Octopus Renewables Infrastructure Trust H1 Earnings Call Highlights

Key Points

• Operating performance exceeded expectations: First-half revenue was 3% above budget and EBITDA 6% ahead, driven by strong solar and offshore wind output. ORIT remains on track for its FY 2026 dividend target of 6.23 pence per share.
• NAV declined materially: NAV fell 5% on a total-return basis to £454.7 million, or 86.18 pence per share, mainly due to a 10.1% reduction in long-term onshore wind generation assumptions, higher discount rates and lower power-price forecasts.
• Debt reduction and asset sales are priorities: Management aims to reduce gearing from 46.6% toward its approximately 40% target using asset-sale proceeds, with the first sale expected within six months. ORIT is also assessing project refinancing while maintaining dividend coverage.

Octopus Renewables Infrastructure Trust LON: ORIT said its first-half revenue and EBITDA exceeded budget despite a negative net asset value total return, as strong solar and offshore wind performance offset weaker onshore wind production.

Co-Fund Manager Chris Gaydon said the renewable energy investor’s portfolio delivered “resilient cash performance” during the period. Revenue was 3% above budget and EBITDA was 6% ahead, helping dividend cover rise to 1.38 times after scheduled debt amortization. On a gross basis before scheduled amortization, dividend cover was 1.91 times.

The trust said it remains on track to pay its FY 2026 target dividend of 6.23 pence per share, representing a 1% increase from 2025. However, NAV total return was negative 5% for the first half, reflecting lower long-term onshore wind generation assumptions, reduced power-price forecasts and higher discount rates.

Portfolio valuation falls as wind forecasts are revised

ORIT reported NAV of £454.7 million, or 86.18 pence per share, at June 30, compared with £495.0 million, or 93.79 pence per share, at the start of the year. Gross asset value was £852 million at period end.

Senior Portfolio Manager Jen Legg said the biggest valuation reduction came from a review of onshore wind energy-yield assumptions. The review reduced forecast long-term onshore wind generation by 10.1%, equivalent to 4.7% of forecast generation across the operating portfolio. The change lowered NAV by £30.4 million, or 5.8 pence per share.

Legg said the reassessment drew on operating history, updated technical analysis, long-term weather data and the judgment of the company’s internal asset-management team. The largest reductions related to Finnish and German wind portfolios. She said the review was intended to establish “a much more robust basis for valuing the portfolio going forward.”

Other valuation headwinds included a £10.6 million reduction from higher discount rates and an £8.6 million net reduction from changes to power prices and other energy-market assumptions. The portfolio-weighted average discount rate increased to 8.3% from 7.8%.

Those movements were partly offset by £5.7 million from revised end-of-life assumptions, including extended operating lives for certain onshore wind assets and updated decommissioning assumptions. Expected portfolio returns and smaller asset-level movements also contributed positively.

Solar and offshore wind outperform budget

The portfolio generated 614 gigawatt-hours of output, including compensated generation, approximately 1% below budget. Solar output was 3% above budget and offshore wind production was 5% ahead, while onshore wind output was 6% below updated budgets.

Co-Fund Manager David Bird said solar generation totaled 271 gigawatt-hours and produced revenue of more than £30 million and EBITDA of £22.3 million. Strong solar irradiance in Great Britain, Ireland and France supported performance, while Irish grid constraints were lower than forecast.

Onshore wind generated 263 gigawatt-hours including compensation. Strong wind speeds at the Cumberhead project in Scotland were outweighed by lower-than-forecast wind speeds in France, Germany and Finland. Technical availability issues at Finnish assets Saunamaa and Suolakangas have been resolved, Bird said, and the company expects most lost generation to be recoverable through turbine-supplier warranties.

The Lincs offshore wind farm in the North Sea generated 80 gigawatt-hours, 5% above budget, aided by strong wind conditions.

As of June 30, ORIT owned 39 assets with 740 megawatts of capacity across five countries and five technologies. Solar represented 50% of the portfolio by value, onshore wind 32% and offshore wind 13%. Operational assets accounted for 95% of investments, while developer investments represented 5%.

The trust said 86% of forecast revenue over the next two years is fixed or contracted, and 42% of expected revenue over the next decade is inflation-linked.

Gearing reduction and asset sales remain priorities

Total look-through debt decreased by £5.3 million during the half to £396.8 million. However, gearing increased to 46.6% from 44.8% because the portfolio’s gross asset value declined. ORIT’s medium-term gearing anchor is about 40%.

The average cost of debt was 3.5%, with an average remaining term of 9.3 years, and approximately 72% of debt was hedged. Legg said future asset-sale proceeds would primarily be used to repay debt alongside scheduled project-level amortization.

Bird said the company is also considering refinancing certain project-level term loans during the remainder of 2026 and into 2027 to improve flexibility for the ORIT 2030 strategy.

The strategy targets medium- to long-term total returns of 9% to 11%, combining dividends with capital growth from investments and active asset recycling. Bird said ORIT had withdrawn from some potential transactions after diligence indicated risk-adjusted returns did not meet its requirements, but added that the company retained an active pipeline of construction-stage acquisition opportunities.

Management also said several asset-sale processes are underway. Gaydon said the trust expects its first sale to complete “well within the next six months” and is targeting pricing around the June NAV, while seeking to exceed book value where possible.

Management addresses share-price discount

ORIT’s share-price total return was positive 13.7% during the period, while its discount to NAV narrowed but remained a focus, management said. Bird acknowledged that the trust’s share-price performance had been disappointing, though he said ORIT’s operational and financial performance had not been an outlier relative to peers.

Bird said the broader listed renewable-infrastructure sector continues to face supply-and-demand pressures, as some investors who entered when interest rates were low have shifted toward other income-producing investments. He said further consolidation and some capital leaving the sector could help address the imbalance.

Management said it believes investing for sustainable capital growth under the ORIT 2030 strategy offers a better long-term outcome than buybacks at current discount levels. Bird said buybacks would need to be financed through higher gearing or asset sales, potentially shrinking the vehicle or affecting its ability to sustain well-covered dividends.

Looking ahead, Gaydon said rising electricity demand from electrification, data centers and battery deployment could support longer-term power prices and reduce capture-price discounts. Management said its near-term focus is completing growth investments and asset sales, reducing gearing toward 40%, and maintaining dividend coverage.

About Octopus Renewables Infrastructure Trust (LON:ORIT)

Octopus Renewables Infrastructure Trust plc (“ORIT”) is an Impact Fund helping accelerate the transition to net zero. It is an investment company focused on providing investors with an attractive and sustainable level of income returns, with an element of capital growth, by investing in a diversified portfolio of Renewable Energy Assets across Europe, the UK and Australia.

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