i Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Octopus
Renewables
Infrastructure
Trust plc
Annual Report
For the year ended
31 December 2023
1 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Contents
About the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Why we are different . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Key milestones during 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Portfolio at a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Chair’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Strategic Report
Operating Model, Objectives and KPIs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Investment Strategy and Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Investment Manager’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
ESG & Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Risk and Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Section 172 Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110
Stakeholder Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Governance
Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
Corporate Governance Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Directors’ Remuneration Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Report of the Audit and Risk Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141
Statement of Directors’ Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .146
Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Financial Statements
Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .160
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161
Other information
Alternative Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Article 9 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203
Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .206
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .207
2 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
About the Company
Octopus Renewables Infrastructure Trust plc
(
“ORIT” or the “Company”
)
is a closed-ended investment company incorporated in England and
Wales.
The Company’s purpose and investment objective is to provide 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 in Europe and Australia.
ORIT classifies itself as an impact fund with a core impact objective of accelerating the transition to net
zero through its investments. ORIT’s ordinary shares were admitted to the Official List of the Financial
Conduct Authority and to trading on the premium listing segment of the main market of the London Stock
Exchange on 10 December 2019.
The IPO raised total gross proceeds of £350 million, and subsequently the Company raised an additional
£224 million of equity in two oversubscribed fundraisings held in July 2021 and December 2021. As a result,
ORIT has raised a total of £574 million to date.
ORIT is managed by one of the largest renewable energy investors in Europe, Octopus Energy Generation
(
the “Investment Manager”
)
.
Investment Strategy Overview
The full Investment Strategy and Policy is set out on pages 21 to 24. ORIT seeks to achieve its objectives in
four ways:
Diversification of
Renewable Assets
Active
Construction
and Asset
Management
Inclusion of
Construction and
Development
Embedding Impact
into Investments
3 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Why we are different
Expert management
Our Investment Manager’s team of over 135 renewable specialists
brings unrivalled expertise
Diversified Portfolio
We manage risk and volatility through geographic diversification
across Europe and the UK and technological diversification
Added Value
We seek to enhance returns and promote additionality through
strategic construction allocation
Unlocking Optionality
Our developer investments provide access to a proprietary pipeline
which we have the right, but not the obligation to fund . This offers
valuable optionality
Sustainable Investing
We prioritise Impact and ESG factors across all our investments .
ORIT is an SFDR Article 9 product, embodying sustainable practices
01
02
03
04
05
4 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Highlights
For the year ended 31 December 2023
Financial highlights
-4.4%
Total shareholder return
in the year
1, 2
(
2022: -5.4%
3
)
6.7%
Total shareholder return
since IPO
(
1.6% per annum
)
1, 2
(
2022: +11.6%, 3.6% per
annum
3
)
2.1%
Net Asset Value
(
“NAV”
)
total return
in the year
1, 2, 4
(
2022: +12.4%
3
)
28.6%
NAV total return since
IPO
(
6.4% per annum
)
1, 2, 4
(
2022: +25.9%, 7.8% per
annum
)
£599m
NAV
4
(
2022: £618m
)
106.0p
NAV per Ordinary Share
4
(
2022: 109.4p
)
£980m
Gross Asset Value
(
“GAV”
)
1, 5
(
2022: £1,073m
)
£1,127m
Total value of all
investments
1, 6
(
2022: £1,304m
)
39%
Total leverage 8
(
2022: 42%
)
£508m
Market capitalisation
as at 31 December 2023
(
As at 31 December 2022:
£565m
)
5.79p
Dividend per Ordinary
Share for FY 2023 In line
with target
(
FY 2022: 5.24p in line
with target
)
1.18x
Dividend cover 7
(
2022: 1.77x
)
10.5%
2023 dividend growth vs
2022
(
2022 vs 2021: 4.8%
)
Alternative Performance Measures (“APMs”)
The financial information and performance data highlighted in footnote 1 on this page
make part of the APMs of the Company . Definitions of these APMs together with how
these measures have been calculated can be found on pages 189 to 192 .
Note: The value of investments and income from dividends can fluctuate, and there
is a possibility that investors may not recover the entire amount originally invested.
1
These are alternative performance measures .
2
Total returns in sterling, including dividends reinvested .
3
Restated from December 2022 KPI reported in the FY 2022 Annual Report .
4
The Net Asset Value as at 31 December 2023 is calculated on the basis of 564,927,536 Ordinary Shares in issue .
5
A measure of total asset value including debt held in unconsolidated subsidiaries .
6
Total asset value including total debt and equity commitments .
7
Dividend cover for FY 2023 is calculated on the basis of actual total net operational cash flows from the portfolio after debt service and Company and
intermediate holding company expenses .
8
Total debt drawn (short-term and long-term) as a percentage of Gross Asset Value .
5 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Highlights
(
continued
)
For the year ended 31 December 2023
Note: Renewable electricity generated in the year, equivalent tonnes of carbon avoided for the year and
equivalent homes powered by clean energy for the year are new for the 2023 reporting period.
* Includes 4 Irish solar assets acquired post year-end
1,569GWh
Potential annual renewable
electricity generated once fully
operational
14
(
2022: 1,740GWh
)
400k
Estimated annual equivalent
tonnes of carbon avoided once fully
operational
12, 14
(
2022: 580k
)
384k
Estimated annual equivalent homes
powered by clean energy once fully
operational
13, 14
(
2022: 522k
)
1,312GWh/
1,427
GWh
(
incl. Irish solar assets
)
*
Renewable electricity generated
in the year
11
366k/
402
k
(
incl. Irish solar assets
)
*
Equivalent tonnes of carbon
avoided for the year
12
355k/
379
k
(
incl. Irish solar assets
)
*
Equivalent homes powered by clean
energy for the year
13
9
Excludes: i) Polish wind assets which were sold during FY 2023; ii) the Spanish solar assets, the option over which was terminated in FY 2023; iii) the Irish solar
assets which were subject to conditional acquisition at 31 December 2023 and were acquired shortly after year end . Each developer investment is counted
as a single asset .
10
Including technologies for operational and construction stage assets and technologies covered through developer investments: onshore wind, offshore
wind, solar, battery storage and hydrogen .
11
Calculated using renewable energy generated by the investment portfolio during the reporting period, proportioned by equity ownership . It includes
generation from the Polish wind assets up to the 30
th
June 2023 locked box date that was applied in the sale transaction .
12
Calculated using the 2021 International Financial Institution’s approach for Common Default Grid Emission factors see here, https://unfccc .int/sites/default/
files/resource/IFITWG_Methodological_approach_to_common_dataset .pdf . Reference updated in January 2024 from 2019 to 2021 to reflect most recent
emission factors available . Includes generation from the Polish wind assets up to the 30
th
June 2023 locked box date that was applied in the sale transaction .
13
Equivalent homes powered by clean energy are calculated based on most recent average household electricity usage values provided by Ofgem (UK) and
Odyssee (EU) . References and methodology updated in January 2024 . Includes generation from the Polish wind assets up to the 30
th
June 2023 locked box
date that was applied in the sale transaction .
14
All metrics are calculated based on an estimated annual renewable energy generation of the investment portfolio once fully operational (including
Irish conditional acquisition and excluding the exited assets in Poland and Spain) and on the basis of ORIT’s equity stake . Metric is based on “P50” yield
assumptions for the next available full operational year, including degradation that occurs naturally over the assets’ lifetimes . Equivalent tonnes of carbon
avoided are calculated using the 2021 International Financial Institution’s approach for Common Default Grid Emission factors . Reference updated in
January 2024 from 2019 to 2021 to reflect most recent emission factors available . Equivalent homes powered by clean energy are calculated based on most
recent average household electricity usage values provided by Ofgem (UK) and Odyssee (EU) . References and methodology updated in January 2024 .
Operational and ESG highlights
37
9
/41
(
incl. Irish solar assets
)
*
Number of assets as at
31 December 2023
5
Number of technologies
10
609
9
MW/
808MW
(
incl. Irish solar assets
)
*
Capacity owned as at
31December2023
6 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Highl ights
Company Results Summary
FY23 FY22 FY21
Oct-19
to Dec-20
15
Share Price as at 31-Dec 90.0p 100 .0p 110 .8p 113 .8p
Profit and total comprehensive income
for the year
£12.7m £69 .8m £34 .8m £8 .3m
Earnings per share
2.24p 12 .36p 8 .20p 2 .75p
NAV
£599.0m £618 .3m £5 7 7 .7m £343 .9m
NAV per share
106.0p 109 .4p 102 .3p 98 .3p
Total declared dividend per share
5.79p 5 .24p 5 .0p 3 .18p
Declared dividends per share since IPO
19.21p 13 .42p 8 .18p 3 .18p
Total shareholder return in the year
-4.4% -5 .4% 1 .7% 7 .8%
Total shareholder return since IPO
6.7% 11 .6% 18 .0% 16 .0%
NAV total return in the year
2.1% 12 .4% 9 .3% 2 .5%
NAV total return since IPO
28.6% 25 .9% 12 .1% 2 .5%
15
First accounting period from launch to 31 December 2020 .
7Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Highlights
Figure 1: Returns history
(10%)
(5%)
-
5%
10%
15%
20%
2020 2021 2022 2023
Total shareholder return in the year NAV total return in the year
Total shareholder return (annualised since IPO) NAV total return (annualised since IPO)
15.0%
2.4%
5.7%
7.8%
6.4%
7.8%
2.5%
9.3%
12.4%
2.1%
(5.4%) (4.4%)
1.7%
8.4%
3.6%
1.6%
Figure 2: Dividend history
3.00
5.00
5.24
5.79
2.6%
4.5%
5.2%
6.4%
0%
1%
2%
3%
4%
5%
6%
7%
-
1
2
3
4
5
6
7
2020 2021 2022 2023
% p.a.
Pence per Share
Dividend per share Dividend yield
Figure 3: Gross Asset Value history
341.5
441.0
738.2
1,072.5
980.3
0
500
1,000
2019 (IPO) 2020 2021 2022 2023
£ million
ORIT Net Asset Value Group Debt
8 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Key milestones during 2023
January 2023
Completed the acquisition of
a 50% stake in Woburn Road,
a 12MW/24MWh ready-to-
build battery storage project in
Bedfordshire, UK
February 2023
Refinanced and increased
the multi-currency RCF to
£270 .8m at an improved
margin of 2 .0%, extending
maturity to February 2026
March 2023
Secured a 10-year inflation-
linked fixed price PPA for
67MW Breach solar project
in the UK, Breach Solar
Farm, which is currently
under construction
July 2023
Agreed to invest in a new
development business,
focused on creating new
ground-mounted solar and
co-located battery assets
in the UK, with exclusive
development services from
BLC Energy Limited
(
“BLCe”
)
Post-year end
Completed the acquisition
of four newly-constructed
solar farms in Ireland totalling
199MW, referred to as the
Ballymacarney solar complex .
A fifth
(
extension
)
site called
Harlockstown is currently
under construction
June 2023
Appointment of Sarim Sheikh as
an Independent Non-Executive
Director of the Company with
effect from 1 June 2023
December 2023
Successful exit from option
to acquire 175MW of ready-
to-build solar projects in
Spain at above
holding value
April 2023
Invested into HYRO Energy Limited,
(
“HYRO”
)
a new joint venture
between ORIT, Sky
(
a private fund
managed by Octopus Energy
Generation
)
and renewable energy
company, RES, to develop green
hydrogen electrolysis projects
December 2023
Launch of a voluntary
Community Benefits Fund
around the two onshore
wind farms in Southwest
Finland, Saunamaa and
Suolakangas, to support the
local community
September 2023
Announcement of the Cumberhead
Wind Farm Community Benefits
Fund’s first-round awardees for
social initiatives in the Coalburn
and Lesmahagow areas
(
50% of the
Community Fund
)
. The Community
Fund is worth a total of £250,000
per year for 30 years
December 2023
HYRO developer platform secures a
CfD from the Department for Energy
Security and Net Zero for a 15MW
hydrogen electrolyser project
December 2023
Completed the sale of the
two wind farms in Poland to
an affiliate of the Polish-
based listed multi-energy
company, Orlen S .A .
2
5
8
3
4
10
9
1
6
7
11 12
9 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
x11
Total
number
of assets
16
37
Total
capacity
16
609
MW
Portfolio at a glance
Geographical overview
Onshore wind
Offshore wind
Solar
Battery
Developer
Assets under
construction
Exited
assets
Current portfolio
geographies
Geographies for
conditional acquisitions
Exited
geographies
16
Excludes: i) Polish wind assets which were sold during FY2023; ii) the Spanish solar assets, the option over which was terminated in FY2023; iii) the Irish solar
assets which were subject to conditional acquisition at 31 December 2023 and were acquired shortly after year end . Each developer investment is counted
as a single asset .
Portfolio at a glance
Geographical overview
10Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Portfolio at a glance
Portfolio overview
Technology Country Sites
Capacity
(
MW
)
17
Average asset
life remaining
(
years
)
Status Key information
Onshore
wind
Sweden 1 48 27. 5 Operational Corporate PPA
France 1 24 28.9 Operational French CfD
UK 1 50 29.2 Operational Corporate PPA
UK 1 23 27.5
Operational
Fixed pricing until end of 2025
Germany 1 35 28.7
Operational German CfD
Finland 2 71 27.8 Operational
Fixed pricing until end of 2025
Offshore
wind
UK 1 42
25.0
Operational ROC Subsidised
Solar
UK 8 123
24.4
Operational ROC Subsidised
UK 1
67
40.0
Construction
Expected to be operational
in Q2 2024
France 14 120
28.4
Operational FiT Subsidised
Ireland 4 199 40.0 Acquired post-year end
1st 4 assets operational since
Q42023
18
Ireland 11 42
40.0
Conditional Acquisition
Fifth site expected to be
operational in Q3 2024
Battery
UK
1 6 35.0 Construction
Expected to be operational
in Q1 2025
Developers
Ireland n/a n/a n/a Developer Floating offshore wind
UK n/a n/a n/a Development pipeline Onshore wind
UK n/a n/a n/a Developer Hydrogen
UK n/a n/a n/a
Exclusive development
services agreement
Solar/co-located battery storage
Finland n/a n/a n/a
Exclusive development
services agreement
Onshore wind/Solar
Acquired at construction stage
17
Pro-rated by ownership .
18
199MW of construction have been completed while under conditional acquisition status; ORIT has actively provided oversight of the construction .
11 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
19
The Woburn Road transaction was signed in June 2022 and completed in January 2023 .
Chair’s Statement
On behalf of the Board, I am pleased to present this annual report for
Octopus Renewables Infrastructure Trust plc for the year ended 31
December 2023
(
the “Annual Report”
)
.
2023 was another interesting year in both the energy markets and investment trust sector . Whilst the argument
for investing in renewable energy is more compelling than ever given the renewed spotlight on energy security,
affordability and the alignment to global efforts to combat climate change, we realise that the Company’s
share price over the year will have been disappointing to shareholders . Discounts to Net Asset Value have
continued to widen following the end of the year, and the Board is deeply aware of the need both to ensure
a sound approach to capital allocation and to manage the discount . To date the proceeds of asset disposals
have been used by the Company to reduce the level of short-term borrowings within the Group; with further
sales proceeds expected to be received during 2024, the Board will consider all options for further capital
allocation, including share buy-backs, depending on the prevailing market conditions at the time .
The difficult macroeconomic conditions which included falling power prices and a relatively
poor year for wind speeds in much of Europe have contributed to a more challenging year for
portfolio performance . Nevertheless, we believe that ORIT’s diversified portfolio, having a high
proportion of fixed price revenues in the near term and strong inflation linkage, showed relative
strength over the year . The Company has succeeded in delivering its target dividend for the year of
5 .79 pence per Ordinary Share and we have also announced an increase in the Company’s target dividend for
2024, marking the third consecutive year the Company has increased its dividend target in line with inflation .
In addition to the investment activities, we strengthened the Board of Directors through the recruitment of
Sarim Sheikh, an experienced renewables professional . We also re-designed and launched an improved website
that better serves our investors and other stakeholders, and also delivered a well-received, inaugural Capital
Markets Day in which we highlighted the Company’s strategic objectives and the strength and depth of our
team .
I have set out below some of our other notable achievements .
Investment Activity and Capital Recycling
During the year, the Company completed the acquisition of its 50% share in the 12MW/24MWh Woburn Road
battery storage construction project
19
, alongside another OEGEN-managed private fund, Sky . The Company
also added two exciting new UK-focussed development companies to the portfolio: a vehicle serviced by BLC
Energy
(
‘BLCe’
)
, which develops ground-mounted solar and co-located battery storage; and HYRO, a joint
venture between ORIT, Sky and the developer, RES, which will develop green electrolysis projects for industrial
hydrogen supply . These acquisitions now mean that developer investments represent 3 .6% of the Company’s
portfolio
(
on a total value of all investments basis
)
as at 31 December 2023 .
Philip Austin MBE – Chair, Octopus Renewables Infrastructure Trust plc
12 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Chair’s Statement
ORIT’s investment objective includes delivering an element of capital growth to investors, and successfully
managing assets through construction is one key way in which this growth can be achieved . However by early
2023, over 90% of ORIT’s portfolio was operational on a total value of all investments basis, and the Company
therefore commenced a strategic capital recycling programme . Releasing capital from operational assets will
allow the company to repay short-term debt and potentially reallocate capital to construction or development
stage investments, or other uses which could deliver greater NAV accretion compared to remaining invested
in a fully operational portfolio . In December the Company completed the sale of its two Polish onshore
wind farms totalling 59MW, delivering an IRR of approximately 30% over the lifetime of ORIT’s investment .
In addition, after having renegotiated the contingent acquisition of the four Spanish solar assets
(
totalling
175MW
)
in March 2023 to no longer having an obligation but, instead, an option to acquire the assets once
they reach ready-to-build status, ORIT made the strategic decision to terminate that option and negotiated a
termination payment from the vendor . Together, these transactions generated a 3 .1 pence per Ordinary share
NAV uplift demonstrating the robustness of the Company’s valuations and the continued demand for these
assets in the market . Further details are provided in the capital recycling programme section on page 29 . ORIT
is seeing good progress in other capital recycling activities which are expected to be completed during 2024 .
Revenue Management
We have continued to utilise Octopus Energy Generation’s expertise to fix revenues with high quality
counterparties at an appropriate level for the portfolio . Breach Solar Farm was acquired in 2022 without
any fixed revenue arrangement, but in January 2023 ORIT successfully entered into an inflation-linked PPA
with Iceland Foods to power c .14% of the electricity requirements of their total UK estate of c .1,000 stores .
The contract increased the portfolio’s overall fixed revenue percentage on a two-year look-forward basis by
3percentage points, and gave rise to a NAV uplift of 1 .9% compared to the merchant power price case . The
Iceland Foods PPA now sits alongside other corporate offtake arrangements in the portfolio with Owens
Corning
(
at Ljungbyholm wind farm
)
, Kimberley Clark
(
at Cumberhead wind farm
)
and Microsoft
(
at the
Ballymacarney solar complex
)
.
Construction
In Q1 2023 the Company completed the construction of the 50MW Cumberhead onshore wind farm, the
largest project in ORIT’s onshore wind portfolio . ORIT has also provided oversight of the construction of the
199MW, four-site Ballymacarney solar complex in Ireland, which became fully operational in 2023 and was
subsequently acquired in February 2024 . As at 31 December 2023, 73MW of capacity
(
by pro-rata ownership
)
was still in construction at the 67MW Breach solar farm and 12MW/24MWh
(
50% stake
)
Woburn Road battery
storage site . In addition to this, the Company is monitoring the construction of the 42MW Harlockstown
extension to the Ballymacarney solar complex in Ireland which is nearing completion, with this site expected
to be acquired in Q3 2024 following commencement of full operations .
Portfolio Performance
During 2023 the Company’s assets generated 1,110GWh of electricity, an increase of 10% compared with
the previous year, but 14% below budget . The generation increase in 2023, compared to 2022, was driven by
the contribution from the first full year of operations at Cerisou
(
France
)
and Crossdykes
(
UK
)
onshore wind
assets, in addition to the start of operations of Cumberhead wind farm which completed its construction
in March 2023 . This was offset by the reduced generation after the sale of the Polish wind assets, and the
fact that onshore wind generation was 20% below budget, largely due to low wind speeds . Production from
solar and offshore wind assets was roughly in line with expectations . Combined with the impact of declining
power prices, the lower wind speeds meant that as a whole the EBITDA for 2023 was 24% below budget . A full
breakdown of the portfolio’s performance is included on page 33 .
Results
During the year NAV fell from £618 .3 million
(
109 .4 pence per Ordinary share
)
to £599 .0 million
(
106 .0 pence
per Ordinary share
)
. However, in combination with the dividends paid during the year, the Company delivered
a NAV total return of 2 .1% . The decrease in NAV over the year was driven primarily by falling power price and
inflation forecasts, coupled with increases applied to discount rates . We have materially mitigated the impact of
power price reduction forecasts through building a portfolio with a high proportion of fixed power revenues
(
as
at 31December 2023, 81% of ORIT’s revenues for the two years to 31 December 2025 were fixed price in nature
)
.
1,110
GWh
electricity
generated
during 2023
13 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Total shareholder return for the year was -4 .4%, as share prices across the sector continued to fall against a
backdrop of high inflation and high interest rates – though we would highlight that the Company’s share price
maintained a narrower discount to NAV compared to most of its peers across the majority of the year .
The Company’s operating income for the year was £19 .7 million
(
inclusive of -£23 .0 million movement in fair
value of investments
)
, giving rise to a profit for the year of £12 .7 million . This was underpinned by EBITDA from
the portfolio of operational assets totalling £73 .8 million, arising from gross revenues of £117 .4 million .
Dividends
The Company made four dividend payments totalling 5 .79 pence per ordinary share for the financial year
to 31December 2023, meeting its FY 2023 dividend target in full and representing a 10 .5% increase on FY
2022’s dividend, in line with inflation . The dividend is fully covered by cashflows arising from the Company’s
portfolio of assets . As announced on 18 January 2024, and in line with the Company’s dividend policy, the
target for the financial year from 1 January 2024 to 31 December 2024 is 6 .02 pence per Ordinary Share . This
increase of 4 .0% over FY 2023’s dividend is in line with the increase to the Consumer Price Index
(
CPI
)
for the
12 months to 31 December 2023, and marks the third consecutive year the Company has chosen to increase its
dividend target in line with inflation . The FY 2024 dividend target is expected to be fully covered by cashflows
generated from the Company’s operating portfolio .
Impact highlights
In 2023, ORIT continued its commitment to its ESG & Impact Strategy, achieving a total portfolio impact of
366,400 tCO
2
e avoided, directly contributing to global climate change mitigation . Once the construction
projects mentioned earlier are complete, ORIT’s portfolio is expected to generate sufficient electricity to power
384,000 homes . This generation will avoid CO
2
emissions of approximately 400 kilo-tonnes per annum, the
equivalent of planting 2 million trees .
The year also saw ORIT allocate over £300,000 from its annual impact budget, supporting initiatives with
Impact Partners such as SUGi, the Good Bee Company, Earth Energy Education, and BizGive . This budget is in
addition to the c .£600,000 agreed as community benefit funds for some of ORIT’s assets . The impact budget
supported the delivery of a number of educational workshops, job programmes, forest plantings and more .
Outlook
Despite the market challenges experienced in the investment trust sector during 2023 which have persisted
into 2024, the fundamental driving forces behind clean energy investment are stronger than ever . The
successful exit of the Polish assets has shown that the Company’s valuations are robust, and if, as appears
likely, the interest rate cycle has neared its peak, we would expect the merits of investing in a high-quality,
diversified portfolio of renewable energy assets delivering attractive income to come to the fore once more .
Finally, at the end of 2023, ORIT announced its desire to explore a combination with Aquila European
Renewables plc . The Board and I believe that a larger, more liquid combined vehicle would benefit both sets
of shareholders and help address some of the continuing challenges in the investment trust sector . Whether
or not such a combination proceeds, we will continue to review the options available to the Company to best
enable it to deliver on our investment objective, mindful of the need to act in the interests of shareholders as
a whole .
Chair’s Statement
366,400
tCO
2
e
total avoided
during 2023
14 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Strategic Report
The Directors present the Strategic
Report for the year ended 31 December
2023 on pages 15 to 114 of the
Annual Report.
15 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Operating Model,
Objectives and KPIs
Structure and operating model
Key facets of the Company are as follows, which should be read
together with the structural representation in Figure 4 which follows .
Listed investment trust: Octopus Renewables Infrastructure Trust plc was incorporated on 11 October 2019 as
a public company limited by shares . The Company intends to carry on business as an investment trust within
the meaning of section 1158 of the Corporation Tax Act 2010 and was listed on the premium segment of the
main market of the London Stock Exchange on 10 December 2019 .
Return objective to shareholders: The Company’s investment objective is to provide 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 in Europe and Australia . Investment into the Ordinary Shares of the
Company is designed to be suitable for institutional investors and professionally advised private investors .
Such an investment may also be suitable for investors who are financially sophisticated, non-advised private
investors who are capable of evaluating the risks and merits of such an investment and who have sufficient
resources to bear any loss which may result from such an investment .
ORIT’s entities: The Company holds and manages its investments through a parent holding company, ORIT
Holdings II Limited and two holding company subsidiaries, ORIT Holdings Limited and ORIT UK Acquisitions
Limited
(
together the “intermediate holding companies”
)
, which in turn hold investments via a number of
Special Purpose Vehicles
(
“SPVs”
)
. The jurisdictions in which the SPVs are incorporated is typically determined
by the location of the assets, and further portfolio-level holding companies may be used to facilitate debt
financings or other commercial objectives .
Board of Directors: The Company has an independent board of non-executive directors, responsible for the
determination of the Company’s investment policy and strategy . It has overall responsibility for the Company’s
activities including the review of investment activity and performance and the control and supervision of the
Company’s service providers, and is also responsible for the final investment decisions .
Investment Manager: The Company has appointed Octopus AIF Management Limited
(
“OAIFM”
)
as its
Alternative Investment Fund Manager
(
“AIFM”
)
to provide portfolio and risk management services to the
Company . The AIFM has delegated the provision of portfolio management services to the Investment Manager,
Octopus Renewables Limited, whose trading name is Octopus Energy Generation
(
“OEGEN”
)
. OEGEN has day
to day portfolio management responsibilities . Further information on the Investment Manager is provided in
the Investment Manager’s Report .
Third-party providers: As an investment trust, the Company does not have any employees and is reliant on
its third-party service providers
(
‘Company Service Providers’ on Figure 4
)
for some of its operational and
service requirements . Likewise, the project company SPVs generally do not have any employees and services
to those entities
(
and, sometimes, the holding companies
)
are also provided through third-party providers .
Each service provider has an established track record and has in place suitable policies and procedures to
ensure they maintain high standards of business conduct and corporate governance .
Key dates: The Company has a 31 December financial year end and announces half-year results in September
and full-year results in March . The Company pays dividends quarterly, targeting payments in February, May,
August and November each year .
16Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Operating Model, Objectives and KPIs
Octopus Renewables
Infrastructure Trust plc,
Listed on the premium
segment of the Main Market
of the LSE
ORIT Holdings
Ltd
ORIT UK
Acquisitions Ltd
ORIT Holdings ll Ltd
Portfolio investments held in SPVs
21
Figure 4: Company structure and operating model
Shareholders
Non-UK SPVs UK SPVs
Company Service Providers
•
Broker: Peel Hunt
•
Fund Administrator and
Company Secretary: Apex Listed
Companies Services
•
Depository: BNP Paribas
•
Registrar: Computershare
•
Auditor: PwC
•
PR Advisor: Buchanan
•
Tax Advisor: BDO
•
Legal: Gowling WLG
Debt Providers
Revolving
Credit Facility
Debt Providers
Short-Term Facility
20
Asset level Debt
Asset Service
Providers
•
External Asset
Managers
•
Operations &
Maintenance
(
“O&M”
)
contractors
•
Engineering,
Procurement and
Construction
(
“EPC”
)
contractors
•
Specialist
consultants
Equity
Debt
Services
Key
Independent Board
of Non-Executive Directors
20
Repaid during the year .
21
Some investments in SPVs may be held indirectly through portfolio-level holding companies
AIFM
Octopus AIF Management
Investment Manager
Octopus Energy Generation
17Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Operating Model, Objectives and KPIs
Investment and asset management process
Figure 5 below outlines the broad process through which the Company typically acquires, manages and
(
potentially
)
exits Renewable Energy Assets .
Origination
Initial phase to identify and secure investment opportunities, involving comprehensive market research, deal
sourcing through industry connections, initial screening to assess potential investments, rigorous due diligence
to uncover risks and validate the investment’s viability, and finally, negotiation to agree on terms and secure
the investment
Investment
Structuring the investment to balance risk and return, including setting up financial vehicles like SPVs,
arranging financing, and optimising tax benefits, while aligning with the Company’s strategic goals and
regulatory requirements
Development – Construction
(
Optional
)
As part of its Investment Policy, ORIT can invest at the development or construction stage of the renewable
assets. This may include project planning, securing necessary permits, managing the construction process, and
ensuring the asset is built to specification and ready for operation
Asset Management & Value Creation
The Company manages operational assets to maximise performance and value. This involves operational
oversight, regular maintenance, and strategic initiatives to enhance efficiency and profitability and increase
the asset’s value over time. In addition, the Investment Manager looks to enhance revenue strategies through
appropriate PPA structuring and origination.
Ongoing Portfolio Optimisation and Capital Allocation
The Company evaluates its assets regularly, taking into account market conditions, asset performance,
operating cash flows and diversification across the portfolio. Where appropriate the Company may initiate
sales of certain assets as part of its capital recycling programme.
The Company considers capital management and allocation on an ongoing basis, including share buy-backs,
depending on the prevailing market conditions at the time
Figure 5: Investment and asset management process
18Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Operating Model, Objectives and KPIs
Objectives and KPIs
The Company’s objective is to provide 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 in
Europe and Australia .
Financial Objectives
22
Investors should note that references 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 .
23
The dividend and return targets stated 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 .
Objective KPI Performance commentary Monitoring activities
Sustainable level of
income returns
•
Provide investors
with a dividend
of 5.79 pence per
Ordinary Share for
FY23, generated
from operational
cashflows
5.79p
dividend declared for
the year per Ordinary
Share, in line with
target
19.21p
total dividends declared
per Ordinary Share
since inception
£73.8m
2023 EBITDA from
underlying operational
assets
1.18x
Operational dividend
cover
Since inception the Company
has declared a total dividend of
19.21 pence per Ordinary Share,
following a progressive dividend
policy
22
; each year fully covered
by operational cashflows.
The 2023 dividend of 5.79p
per Ordinary Share, a 10.5%
increase on the 2022 dividend in
line with CPI, was fully covered
by operational cashflows at
the SPV level less costs at the
plc and intermediate holding
company levels.
For FY 2024, the Company’s
dividend target is rising by 4.0%
(
in line with CPI
)
to 6.02 pence
per Ordinary Share.
22,23
EBITDA from operational assets
was 24% below budget with
the slight increased output
compared with the prior year
offset by declining power prices
across Europe.
The Board monitors dividend
cover and ratios at each
quarterly Board meeting
against the targets and
makes determinations on the
dividends to be paid.
The Investment Manager
actively manages operational
performance of assets on an
ongoing basis with actions
taken to resolve and mitigate
operational issues.
Financial performance of
assets is reviewed monthly by
the Investment Manager.
Operational and financial
performance is reviewed
quarterly by the Board.
Any material issues would
be highlighted to the Board
without delay.
19Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Operating Model, Objectives and KPIs
Financial Objectives
(
continued
)
Objective KPI Performance commentary Monitoring activities
Capital preservation
with element of
growth
•
Provide investors
with a net total
shareholder return
of 7% to 8% per
annum over the
medium to long-
term
•
Generated through
a diversified
portfolio including
construction and
development assets
•
Cost control and
prudent financial
management
106.0p
NAV per Ordinary Share
at 31 Dec 2023
6.7% total, 1.6%
annualised total
shareholder return
since IPO
-4.4% total shareholder
return in FY2023
28.6% total, 6.4%
annualised
NAV total return since
IPO
2.1% NAV total return in
the year
5 technologies
(
including hydrogen via
developer investment
)
6 countries across
Europe
24
3 new acquisitions
25
during FY 2023 across
battery storage and
developer investments,
and one post-year
end with completion
of the Ballymacarney
Irish solar complex
acquisition
50MW of new capacity
connected to the grid
(
Cumberhead
)
, plus
199MW of operational
Irish solar acquired post
year end.
3.1p per Ordinary share
NAV uplift from capital
recycling programme
activities
1.16%
Ongoing charges ratio
0.3%
Transaction costs as
percentage of NAV
Decrease in NAV driven by
falling power price and inflation
forecasts, and increases applied
to discount rates.
The acquisitions in the year
include ORIT’s first battery
storage project along with
two investments in developer
platforms including the first
in hydrogen projects through
the HYRO platform, increasing
the diversification of ORIT’s
portfolio.
In the year ORIT initiated its
capital recycling programme
with the sale of its two onshore
wind farms in Poland and
opted to terminate its option
to acquire the solar projects in
Spain.
Minor increase in the ongoing
charges ratio to 1.16%
(
FY 2022:
1.12%
)
, however the result is
better than expected figure of
1.18% as published in the latest
KID.
Transaction costs incurred on
acquisitions and sales in the
year were below expectations
at 0.3%, compared to the latest
KID indication of 0.5%.
The Board monitors both
the NAV and share price
performance and compares
with other similar investment
trusts. A review of performance
is undertaken at each quarterly
Board meeting and the reasons
for relative under and over
performance against various
comparators is discussed. The
Investment Manager evaluates
and selects investment
opportunities to deliver against
the investment strategy and
policy. Company level budgets
are approved annually by the
Board and actual spend is
reviewed quarterly. Transaction
budgets are approved by the
Board and potential abort
exposure is carefully monitored.
24
Including Ireland acquisition post-year end .
25
Battery storage project (Woburn Road) transaction was signed in 2022 and completed in 2023 .
20Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Operating Model, Objectives and KPIs
Further information on our ESG & Impact Strategy and performance against our Impact Objectives can be found in the ESG &
Impact section of this Strategic Report from page 65 and the Company’s ESG & Impact Strategy published on our website here
www.octopusrenewablesinfrastructure.com/investors/
Impact Objectives
Our core impact objective is to accelerate the transition to net zero
through our investments, building and operating a diversified
portfolio of Renewable Energy Assets to help facilitate the transition
to a more sustainable future . Our investments are long-term and
therefore require a long-term view to be taken both in the initial
investment decisions and in the subsequent asset management,
adopting long-term and sustainable business practices .
26
Amount shown is the total value of all investments, which excludes the amount committed to assets which have subsequently been sold, and also includes
the impact of valuation movements since commitment
27
Metric calculated based on an estimated annual production of the construction portfolio once fully constructed (including the Irish solar sites acquired post
year end) .
28
Metrics based on an estimated annual production of the whole portfolio once fully constructed . Carbon avoided is calculated using the International
Financial Institution’s approach for harmonised GHG accounting .
29
100% of investments are significantly contributing to climate change mitigation .
30
RIDDOR stands for the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013 and these are reportable incidents to the UK Health
and Safety Executive .
Objective KPI
Performance:
Build and operate a diversified
portfolio of Renewable Energy Assets,
mitigating the risk of losses through
robust governance structures, rigorous
due diligence, risk analysis and asset
optimisation activities to deliver
investment return resilience
£1,127 million committed into renewables
26
1,569GWh of potential annual renewable energy generation, 105GWh
of which will be additional generation from constructing assets
27
37 assets
Financial return metrics are shown in the Financial Objectives table
Planet:
Consider environmental factors to
mitigate risks associated with the
construction and operation of assets,
enhancing environmental potential
where possible
400k tCO
2
e avoided
28
55.47 tCO
2
e per MW estimated carbon intensity
(
direct and indirect
)
3.74 tCO
2
e/£m weighted average carbon intensity
553t worth of carbon purchased in Pending Issuance Units
100% investments qualify as sustainable in line with EU Taxonomy
29
93% generating sites on renewable import tariffs
People:
Evaluate social considerations to
mitigate risks and promote a ‘Just
Transition’ to clean energy
0 RIDDORs or equivalent relating to injuries on people
30
7,827 students benefitting from social initiatives
>£600,000 per year of community benefit funds
>£300,000 impact budget in 2023
21 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Investment Strategy
and Policy
Investment Strategy
The Company will seek to achieve its objectives in four ways:
Diversification: The Company’s Investment Policy includes a broad mandate to invest across different
renewable technologies and in different geographies, reducing concentration of risk in particular to power
markets, regulatory change or weather conditions as well as allowing the Company to access investments
from a large set of opportunities originated by the Investment Manager .
Inclusion of construction and development: The Company has a diversified portfolio of operational assets,
which generate income, supporting the Company’s dividend . Also investing into Renewable Energy Assets
at the construction ready stage allows the opportunity for greater capital growth through the successful
management of construction risks and delivery of the asset into operations, as well as increasing the ability
to influence social and environmental benefits . Investments into development stage Renewable Energy
Assets are limited to 5% of GAV and allows the Company access to a wider range of renewable energy asset
investment opportunities .
Active construction and asset management: The Company, via the Investment Manager, takes an active
role in ensuring site safety, in managing construction risks and in seeking to enhance the value of the portfolio
through maximising generation, optimising the price received for generation, dynamic risk management and
controlling costs as well as longer term value enhancements such as equipment upgrades or life extension .
Embedding impact into investments: As an Impact Fund the Company ensures that social and environmental
benefits are considered and maximised alongside financial returns, both at the time of initial investment and
throughout the ongoing management of the portfolio .
Ballymacarney solar complex
22Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Strategy and Policy
Investment Policy
The Company will seek to achieve its investment objective through
investment in renewable energy assets in Europe and Australia,
comprising
(
i
)
predominantly assets which generate electricity from
renewable energy sources, with a particular focus on onshore and
offshore wind farms and photovoltaic solar
(
“solar PV”
)
parks, and
(
ii
)
non-generation renewable energy related assets and businesses
(
together “Renewable Energy Assets”
)
.
The Company may invest in operational, in-construction, construction ready or development Renewable
Energy Assets . In-construction or construction ready Renewable Energy Assets are assets that have in place the
required grid access rights, land consents, planning and regulatory consents . Development Renewable Energy
Assets comprise projects that do not yet have in place the required grid access rights, land consents, planning
and regulatory consents, as well as investments into development pipelines and developers
(
“Development
Renewable Energy Assets”
)
.
The Company intends to invest both in a geographically and technologically diversified spread of Renewable
Energy Assets and, over the long-term, it is expected that investments:
(
i
)
located in the UK will represent less
than 50 per cent . of the total value of all investments,
(
ii
)
in any single country other than the UK will represent
no more than 40 per cent . of the total value of all investments,
(
iii
)
in onshore or offshore wind farms will
not exceed 60 per cent . of the total value of all investments, and
(
iv
)
in solar PV parks will not exceed 60 per
cent . of the total value of all investments . For the purposes of this paragraph, investments shall
(
i
)
be valued
on an unlevered basis,
(
ii
)
include amounts committed but not yet incurred and
(
iii
)
include Cash and Cash
Equivalents to the extent not already included in the value of investments or amounts committed but not yet
incurred .
The Company may acquire a mix of controlling and non-controlling interests in Renewable Energy Assets
and may use a range of investment instruments in the pursuit of its investment objective, including but not
limited to equity and debt investments . A controlling interest is one where the Company’s equity interest in the
Renewable Energy Asset is in excess of 50 per cent .
In circumstances where the Company does not hold a controlling interest in the relevant investment, the
Company will secure its shareholder rights through contractual and other arrangements, to, inter alia, ensure
that the Renewable Energy Asset is operated and managed in a manner that is consistent with the Company’s
investment policy .
Investments may be made into Development Renewable Energy Assets, which may be developers, portfolios
and/or pipelines of Development Renewable Energy Assets, where the relevant investment:
(
i
)
includes
limited exposure to Renewable Energy Assets outside Europe and Australia, which at the time of investment
comprises both a minority of the assets in the relevant developer, portfolio or pipeline by number and value
and is less than 1 per cent . of Gross Asset Value, and/or
(
ii
)
may include indirect exposure to ancillary assets
and/or businesses unrelated to renewable energy whose value is de minimis as at the time of investment . The
Company may retain an interest in any such assets and/or businesses following achievement of construction
ready status .
Investment Restrictions
The Company aims to achieve diversification principally through investing in a range of portfolio assets across
a number of distinct geographies and a mix of wind, solar and other technologies .
The Company will observe the following investment restrictions when making investments:
•
the Company may invest up to 32 .5 per cent . of Gross Asset Value in one single asset, up to 27 .5 per cent .
of Gross Asset Value in a second single asset, and the Company’s investment in any other single asset
shall not exceed 20 per cent . of Gross Asset Value, in each case calculated immediately following each
investment .
23Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Strategy and Policy
•
the Company’s portfolio will comprise no fewer than ten Renewable Energy Assets .
•
no more than 20 per cent . of Gross Asset Value, calculated immediately following each investment, will
be invested in Renewable Energy Assets which are not onshore or offshore wind farms and solar PV parks .
•
no more than 25 per cent . of Gross Asset Value, calculated immediately following each investment, will
be invested in assets in relation to which the Company does not have a controlling interest .
•
no more than 5 per cent . of Gross Asset Value, calculated immediately following each investment, will be
invested in Development Renewable Energy Assets .
•
the Company will not invest in other UK listed closed-ended investment companies .
•
neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in the
context of the Group as a whole; and
•
no investments will be made in fossil fuel assets .
Compliance with the above restrictions will be measured at the time of investment and non-compliance
resulting from changes in the price or value of assets following investment will not be considered as a breach
of the investment restrictions .
In addition to the above investment restrictions, following the Company becoming fully invested and
substantially fully geared
(
meaning for this purpose borrowings by way of long-term structural debt of 35
per cent . of Gross Asset Value
)
at the time of an investment or entry into an agreement with an Offtaker,
the aggregate value of the Company’s investments in Renewable Energy Assets under contract to any single
Offtaker will not exceed 40 per cent . of Gross Asset Value .
The Company will hold its investments through one or more special purpose vehicles owned in whole or in
part by the Company either directly or indirectly which will be used as the project company for the acquisition
and holding of a Renewable Energy Asset
(
an “SPV”
)
and the investment restrictions will be applied on a look-
through basis .
For the purposes of the investment policy, “Gross Asset Value” means the aggregate of
(
i
)
the fair value of
the Company’s underlying investments
(
whether or not subsidiaries
)
, valued on an unlevered basis,
(
ii
)
the
Company’s proportionate share of the cash balances and cash equivalents of assets and non-subsidiary
companies in which the Company holds an interest and
(
iii
)
other relevant assets and liabilities of the Company
(
including cash
)
valued at fair value
(
other than third-party borrowings
)
to the extent not included in
(
i
)
or
(
ii
)
above .
Borrowing Policy
The Company may make use of long-term limited recourse debt to facilitate the acquisition or construction
of Renewable Energy Assets to provide leverage for those specific investments . The Company may also take
on long-term structural debt provided that at the time of drawing down
(
or acquiring
)
any new long-term
structural debt
(
including limited recourse debt
)
, total long-term structural debt will not exceed 40 per cent . of
Gross Asset Value immediately following drawing down
(
or acquiring
)
such debt . For the avoidance of doubt, in
calculating gearing, no account will be taken of any investment in Renewable Energy Assets that are made by
the Company by way of a debt investment .
In addition, the Company may make use of short-term debt, such as a revolving credit facility, to assist with the
acquisition or construction of suitable opportunities as and when they become available . Such short-term debt
will be subject to a separate gearing limit so as not to exceed 25 per cent . of Gross Asset Value immediately
following drawing down
(
or acquiring
)
any such short-term debt .
The Company may employ gearing at the level of an SPV, any intermediate subsidiary of the Company or
the Company itself, and the limits on total long-term structural debt and short-term debt shall apply on a
consolidated basis across the Company, the SPVs and any such intermediate holding entities
(
but will not count
any intra-Group debt
)
.
24Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Strategy and Policy
In circumstances where these aforementioned limits are exceeded as a result of gearing of one or more
Renewable Energy Assets in which the Company has a non-controlling interest, the borrowing restrictions will
not be deemed to be breached . However, in such circumstances, the matter will be brought to the attention of
the Board who will determine the appropriate course of action .
Currency and Hedging Policy
The Company can enter into hedging transactions for the purpose of efficient portfolio management . In
particular, the Company may engage in currency, inflation, interest rates, electricity prices and commodity
prices
(
including, but not limited to, steel and gas
)
hedging . Any such hedging transactions will not be
undertaken for speculative purposes .
Cash Management
The Company may hold cash on deposit and may invest in cash equivalent investments, which may include
short-term investments in money market type funds
(
“Cash and Cash Equivalents”
)
.
There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold and there
may be times when it is appropriate for the Company to have a significant Cash and Cash Equivalents position .
For the avoidance of doubt, the restrictions set out above in relation to investing in UK listed closed-ended
investment companies do not apply to money market type funds .
Changes to and Compliance with the Investment Policy
Any material changes to the Company’s investment policy set out above will require the approval of
shareholders by way of an ordinary resolution at a general meeting and the approval of the FCA .
In the event of a breach of the investment guidelines and the investment restrictions set out above, the AIFM
shall inform the Board upon becoming aware of the same and if the Board considers the breach to be material,
notifiation will be made to a Regulatory Information Service .
25 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Investment Manager’s Report
Investment Manager: Octopus Energy Generation.
Octopus Energy Generation
(
trading name of Octopus Renewables
Limited
)
, part of the Octopus Energy Group, is a specialist clean energy
investment manager with a mission to accelerate the transition to a
future powered by renewable energy .
£6.7bn
OEGEN
AUM as at
31 December
2023
31
19
countries
invested in
since 2010
31
£2.7bn
Solar & wind
construction
31
>3.7GW
capacity
managed
>135
Renewable Energy
Professionals
31
Assets under management defined as the sum of Gross Asset Value and capital committed to existing investments and signed (yet to be completed)
deals and excludes capital available, yet to be deployed . Number of countries includes countries of assets under management, countries in which asset
investments have been exited, countries of head offices of developer company investments, and countries of presence for OEGEN origination teams . Solar
& wind construction defined as total committed costs of assets either currently in construction or constructed under OEGEN management . Some of these
assets are now operational within the portfolio .
26Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
This year has seen the team perform well in the face
of challenging market conditions. Construction
projects have either reached completion or are making
significant progress, and an attractive PPA was secured
at Breach solar farm, boosting the proportion of fixed
revenue in the portfolio. In ad dition, we have expanded
into new technologies through our inaugural investment
into battery storage as well as via a small investment
into hydrogen through the HYRO development platform.
We also made a strategic decision to opt out of the
conditional solar acquisition option in Spain, in line with
ORIT’s capital allocation strategy.
Chris Gaydon
Investment Director
20+ years of experience
Chris joined Octopus Energy Generation as an investment
director in 2015 and is a long-standing member of the
OEGEN’s Investment Committee and Leadership Team which
has led the growth in OEGEN’s fund management business .
Having previously led OEGEN’s Investment Team, Chris now
focuses on the origination of acquisition opportunities and
fundraising, as well as strategic investments in related sectors .
Prior to joining the Octopus Group, Chris was a business
development director at Falck Renewables where he had
a range of roles, including in M&A and leading greenfield
development in France and Poland . Chris holds a Bachelor of
Commerce
(
Finance
)
degree and a Bachelor of Engineering
(
Chemical
)
degree from the University of Sydney .
David Bird
Investment Director
15+ years of experience
David is an investment director who joined the Octopus
Energy Generation team in 2014 and works full-time on fund
management for ORIT . As well as working in the transaction
team leading acquisitions and project finance debt raising
in the UK, France and Ireland, David has previously led the
team responsible for the management of OEGEN’s bioenergy
investments and has represented Octopus Energy Generation
on a number of industry panels convened by Ofgem, the GB
energy regulator .
Prior to joining the Octopus Group, David was a director at
Walbrook Capital, a boutique investment manager with a
particular focus on renewables . He is a chartered accountant
having qualified at EY, and holds a Masters in Mathematics
from Oxford University .
This year marked the initiation of ORIT’s capital recycling
programme and it is gratifying to witness the successful
conclusion of the programme’s first disposal in the
sale of the two wind farms in Poland. The transaction
demonstrated the market’s interest in ORIT’s assets,
corroborated our conservative valuations, and proved
our ability to add value through the construction process.
The majority of the proceeds from this sale enabled us to
pay off short-term debt. We look forward to reporting
further results from the capital recycling programme in
due course.
At the end of 2023 ORIT also announced to the market
its ambition to drive a combination with Aquila European
Renewables plc, which we believe would be an attractive
proposition for investors.
Fund Managers
27 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Company Developments in 2023
Investments and capital recycling programme
3
Investments made during
the year
32
Completion of Irish solar
assets acquisition post-year
end
£7m
Total allocated capital to
new investments
(
includes future
commitments
)
£1,127m
Total value of all
investments
£97m
Total proceeds from
capital recycling
initiatives during the year
Acquisitions
12MW/24MWh
Woburn Road, ready to
build battery storage in the
UK
50% stake
1st battery project
investment
HYRO JV
platform
UK hydrogen developer
platform
25% stake
1st hydrogen investment
Developer
platform serviced
by BLCe
UK solar and co-located
batteries
100% stake
199MW Irish Solar
Post-year end acquisition of
four newly constructed
solar sites near Dublin
100% stake
Divestments
+2.8
p
ence per
Ordinary Share
NAV uplift
Sale of two operational
Polish wind farms
(
59MW
)
+0.3
p
ence per
Ordinary Share
NAV uplift
Exit of Spanish solar
projects option
(
175MW
)
Further capital
recycling projects
ongoing
Repaid short-term
facility
Debt management
39% leverage
(
as % of GAV
)
As at 31-Dec 2023,
vs 42% 31-Dec 2022
RCF refinancing
Increased size to £270 .8m
and extended maturity to
February 2026, reduced
margin to 2%
32
Includes the investment into the battery storage asset Woburn Road which closed within the year in January 2023, with the initial commitment having been
made during 2022 .
28 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Revenue management
Signing of Breach solar
PPA with Iceland Foods
1 .9% NAV uplift vs merchant power
price case
Forecast £55 million in fixed price
revenues
33
across the 10-year tenor
of the PPA, increasing the fixed
proportion of forecast revenues
from the group’s operational assets
on a 2-year look-forward basis by 3
percentage points
Start of Cumberhead
wind PPA with Kimberly
Clark
Offtake agreement is forecast to
generate £75 million of fixed price
revenues across the 10-year tenor of
the PPA
Hedging of UK solar
revenues
PPA with Total Energies for 5 years
forecast to generate £14 .8 million
fixed revenues, and fixed price CfD for
3years generating £11 .2 million fixed
revenues .
Together these increase the proportion
of fixed forecast revenues from the
group’s operating assets on a 2-year
look-forward basis by 4percentage
points .
Construction
50MW
Construction completed at
Cumberhead wind farm
199MW
Construction completed at
Ballymacarney Irish solar
complex, under ORIT’s
oversight
73MW
73MW in construction
in portfolio
(
pro-rata by
ownership
)
42MW
Construction of the fifth
site at the Ballymacarney
solar complex is underway .
The site will be acquired
once operational
Impact highlights
£300,000
Impact budget
£600,000
Funding for local
communities for specific
projects
33
This figure and the equivalent figure for the Cumberhead CPPA are calculated based on P50 production, the fixed price and inflation assumptions .
29Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Capital recycling programme
As announced in 2023, ORIT launched a capital recycling programme
through which the Company intends to sell a number of assets . Recycling
assets in this way also allows the Company to react to changing market
conditions, for example rising debt costs
(
because ORIT can use proceeds
to pay down short-term debt
)
, and gives the Company further options
for capital allocation .
The assets included in the recycling programme have been selected such that the portfolio remains balanced,
and in order that the Company is able to deliver on its objectives . Whilst the recycling programme is ongoing,
ORIT has completed the following components:
Sale of Polish wind assets
In December 2023 ORIT completed the sale of the
Krzecin and Kuslin wind farms
(
totalling 59MW
)
in
Poland to an affiliate of the Polish-based listed multi-
energy company, Orlen S .A ., realising net proceeds
of approximately £92 million
(
7% of Total value of all
Investments at 30 September 2023
)
— a 21% premium
over the holding value of the assets at the time of sale .
The sale resulted in a +2 .8 pence per Ordinary Share
uplift over the holding NAV prior to the disposal and the
realisation of an IRR of around 30% over the lifetime of
ORIT’s investment . ORIT acquired these assets when
they were in the construction phase in October 2021,
before managing the construction and bringing the
wind farms into operation in 2022 . The exit of these
assets at a NAV-accretive value demonstrates ORIT’s
ability to add value through managing construction
risk, and also underlines the Company’s conservative
valuation approach .
Exit of Spanish solar projects
ORIT elected to terminate its option to acquire 175MW
of ready-to-build solar projects in Spain . Agreements
were signed in December 2023, but cash delivery from
the counterparty completed in January 2024 .
We had originally entered into a conditional acquisition
agreement over the sites in 2020 . However, having
reassessed the projects on a risk-adjusted basis and
taking into account the Company’s approach to
capital allocation, exiting the option at a value above
the holding value was a more attractive proposition
than committing to the construction . In doing so, ORIT
realised a net gain of £3 .0 million over the €2 .0 million
(
c .£1 .7 million
)
initial deposit, or approximately £1 .5
million over the £3 .2 million holding valuation prior to
exit .
Further initiatives of the capital recycling programme
remain in progress and are expected to conclude in
2024 .
+2.8 pence
per Ordinary
Share NAV
uplift
vs holding value
at 30 Sep 2023
c.30% IRR
over the lifetime
of ORIT’s
investment
+0.3 pence per
Ordinary
Share NAV
uplift
vs holding value
at 30 Sep 2023
+0.5 pence per
Ordinary
Share total
NAV uplift
over lifetime of
investment
Kuslin wind farm
30Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Portfolio Breakdown
(
as at 31 December 2023, including construction assets
)
The Company’s portfolio of assets and are not segmented by technology, phase or jurisdiction for the
Company’s reporting purposes .
Technology Country Site name
Whole site
capacity
(
MW
)
Phase
Start of
operations
Remaining
asset life
(
years
)
Stake %
Onshore wind
UK Cumberhead 50 Construction 31/03/2023 29 100%
France Cerisou 24 Operational 15/11/2022 29 100%
Sweden Ljungbyholm 48
Operational 30/06/2021
27 100%
Finland
Saunamaa 34
Operational 28/08/2021 28 100%
Suolokangas 38
Operational 29/12/2021 28 100%
Germany Leeskow 35 Operational 30/09/2022 29 100%
UK Crossdykes 46 Operational 30/06/2021 27 51%
Offshore wind
UK Lincs 270 Operational 31/10/2013 25
15 .5%
Solar
UK
Wilburton 2
(
Mingay
)
19 Operational 29/03/2014 20 100%
Abbots Ripton 25 Operational 28/03/2014 30 100%
Ermine Street 32 Operational 29/07/2014 21 100%
Penhale 4 Operational 08/03/2013 29 100%
Chisbon 12 Operational 03/05/2015
27 100%
Westerfield 13 Operational 25/03/2015
21 100%
Wiggin Hill 11 Operational 10/03/2015
16 100%
Ottringham 6 Operational 07/08/2013
31 100%
Breach 67 Construction -
40 100%
France
Charleval 6 Operational 26/03/2013
29
100%
Cuges 7 Operational 17/04/2013
29
100%
Istres 8 Operational 18/06/2013
29
100%
La Verdière 6 Operational 27/06/2013
29
100%
Brignoles 5 Operational 26/06/2013
29 100%
Saint Antonin du Var 8 Operational 28/11/2013
30 100%
Chalmoux 10 Operational 01/08/2013
30 100%
lovi 1 6 Operational 17/07/2014
31 100%
lovi 3 6 Operational 17/07/2014
31 100%
Fontienne 10 Operational 02/07/2015
31 100%
Ollieres 1 12 Operational 19/03/2015
31 100%
Ollieres 2 11 Operational 19/03/2015
31 100%
Arsac 2 12 Operational 05/03/2015
18 100%
Arsac 5 12 Operational 30/01/2015
18 100%
Ireland
Ballymacarney
34
54 Acquired post year-end 18/12/2023
40 100%
Fidorfe
34
68 Acquired post year-end 18/12/2023
40 100%
Muckerstown
34
48 Acquired post year-end 18/12/2023
40 100%
Kilsallaghan
34
29 Acquired post year-end 18/12/2023
40 100%
Harlockstown 42 Conditional acquisition -
40 100%
Battery
UK
Woburn Road 12 Construction - 35 50%
Developer
UK
(
HQ
)
Wind 2 - Developer -
- 25%
UK
(
HQ
)
HYRO - Developer -
- 25%
Ireland
(
HQ
)
Simply Blue - Developer -
- 19%
Finland
(
HQ
)
Norgen - Developer -
- 50%
UK
(
HQ
)
BLCe serviced platform - Developer -
- 100%
34
Note that these four sites are sometimes (in this report and elsewhere) collectively referred to as ‘the Ballymacarney solar complex’ . The start of operations
dates for these sites relates to the full commercial operations date, including completion of technical test etc . However, electricity production started in May
2023 (initially small volumes, before ramp-up) and revenues have been generated for the benefit of ORIT since this time through the commissioning phase .
31 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Portfolio Breakdown
(
as at 31 December 2023, including construction assets
)
35
Portfolio composition on a total value of all investments basis (including the amount committed to the conditional acquisition of the Irish solar assets) in line
with the Company’s investment policy as at 31 December 2023 . The investments are valued on an unlevered basis and including amounts committed but
not yet incurred . Sum may not add up due to rounding .
Operational: 92%
(
34% from assets acquired
at construction
)
Construction: 6%
Developer: 4%
Asset phase
Operational: 88%
Construction: 12%
Asset phase
UK: 40%
Ireland: 17%
France: 16%
Finland: 11%
Germany: 6%
Sweden: 6%
Developer: 4%
Country
UK: 51%
France: 24%
Finland: 12%
Sweden: 8%
Germany: 6%
Country
Solar: 44%
Onshore wind: 39%
Offshore wind 13%
Developer: 4%
Battery storage: 0.2%
Technology
Solar: 51%
Onhore wind: 41%
Offshore wind 7%
Battery storage: 3%
Technology
310MW/
509
MW
Across 23 solar plants/
across 27 solar plants
including 4 Irish solar farms
251MW
Across 7 onshore
wind farms
42MW
Across 1 offshore
wind farm
6MW
Across 1 battery
storage plant
5
Investments in
Developers
Figure 6: Portfolio composition broken down by total value of all investments in accordance
with the Company’s investment policy
(
including the amounts committed to the conditional
acquisitions of the Irish solar PV.
35
£1,127m
Total value of all
investments
Figure 7: Portfolio composition broken down by MW of capacity pro rata for ORIT’s ownership
(
including the capacity of construction assets
)
on a current invested basis as at 31 December
2023
(
and therefore exclude the Irish solar assets under conditional acquisition at year end
and the Polish wind assets which were sold during FY 2023
)
.
609MW
Capacity owned
32Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Portfolio performance
Operational portfolio technical and financial performance
This section reports on the performance of the Company’s underlying operational investments and
Figure 8 shows the metrics which form part of the Alternative Performance Measures.
For the financial year ending 31 December 2023, the Company’s operational portfolio generated 1,110GWh
of electricity
(
2022: 1,005GWh
)
, -14% vs budget
(
-175GWh
)
, largely due to grid curtailments and lower wind
speeds which impacted performance across the onshore wind assets .
Revenues of £117 .4 million were achieved in the year
(
2022: £112 .0m
)
, -16% vs budget, as the benefit of our
increased output compared to 2022, was offset by declining power prices across Europe . Opex of £43 .6
million
(
2022: £35 .7m
)
was incurred in the year, 1% adverse to budget . The resulting total EBITDA, across ORIT’s
operational portfolio, was £73 .8 million
(
2022: £76 .3m
)
, -24% vs budget .
2023 was the first full operational year for the onshore wind assets Cerisou in France
(
24MW
)
, for which ORIT
managed the construction, and Crossdykes in the UK
(
23MW pro-rata for ORIT’s stake
)
, which ORIT acquired
in November 2022 . Cumberhead in the UK completed construction works and became fully operational from
31 March 2023 . The two Polish assets which were sold during the year to 31 December 2023 had a locked box
date for the transaction of 30 June 2023 .
On 1 February 2024, we successfully completed the acquisition of four newly constructed solar farms located
in Ireland and the pre-commissioning net revenues, arising in 2023, have been secured for the benefit of ORIT .
The performance of these assets includes production and revenues generated since May 2023 during the
commissioning phase .
Including the performance from the Irish solar sites related to FY 2023, the portfolio generated 1,224GWh
during 2023, with revenues of £127 .2 million and EBITDA of £82 .3 million .
Cerisou wind farm
33Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Output Revenue Opex EBITDA
Offshore wind
£17.0m
-2% vs budget
(
2022: £7 .1m
)
£22.4m
6% adverse to
budget
(
2022: £19 .9m
)
£39.5m
+2% vs budget
(
2022: £27 .0m
)
152GWh
-1% vs budget
(
2022: 148GWh
)
Onshore wind
£30.7m
-42% vs budget
(
2022: £43 .8m
)
£12.0m
4% favourable to
budget
(
2022: £7 .5 m
)
£42.7m
-34% vs budget
(
2022: £51 .3m
)
682GWh
-20% vs budget
(
2022: 565GWh
)
Solar
(
excluding
Irish portfolio
)
£26.0m
-2% vs budget
(
2022: £25 .4m
)
£9.2m
3% adverse to
budget
(
2022: £8 .3m
)
£35.2m
-2% vs budget
(
2022: £33 .7m
)
275GWh
-1% vs budget
(
2022: 292GWh
)
Operational
portfolio incl .
post-year end
acquisition of
Irish solar
£82.3m
+11% vs above
(
£8.5
million
)
+9% vs 2022
£44.9m
3% increase vs
above
(
£1.3 million
)
26% increase vs
2022
£127.2m
+8% vs above
(
£9.8 million
)
+14% vs 2022
1,224GWh
+10% vs above
(
115GWh
)
+22% vs 2022
Operational
portfolio
£73.8m
-24% vs budget
-3% vs 2022
(
2022: £76 .3m
)
£43.6m
1% adverse to
budget
22% increase
vs 2022
(
2022: £35 .7m
)
£117.4 m
-16% vs budget
+5% vs 2022
(
2022: £112 .0m
)
1,110GWh
-14% vs budget
+10% vs 2022
(
2022: 1,005GWh
)
Figure 8: Performance of Company’s underlying operational investments
Note: Totals may not add up due to rounding
34Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Solar
The operational solar portfolio
(
22 sites across the UK and France
36
)
generated 275GWh during 2023, -1% vs
budget
(
-3GWh
)
. Higher than expected irradiance
(
+12GWh
)
across both portfolios was offset by marginal
production losses due to site efficiency across the entire portfolio
(
-5GWh
)
, as well as outages of -10GWh, of
which -8GWh
(
80% of lost production due to outages
)
was due to a fire at one site in France, Saint-Antonin-du-
Var
(
“SADV”
)
. The overwhelming majority of the revenue losses in 2023 due to the SADV fire are expected to
be recovered from insurance . Excluding the impact of the SADV fire, the adjusted production of the portfolio
would be 1% above budget
(
+5GWh
)
.
The solar portfolio generated revenues of £35 .2 million for 2023, -2% vs budget
(
£0 .8 million
)
. 23% of the
variance to budget was due to under production
(
£0 .2 million
)
, the remaining 77% was due to movement in
energy prices in the UK portfolio
(
£0 .6 million
)
which is exposed to merchant prices
(
the French solar portfolio
benefits from 100% fixed revenues under feed-in-tariffs
)
. Revenues arising under fixed price contracts
represented 84% of total revenue from the UK and French solar portfolios for the year .
The portfolio realised an EBITDA of £26 .0 million, -2% vs budget
(
£0 .5 million
)
as a consequence of lower
revenues, offset by savings on opex of 3%
(
£0 .3 million
)
in the French portfolio due to lower than expected
O&M and utilities costs . Total opex amounted to £9 .2 million .
Irradiance
278
12 -8
-7
275
Budget Other production
losses
SADV fire Actual
Figure 9: 2023 solar output variance to budget
(
GWh
)
Breach solar farm
36
Excluding Irish assets .
35 Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Onshore wind
In 2023, ORIT’s onshore wind portfolio
(
9 sites across 6 countries in Europe, including the Polish assets for the
first 6 months to 30 June 2023
37
)
generated 682GWh of renewable electricity, -20%
(
170 GWh
)
vs budget .
This underperformance can be primarily attributed to lower than projected wind speeds
(
48% of the budget
variance, 81GWh
)
, with other main contributors being externally imposed site curtailments due to negative
pricing periods or transmission grid constraints,
(
26% of the variance, 45GWh
)
and slower than expected post-
construction ramp-up at Cumberhead wind farm
(
15% of the variance, 26GWh
)
.
The projects benefit from various compensation schemes which protect the portfolio from exposure to
externally imposed curtailments and from performance falling below the contracted thresholds under their
turbine, operating and maintenance agreements . The portfolio received compensation for 51GWh of lost
production, of which 20GWh has been received in the year with the remainder yet to be paid . This results in an
adjusted production for the year of 734GWh
(
+8% vs actual production, -14% vs budget
)
.
The 50MW Cumberhead wind farm became operational mid-way through the year . We had budgeted
production for 2023 to be 98GWh, whereas actual production was 59GWh . Of the 39GWh shortfall, 26GWh
(
67%
)
can be attributed to the slower than expected ramp-up time for the site to reach full operational capacity,
compensation against these production losses are under negotiation with the turbine supplier . Since November
2023, Cumberhead is part of the National Grid Balancing Mechanism scheme, and received compensation
towards 4GWh
(
11%
)
of curtailed production . The remaining 13GWh
(
33%
)
variance to the budgeted production
was due to the low wind speeds experienced .
Other main contributors to the reduced portfolio generation were the sites in Finland and Germany, which
suffered forced curtailment due to negative pricing periods, resulting in a loss of 33GWh of production . This
risk has been actively managed by ORIT, securing compensation that is expected to recover the equivalent
of 27GWh .
The portfolio generated a total revenue of £42 .7 million for 2023, -34% vs budget
(
£22 .4 million
)
. Lower
than expected production accounted for 61%
(
£13 .7 million
)
of the revenue decrease . A decrease in average
power prices vs budget in the Nordic region accounted for the remaining 39%
(
£8 .8 million
)
with £8 .2 million
attributable to Ljungbyholm, Sweden . Across France, Germany, Poland, and the UK, the average power prices
achieved were in line with, or higher than, budget after accounting for revenues received for forced curtailment .
The portfolio realised an EBITDA of £30 .7 million, -42% vs budget
(
£22 .0 million
)
, as a consequence of the
lower revenues achieved by the portfolio . Overall opex amounted to £12 .0 million, 4% favourable to budget
(
£0 .4 million underspend
)
.
Budget Other
production
losses
Grid / systems
constraints
Wind
speed
Cumberhead
ramp-up
delay
Actual Compensated
Actual
Compensated
other
Compensated
grid
852
-26
-44
-81
682
39
13
734
-19
Figure 10: 2023 onshore wind output variance to budget
(
GWh
)
Investment Manager’s Report
37
The two Polish assets which were sold during the year to 31 December 2023 had a locked box date for the transaction of 30 June 2023 .
36Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Offshore wind
The offshore wind portfolio
(
made up in entirety by ORIT’s 15 .5% stake of the Lincs asset
)
, produced 152GWh in
2023, -1% vs budget
(
-2GWh
)
. Favourable wind conditions
(
+2GWh
)
, were offset by lower availability due to a
number of generator repairs being required
(
-3GWh
)
.
