2023 of 5.79p per share.

3:20 And looking forward, the dividend target has been increased for FY '20 four by 4%, and that's the third year in a row in which the board has been able to increase the dividend in line with inflation. Meanwhile, we're continuing to progress on asset sales, building on the success that we've had to date with the exit from our Polish and Spanish portfolios. During 2023, we've been highly selective in allocating capital with only £7,000,000 committed to new investments. We completed the previously announced acquisition of 50% of the rights to build a 12 megawatt battery project in Bedfordshire, whilst deferring the point in time in which we need to fully commit to the project in order to preserve optionality.

4:10 We have also made two developer investments. Firstly, into a newly established hydrogen development platform in The UK called Hiro, and secondly, into a UK solar development platform with BLCE. Post year end, we completed the acquisition of our 199 megawatt portfolio of Irish solar assets for a consideration of around €160,000,000. That Irish acquisition, which covered four sites, represents the largest currently operational solar portfolio in Ireland. The sites had been subject to a conditional acquisition agreement, which was entered into back in 2021, and the purchase completed once the construction contracts had formally handed over.

4:57 However, it's important to note that whilst the acquisition completed earlier in 2024, the sites have actually been operating since late spring twenty twenty three. And as part of the deal, the revenues from that commissioning period all accrue to ORIT. And that's why some of the 2023 operational numbers in this presentation are described both in terms of with and without the Irish solar portfolio. There is a fifth site in the solar complex, is called Harlockstown, and that is nearly fully constructed and on track to connect this summer. There's also the potential to add a sixth site, subject to capital allocation considerations and commercial agreement. All five existing sites benefit from a long term PPA with Microsoft, providing fixed price revenues for the entire output of the site for the next fifteen years.

5:52 2023 marked the first time that ORIT has sought to sell assets. Active portfolio management was part of the strategy right from the outset at IPO. And with equity markets closed and ORIT's portfolio increasingly weighted towards operational assets, it made sense to look to release capital from that portfolio and then consider the most appropriate use of the proceeds.

6:16 This process of capital recycling has begun very successfully, realizing 97,000,000 of net proceeds from the sale of two operational wind farms in Poland, which ORIT acquired in 2021 at the construction stage, as well as the termination of an option to acquire 175 megawatts of ready to build solar assets in Spain. The Polish sale in particular was completed at a 21% premium to the holding value and represented a 30% IRR over the lifetime of our investment. The proceeds of these asset sales have been used to repay short term debt.

6:56 At OCTOPUS Energy Generation, we're an active manager, and one of the ways in which we can add value is through careful revenue contracting. We have a dedicated energy markets team, and this is one of their key focuses. This slide highlights three of the corporate PPAs that we have in place. Firstly, with Iceland, where we entered into an agreement earlier in 2023 to take the full output of the Breech Solar Farm in Cambridgeshire for ten years. Secondly, with Kimberly Clark, whose agreement to take power from the Cumberhead wind farm in Scotland came into effect in 2023 as that site reached operations. And lastly, Microsoft, who have agreed to take the full output of the 199 megawatt Iris Solar Complex for fifteen years.

7:43 But as well as these corporate PPAs, we also have other fixes in place with utilities and financial counterparties. For example, in the year, we put in place fixed prices on a number of UK solar assets, and that increased our fixed revenue percentage by four percentage points. This and other hedging activity was enough to increase the proportion of fixed revenues on a two year look forward basis from 68% to 81% during the year. And we hope to be able to announce further corporate PPAs in the not too distant future.

8:19 You can see on this slide the scale and diversification within the portfolio, which now, with the addition of those four Irish solar sites, sits at over 800 megawatts across 41 assets, including the five developer stakes. Notwithstanding the ongoing asset sales, we maintain a good spread across geographies and a balance between wind and solar, alongside a small allocation to complementary technologies such as battery storage and green hydrogen. You can also see the progress of the portfolio towards becoming fully operational, including the 34% of the portfolio, which is now operational, but the ORIT acquired at the construction stage, with only the Breech Solar Farm and the Woven Road factory remaining at the construction stage, as well as that fifth Irish solar site, Harlockstown.

9:11 The allocation of 4% towards developers allows us to retain optionality on proprietary pipeline, which is particularly important in the current macroeconomic environment. I'll now hand over to Chris, who will run through the operational and financial highlights in more detail.

9:32 Okay. Thank you, David. So this slide sets out the operational highlights of the company for the year. So starting at the top left, a generation in 2023 from the sites in the portfolio at year end and including the first six months of contribution from the Polish wind farms only was eleven ten gigawatt hours, which was 14% below budget. And this was predominantly due to lower wind speeds across Europe. Moving across to the right along the top of the table, as well as below budget onshore wind generation, revenues were further impacted by lower than expected power prices, principally driven by the significant drop in market pricing which occurred in the first quarter of twenty twenty three.

