Octopus Renewables Infrastructure’s (ORIT) net asset value (NAV) fell 5.8% in the second quarter after the £329m investment trust cut its long-term forecasts for onshore wind generation by 10%.
Fund managers David Bird and Chris Gaydon said a review of the maturing onshore wind farms that account for 57% of ORIT’s seven-year-old portfolio had replaced independent pre-construction forecasts with actual operating performance.
“While this resulted in a reduction in NAV, the approach ensures our valuations are based on actual data and the latest technical evidence, with none of our wind assets now valued using pre-construction forecasts,” they said.
The quarterly update showed NAV per share fell 6.97p per share from 93.15p to 86.18p in the three months to 30 June. The review of onshore wind energy yields knocked 5.77p, or £30.4m, off the valuation.
Other reductions included: a further fall in power price forecasts lowering NAV by 1.8p per share, or £9.5m; discount rates rising from 8.2% to 8.8% to reflect a decline in the prices of recent European renewable transactions; and the 1.55p dividend costing £8.2m.
Higher inflation and enhancements to extend the operating life of some onshore wind farms from 30 to 35 years added 1.72p per share or £9.1m to NAV.
The net effect of these was to reduce the portfolio by £36.8m from £491.5m at 31 March to £454.7m.
Chair Phil Austin said: “While this has contributed to a lower NAV this quarter, the review reinforces our conservative approach to deliver on the company’s strategic priorities.”
He said these were predictable cash generation with around 86% of revenues to June 2028 fixed and a fully covered progressive dividend.
Shares in the 10%-yielder dipped 2%, or 1.3p, to 60.9p, a 29% discount to the new NAV. They have fallen from a peak of 116p in April 2022. This reflects a 21% decline in NAV from 209.4p at the end of that year.
Our view
James Carthew, head of investment company research at QuotedData, said: “Unfortunately, one of the effects of hotter weather from climate change appears to be lower average wind speeds across the UK. Some other trusts have already taken a hit to NAV as a result. ORIT is just the latest to recognise it.”
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