Downing Renewables & Infrastructure (DORE) has published its latest NAV and operational update as at 30 September 2024. The NAV was £202.6m or 117.3p per share, a decrease of 0.5% from the NAV per share as at 30 June 2024 (£207.6m or 117.9p per share) which also takes into account the payment of the £2.5m (1.45p per share) quarterly dividend. The movement in NAV during the quarter was attributable to several factors:
- Positive portfolio performance (+£1.3m, +0.6p per share);
- Update to the long-term power price forecasts (+£2.2m, +1.3p per share);
- Inflation (-£1.4m, -0.8p per share);
- Share buybacks (-£2.6m, +0.7p per share);
- Dividend (-£2.5m, -1.4p per share); and
- Other movements (-£2.0m, -1.1p per share).
As at 30 September 2024 the company’s GAV was £342.0m (30 June 2024: £347.8m).
Operational performance
Energy generation from DORE’s portfolio was 6.7% higher than expected overall, with higher generation in the hydropower and wind portfolios marginally offset by lower than expected generation across the solar assets. DORE’s grid infrastructure assets saw slightly higher revenues than expected but lower than expected power pricing in Sweden resulted in operating profits being 9% lower than budgeted.
Power prices and inflation
The increase in forecast future power prices generated a £2.2m (+1.3p per share) increase in NAV, with the majority of the impact felt in the Swedish hydropower assets. DORE says that it continues to manage exposure to merchant power pricing effectively with 65% of its UK revenues fixed for the next 10 years (39% of its total revenues fixed for that period). As part of the 30 September 2024 valuation, the inflation forecasts for 2024 and 2025 have been updated to align with the latest market consensus. The full year expectations for the RPI rate remained unchanged for 2024, with 2025 expectations moderately increasing. CPI expectations are slightly increased for both 2024 and 2025. Swedish CPI rates for both 2024 and 2025 remained unchanged. Lastly, expectations for the European CPI rate for 2024 have been reduced, however they remain unchanged for 2025.
Discount rates
DORE says that there have been no movements in discount rates for the period – the weighted average discount rate of the portfolio remains at 7.7%.
Hydropower
The previously announced acquisition of three hydropower plants, Hagby, Gyttorp and Hammarby, occurred on 21 November 2024. Following this acquisition, DORE now has 37 assets within the hydropower portfolio with a forecast annual average production of c. 222 GWh.
Wind
Generation in the wind portfolio was 23% ahead of budget, however this was offset by materially lower than budgeted prices.
Grid
During the quarter, the managers renegotiated the Mersey shunt reactor contract, which drove a 30% uplift to long term contracted revenues. Additionally, Blåsjön’s real weighted average cost of capital for this regulatory period increased to 4.5%, up from 3.6%, resulting in increased future revenues for DORE.