Lincs generated revenues of £39 .5 million, +2% vs budget
(
£0 .9 million
)
. This was due to higher than budgeted
average pricing across the various income streams
(
£1 .2 million
)
, being partially offset by the lower production
(
£0 .3 million
)
.
EBITDA for 2023 totalled £17 .0 million, -2% vs budget
(
£0 .3 million
)
, due to additional Opex offsetting the
revenue increase . Opex was £22 .4 million, 6% adverse to budget
(
£1 .2 million
)
, driven by increased O&M spend
in the year .
Budget Turbine availabilityWind speed
Actual
154
2
-3
152
Figure 11: 2023 offshore wind output variance to budget
Lincs offshore wind farm
37Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Asset management
Octopus Energy Generation actively manages the assets and follows a
proactive approach of identifying and mitigating risks to secure long-
term performance of its growing and increasingly diverse global portfolio
of renewable energy assets .
Case studies: 2023 solar asset management initiatives to deliver and
manage global growth and standardisation:
Breach solar farm
Scalable
global asset
management
standards
Development of standards and best practices
to ensure consistent high standards of safety,
asset performance, regulatory compliance .
Example: During 2023, OEGEN solar asset
management team worked in partnership with Quintas
Energy on ORIT UK solar portfolio to develop the
Octopus Solar Standards
(
“OSS”
)
platform, a scalable
platform for managing risk and deploying strategy
on global renewable energy portfolios and assuring
the best overall return on investment for investors .
The platform has been successfully implemented on
the UK fleet and OEGEN is running a pilot project in
2024 for the French portfolio alongside WPO
(
the asset
manager
)
.
Health,
safety and
wellbeing
Ensuring health, safety & wellbeing is one
of OEGEN’s key values . This is achieved by
promoting a positive safety culture through
collaboration, sharing best practices and
implementing robust processes from
tracking of information to mitigating risk and
investigating incidents .
Example: OEGEN hosted a H&S best practice full day
seminar where all core counterparties on ORIT’s solar
portfolio
(
operations and asset managers
)
attended
an in-person workshop focused on knowledge sharing
and building a safety culture alongside their peers from
other OEGEN-managed assets . The nine counterparties
who attended covered OEGEN’s operations in solar
across Europe as well as the UK . The workshop was
successful in sharing best practices and identifying key
areas for improvement with following on workstreams
taking place to help tackle industry challenges such
as skills shortages in renewables . This event has been
considered as the first of its kind and was highly rated
by all the participants .
38Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Smart
management
of maturing
assets
Maintaining performance of the portfolio
as it matures following a conservative and
systematic approach consisting of a bespoke
component risk strategy and standardisation
solution for revamping . OEGEN carefully
evaluates considerations between deferring
capital expenditure for as long as feasible and
implementing technical solutions to revamp
the fleet in due course . Expertise covers
component risk assessment, asset health
monitoring, contingency planning, strategic
spares management and engineering
capabilities .
Example: Following a small fire at Saint-Antonin-
du-Var where degradation of the back of the panels
had occurred, OEGEN negotiated replacement of the
entire site’s panels and installation of these from the
manufacturer . The new panels will not only resolve the
historic degradation but also increase the installed
capacity by 10% .
Supply chain
resilience
Development of standards and best practices
to ensure consistent high standards of safety,
asset performance, regulatory compliance .
Example: The Investment Manager team has been
proactively managing the supply chain risk across
ORIT’s UK solar portfolio and is the first player in the
market to have set up centralised spare parts platform
with incomparable levels of optimisation alongside RES .
RES is responsible for storing in a centralised warehouse
an agreed stock of critical components
(
not included as
part of the on-site spare parts
)
regularly required to be
replaced and usually only available on long-lead times .
The components are dispatched to site within 48 hours
of order placement . This initiative has been estimated
to have saved c .£400k in 2023 through avoiding
interruption to operations .
Opportunistic
improvements
Invest opportunistically in technical or
commercial solutions that could boost
the performance of the assets above the
base case . The focus remains firmly on
mitigating downside risks and opportunistic
improvements will be pursued only where
there is a compelling business case, and any
downside risks can be effectively mitigated .
Example: The Investment Manager conducted a
technical programme across ORIT’s French solar
portfolio to improve grid reliability with a new
technology implemented between the site and the grid
operator to allow rapid communication and instant
disconnections, which is expected to result in a slight
cost reduction for the portfolio .
Breach solar farm
39Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Construction and development portfolio
Alongside operational assets investments that drive predictable cashflows
and support the dividend, ORIT values investments in construction and
development assets in order to actively participate in increasing the
supply of renewable energy generation portion, drive a cleaner future
and deliver opportunities for capital growth for investors .
Construction ORIT was set up with the ability to invest in assets at the construction phase, leveraging the
specialist skills and track record of the Investment Manager in this area .
Investing into construction creates the opportunity to deliver Net Asset Value growth from the
reduction in discount rate which comes through successfully managing construction risks . If
managed well, it costs less to acquire a ready-to-build project and fund the construction costs
than it does to acquire a fully operational project .
Investing at the construction stage also delivers greater positive impact, as new clean generation
capacity is added to the power network .
Construction
achievements
As at 31 December 2023, ORIT has invested in 7 assets at construction of which 5 have been
completed
(
including the Polish wind farms exited during the year
)
representing 181MW and
resulting in a £14 .8 million uplift to Net Asset Value since inception .
Additionally, ORIT committed to 5 solar assets in construction in Ireland, subject to the sites
becoming operational . The first four sites, totalling 199MW, were completed and brought into
operation during 2023 with ORIT acquiring them post year end . The fifth additional site is under
construction and expected to become operational and be acquired by ORIT later this year . The
Investment Manager has actively provided oversight of the construction across these sites .
The key achievement during the year was the completion the completion of the Cumberhead wind
farm construction of 50MW, the largest onshore windfarm asset of ORIT’s portfolio delivering a
NAV uplift from December 2022 of +2 .3 pence per Ordinary Share . See case study page 41 .
181MW
constructed
199MW
construction
oversight
Cumberhead wind farm
40Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Status
Technology
Country Site name
Capacity
(
MW,
pro-rata for
ORIT ownership
)
Date of
acquisition
Date of
operations
Operational Onshore wind Sweden Ljungbyholm 48 Mar-2020 Jun-2021
Operational Onshore wind France Cerisou 24 Oct-2020 Nov-2022
Operational Onshore wind UK
Cumberhead 50
Sep-2021 Mar-2023
Exited Onshore wind Poland
Krzecin 19 Oct-2021 Feb-2022
Exited Onshore wind Poland
Kuslin 40 Oct-2021 Dec-2022
Construction Solar UK Breach 67 Jun-2022
Expected
Q2 2024
Construction Battery Storage UK Woburn Road 6 Jan-2023
Expected
Q1 2025
Operational,
acquired post-
year end
Sol
ar Ireland Ballymacarney
54 n.a.
Dec-2023
38
Operational,
acquired post-
year end
Sol
ar Ireland Kilsallaghan
29 n.a. Dec-2023
38
Operational,
acquired post-
year end
Sol
ar Ireland Muckerstown
48 n.a. Dec-2023
38
Operational,
acquired post-
year end
Sol
ar Ireland Fidorfe
68 n.a. Dec-2023
38
Construction,
acquired post-
year end
Sol
ar Ireland Harlockstown 42 n.a.
Expected
Q3 2024
Figure 12: Assets invested in, or conditionally committed to, at construction stage
38
Note that these four sites are sometimes (in this report and elsewhere) collectively referred to as ‘the Ballymacarney solar complex’ . Sites passed all of their
final technical compliance requirements in December 2023, but started exporting electricity from May 2023 .
41Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Construction case study: Cumberhead wind farm
ORIT successfully built the largest onshore windfarm of its portfolio,
which operates on a subsidy-free basis, having secured a PPA with a
trusted partner, and adds a genuine impact to the community through
its community benefits fund .
The 50MW, 12-turbine Cumberhead wind farm provides an example of ORIT delivering a state-of-the-art
renewable energy asset . The project engages actively and extensively with the local community, bringing
tangible benefit to people in its vicinity, and through a PPA with Kimberley-Clark it is helping a large corporate
organisation to decarbonise its manufacturing activities . The wind farm provides a high quality model for
further deployment of subsidy-free, onshore wind which does not rely on huge economies of scale for financial
viability .
Cumberhead produces clean energy equivalent to the usage of over 69,000 homes and runs a £250,000 per
year community benefits fund which will remain in place for the lifetime of the asset, equivalent to a total
£7 .5 million of funding to support an estimated 100+ community initiatives .
The project is sited in one of the best areas of Scotland for wind resource - some turbines benefit from
average wind speeds in excess of 9m/s – and has been exporting electricity since March 2023 . ORIT acquired
Cumberhead as a ready-to-build project in September 2021, before managing its construction, and the
project is the largest onshore wind site in the Company’s portfolio, representing 20% of its total onshore wind
capacity at 31 December 2023 .
Figure 13: Key features of Cumberhead wind farm
12 Turbines 12 turbines with
a total power capacity of
50MW.
The site will generate 187GWh of average annual
electricity, powering over
69,000 homes.
Approx. 45ha of land has been removed from forest activity.
A compensatory planting scheme of the equivalent area has been
sourced within Buccleuch Estates, and implemented to replace all
lost with the Scottish Forestry and Local Authority Planning Dept.
History of the site
Cumberhead has been a commercial forest since the 1970’s.
There were some limited areas of open cast mining in the
1980’s-1990, as well as evidence of sheep farming prior to the
afforestation, and includes a section of dismantled railway from
the old Caledonian Railway from Douglas to Glenbuck.
Wetland insects:
Dragonfly
Damselfly
The Cumberhead Development Site
has an area of approx.
745.5 hectares (ha).
The project is expected to
offset
approx. 60kt of
CO
2
per year.
Elevations
Across the site vary considerably with the highest elevations of
491m above ordnance datum (AOD) at the summit of Meikle Auchinstilloch
in the southwest of the site, and the Law in the centre of the site at 419m
AOD, and dipping to circa 260m along parts of the access track.
The Cumberhead windfarm is
predominantly within the
Cumberhead Forestry
Complex,
a commercial plantation.
Turbine blades are
66.6m long with a
133m rotor
Turbines have an
operational life
of 30 years
Average site wind
speed of 8.5 m/s
at hub height
Watercourses
These small streams are
tributaries to a larger river
that flows into the River Clyde.
Ecological monitoring and
mitigation measures
have taken place
throughout the
construction
phase to ensure
that earth moving
activities have not negatively
impacted the habitats and
resident species of aquatic life
native to the waters such
as brown trout.
Tree species managed within the forest include: Sitka Spruce, Norway Spruce, Lodgepole Pine & Broadleaf (various)
Animals in the forest include:
Red Fox, Badgers, Red Deer, Roe
Deer, Grey Squirrel, Field Voles,
Otter, Bats – Common Pipistrel
and Soprano Pipistrel.
Forest birds include: Peregrine,
Merlin, Short Eared Owl,
Golden Plover, Hen Harrier,
Red Grouse, Black Grouse,
Ravens, Jays, Buzzards, Crossbill,
Snipe, Meadow Pippet and Skylark.
Hub heights are 83m
and 110m for T4 and T8
all above ground level
SUBSTATION
42Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Construction portfolio
As at 31 December 2023, the portfolio contained 73MW
(
pro-rata by
ownership stake
)
of in-construction projects, and another conditionally-
acquired 42MW in Ireland remains in construction
(
the fifth ‘add-on’ solar
site to the Ballymacarney solar complex
)
.
A summary of the construction progress is set out below:
Breach solar
(
67MW
)
: The on-site construction phase of the solar farm was successfully completed by
October 2023, and the site is now only awaiting its connection to the National Grid substation . National Grid
has been delayed and the outage date to allow the connection works has been pushed back to April 2024 .
Delays to grid connections at the hands of network operators are not uncommon, and whilst frustrating in
that connection will be later than forecast, the project will not be required to pay any penalties under the
corporate PPA due to the construction contingency time that was factored into the offtake agreement .
Woburn Road battery storage
(
12MW/24MWh, with ORIT owning a 50% stake
)
: This project is owned
50/50 alongside Sky, another OEGEN-managed fund . To date ORIT has invested c .£0 .4 million . ORIT has
entered into an agreement with Sky whereby Sky is covering the entirety of the construction costs c .£11million
until such time that ORIT elects to catch up . In the event that ORIT opts not to do so, then ORIT’s stake would
transfer to Sky .
Whilst the majority of on-site work has yet to commence, the construction phase has seen significant
progress, with the signing of construction contracts for the battery supply and installation, balance of plant
and connection works, as well as the O&M contract . These contracts were put in place in parallel with the
development of a battery ESG procurement policy at OEGEN level see page 68 for further details .
Harlockstown solar
(
42MW
)
: Near the four-site 199MW Ballymacarney solar complex in Ireland
(
which
became operational in 2023
)
, a fifth ‘add-on’ site of 42MW
(
Harlockstown
)
is currently under construction .
Under a similar arrangement to the first four sites, ORIT will acquire this project once it becomes fully
operational, which is currently expected to occur during Q3 2024 .
Cumberhead opening event
43Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Developers portfolio
Investments in developers offer future opportunities at construction-
ready stage for ORIT to invest in and support professionals who are
actively contributing to creating new capacity for clean energy sources .
Investing in developers provides valuable optionality for future expansion .
ORIT will have preferential access to fund construction-ready sites arising
from these development pipelines .
As at 31 December 2023, ORIT’s portfolio of developer investments comprises five companies – representing
4% of total value of all investments – with a combined pipeline of 33GW of renewable energy generation
projects .
Developer
investments
overview
•
19% stake
•
Floating
offshore
wind
•
UK and
Europe
ORIT first invested in Simply Blue in August 2021 for a c.12% stake, with later increases of
its stake to 15.5% and then 19% through follow-on investments. ORIT invested alongside
Sky
(
a private fund managed by Octopus Energy Generation
)
through a joint venture.
In 2023, Simply Blue achieved a number of significant milestones in a challenging year
for the global offshore wind market, which has met headwinds from increased capex
and financing costs and resulting slowdown in development activity. In particular, Simply
Blue received marine consent for its Erebus project in Wales, secured a development
partnership with EDF for its Irish projects, and secured Orsted as development partner for
Salamander project in Scotland.
•
25% stake
•
Onshore
wind
•
UK
In December 2021, ORIT agreed to provide up to £10 million in development funding for 9
newly formed joint venture onshore wind farms for which Wind2 is providing development
services. ORIT’s investment was through a joint venture with Sky
(
see above
)
.
In 2023, the Wind2 team made good progress in the development of the projects. As at
the end of 2023, the projects under development totalled c. 900MW, with four projects at
pre-application stage, three in pre-scoping stage, and one having submitted its planning
application.
•
100%
stake
•
Solar and
battery
storage
•
UK
ORIT entered into a development services agreement with BLC Energy to fund up to £2m
for the development of solar and battery storage projects in the UK, through a vehicle
called Trio Power Limited.
In 2023, the BLC Energy team originated c.500MW pipeline, of which c.100MW has heads
of terms signed and grid applications submitted.
•
50% stake
•
Solar and
onshore
wind
•
Finland
In April 2022, ORIT co-invested with Sky
(
see above
)
through a joint venture.
The Norgen development team had a successful 2023, bringing seven new projects
into the approved development pipeline, including three solar projects totalling 428MW
and four onshore wind projects totalling 237MW. This is in addition to the two projects
acquired under exclusivity terms during the initial transaction. The committed funding
has now all been allocated to projects and Norgen is working through the various stages of
development to bring these projects to ready-to-build stage.
•
25% stake
•
Green
hydrogen
production
•
UK
ORIT agreed to invest up to £5 million into HYRO Energy Limited
(
“HYRO”
)
, a JV between
ORIT and Sky
(
see above
)
and the global developer company, RES. HYRO has been
established to develop green electrolysis projects in England, Scotland and Wales for
industrial offtake/consumption, and one project has secured a government-backed CfD.
44Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Commentary ORIT’s position and opportunity
Clean energy
transition:
broad picture
Despite the current macroeconomic environment
(
see below
)
, there is deep opportunity for
investment in the clean energy transition.
Russia’s invasion of Ukraine put a spotlight on
energy security and has accelerated investment:
USD 659bn
39
was invested in renewable power
generation globally in 2023, 11% higher in real
terms than 2022, and 27% higher than 2021. To
reach net zero by 2050, the International Energy
Agency estimates that clean energy investment
- including in grids, energy efficiency and other
sectors alongside power generation - needs to
increase from USD 1.8tn in 2023 to USD 4.5tn per
year by 2030. Tailwinds are strong and gathering
momentum: COP28 saw a pledge signed by 118
countries to triple renewables by 2030, and as a
general rule public and political support is present
across geographies.
ORIT is very well placed to capitalise on the
investment and impact opportunity, given
its broad mandate across technologies and
geographies, including ability to invest in pre-
construction assets and developers in order to
capture value across the entire life cycle and to
contribute new renewable capacity. OEGEN as
its manager has extensive links into numerous
markets as well as a deep pool of expertise in its
team.
Macro-
economic
environment
We are still in a world of elevated interest rates
and high inflation, following the post-pandemic
rising demand and the supply impact caused
by Russia/Ukraine and other global events. This
has hampered fund raising for listed investment
funds, but transactions in the renewable energy
sector have continued to take place. These include
the recent completion of three very large recent
solar deals: Schroders Greencoat-managed funds’
purchase of the c.500MW Toucan Energy UK solar
portfolio, plus Lightsource bp’s sales of a 294MW
Italian portfolio and a 247MW UK portfolio. Pricing
has been consistent with holding valuations, or
even in excess of expectations, as ORIT has been
able to demonstrate first hand through its sales of
the Polish wind assets at a significant premium to
holding value.
For construction projects, the macroeconomic
conditions have not been helpful
(
causing high
capex and supply chain difficulties
)
, and some
developers may have been holding back projects
in order to wait for more opportune times to sell.
There has still been a flow of projects coming to
market, however, and this can be expected to
expand as conditions improve further.
Like our peers, higher discount rates have put
downward pressure on ORIT’s NAV, and high
interest rates have driven share prices to trade
at discounts to NAV. High inflation is a double-
edged sword: it is broadly a benefit to ORIT given
our relatively high proportion of inflation-linked
revenues, although it has – and will – also feed
into higher construction costs for future projects.
ORIT’s forecast inflation-linked revenues on a
10-year look forward basis have remained high:
51% as at 31December 2023
(
vs 53% as at 31
December 2022
)
. Breach solar farm’s inflation-
linked CPPA contributed positively to this metric,
partially offsetting the sale of the Kuslin and
Krzecin Polish onshore wind farms which has
meant that the projects’ inflation-linked CfD
revenues no longer contribute to the portfolio’s
inflation-linked revenues.
Overall we expect the supply of ready-to-build
projects to increase as governments seek to
accelerate permitting and grid connection
processes, and developers are required to sell
projects to generate cash to fund future pipeline.
Market outlook
39
Source: From the International Energy Agency report here https://www.iea.org/reports/world-energy-investment-2023/overview-and-key-findings
45Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Commentary ORIT’s position and opportunity
Outlook in
the UK
The general picture for investing in the energy
transition in the UK remains favourable,
notwithstanding some challenges and
uncertainty as a general election approaches.
After a disappointing 2023 CfD auction
(
no
offshore wind bids
)
owing to pricing parameters
which failed to account for inflation in equipment
and construction costs, the UK government
responded with a more feasible set of initial
parameters for the 2024 round which were met
favourably by the industry. It remains to be seen
whether the detailed budget allocation allows
sufficient new projects to come forward.
Whilst grid backlogs remain, concerted pressure
from across industry resulted in an announcement
in the government’s Autumn Statement outlining
an action plan that aims to release many gigawatts
of capacity from the connections queue and cut
average connections delays from five years to six
months. This should flow through into allowing
more projects to reach ready-to-build status.
Further measures have been announced as part of
the 2024 Spring Budget.
The same Autumn Statement also removed the
45% Electricity Generator Levy for new projects,
and was seen favourably by the industry in
contrast to Rishi Sunak’s announcement earlier
in the year which watered-down several net zero
policies.
In March 2024 the UK Government launched a
second consultation on its Review of Electricity
Market Arrangements, which includes proposals
to split the national electricity market into a
number of different price zones, similar to existing
arrangements in the Nordic markets.
The UK is ORIT’s largest single market
(
40% of
total value of all investments at 31 December
2023
)
, and OEGEN is an experienced manager
across all technologies here. ORIT has also proven
that it is not reliant on the CfD mechanism
or other revenue support schemes, and has
demonstrated its ability to source corporate PPAs
which can provide long-term revenue certainty.
In the event of market design changes being
implemented in the longer term
(
for example
locational zonal pricing
)
, ORIT is well placed: its
manager OEGEN has successfully navigated
policy and market changes many times before,
and has deep insight
(
especially through the
wider Octopus Energy group
)
regarding the latest
thinking amongst policy and decision makers.
ORIT’s focus on diversification reduces the risk
associated with any one country’s regulatory
changes.
Outlook in
Europe
Europe benefits from the same climate-related
tailwinds as the UK, albeit with a range of levels of
policy and regulatory support across jurisdictions.
There is widespread development activity across
Europe and there will continue to be volumes
of new projects to invest in, across various
technologies.
As in the UK, cost increases and in some cases
regulatory delays have increased the time expected
for offshore wind projects, particularly floating, to
reach ready to build stage. A number of strategic
investors, particularly those from oil and gas
backgrounds, have refocused their business plans to
reduce the level of investment in green technologies.
ORIT and its manager hold deep experience in
numerous European energy markets
(
in Europe
outside of the UK, ORIT has investments in
five countries, and OEGEN in 12
)
. ORIT is well
positioned to invest in assets across the value
chain, as well as in more developers who are
exploiting opportunities in these markets.
Offshore wind remains a key technology in the
energy system of the future, and floating turbines
will be required to meet deployment targets.
ORIT will be able to consider providing additional
working capital to developers to the extent
necessary.
46Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Commentary ORIT’s position and opportunity
Power prices
and green
certificates
Electricity prices at the front end of the forward
curves
(
the next 2-3 years
)
have trended down
across 2023 – to illustrate, see Figures 14 and 15,
showing day-ahead and forward prices in the
markets where ORIT has merchant exposure over
this time. This decline is a result of very high gas
storage levels following a warm 2022/23 winter,
coupled with drops in industrial gas and electricity
consumption and a French nuclear fleet whose
availability is much improved relative to its
performance across 2022.
Across 2023, European power demand fell by 3%
as a result of the success of demand reduction
strategies as well as industrial response to high
retail prices. Of particular note is Germany, where
demand fell 5% year-on-year, driven by the
demand reductions from its industrial sector.
As a result of the above, followed by the mild end
to the year, gas storage levels stood at record
levels going into 2024, ensuring a bearish end
to the year for the European power market.
Geopolitical events in the Middle East continue to
pose a supply risk to the market, but the fact that
the start of the conflict had such a limited impact
on power prices evidences the healthy position in
which the market ended 2023.
Prices for the short-medium term future are still
expected to remain well above the long-term
(
pre-Russia and pre-Covid
)
historic average,
mainly due to i
)
the dependence on international
Liquified Natural Gas
(
LNG
)
, the price of which
rose sharply following sanctions on imports from
Russia; ii
)
delays to the deployment of offshore
wind, and iii
)
a significant amount of price support
arising from demand growth from expanding
electrification
(
cars, heating and industry
)
towards 2030.
During Q1 2024 near term power prices on forward
markets continued to fall, which is expected to
put downard pressure on valuations.
Figure 16 presents the Company’s forecast
revenues, categorised by price structure, through
to 2050.
ORIT has a high proportion of fixed revenues
(
81%
for the two years up to 31 December 2025
)
so is
well protected from near- and medium-term
price falls in forward curves and advisor price
forecasts. We take an active approach to revenue
risk management and will continue to do so as
the portfolio evolves. Fixed subsidies are a large
contributor, but we also look to secure fixed PPAs
for power sales. In FY 2023, the Breach PPA that
was signed increased the portfolio’s overall fixed
revenue percentage on a two-year look-forward
basis by 3 percentage points.
The portfolio’s exposure to wholesale power prices
is limited due to fixed price PPAs
(
with corporate
and utility offtakers
)
which the Investment
Manager has originated, as well as government-
backed subsidies across the UK, France and
Germany.
As at 31 December 2023, all of ORIT’s fixed
revenues are fixed on a pay-as-produced basis,
meaning that unlike as is required for baseload
hedges, ORIT is not exposed to the risk of having
to buy power on the market at expensive prices
to top up the solar or wind generation profile to a
baseload shape.
As at 31 December 2023, 50% of the portfolio’s
value is derived from fixed price revenues, and
50% is from variable price revenues. As can be
seen in Figure 16, the portfolio’s variable revenues
are concentrated in the medium and longer term
forecast, meaning that movement in wholesale
power price forecasts will have a more muted
impact on portfolio-level NPV than would be the
case if variable revenues were distributed evenly
across the modelled horizon.
Compared to 12 months prior, the proportion
of ORIT’s forecast fixed price revenues on a
24-month look forward basis has increased from
68% to 81%. Key to this has been the Investment
Manager’s continued proactivity with securing
hedges for a number of its assets, including a
10-year, inflation-linked corporate PPA secured
for the Breach solar farm. Other factors which
have increased this metric include 5-year PPAs
secured for three of ORIT’s UK solar farms, 3-year
PPAs secured for another three of ORIT’s UK solar
farms, as well as the drop in wholesale electricity
price forecasts across the year. The successful
sale of the Kuslin and Krzecin Polish onshore wind
farms decreased ORIT’s forecast fixed revenues
deriving from subsidies.
The proportion of ORIT’s forecast variable
revenues increases in the medium-long-term
as subsidies and PPAs expire
(
noting that we will
continue to actively hedge our variable power
revenues
)
. In the late 2020s, ORIT’s merchant
exposure derives primarily from GB and Finland,
while into the 2030s and 2040s, GB is the market
to which ORIT is most exposed.
47Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
0
20
40
60
80
100
120
140
160
January
February
March
April
May
June
July
August
S
eptember
October
November
December
EUR/MWh
SE
4
FI
GB
Figure 14: 2023 Day-Ahead Prices
41
40
ORIT announced it is seeking to combine with Aquila European Renewables plc (“AERI”), through a scheme of reconstruction under which AERI would be
liquidated and AERI shareholders would receive new shares in ORIT in exchange for their AERI shares . ORIT’s Board believes there is a strong rationale for
the transaction for both sets of shareholders . There can be no certainty that engagement will progress, that heads of terms will be agreed or whether the
proposed combination will take place .
41
Sources: N2EX, Nordpool .
Commentary ORIT’s position and opportunity
Investment
Trust
landscape
Share price discounts to NAV across the
investment trust world have remained wide, in
parallel with base interest rates
(
and gilt yields
)
remaining high. Across the renewables investment
trust sector, discounts to NAV of 10-25% have
been pervasive throughout 2023, and these have
widened since the end of the year. Fundraising has
therefore not been possible, and this will remain
the case until interest rates have fallen and share
prices return to levels higher than NAV: something
which could take until the end of 2024 or longer.
In the meantime, we expect to see more asset
sales as a means to recycle capital
(
the Company
sold its Polish wind assets in 2023, see page29
)
,
and others have also embarked on a similar
strategy this year. There is also the possibility
of consolidation amongst funds if the market
capitalisation of smaller funds continues to fall.
ORIT’s discount to NAV has stayed consistently
shallower than most of its peers, throughout the
year. We have been proactive in asset recycling
and we also announced at the end of 2023
a carefully-considered strategic proposal to
combine with Aquila European Renewables plc
40
.
48Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
£/MWh
GB Electricity Forwards Prices
GB: 31-Dec-22 GB: 31-Mar-23
EUR/MWh
Sweden (SE4) Electricity Forwards Prices
01-Jan-23
01-Apr-23
01-Jul-23
01-Oct-23
01-Jan-23
01-Apr-23
01-Jul-23
01-Oct-23
01-Jan-24
01-Apr-24
01-Jul-24
01-Oct-24
01-Jan-25
01-Apr-25
01-Jul-25
01-Oct-25
01-Jan-26
01-Apr-26
01-Jul-26
01-Oct-26
01-Jan-27
0
20
40
60
80
100
120
140
160
180
200
220
240
SE4: 31-Dec-22 SE4: 31-Mar-23
GB: 30-Jun-23
GB: 30-Sep-23 GB: 31-Dec-23 GB: 29-Feb-24
0
20
40
60
80
100
120
140
160
180
200
SE4: 30-Jun-23 SE4: 30-Sep-23
SE4: 31-Dec-23 SE4: 29-Feb-24
01-Jan-24
01-Apr-24
01-Jul-24
01-Oct-24
01-Jan-25
01-Apr-25
01-Jul-25
01-Oct-25
01-Jan-26
01-Apr-26
01-Jul-26
01-Oct-26
01-Jan-27
EUR/MWh
Finland Electricity Forwards Prices
01-Jan-23
01-Apr-23
01-Jul-23
01-Oct-23
FI: 31-Dec-22 FI: 31-Mar-23
0
20
40
60
80
100
120
140
160
FI: 30-Jun-23
FI: 30-Sep-23
FI: 31-Dec-23 FI: 29-Feb-24
01-Jan-24
01-Apr-24
01-Jul-24
01-Oct-24
01-Jan-25
01-Apr-25
01-Jul-25
01-Oct-25
01-Jan-26
01-Apr-26
01-Jul-26
01-Oct-26
01-Jan-27
Figure 15: Electricity Forwards Prices
42
42
Sources: ICIS, Nordpool .
49Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
0%
20%
40%
60%
80%
100%
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Fixed - Subsidy Fixed - Power Variable - Other Variable - Power
Figure 16: Fixed vs variable revenue forecast
(
as at 31 December 2023
)
43
0%
20%
40%
60%
80%
100%
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
UK RPI UK CPI French L Factor Fixed Price - unindexed Merchant
Figure 17: Inflation-linked revenue forecast
(
as at 31 December 2023
)
0
20
40
60
80
GBP millions
140
120
100
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Fixed – Subsidy Fixed - Power Variable – Other Variable – Power – GB
Variable – Power – Sweden Variable – Power – Germany Variable – Power – Finland
Variable – Power – France
43
Fixed price revenues derive from either subsidies, such as ROCs (“Fixed – subsidy”) or from power prices fixed under PPAs (“Fixed – Power”) . Variable revenues
derive from merchant or uncontracted power revenues (“Variable – power”) or from other sources of variable revenue, such as the ROC recycle (“Variable
– other”) .
50Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Activity
MW
pro-rata
for ORIT’s
stake Key information
H1
2023
H2
2023
H1
2024
H2
2024
H1
2025
Investments
Woburn Road 6MW 12MW/24MWh site
Harlockstown
(Ballymacarney)
42MW Long-term PPA
HYRO n.a. Developer
(
hydrogen
)
BLCe n.a.
Developer
(
solar/
co-located battery
)
Construction
Cumberland 50MW Corporate PPA
Breach 67MW 10y fixed CPPA
Woburn Road 6MW 12MW/24MWh site
Ballymacarney
(
first 4 sites
)
199MW Long-term PPA
Harlockstown
(
Ballymacarney
)
42MW Long-term PPA
Capital
recycling
programme
Polish wind sale 59MW 2 onshore wind sites
Spanish solar option
termination
175MW 175MW, construction
Further capital
recycling
Confidential, in
progress
Reinvestment of
proceeds
Short-term debt
repayment and other
capital allocation
opportunities
Report date
31 December 2023
Timeline of current key activities
51Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Counterparty risk
The Investment Manager monitors this risk closely and carries out qualitative
and quantitative due diligence on counterparties before they are appointed
and, where possible, seeks to obtain extensive warranty protection on all
contracts . Exposure to counterparties is reviewed by the Investment
Manager on a quarterly basis . Figure 18 below illustrates the Company’s
exposure to offtakers and O&M providers as at 31 December 2023 .
As detailed on page 87, reliance on third-party counterparties is a principal risk to the Company . In the current
economic climate, there is an increased risk associated with service providers defaulting on contractual
obligations or suffering an insolvency event, and this can impact the performance of the portfolio of assets
and ultimately the Company .
Offtaker by total value
of all investments
44
EDF: 25%
Microsoft: 17%
British Gas: 13%
Esti Energi: 11%
Npower/Axpo: 7%
Kimberly Clark: 7%
Alpix: 6%
Owens Corning: 6%
Octopus Energy: 4%
N/A: 4%
Having multiple offtakers offers advantages such as
risk diversification and offers local expertise in ORIT’s
key geographical markets .
O&M providers by total value
of all investments
Nordex: 23%
Statkraft: 17%
Orsted: 13%
Engie: 11%
Vestas: 11%
PSH: 6%
RES: 5%
SGRE: 5%
Goldbeck: 4%
N/A: 4%
BayWa 1%
A diversified group of O&M providers allows
ORIT to leverage competitive pricing and
specialised expertise .
Figure 18: Offtaker and O&M providers breakdown
44
Npower/Axpo: Sites sell ROCs and power to NPower but also have a price-fixing arrangement with Axpo .
52Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Financing and risk management
During the year total leverage decreased from 42% to 39%
45
made up of 26% long-term debt and 13% short-
term RCF drawings . In December 2023, the £50 million short-term facility was repaid in full . Post-year end
the Company has increased its leverage to fund the acquisition of four newly constructed solar farms located
in Ireland . The total acquisition cost of €160 .6 million was in part financed using a €80 .6 million debt facility
provided by Allied Irish Banks and La Banque Postale and part financed by drawing down £66 .2 million on
th e RC F .
During February 2023, the Company refinanced and increased its multi-currency RCF . The committed
£270 .8million RCF has a three-year term and can be drawn in GBP, EUR, AUD and USD and has an interest
rate of 2 .0% above SONIA . It also has an uncommitted accordion feature allowing the facility to be increased
in size by up to a further £150 million .
During the second half of 2023, the Company used proceeds raised from the sale of Polish wind assets and
exit of Spanish solar project, to repay its £50 million short-term facility with Natwest and partially repay its
outstanding RCF balance .
Should no further asset sales take place, and all cash flows not required to pay the Company’s costs and
continue growing the dividend were used to pay down debt, the Company’s gearing is expected to fall to
around 20% of GAV over a ten year period .
