The Board of Downing Renewables & Infrastructure Trust plc (the "Company" or "DORE") is pleased to announce the Company's unaudited Net Asset Value ("NAV") as at 31 March 2022 and the declaration of an interim dividend in respect of the period from 1 January to 31 March 2022.
Net Asset Value as at 31 March 2022
The Company reports that its unaudited NAV was £150.9 million or 110.1 pence per share as at 31 March 2022. This is an increase of 6.4% from the Company's NAV as at 31 December 2021 which was £141.8 million or 103.5 pence per share. Including the 1.25 pence per share dividend paid during the quarter, the Company's NAV total return for the period was 7.6%. The increase in NAV during the period was attributable to several factors including accretive acquisitions, increasing power prices, inflation and financial performance.
The three acquisitions completed during the first quarter, all of which were accretive, comprising two river-run hydro portfolios located in the SE2 and SE3 pricing areas in central Sweden with c.48 GWh of average annual production, which accounted for £3.1 million (2.3pps) of the NAV uplift and an operational 46 MWp onshore wind project located in north-east Sweden, which accounted for £2.2 million (1.6pps) of the NAV uplift.
An agreement to acquire two additional hydropower plants located in Sweden's southern SE4 pricing region with an aggregate forecast annual production of c.18 GWh p.a. was entered into after the end of the quarter ending 31 March 2022. This accretive acquisition has also now completed.
The portfolio, which is becoming increasingly diversified, comprises asset classes that have limited correlation to each other which reduces seasonality and intermittency.
The investment manager believes that hydropower, which is often overlooked as a source of renewable energy, will be a key part of the energy transition as it is possible to store water in reservoirs and use this to produce energy when supply from renewable sources elsewhere is low. This helps to reduce price volatility, mitigate price capture risk and maximise the value of the energy stored for end users and investors.
Power prices and inflation
The increase in forecast future power prices, contributed to £2.9 million (2.1pps) of the NAV uplift.
UK outturn RPI for the quarter ending March 2022 was 1.8%, considerably in excess of the Investment Manager's annualised valuation assumption of 2.75% for the third successive quarter. In light of the continuing rises in actual and forecast inflation across Europe and the UK, 2022 inflation forecasts have been increased to 7.8%, up from 2.75% in the UK, and 4% in Sweden, up from 1.8%. The adjusted inflation forecasts contributed to £2.9 million (2.1pps) of the NAV uplift. Inflation assumptions for 2023 onwards are unchanged.
Financial performance for the quarter was above expectations and contributed to £0.5 million (0.4pps) of the NAV uplift. The UK solar portfolio led the way with generation and operating profit both c.14% above budget.
The hydro portfolio was below budget generation due to dry weather and a delayed spring flood but returned a strong financial result following cost savings, particularly in relation to the successful transition of the business to independent operations which occurred on time and below budget. The wind portfolio was below target generation and operating profits were also £0.2 million below budget. This shortfall was offset by the strong solar performance.
Discount rates for hydropower and solar assets are unchanged from year-end, and the introduction of the wind asset has moved the weighted average discount rate to 7.1% p.a.
Costs, management fees and the dividend of 1.25pps (£1.7 million) paid during the quarter represented the balance of the NAV movements.
Dividend Declaration and Guidance
The Board has declared an interim dividend in respect of the period from 31 December 2021 to 31 March 2022 of 1.25 pence per Ordinary Share. The dividend will be paid on or around 30 June 2022 to shareholders on the register on 27 May 2022. The ex-dividend date will be 26 May 2022.
A portion of the Company's dividend is designated as an interest distribution for UK tax purposes. The interest streaming percentage for the dividend declared above is 65%.
The Company is targeting dividend payments totalling 5 pence per share for the financial year ending 31 December 2022*.
Hugh Little, Chairman, commented:
"We are very pleased to provide a strong positive quarterly performance and significant NAV uplift, driven mainly by three accretive acquisitions completed during the period and positive movements in power price and inflation forecasts. Given the continuing increases in power prices since the quarter end, we believe that the Company will continue to benefit from the positive pricing tailwinds. As recently announced, the Company has a strong pipeline of assets and is considering the issue of new shares to raise additional capital to take advantage of this pipeline, which should enhance the diversity of DORE's portfolio."
DORE has today published its quarterly factsheet and commentary to the end of March 2022. Copies can be downloaded from the Company's website: www.doretrust.com
* The dividend and return targets stated in this announcement are targets only and not profit forecasts. There can be no assurance that these targets will be met, or that the Company will make any distributions at all and they should not be taken as an indication of the Company's expected future results. The Company's actual returns will depend upon a number of factors, including but not limited to the Company's net income and level of ongoing charges. Accordingly, potential investors should not place any reliance on these targets and should decide for themselves whether or not the target dividend and target net total shareholder return are reasonable or achievable. Investors should note that references in this announcement to "dividends" and "distributions" are intended to cover both dividend income and income which is designated as an interest distribution for UK tax purposes and therefore subject to the interest streaming regime applicable to investment trusts.