10:20 This led to revenue and EBITDA being 1624% below budget respectively, as shown in the top row.

10:29 Despite the low wind speeds and falling power prices though, output increased by 10% and revenue by 5% versus the prior year. Now looking down to the second row on the left, including the Irish assets and excluding any contribution from Poland in the second half of the year, output was twelve twenty four gigawatt hours and that was 22% higher than in 2022, which demonstrated the continued growth of the operational portfolio. Overall, and including those Irish solar revenues, the portfolio delivered £82,300,000 of EBITDA, which was 9% higher than 2022. Moving down the slide, once again the benefits of diversification really stand out with solar and offshore wind performance broadly in line with budget.

11:29 So this slide gives some granularity on the generation from different technologies against their budgets. And we did have a small fire at one of the French solar sites, San Antonin Duvart, and as a result, we took the decision to suspend generation at the entire site to allow for a panel retrofit and manage the risk of to better manage the risk of future fires. Now, the panel supplier is covering the cost of this retrofit under the warranty and much of the lost production will be covered by insurance. Now that aside, both solar and offshore wind output was in line with expectations. The onshore wind chart in the middle of this slide shows the impact of lower than expected wind speeds, but also something which doesn't jump out from the headline generation numbers and that is the amount of times the sites are compensated for missing generation, particularly when this occurs during transmission network constraints or negative prices on the grid in Finland, France or Germany for example.

12:35 Now here you can see the impact of the continued growth of the operational portfolio. With a full year of generation from the Irish solar sites and Cumberhead Wind Farm, as well as Breach Solar Farm, the portfolio is expected in the average weather year to produce over 1.5 terawatt hours of green electricity, giving us flexibility to continue our pursuit of asset sales without compromising the dividend.

13:07 ORIT is an impact fund and as well as the ESG and impact section in the annual report, a more extensive impact report and update to the impact strategy has been published on the ORIT website. During the year, the portfolio produced enough electricity to power 355,000 homes, avoiding 366,000 tonnes of carbon dioxide emissions, which is equivalent to planting around 1,800,000 trees.

13:40 And now on to the financial results. During the period, four dividend payments totaling 5.79p per ordinary share were made in respect of FY 2023, meeting the FY twenty twenty three dividend target in full. This was a 10.5% increase on FY twenty twenty two's dividend and that increase is in line with CPI. The dividend was 1.18 times covered by cash flows. Not all scheduled sorry, net of all scheduled debt service including principal repayments. And the 1.18 figure was influenced by the sale of the Polish assets, as it does not include any cash flows arising from their operations after the end of June.

14:26 However, it also does not include the positive impact of the gains from the asset sales above their holding value. Including this figure, the dividend cover would have been 1.52 times. Now, the target dividend for FY24 has been increased to 6.02p per share, an increase of 4% over FY 2023 and that's again in line with inflation for 2023. In fact, this is the third consecutive year the company has increased its dividend target in line with inflation. Now, subject to the timing of potential further asset sales, dividend cover in 2024 is expected to increase compared with 2023, as the Cumberhead wind farm and the first four sites of the Irish solar portfolio contribute a full year of operational cash flow and also Breach Solar Farm will commence operations.

15:17 Cash generated by the operations of ORIT's current portfolio, net of all debt service, including scheduled principal repayments, is expected to be sufficient to cover the dividend fully over the next five years.

15:33 And just to emphasise the point, here is a chart where you can see ORIT's growing track record of delivering dividend growth. Moving on from the dividend, here are the key financial highlights for the FY 2023 year. Underpinned by that dividend, the company delivered a positive NAV total return for the year of 2.1%. NAV itself decreased from £618,000,000 to £599,000,000 and gross asset value from £1,100,000,000 to £980,000,000 due principally to falling power prices and inflation forecasts, plus increases to discount rates, as well as the asset sales that we covered earlier.

16:23 Including commitments outstanding at year end, mostly relating to the Irish solar portfolio, the gross asset value is expected to rise to around GBP 1,170,000,000, ignoring valuation movements in the meantime. In what has been a challenging macroeconomic environment for the whole sector, total shareholder return for the year was minus 4.4%. However, the positive NAV return demonstrates resilience, despite the low wind speeds and falling power prices. And with that, I'll hand over to Jen, who will talk about valuations. Thanks, Chris. During the year, the company's net asset value fell by 3.4p per ordinary share to a 106p.

17:11 Here you can see a valuation bridge for the underlying portfolio of assets and then up to the ORIT PLC NAV. We'll run through the main valuation drivers over the next couple of slides. But as you can see, that aside from a movements movements of cash in and out of the portfolio through investments, distributions, and disposals, the main elements which affected the valuations during the year were updates to macroeconomic assumptions, updates to power price and green certificate forecasts, updates to discount rates, including factoring in construction progress and other movements, most of which represents the expected return on the portfolio of assets.