45
Leverage has been calculated as a percentage of GAV .
Chisbon solar farm
53Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Investment Manager’s Report
Summary of ORIT debt facilities as at 31 December 2023:
Short-
Term Long-Term
Asset HoldCo FR Solar FR Wind IRE Solar
46
GER Wind
UK Offshore
Wind
Debt Terms
Currency
GBP or
EUR
EUR EUR EUR EUR GBP
Term loan £270 .8m €125 .7m €43 .2m €91 .5m €61 .0m £110 .5m
Drawn at 31 December 2023 £130 .0m €102 .9m €42 .9m - € 57 . 5m £75 .5m
Drawn at 31 December 2023
£m
£130 .0m £89 .2m £37 .2m - £49 .8m £75 .5m
Initial Term
(
yrs
)
3 18 20 20 18 15
Expiry Date Feb-26 Dec-38 Sep-42 Jun-42 Mar-41 Sep-32
Facility date Nov-20 Jan-21 Apr-21 Jul-21 Sep-22 Dec-17
Margin
Y1-5 1 .30%
2017-2022:
1 .45%;
2 .0% 1 .25% 1 .30%
Y6-10
1 .40%
0 .83%-1 .75%
2023-2027:
1 .65%
Y10+ 1 .65%
2028-2032:
1 .85%
Variable interest % SONIA EURIBOR EURIBOR EURIBOR EURIBOR SONIA
Hedging
% hedged - 85% 90% n/a 100% 85%
Swap rate n/a -0 .12% 0 .51% n/a 0 .12% 1 .27%
As well as the interest rate hedging associated with the Company’s borrowings, foreign exchange hedging has
been implemented to limit the impact of exchange rate movements on the cashflows and valuation of the
Company . On an unhedged basis, the value of the Company’s portfolio of assets declined by £6 .1 million during
the year as a result of foreign exchange movements . However the value of the FX hedging instruments increased
by £4 .0 million during the period, thereby offsetting approximately two thirds of the underlying valuation
movement .
Total Short-Term Debt Long-Term Debt
Debt as a % of GAV 39% 13% 26%
Committed debt as a % of Total value of all investments 47% 17% 30%
% Hedged 58% 0% 89%
Average cost of debt 3 .9% 7 .2 % 2 .1%
Average remaining term
(
years
)
10 .1 2 .2 14 .1
ORIT debt summary as at 31 December 2023:
46
Post-period end ORIT acquired four Irish solar farms . The total acquisition cost of €161m was in part financed using a €80 .6m debt facility provided by Allied
Irish Banks and La Banque Postale . This facility is 100% hedged at an interest rate of 3 .07% .
54Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Portfolio Valuation
£599m
Net Asset Value
(
2022: £618m
)
106.0p
NAV per Ordinary Share
(2022: 109.4p)
£980m
Gross Asset Value
(2022: £1,073m)
£1,127m
Total value of all
investments
(2022: £1,304m)
Regular valuations are undertaken for the Company’s portfolio of assets . The process follows International
Private Equity Valuation Guidelines using a discounted cashflow
(
“DCF”
)
methodology . DCF is deemed the
most appropriate methodology where a detailed projection of likely future cash flows is possible . Due to the
asset class, availability of market data and the ability to project the asset’s performance over the forecast
horizon, a DCF valuation is typically the basis upon which renewable assets are traded in the market . Key
macroeconomic and fiscal assumptions for the valuations are set out in Note 9 to the financial statements .
Valuation bridge for the year
The fair value of the Company’s portfolio of assets as at 31 December 2023 was £706 .0 million, reflecting
acquisitions and capital injections during the year of £68 .0 million and disposal proceeds of £97 .2 million
alongside changes to economic, wholesale energy and asset specific assumptions and the return on the
portfolio net of distributions . Including the Company’s and its intermediate holding companies’ net liabilities
of £106 .9 million, the total net asset value as at 31 December 2023 is £599 .0 million or 106 .0 pence per Ordinary
Share .
Fair value of
the portfolio
of assets at
31 December
2022
Cash
distributions
from
portfolio
Changes in
wholesale
energy price
and green
certificates
Balance
of
portfolio
return
PLC and
intermediate
holding
company
net assets
Investments
in the
period
Changes
in
economic
assumptions
Gain on
Holding
Value
Asset
Disposals
Change in
Discount
Rates
Construction
risk
premium
Fair value
of portfolio
of assets at
31 December
2023
NAV as at
31 December
2023
743.7
65.2
-37.5
-97.2
17.8
-10.8
-5.9
2.6
-21.3
49.4
706.0
-106.9
599.0
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1 2 3 4 5 6 7 8
Figure 19: ORIT Equity Value Bridge
(
£m
)
55Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Investments in the year
During the year, the Company announced new investments including up to £5 million into HYRO Energy
Limited, a new joint venture between ORIT, Sky
(
a fund managed by Octopus Energy Generation
)
and
renewable energy company RES . HYRO has been established to develop green hydrogen electrolysis projects
and intends to develop c .700MW of green hydrogen electrolyser capacity by 2030 .
The Company has also agreed to invest up to £2 million into a development platform serviced by BLC Energy
limited, to set up and fund a new development business, focused on creating new ground-mounted solar
and co-located battery storage assets in the UK . This new venture intends to target an initial pipeline of over
350MW of projects and ORIT will have the exclusive right to provide further funding to bring the initial pipeline
to ready-to-build status between 2025 and 2029 .
Elsewhere in the portfolio payments were made in relation to construction at the Cumberhead Wind Farm
and Breach Solar Farm . There were also payments made in relation to the developer investments in line with
existing commitments to business plans .
Distributions paid out of the portfolio of assets
This relates to the amount of cash paid out of the portfolio of assets and received by the Company or its
intermediate holding companies in the year ending 31 December 2023 .
Asset Disposals and holding value movement
As previously mentioned, the Company completed the disposal of the Krzecin and Kuslin onshore wind farms
in Poland and the ready-to-build solar project option over Antequera in Spain . The net proceeds generated
from the sales
(
approximately £92 .0 million for the Polish asset and £5 .2 million for the Spanish asset
)
have
resulted in a positive impact on NAV of approximately +2 .8 pence per and +0 .3 pence per Ordinary Share
respectively .
Economic assumptions
Over the course of 2023, inflation forecasts have moderated compared to the prior year . Forecasts have
decreased on average in Europe while remaining broadly flat across the UK . This has resulted in a net valuation
decrease of £4 .8 million .
The inflation inputs used to calculate the NAV per Ordinary Share as at 31 December 2023 has been sourced
from:
(
i
)
recent consensus UK inflation forecasts published by His Majesty’s Treasury
(
November 2023
)
; and
(
ii
)
inflation forecasts for European countries published by the European Commission
(
November 2023
)
.
During the year, sterling appreciated against the euro by approximately 2 .3%, leading to a negative valuation
impact of £6 .1 million . Euro-denominated investments comprised 52% of the portfolio at the year end .
The combined impact of inflation and foreign exchange movements represents a valuation decrease of
£10 .8 million
(
excluding the impact of hedging
)
.
The Investment Manager regularly reviews the level of euro exposure and utilises hedges, with the objective of
minimising variability in shorter term cash flows . After the impact of currency hedges held at Company level
are taken into account, the loss on foreign exchange reduces to £2 .1 million .
1
2
3
4
56Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
£/MWh (real 2023)
Gen. Weighted Price – Power (Q4 2023)
Gen. Weighted Price – Total (Q4 2023)
Gen. Weighted Price – Power (Q4 2022) Gen. Weighted Price – Total (Q4 2022)
0
20
40
60
80
100
120
Figure 20: Generation – Weighted Price
Power prices and Green Certificates
Unless fixed under PPAs or otherwise hedged, the power prices used in the valuations are based on market
forward prices in the near term, followed by an equal blend of two independent and widely used market
consultants’ technology-specific capture price forecasts for each asset .
Europe’s power market, while remaining higher than historic norms, has seen a clear downward trend across
2023 . For further details, please see the “Power Prices and Green Certificates” section within the Investment
Manager’s Report .
ORIT’s high proportion of near-term fixed revenues means that its revenues have been shielded, to a reasonable
extent, from the fall in power prices, particularly over the short to medium term .
Updating power price forecasts during the year led to a valuation decrease of £31 .4 million .
Green certificates
(
Renewable Energy Guarantees of Origin
(
“REGOs”
)
in the UK and Guarantees of Origin
(
“GoOs”
)
in European markets
)
are sold by generators to guarantee that purchased electricity is from a ‘green’
source . Prices for green certificates have been reflected in the valuations and been updated in line with third-
party forecasts . Overall, updating green certificate forecasts has led to a net increase of £25 .5 million in the
value of the portfolio as at 31 December 2023 .
The net impact of updating power price and green certificate forecasts was a £5 .9 million decrease in the
value of the portfolio as at 31 December 2023 . The power prices used in the valuations as at December
2023 include the relevant ‘capture price’ discount to baseload prices derived from the independent market
consultants forecasts, and do not include any further discounts . The power prices used in the valuations as at
December 2022 had included additional prudential discounts in the first few years of the forecasts, reflecting
the elevated and volatile nature of forward markets at that time .
Revenues
The portfolio’s forecasted power only generation weighted prices
(
“Power only GWP”
)
and the generation
weighted prices including subsidies and additional benefits
(
“Total GWP”
)
for the period from 2024 to 2050
are shown in Figure 20 below . The curves are blended across the markets in which the portfolio’s generation
assets are located, weighted by the portfolio generation mix and converted into £/MWh using the FX spot
rate as at 31 December 2023 . On average, the graph shows Power only GWP of £53 .17/MWh in the period
2024-2028 and £40 .57/MWh in the period 2029-2050 . The decrease in the power-only GWP, most notably
seen in the near-term, comes as a result of the electricity forwards markets which have fallen across 2023 .
5
57Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Construction risk premium
A valuation increase of £2 .6 million resulted from the unwind of a portion of the construction risk premium
included in the discount rate applied to the Cumberhead Wind Farm and the Breach Solar Farm, both in the
UK, recognising the significant construction progress made by the end of the year . As at 31 December 2023,
construction at the Cumberhead Wind Farm was completed .
Breach Solar Farm has completed construction however, the site is still awaiting a grid connection from
National Grid . It is expected that the remaining construction risk premium will be unwound as the project
becomes derisked through the completion of its grid connection .
Change in discount rates
A range of discount rates are applied in calculating the fair value of the investments, considering the location,
technology and lifecycle stage of each asset as well as leverage and the split of fixed and variable revenues .
Although a high-inflationary environment remains in the UK and Europe and bond yields continue to be
elevated versus pre-2022 levels, competition for renewable assets has remained high, dampening the
extent to which benchmark rate rises have fed through into asset discount rates . Although UK and European
bond yields have decreased since highs of mid-2023, the Board and the Investment Manager considered it
appropriate to reflect an increase in the UK discount rates by 0 .5% and European discount rates by 0 .25%
during 2023 . The change in discount rates resulted in a decrease of -£21 .3 million in the portfolio valuation .
Despite increases to the discount rates applied to ORIT’s portfolio of assets, the weighted average discount
rate has decreased over the course of the year by 0 .3% to 7 .2% as at 31 December 2023 . The primary reason for
the decrease in the overall blended rate is due to the derisking of the portfolio through the Spanish and Polish
disposals
(
which attracted a higher discount rate due to their relative risk profiles
)
as well as unwind of the
construction risk premiums included in the discount rates for construction assets . The increases in underlying
discount rates were also offset by a decrease in the underlying discount rate reflecting the greater proportion
of fixed cash flows arising from entering into hedging arrangements across the portfolio of assets .
The weighted average discount rate does not include any contribution from the following, each of which would
be expected to increase the return achieved on the Company’s portfolio of assets:
(
i
)
the return expected on
the Company’s investment into development stage assets, which are not valued on a discounted cashflow
basis;
(
ii
)
the return enhancement associated with the Company’s FX hedging programme;
(
iii
)
the increased
return associated with the additional leverage from the RCF .
31-Dec-23 31-Dec-22
UK Assets
Levered IRR 7 .5% 7 .5%
Gross Asset Value
(
GAV
)
(
£m
)
491 440
Asset Leverage %GAV 17% 19%
European Assets
Levered IRR 6 .9% 7 .5%
Gross Asset Value
(
GAV
)
(
£m
)
488 633
Asset Leverage %GAV 36% 40%
Total Portfolio
Levered IRR 7 .2% 7 . 5%
Gross Asset Value
(
GAV
)
(
£m
)
980 1,073
Asset Leverage %GAV 26% 30%
Fund Leverage %GAV 13% 13%
Total Leverage %GAV 39% 42%
7
6
58Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Balance of portfolio return
This refers to the balance of valuation movements in the year excluding the factors noted above and represents
an increase of £49 .4 million .
Of this, £52 .3 million reflects the net present value of future cashflows being brought forward from the
valuation date used for the acquisitions to 31 December 2023 .
£1 .4 million of the increase resulted from entering into fixed price arrangements such as a 10-year index-linked
Power Purchase Agreement between Breach Solar Farm and Iceland Foods Limited and 5-year fixed price
Power Purchase Agreements across part of the UK Solar portfolio with Total Energies .
Also during the year, ORIT benefitted from being awarded T-1 and T-4 Capacity Market contracts at the
Cumberhead site, and the signing of a 3-year direct marketing agreement at Leeskow, resulting a combined
uplift of £1 .9 million .
Over the course of 2023, the holding valuations of the options to buy the Irish solar portfolio and build the
Spanish solar farms increased by £4 .6 million as the probability of acquisition for the Irish portfolio and exit for
the Spanish portfolio became increasingly more certain .
These movements were partially offset by financial and technical performance during the year resulting
in a net negative valuation impact of -£3 .5 million . The net performance of the underlying portfolio was
slightly down on average primarily due to low wind speeds . Additionally, a further -£5 .6 million decrease was
recognised due to updating for an updated wind yield assessment for the Ljungbyholm wind farm following
its first two years of operations .
The valuations were also updated to reflect the delay in grid connection at Breach Solar Farm and the delay in
the operational start date for Cumberhead, resulting in a combined valuation impact of -£2 .9 million .
The remaining amount relates to other smaller adjustments at the project company level, which resulted in
an increase of £1 .1 million .
8
Ballymacarney construction
59Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Portfolio valuation sensitivities
Figures 21 and 22 below show the impact of changes to the key input assumptions on NAV with the x axis
indicating the impact of the sensitivities on the NAV per share. The sensitivities are based on the existing
portfolio of assets as at 31 December 2023. Figure 21 includes cash flows of conditional acquisitions, and as
such may not be representative of the sensitivities once the Company is fully invested and geared.
For each of the sensitivities shown, it is assumed that potential changes occur independently with no effect on
any other assumption. As such the sensitivities also do not capture any potential benefit of a portfolio effect
through diversification.
Energy Yield P90/P10
Power Price Curve -/+10%
Inflation -/+ 0.50%
Inflation -/+ 2.0% 2024/2025
FX Rate +/-10%
Negative directional
change to assumption
Positive directional
change to assumption
Discount rate -/+ 0.50%
(-4.5p, -4.3%)
(4.9p, 4.6%)
(-8.6p, -8.1%)
(8.6p, 8.1%)
(-3.9p, -3.7%)
(4.2p, 3.9%)
(-2.8p, -2.7%)
(2.9p, 2.7%)
(-1.0p, -0.9%)
(1.0p, 0.9%)
(-15.6p, -14.7%)
(15.2p, 14.4%)
Discount rate -/+ 0.50%
Energy Yield P90/P10
Power Price Curve -/+10%
Inflation -/+ 0.50%
Inflation -/+ 2.0% 2024/2025
FX Rate +/-10%
Negative directional
change to assumption
Positive directional
change to assumption
(-6.0p, -5.6%) (6.5p, 6.1%)
(-9.7p, -9.2%) (9.7p, 9.1%)
(-4.4p, -4.2%) (4.8p, 4.5%)
(-2.8p, -2.7%) (2.9p, 2.7%)
(-1.3p, -1.2%) (1.3p, 1.2%)
(-19.6p, -18.5%)
(19.0p, 17.9%)
Energy Yield P90/P10
Power Price Curve -/+10%
Inflation -/+ 0.50%
Inflation -/+ 2.0% 2024/2025
FX Rate +/-10%
Negative directional
change to assumption
Positive directional
change to assumption
Discount rate -/+ 0.50%
(-4.5p, -4.3%)
(4.9p, 4.6%)
(-8.6p, -8.1%)
(8.6p, 8.1%)
(-3.9p, -3.7%)
(4.2p, 3.9%)
(-2.8p, -2.7%)
(2.9p, 2.7%)
(-1.0p, -0.9%)
(1.0p, 0.9%)
(-15.6p, -14.7%)
(15.2p, 14.4%)
Discount rate -/+ 0.50%
Energy Yield P90/P10
Power Price Curve -/+10%
Inflation -/+ 0.50%
Inflation -/+ 2.0% 2024/2025
FX Rate +/-10%
Negative directional
change to assumption
Positive directional
change to assumption
(-6.0p, -5.6%) (6.5p, 6.1%)
(-9.7p, -9.2%) (9.7p, 9.1%)
(-4.4p, -4.2%) (4.8p, 4.5%)
(-2.8p, -2.7%) (2.9p, 2.7%)
(-1.3p, -1.2%) (1.3p, 1.2%)
(-19.6p, -18.5%)
(19.0p, 17.9%)
Figure 21: NAV sensitivities per Ordinary Share
(
including Conditional Acquisitions
)
Figure 22: NAV sensitivities per Ordinary Share
(
excluding Conditional Acquisitions
)
1
2
3
4
5
1
2
3
4
5
60Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Discount rate
(
levered cost of equity
)
A range of discount rates are applied in calculating the fair value of the investments, considering the location,
technology and lifecycle stage of each asset as well as leverage and the split of fixed and variable revenues .
Volumes
Each asset’s valuation assumes a “P50” level of electricity output based on yield assessments prepared by
technical advisors . The P50 output is the estimated annual amount of electricity generation that has a 50%
probability of being exceeded – both in any single year and over the long-term – and a 50% probability of
being underachieved . The P50 provides an expected level of generation over the long-term .
The P90
(
90% probability of exceedance over a 10-year period
)
and P10
(
10% probability of exceedance over a
10-year period
)
sensitivities reflect the future variability of wind speed and solar irradiation and the associated
impact on output, along with the uncertainty associated with the long-term data sources used to calculate
the P50 forecast . The sensitivities shown assume that the output of each asset in the portfolio is in line with
the P10 or P90 output forecast respectively for each year of the asset life .
Power price curve
As described above the power price forecasts for each asset are based on a number of inputs . The sensitivity
assumes a 10% increase or decrease in power prices relative to the base case for each year of the asset life .
Inflation
Sensitivity 1: The sensitivity assumes a 0 .5% increase or decrease in inflation relative to the base case for each
year of the asset life .
Sensitivity 2: The sensitivity assumes a 2 .0% increase or decrease in inflation during 2024/2025 relative to the
base case of the asset .
Foreign exchange
The Company seeks to manage its exposure to foreign exchange movements to ensure that
(
i
)
the sterling
value of known future construction commitments is fixed;
(
ii
)
sufficient near term distributions from non-
sterling investments are hedged to maintain healthy dividend cover;
(
iii
)
the volatility of the Company’s
NAV with respect to foreign exchange movements is limited; and
(
iv
)
all settlements and potential mark-to-
market payments on instruments used to hedge foreign exchange exposure are adequately covered by the
Company’s cash balances and undrawn credit facilities .
Of the portfolio as at 31 December 2023, 52% of the NAV is euro denominated . Euro hedges are in place for all
construction payments as well as forecast cash generation from all Euro based investments for the first three
years of operations . The sensitivity applied above shows the impact on NAV per share of a +/- 10% movement
in the GBP:EUR exchange rate .
1
2
3
4
5
61Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Financial Review
The financial statements of the Company for the year ended 31 December 2023 are set out on pages 157 to
160 . These financial statements have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and the applicable legal requirements of
the Companies Act 2006 . In order to continue providing useful and relevant information to its investors, the
financial statements also refer to the “intermediate holding companies”, which comprise the Company’s
wholly owned subsidiary, ORIT Holdings II Limited and its indirectly held wholly owned subsidiaries ORIT UK
Acquisitions Limited and ORIT Holdings Limited .
Net assets
Net assets have decreased from £618 .3 million as at 31 December 2022 to £599 .0 million as at 31 December
2023, largely due to a decrease in the fair value of portfolio of assets as described in the Portfolio Valuation
section above .
The net assets comprise the fair value of the Company’s investments of £592 .1 million
(
2022: £608 .8m
)
and
the Company’s cash balance of £10 .0 million
(
2022: £10 .6m
)
, offset by £3 .1 million
(
2022: £1 .1m
)
of Company’s
other net liabilities .
Included in the fair value of the Company’s investments are net liabilities of £113 .9 million
(
2022: liabilities
of £135 .0m
)
held in the intermediate holding companies . These comprise asstes of cash £13 .2 million
(
2022:
£4 .5m
)
, the positive mark-to-market value of the FX hedges taken out to minimise the volatility of cashflows
associated with non-UK portfolios of £2 .3 million
(
2022: £8 .0m
)
, other debtors of £2 .4 million
(
2022: nil
)
and
offset by amortised transaction costs associated with bank loans of £1 .9 million
(
2022: £2 .0m
)
, the principal
and interest outstanding on the bank loans of £131 .3 million
(
2022: £128 .0m
)
, and other liabilities of £2 .4 million
(
2022: £5 .5m
)
predominantly relating to accrued transaction costs not yet paid and outstanding VAT liabilities .
Results as at 31 December
2023
£m
2022
£m
Fair value of portfolio of assets 706 .0 743 .7
Cash held in intermediate holding companies 13 .2 4 .5
Bank loans and accrued interest held in the intermediate holding companies -131 .3 -128 .0
Fair value of other net assets/
(
liabilities
)
in intermediate holding companies 4 .2 -11 .4
Fair value of Company’s investments 592.1 608.8
Company's cash 10 .0 10 .6
Company's other net liabilities -3 .1 -1 .1
Net asset value as at 31 December 599.0 618.3
Number of shares 564 .9 564 .9
Net asset value per share
(
pence
)
106.0 109.4
62Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Income
In accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust
Companies and Venture Capital Trusts
(
“SORP”
)
issued in July 2022 by the Association of Investment
Companies
(
“AIC”
)
, the statement of comprehensive income differentiates between the ‘revenue’ account and
the ‘capital’ account, and the sum of both items equals the Company’s profit for the year . Items classified as
capital in nature either relate directly to the Company’s investment portfolio or are costs deemed attributable
to the long-term capital growth of the Company
(
such as a portion of the Investment Manager’s fee
)
.
In the financial year ending 31 December 2023, the Company’s operating income was £19 .7 million
(
2022:
£7 7 .9m
)
, including interest income of £25 .9 million
(
2022: £23 .1m
)
, dividends received of £16 .8 million
(
2022:
£17 . 3m
)
and net loss on the movement of fair value of investments of £23 .0 million
(
2022: £37 .6m gains
)
. The
operating expenses included in the statement of comprehensive income for the year were £7 .1 million
(
2022:
£8 .1m
)
. These comprise £5 .6 million Investment Manager fees
(
2022: £5 .7m
)
, transaction and abort costs of
£0 .1 million
(
2022: £1 .3m
)
and other operating expenses of £1 .4 million
(
2022: £1 .1m
)
. The details on how the
Investment Manager’s fees are charged are set out in Note 17 to the financial statements .
Ongoing charges
The ongoing charges ratio
(
“OCR”
)
is a measure, expressed as a percentage of average net assets, of the
regular, recurring annual costs of running the Company . It has been calculated and disclosed in accordance
with the AIC methodology, as annualised ongoing charges
(
i .e . excluding acquisition costs and other non-
recurring items
)
divided by the average published undiluted Net Asset Value in the year . For the year ended
31December 2023, the ratio was 1 .16%
(
2022: 1 .12%
)
.
Dividends
During the year, interim dividends totalling £31 .9 million were paid
(
1 .31p per share paid in respect of the quarter
to 31 December 2022 in February 2023
(
2022: March
)
, 1 .44p per share in respect of the first quarter of 2023
paid in June 2023
(
2022: May
)
and 1 .45p per share paid in respect of the second and third quarters of 2023 in
September 2023 and December 2023 respectively
(
2022: August and November
)
.
Post year end, a further interim dividend of 1 .45p per share was paid on 23 February 2024 in respect of the
quarter ending 31 December 2023 to shareholders recorded on the register on 9 February 2024 . As such,
dividends totalling £32 .7 million have been paid in respect of the year under review . These dividends are fully
covered from the operational cash flows of the underlying portfolios .
63Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
Dividend cover - operational cash flows
(
portfolio level
)
Year ended 31 December
2023
£m
2022
£m
Operational cash flows
UK Solar 14 .8 13 .7
French Solar 11 .2 11 .7
Swedish Wind 4 .4 8 .8
Finnish Wind 7 .1 15 .9
Polish Wind 4 .9 12 .1
French Wind 3 .1 1 .3
German Wind 3 .0 0 .7
UK Wind 8 .2 5 .0
UK Offshore Wind 17 .0 7 .1
Irish Solar 8 .5 -
82.2 76.3
SPV level taxes
French Solar, Finnish Wind, Polish Wind, UK Offshore Wind
47
-2 .8 -
Interest payable on external debt
French Solar, Polish Wind, French Wind, German Wind, UK Offshore Wind -7 .9 -4 .0
Operational cash flow pre debt amortisation 71.5 72.3
Company and intermediate holding company level expenses -10 .1 -7 .0
Interest and fees payable on RCF and short-term facility -12 .3 -2 .6
Net cash flow from operating activities pre debt amortisation 49.1 62.7
Dividends paid in respect of year 32 .7 29 .6
Portfolio level operational cash flow dividend cover pre debt amortisation 1.5x 2.1x
External debt amortisation
French Solar, Polish Wind, French Wind, German Wind, UK Offshore Wind -10 .4 -10 .2
Net cash flow from operating activities 38.7 52.5
Dividends paid in respect of year 32 .7 29 .6
Portfolio level operational cash flow dividend cover 1.18x 1.77x
47
Taxes falling due on operational asset trading profits
(
e.g. Corporation Tax in the UK
)
.
64Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Investment Manager’s Report
The headline dividend cover metric only takes into account 6 months of operational cash flow from the Polish
wind farms following their sale in the second half of the year .
Additionally the above metric does not include any proceeds related to gains on either Spanish solar and Polish
wind sales
(
with the exception of any cash received or paid as a result of breaking hedging arrangements
)
. The
dividend cover metric below includes cash realised from sale proceeds in excess of the previous holding values .
2023
£m
2022
£m
Net cash flow from operating activities 38.7 52.5
Gain on asset sales/exits
(
above previous holding value
)
11 .1 -
Net cash flow from operating activities 49.8 52.5
Dividends paid in respect of year 32 .7 29 .6
Portfolio level operational cash flow dividend cover 1.52x 1.77x
Subject to the timing of potential further asset sales, dividend cover in 2024 is expected to increase compared
with 2023 as Cumberhead wind farm and the first four sites of the Irish Solar portfolio contribute a full year
of operational cash flow, and Breach solar farm commences operations . Cash generated by the operations
of ORIT’s current portfolio, net of all debt service including scheduled principal repayments, is expected to be
sufficient to cover the dividend over the next 5 years .
Cumberhead opening
65Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
ESG & Impact
As at 31 December 2023
ESG & Impact Strategy
ORIT is an impact fund with a core impact objective to accelerate the
transition to net zero through its investments, building and operating a
diversified portfolio of Renewable Energy Assets.
ORIT enables individuals and institutions to engage with the energy transition. The renewable energy generated
from ORIT’s portfolio of assets supports the transition to net zero by replacing unsustainable energy sources
with clean power. This intended outcome is the Company’s core impact objective.
The ESG & Impact Strategy considers all of ORIT’s culture, values and activities through three lenses:
Performance, Planet and People – to ensure that ORIT’s activities integrate ESG risks and bring to life
additional impact opportunities.
For a more in-depth understanding of ORIT’s ESG & Impact Strategy, encompassing definitions of
ESG and Impact, along with detailed insights into four impact themes
(
Stakeholder engagement,
Equality and wellbeing, Innovation, and Sustainable momentum
)
, please refer to the separately
published ESG & Impact Strategy.
Stewardship and Engagement
The Investment Manager manages ORIT’s investments in line with its Engagement and Stewardship Policy.
Where ORIT has 100% ownership stakes, the Investment Manager has direct control of the underlying assets,
usually through directorship services. As well as decision making oversight, the Investment Manager carries
out service reviews on each material third-party service provider. In circumstances where ORIT does not hold
a controlling interest in the relevant Investee Company, the Investment Manager will secure shareholder
rights through contractual and other arrangements, to, inter alia, ensure that the renewable energy asset or
portfolio company is operated and managed in a manner that is consistent with ORIT’s investment and ESG
Policy. The Investment Manager will always take up portfolio investment Board seats, attend Board meetings
and will directly use its influence to monitor and support investee companies on relevant matters to galvanise
other shareholders in line with ORIT’s ESG Policies.
ORIT aims for investment-specific active stewardship, regardless of ownership percentage. The Company
consistently exercises shareholder rights, overseeing approval and reserved matters. The ORIT Board receives
regular reports on investee performance, including environmental and social issues. The Investment Manager
collaborates on industry risks to drive positive stewardship outcomes with various stakeholders.
The initiatives and case studies presented in the ESG & Impact section of the Annual Report and the separately
published ESG & Impact Report provide examples of the application of the Engagement and StewardshipPolicy.
The Investment Manager’s full Engagement and Stewardship Policy can be viewed here.
48
48
https://a.storyblok.com/f/154679/x/5eeb87e6d3/oegen-engagement-and-stewardship-policy-june-2023-vf.pdf
66ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Performance
Impact Objective: Build and operate a diversified portfolio of
Renewable Energy Assets, mitigating the risk of losses through robust
governance structures, rigorous due diligence, risk analysis and asset
optimisation activities to deliver investment return resilience and the
maximum amount of green energy.
49
Total asset value including total debt and equity commitments.
50
Reductions observed between ORIT’s 2022 vs. 2023 potential renewable energy production and equivalent impact KPIs are driven in part by the sale of the
Polish onshore wind farms midway through 2023, and by a change in the methodology for calculating potential generation, which now accounts for expected
degradation across the portfolio.
51
More detail on how ORIT has contributed to these UN SDGs is included in the separately published ORIT Impact Report.
£1,127m
Total value of sustainable investments
– 100% investments committed into
renewables
49
(
2022: £1,304m
)
37
Assets
(
2022: 36 assets
)
1,569GWh
Potential annual renewable energy
generation, 105GWh of which will be
additional generation from construction
assets
50
(
2022: 1,740GWh, 669GWh
)
1 00%
Of investments adhere to ORIT’s ESG Policy
and all transactions in the year met ORIT’s
minimum ESG matrix threshold
1,312GWh
Renewable energy generated in the year
UN SDGs
51
67ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Regulatory Disclosures
The TCFD disclosures can be found in the Risk and Risk Management Statement section of the Annual
Report.
ORIT is classified as an Article 9 product under the EU Sustainable Finance Disclosure Regulation
(
“SFDR”
)
regulation. Please refer to page 193 of the Annual Report and to the ORIT website for ORIT’s
SFDR disclosures.
The Investment Manager is keeping up with recent developments in new regulatory frameworks aimed at
increasing transparency in environmental and social factors. This includes the Taskforce for Nature-related
Financial Disclosures
(
“TNFD”
)
and the UK’s Sustainable Disclosure Requirements
(
“SDR”
)
.
Recognising the complexity and the depth of insight required to meet the TNFD standards, the Investment
Manager has concentrated on understanding both direct operational dependencies and those within ORIT’s
supply chain. Initial analysis indicates that primary dependencies likely to significantly impact the portfolio’s
direct operations are integrated into ORIT’s current risk management frameworks
(
refer to ORIT 2023 Interim
Report page 37
)
. Furthermore, a summary of the Investment Manager’s analysis regarding supply chain
dependencies is detailed in the separately published ESG & Impact Report. This foundational phase of
research is essential for establishing a solid base for comprehensive TNFD disclosure, an ambition ORIT is
dedicated to achieving.
The Company supports “anti-greenwashing” efforts and expects to start making the necessary disclosures in
relation to SDR from 30 June 2024. An initial review of the different investment labels and their criteria, the
Investment Manager expects ORIT to qualify for the “Sustainability Focus” label. Products with these labels
are those that invest in assets that are environmentally and/or socially sustainable, determined using robust
and evidence-based standards. An example the FCA gives in this category is a fund that invests in assets that
contribute to climate change mitigation or adaptation.
Performance initiatives
Delivering investment performance is fundamental to the ESG & Impact Strategy, to supporting the transition
to net-zero, and to being an impact fund. Asset optimisation initiatives and robust ESG risk management aim
to improve financial resilience and overall performance of the Company, maximising the amount of green
electricity the Company generates.
Our Investment Manager works with key partners to mitigate production risks and maximise performance of
ORIT’s operational assets. Examples of projects that contributed to this objective are laid out in the separately
published ORIT ESG & Impact Report.
68ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Case Study: Addressing and mitigating ESG risks,
including human rights risks within BESS assets
ORIT is committed to acting ethically and with integrity in all its business dealings and relationships
associated with its battery energy storage system
(
BESS
)
assets. ORIT recognises its responsibility
specifically regarding its supply chain and operations, and the Investment Manager is dedicated to taking
the necessary steps to engage with and influence its partners to prevent any adverse impacts and mitigate
against any risks related to ESG issues.
BESS assets will be vital to achieving a green transition by facilitating greater access to renewable energy
and reducing the world’s dependence on fossil fuels. However, BESS supply chains still present significant ESG
risks that must be managed. The extraction and refining of raw materials needed for battery applications
has been connected to adverse impacts, such as biodiversity loss, pollution, forced labour, violations of
Indigenous rights and corruption, while the manufacturing and operation of BESS raises concerns around
climate change and safety. Moreover, poor visibility and lack of transparency within battery supply chains
makes it a challenge to address these issues.
