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Downing Renewables launches £50m fundraise

Downing Renewables & Infrastructure Trust is aiming to raise £50m through an issue of up to 45,669,495 new ordinary shares at 111p per share, and to establish a 12-month share issuance programme to issue up to 250m ordinary shares (less the number issued under this initial issue). Shareholders need to approve these plans.

The net proceeds from the initial issue are expected to be used to repay amounts drawn down under the company’s revolving credit facility (RCF), which currently amount to £17.3m, and to pursue the manager’s pipeline of investment opportunities, including near-term hydropower, wind and solar assets in the UK, Sweden and Finland..

Hugh Little, chair of the trust, commented: “The company has made excellent progress since its IPO in building a diverse portfolio of renewables projects in the UK and Northern Europe. The investment manager has already demonstrated its ability to deliver value for shareholders ahead of expectations through a series of carefully selected and highly-accretive acquisitions. The company’s pipeline, which has in excess of £200m of near-term opportunities, includes hydro, solar, wind, batteries and utilities across target geographies and construction phases. Raising capital to acquire additional assets has the potential to further grow NAV, increase the diversity of DORE’s portfolio, and continue to provide stable returns to shareholders.”

Investors will be able to invest through an initial placing, open offer, initial offer for subscription and initial intermediaries offer.

The 111p issue price represents:

  • a premium of 1.98% to the NAV as at 31 March 2022 (unaudited) of 110.1p (less 1.25 pence to reflect the first interim dividend which will be paid on 30 June 2022);
  • a discount of 1.3% to the closing price on 6 June 2022 of 112.5p

Existing qualifying shareholders will be entitled to participate in the open offer on the basis of 1 ordinary share for every 3 existing ordinary shares that they own. They will also be offered the opportunity to subscribe for additional shares via an excess application facility.

Retail investors may subscribe through the initial intermediaries offer. NB you have to be located in the United Kingdom, the Channel Islands and the Isle of Man to be eligible to participate.

We have written extensively about the fund and have interviewed the managers. The investment manager is in bilateral and/or exclusive discussions in relation to near-term pipeline assets with a total equity value in excess of £200m. They say that there are attractive pricing tailwinds at the moment, noting:

  • Inflation in 2021 was at its highest for 10 years in the UK and consensus forecasts show inflation remaining high for at least 2023 and 2024. As at 31 March 2022, 65% of the forecast UK revenues of the company’s portfolio of assets and 44% of the forecast total revenues of the portfolio are directly linked to inflation.
  • Power prices in the UK and Nordic markets also increased dramatically in 2021 resulting from increased gas and carbon pricing and demand outstripping supply. Elevated pricing has continued in 2022, predominately driven by the European energy crisis and the war in Ukraine.
  • Interest rates in the UK have increased sharply in 2022 and in an inflationary environment, it is more likely that interest rates will continue to increase. Other than short term borrowings under the RCF (which will be repaid with the proceeds of the Initial Issue), the group’s current borrowings are fixed for the long term and the group is not exposed to changes in interest rates on its borrowing in the UK or Sweden until 2034.

Proposed changes to the investment policy

The circular to approve the plans will also contain proposed changes to the investment policy as detailed below.

  • increase the technology investment limit from 50% to 60% of gross asset value (GAV) and the geographic investment limit from 60% to 75% of GAV, both measured at the time of investment, until the NAV first exceeds £300m;
  • amend the definition of GAV for the purposes of the investment policy by using the assumption that gearing of 50% is only in place for uninvested cash and cash equivalents for the group, but otherwise to use actual gearing levels, when determining GAV; and
  • increase its maximum short-term debt limit from 10% to 20% of prevailing GAV at the time of drawn down (or acquiring) such debt.

The proposed changes to the investment policy have been approved by the FCA, but will require the approval of shareholders in order to be implemented. Further details on the proposed changes to the investment policy will be included in the Circular.

Dividend policy

The company is currently targeting quarterly dividends totalling 5 pence in respect of the 12 months ending 31 December 2022. The company adopts a progressive dividend policy taking into consideration the prevailing inflationary environment. Given the nature of the company’s income streams, the board expects that this will result in increases to the dividend in the medium term.

Expected timetable

  • Record Date for entitlements under the Open Offer: close of business on 1 June
  • Initial Issue opens, posting to Shareholders of the Circular, the Prospectus and Open Offer Application Form 7 June
  • Ex entitlement date for the Open Offer 8.00 a.m. on 7 June
  • Open Offer Entitlements and Excess CREST Open Offer Entitlements enabled in CREST and credited to stock accounts of Qualifying CREST Shareholders as soon as possible on 8 June
  • Recommended latest time and date for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST 4.30 p.m. on 15 June
  • Recommended latest time and date for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements into CREST 3.00 p.m. on 16 June
  • Recommended latest time and date for splitting Open Offer Application Forms (to satisfy bona fide market claims only) 3.00 p.m. on 17 June
  • Latest time and date for receipt of completed Open Offer Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions 11.00 a.m. on 21 June
  • Latest time and date for receipt of proxy appointments in respect of the General Meeting 12.00 p.m. on 21 June
  • Latest time and date for receipt of completed applications from the Intermediaries in respect of the Initial Intermediaries Offer 1.00 p.m. on 21 June
  • Latest time and date for receipt of completed Application Forms in respect of the Initial Offer for Subscription and, if applicable, Tax Residency Self-Certification Forms, and payment in full under the Initial Offer for Subscription 1.00 p.m. on 22 June
  • Latest time and date for commitments under the Initial Placing 1.00 p.m. on 22 June
  • General Meeting 12.00 p.m. on 23 June
  • Announcement of the results of the General Meeting through an RIS 23 June
  • Announcement of the results of the Initial Issue 24 June
  • Initial Admission and dealings in the Ordinary Shares issued pursuant to the Initial Issue commence 8.00 a.m. on 27 June
  • Crediting of CREST stock accounts in respect of the Ordinary Shares issued pursuant to the Initial Issue as soon as practicable after 8.00 a.m. on 27 June
  • Share certificates despatched (where applicable) week commencing 4 July (or as soon as possible thereafter)

DORE : Downing Renewables launches £50m fundraise

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