17:53 Overall, these steps take the value of the portfolio from £743,700,000 to £706,000,000 at December 2022... At December 2023. Taking into account the net assets and liabilities of £106,900,000 at the PLC and Intermediate Holding Companies takes the company's NAV to £599,000,000 or 106p per share. We'll now step through some of those key valuation movements in a little bit more detail. As previously mentioned by David, in December, the company successfully completed the sale of its two Polish onshore wind farms totalling 59 megawatts.

18:39 The wind farms were sold at an attractive price, which was 21% above the holding value resulting in an uplift of 2.8p per share. Having originally acquired these assets in the construction phase, the exit delivered an IRR of approximately 30% over the lifetime of ORIT's investment. We also chose to exit the option over the Spanish solar assets totaling 175 megawatts where ORIT received a termination payment from the vendor. Together, these transactions generated a valuation uplift of £17,800,000 or 3.1p per ordinary share, which demonstrates the robustness of the company's valuations and the continued demand for these assets in the market.

19:26 We'll cover progress on the ongoing capital recycling program later in this deck. Over the course of twenty twenty three, inflation for inflation forecast have moderated compared to the prior year, resulting in a net valuation decrease of £4,800,000 For FX, during the year, sterling has appreciated against the euro by 2.3%, leading to a negative gross valuation impact of 6,100,000 To contextualize that, the euro denominated investments comprised approximately 52% of the portfolio at the year end. However, as a result of ORIT's ongoing FX hedging activity, we also had a £4,000,000 positive impact due to FX hedge gains in the year, which partially offset this negative impact.

20:21 For reference, the £4,000,000 gain is included in the movement in PLC and Intermediate Holding Company liabilities in the valuation

20:28 bridge. Power price forecasts have fallen over the course of the year as a result of very high gas storage levels following a warm 2022 and 2023 winter coupled with drops in industrial gas and electricity consumption. However, prices for the short to medium term are still expected to remain well above the pre energy crisis long term historic average. The change in power price forecast has led to a negative impact on the valuations of around £31,000,000 but this was mostly offset by the uplift from higher green certificate price forecasts. We... This relates to regos in The UK and goos in Europe. We've also seen increasing demand for green certificates both from corporates and traditional energy suppliers.

21:19 We do expect that green certificate pricing may come back down as power prices reduce, but expect long term pricing to remain far higher than we've previously assumed. Falling power prices during Q1 twenty twenty four are expected to apply some further downward pressure on valuations. At the end of the year, GB... Base load pricing in the GB market was trading around £80 a megawatt hour, but had fallen to more like £60 by the end of February that we have seen some uplift since then.

21:58 During the course of the year, we applied an increase to UK discount rates of naught point 5% and an increase to European discount rates of 2.5... Naught point 25%. Despite these increases, the weighted average discount rate decreased over the course of the year by 0.3% to 7.2 at the end of December 31. The primary reason for the decrease in the overall blended rate is due to the de risking of portfolio through the solar... The Spanish solar option and Polish wind disposals, both of which attracted a higher discount rate due to their relative risk profiles. Unwind of the construction risk premiums included discount rates of construction assets as the projects meet specific milestones has also contributed to the decrease in the blended rate.

22:47 In addition, falls in power prices and additional revenue fixing through PPAs has meant that the proportion of fixed revenues has increased.

22:56 We apply a lower discount rate to fixed cash flows compared to variable cash flows, and therefore, this has also served to decrease the overall blended rate. It's worth noting, though, that this discount rate is calculated at the portfolio level and only on the assets where discount cash flows is used discounted cash flow is used for the valuations. It, therefore, emits the impact of FX hedging. It omits the high returns expected from developer investments and it also

23:27 omits the return improvement, which could be expected from additional gearing at the level of the RCF. Accounting for these factors, the expected return on the portfolio before PLC costs could be nearer to 8.3%.

23:46 Finishing with gearing. Overall, leverage reduced from 42% to 39% during the year due to the fact that the Polish wind assets that were sold have project level debt and any equity proceeds realized was used to pay down short term facilities. Gearing has increased post period with the acquisition of the Irish Solar assets taking this to more like 47%. All the long term debt in the group though is genuinely long term, fully amortizing over subsidy or PPA lifetimes of the underlying assets, meaning there is no refinancing risk associated with this part of the debt structure.

24:26 The long term debt is also highly hedged at around 89%. This means even with base rates high, the average cost of debt at year end was 2.1% and still less than 4% when RCF borrowings are included. Should no further asset sales take place and all cash flows not required to pay the company's costs and contribute to a growing dividend we use to pay down the debt, the company's gearing is expected to fall to around 20% of GAV over a ten year period.

