Octopus Renewables Infrastructure proposes amendments to its investment policy

Octopus Renewables Infrastructure (ORIT) has announced the publication of a circular to shareholders which includes details of proposed changes to its investment policy (accessible in its entirety by clicking here).

ORIT noted the following: “The proposed changes broadly fall into three categories: (i) to allow limited investment, of up to 5% of gross asset value, in renewable energy assets that are under development, together with renewable energy developers and development pipelines, (ii) to reflect the progress of the company since launch and (iii) to make further minor changes to clarify certain sections of the current investment policy.”

A general meeting will be held on 4 February 2021. The general meeting will be run as a closed meeting via video conferencing.

Changes proposed

ORIT’s proposed investment policy is included below. We note that additions are highlighted in bold and deletions are shown in strikethrough [The text below is an extract of the proposed additions and deletions exactly as they appear in the RNS release. Readers are encouraged to access the RNS release for the full announcement.].

Investment Policy

“The Company will seek to achieve its investment objective through investment in renewable energy assets in Europe and Australia, comprising (i) predominantly assets which generate electricity from renewable energy sources, with a particular focus on onshore wind farms and photovoltaic solar (“solar PV”) parks, and (ii) non-generation renewable energy-related assets, in each case either already operating, in construction or construction-ready and businesses (together “Renewable Energy Assets”).

The Company may invest in operational, in construction, construction-ready or development Renewable Energy Assets. In construction or construction-ready Renewable Energy Assets are assets that have in place the required grid access rights, land consents, planning and regulatory consents. Development Renewable Energy Assets comprise projects that do not yet have in place the required grid access rights, land consents, planning and regulatory consents, as well as investments into development pipelines and developers (“Development Renewable Energy Assets”).

The Company intends to invest both in a geographically and technologically diversified spread of Renewable Energy Assets and, over the long term, it is expected that: (i) investments: (i) located in the UK will represent less than 50 per cent. of Gross Asset Value; (ii) the total value of all investments; (ii) in any single country other than the UK will represent no more than 40 per cent. of Gross Asset Value of the total value of all investments; (iii) investment in onshore wind farms will not exceed 60 per cent. of Gross Asset Value of the total value of all investments; and (iv) investment in solar PV parks will not exceed 60 per cent. of Gross Asset Value. of the total value of all investments. For the purposes of this paragraph, investments shall (i) be valued on an unlevered basis, (ii) include amounts committed but not yet incurred and (iii) include Cash and Cash Equivalents to the extent not already included in the value of investments or amounts committed but not yet incurred.

The Company may acquire a mix of controlling and non-controlling interests in Renewable Energy Assets and may use a range of investment instruments in the pursuit of its investment objective, including but not limited to equity and debt investments. A controlling interest is one where the Company’s equity interest in the Renewable Energy Asset is in excess of 50 per cent..

In circumstances where the Company does not hold a controlling interest in the relevant investment, the Company will secure its shareholder rights through contractual and other arrangements, to, inter alia, ensure that the Renewable Energy Asset is operated and managed in a manner that is consistent with the Company’s investment policy.”

Investment Restrictions

“The Company aims to achieve diversification principally through investing in a range of portfolio assets across a number of distinct geographies and a mix of wind, solar and other technologies. Once fully invested and substantially fully geared (meaning for this purpose borrowings by way of long term structural debt of 35 per cent. of Gross Asset Value), the The Company will observe the following investment restrictions when making investments:

• the Company may invest up to 32.5 per cent. of Gross Asset Value in one single asset, up to 27.5 per cent. of Gross Asset Value in a second single asset, and the Company’s investment in any other single asset shall not exceed 20 per cent. of Gross Asset Value; and,in each case calculated immediately following each investment;
• the Company’s portfolio will comprise no fewer than sixten Renewable Energy Assets.;

The Company will also observe the following investment restrictions when making investments:

• no more than 20 per cent. of Gross Asset Value, calculated immediately following each investment, will be invested in Renewable Energy Assets which are not onshore wind farms and solar PV parks;
• no more than 25 per cent. of Gross Asset Value, calculated immediately following each investment, will be invested in assets in relation to which the Company does not have a controlling interest;
• no more than 33 per cent. by number of the Company’s investments in Renewable Energy Assets will be invested in assets in relation to which the Company does not have a controlling interest;
• no more than 5 per cent. of Gross Asset Value, calculated immediately following each investment, will be invested in Development Renewable Energy Assets;
• the Company will not invest in other UK listed closed-ended investment companies;
• neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in the context of the Group as a whole; and
• no investments will be made in fossil fuel assets.

Compliance with the above restrictions will be measured at the time of investment and non-compliance resulting from changes in the price or value of assets following investment will not be considered as a breach of the investment restrictions.

In addition to the above investment restrictions, following the Company becoming fully invested and substantially fully geared (meaning for this purpose borrowings by way of long-term structural debt of 35 per cent. of Gross Asset Value) at the time of an investment or entry into an agreement with an Offtaker, the aggregate value of the Company’s investments in Renewable Energy Assets under contract to any single Offtaker will not exceed 40 per cent. of Gross Asset Value.

The Company will hold its investments through one or more SPVs special purpose vehicles owned in whole or in part by the Company either directly or indirectly which will be used as the project company for the acquisition and holding of a Renewable Energy Asset (an “SPV”) and the investment restrictions will be applied on a look-through basis.

For the purposes of the investment policy, “Gross Asset Value” means the aggregate of (i) the fair value of the Company’s underlying investments (whether or not subsidiaries), valued on an unlevered basis, (ii) the Company’s proportionate share of the cash balances and cash equivalents of assets and non-subsidiary companies in which the Company holds an interest and (iii) other relevant assets and liabilities of the Company (including cash) valued at fair value (other than third party borrowings) to the extent not included in (i) or (ii) above.”

ORIT: Octopus Renewables Infrastructure proposes amendments to its investment policy