Octopus Renewables Infrastructure Trust (ORIT) has entered into a conditional agreement to sell its Krzecin and Kuslin onshore wind farms in Poland to an affiliate of ORLEN S.A. On completion of the Transaction, ORIT expects to receive net proceeds, following the repayment of asset level debt and termination of hedging arrangements, of between PLN 470m and PLN 490m (equivalent to approximately £88m to £92m), which represents a 14 to 19% premium over the holding value of the Krzecin and Kuslin wind farms of £77m as at 30 June 2023. Assuming the transaction proceeds as planned, ORIT expects to realise an IRR of 25% to 30% over the lifetime of its investment in these assets. The transaction is subject approval from the relevant competition authorities and is expected to complete within the next 2-6 months.
Assets acquired during the construction phase
ORIT acquired the Krzecin and Kuslin wind farms when they were in the construction phase in October 2021. The company managed the construction of the two wind farms, bringing them into operation in 2022. The two sites have a combined capacity of 59 MW, generating enough green power for well over 100,000 homes and avoiding the equivalent of 150,000 tonnes of carbon dioxide emissions every year. The purchaser, ORLEN, is a Polish-based listed multi-energy company and in connection with the transaction, ORLEN has agreed to provide a loan to repay the existing bank debt secured against the Krzecin and Kuslin wind farms.
Strong buyer appetite for renewable energy assets
ORIT says that “This accretive sale demonstrates the strength of the Company’s net asset value and strong buyer appetite for renewable energy assets as the Investment Manager continues to actively manage the Company’s portfolio. The sale forms part of the Company’s announced strategy to release capital through the sale of a small number of assets. The proceeds will initially be used to repay short term debt facilities and may subsequently be reinvested in projects that offer further opportunities for capital growth and greater impact through building more new renewable energy projects like wind and solar farms”.
Comments from Phil Austin, chairman of ORIT
“ORIT is committed to making a positive impact through investing in renewable assets which help accelerate the transition to net zero. Building new wind farms, like these two in Poland, has brought more vital green energy onto the system. The Company has demonstrated its ability to manage the construction of these renewable energy projects, successfully delivering capital growth for investors, proving its ability to sell assets at an attractive valuation.
“As the Company’s portfolio becomes increasingly weighted towards operational assets, selling some of these now and paying down short term debt will then give ORIT the ability to explore new opportunities to build more green energy projects. This creates even greater scope for capital growth alongside ORIT’s income, and to continue making a difference by rapidly accelerating the green energy transition.”
[QD comment: As we have seen with a number of asset sales within the alternative income space, this transaction has comes at a premium to NAV highlighting the conservative nature of the methodology used to value the assets and giving credibility to the NAV. At the time of writing, ORIT is trading at around a 25% discount to NAV, which, like the discounts that are being applied to many of its peers, seems out of step with the values that these assets are achieving in secondary transactions – something which many of these funds have been saying for some time.]