25:01 And with that, I'll pass back to David to talk about the outlook. Thanks, Jim. So here we set out some of the key activities that have either recently been completed or are now ongoing. In the top section of the slide, you can see the 2023 investment activity that we talked through earlier. Then in the middle section, you can see the construction activity remaining, following the completion of the Cumberhead wind farm in early twenty twenty three. In particular, we have the Breech solar farm, where Chris and I were actually on-site earlier last week, and things looked very well set for it to be connected to the grid in Q2 of this year. We have the Woven Road battery, which is just starting its construction and that we expect to come online early in 2025, and where ORIT retains optionality until that point in time on whether or not to participate in the project.

25:56 You can also see the fifth Irish solar site, Harlowstown, which is more or less fully constructed and in the process of going through the grid connection and testing procedures. Finally, at the bottom of the chart, you can see the capital recycling program. We've already covered the Polish and Spanish sales, which have completed successfully during 2023. But we do also have further components to the capital recycling program, which are actively ongoing at the moment. We can't go into too much detail on

26:27 these right now, but we do look forward to being able to report on additional asset sales later in the year. You can see on this chart the overall level of revenue fixing that is in place over the coming years. As a reminder, have 81% of our expected revenues fixed price in nature over the two years to the end of twenty twenty five, And that's an increase from 68% a year beforehand. A number of corporate PPAs such as those we talked to earlier contribute to this increase, as well as the fixed price utility PPAs and hedges. And of course, the existing fixed price subsidies that you can see in the dark blue bars on this chart. This high proportion of fixed revenues, which stretch right out into the early 2030s, means that ORIT is relatively well protected against power price falls, including those that we have seen in the early part of this year.

27:24 And we will continue to look to put price fixing strategies in place on a rolling basis in order to maintain a high level of revenue certainty in the near term and to keep extending that high level of price fixing out into the medium to long term. As well as a high level of fixed prices, the portfolio also benefits from a high degree of inflation linkage. 51 of the expected revenues over the next ten years have explicit contractual inflation linkage, and that's key to supporting the progressive dividend policy. And with that, I'll hand over to Chris to talk through the last few slides. Thank you, David. So, ORIT has a powerful and now well established tailwind behind us in the form of the energy transition.

28:13 Trillions of pounds of investment will be needed over the coming years in order to solve the energy trilemma of achieving an energy system that is secure, zero carbon and also affordable. ORIT is very well placed to play a part in this and to build on its track record. Strategically, we think our ability to invest at construction stage and into developers allows us to be most effective from both an impact perspective, but also in order to capture maximum value from this very large opportunity. And to that end, I wanted to highlight our developer investment portfolio, which you can see summarized here. ORIT now has five developer investments, all of which except for BLC Energy are co owned with another OCTOPUS Energy Generation managed fund.

29:02 What we think is particularly exciting about these investments is the access to the very large pipeline of projects that ORIT can invest into over the coming years.

29:14 Across these developer platforms in total, there is a pipeline running into multiple gigawatts, which ORIT will have preferential funding rights, which are proportionate to its shareholding. One of our newest investments, Hiro, was one of a small number of hydrogen developers, which was successful in securing a government contract for difference type contract in the first ever UK auction round. And that first project could be ready to build later this year.

29:41 Crucially, all of this future project funding is optional, which allows us and the board to maintain a disciplined approach to capital allocation. So, to conclude, ORIT has a sizable and truly diversified portfolio. Our valuations are being validated or have been validated through the recent asset sales And the portfolio has shown robust performance in a difficult economic climate with positive NAV return and a fully covered dividend. We think there is a very positive outlook for the Fund through further asset sales and a disciplined approach to capital allocation And its broad mandate is very well positioned to capture growth opportunities once the time is right to do so.

30:32 And that concludes our presentation. Chris, David, Jen, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab just situated on the right hand corner of the screen. Just wanted the guys to take a few moments to review your questions submitted already. I just want to remind you that the recording of this presentation along with a copy of the slides and the published Q and A, can be accessed via the Investor Meet company dashboard. Chris, David, Jen, as you can see, you've had a number of questions from investors. So thank you to everybody for your engagement this afternoon. And if I may, Chris, if I can just hand back to you just to read out the questions where it's appropriate to do so, and I'll pick up from you at the end. Actually, I'll I'll pick up because I think Chris is struggling to find the the q and a bar. So the first question we've got here, is can you share any comments on hydrogen and nuclear as part of the overall renewables energy portfolio?

31:23 So in terms of ORIT's portfolio, we're not considering nuclear as a potential investment opportunity for a number of reasons, principally around the time it takes to build projects and the amount of capital that's required.