The presence of these impacts and the risk that ORIT’s activities may be contributing to them has led the
Investment Manager to develop and implement a tailored ESG policy and processes for its BESS assets. The
Investment Manager is working in collaboration with Infyos, an ESG technology company specialising in
battery supply chains and sustainability, and will use Infyos’s software platform to manage, monitor and
improve ORIT’s BESS ESG performance.
The policy ensures
1. Responsible sourcing principles are firmly integrated into all investment decisions
2. Assets are operated to reduce their impact on biodiversity and climate
The Investment Manager is able to enact positive change across the industry on behalf of ORIT through
wider industry collaboration and engagement
As part of the recently launched BESS ESG Policy, the Investment Manager has:
• conducted a detailed risk assessment of its BESS assets and their supply chain using Infyos’s proprietary
risk and supply chain models to identify the most significant ESG risks on an ongoing basis;
• strengthened its due diligence framework in line with industry best practice, including the OECD Guidelines
for Multinational Enterprises and Guidance for Responsible Business Conduct, to address and mitigate
the most significant risks identified above; and
• incorporated an in-depth assessment of supplier risk and ESG performance, as well as bespoke mitigation
actions plans, into the project procurement and supplier management process via the Infyos Platform to
ensure all potential and actual impacts are identified, avoided and/or addressed on an ongoing basis.
In addition, the Investment Manager will:
• develop controls to ensure the assets are managed in a safe and efficient manner to reduce their impact
on biodiversity and the environment, including at the end of life;
• digitally map its high-risk material supply chains using the Infyos Platform to ensure more accurate and
granular data related to potential and actual impacts; and
• engage with industry bodies and suppliers to promote greater transparency in the battery supply chain
and integrate best practice across the industry.
For more information on how ORIT is addressing Human Rights risks, including modern slavery and human
trafficking, please refer to ORIT’s statement on its website here.
52
Stakeholder
Engagement
Equality &
Wellbeing
52
https://assets-global.website-files.com/6465321ab5b5a7de6f3fcd1d/65cb7cea5a32125cf2a07493_ORIT_Modern_Slavery_
Statement_
(
January_2024
)
_vF.pdf
69ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Who?
BESS supply chain
How much?
ORIT’s current BESS
assets: 6MW
53
What?
New BESS
procurement policy
Alignment to
OECD Guidelines
for Multinational
Enterprises and
Guidance for
Responsible Business
Conduct
Reduced risk of
adverse impact in
ORIT supply chain
Impact Theme
Equality and
Wellbeing
Stakeholder
Engagement
Impact tracker
53
Represents the capacity of ORIT’s existing BESS asset, Woburn Road.
70ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Planet
Impact Objective: Consider environmental factors to mitigate risks
associated with the construction and operation of assets, enhancing
environmental potential where possible.
Based on actual annual renewable energy generation during the year
400k
Estimated annual equivalent
tCO
2
e avoided once fully
operational
54
(
2022: 580k
)
366k
Equivalent tCO
2
e avoided
UN SDGs
100%
Investments qualify as
sustainable in line with EU
Taxonomy
(
2022: 100%
)
93%
Generating sites on renewable
import tariffs
55
(2022: 87%)
2.0m
Equivalent new trees required
to avoid same carbon
54
(2022: 2.9m)
203k
Equivalent cars off the road
required to avoid same carbon
54
(2022: 318k)
4
Environmental incidents
(2022: 0)
553t
Worth of carbon purchased in
Pending Issuance Units
18 6k
Equivalent cars off the road
required to avoid same carbon
55.47t
CO
2
e per MW estimated carbon
intensity
(
direct and indirect
)
(
2022: 8.48t
)
1.8m
Equivalent new trees required
to avoid same carbon
54
Based on potential annual renewable energy generation once fully operational.
55
As at 31 December 2023.
Further information on the KPIs can be found in the separately published ESG & Impact Report. All KPIs
with no reference to 2022 are new for the 2023 reporting period.
71ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Maximising ORIT’s positive environmental impact
ORIT recognises the critical role that renewable energy plays in meeting net zero emissions targets,
with an inherently positive impact on the environment. This is demonstrated by the equivalent tCO
2
e
avoided by the renewable energy generated during the year.
Figures for carbon avoided use country-specific grid intensity factors, which are updated on a periodic basis
to reflect the changing composition of the grid’s energy sources. Increasing renewable capacity on the grids
in which ORIT’s assets are located has resulted in a reduction in the tCO
2
e avoided per MWh of renewable
energy generated.
ORIT’s LSE’s Green Economy
56
demonstrates the Company significant contribution to the transition to a zero-
carbon economy.
The Investment Manager can also confirm that 100% of ORIT’s assets directly contribute to or enable
climate change mitigation in line with the EU Taxonomy criteria
(
see Figure 23
)
. The EU Taxonomy is
a classification system for sustainable activities designed to help investors identify “green” environmentally
friendly activities. This is aimed to demonstrate investments that are sustainable; ones that make a
substantial contribution to climate change mitigation or adaptation, while avoiding significant harm to other
environmental objectives and complying with minimum safeguarding standards. The Company assesses % of
Taxonomy-aligned activities through turnover reflecting the share of revenue from green activities of investee
companies. More information on the Investment Manager’s screening and assessment approach can be
found in ORIT’s ESG & Impact Strategy.
Figure 23: EU Taxonomy alignment overview:
Turnover £107.94 m 100% Aligned 0% Not Aligned 0% Not Eligible
As part of ORIT’s approach to maximise positive environmental impact, ORIT will review and adopt relevant
industry standards alongside initiatives to reduce its own carbon footprint.
The four recorded environmental incidents were minor. Three of the recorded incidents were in relation to
very small amounts of oil/fuel leakage. In each case, the required mitigation response was deployed and
the events had no lasting negative impacts. The final environmental incident was in relation to the discovery
of a dead bat at one of ORIT’s sites. Following environmental monitoring of bat activity on site, extended
curtailment was implemented to ensure adequate protection.
Carbon measurement and reporting
In 2023 the Investment Manager on behalf of the Company engaged with Altruistiq to help calculate
and validate the Greenhouse Gas
(
“GHG”
)
emissions footprint for ORIT. ORIT has quantified and reported
organisational GHG emissions in line with the iCI and ERM Greenhouse Gas Accounting and Reporting Guide
for the Private Equity Sector
(
2022
)
. This methodology was developed to complement both the World Resources
Institute’s Greenhouse Gas Protocol Standards and the Partnership for Carbon Accounting Financials’
Standard for the financial industry. This approach consolidates the organisational boundary according to the
operational control approach. For more information on the carbon footprint methodology and definitions for
terms used in this section, please refer to ORIT’s ESG & Impact Strategy.
The Company, as a legal entity, has no direct employees, owned or leased real estate, or direct assets, and
therefore the Company has no Scope 1 or 2 emissions. Scope 1 and 2 emissions for the portfolio arise mainly
from on-site fuel combustion and imported electricity. The majority of emissions are Scope 3. For the portfolio,
Scope 3 emissions largely stem from purchased goods and services alongside indirect activities like waste
management, transportation, and travel. For the Company, they relate to purchased services acquired, such
as legal and investment management services.
56
The Green Economy Mark identifies London-listed companies and funds that generate between 50% and 100% of total annual revenues from products and
services that contribute to the global green economy.
72ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Scope Portfolio
Emissions
(
tCO
2
e
)
Company
Emissions
(
tCO
2
e
)
Total Emissions
(
tCO
2
e
)
% of Total
1 – Direct Emissions 223.45 – 223.45 0.6
2 – Indirect Emissions
(
market-based
)
57
728.98 – 728.98 2.0
3 – Indirect Emissions 36,012.16 83.58 36,095.74 97.4
- Fuel & Energy Related Activities 410.22 – 410.22 1.1
- Purchased Goods and Services 34,687.11 83.58 34,770.69 93.9
- Travel and Transport
58
749.03 – 749.03 2.0
- Waste 165.80 – 165.80 0.4
Total 36,964.59 83.58 37,0 4 8.17
ORIT’s overall carbon intensity was calculated to be 55.47 tCO
2
e per MW.
ORIT’s weighted average carbon intensity
(
“WACI”
)
for the year was calculated to be 3.74tCO
2
e/£m revenue
59
.
The following table separates ORIT’s carbon emissions into UK and non-UK based emissions in line with the
Streamlined Energy and Carbon Reporting framework
(
“SECR”
)
.
2023 2022 2021
UK
Emissions
Non-UK
Emissions
UK
Emissions
Non-UK
Emissions
UK
Emissions
Non-UK
Emissions
Scope 1 tCO
2
e 218.0 5.4 0.0 0.6 0.0 0.0
Scope 2 Market based tCO
2
e 126.5 602.5 0 885.2 0.0 5.0
Location based tCO
2
e 342.1 471.3 190.4 836.5 192.2 62.4
Energy consumption
MWh
60
11,221.7 2,550.1 1,568.4 2,724.9 905.2 1,150.5
Scope 3 tCO
2
e 29,262.2 6,749.9 5,706.4 1,261.4 710.9 1,500.7
57
Using a location-based approach, ORIT’s portfolio Scope 2 emissions equate to 813.39tCO
2
e.
58
This category includes upstream transportation and distribution, employee commuting, business travel and contractor travel.
59
A market-based approach as used to calculate the WACI. The WACI using a location-based approach is equal to 3.62tCO
2
e/£m revenue.
60
The uplift in energy consumption MWh is partially due to greater capture of on-site fuel consumption reported alongside electricity consumption.
73ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Real data
(
44% total
)
Estimated data
(
49% total
)
Proxy data
(
7% total
)
Actual activity data = 9% Estimated activity data = 40%
Proxy activity data = 7%
Actual spend data = 35% Estimated spend data = 9% Proxy spend data = 0%
The Investment Manager has disclosed the different categories of data points used to calculate the Company’s
carbon footprint to transparently convey both the quality and accuracy of the carbon footprint reported. The
table below shows the split between the defined
61
categories of data:
2023 2022 2021
55.47 tCO
2
e/MW 8.48 tCO
2
e/MW 5.23 tCO
2
e/MW
In 2023, the Investment Manager worked together with the ORIT’s investee companies and carbon consultant
to create a bespoke template to support the reporting of carbon-related data, and the attribution of more
specific emission factors for the calculation of emissions. It is positive to see that these efforts have led to a
marked improvement in the quality of ORIT’s carbon footprint in 2023.
Whilst the percentage of estimated data has remained relatively consistent, “proxy” estimations have
decreased from 25% of total data in 2022, to 7% in 2023, whilst “real data” has almost doubled year-on-year,
from 22.5% to 44%. As such, the Investment Manager has high confidence in 93% of the datapoints provided
(
compared to 75% in 2022
)
.
Furthermore, whilst actual activity data appears lower than expected at 9% of total data in 2023, this is in
part due to greater capture of actual service-related spend data during this reporting period, which cannot
be captured through weight- or volume-based data. The Investment Manager is cognizant of the potential for
bias in the calculation of data quality, and will continue to refine the methodology to present data quality in
the most appropriate format.
Carbon reduction
The Company’s aim is to reduce its emissions through stakeholder engagement and proactive management
of its assets. As the Company improves data quality, especially for assets in construction, the Investment
Manager will continue to explore opportunities to reduce emissions associated with embodied carbon.
The carbon intensity metric based on the MW capacity of the portfolio has increased significantly since 2022.
Changes in the carbon intensity are dependent on factors such as the operational and construction split of
assets, whereby construction assets typically display higher carbon footprints than operational assets. The
2023 increase is primarily driven by activities and purchases for the construction of Cumberhead wind farm
and Breach solar farm.
It is also important to note that even within construction projects of a similar size, there may be still large
variations in related carbon emissions. Factors such as foundation type, location and supplier can have very
significant implications on an asset’s footprint. The Investment Manager expects ORIT’s carbon intensity per
MW to reduce once the portfolio is fully operational.
61
Please refer to ORIT’s ESG & Impact Strategy for definitions of these terms.
74ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
62
A Pending Issuance Unit (“PIU”) is effectively a ‘promise to deliver’ a Woodland Carbon Unit in future, based on predicted sequestration. It is not ‘guaranteed’
and cannot be used to report against UK-based emissions until verified. However, it allows companies to plan to compensate for future emissions or make
credible statements in support of woodland creation.
63
A Woodland Carbon Unit (“WCU”) is a tonne of CO
2
e which has been sequestered in a Woodland Carbon Code-verified woodland. It has been independently
verified, is guaranteed to be there, and can be used by companies to report against emissions or to use in claims of carbon neutrality or Net Zero emissions.
Carbon offsetting
Whilst carbon reduction remains the priority in ORIT’s carbon strategy, ORIT does still commit to offsetting
any residual direct emissions relating to its Scope 1 and 2 emissions.
Last year, ORIT purchased 400 tonnes worth of carbon in “Pending Issuance Units”
62
. These units have been
secured both to future-proof ORIT’s carbon units in light of increasing prices and low availability of “Woodland
Carbon Units”
63
and also to support new woodland creation in the UK. In 2023, the Investment Manager
purchased an additional 553 PUIs to cover the emissions relating to ORIT’s 2023 Scope 1 and 2 emissions.
Supporting the planting of new UK woodland helps plant new trees today, but these woodlands do not
deliver “offset” credits immediately. Only once the woodland biomass has grown sufficiently will its carbon
credits be verified and converted from ex-ante PIUs to ex-post WCUs. Only then can only then be used as
official offsets.
In recognition of the carbon impact of ORIT’s operations, ORIT has decided to invest in a UK woodland carbon
project that will capture 953 tonnes worth of CO
2
over the next 31 years. The units are derived from a “Forest
Carbon” project in Acheilidh, Tain, Highlands. The new native broadleaf woodland is expected to deliver all
953 tonnes of carbon by 2055 and 75% of its carbon units by 2050.
The Board will reassess if the purchase of additional PIUs will be necessary on a year-to-year basis.
The growing trees will also provide wider co-benefits beyond climate mitigation, including water quality
improvements, habitat creation, employment, and cleaner air. Through ORIT’s support for UK woodland
creation, the Company is helping the country to meet its long-term international climate targets in a way
that also benefits wider society and nature.
Planet initiatives
Maximising the Company’s positive contribution to the environment is core to the ESG & Impact Strategy.
Planet initiatives contribute to solutions to combat climate change. Projects undertaken in the year are
outlined in the separately published ESG and Impact Report.
75ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Case Study: Empowering communities for climate justice -
Citizens UK Diversifying Climate Leadership National Project
ORIT engaged with Citizens UK, a prominent community organising alliance, to deliver the “Diversifying
Climate Leadership National Project” with the aim of addressing local climate issues and empowering a
diverse range of individuals underrepresented in the climate sector.
Through this project, ORIT and Citizens UK aimed to address the following objectives as the initial
scoping phase of their broader climate justice campaign:
1. Local climate advocacy and representation: Bring about change on local climate issues, emphasising
campaigns led by local communities to ensure relevance.
2. Building power and addressing inequalities: Seek commitments from various civil society leaders from
diverse backgrounds to build power and simultaneously provide improved representation and perspective
of local needs in climate campaigns.
3. Empowering civil society leaders: Deliver a training course for civil society leaders embedded into local
organisations, equipping them with the skills to lead successful climate justice campaigns within their
communities.
The project was a huge success. Citizens UK delivered a comprehensive 5-part training course, attracting over
100 attendees from 5 regions in the first session, fostering regional representation and diverse participation.
Trained leaders initiated impactful community organising, addressing key issues such as housing repair,
transport improvements and the revitalisation of green spaces.
Following the completion of the training, a National Climate Team consisting of 15 members was formed, and
the pivotal inclusion of “Climate Justice” into Citizens UK’s core agenda marked a significant achievement.
This outcome signifies that ORIT’s pilot project successfully facilitated the sustained emphasis on climate
change as a central issue within the priorities of Citizens UK.
For more information on the project, please visit the Citizens UK website
64
.
New climate leader in Greater Manchester, Rev Ian Rutherford: “I’ve always been
passionate about taking action on climate, but it’s never really been a priority at
Citizens UK until now. The training I did has galvanised local people to be ambitious
for change and to do something about it. There’s not only more local climate
campaigns happening now but a dedicated national team. I’m really excited about
what we can achieve.
Sustainable
Momentum
Stakeholder
Engagement
64
https://www.citizensuk.org/campaigns/climate-justice/
76ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Who?
Citizens UK 50,000
members.
How much?
5 regions
15 members of a
National Climate
Team
What?
Provided a grant to
support the delivery
of 5-part training
programme for local
civil society leaders,
providing them with
the necessary skills
to deliver effective
climate justice
initiatives in their
communities. This
project’s success also
resulted in Citizens
UK incorporating
“Climate Justice”
as a key priority in
their organisation’s
agenda
Impact Theme
Sustainable
momentum
Stakeholder
Engagement
Impact tracking
77ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
People
Impact Objective: Evaluate social considerations to mitigate risks and
promote a ‘Just Transition’ to clean energy.
Managing our impact on society
Investing in renewable energy has natural positive impacts on people and for the wider society by benefitting
the economy. By channelling capital towards “homegrown renewables” ORIT is also contributing to energy
security, preventing future energy crises resulting from reliance on unsustainable global fossil fuel markets.
It is also vital the Company mitigates any possible negative impacts and risks to people as the Company
invests, constructs, and operates our portfolio of renewable assets. ORIT has clear policies and governance
structures to achieve this. Some social factors that ORIT and our Investment Manager consider to be the
most important during due diligence and ongoing monitoring of assets include:
•
Health and safety
•
Diversity and inclusion
•
Promoting a Just Transition
(
workers, community and customers
)
ORIT also supports initiatives that contribute to solutions to engage communities and promote a “Just
Transition” to clean energy
(
see “People Initiatives” section below
)
.
7,827
Students benefitting from
social initiatives
(
2022: 396 students
)
169
Estimated FTE jobs created
7,8 49
Direct beneficiaries from the
projects funded through the
BizGive platform
(202 2: 7, 536)
UN SDGs
0
RIDDORS
(
or equivalent
)
(
2022: 1
)
78ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Health and safety approach
ORIT recognises its health and safety responsibilities and keeping people safe remains its highest priority.
ORIT has put arrangements in place with its Investment Manager to ensure that health and safety risks are
managed effectively.
Our Investment Manager employs specialist HSE consultants and additionally has employed a Head of
Health and Safety to ensure that health and safety procedures are embedded into our model of investing
and managing assets.
This integration is achieved through:
•
Technical Compliance Standards
•
Diligence and benchmarking of contractors
•
Audits and ongoing oversight
•
Continuous Improvement
Where minority stakes in businesses are held, the Investment Manager still tracks performance via Board
meeting attendance.
Our Investment Manager actively tracks and monitors various accident and incident classifications from
events where there is a statutory requirement to report to the UK Health & Safety Executive
(
RIDDORs
)
or
other local government bodies. This includes incidents classified as accidents, near misses, dangerous
occurrences, and general safety observations. Where accidents occur on overseas assets that would merit
reporting as a RIDDOR if they were to occur in the UK, we flag them as “RIDDOR-like” events. All notifications
of HSE incidents are investigated by the Investment Manager’s in-house asset management team and where
necessary the third-party HSE advisor and the Investment Manager ensure that out-sourced HSE managers
close out all incidents with root cause analysis and establish lessons learned and where necessary change
processes and procedures. Where weaknesses in underlying procedures and systems are identified, the HSE
advisor works with businesses to implement appropriate remedies.
RIDDORs Lost time injuries
(
>7 days
)
Near misses Personal injuries Minor equipment
damage incidents
0 2 14 10 first aid
23
The organisation’s safety performance during the year has been positive, with no significant risks to highlight. All
incidents were investigated, and appropriate actions were taken.
79ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Diversity and inclusion
Equality and wellbeing are fundamental to ORIT’s impact ambitions. This is reflected in our Company policies
and in the way that the Company operates externally, through understanding the approach that our third-party
providers take to diversity and inclusion, and suggesting ways to improve this wherever possible.
The Investment Manager provides directors to the underlying subsidiary companies and ensures diversity is
considered when appointing them.
Board Investment Manager
The Company’s Board is made up of
a complementary mixture of social
backgrounds, gender diversity and
ethnicity. The Company’ complies
with the FCA’s diversity targets on the
representation of women and ethnic
minorities:
•
At least 40% of the board should be
women.
•
At least one of the senior board
positions or Senior Independent
Director
(
SID
)
should be a woman.
•
At least one member of the board
should be from an ethnic minority
background excluding white ethnic
groups
(
as set out in categories used
by the Office for National Statistics
)
.
The Investment Manager shares ORIT’s values and places diversity and
inclusion at the heart of them, which is demonstrated through initiatives
implemented in 2023. These initiatives include:
•
Recruitment Enhancements: Established hiring guidelines and unconscious
bias training; diversified candidate pools through broader job advertising
and inclusive job descriptions.
•
Workplace Attractiveness: Updated parental leave policies for diverse
family structures; proactive monitoring of gender pay gaps.
•
Promotion Process Reforms: Revised promotion process for greater
transparency and decision-making diversity at the team level.
•
Workplace Adjustments: Implemented necessary adjustments and
encouraged open communication for supporting diverse workplace needs.
•
Focus on Neurodiversity: Established a neurodiversity group, planning
manager training on neurodiversity for 2024.
•
Internship Programs: Successful participation in the Octopus Energy
Equality Internship, leading to full-time roles for several interns.
80ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Promoting a “Just Transition”
A “Just Transition” refers to the equitable distribution of benefits in the shift to clean energy. ORIT actively
engages with workers, local communities and customers, focusing on job creation, community benefits and
fair access to green energy.
Strategy’s aim: Performance KPIs:
Workers –
Job Creation
Enhance socio-economic distribution and equity by supporting the
creation of decent jobs through ORIT’s partners and subcontractors.
This is achieved by their commitment to adhere to standards of equal
opportunities, workplace best practices, diversity, and inclusion,
coupled with a focus on promoting local employment opportunities.
•
169 estimated FTE jobs
supported
•
20% local
Community –
Engagement,
Voice and
Benefit
Empower local communities by establishing avenues for benefits such
as through community benefit schemes, educational engagement
with local schools via workshops and site visits, and support of local
charities. As ORIT’s portfolio expands, these impact partnerships are
designed to create a more significant and lasting impact across a
diverse range of beneficiaries. Applicability of community initiatives will
be determined on a portfolio-by-portfolio basis. Proactively engaging
with communities and stakeholders from the outset, ORIT aims to
secure social license for its investments, particularly in extending the
operational lifespan of its assets.
•
Over £600,000 per year of
community benefit funds
•
7,827 students benefitting
from social initiatives
•
7,8 49 direct beneficiaries
from the projects funded
through the BizGive
platform.
Customers
– Affordable
Green Energy
Deliver societal benefits by supplying affordable, clean energy to the
grid. This not only aims to lower energy bills but also to enhance energy
security in regions with ORIT’s assets.
•
354,880 Equivalent
number of homes powered
by ORIT’s assets
65
.
People initiatives
Alongside keeping people safe, ORIT considers its potential impact on people. People initiatives contribute to
solutions to engage communities and promote a “Just Transition” to clean energy. ORIT exhibits a variety of
social considerations across its assets and beyond, utilising the experience and approach developed by our
Investment Manager to maximise benefits. Projects undertaken in the year are outlined in the separately
published ESG & Impact Report.
65
Metric based on actual production generated by ORIT’s assets during the year.
81ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Case Study: Community Benefits at ORIT’s wind farms
ORIT’s wind farms collectively stand to provide over £600,000 a year to its local communities as part
of their community benefit funds. At the heart of ORIT’s community benefit programme, Cumberhead
and Crossdykes wind farms stand out for their significant annual contributions, amounting to £249,900
and £322,000 respectively. These funds are directed towards a myriad of community-centric projects
through open grantmaking, which includes support for local education, infrastructure, and environmental
stewardship.
Cumberhead
With an annual provision of £249,900, Cumberhead community benefit fund promises substantial support
over the site’s 30-year lifespan. This fund will benefit the communities within the South Lanarkshire Council
area, with 50% of the funds directly attributed to the Council’s Renewable Energy Fund and the remaining
50% available to community council areas of Coalburn and Lesmahagow through bi-annual award rounds.
September 2023 marked the fund’s inaugural round, and the fund saw four awardees from six applications,
disbursing c£45,000, which represents 40% of the year’s allowance for Coalburn and Lesmahagow.
The Cumberhead community benefit fund beneficiaries highlight the fund’s diverse impact:
•
Three Valleys Women’s Walking Football Club received funding for equipment and professional
coaching to support its aim of encouraging women into physical activity, enhancing mental
health, and building supportive social networks.
•
Lesmahagow Development Trust, awarded for infrastructure improvements at the Fountain
Community Centre, demonstrates the fund’s commitment to enhancing community facilities
and services.
•
OutLET: Play Resource was supported to employ a new staff member for its Youth Foresters
Programmes, promoting youth development and outdoor education.
•
Coalburn Men’s Shed received a grant towards running costs and equipment, showcasing the
fund’s impact in promoting mental and physical well-being through community engagement.
Crossdykes
The Crossdykes community benefit fund contributes £7,000 per installed megawatt annually, directly
benefiting the surrounding communities within the council areas of Eskdalemuir, Langholm, Ewes & Westerkirk,
Lockerbie, Middlebie & Waterbeck, and North Milk. This fund has three schemes to address a wide array of
community needs and has distributed £348,000 in 2023 alone.
The Open Grant Funding Scheme is dedicated to larger community projects across various sectors aimed at
enhancing community development and rural regeneration, combating poverty, advancing education and
health, and enriching lives through the arts, heritage, culture, and science. It promotes active participation
in sports, improves living conditions through recreational facilities, and supports environmental protection
efforts to combat climate change, benefit nature and animal welfare. The fund provides relief for those
affected by age, ill-health, disability, or financial hardship, a holistic approach to community support and
sustainable development.
Equality &
Wellbeing
82ESG & ImpactOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
An example is the £30,000 grant made to the D&G HandyVan project. This funding enabled the
charity, which aids vulnerable populations in Dumfries and Galloway by providing home repairs and
improvements, to extend its reach and efficiency through the purchase of a new van. This purchase
underscores the project’s commitment to aiding those in need while contributing positively to
climate action efforts. For more details, see here.
66
As well as the open grant scheme the Community Council Small Grants Scheme allocates up to £5,000 per
year to each community council within the benefit area, enabling them to swiftly respond to smaller local
needs.
The Education and Training Bursaries scheme offer £2,000 annually to each of the five community councils for
distribution as bursaries, aimed at improving access to education and training opportunities.
Saunamaa and Suolakangas
ORIT extended this voluntary initiative to its Saunamaa and Suolakangas wind farms in Finland in December
2023, contributing €30,000 to support local projects, a practice less common in Finland compared with the
UK. These funds will be distributed following the review and selection of successful applicants by a community
panel.
Together, these funding streams provide a holistic and responsive framework for community development.
The extension of such initiatives to Finnish wind farms underscores ORIT’s commitment to community
development beyond the UK, promoting a model for renewable energy projects to contribute positively to
local communities globally.
Who?
Communities near:
- Crossdykes
- Cumberhead
- Saunamaa and
Suolakangas
How much?
Annual
commitments of:
- £322,000
- £249,900
- €30,000
What?
- Funding that
supports local
needs and
priorities
- Shared benefits
with communities,
providing a just
transition
Impact Theme
Equality & Wellbeing
Impact tracker
66
Link: https://www.foundationscotland.org.uk/our-impact /case-studies/dg-handyvan-goes-electric-to-benefit-local-community
83Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Risk and Risk Management
Risk Appetite
The Board is ultimately responsible for defining the level and types of risk that the Company considers
appropriate. In the context of the Company’s strategy, risk appetite is aligned to the Investment Policy and
this provides the framework for how capital will be deployed to meet the Company’s investment objective.
The limits set out in the Investment Policy represent the amount of risk the Company is willing to take and
the constraints that the Board determines that the Investment Manager must adhere to on behalf of the
Company. This covers the principal risks the Company faces including, amongst other things, the level of
exposure to power prices, financing risks and investment risks. Beyond this, risk limits and tolerances are
monitored and set by the AIFM as part of the AIFM’s risk management services. These are documented in
the AIFM’s Risk Management Policy for the Company covering credit, liquidity, counterparty, operational and
market risks. Adherence to these risk limits is reported regularly to the Board through the quarterly AIFM risk
management report.
Principal risks and uncertainties
The Company has carried out a robust assessment of its principal and emerging risks and the procedures in
place to identify any emerging risks are described below.
Procedures to identify principal or emerging risks:
Well managed risks are key to generating long-term shareholder returns. The purpose of the risk management
framework and policies adopted by the Company is to identify risks and enable the Board to respond to risks
with mitigating actions to reduce the potential impacts should the risk materialise.
The Board regularly reviews the Company’s risk matrix, with a focus on ensuring appropriate controls are in
place to mitigate each risk. The experience and knowledge of the Board is important, as is advice received
from the Company’s service providers.
The following is a description of the procedures for identifying principal risks that each service provider
highlights to the Board on a regular basis.
1. Alternative Investment Fund Manager
(
“AIFM”
)
: The Company has appointed Octopus AIF Management
Limited to be the Alternative Investment Fund Manager of the Company
(
the “AIFM”
)
for the purposes of
UK AIFM Directive. Accordingly, the AIFM is responsible for the portfolio management of the Company
and for exercising the risk management function in respect of the Company. As part of this the AIFM has
put in place a Risk Management Policy which includes stress testing procedures and risk limits. As part
of this risk management function, the AIFM maintains a register of identified risks including emerging
risks likely to impact the Company. This is updated quarterly following discussions with the Investment
Manager and highlighted to the Board.
2. Investment Manager: Portfolio Management has been delegated by the AIFM to the Investment Manager.
There is a comprehensive due diligence process in place to ensure that potential investments are screened
against the Company’s objectives, and that financial and economic analysis is conducted alongside a full
risk analysis. Any potential transaction must be granted approval in principle
(
“AIP”
)
by the Octopus Energy
Generation Investment Committee
(
“OEGEN IC”
)
and the due diligence budget signed off by the Board.
Once due diligence and negotiations of final terms are substantially complete, the final proposal including
the risk analysis will be presented to OEGEN IC for a decision on whether the Company should proceed
with investment, subject to approval from the Board. The Investment Manager also provides a report to
the Board at least quarterly on asset level risks, industry trends and insight to future challenges in the
renewable sector including the regulatory, political and economic changes likely to impact the renewables
sector.
84Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
3. Broker: The Broker provides regular updates to the Board on Company performance advice specific to
the Company’s sector, competitors and the investment company market whilst working with the Board
and Investment Manager to communicate with shareholders.
4. Company secretary and auditors: Brief the Board on forthcoming legislation/regulatory change that
might impact on the Company. The auditors also have specific briefings at least annually.
Procedure for oversight
The Audit and Risk Committee undertakes a review at least three times a year of the Company’s risk matrix
and a formal review of the risk procedures and controls in place at the AIFM and other key service providers to
ensure that emerging
(
as well as known
)
risks are adequately identified and – so far as practicable – mitigated.
During the year, the Audit and Risk Committee have added additional principal risks covering the impact on
Company performance of asset sales
(
and other capital recycling
)
processes, and the impact on Company
performance of corporate M&A and other growth initiatives. The Company reviews the risk matrix on a
quarterly basis and revises risk scores as appropriate.
Principal risks
The Board considers the following to be the principal and other risks faced by the Company along with the
potential impact of these risks and the steps taken to mitigate them.
Economic, political and climate risks
Income and value of the Company’s investments may be affected by future changes in the economic and
political environment, alongside risks associated with climate change.
Inflation and
interest rates
The revenue and expenditure of the Company’s
investments are frequently partially index-
linked and therefore any discrepancy with
the Company’s inflation expectations could
impact positively or negatively on the
Company’s cashflows.
Changes in interest rates may affect the
valuation of the investment portfolio by
impacting the valuation discount rate and could
also impact returns on cash deposits and the cost
of borrowing.
In the event that actual inflation differs from
forecasts or projected levels, the profitability
of the Company may be impaired leading to
reduced returns to shareholders.
Increased inflation and a higher cost of living can
adversely impact investor appetite.
Inflation and interest rate assumptions are
reviewed and monitored regularly by the AIFM
and the Investment Manager in the valuation
process. Assumptions are set by the Valuations
Consistency Group and valuations approved by
the AIFM.
It is expected that a natural hedge may
occur where higher interest rates are also
accompanied by higher inflation rates due to
subsidies being inflation linked.
The Company can utilise interest rate swaps or
fixed rate financing to mitigate interest rate
risks.
MitigationRisk Potential Impact
85Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Foreign
currency
The Company’s functional currency is Sterling,
but some of the Group’s investments are based in
countries whose local currency is not Sterling.
Therefore, changes in foreign currency exchange
rates may affect the value of the investments
due to adverse changes in currencies.
The principal mitigation is through the
Company’s hedging policy which seeks to
minimise the volatility of cash flows in non-GBP
currencies. The RCF can also be drawn in
multiple currencies to allow the matching of
debt and the underlying assets.
The Investment Manager monitors foreign
exchange exposures using short and long-term
cash flow forecasts.
The Company’s portfolio concentrations and
currency holdings are monitored regularly by the
Board, the AIFM and the Investment Manager.
All FX hedges are held within the intermediate
holding companies.
Government
policy changes
The Company’s investments in Renewable Energy
Assets are remunerated by both government
support schemes and private PPAs – the terms
of these may be impacted by government
changes or policy or even terminated in certain
circumstances. This would adversely impact the
value of the Company’s investments.
The Company holds a diversified portfolio of
Renewable Energy Assets and so it is unlikely
that all assets will be impacted equally by a
change in legislation.
There is also strong public demand for support of
the renewables market to hit “net zero” carbon
emission targets.
Geopolitical
risks
Events in Ukraine and the impact of sanctions
placed on Russia and affiliated countries may
impact the target returns of the Company.
The Company engages third-party contractors to
oversee the day-to-day operations of the assets.
If any of these contractors are impacted by the
events in Russia and Ukraine, or by the current
sanctions imposed on Russia, this may impact
the performance of the assets, and ultimately
the target returns of the Company.
