Downing Renewables and Infrastructure generated a positive NAV total return of 3.5% over 2023, the flatter figure for 2023 reflecting more normal power prices. In common with other renewables companies, the discount widened over the year; the share price fell to 90p from 113.5p and now stands at 75.2p, a 36.1% discount to the end December NAV [QD comment: which we find impossible to rationalise, there is no plausible reason that we can think of that would justify these levels of discount].
The underlying portfolio generated £24.7m (2022: £19.5m) of operating profit during the period, an 11.6% return (2022: 8.9%) on equity capital deployed. The 4,866 core renewable energy assets produced approximately 396 GWh of renewable electricity, enough to power 146,183 houses, with the two new grid infrastructure assets in particular performing well.
Dividends for 2023 totalled 5.38p, in line with targets, and were covered by cash after servicing the debt 1.21x. The target for 2024 is 5.8p, a 7.85% uplift, and this is expected to be covered by cash 1.35x based on the forecast revenues of the existing portfolio.
It was a busy year, with £47m deployed into new investments including Blasjon (the Swedish regulated electricity distributor, with revenues that don’t fluctuate with the volume nor price of electricity it distributes), and a hydropower plant in Iceland with a good operational track record and long-term, fixed price, inflation-linked revenues. The Swedish hydropower portfolio grew to 215GWh across 34 plants, bringing further economies of scale plus the potential to benefit from energy storage revenues that we outlined in our last note.
The company has access to a £40m revolving credit facility (RCF), of which £18.6m is drawn. There are two additional long term debt facilities at asset level, a £78.8m facility which is fully drawn and a €68.5m facility of which €49.4m was drawn as at 31 December 2023. In total, the sterling value of debt was £140m at 31 December 2023. The weighted average cost of debt across the borrowings is 2.5%.
During the twelve months to 31 December 2023 the company has bought back a total of 4,375,363 shares into treasury at a cost of £4.1m. Since the period end, a further 2,544,899 shares have been bought back into treasury at a cost of £2.1m.
DORE : Solid results and promising dividend outlook for Downing Renewables