Octopus Renewables Infrastructure Trust (ORIT) has entered into a 10-year power purchase agreement (PPA) for the electricity to be generated at its Breach Solar Farm project with Iceland Foods Limited. Breach is a circa 67 MW solar PV project in Cambridgeshire, UK that ORIT acquired in June 2022. Breach is currently in construction and is expected to become operational in Q4 2023. Iceland is a British food retailer with over 900 stores throughout the UK, a further 40 owned or franchised stores across Europe, and a global export business.
The Breach Solar Farm
Once construction has been completed and the project energised, the Breach solar farm will provide around 64 Gigawatt hours (GWh) of energy every year to power 150 sites, which will cover 14% of Iceland Foods’ electricity needs for its UK stores. This will reduce Iceland’s emissions by nearly 22,955 tonnes of carbon dioxide, which ORIT says is equivalent to removing 12,590 petrol cars and planting 112,592 trees every year.
The PPA provides ORIT with a 10-year UK inflation (CPI) indexed price for 100% of Breach’s production each year and will provide Iceland with green electricity for its operations in the UK. Iceland will be providing investment grade credit support for the PPA.
The PPA will increase the percentage of ORIT’s forecast revenues which are fixed over the two years to 31 December 2024 to 71% and the percentage of forecast revenues which are index linked over the next 10 years to 31 December 2032 to 56%. The PPA is expected to be NAV-accretive when compared with the power price assumptions included in the unaudited Net Asset Value as at 31 December 2022. This deal also further supports ORIT’s dividend cover for the coming years.
Update on Cumberhead Wind Farm
Cumberhead, the 50MW wind farm under construction in Scotland, which has a PPA with Kimberley Clark, recently participated in auctions for the UK Capacity Market, which provides payments to new electricity generators not participating in the Government’s contract for difference scheme. Cumberhead was awarded capacity market contracts which will pay ORIT an inflation-linked revenue starting at over £200,000 per annum, from 2026 until 2041, as well as a single-year contract for 2023/24 also valued at over £200,000. This is more than double the assumptions used in the Q4 2022 valuations in each case. This revenue is in addition to the revenue expected to be received from Kimberley Clark under the PPA. The successful award of the capacity market contracts is expected to have a positive impact of around £1m on the Company’s 31 March 2023 Net Asset Value.
Comments from Phil Austin, chairman of ORIT
“We’re delighted to be partnering with Iceland Foods, a major British supermarket, through this corporate PPA. The Breach solar farm will provide enough energy for a significant portion of Iceland’s UK stores – showing the vital role that renewables play in accelerating businesses’ transitions to Net Zero.”