Assets located in nearby jurisdictions may be
impacted by the conflict.
The conflict may lead to increased volatility of
power prices and hence valuations. Heightened
power prices may lead to an increased risk of
political intervention to regulate prices or impose
windfall taxes.
The conflict may lead to an increased risk of
cyber attacks.
The Investment Manager undertakes extensive
due diligence on all counterparties prior to
conducting business with them and will fully
comply with all sanctions. As part of this
review, all counterparty due diligence has been
reviewed and confirmed that the Group’s current
counterparties are not materially impacted by
recent events or by the new sanctions.
The Investment Manager will remain agile to
the changing geopolitical environment and will
continue to evolve and reassess appropriate
mitigation strategies.
Mitigations for power prices as well as for cyber
security are described below.
MitigationRisk Potential Impact
86Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Risks
associated with
climate change
Climate related risks relate to transition risks and
physical risks.
The prominent transition risk relates to
oversupply of renewables over time, which may
cause downward pressure on long-term power
price forecasts setting lower capture prices,
including the risks associated with periods of
negative power prices and power price volatility.
This could ultimately lead to a shortfall in
anticipated revenues to the Company.
The prominent physical risks relate to long-term
changes to weather patterns, which could
cause a material adverse change to an asset’s
energy yield from that expected at the time of
investment.
Physical risks associated with acute and chronic
temperature change could lead to flooding,
storms, and high winds. This could damage
equipment and force operational downtime
resulting in reduced revenue capability and
profitability of the portfolio of assets.
The Investment Manager has engaged with
third party advisors on how climate related risks
are being modelled in long-term power price
forecasts. There are likely to be opportunities
associated with the transition to a low carbon
future including growth in the market,
government interventions and technology
advancements that could counterbalance
the transition risks of climate change on the
Company.
The Board and the Investment Manager
periodically assess the Company’s portfolio
of assets for potential transition risks within
the jurisdictions that it currently operates. The
Investment Manager works with third-party
asset managers to ensure an appropriate level
of equipment spares to minimise downtime
associated with damaged equipment.
There is growing demand for consistent,
comparable, reliable, and clear climate related
financial disclosure from many participants
in financial markets. The Board, AIFM and
Investment Manager have included TCFD as part
of the Company’s ESG & Impact Strategy.
Company: operational risks
Risk that target returns and Company objectives are not met over the longer term.
Deployment A deterioration of the investment pipeline may
impact the ability to commit and deploy capital
into suitable opportunities in the expected time
frame. Competition in the infrastructure market
remains strong which could limit the ability of
the Company to acquire assets in line with target
returns or incur abort costs where transactions
are unsuccessful.
Both deployment risks could ultimately impact
shareholder returns.
The Company has an experienced Investment
Manager with good presence and strong
relationships in the renewables market. The
investment mandate is diversified giving a broad
landscape of opportunities.
The Board and Investment Manager oversee
the investment pipeline and abort exposure and
frequently monitor its progress in relation to
Company targets. This risk naturally reduces as
the amount of capital to deploy falls. Low levels
of ‘dry powder’ currently and during 2023 have
meant this risk is and has been less relevant
recently.
MitigationRisk Potential Impact
MitigationRisk Potential Impact
87Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Capital
recycling
through asset
sales
Selling assets could have an impact on the
ongoing dividend target and other investment
policy limits. It could also result in the loss of
receipt of anticipated cash flows impacting
dividend cover.
Unsuccessful transactions could also result
in abort costs, and potentially also impact
Company reputation.
The Company has an experienced Investment
Manager within the sector and the Investment
team has a good understanding of the M&A
market and investor landscape. Certain assets
have been identified by the Investment Manager
as being potentially available and appropriate
for sale by the Company.
The Investment Manager has an Investment
Committee to approve asset sales in principle
and sign off transaction budgets. These costs
are reported to the board. Reliance is placed on
due diligence reports prepared by professionals
appointed by the Investment Manager and
therefore the Company could claim for losses if
necessary.
Reliance on
third-party
service
providers
The Board has contractually delegated to
third-party service providers day to day
management of the Company. A deterioration
in the performance of any of the key service
providers including the Investment Manager,
AIFM and Administrator could have an impact
on the Company’s performance and there
is a risk that the Company may not be able
to find appropriate replacements should the
engagement with the service providers be
terminated.
Each contract was entered into after full and
proper consideration of the quality and cost of
services offered, including the financial control
systems in operation in so far as they relate to
the affairs of the Company. All of the above
services are subject to ongoing oversight by
the Board and, where applicable, the AIFM and
the performance of the key service providers is
reviewed on a regular basis. The Board, through
the Management Engagement Committee
monitors key personnel risks as part of its
oversight of the AIFM and Investment Manager
and the Company’s key service providers
report periodically to the Board on their control
procedures.
Valuations Valuation of the portfolio of assets is based on
financial projections and estimations of future
results. Actual results may vary significantly
from the projections, which may reduce the
profitability of the Company leading to reduced
returns to shareholders.
The Investment Manager has significant
experience in the valuation of renewable assets
and conducts a quarterly valuations process.
The AIFM has a valuations committee separate
to the Investment Manager to provide
valuations consistency on macro assumptions
and to provide oversight and challenge to the
valuations.
The Board and AIFM review the valuations
provided quarterly and they are audited
annually.
Dividend cover and ratios monitored by the
Investment Manager and reported to the AIFM.
Risk Potential Impact Mitigation
88Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
ESG policy Material ESG risks may arise such as slave
labour in the supply chain, health and safety,
unfair advantage, bribery, corruption and
environmental damage. If the Company fails to
adhere to its public commitments as stated in
its ESG Policy and ESG & Impact Strategy this
could result in shareholder dissatisfaction and
adversely affect the reputation of the Company.
ESG is embedded in the investment cycle with
a formal ESG matrix including a minimum
target ESG score required for approval of any
new investments. Ongoing operational and
construction ESG risk management is reviewed
periodically by the Investment Manager, who
work closely with service providers on ESG and
impact standards reporting.
ESG Policy signed off and reviewed by the Board.
Conflicts of
interest
The appointment of the AIFM is on a
non-exclusive basis and each of the AIFM and
Investment Manager manages other accounts,
vehicles and funds pursuing similar investment
strategies to that of the Company. This has the
potential to give rise to conflicts of interest.
Board and counterparties conflicts.
The AIFM and Investment Manager have clear
conflicts of interest and allocation policies
in place. Transactions where there may be
potential conflicts of interest are overseen by
the Investment Manager’s conflicts committee,
an independent fairness opinion on valuation is
commissioned, and as with all transactions, the
Board has final approval rights. The Board, AIFM
and Investment Manager are responsible for
establishing and regularly reviewing procedures
to identify, manage, monitor and disclose
conflicts of interests relating to the activities of
the Company. These procedures are more fully
described in the Company’s prospectus dated
10 June 2021.
Conflict of interest policies in place both at
Board level and under the Listing Rules.
Board
effectiveness
and
compensation
Inappropriate or inadequate Board composition
left unidentified through a poor Board evaluation
process could lead to poor decision making and
adversely affect the reputation of the Company
or result in a financial loss.
Board compensation structures may encourage
risk taking that is not aligned to Company
strategy and risk appetite or may lead to
an inability to retain knowledgeable Board
members.
The Broker and Investment Manager were
involved in the initial selection of the Board.
The Nomination Committee is responsible for
ongoing monitoring of Board composition.
Board effectiveness is also reviewed externally
every 3 years.
External benchmark surveys are undertaken
on Board remuneration via the Remuneration
Committee and ratified at the Annual General
Meeting.
The FCA announced new rules for listed
companies in the UK in July 2022 to report
on the diversity of Boards and Executive
Management, with new board targets on a
comply or explain basis. The Board composition
now meets the FCA criteria.
Risk Potential Impact Mitigation
89Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Trading at a
discount to NAV
The Ordinary Shares may trade at a discount to
NAV and shareholders may be unable to realise
their investments through the secondary market
at NAV which could lead to a loss of market
confidence in the Board and/or Investment
Manager.
A failure to adapt to changing investor demands
could reduce the demand for shares and widen
the discount further.
The Company’s Broker monitors the market
situation and reports regularly on the status,
along with demographics and changes in
shareholder register. Regular shareholder
communications and marketing roadshows
undertaken to ensure updated information is
available to the market/shareholders. The Board
has put in place a discount control policy and
has the option of a share buyback if the Board
believes it to be in shareholders’ interests as a
means of correcting any imbalance between
the supply of and demand for the Ordinary
Shares. The Company also has the ability to hold
treasury shares to mitigate this risk.
Corporate
M&A and
other growth
initiatives
Unsuccessful corporate M&A activity could
impact Company reputation, and lead to abort
costs in the event of an unsuccessful transaction.
External growth activity is partially driven by
external market factors.
The Company has an experienced Investment
Manager within the sector meaning that
Investment team has a good understanding
of the M&A market and investor landscape.
In addition, the Company’s broker provides
independent support for corporate M&A activity
taking into account target performance,
investor sentiment and market conditions.
Cyber security Attempts may be made to access the IT systems
and data used by the Investment Manager,
Administrator and other service providers
through a cyber-attack or malicious breaches of
confidentiality that could impact the Company
reputation or result in financial loss.
Cyber security policies and procedures
implemented by key service providers are
reported to the Board and AIFM periodically to
ensure conformity. The Investment Manager has
a robust 3 lines of defence risk model in place in
place to implement, check and audit technology
controls. Thorough third-party due diligence is
carried out on all suppliers engaged to service
the Company. All providers have processes in
place to identify cyber security risks and apply
and monitor appropriate risk plans.
Portfolio of assets: operational risks
Risk that the portfolio underperforms and, as a result, the target returns, and Company objectives are not met over the longer-term.
Power prices The income and value of the Company’s
investments may be adversely impacted by
changes in the prevailing market prices of
electricity and prices achievable for off-taker
contracts. There is a risk that the actual prices
received vary significantly from the model
assumptions, leading to a shortfall in anticipated
revenues to the Company.
The Investment Manager has a specific
Energy Markets Team that monitors energy
price forecasts and puts in place mitigating
strategies. This could be through the use of
short-term PPA contracts to fix the electricity
prices where possible, or to hedge the exposure
of fluctuating electricity prices through
derivative instruments. Model assumptions are
based on quarterly reports from a number of
independent established market consultants
to inform on the electricity prices over the
longer-term.
Risk Potential Impact
Mitigation
Risk Potential Impact
Mitigation
90Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Construction Construction project risks associated with the
risk of inaccurate assessment of a construction
opportunity, delays or disruptions which are
outside the Company’s control, changes
in market conditions, and the inability of
contractors to perform their contractual
commitments could impact Company
performance.
The Investment Manager monitors construction
carefully and reports frequently to the Board
and AIFM. The Investment Manager undertakes
extensive due diligence on construction
opportunities and has in place clear approval
processes for any material construction cost
overruns and contingency spend.
Development Development project risks associated with delays,
increases in costs or ultimate failure to deliver the
expected assets to construction ready status.
The Company’s maximum exposure to
development is limited to 5% of GAV.
The Investment Manager monitors progress of
development projects carefully and ensures
all costs are managed appropriately. A clear
approval processes is in place for any material
project cost overruns and contingency spend.
Cost and progress analysis of development
projects is reported frequently to the Board and
AIFM. The Investment Manager also monitors
exposure to any one developer to ensure this is
kept within reasonable limits.
Asset-specific
risks, including
production and
HSE risks
Circumstances may arise that adversely affect
the performance of the relevant renewable
energy asset. These include health and
safety, grid connection, material damage
or degradation, equipment failures and
environmental risks.
The Company’s experienced Investment
Manager oversees and manages asset and
site level issues. Third-party O&M contractors
are engaged to carry out regular preventative
maintenance and a level of spares is maintained
from diversified manufacturers. The Investment
Manager uses established relationships with
relevant DNOs and works closely with them to
maintain grid connection.
A SH&E Director is employed by the Investment
Manager to oversee and advise on the HSE
system for renewable assets. The Company has
in place insurance to cover certain losses and
damage.
Contractor
default risk
In the current economic climate, there is also
an increased risk that service providers default
on their contractual obligations or suffer an
insolvency event.
The Company and the Investment Manager
will seek to mitigate the Company’s exposure
to contract default risk through carrying out
qualitative and quantitative due diligence on
counterparties.
Risk Potential Impact
Mitigation
91Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Compliance and regulatory risks
Failure to comply with relevant regulatory changes, tax rules and obligations may result in reputational damage to the Company or have
a negative financial impact.
Noncompliance
with FCA, Listing
Rules, UK AIFM
Directive, MAR
and investment
trust eligibility
conditions
Failure to comply with any relevant regulatory
rules including Section 1158 of the Corporation
Tax Act, the rules of the FCA, including the
Listing Rules and the Prospectus Rules,
Companies Act 2006, MAR, UK AIFM Directive,
Accounting Standards, GDPR and any other
relevant regulations could result in financial
penalties, loss of investment trust status, legal
proceedings against the Company and/or its
Directors or reputational damage.
The Board monitors compliance and regulatory
information provided by the Company
Secretary, the AIFM and Investment Manager
on a quarterly basis and the assessment of
regulatory risks forms part of the Board’s
risk management framework. All parties are
appropriately qualified professionals and ensure
that they keep informed with any developments
or updates to the legislation.
Financial risks
Various types of risk associated with financing and liquidity. Further financial risks are detailed in Note 16 of the financial statements.
Risks associated
with borrowing
can impact
on Company
performance
The Company’s investment policy involves the
use of long-term and short-term debt. The use
of leverage may increase the volatility of the
Net Asset Value, may significantly increase the
Company’s investment risk and could lead to an
inability to meet financial obligations.
The Company may be unable to obtain
borrowing facilities at appropriate levels
impacting returns.
Risks include refinancing risk, covenant
breaches, poor management of assets and
liabilities, over-gearing and possible enhanced
loss on poor performing assets.
The Board monitors debt covenants, gearing
limits appropriate to the Company and reviews
any debt facilities before financial close.
Portfolio allocations are monitored on an
ongoing basis by the AIFM to ensure compliance
with borrowing policy and limits stated in the
investment policy.
The Company has the ability to enter into
hedging transactions in relation to interest
rates for the purpose of efficient portfolio
management to protect the Company from
fluctuations of interest rates. Read more above
in interest rate, currency and power price risks.
Risk Potential Impact
Mitigation
Risk Potential Impact
Mitigation
92Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Task Force on Climate-related Financial Disclosures
(
“TCFD”
)
The TCFD, established in December 2015 by the Financial Stability Board, was tasked with reviewing how the financial sector could
take account of climate related issues. In 2017, the TCFD published its recommendations for consistent climate-related financial risk
disclosures across Governance, Strategy, Risk Management, and Targets & Metrics. Eleven recommendations across these four pillars
were prescribed for companies to provide information to investors, lenders, insurers, and other stakeholders. The TCFD recommends
that all organisations provide climate-related disclosures in their annual report and accounts, providing a framework to help companies
assess the risks and opportunities associated with climate change.
Following this, the Financial Conduct Authority
(
“FCA”
)
issued a rule, effective for periods beginning on or after January 2021, for UK
premium listed companies to start to report against the TCFD, with other companies to follow. Whilst not currently mandated to make
a TCFD disclosure, being excluded as an Investment Trust, ORIT supports the TCFD’s aims and objectives and has decided to voluntarily
report in line to adopt best practice disclosures. Material climate-related financial disclosures can help support investment decisions
as we move towards a low-carbon economy. The Company is acutely aware of the risks of climate change and through its investment
mandate, believes it is well placed to contribute to solutions and harness the opportunities that arise from a transition to net zero.
However, no company is isolated from climate change, and the disclosures below outline the climate-related risks ORIT faces.
Statement of Compliance
The Company is pleased to confirm that it has included climate-related financial disclosures aligned with the four recommendations
and the eleven recommended disclosures provided in the TCFD’s 2021 report ‘Implementing the Recommendations of the Task Force on
Climate-related Financial Disclosures’, which included additional guidance for Asset Owners and Asset Managers.
The following table maps the TCFD recommended disclosures to the sections of the Company’s TCFD report.
TCFD disclosure recommendations covered: Section Found:
Governance a
)
Describe the Board’s oversight of climate-related risks and
opportunities.
Ensuring accountability and
responsibility by board and
management
b
)
Describe management’s role in assessing and managing climate-
related risks and opportunities.
Ensuring accountability and
responsibility by board and
management
Process for identifying, assessing
and managing climate-related
risks
Strategy a
)
Describe the climate-related risks and opportunities the organisation
has identified over the short, medium and long-term.
Understanding impact of
climate change across different
timescales and scenarios
b
)
Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial planning.
c
)
Describe the resilience of the organisation’s strategy, taking into
consideration different future climate scenarios, including a 2ºC or
lower scenario.
Risk
Management
a
)
Describe the organisation’s processes for identifying and assessing
climate-related risk.
Process for identifying, assessing
and managing climate-related
risks
b
)
Describe the organisation’s processes for managing climate-related risk.
c
)
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall
riskmanagement.
Metrics &
Targets
a
)
Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk management
process.
Measuring and managing climate
impact
b
)
Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas
emissions, and the related risks.
c
)
Describe the targets used by the organisation to manage climate-
related risks and opportunities and performance against targets.
93Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Ensuring accountability and responsibility by board and management
Oversight and management of climate-related risks and opportunities is integrated within the Governance framework of the Company,
illustrated in the diagram below.
The ORIT Board has full responsibility for managing the Company. On behalf of the Company, the Board has appointed Octopus AIF
Management
(
“OAIFM”
)
as the Alternative Investment Fund Manager
(
“AIFM”
)
. Whilst overall risk management of the Company is
retained by OAIFM, portfolio management has been delegated to Octopus Energy Generation
(
OEGEN
)
asthe Investment Manager.
Climate risk analysis and management falls within the scope of portfolio management on a day-to-daybasis.
Figure 24: Governance Framework of the Company
Board ORIT Board of Directors
Responsible for overall strategic direction of the Company and final investment decisions
ORIT Audit and Risk Committee
Reviews and monitors the Company’s approach to managing the financial and operational risks including
those associated with climate change
AIFM Board AIFM Board
Responsible for overall risk management oversight, including climate related risks
Investment
Manager
governance
boards and
management
structures
OEGEN
Investment Committee:
Responsible for assessing
climate-related risks
associated with
investment decisions.
OEGEN
Asset Board:
Responsible for
assessing, monitoring,
and managing climate-
related risks associated
with ongoing asset
management.
ORIT Customer
Board:
Made up of Lead
Managers and OEGEN
Directors and responsible
for day-today
implementation of the
Investment Strategy. This
includes risk analysis and
advising the Board on
strategic opportunities
and risks.
OAIFM Valuation
Committee:
Responsible for
approving the value
of investments held
by funds, including
sensitivities to
assumption changes
OEGEN ESG team
Lead by OEGEN Head of Funds and Sustainability, responsible for development of the ESG & Impact
Strategy, considering climate-related risk management.
The Company considers climate-related risks and opportunities as an integrated element of the Company’s strategy. The nature of the
Company’s business model is to invest in renewable energy assets, with a core sustainability objective of accelerating the transition to
net zero through its investments. Investing in renewable energy enables the transition to clean energy to reduce climate change and
makes a direct contribution to the prevention of a 4-degree scenario.
The Board remains agile to respond to emerging issues and opportunities. In particular, the Company benefits from the significant climate
related expertise of Board member James Cameron and this, alongside the Investment Manager and broader industry expertise through
the Octopus Energy Group, informs and educates the Board so that decisions can be made on the short, medium and longer-term
strategy of the Company. The Board also reviews and approves the Company’s ESG & Impact Strategy annually which includes climate-
related KPIs, metrics and targets which are reported on in both the Interim and AnnualReport.
94Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The Board meets quarterly, and the Audit and Risk Committee
(
“ARC”
)
meets at least three times a year to discuss risks, including
those relating to climate change. The Board has formally recognised climate change as an emerging risk and instructed the AIFM and
Investment Manager to integrate this within the existing risk management framework and transaction due diligence. The Investment
Manager’s quarterly report to the Board includes analysis of emerging market risks and transition opportunities alongside an update on
the implementation of the ESG & Impact Strategy. Investment strategy decisions and material risks are discussed with the Board. The
Board also receives regular market updates from its Broker to remain informed about developments in the market and how peer group
companies who also invest in renewable energy are responding to the emerging risks and opportunities related to climate.
The Investment Manager has in place a number of management committees and governance forums to assess risk, including those that
are climate related on a periodic basis.
Investment Committee: Every investment is assessed for climate-related risks and these are evaluated and presented in the investment
committee paper for final transaction approval. Each opportunity is subject to formal approval by the Board.
Customer Board: Responsible for monitoring climate-related government policy and physical changes in the climate to inform the
investment strategy and the materiality of risks faced by the Company’s portfolio of investments.
Valuation Committee: The most material impact on valuation of renewable energy assets are usually wholesale energy prices and
operational performance. The valuation committee is responsible for reviewing these assumptions and the sensitivities associated. Both
energy prices and operational performance could be impacted by climate related risks and opportunities and is therefore a consideration
as part of the valuation process.
Asset Board: After making an investment, should any material risks
(
including climate-related risks
)
be identified by the Asset Board,
a mitigation strategy would be agreed and the Asset management team would be responsible to oversee the implementation of the
strategy by third-party asset managers. The Investment Manager has in place a Stewardship and Engagement Policy which outlines its
active approach to asset management.
In addition to these forums, the OEGEN Head of Funds and Sustainability leads on the ESG & Impact Strategy and is supported directly by
two other employees. This includes monitoring of climate-related issues. The Investment Manager also receives market updates regularly
through its networks and membership to the Institutional Investors Group on Climate Change “IIGCC”. This enables the Investment
Manager to remain informed about developments in the market and how peer group companies
(
who also invest in renewable energy
)
are responding to the emerging risks and opportunities related to climate.
The Investment Manager maintains a risk register which is formally reviewed quarterly by the AIFM and the risks within the register are
assessed for inherent and mitigated impact and likelihood. Climate risk is evaluated as part of our existing risk management processes
as outlined in the next section.
Process for identification, assessment, management and integration of climate-related risks
and opportunities.
The Company’s investment strategy is aligned to accelerate the transition towards a net zero future and given the nature of the business,
this is thought about by management on a day-to-day basis, not just at formal governance committees. The OEGEN ESG team has also
developed a formal ESG & Impact Strategy for the Company, which has been approved by the Board.
Climate change considerations apply at the acquisition stage of investments
(
throughout the deal origination and due diligence processes
)
and at the portfolio management phase
(
asset management activities, monitoring, and reporting
)
. Day-to-day management of the
portfolio is the responsibility of Investment Manager with services provided by the Company’s third-party asset managers and O&M
service providers.
Given the existing close relationship between renewable energy infrastructure and climate, OEGEN, through its energy markets
professionals, already monitors climate-related government policy and physical changes in the climate to inform the investment
strategy and the materiality of risks faced to the portfolio of investments.
95Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Climate change covers various risks, which to a large extent are not foreign to the Company. These risks can be grouped as follows:
•
Physical, deriving from possible material impacts on the Company’s assets as a result of the future evolution of climate variables.
These are related to changes in temperatures, sea levels, precipitation, irradiance, wind speed and an increase in extreme weather
events both in terms of frequency and intensity.
•
Transition, associated with all the risks that may appear in the world’s decarbonisation process, such as regulatory changes, market,
technological and reputational risks, and changes in demand.
Climate-related risks are considered at two levels:
•
At the Company level in relation to transition risks that could impact the overall success of the Company, and
•
At the investment level, where specific physical or market related transition risks are more likely to have a bigger impact.
At a Company level, the Investment Manager has undertaken a risk assessment in relation to climate-related risks and the outcomes of
this are presented in section “Building climate resilience into our business strategy”. On an ongoing basis, changes to the risk profile of
the Company which are most likely to be sensitive to climate change are:
•
Existing and changing government policy and regulations
•
Technology changes
•
Power market changes
Each of these risks is evaluated for inherent and mitigated impact and probability in the Company’s risk register demonstrating relative
materiality to the Company. In addition, sensitivities to significant changes in power prices or production of assets are presented quarterly
to the Investment Committee and Valuations Committee through valuation papers that model the long-term valuation of assets based
on updated assumptions based on the latest information.
It must be recognised that financial projections are based on models with a large number of underlying assumptions, in particular, power
price forecasts and yield estimates. Whilst the Company utilises several external advisors to produce and validate these assumptions,
financial forecasts and budgets are still subject to risks associated with the accuracy of these assumptions. For example, power price
curves are largely based on historical meteorological data which may not be as applicable under a climate change scenario. The
Investment Manager will continue to explore methods to improve how they quantify the impact of physical risks and opportunities on
the portfolio while also integrating transition risks and opportunities within the long-term forecasting of the valuation process.
At an investment level, transition and physical risks/opportunities are considered throughout the acquisition process. The Investment
Manager has incorporated questions into the ESG matrix to prompt due diligence on assets, requiring the review of natural hazards in the
region where an asset is located, using the ThinkHazard and Climate Scale tools, and in depth technical due diligence by independent
technical advisors in line with the EU Taxonomy’s “do no significant harm” to Climate Change Adaptation criteria. Results are presented
in the investment committee paper to both the Investment Committee for investment approval and ultimately to the Board for final
approval to drawdown funds from the Company to enter into the transaction.
96Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Case Study 1: Example of evaluating a prospective investment
Method of assessment:
A climate risk assessment was completed for Crossdykes wind farm in 2022 in line with the IPCC modelling recommendations.
This was completed to understand the climate change resilience of the asset prior to investment. The assessment considered
different potential future climate change scenarios
(
RCP4.5 and RCP8.5 scenarios
)
, covered the expected lifespan of the
asset and compared the relative change to baseline historical periods.
Risk results:
Minor and low climate-related risks were identified for changing temperatures, heat stress, precipitation, floods and
wildfires. Medium risks were identified for average wind speeds and extreme wind speeds under each scenario. The modelling
suggested both an upward and downward trend in average wind speeds, with orders up to 6%.
Actions carried out before investment approval:
Further sensitivities on yield were carried out and presented to the Investment Committee. This was done to illustrate the
potential impacts of an upward and downward trend in average wind speeds. This included sensitivities where:
•
Energy yield decreased by 1% vs base case
•
Energy yield decreased by 5% vs base case
•
Energy yield increased by 3% vs base case
Suggested mitigants for extreme wind speeds included control optimisation for the turbines, to reflect changing wind
speed profiles and the overall loading characteristics of the turbine. The contingency budget was deemed sufficient to
cover any potential additional costs.
After making an investment
(
where assets could be in development, construction or operation
)
the OEGEN Asset Board is responsible
for ensuring that each investment adheres to the relevant fund ESG policy. Should any material risks
(
including climate-related risks
)
in the portfolio be identified by the OEGEN Asset Board, a mitigation strategy would be agreed, and the Investment Manager’s Asset
Management team would be responsible to oversee the implementation of the strategy by our third-party asset managers. Asset
management plans are created to meet/exceed ESG requirements, and the Investment Manager commits to regularly reviewing and
monitoring our external service providers.
Building climate resilience into our business strategy
The transition to a lower carbon future is ingrained within the Company’s investment strategy. As such, the Company is well positioned
to take advantage of the investment opportunities that arise from this transition– over the short, medium and long-term. The current
average remaining asset life in the portfolio is 27.8 years and therefore a long-term view is required on the risks and opportunities.
However, the pace of change is accelerating, and it is difficult to predict how much change will occur in what time period. For the
purposes of climate risk analysis, the Company defines short-term as the next 5 years, the medium-term as the next 5-15 years and the
long-term beyond that. The appropriateness of the time horizons will continue to be evaluated each year by the Board.
The speed and efficiency of the transition will have a notable effect on the performance of the Company. If global temperature change
is to be limited to below a 2-degree increase from pre-industrial levels by 2100, it is expected there will need to be significant intervention
from governments, regulators, and the market. Given the Company’s investment mandate, there is a direct correlation between
transition to a low carbon future and the size of the investment opportunity over the long-term.
If temperatures increase beyond 2-degrees, the physical effects of climate change will be more severe, creating additional risks for the
infrastructure that the Company acquires.
The Company has explored scenario planning to determine which climate-related risks could have a material financial impact on the
Company. The Company has considered potential impact on strategy, portfolio investments and financial planning across different
timeframes
(
short, medium, long-term
)
and climate scenarios in Tables 1a, 1b and 1c. More detail on the potential physical risks is in the
“Understanding the Company’s physical climate risks” section.
97Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Climate-related risks and opportunities on balance provide more opportunities to the Company than risks and the Company is likely to
benefit from a 1.5/2-degree scenario more than the 4-degree scenario pathway. The investment mandate and philosophy are driven
by action to avert climate change and harness opportunities for investors. The political and societal tailwinds should support the
Company’s continued success and the Company should welcome additional regulations to drive action to prevent climate change. The
Investment Manager believes the Company is well positioned to respond to these either through its core mandate or through adjusting
its Investment Strategy over time to best achieve the pathway to net-zero and continue to deliver investment returns.
There are a number of risk mitigation strategies that the Investment Manager can utilise to mitigate climate-related risks to the Company.
These are summarised as:
•
Hedge and fix pricing, maintaining diversification of revenue sources between merchant, fixed offtake, corporate and government
sources of income
•
Diversify the portfolio across technologies, geographies and development stage
•
Seek strategic opportunities from emerging markets and technologies
•
Invest in developers to provide proprietary pipeline of assets to avoid competitive transaction processes
•
Put in place appropriate levels of insurance for assets
•
Source appropriate levels of equipment spares to minimise downtime associated with damaged equipment
•
Move to renewable energy electricity import tariffs
•
Active management and engagement with asset managers, O&M contractors and portfolio companies on climate-related issues,
risks and opportunities
•
Work with policy makers and regulators to educate and influence policy and frameworks to accelerate the transition to a clean energy
future and actively engage with stakeholders and communities to mitigate resistance to Renewable EnergyAssets
Overall, as previously noted, the Asset Board is responsible for day-to-day risk management of portfolio assets. Should any material
risks
(
including climate-related risks
)
in the portfolio be identified, a mitigation strategy would be agreed amongst the Asset Board and
the Asset Management team would be responsible to oversee the implementation of the strategy by our third-party asset managers.
Risks and opportunities identified across different timescales and scenarios
Table 1a, 1b, 1c: Impacts of Climate-related Risks and Opportunities on Strategy, Portfolio Investments and Financial Planning
across the
(
a
)
short,
(
b
)
medium and
(
c
)
long-term.
Legend
Positive impact
Positive impacts on the Company which are estimated to potentially cause increases in performance of
more than 5%
(
revenue increase, cost reduction NAV increase, decreased cost of capital
)
.
Neutral impact Impacts that are unlikely to have a material impact on the Company
(
potential to cause an increase or
decrease in performance between -5% to 5%.
Negative impact
Negative impacts on the Company that are estimated to potentially cause decreases in performance of
more than -5%
(
revenue decrease, cost increases NAV decrease, increased cost of capital
)
.
1.5/2ºC This scenario requires an acceleration of the pace of change and bigger commitments to action.
4ºC This is in line with business as usual
(
BAU
)
, if pace of change remains as it is today in line with current
policies.
FPI Financial planning impact
SI Strategic impact
PII Portfolio investments impact
98Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
1a: Short-term
(
0-5 years
)
There is little difference in the risks and opportunities in the short-term between the given scenarios, as too little time has occurred
to meaningfully determine the pathway. All efforts in the short-term will be focused on driving towards a 1.5/2-degree scenario.
Consequently, in the short-term, we consider a higher likelihood of transitional risks and opportunities compared to physical changes.
Risks
(
R
)
and opportunities
(
O
)
Potential impact seen given the scenario
Type 1.5/2ºC 4ºC
(
O
)
Significantly increased
investment opportunity
SI
Government policies across Europe have shown that renewable energy is key in decarbonising the energy sector. Energy
security concerns are also leading many countries to reduce their reliance on other fossil fuel rich countries for their energy.
Instead, countries are securing their energy by building out their country’s renewable energy capacity. The International
Energy Agency reports that clean energy investment could be on course to exceed $2 trillion per year by 2030, an increase of
over 50% compared to 2022.
Delivery on these ambitions requires a significant increase in the pace of investment into renewable energy, all of which leads to
a growth in the Company’s investment opportunity.
The Company is well placed to be agile and respond to emerging investment opportunities and access to increased levels of
capital through its diversified investment approach as well as new technologies. The growth in the Company’s investment
opportunity is expected in both scenarios but we expect a larger growth under a 1.5/2ºC scenario.
(
O
)
Increased product and
services availability
FPI
The Company has an opportunity to take advantage of the products and services that many businesses may start to offer that
give preferential rates to ESG or sustainability-linked investments and businesses
(
for example ESG-linked insurance and ESG
linked credit facilities
)
.
(
R
)
Competition risk remains
as the Company develops its
proprietary pipeline
SI & FPI Neutral
The main risk in the short-term is an increasing volume of capital looking to deploy into renewables. Competition for assets in
the Company’s key geographies remains strong.
The Investment Manager’s strong networks and experience has allowed the Company to continue to acquire assets at attractive
valuations relative to the market. The Company has responded to this increased competition by introducing a small allocation
to developers and assets at the development stage. This gives the Company access to a proprietary pipeline of assets into which
it can invest at the construction-ready stage, mitigating competitive asset price risks and protecting investor returns.
(
R
)
In year variability in weather
patterns or acute weather events
FPI Neutral
This could directly impact solar and wind assets. This could lead to underperformance or overperformance of specific assets in
the portfolio within specific years and in-year captured power prices.
As shown by the analysis laid out on page 65 of the 2022 annual report, long-term wind speeds are not expected to materially
change as a result of climate change, even under a 4-degree scenario where we expect there to be an increased level of physical
risks. However, in-year variability could lead to underperformance or overperformance of the portfolio within specific years and
in-year captured power prices.
For solar, increased irradiance results in increased production, but as temperatures increase, the efficiency of solar panels
decreases. Climate risks modelling for the Company’s solar assets suggests that long-term changes in temperature are unlikely
to have a material impact on solar yield.
