Downing Renewables & Infrastructure Trust has bought two hydropower plants for a total of €5.8m. The two operational hydropower plants are located in Sweden’s SE2 electricity region. The deals are being funded through Downing’s available cash reserves.
The first acquisition, completed in February 2023, is a c. 2.5 GWh hydropower plant in Högforsen, on the Gillerån river, a tributary to the Indalsälven river. The plant was commissioned in 1915 and in 2011, the plant underwent a major renovation, including replacement of generator, turbine and control system.
The second is of a c. 6 GWh hydropower plant in the municipality of Gottne, located on the Moälven river. The plant underwent a major refurbishment in 2015. The acquisition is scheduled to be completed early March 2023.
These acquisitions increase the total number of the trust’s managed Swedish hydropower plants to 28 with a total annual average production of 197 GWh.
Related party transaction
Magnus Olofsson, the vendor of the Gottne hydropower plant is also a director of Downing Hydro AB, the subsidiary that holds Downing Renewables’ hydropower portfolio. As such, this is a related party transaction. Given its relatively small size (that part of the deal amounts to about £3.6m), it constitutes a smaller related party transaction under the Listing Rules. The company has received written confirmation from its sponsor that the terms of the transaction with the related party are fair and reasonable as far as shareholders of the company are concerned, and therefore it does not need to be put to a shareholder vote.
Dividend
Downing Renewable’s annual dividend target will increase by 7.6% for the year ended 31 December 2023 to 5.38 pence per share. Dividends will continue to be paid quarterly in equal amounts. The increased dividend is expected to be fully covered by cash generated by the current portfolio.
In addition, the trust has more near-term deals that are under exclusivity. Assuming those assets are acquired, the dividend cover against the increased dividend target is expected to be in excess of 1.4x. Cash dividend cover has been calculated on a cash basis of income expected to be received by the company and its immediate subsidiary.
DORE : Downing Renewables expands hydropower portfolio, ups dividend