31:42 But we're much more focused on investing into wind and solar generation. We think that it's a cheaper option. And we're also taking our first steps on investing into hydrogen as well. In the first stages of the hydrogen rollout, we think it will be mainly targeted at industrial uses and potentially some types of heating.

32:09 And over time, hydrogen might become a store of energy for longer duration flexibility. But we will see how the market evolves on that front and the role that batteries also are going to play in the flexibility markets. Thanks, Chris. Next question then is related to the current discount to net asset value that the shares trade at and asking whether the Board might consider a particular sort of tender offer or similar rather than buybacks. I think what I'd say here is firstly, we agree that the share price discounts to NAV are clearly unsatisfactory and we don't think reflect anything sort of fair around either the quality of the portfolio or the attractiveness of the sector and or in particular.

33:01 To date, the board simply haven't had capital available to allocate, whether to buy back tender offers or any other sort of form of return of cash to shareholders as the proceeds of the asset sales have been focused on bringing leverage down and then particularly paying down short term debt. We are continuing to look at further asset sales, which means we might expect there to be capital to allocate in the future. And we'll be talking to the Board a lot. And ultimately, they'll be seriously considering those, you know, all of the capital allocation options they have in front of at the time depending on where the shares are trading right now. But we certainly can't sort of give any specific guidance or commitments either way around specific, sort of structures that might or might not be considered with that one.

33:51 Okay, so we have another question here. So what are the challenges for OCTOPUS with wind farm structural health monitoring and performance optimization? How much is the lost energy and revenues due to underperformance and downtime? And how much is spent on insurance for a wind turbine?

34:08 So I'll pick that one up. So I think if you think back to the slide we were showing around some of the output variance during the year, Clearly, we had less wind output than we expected, but that was driven either by lower wind speeds or by the Comberhead wind farm starting up a little bit later than originally planned or by things to do with the grid or the power system, which ultimately were largely compensated. So if you look at sort of what's left in the output variance that hasn't been compensated, it's really around sort of 1% of the output. So we don't see any particular sort of reliability issues, any particular sort of structural concerns.

34:53 Clearly active management and monitoring of our assets is something that we do a lot of and we're continuing to see the industry develop there with sort of new and better technologies for getting advanced warning of where maintenance might be required while rather than waiting for a component to fail. But we really haven't seen much in the way of lost performance or revenue from sort of technical unavailability or reliability. On the insurance question, that's not something I have to hand, but we do see insurance costs move around, but in the grand scheme of things, they're certainly not the most material component of the cost of these assets.

35:36 Okay. The next question is, will the trust look to do any further refinancing or fundraising in the near future? Perhaps I could probably pick that one up. So, the short answer is no to fundraising while equity markets are closed. And in fact, rather than refinancing, our focus is principally on debt repayment and delevering. And it will be that way for some time as we look to deploy the proceeds of our asset sales. Anything you wanted to add to that? Okay, next question. Hello, what can you do to stem the daily decline of your share price now rather than if disposal is made in the future?

36:25 Director buying and share purchases are not pleasant as a shareholder. Yes. So as we touched on before, I think the company itself simply hasn't been in a position to allocate capital towards anything like share buybacks up to date, and we can't comment on whether that will or won't happen other than to reinsure investors that it will certainly be on the menu of options for the board to consider when there is capital to be allocated. I think the level of discount we're seeing is something that's mirrored across the entire sector and not something that I would expect buying by sort of directors to be able to significantly move the needle on. But clearly, it's something we're very mindful of.

37:11 I I personally am a shareholder myself and and have bought new shares over the last sort of year and a half or so as as the shares have been trading at a discount. But there's there's no sort of easy fixes here to what's really a sector wide phenomenon of of these assets trading at a discount to now in a way that we don't think is at all justified by the quality of the portfolio.

37:36 Can you comment on capital allocation and how returns risk on Irish solar PV portfolio compare with returns on foregone Spanish solar PV portfolio? So perhaps I'll take that question. So, the Irish solar PV portfolio was a commitment that we made some time ago. So it wasn't actually a capital allocation decision between the Irish and the Spanish solar portfolios. Having said that, in terms of returns and risks, the Irish solar portfolio was a what we call a forward purchase. We acquired it once it was already built and it benefits from a fifteen year fixed price offtake arrangement with Microsoft.

38:22 The Spanish Solar portfolio, on the other hand, was a ready to build site that did not have any price hedging in place. And well, I suppose since we didn't have the decision to allocate between one or the other, it's a bit hard to compare returns. But we're very happy holding the Irish Solar portfolio. And certainly, we think that exiting the Spanish one was the right thing to do for the company. Yes. Particularly when you bear in mind that because we had to go ahead with the Irish Solar acquisition, and again, that's something we're very happy with, To do the Spanish Solar acquisition, we'd have had to take on maybe another $100,000,000 of debt. And that's certainly not something that we thought was attractive given where debt costs are right now and gearing level of the company is in a sensible place, but not somewhere where we'd want to add $100,000,000 for those Spanish solar assets.