This could impact in-year distributions, but unlikely to impact longer term valuations. Increasing variability may discourage
investors from investment where they seek long-term predictable returns. The Investment Manager mitigates the impact of
physical climate risks on the portfolio by diversifying the investments’ phase, technology, and geography. This diversification is
expected to provide the portfolio returns added protection and durability to physical climate risks compared to that of a more
restricted and unvaried portfolio.
Diversification of the portfolio means this risk is assessed as neutral.
99Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
1b: Medium-term
(
5-15 years
)
There may be both transition risks and opportunities in the 4-degree scenario, depending on governmental and societal response. In the
medium-term under a 4-degree scenario, there will either be a lack of investment into climate change mitigations
(
transition risk
)
or a
lack of effectiveness of the existing policies creating further drive for renewable energy investment
(
opportunity
)
.
Risks
(
R
)
and opportunities
(
O
)
Potential impact seen given the scenario
Type 1.5/2ºC 4ºC
(
O
)
Mandate expansion SI
As new technologies arise and become investable
(
for example battery and green hydrogen technologies
)
, this may provide
the Company with an opportunity to broaden its investment mandate to take advantage of these emerging investment
opportunities as the technologies mature.
(
O
)
Electrification PII & FPI
Increasing demand for electricity through electrification across all industries continues to generate vast investment
opportunities to increase the global capacity of renewable energy generators. Increasing demand supports the power price for
electricity and mitigates power price cannibalisation risk.
(
O
)
Improving existing asset
valuations
PII & FPI
Government policies aimed at the transition to net zero may present opportunities for the Company by making it more likely/
easier to:
•
Acquire asset life extensions on existing sites.
•
Acquire and invest in co-located battery storage.
Technology advancement may bring down costs for construction, spares and repowering. Repowering would increase the
useful life and valuation of operational assets that were starting to approach end of life. We expect these benefits to be more
pronounced under a 1.5/2-degree scenario.
(
R/O
)
Operational Expenditure FPI Neutral Neutral
Implementation of carbon pricing and taxation could impact companies within the supply chain. This may lead to price
increases and increased costs for constructing assets, ultimately resulting in reduced financial returns from investments.
On the other hand, technology advancement may bring down costs for construction, spares and repowering. Considering both
the potential positive and negative effects, the Investment Manager has classified this risk as neutral.
(
R
)
Increased in-year variability in
weather patterns
PII Neutral
In the medium term it is expected that this risk becomes more pronounced. In a 4-degree scenario this could become negative.
(
R
)
Acute weather PII Neutral
Higher frequency or severity of weather-related events such as winter storms, surge floods, hail and wildfires. Exposure to
physical risks needs to be monitored across the portfolio and assessed for each investment opportunity, for example through
diligence of asset design, avoiding investments in high-risk assets, spares programmes and insurance cover. See Figure 25 for
more information. We expect on balance these will not materially increase in the medium-term.
Neutral /
100Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Risks
(
R
)
and opportunities
(
O
)
Potential impact seen given the scenario
Type 1.5/2ºC 4ºC
(
R
)
Potential regulatory and
financial risk
FPI
Neutral
Where investments become dependent on government interventions, this could represent increased regulatory or financial
risks for the Company. It is difficult to predict whether these will on balance have a positive or negative impact on the portfolio
investments.
(
R
)
Power-price volatility FPI Neutral Neutral
In the medium- to longer-term, as fixed revenue and subsidy regimes expire, assets will be subject to power price market risks.
As renewable energy represents an increased proportion of electricity generation, there is a risk that there will be increased
fluctuations in power prices due to the intermittent nature of generation from solar and wind assets.
Considering the lifetime of the Company’s assets, the most material drivers on power price are those that are already
considered in the reference case, for example the commodity prices – CO2 cost, gas cost, and technology costs. The impact
of physical changes in climate on EU power prices is relatively small. For example, Baringa’s analysis on page 65 of ORIT’s 2022
annual report suggested that in 2035, commodity prices impact revenue +/- 32%, whereas weather variation impact revenue
+/- 5%.
Under both scenarios, we continue to use updated power price curves to ensure that the valuations consider the most material
drivers. The risk is managed by monitoring wholesale energy price and reacting appropriately, for example by implementing
price hedges, fixed PPAs and portfolio diversification. We also expect this risk to be mitigated in the medium term through the
introduction of more grid-supporting infrastructure like co-located storage. As a result, the risk has been classified as neutral.
Long-term
(
15+ years
)
In the long-term, the scenario will have a larger impact on the scale of the risks and opportunities presented. Under a 1.5/2-degree
scenario, governmental measures have started to work. Taking advantage of the investment opportunity will be required to keep pace
with the increased demand for renewables. Under a 4-degree scenario, more dramatic efforts to reverse the effects of climate change are
expected to be made, leading to an increase in the Company’s transitional opportunities and risks. The realisation of the most significant
physical risks are also expected.
Risks
(
R
)
and opportunities
(
O
)
Potential impact seen given the scenario
Type 1.5/2ºC 4ºC
(
R
)
Power-price uncertainty FPI Neutral Neutral
Transition risks can arise from unexpected changes to government policies. A faster than forecast transition to a global
renewable energy supply would increase the penetration of zero marginal cost electricity with gas no longer setting the price
for electricity. This additional ‘price cannibalisation’ could result in generating assets selling their power for less than forecast at
investment.
The Investment Manager utilises a blend of two independent and widely used market consultants when forecasting long-term
cash flows and valuations of Renewable Energy Assets. Power price risk is factored in proprietary models developed for portfolio
monitoring and valuation, with quarterly evaluations of sensitivities based on a +/- 10% parallel shift in power price forecasts.
These forecasts closely align with the 1.5/2-degree scenario and consider governments’ net zero commitments and policies.
Therefore, valuations are based on a high transition risk scenario, ensuring their relevance throughout the transition to net
zero. In a 4-degree scenario, slower build-out and less effective interventions are expected. Further, hedge and fix pricing,
maintaining diversification of revenue sources between merchant, fixed offtake, corporate and government sources of income
help mitigate power-price risk.
Financial projections are based on models with a large number of underlying assumptions, in particular, power price forecasts
and yield estimates. Whilst the Company utilises several external advisors to produce and validate these assumptions and
they, in turn, use a number of different climate models, The Company’s financial forecasts and budgets are still subject to
climate-related risks associated with the accuracy of these assumptions.
101Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Risks
(
R
)
and opportunities
(
O
)
Potential impact seen given the scenario
Type 1.5/2ºC 4ºC
(
R
)
New technology uncertainty FPI Neutral Neutral
Investments into newer technologies could underperform compared to investment cases. Whilst representing a risk, it is
expected that the negative impact will be immaterial to the portfolio as a whole leading to this risk being classified as neutral.
(
R
)
Physical climate risks PII Neutral
Neutral /
Physical climate risks in this scenario are likely to result from chronic long-term changes to weather patterns alongside
increased frequency of acute weather risks.
It is recognised there are increased physical risks in a 4-degree rather than a 1.5/2-degree scenario in the long-term. This could
cause variations in an asset’s energy yield from what was expected at the time of investment and increased costs of repairs and
maintenance through acute and chronic changes in weather. Yield impacts are modelled through portfolio valuation models
and P10/P90 impacts evaluated.
The Company has strong mitigation strategies in place to limit the impact of physical risks
(
see section “Understanding the
Company’s physical climate risks”
)
leading to this risk being classified as neutral and partially negative.
(
R
)
Portfolio companies don’t
effectively manage climate risks
SI Neutral Neutral
Portfolio companies invested into may not adequately risk assess climate related risks and opportunities which may mean
investment assumptions on long-term performance and valuation of companies could be inaccurate.
The Investment Manager engages with portfolio companies existing climate risk management processes as part of annual
reviews and more regular check-ins, helping to mitigate this risk to neutral.
(
O
)
Significantly increased
investment opportunity
SI
Neutral
Increased global efforts provides investment opportunities to emerging technologies and emerging markets expanding the
investment opportunity for the fund.
(
O
)
Repowering FPI
Neutral
Repowering becomes financially attractive through lower capital costs. This increases the useful life and the valuation of
operational assets.
Understanding the Company’s physical climate risks
Acute Weather Impacts
Under a high physical risk scenario, we assume an increase in frequency of extreme weather events that could threaten the successful
operation of assets within the portfolio.
In partnership with Climate Scale, the Company’s assets have been assessed for climate-related hazards under a 4-degree scenario.
Climate Scale provides high-resolution climate data and climate advisory to businesses, enabling the identification of climate change
risks and opportunities. Risks were considered over the course of asset-life and physical risks relating to the Company’s platform and
portfolio companies were assessed separately.
The most material risks highlighted for each technology by Climate Scale have been laid out below in tableX by asset type, risk level
(
High= “H”, Medium-High= “MH”
)
, potential impact and the mitigation measures put in place. The main risks identified across the
portfolio were, fire risk, precipitation, increased temperature, storminess and iciness. No MH or H risks were identified for ORIT’s battery
project.
Mitigation measures utilised by the portfolio to address these include continuous monitoring of risks, insurance cover and effective
spares management. More generally, the Company as a whole mitigates the impact of these risks through the maintenance of a
diversified portfolio.
102Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Figure 25: Physical risks to assets and their mitigations under a 4-degree temperature scenario
Asset
Type
Risk Level Potential Impact
Management and
mitigations
Mitigations considered in
long-term assumptions
(
R
)
Fire Conditions
MH/H Extreme fire conditions
(
>40ºC
)
expected to occur bi-annually at 14ground-mount solar farms.
Material failure of central
inverters due to abnormal
operating temperatures.
Solar sites impacted have
one of two inverters installed.
Inverters installed at half the
sites are designed to operate
up to 55°C and the remaining
50% up to 40°C. Failure of
a central inverter typically
costs £150,000 to replace and
business interruption in excess
of £100,000. If this scenario
were to materialise it is likely
that one of the lower rated
inverters would fail every
other year causing £150,000
in repair costs and business
interruption.
Inverter temperatures
are monitored, when
temperatures increase sharply
and are sustained at a level
that is higher than normal it
is indicative that this inverter
is stressed. On occasions
when high temperatures
are forecast, operators are
instructed to restrict inverter
output for warm periods of
the day on specific inverters
where abnormal trend
patterns were observed. This
reduces component stress and
likelihood of failure.
Insurance is in place should a
material failure occur, and a
stock of entire inverter units
are held to minimise potential
business interruption.
Although optimisations to
operating practice reduce
the likelihood of material
inverter fires occurring, there
remains a residual risk of a
fire occurring. This would
be claimable on insurance,
leaving only deductibles
irrecoverable. The insurance
provision modelled in the
valuation includes a buffer
for higher premiums and
deductibles which increases
over time.
Vegetation fire causing
damage to generation
infrastructure.
Site operators monitor grass
conditions at site and adapt
management regimes to
accommodate seasonal
changes to temperatures.
103Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Asset
Type
Risk Level Potential Impact
Management and
mitigations
Mitigations considered in
long-term assumptions
MH/H Extreme fire conditions could affect 2 of the Company’s wind sites.
Wildfires could affect access
to turbines and could cause
damage to wind turbines or
other onsite infrastructure.
The sites have fire risk
assessments with detailed
mitigations for the specifics of
the site – these could include
the inclusion on the site
induction to raise awareness
of fire risks, fire breaks,
emergency exercises with
local fire departments.
Insurance cover would cover
replacement of damaged
infrastructure.
(
R
)
Precipitation
(
flooding
)
H
Extreme precipitation
(
flooding
)
expected once in the remaining period of operation could affect
11 ground-mount solar farms.
Cable deterioration due to
prolonged water submersion.
If the panel array is submerged
in water for an extended
period of time, water
ingress into cables
(
causing
underperformance
)
could
occur, which could reduce
performance by more than
10% during the period of
saturation.
Corrosion to structures
due to prolonged water
submersion.
If the panel array is submerged
with water for an extended
period of time, water ingress
could into cables could occur,
causing underperformance.
Flood risks assessment
due diligence completed
during acquisition stage of
investment and recommended
mitigants such as drainage
systems or flood barriers
incorporated into investment
case where appropriate
helping to ensure sites are
designed to withstand these
extreme precipitation or
flooding events.
This would be claimable
on insurance, leaving only
deductibles irrecoverable. The
insurance provision modelled in
the valuation includes a buffer
for higher premiums and
deductibles which increases
over time.
Substation flooding.
Flooding of a substation
could cause high voltage
components to fail leading
to prolonged downtime and
costly capex remedial works.
As above. Unprecedented rainfall events
could cause drainage systems
to become overwhelmed and
result in substation flooding. In
this unlikely event an insurance
claim would be placed and
the residual impact would
only amount to insurance
deductibles.
104Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Asset
Type
Risk Level Potential Impact
Management and
mitigations
Mitigations considered in
long-term assumptions
MH
Extreme precipitation
(
flooding
)
expected once in the remaining period of operation could affect
1 of the Company’s wind sites.
Blade deterioration due to
prolonged precipitation.
Blade leading edge protection
installed in the factory.
Regular blade inspections and
maintenance ensure continued
performance.
Insurance cover would cover
replacement of damaged
infrastructure.
Flooding of a substation
could cause high voltage
components to fail leading
to prolonged downtime and
costly capex remedial works.
Effective flood risk
assessments and drainage
designs completed as part
of the planning process.
Foundation designs account
for water table. Typical
mitigation includes raising
floor levels and key electrical
infrastructure above the
design flood levels, design
development to allow convey
of floodwaters across a site,
provision of sustainable
drainage measures such as
swales and infiltration trenches
to alleviate concentration
of runoff, slow the surface
water flow across the site
and encourage infiltration of
surface waters and maintain
statutory and byelaw
distances from rivers, drains
and other watercourses on
site.
Insurance cover would cover
replacement of damaged
infrastructure.
(
R
)
Increased temperatures
(
heatwaves, droughts
)
H
Extreme stress to humans at 1 ground-mount solar farm located in France. This risk was not
highlighted as MH or H for the rest of the Company’s solar portfolio.
Unsafe conditions for
maintenance procedures.
Injury to site operatives
or extended downtime as
conditions become unworkable
Operator risk assessments
consider weather
related hazards prior to
commencement of any work
on site. If unsafe to conduct
activities under certain
conditions, work practices can
be adapted easily if necessary.
No unmitigated impact to
consider.
105Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Asset
Type
Risk Level Potential Impact
Management and
mitigations
Mitigations considered in
long-term assumptions
(
R
)
Storminess
H
Severe storms with wind in excess of 31m/s expected once every 10 years could affect three solar
sites.
Panel detachment due to
high winds.
Significant damage to the
panel array caused by high
winds.
Due diligence reports show
that reinforcements to
mounting structures have
been implemented in certain
areas of some sites where risk
is higher.
This would be claimable
on insurance, leaving only
deductibles irrecoverable. The
insurance provision modelled in
the valuation includes a buffer
for higher premiums and
deductibles which increases
over time.
MH/H
Severe storms with wind in excess of 31m/s expected once every 10 years could affect 3 wind sites.
Damage due to high wind
and lightning.
High windspeeds may
exceed wind-turbine design
parameters causing damage
and reducing performance.
Wind turbines are selected
based on the site conditions,
and any site where 31m/s wind
speeds are possible during rare
storm events will have a ride
through function whereby the
blade feathers to allow the
wind Turbine to go into idle
until the wind returns to the
optimum speeds. Any other
wind turbine will follow its
usual shut down programme
in high wind. Wind turbines are
programmed to automatically
shut down during high winds
to protect themselves, the
systems which control this
are routinely maintained
and tested on an annual
basis to ensure they are
fully operational. High wind
shutdowns are accounted for
in energy yield assessments.
Impact of high wind events
more likely on other wind farm
infrastructure
(
substation
buildings etc.
)
, regular
inspections and maintenance
are done, and any damage is
repaired.
Insurance cover would cover
replacement of damaged
infrastructure.
Opex budgets have allowances
for infrastructure and blade
repairs, and full blade
replacements are covered
under project insurance.
106Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Asset
Type
Risk Level Potential Impact
Management and
mitigations
Mitigations considered in
long-term assumptions
(
R
)
Iciness
H
>5% of icy days per year could affect 3 sites.
Ice build-up on turbines can
impact turbine blades.
Ice build-up can cause
aerodynamic inefficiencies,
create rotor imbalances and
pose safety hazards.
Where turbines are located in
areas of extreme icing, blade
anti-icing systems are installed
which prevent ice build-up
on the blades. Elsewhere the
turbines are able to monitor
ice build-up during operations
and are programmed to shut
down before any damage is
done.
Energy yield assessments have
assumptions for icing during
operations.
Insurance cover and spares
management program
to replace damaged
infrastructure.
Chronic weather impacts
The Company’s assets may be affected by extended changes in weather patterns, such as shifts in temperature and average wind
speeds, which could have an impact on the anticipated power price or performance. Toassess the significance of these long-term risks,
the Investment Manager conducted additional analysis utilizing data from Climate Scale and other climatemodels.
Solar
High temperatures at solar sites can result in reduced performance of PV panels, inverters, and cables. TheInvestment Manager’s Climate
Scale risk assessment on the Company’s solar sites identified medium-high or high chronic risks of increased average temperatures at 4
of the solar sites, all located in the French portfolio. To evaluate the financial impact on the Company’s assets, the Investment Manager
considered a P50 model of one of these ORIT sites. When the expected temperature increase under a 4-degree scenario was modelled
on this site, the site’s yield decreased by 1.1%. The outcome of this analysis determined the risk’s impact to be negligible. Given the
likely similar result if applied to the Company’s other assets, and the level of uncertainty around existing P50 scenarios, the Investment
Manager is comfortable that this risk is sufficiently considered in the Company’svaluations.
Wind
We carried out a pilot study with Baringa, one of the Company’s power price curve providers, to quantify physical climate impacts through
modelling under a 4-degree climate scenario. The study focused on UK wind, but also considered other European wind generators. The
findings indicated that average annual wind generator yield is not negatively impacted by climate change in a manner that is material
to the valuation of wind generation assets in the Company's operating countries. Please see page 65 of ORIT’s 2022 annual report for
a detailed case study of this analysis.
Given the possible acute and chronic physical risks under this scenario a number of factors have been considered:
•
An increase in insurance cost and maintenance and replacement works.
•
A decrease in spare parts availability due to weather events affecting supply chains.
•
Unexpected changes to asset performance due to increase in climate change-related inter-annual variability.
107Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The majority of the financial impact from these risks has been mitigated through the aforementioned strategies. Any remaining financial
consequences can be estimated by referring to the disclosure of power price sensitivity and energy yield
(
P10/P90
)
sensitivities provided
in page 59.
Physical climate risks relating to the Company’s portfolio companies
The Company’s portfolio companies incorporate climate-related risks into their risk management framework. In the case of development
platform companies, they evaluate the physical climate risks associated with each project during the development process and consider
measures to mitigate them.
Measuring and managing climate impact
Climate-related risks and opportunities are considered in ORIT’s financial, strategic and operational performance, and the Investment
Manager therefore uses a wide variety of metrics to measure the current and potential impact. Most of the metrics relating to existing
mitigation strategies are covered in the section “Building climate resilience into our business strategy” but are summarised below.
Risk/ Opportunity Type Explanation Metrics
Transition Opportunity The Company’s investment strategy is 100%
aligned to a 1.5/2-degree scenario and
aims for 100% of revenues to be generated
from sustainable sources. This reflects the
Company’s role in enhancing renewable
energy as a key contributor to climate
change mitigation, quantifying the scale of
climate-related opportunities seized.
See pages 20, 66 and 70 for the following
metrics
•
£m Capital invested in & committed to
renewable energy assets
•
% Investments aligned to the EU Taxonomy
•
GWh of potential renewable electricity
produced annually
•
Number of homes powered by clean energy
•
Estimated tonnes of CO2 avoided
•
Equivalent trees and cars off the road for
CO2 avoided
Transition Risk Monitors
(
a
)
the transition risk on power
price and also
(
b
)
the potential future
constraints on emissions, which, while not
expected to be significant for a low-carbon
portfolio, are crucial for maintaining
alignment with low-carbon transition
pathways.
(
a
)
•
Wholesale energy price sensitivities
(
page59
)
•
% of revenues with fixed power prices
(
page 49
)
•
Portfolio diversification
(
page 31
)
(
b
)
•
Scope 1, 2, and GHG emissions
(
page 72
)
•
Weighted average carbon intensity
(
page72
)
•
tCO2e/MW
(
page 72
)
For more information on the activities that
are applicable to ORIT's carbon footprint
please refer to page 76 and also to ORIT's
ESG & Impact Strategy.
Physical Risk
(
Asset
Level
)
At the asset acquisition stage, physical
risks are evaluated within the ESG matrix,
affecting the ESG matrix output score if
climate risks are high and no mitigation
strategies are in place. This score influences
the Investment Committee’s approval
process.
•
ESG Matrix Output Score
(
Influence
on Investment Committee and Board
approval
)
108Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Risk/ Opportunity Type Explanation Metrics
Acute Physical Risk
(Company
/Portfolio
Level
)
Residual acute and chronic physical risks are
assessed at both Company and portfolio
levels by considering portfolio diversification
and performance.
•
Current portfolio diversification
(
page 31
)
•
Annual performance against budget of
portfolio assets
(
page 32
)
•
CapEx / repairs and maintenance costs
Chronic Physical Risk
(Company
Level
)
Chronic physical risks to yield are assessed
by monitoring P10/P90 figures on portfolio
valuation models.
•
P10/P90 figures on portfolio valuation
models
(
page 59
)
Targets used by the Company to manage climate-related risks and opportunities
Given ORIT’s investment strategy is in line with climate change mitigation and accelerating the transition towards 1.5-degree pathway,
the main target used by the Company is to deliver ultimate investment success. Investment success will bring further opportunities for
investing in renewable energy and enable the Company to benefit from climate-related opportunities. These financial objectives are
presented on pages 18 and 19 whilst targets associated with portfolio diversification and energy price risk are outlined in the Investment
Policy presented in pages 22 to 24.
The Company also has some qualitative targets surrounding carbon and sustainability reporting specifically, which include:
Target 2020 2021 2022 2023
Reducing the %
estimations used
in carbon footprint
exercise to
increase reliability
of carbon data
23.9% 25.1% In 2022 a new
method of defining
data points was
applied.
•
Real data = 22.5%
•
Estimated activity
data = 52.5%
•
Proxy data = 25%
Real data = 44%
Estimated data
= 49%
Proxy data = 7%
Moving all
generating sites
on renewable
energy import
tariffs
100% 92% 87% 93%
Offset all direct
emissions
(
relevant
Scope 1 and 2
emissions
)
Complete – 20
carbon units
purchased
Complete – 6 carbon
units purchased
Complete – 886
carbon units
purchased
N/A – ORIT offset
strategy has
changed. A total
of 953 have been
purchased
(
in 2022
and 2023
)
. These
PIUs will capture
953 tonnes worth of
CO
2
over the next
31years.
100% of
investments
aligned to EU
Taxonomy
100% 100% 100% 100%
109Risk and Risk ManagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Due to the level of estimation and difficulties in measuring Scope 3 carbon, the Company will not set quantitative targets on reducing
the carbon intensity until a reliable baseline for the Company can be established.
The timing of moving assets acquired in the year onto renewable energy will depend on existing contractual structures for newly acquired
assets and therefore this metric is likely to fluctuate on a year-by-year basis.
The Board will continue to identify metrics that quantify climate-related risks and opportunities and will continuously evaluate and
respond as the industry standards evolve.
These climate-related financial disclosures have been made in line with TCFD recommendations and has been approved by the Board
of directors and signed on their behalf by:
Philip Austin MBE
Chair
Octopus Renewables Infrastructure Trust plc
22 March 2024
110Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Section 172
(
1
)
Statements: Reference
The likely
consequences of any
decision in the
long-term
The Board has set out long-term objectives for the Company and targets a net total
shareholder return of 7% to 8% per annum over the medium to long-term. The Board receives
regular updates through weekly meetings with the Investment Manager. Additionally Board
members convene at least four times a year to discuss matters related to items
(
a
)
-
(
f
)
of
section 172. Once a year, the Board collaborates with the Investment Manager and other key
advisers to evaluate the Company’s strategic position, including capital allocation and risk
management. Throughout the year, the Board actively considers shareholders’ views to inform
its decision-making process.
See also Operating Model, Objectives and KPIs section on pages 15 to 20, Chair’s Statement on
pages 11 to 13 and Stakeholder Engagement section on page 111.
The interests of the
Company’s employees
As a closed-ended investment company, the Company has no direct employees. However, the
Investment Manager assesses the impact of the Company’s activities on other stakeholders.
The Board monitors People related KPI’s on health and safety, diversity and inclusion collected
directly from contractors of the investee companies within the investment portfolio, that are
reported in the Company’s publications.
See also People reporting of the Impact section on page 77 and find more details on the
separately published ESG & Impact Report. Additional KPIs can be found in the Principle Adverse
Impact statement on the website.
Section 172 of the Companies
Act 2006
The Board as the governing body of the Company, shapes the strategy
and objectives and seeks to ensure performance and long-term
success by considering all its stakeholders’ interests.
During the year under review, the Board believes that it has acted
in good faith and fulfilled its obligations under Section 172 of the
Companies Act 2006 to promote the success of the Company for
the benefit of all shareholders while also considering the interests of
other stakeholders and the environmental impact of the Company’s
operations. See page 111 for key stakeholders.
As a closed-ended investment company, the Company has no direct employees. However, the Investment
Manager assesses the impact of the Company’s activities on other stakeholders, in particular local
communities, sub-contractors and end customers, recognising that its investments in Renewable Energy
Assets make a positive contribution to the transition to a cleaner future.
111Stakeholder EngagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Section 172
(
1
)
Statements: Reference
The need to foster the
Company’s business
relationships with
suppliers, customers
and others
The Board recognises the importance of fostering the Company’s business relationships with
suppliers, customers, and other essential stakeholders for preserving long-term shareholder
value and takes their respective interests into consideration where relevant as part of the
decision-making process. The Board evaluates the performance of the service providers
annually through the Management Engagement Committee.
See also Stakeholder Engagement section on page 111 and Directors’ Report from page 116.
The impact of the
Company’s operations
of the community
and environment
This aspect continues to be integral to the Company’s strategic ambitions through its core
impact initiative of accelerating the transition to net zero through its investments, building and
operating a diversified portfolio of Renewable Energy Assets. Environmental and community
considerations, including the impact on nature, are specifically embedded in the Company’s
Planet and People Impact objectives respectively. The Board is responsible for the sign off of the
Company’s ESG & Impact Policy and Strategy.
See also ESG & Impact section of the Annual Report on page 65 and the separately published
ESG & Impact Report and ESG & Impact Strategy document.
The desirability of the
Company maintaining
a reputation for high
standards of business
conduct
The Board aims to to meet or exceed the standards expected of a listed company investing in
Renewable Energy Assets. This is achieved with the help of the Investment Manager which is
responsible for ensuring that the Company’s investments are managed to a high standard of
business conduct. The Company has obtained a copy of the Investment Manager’s, Company
Secretary’s, Administrator’s and Broker’s anti-bribery policies and procedures and is satisfied
that these are adequate for the purposes of the Company. The Investment Manager seeks to
ensure asset level service providers have appropriate policies in place.
See also Stakeholder Engagement section on page 111, Human Rights section on page 114.
The need to act fairly
as between members
of the Company
The Board aims to act fairly between the Company’s members, by seeking to ensure effective
communication is provided to all Shareholders. Reporting materials are made available to
the public and the Board encourages Shareholders to attend the Annual General Meeting.
Procedures and policies are in place in case conflicts of interest arise.
See also Stakeholder Engagement section on page 111 and Corporate Governance Statement
from page 125.
Stakeholder Engagement
Details of the Company’s engagement with key stakeholders is set out below.
The Board is aware of the need to foster the Company’s business relationships with suppliers, customers and
other key stakeholders through its stakeholder management activities as described below. The Board believes
that positive relationships with each of the Company’s stakeholders are important to support the Company’s
long-term success. The table below outlines the stakeholders that the Board has identified as key, the specific
engagement methods used and key activities within the reporting period.
112Stakeholder EngagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Stakeholders How ORIT has communicated and engaged
Shareholders
The Board looks to attract long-term investors in the Company and in doing so, it has sought out
regular opportunities to communicate with shareholders whether from the regular reporting on the
Company’s activities and market announcements and the website or specific initiatives.
Key communication methods include:
•
Annual and Interim reports
•
Dedicated ORIT website
•
Corporate LinkedIn Page
•
Quarterly factsheets
•
Investor roadshows and presentations
•
Dialogue with shareholders
•
Occasional events
(
Capital Market
)
•
Regular market announcements
•
Annual General Meetings
•
Dedicated email address for shareholder enquiries
•
Proxy voting guidelines
For example, Board members have had opportunities to meet with key stakeholders during key
Company events in 2023 at the Capital Markets Day and the Cumberhead Opening Event.
Separately, the Investment Manager actively participates in roadshows to meet with the Company’s
key shareholders after the release of the annual and interim results. The Investment Manager also
meets with shareholders on an ad hoc basis following key announcements. Shareholders’ views
are regularly collected throughout the year by the Investment Manager and the Corporate Broker.
Shareholders’ views are considered by the Board to assist the Board’s decision-making process.
In 2023, the Company enhanced its engagement with shareholders via its Consumer Duty Guide, its
rebranded website providing new content and a glossary, and the launch of its corporate Linkedin
page.
The Board invites shareholders to attend the forthcoming Annual General Meeting to be held
on 19 June 2024 or to contact the Company through its dedicated email address for shareholder
enquiries.
AIFM and
Investment
Manager
The most significant service provider for the Company’s long-term success is the AIFM who has
engaged the Investment Manager for the purpose of providing investment management services to
the Company. The Board regularly monitors the Company’s investment performance in relation to
its objectives, investment policy and strategy. The Board receives and reviews regular reports and
presentations from both the AIFM and Investment Manager and seeks to maintain regular contact to
maintain a constructive working relationship.
The Board receives regular reports from the Investment Manager and maintains ongoing dialogue
between scheduled meetings. Representatives of the Investment Manager attend Board meetings.
The Investment Manager’s remuneration is based on the NAV of the Company which aligns their
interests with those of shareholders.
A description of the Investment Manager’s role, along with that of the AIFM, can be found on
page118 of the Directors’ Report.
113Stakeholder EngagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Stakeholders How ORIT has communicated and engaged
Company
Service Providers
To build and maintain strong working relationships, the Company’s key service providers are
invited to attend quarterly Board meetings to present their respective reports. This enables the
Board to exercise effective oversight of the Company’s activities. The Board also has in place a
Management Engagement Committee that meets annually to review service provider performance.
Further information on the Management Engagement Committee can be found in the Corporate
Governance Statement on page 127.
The Company’s external auditors attend at least two Audit and Risk Committee meeting per year.
The Chair of the Audit and Risk Committee maintains regular contact with the auditors, Investment
Manager and Administrator to ensure that the audit process is undertaken effectively.
The Board has also spent time engaging with the Company’s key service providers outside of
scheduled Board meetings to develop its working relationship with those service providers and ensure
the smooth operational function of the Company.
Asset Service
Providers
The Investment Manager has an experienced asset management team who actively manage asset
level service providers including third-party asset managers, Operations & Maintenance
(
“O&M”
)
contractors, Construction Managers, Owners Engineers, suppliers, HSE contractors and Landowners.
Communications with service providers are managed across a variety of platforms to ensure focus
on day-to-day operational performance of the assets. The Investment Manager undertakes quarterly
meetings with external asset managers to review performance against service provisions, weekly
calls with all operators and formal annual contract reviews. The Investment Manager actively
engages asset service providers to seek innovative solutions to reduce the downtime of our assets.
function and our Investment Manager positively influences the safety performance of our service
providers by monitoring accidents, incidents and unsafe conditions at site.
Our Investment Manager actively manages the investments in-construction assets through a risk
prevention oversight model and by maintaining strong relationships with the Owners Engineering
teams. There is daily communication with the Owners Engineering teams during the critical stages of
construction.
Debt
Providers
As at 31 December 2023, the Company’s wholly owned subsidiary, ORIT Holdings II Limited, had a
Revolving Credit Facility
(
“RCF”
)
provided by a group of four lenders, Allied Irish Banks, National
Australia Bank, NatWest and Santander. Regular communications with each lender alongside the
provision of data for formal semi-annual reporting and covenant testing requirements is undertaken
by the Investment Manager. The RCF was extended and refinanced in February 2023. During the
period, the Company agreed an extension in the maturity date of its subsidiary’s £50 million
short-term facility provided by NatWest to align with expected receipt of proceeds from the Polish
assets sale. The facility was repaid in full in December 2023.
The Investment Manager ensures that asset level debt providers are provided with data and
information in line with debt agreements and undertakes all covenant testing requirements.
Community
ORIT actively engages and aims at empowering local communities by establishing avenues for
benefits such as through community benefit schemes, educational engagement with local schools
via workshops and site visits, and support of local charities.
See People section of the Impact Report on pages 77 to 82.
114Stakeholder EngagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Human Rights
Although ORIT has no employees, the Company is committed to respecting human rights in its broader
relationships and respects the UN Guiding Principles on Business and Human Rights. This is reflected in our
wider policies and in how the Company conducts business with its stakeholders. All material counterparties
have either signed up to the Investment Manager’s Supplier Code of Conduct or have their own that meets
the Investment Manager’s standards.
Our Investment Manager undertakes due diligence on service providers and as part of this suppliers are
required to complete an ESG questionnaire to ensure alignment with Company values. This contains specific
questions in relation to Human Rights which is reviewed before appointment alongside their policies, for
example anti bribery and corruption policies.
For more information on how the Company addresses human rights and modern slavery more specifically,
please refer to ORIT’s Modern Slavery Act Statement on its website
(
see here https://assets-global.website-
files.com/6465321ab5b5a7de6f3fcd1d/65cb7cea5a32125cf2a07493_ORIT_Modern_Slavery_Statement_
(
January_2024
)
_vF.p d f
)
.
This Strategic Report has been approved by the Board of Directors and signed on their behalf by:
Non-Financial Information Statement
The table below references where the following non-financial information is disclosed within this strategic
report.
