Downing Renewables & Infrastructure Trust is buying (through its subsidiary Downing Hydro AB), a 100% interest in a portfolio of operational run-of-river hydropower plants in Sweden. The purchase price is about €20m and the vendors are Batten AB and Daturum AB. Initially, the deal will be funded by drawing down on the fund’s £25m revolving credit facility (RCF), meaning the RCF will be 68% drawn.
The portfolio comprises two hydropower plants located in Sweden’s southern SE4 pricing region. The plants were comprehensively renovated between May 2014 and September 2019 and have an aggregate forecast annual production of about 18 GWh each year.
The newly acquired hydropower plants will be fully integrated into Downing Renewable’s existing hydropower operational, control and dispatch arrangements. This acquisition will increase the number of Downing Hydro AB hydropower plants to 19 and the total forecast annual production of the hydropower portfolio to about 174 GWh, around a 60% increase since 31 December 2021.
These are the trust’s first assets to be located in the southern SE4 pricing region. This area has the highest wholesale power prices in Sweden, benefitting from export cables to continental Europe. The acquisitions in a new price zone will further support the trust’s strategy of focusing on diversification by geography, technology, revenue and project stage, designed to increase the stability of revenues and the consistency of income to shareholders [but they also reinforce Downing Renewable’s strong position in Sweden and hydropower, both of which distinguish it from peers.]
Intention to raise equity
Downing Renewable’s investment manager says that it continues to see a strong pipeline of investment opportunities. In order to access that pipeline, and to repay drawings under the credit facility, the company is considering the issue of new ordinary shares to fund additional investments, with the wider aims of increasing diversification, driving efficiencies of scale at the portfolio level, spreading the fixed costs over a wider asset base and increasing liquidity for current and future shareholders [all of which we think make sense].
A further announcement will be made in due course. There’ll be a new NAV update, looking at the position at the end of March 2022 and a dividend declaration in the week commencing 9 May 2022.
DORE : Downing Renewables ready to expand