39:20 So this is from Jason. What is the current RCF drawdown and at what floating rate? And when will this be reduced further and roughly by how much? Jen, do you want to pick up that I can take that one. So at the year end, the RCF drawn balance was around GBP 130,000,000 following the acquisition of the Irish Solar assets. That'll be closer to $192,100,000,000 pounds at today's date. In terms of repaying the RCF, it's a capital allocation consideration.

39:57 So where we are distributing cash out of the portfolios, that will be in the first instance immediately paying down RCF where possible. And the rate on that, I'll say... And the rate is that. That is 2% above the current floating Sonya rates at the moment. And what's our current LTV percentage and latest discount rate? So again, at the year end, this dropped down to around 39%. But following the acquisition of the ORITS solar portfolio, that has now increased to around 47%. In terms of the latest discount rate, the weighted average discount rate at the year end was 7.2%. Okay. Thanks, Jen. And what are the expected timelines for completing the ongoing construction projects? And what's the anticipated impact on revenue and net asset value?

40:50 So, I'll pick that one up. So the two ongoing construction projects that are sort of material to the portfolio are the Breach Solar Farm in Cambridgeshire and then that fifth Irish site, Harlowstown. Both of those solar sites are effectively complete from a structural point of view and in terms of putting the panels down, more or less. In fact, the picture on the screen at the moment is I think of Breach.

41:15 And so the work that's ongoing on both of these sites is the sort of final stages of connecting to the grid and then the testing procedures that go along with that before the construction contractor then sort of formally hands over. So with Breach, we expect that grid connection work to take place during the second quarter of this year.

41:37 But ultimately, those timelines are down to grid because it's a site that connects directly into the National Grid Transmission Network. And then with Harlowstown in Ireland, again, expect grid connection to be taking place over the next few months. But what will happen then with the Irish asset is that we will not acquire the site into the ORIT portfolio until all of those sort of testing and commissioning works are done and the construction contracts have sort of formally come to an end. So we do expect that to be during 2024, but perhaps slightly later in the year. However, we will benefit from all of the cash flows coming from these sites once they start generating. So what does that mean for revenue? Well, certainly, we sort of touched on it earlier. With the four Irish sites coming in to the portfolio, output was around sort of 1,200 gigawatt hours.

42:31 We only had around half a year with the first four Irish sites in that number. So this is all incremental generation, and Chris picked up on a number earlier of about 1,500 gigawatt hours a year of generation once the portfolio is fully operational. We don't expect to be quite there in 2024 because we won't have a full year at either of those two sites, but it's all additive to the overall output and therefore, revenue. From a NAV perspective,

42:57 we do see generally a little bit of NAV uplift when sites come through to being fully operational because we remove some of the risk premium and the discount rate. There is some of that remaining, particularly in terms of Breach. But in sort of overall NAV terms, it's not going be massively material just because of the size of the site versus the portfolio and the fact that a lot of that's already come through because the site's more or less built. Okay. Can you comment on Ofgem's investigation into how renewable operators are compensated for lost production due to curtailment? To an extent, yes. So it's definitely something we've seen and it's been quite prominent in a few news articles in recent sort of days and weeks. So ORIT does have assets which will have received payments for for being turned off in The UK in the bouncing mechanism.

43:49 We we will have been doing that in conjunction with sort of external counterparties that actually manage that bidding process under contract. And we've been sort of discussing with those counterparties to make sure that we fully understand their bidding strategy and it's compliant with all the relevant industry rules. So we believe that those sites have been doing as they should be. Certainly, we don't have sort of sites that have been receiving anywhere near in the sort of top of the list of how much payments have been made on this. But obviously, if Ofgem do come and ask questions and we haven't had any questions from them yet, then we'll sort of cooperate fully and and and make sure they have all the information need to make needed to make sure that everything has been done as it should be. Okay.

44:37 If a labor government is elected, what impact will the mooted Great British Energy publicly owned clean energy company have on our company's UK assets and future investment? So shall I pick that up? So yeah, think the short answer is we don't know, because it will depend on exactly what that company does. My understanding is that that is not intended to be sort of competition for companies like ORIT in the sort of the areas where we're active in sort of owning and building solar farms and wind farms, are already very established technologies where there's lots of capital looking to invest into projects, provided projects can get grid connections and can get planning. So I think actually, some kind of, government backed entity to to deal with some of the things like how quickly grid connections can be built or maybe some of the longer term challenges in decarbonization, like maybe long duration energy storage. Now that's something which we've seen in the past with the green investment bank. That was massively helpful

45:43 in turbocharging The UK's offshore wind industry and turning us into a world leader. So there's definitely a place for that kind of public capital alongside private capital. And certainly, haven't seen anything that suggests it would be any kind of competition for ORIT or companies like ORIT. What are the minimum wholesale price figures for electricity in The UK, Ireland and France that will ensure, firstly, a covered dividend, sufficient margin to cope with solar irradiation and wind speed fluctuations, and thirdly, enough free cash flow to allow further investment and growth?

46:19 That's quite a tricky one to answer off the top of my head. I think one thing that we can say is that when we reported last year, and things have moved on a bit with asset sales, but when we reported this time last year, at that point, our fixed revenues were enough to fully cover our dividend. Now we've paid we've sold some assets since then. The portfolio shape is slightly different, but we have a sufficiently high degree of fixed revenues that power prices can fall quite materially and still allow us to pay a covered dividend. Clearly, as time goes on and we move into a period where there's slightly less in the way of fixed revenues,

46:57 then we're more dependent on what the prevailing power price is. But if you look at our long term power price projections, we're not forecasting that power prices remain anywhere near where they have been in the last couple of years or even where they are now. So our long term power price projection is more like GBP 40 a megawatt hour in today's money than the sort of 70 odd that we're seeing at the moment. And we expect to continue running ORIT in the way that, that question describes, the covered dividend, buffer, with the ability to grow at prices in line with those forecasts. Offshore wind with respect to CapEx? And then for ongoing maintenance, comparative percentage ratios would be useful. I guess this one's for me. Yes.

47:44 So, yes, as you may be aware, we do have a stake in a floating offshore wind developer called Simply Blue. In terms of the costs for deploying floating offshore wind turbines, the foundations and the anchoring systems are between two and three times what you would expect to pay for, the foundations and towers on fixed foundation float, offshore wind. But having said that, there is a similar amount of steel in floating offshore wind turbine foundations as there is in some of the deeper fixed foundation turbines. So what the industry is really working on is a, optimizing the design of those foundations, but also improving the supply chains and making or bringing modularization into the industry so that we can start to build the floating foundations much more cheaply.

48:46 In terms of ongoing maintenance, there's lots of benefits actually for floating offshore wind, such as if you do need to replace a blade or a generator or something of that nature, you could actually just tow the floating offshore wind turbine back into a port and do it at a port where it's much more cheaper and easier than it is to do it in situ.

49:16 Low price acceptance targets for UK power price auctions have stalled further renewable energy development. Is this also an issue in other jurisdictions where ORIT operates? I think the first thing I'd say is I don't think renewable energy development in The UK has stalled. I think the most recent set of CFD auctions was clearly not a good outcome, particularly for offshore wind and has caused delay. But I think when we see the results of the next auction, we'll see lots of projects coming through. So there's not been anything quite as well publicized in in other jurisdictions. That's not to say those are without their own challenges. That's The UK certainly not alone when it comes to certain projects finding it difficult to get grid connections.

50:05 Equally, there are other countries where that's less of a problem because just the rules work in a different way and and big connections just get built much more quickly. We have seen some other auctions where, parties have sort of pulled out relatively later on as we saw in the last UK. So it's certainly not a a sort of UK unique issue, but perhaps we haven't seen anything quite as high profile as those auctions last year. Okay. Next question is just to make sure that I understand the positive impact from reduction in construction premium is due to projects moving forward as planned, not decision to to lower the construction risk premium per se. Is this correct? Jen, do want to take that one? Yep. Sure. Yep. That's exactly correct. So we would look to include on our construction assets a premium to the discount rate, a range depending on the technology and complexity of that construction.

51:03 As the projects move through specific milestones, we would look to unwind that construction premium with, by the time the assets get to operations, having unwound the full amount of that construction premium. Okay. Thanks, Jen. Any updates on the Aquila potential merger and possible impact on the forward looking financials?

51:24 So this is one. So if anyone not familiar, ORIT proposed late in 2023 that we would like to combine with Aquila European Renewables. We're not in a position where we're really able to say very much more than what I just said. So there were a couple of announcements made a few weeks ago where the Aquila company sort of confirmed that it was running a process to consider various options, ORIT has confirmed that we're sort of participating in that process and and sort of any further details. Certainly, sort of forward looking financial details, certainly not something that we're able to share. What we can really say is that and that we continue to believe that a combination of that type, we think, would make a lot of sense for both sets of investors.

52:12 Okay. Is the aim to build new sites specifically for resale?

52:17 Perhaps I'll take that one. So, in short, the answer is no, we wouldn't be building sites specifically for resale. But where there's an opportunity to crystallize that construction gain and then perhaps reinvest the proceeds into new construction projects, we think that could that's a core part of our mandate and also has the potential to drive some additional NAV growth into the portfolio. Have the windfall taxes in The UK had any financial impact?

52:49 And do you expect them to do so in the future?

52:56 So with the drops in power prices over the course of the year, the threshold of where our prices are above the caps has reduced. The energy generation liability in particular has a financial allowance per year. So any revenue excess of that cap is expected to be below that cap in The UK, and we're also not expecting any financial impact from windfall taxes in any other European

53:25 jurisdictions. We do we do monitor this regularly forecast this out. But, yes, no, we're not expecting any financial impact. Thanks, Jen. Is biomethane especially targeting its use in gas fired power stations an alternate use to wind and solar? Is that use case a target?

53:51 In short, the answer is no, not for ORIT. Biomethane, biomass more generally in my view does have a role to play during the transition. But we're also of the view that over time, any sort of emitting or CO two emitting technology may be more exposed to regulatory risk. And we think that the long term power sources of the future will be wind and solar. And so that's where we're focusing our efforts.

54:27 Any further thoughts on obtaining or the use of hydropower?

54:31 Yes. So I mean, Chris has just sort of touched on where we see the growth in the sector and where we see new renewable generation coming from in the main. So that's not to say that hydro doesn't have a role. There's a lot of existing hydro in Europe. And so we would certainly be open to owning hydro within ORITS portfolio, but it's certainly not a focus for us. So our focus is wind and solar. If, whether by a combination transaction, some hydro came into the portfolio, that would be something we'd be fine with. Are we looking to go and build hydro? No. It's just not a focus for us and not somewhere where we see a lot of growth for sort of new generation. But the other aspect where hydro could be interesting is pumped hydro as a form of longer duration storage. Again, that's probably not one that's going to form any sort of material part of ORIT anytime in the near future, but it's something that we can certainly see being an interesting part of the energy mix in in the future.

55:31 Have you stress tested what sort of scenarios would lead to a dividend cut?

55:36 So we do a lot of stress testing around cash flows and what that means for dividend cover as part of, just generally running the company, but also as part of the the information that the board has when it sets the dividend target. I think it's important to distinguish between the level of the power price fall or output fall that might lead to dividend cover falling down to one and potentially below versus what might lead to a dividend cut because those aren't necessarily the same thing. We don't see any reason to to see sort of risk of a dividend cut. We have always had the intention to pay a progressive dividend policy. We've got a track record of having done that. Ultimately, the board will set at what level, if any, the dividend increases year on year. So yes, there's lots of stress testing and we're not seeing anything that we think should be leading people to be worried around cutting dividends.

56:32 As the fund has traded well below NAV for more than six months, what will trigger a vote on dissolution of the fund? Should I put that one up as well? So so, yeah, so this might be touching on the fact that there are a number of companies out there where there are explicit triggers. So if the if the shares have traded at a particular discount to NAV for a certain length of time, that can that can lead to a continuation vote. Or it does not have that feature, so there's no sort of expectation of a discount based trigger, coming through in the current current year where a number of other companies might. However, that said, right from the start, there's been a continuation vote, sort of scheduled for around five years after launch. We would expect there to be a routine continuation vote of ORIT, during 2025.

57:22 And then finally, if someone was to invest in the shares today, what sort of return might we be expecting on a five year horizon? I appreciate there will be assumptions in your answer, but would be useful to know your view. Yes. So again, predicting the share price trajectory is not something I'm going to get into. What we will say is when we launched ORIT, we were set up with a long term return target of seven to 8%. We still believe that the opportunity is out there to be able to deliver on that. We always target that in terms of NAV growth, but ultimately what matters to shareholders is ultimately where the shares go. So we... You know, how quickly the current discount to NAV closes will be a factor in what return people can get on their shares. We're still targeting to to be able to deliver seven percent to 8% over the long term and not needing the discount closing to be part of that equation.

58:20 That's great. Chris, David, Jen, thank you very much, and Peter. I think you've answered all the questions that we've had from investors. So thank you once again to everybody for engagement this afternoon. David, I know that investor feedback will be particularly important to you and to the team, and I'll shortly redirect those on the call to give you their feedback. But I wonder before doing so, if I may, just come back to you for a couple of closing comments. Yeah. So really just want to say thank you everyone for joining and particularly for all the questions as well. It's always great to have a really engaged audience and look forward to speaking to many of you in the not too distant future. Thank you. That's great. David, Chris, Jen, thank you once again for updating investors. Could I please ask investors not to close this session as we're now automatically redirect you to the opportunity to provide your feedback in order the management team can better understand your views and expectations.

59:05 This may take a few moments to complete, but I'm sure we'll be greatly valued by the company. On behalf of the management team from OCTOPUS Renewables INFRASTRUCTURE TRUST PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.