Philip Austin MBE
Chair,
Octopus Renewables Infrastructure Trust plc
22 March 2024
Non-financial
information area Reference
Environmental
matters
(
including
the impact of the
Company’s business
on the environment
)
See Planet section of the Impact Report on page 70.
The Company’s
employees
As a closed-ended investment company, the Company has no employees. The People section of
the Impact Report on page 77 refers to how the Company assesses its impact of the employees
of its sub-contractors.
Community issues
See People section of the Impact Report on page 77.
Social matters
See People section of the Impact Report on page 77.
Respect for human
rights
See Stakeholder Engagement section on page 111.
Anti-corruption and
anti-bribery matters
See Anti-bribery and corruption statement on separately published ESG & Impact Report.
115Stakeholder EngagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Governance
116Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Directors’ Report
The Directors present their report and financial statements for the
year ended 31 December 2023.
The Directors of the Company who were in office during the year and up to the date of signing the financial
statements were:
Philip Austin MBE
(
Chair
)
Audrey McNair
(
Senior Independent Director
)
James Cameron
Elaina Elzinga
Sarim Sheikh
(
from 1 June 2023
)
Strategic Report
The Directors’ Report should be read in conjunction with the Strategic Report on pages 15 to 114.
The following information has been disclosed in the Strategic Report:
Corporate Governance
The Corporate Governance Statement on pages 125 to 135 forms part of this report.
Risk and Risk Management
The Risk and Risk Management section on pages 83 to 91 forms part of this report.
Disclosure Page Reference
Business review
See Investment Manager’s Report on page 25.
Principal risks and uncertainties
See Risk and Risk Management section on page 83.
Key performance indicators
See Objectives and KPIs section on page 18.
Financial risk management
See Risk and Risk Management section on page 83 and Note 16 on
page 179.
Future developments in the Company’s
business
See Investment Manager’s Report on page 25.
Stakeholder Engagement
See Section 172 on page 110.
Streamline Energy and Carbon Reporting
framework
See Planet in Impact section on page 70
117Directors’ ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Legal and Taxation Status
The Company is an investment company within the meaning of Section 833 of the Companies Act 2006.
TheCompany conducts its affairs to meet the requirements for approval as an investment trust under section
1158 of the Corporation Tax Act 2010. The Company has received initial approval as an investment trust and
the Company must meet eligibility conditions and ongoing requirements for investment trust status to be
maintained. In the opinion of the Directors, the Company has met the conditions and requirements for
approval as an investment trust for the year ended 31 December 2023.
Market Information
The Company’s Ordinary Shares are listed on the premium segment of the main market of the London Stock
Exchange. The unaudited NAV Ordinary Share of the Company is published quarterly through a regulatory
information service.
Retail distribution of Investment Company shares via financial
advisers and other third-party promoters
As a result of the Financial Conduct Authority
(
“FCA”
)
rules determining which investment products can be
promoted to retail investors, certain investment products are classified as “non-mainstream pooled investment
products” and face restrictions on their promotion to retail investors.
The Company has concluded that the distribution of its shares, being shares in an investment trust, is not
restricted as a result of the FCA rules described above.
The Company currently conducts its affairs so that the shares issued by the Company can be recommended
by financial advisers to retail investors and intends to continue to do so for the foreseeable future.
Articles of Association
Amendments to the Company’s Articles of Association require a Special resolution to be passed by
shareholders. The Company’s Articles of Association were last changed at the time of IPO.
Management
The Board
The Board is entirely comprised of independent non-executive directors who are responsible to Shareholders for the
overall stewardship of the Company’s affairs. The Board has adopted a Schedule of Matters Reserved for the Board
which sets out the division of responsibilities between the Board and its various committees. Further details can
be found in the Corporate Governance Statement on pages 125 to 135. Through the Committees and the use of
external independent advisers, the Board oversees the risk management function and overall governance within the
Company. The Board actively supervises the Investment Manager in the performance of its functions.
Directors’ indemnities
Subject to the provisions of the Companies Act 2006, the Company has agreed to indemnify each Director
against all liabilities which any Director may suffer or incur arising out of or in connection with any claim
made, or proceedings taken against him/her, or any application made by him/her, on the grounds of his/
her negligence, default, breach of duty or breach of trust in relation to the Company or any associated
Company. This policy remained in force during the financial year and also at the date of approval of the
financial statements.
118Directors’ ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Appointment and Replacement of Board
The rules concerning the appointment and replacement of directors are contained in the Company’s
Articles of Association which require that each Director shall be subject to election at the first AGM after
appointment and re-election annually thereafter. Further details of the Board’s process for the appointment
and replacement of Board members can be found on page127.
Alternative Investment Fund Manager
The Company is classified as an Alternative Investment Fund under the UK AIFM Directive as defined on
page203 and has appointed Octopus AIF Management Limited as its AIFM. The AIFM is responsible for
portfolio management of the Company, including the following services:
•
Risk management – Portfolio management is delegated to the Investment Manager.
•
Approval of quarterly portfolio valuations through the AIFM Valuations Committee.
•
Review financial reporting prepared by the Administrator.
•
Ensuring compliance with the UK AIFM Directive regulations and reporting.
•
Ensuring compliance with FATCA reporting requirements; and
•
Monitoring and ensuring compliance with Investment Restrictions and policies as set out in the
Company’s prospectus.
The AIFM is entitled to a management fee of 0.95% per annum of the Net Asset Value of the Company up to
£500 million and 0.85% per annum of Net Asset Value in excess of £500 million, payable quarterly in arrears.
No performance fee or asset level fees are payable to the AIFM under the Management Agreement.
The AIFM is responsible for the payment of the Investment Manager’s fees.
The Management Agreement is for an initial term of five years from the date of First Admission and thereafter
subject to termination on not less than 12 months’ written notice by either party. The Management Agreement
can be terminated at any time in the event of the insolvency of the Company or the AIFM, in the event that
the AIFM ceases to be authorised and regulated by the FCA
(
if required to be so authorised and regulated to
continue to carry out its duties under the Management Agreement
)
or if certain key members of the Octopus
Energy Generation team cease to be involved in the provision of services to the Company and are not replaced
by individuals satisfactory to the Company
(
acting reasonably
)
.
The Company has given an indemnity in favour of the AIFM
(
subject to customary exceptions
)
in respect of the
AIFM’s potential losses in carrying on its responsibilities under the Management Agreement.
The Management Agreement is governed by the laws of England and Wales.
Investment Manager
The AIFM has delegated portfolio management services to Octopus Renewables Limited
(
trading name –
Octopus Energy Generation
)
as Investment Manager to provide Investment Management services to the AIFM
in respect of the Company pursuant to the Management Agreement. As part of these delegated portfolio
management services, the Investment Manager has responsibility for managing cash not yet invested by the
Company or otherwise applied in respect of the Company’s operating expenses with the aim of preserving
capital value.
Company Secretary and Administrator
Apex Listed Companies Services
(
UK
)
Limited
(
formerly Sanne Fund Services
(
UK
)
Limited
)
provides company
secretarial and administration services to the Company, including but not limited to the calculation of its
quarterly Net Asset Value and financial reporting.
Depositary
BNP Paribas Securities Services has been appointed as the Company’s depositary.
119Stakeholder EngagementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
UK AIFM Directive
In accordance with the UK AIFM Directive, the AIFM must ensure that an annual report containing certain
information on the Company is made available to investors for each financial year. The investment funds
sourcebook of the FCA
(
the “Sourcebook”
)
details the requirements of the annual report. All the information
required by those rules are included in this Annual Report or will be made available on the Company’s website.
Appointment of Service Providers
The Board has committed to undertake an annual review of its service providers which will be undertaken by
the Management Engagement Committee, to ensure that their continued appointment is in the best long-
term interests of the Company’s shareholders. The outcome of the review of the Company’s service providers
can be found on page 127.
Issued Share Capital
During the year ended 31 December 2023, the Company did not issue any further Ordinary Shares. At the year
end the Company’s issued share capital comprised 564,927,536 Ordinary Shares.
Voting rights
Each Ordinary Share held entitles the holder to one vote. All Ordinary Shares carry equal voting rights and
there are no restrictions on those voting rights. Voting deadlines are stated in the Notice of Meeting and Form
of Proxy and are in accordance with the Companies Act 2006.
Restrictions
There are no restrictions on the transfer of Ordinary Shares, nor are there any limitations or special rights
associated with regard to control attached to the Ordinary Shares. There are no agreements between holders
regarding their transfer known to the Company, no restrictions on the distribution of dividends and the
repayment of capital, and no agreements to which the Company is a party that might affect its control
following a successful takeover bid.
120Directors’ ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Dividend Policy and Target Returns
The Company intends to pay dividends on a quarterly basis with dividends typically declared in respect of
the quarterly periods ending March, June, September and December and typically paid in May, August,
November and February respectively.
Distributions made by the Company may take either the form of dividend income, or of “qualifying interest
income” which may be designated as interest distributions for UK tax purposes. Prospective investors should
note that the UK tax treatment of the Company’s distributions may vary for a shareholder in the Company
depending on the classification of such distributions. Prospective investors who are unsure about the
tax treatment which will apply to them in respect of any distributions made by the Company should
consult their own tax advisers.
The Company has a progressive dividend policy and is targeting a total dividend of 6.02 pence per Ordinary
Share in respect of the financial year to 31 December 2024, representing a 4.0% increase from the 5.79 pence
per Ordinary Share dividend distributed for the financial year ended December 2023. This increase was chosen
to be in line with the increase to the Consumer Price Index
(
CPI
)
for the 12 months to 31 December 2023, and
marks the third consecutive year the Company has increased its dividend target in line with inflation
67
.
The Company is targeting a net total shareholder return of 7% to 8% per annum over the medium to long-
term. Further information on the Company’s financial objectives can be found on pages 18 to 19.
Results and Dividend
The Company’s revenue profit after tax for the year amounted to £36.9 million
(
2022: £34.4 m
)
. The Company
made a capital loss after tax of £24.2 million
(
2022: £35.4m profit
)
. Therefore, the total profit after tax for the
Company was £12.7 million
(
2022: £69.8m
)
.
The Company has paid the following interim dividends during the year under review:
On 31 January 2024 the Company declared an interim dividend of 1.45p per Ordinary Share in respect of the
three months to 31 December 2023, a total of £8.2 million. The ex-dividend date was 8 February 2024, the
record date was 9 February 2024 and the dividend was paid on 23 February 2024.
Period
Dividend per Ordinary
Share
(
pence
)
Payment Date Record Date
Ex-Dividend
Date
Q4 2022 1.31 24 February 2023 10 February 2023 9 February 2023
Q1 2023 1.44 2 June 2023 19 May 2023 18 May 2023
Q2 2023 1.45 1 September 2023 18 August 2023 17 August 2023
Q3 2023 1.45 1 December 2023 17 November 2023 16 November 2023
67
The dividend and return targets stated 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.
121Directors’ ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
68
Based on number of Ordinary Shares in issue of 564,927,536 at the Company’s year-end.
Substantial Shareholders
As at 31 December 2023, the Directors have been formally notified of the following interests in the Company’s
Ordinary Shares, comprising 3% or more of the issued share capital of the Company:
Since the year end, Sarasin & Partners LLP notified the Company on 1 March 2024 that it had reduced its
holding to 26,562,005, which equates to 4.07% of the Company’s issued share capital. Since 31 December
2023 and 22 March 2024, the Company was not notified of any further interests, or changes in interests, in the
Company’s Ordinary shares comprising 3% or more of the issued share capital of the Company.
Shareholder Engagement
The Board is mindful of the importance of engaging with the Company’s shareholders to gauge their views
on topics affecting the Company. See page 111 for further information on how the Company engages with
its shareholders.
The Company will be holding a combined physical and electronic Annual General Meeting, at which members
of the Board and Investment Manager will be available to answer shareholder questions.
Shareholders are encouraged to vote their holdings using the enclosed Form of Proxy or electronically using
the instructions contained in the notes to the Notice of AGM and notes to the Form of Proxy. The Company’s
Annual General Meeting will be held on 19 June 2024. Proxy voting figures will be made available shortly after
the AGM on the Company’s website
(
www.octopusrenewablesinfrastructure.com
)
where shareholders can
also find the Company’s quarterly factsheets, dividend information and other relevant information.
Appointment of Auditors
The Company’s auditors, PricewaterhouseCoopers LLP, having expressed their willingness to continue in office
as auditors, will be put forward for re-appointment at the Company’s Annual General Meeting and the Board
will seek authority to determine their remuneration for the forthcoming year.
Shareholder Name Holding %Holding
68
Date of notification
Sarasin & Partners LLP 56,165,734 9.94% 6 May 2022
Rathbone Investment Management Ltd 41,703,191 7.4 0% 12 July 2022
Brewin Dolphin Limited 29,615,256 5.24% 7 June 2023
Schroders plc 28,294,909 5.01% 29 September 2023
Baillie Gifford & Co 28,273,333 5.00% 27 October 2022
EFG Private Bank Limited 28,212,542 4.99% 29 June 2023
Quilter Plc 24,261,042 4.29% 14 November 2022
Newton Investment Management Limited 17,288,560 3.06% 9 March 2021
122Directors’ ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Going concern
The Directors, in their consideration of going concern, have reviewed comprehensive cash flow forecasts
prepared by the Company’s Investment Manager which are based on market data and believe, based on
those forecasts, the assessment of the Company’s subsidiaries’ banking facilities and the assessment of
the principal risks described in this report, that it is appropriate to prepare the financial statements of the
Company on the going concern basis.
In arriving at their conclusion that the Company has adequate financial resources, the Directors were mindful
that the Group had unrestricted cash of £23 million as at 31 December 2023
(
2022: £11m
)
and available
headroom on its RCF of £141 million
(
2022: 169m
)
. The Company’s net assets at 31 December 2023 were
£599 million
(
2022: £618m
)
and total expenses for the year ended 31 December 2023 were £7 million
(
2022:
£8m
)
, which represented approximately 1.16%
(
2022: 1.3%
)
of average net assets during the year. At the date
of approval of this document, based on the aggregate of investments and cash held, the Company has
substantial operating expenses cover.
The Directors have fully considered each of the Company’s investments. The Directors do not foresee any
immediate material risk to the Company’s investment portfolio and income from underlying SPVs. A prolonged
and deep market decline could lead to falling values to the underlying business and interruptions to cash flow,
however the Company currently has more than sufficient liquidity to meet any future obligations.
The covenants of the RCF have been tested and are not expected to be breached, even in downside scenarios.
Plausible downside scenarios include a decrease in wholesale energy prices, a decrease in output and an
increase in the discount rate applied to the underlying cash flow forecasts. While in some downside scenarios,
the headroom available on the RCF will be lower, the Directors remain confident that the Company has
sufficient cash balances and headroom in the RCF held by an intermediate holding company, in order to fund
the commitments detailed in note 19 to the financial statements, should they become payable.
As such, the Directors are satisfied that the Company has sufficient resources to continue to operate for the
foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue
to adopt the going concern basis in preparing these financial statements.
Viability statement
In accordance with the UK Corporate Governance Code and the Listing Rules, the Directors have assessed the
prospects of the Company over a longer period than the 12 months required by the “Going Concern” provision.
In reviewing the Company’s viability, the Directors have assessed the viability of the Company for the period
to 31 December 2028
(
the ‘Period’
)
. The Board believes that the Period, being approximately five years, is an
appropriate time horizon over which to assess the viability of the Company, particularly when taking into
account the long-term nature of the Company’s investment strategy, which are modelled over five years.
Based on this assessment, the Directors have a reasonable expectation that the Company will be able to
continue to operate and to meet its liabilities as they fall due over the period to 31 December 2028.
In their assessment of the prospects of the Company, the Directors have considered each of the principal
risks and uncertainties set out in this report and the solvency of the Company. The Directors have considered
the Company’s income and expenditure projections, along with the Group’s access to banking facilities and
financial markets.
The Company receives revenue in the form of dividends and interest from its portfolio of assets. These revenues
are predominantly derived from the sale of electricity and green certificates through power purchase or other
similar agreements, as well as subsidies in some cases. A prolonged and deep market decline could lead to
falling values to the underlying business or interruptions to cashflow, however the Directors do not foresee
any immediate material risk to the Company’s investment portfolio and income from underlying assets,
particularly given the level of geographic and technological diversification, and significant portion of fixed
revenues. The Directors are also satisfied and are comfortable that the Company would continue to remain
viable under downside scenarios, including a decline in long-term power price forecasts.
123Directors’ ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The major cash outflows of the Company are the payment of dividends, commitments payable for
construction projects and contingent acquisitions. The Directors are confident that the Company has
sufficient cash balances and headroom in the RCF held by an intermediate holding company, to fund all
outstanding commitments as they become payable over the Period.
The covenants associated with the RCF have been tested and are expected to be compliant, even in downside
scenarios. While the RCF falls due for repayment in February 2026, the Directors are confident that they have
sufficient access to debt finance and equity markets to cover all cash outflows after this date.
The Directors do not expect there to be any material increase in the annual ongoing charges of the Company
over the period and as the Company grows the annual ongoing charges ratio is expected to decrease. The
Company’s income from investments provide substantial cover to the Company’s operating expenses, and
any other costs likely to be faced by the Company over the period of the assessment.
Based on this review, the Directors confirm that they have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall due over the five-year period to December2028.
Auditors information
Each of the Directors at the date of the approval of this report confirms that:
•
so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are
unaware; and
•
the Director has taken all steps that he/she ought to have taken as director to make himself/herself aware
of any relevant information and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the
Companies Act 2006.
Annual General Meeting
The following information is important and requires your immediate attention. If you are in any doubt
about the action you should take, you should seek advice from your stockbroker, bank manager,
solicitor, accountant, or other financial adviser authorised under the Financial Services and Markets
Act 2000.
Resolutions relating to the following items of special business will be proposed at the Annual General Meeting
(
“AGM”
)
held on 19 June 2024. Notice of AGM
(
the “Notice”
)
together with detailed explanation of the proposed
resolutions can be found on page 207.
Issuance of Ordinary Shares and dis-application of pre-emption
rights
Resolutions 12 to 14 provide authority to issue Ordinary Shares. The Directors intend to use the net proceeds of
any issuance to invest in Renewable Energy Assets, in accordance with the Company’s investment objective
and Investment Policy and for working capital purposes.
At the forthcoming Annual General Meeting, the Board is seeking authority to allot up to a maximum of
135,582,608 Ordinary Shares
(
representing approximately 24% of the Ordinary Shares in issue at the date
of this document
)
and to dis-apply pre-emption rights when allotting those Ordinary Shares. The authority
granted under Resolutions 12 to 14 will expire at the conclusion of the Annual General Meeting to be held in
2025. The full text of these resolutions is set out in the Notice of Meeting on pages 207 to 213.
124Directors’ ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The authority granted by shareholders to issue Ordinary Shares will provide flexibility to grow the Company
and further expand the Company’s assets. Ordinary Shares issued under this authority will only be issued at a
premium to the NAV
(
cum income
)
. Ordinary Share issues are at the discretion of the Board.
Authority to purchase own shares
At the AGM of the Company held on 16 June 2023, the Directors were granted authority to make market
purchases of up to 14.99% of the Ordinary Shares in issue, equating to a maximum of 84,682,637 Ordinary
Shares. During the year ended 31 December 2023, the Company did not utilise its authority to purchase its
own shares.
The current authority to make market purchases expires at the conclusion of the 2024 AGM of the Company.
The Directors recommend that a new authority to purchase up to 84,682,637 Ordinary Shares
(
subject to the
condition that not more than 14.99% of the Ordinary Shares in issue, excluding treasury Shares, at the date
of the AGM are purchased
)
be granted and a resolution to that effect will be put to the AGM. Any Ordinary
Shares purchased will either be cancelled or, if the Directors so determine, held in treasury.
The Companies Act 2006 permits companies to hold shares acquired by way of market purchase as treasury
shares, rather than having to cancel them. This provides the Company with the ability to re-issue Ordinary
Shares quickly and cost effectively, thereby improving liquidity and providing the Company with additional
flexibility in the management of its capital base. No Ordinary Shares will be sold from treasury at a price less
than the
(
cum-income
)
NAV per existing Ordinary Share at the time of their sale unless they are first offered
pro rata to existing shareholders. At the year end the Company did not hold any shares in treasury.
Unless otherwise authorised by shareholders, Ordinary Shares will not be issued at less than NAV and Ordinary
Shares held in treasury will not be sold at less than NAV. The Directors have no present intention of exercising
the authority to purchase the Company’s Ordinary Shares but will keep the matter under review, taking into
account the financial resources of the Company, the Company’s share price and any discount to NAV, and
future investment opportunities. The authority will be exercised only if the Directors believe that to do so would
be in the best interest of Shareholders as a whole.
Authority to declare all dividends as interim dividends
At the AGM of the Company held on 16 June 2023, the Directors were granted authority to declare and pay
all dividends of the Company as interim dividends and for the last dividend referable to a financial year to
not be categorised as a final dividend that is subject to shareholder approval. The Directors intend to ask
shareholders to renew this authority and to declare and pay all dividends declared during the financial year
as interim dividends.
Regulatory Disclosures – Information to be disclosed in accordance
with Listing Rule 9.8.4
The Listing Rules requires listed companies to report certain information in a single identifiable section of their
annual financial reports. The Company confirms that only LR 9.8.4
(
7
)
(
issue of shares
)
is applicable during the
year under review. During the year ended 31 December 2023 the Company did not issue new shares.
By order of the Board
For and on behalf of
Apex Listed Companies Services
(
UK
)
Limited
Company Secretary
22 March 2024
125Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Corporate Governance Statement
This Corporate Governance Statement forms part of the Directors’ Report.
The Company is a member of the Association of Investment Companies and as such the Board of the Company
has considered reporting against the principles and provisions of the AIC Code of Corporate Governance
(
the
“AIC Code”
)
. The AIC Code adapts the principles and provisions set out in the UK Corporate Governance Code
(
the “UK Code”
)
to make them relevant for investment companies and includes supplementary guidance on
issues that are of specific relevance to the Company.
The Board considers that reporting against the principles and provisions of the AIC Code, which has been
endorsed by the Financial Reporting Council provides more relevant information to shareholders. This enables
boards to make a statement that, by reporting against the AIC Code, they are meeting their obligations under
the UK Code and associated disclosure requirements under paragraph 9.8.6 of the FCA’s Listing Rules.
The Company has complied with the principles and provisions of the AIC Code except as noted below.
The AIC Code is available on the AIC website
(
www.theaic.co.uk
)
and the UK Corporate Governance Code
can be found on the Financial Reporting Council’s website
(
www.frc.org.uk
)
.
Compliance with the AIC Code
Throughout the year ended 31 December 2023, the Company complied with the principles and provisions of
the AIC Code.
The UK Corporate Governance Code includes provisions relating to the role of the chief executive, executive
directors’ remuneration and the need for an internal audit function. For reasons set out in the AIC Code, the
Board considers these provisions are not relevant to the Company as it is an externally managed investment
company. In particular, all of the Company’s day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no executive Directors, employees or internal
operations.
The Board Composition
At the date of this report, the Board consists of five non-executive Directors, including the Chair. The Board
comprises two female and three male Directors. The Board believes that the balance of skills, gender,
experience, ethnic diversity and knowledge of the current Board provides a sound base for the appropriate
management of the Company. The Directors have a breadth of investment knowledge, business and financial
skills and experience relevant to the Company’s business.
All of the Directors are independent of the Investment Manager and other key service providers are able to
allocate sufficient time to the Company to discharge their responsibilities effectively. The Directors have a
broad range of relevant experience to meet the Company’s requirements and their biographies are shown
below.
Read more about the Division of Responsibilities and respective roles on page 130.
126Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Philip Austin MBE Non-executive Chair and Chair of the Nomination Committee
Philip spent most of career in banking with HSBC in London and, latterly, in Jersey as Deputy CEO of the
Bank’s Offshore business. Founding CEO of Jersey Finance Ltd, the body that represents and promotes
the Island’s finance industry, both at home, and internationally. Non-executive director of portfolio
containing both private and publicly owned businesses. Chairman of Jersey Electricity plc. Fellow of
the Chartered Institute of Bankers and a Fellow of the Chartered Management Institute. Awarded an
honorary doctorate in business from the University of Plymouth
(
October 2015
)
and an MBE in the
Queen’s New Year’s honours list
(
January 2016
)
.
Audrey McNair Non-executive Senior Independent Director and Chair of the Audit and Risk
Committee
Audrey has held non-executive positions where she was Chair of the Audit and/or risk committees at
two listed investment companies and at two mutual companies. Audrey’s executive career was across
the buy and sell side in City of London, where she gained extensive knowledge of regulatory, governance
and investment management processes and products. Worked at Aberdeen Asset Management plc
from May 2008 to March 2016, starting as Head of Internal Audit
(
EMEA
)
and becoming Global Head
of Business Risk and responsible for the group’s risk management framework and internal capital
adequacy assessment.
James Cameron Non-executive Director and Chair of the Management Engagement Committee
James is an award-winning authority in the global climate change movement and a qualified Barrister
with 30+ years’ experience, James serves on a number of boards and advisory committees across
business, finance, legal, academic and government organisations. James is an Honorary Senior
Research Fellow in the Grantham Institute on Climate Change and Environment, Imperial College
London, Chairman of Crown Agents, a senior advisor to Pollination Global, a Friend of COP26 and a
Director of Africa’s fastest growing solar company, Ignite Power.
Elaina Elzinga Non-executive Director and Chair of the Remuneration Committee
Elaina is currently a Principal in Investments at the Wellcome Trust, a global charity committed to
improving human health and funded from a diverse, unconstrained portfolio of over £37 billion.
Previously investment banker and investment manager at Goldman Sachs. Lead of Absolute Return,
where she is responsible for Wellcome’s partnerships with managers that have low equity market
correlations, including multi-strategy and credit hedge funds, and their climate strategy. Covers the
natural resources sector, with a strong interest in the energy transition, and led the development
of Wellcome’s net zero strategy for its investment portfolio. Trustee for the Cambridge University
Endowment Trustee Body and a Non executive Director for Premier Marinas. CFA Charterholder and
read History at the University of Cambridge.
Sarim Sheikh Non-executive Director
Sarim is a business leader with nearly three decades of experience working in renewables and energy
markets with GE and Shell across Europe, Americas, Asia and Africa. In his last role with GE he served
as COO GE Offshore Wind to 2023. Sarim has deep domain expertise in energy markets, technology
(
onshore/ offshore wind, solar, hydro, biomass
)
and operations. Through his career, he has served on
several boards across business, philanthropy and government in the UK, Netherlands, Croatia, Oman,
and Pakistan and is currently a Non-executive Director on Net Zero Technology Centre. He holds an
MBA
(
with distinction
)
from London Business School.
127Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The Articles of Association provide that each of the Directors shall retire at each annual general meeting in
accordance with Provision 23 of the AIC Code. Sarim Sheikh was appointed to the Board on 1 June 2023 and
stands for election, while Phil Austin MBE, Audrey McNair, Elaina Elzinga and James Cameron offer themselves
for re-election at the Annual General Meeting to be held on 19 June 2024.
Copies of the Directors’ appointment letters are available on request from the Company Secretary. Upon
joining the Board, any new Director will receive an induction and relevant training is available to Directors on
an ongoing basis.
A policy of insurance against Directors’ and Officers’ liabilities is maintained by the Company.
A procedure has been adopted for Directors, in the furtherance of their duties, to take independent professional
advice at the expense of the Company.
Board committees
The Board has formed several committees, each of which has adopted formal terms of reference, which are
reviewed at least annually, and copies of these are available on the Company’s website or on request from the
Company Secretary. The Board decides upon the membership and chair of its committees.
Audit and Risk Committee
The Audit and Risk Committee is chaired by Audrey McNair and consists of all of the Directors. A report on
page 141 provides details of the role, composition and meetings of the Audit and Risk Committee together
with a description of the work of the Audit and Risk Committee in discharging its responsibilities.
During the year, the FRC reviewed the financial statements for the year ended 31 December 2022. The FRC’s
review is limited in scope with no detailed knowledge of our business and no reliance should be placed on the
findings of their review. Further information can be found in the Audit and Risk Committee report on page 143.
Management Engagement Committee
The Management Engagement Committee is chaired by James Cameron and consists of all of the Directors.
The Management Engagement Committee meets at least once a year or more often if required. Its principal
duties will be to consider the terms of appointment of the AIFM and Investment Manager, as well as other
service providers and it will annually review those appointments and the terms of engagement.
The Management Engagement Committee carries out an annual review of the Company’s key service
providers and advisers based on a number of objective and subjective criteria, including a review of the terms
and conditions of their appointment with the aim of evaluating performance, identifying any weaknesses and
ensuring value for money for the Company’s shareholders.
During the year, the Management Engagement Committee formally reviewed the performance of the AIFM,
Investment Manager and other key service providers. The performance of key service providers were found to
be satisfactory.
Nomination Committee
The Nomination Committee is chaired by Philip Austin and consists of all of the Directors. The Nomination
Committee meets at least once a year or more often if required. Its principal duties will be to regularly review
the structure, size, composition
(
including the skills, knowledge, experience and diversity
)
of the Board as a
whole and make recommendations to the Board with regard to any changes, prepare a policy on the tenure
of the chair and the Board and keep up to date and fully informed about strategic issues and commercial
changes affecting the Company and the market in which it operates. The Nomination Committee will also be
responsible for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as
and when they arise. Any appointments to the Board are made in a formal and transparent matter.
128Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
New Non-Executive Director
On 31 May 2023 the Company announced the appointment of a new independent Non-Executive Director,
Sarim Sheikh, who joined the Board with effect from 1 June 2023. Sarim Sheikh was hired following a
recruitment process for which the Board appointed an external recruitment consultancy, Nurole Ltd. Nurole
Ltd has no other connection with the Company and is considered independent.
Board effectiveness review and implementation plan
The Board effectiveness review was led by the Nomination Committee ahead of its meeting in December
2023. The results of the review were positive, and no critical issues were identified. As a result of the review,
the Nomination Committee recommended that the Board increase its focus on certain aspects of business
performance including the share price discount to NAV. The recommendations from the report conducted by
an external independent specialist firm in 2022, which included recommendations in respect of succession
planning, were also noted to have been implemented during 2022 and 2023. As part of the effectiveness
review, the Chair held informal 1:1 meetings with each Director to discuss their performance and development
needs. The Chair evaluated the skills and performance of each Director and considered any development
needs whilst the SID conducted the Chair's annual appraisal. The Nomination Committee also refreshed the
Company’s Board succession plans and tenure policy during the period.
In line with the AIC Code, the Board aims to conduct an externally-facilitated board effectiveness review
every three years. Thelast externally-facilitated board effectiveness review was performed during 2022 and
presented to the Nomination Committee in September 2022.
Directors’ professional training
The Board is committed to staying up-to-date with the latest industry knowledge and best practices.
The Directors actively participate in various industry events and training programs such as AIC Directors’
roundtables, AIC annual conference, Big Four’s NED training webinars, and other relevant training sessions.
As part of ongoing efforts to keep themselves informed, the Directors attended a refresher course on Market
Abuse Regulations
(
MAR
)
in December, co-led by the Company’s Brokers and legal advisers. The Board
believes that these continuous learning opportunities help to better serve the Company’s stakeholders and
make informed decisions that drive the Company forward.
Remuneration Committee
The Remuneration Committee is chaired by Elaina Elzinga and consists of all of the Directors. The Remuneration
Committee meets at least once a year or more often if required. The Remuneration Committee’s main functions
include agreeing the policy for the remuneration of the Directors and reviewing any proposed changes to the
policy, reviewing and considering ad hoc payment to the Directors in relation to duties undertaken over and
above normal business and appointing independent professional remuneration advice as required.
During the year, the Remuneration Committee reviewed the remuneration policy of the Directors and
developed amendments for recommendation to the Board as a result of its review. The Company has
developed a revised Remuneration Policy and shareholders are asked to consider this at the Company's
upcoming AGM. Other activities of the Remuneration Committee included the commissioning of a fee
benchmarking report, the revision of its Board expenses policy, and the development of recommendations
in respect of Board remuneration. Please read more on the work of the Remuneration Committee in the
Remuneration Report on page 136.
129Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Meeting attendance
The full Board meets at least four times per year and there is regular contact between the Board, the Investment
Manager, the Administrator and the Company Secretary. Meeting agendas and supporting papers are
distributed in advance of all meetings to allow sufficient time for review and to permit detailed discussion at
the meetings. Ad hoc meetings consider potential investment acquisitions, refinancings and approval of other
key contracts entered into by the Company and its subsidiaries. The tables below lists Directors’ attendance
at Board and committee meetings during the year.
Directors
Philip
Austin
MBE
James
Cameron
Elaina
Elzinga
Audrey
McNair
Sarim
Sheikh
69
Total
Possible
Quarterly Board 4 4 4 4 3 4
Quarterly NAV / Dividend 4 4 3 4 2 4
Ad hoc Board 5 6 5 6 2 6
Audit and Risk Committee 4 4 4 4 2 4
Management Engagement Committee 2 2 2 2 2 2
Nomination Committee 1 1 1 1 1 1
Remuneration Committee 1 1 1 1 1 1
Total Board and Committee meetings 21 22 20 22 13 22
Total Board and Committee meetings
(
excluding ad hoc
)
16 16 15 16 11 16
Directors
Philip
Austin
MBE
James
Cameron
Elaina
Elzinga
Audrey
McNair
Sarim
Sheikh
69
Quarterly Board 100% 100% 100% 100% 100%
Quarterly NAV/Dividend 100% 100% 75% 100% 100%
Ad hoc Board 83.33% 100% 83.33% 100% 100%
Audit and Risk Committee 100% 100% 100% 100% 100%
Management Engagement Committee 100% 100% 100% 100% 100%
Nomination Committee 100% 100% 100% 100% 100%
Remuneration Committee 100% 100% 100% 100% 100%
Total Board and Committee meetings 95.45% 100% 90.91% 100% 100%
Total Board and Committee meetings
(
excludingadhoc
)
100% 100% 93.75% 100% 100%
69
Sarim Sheikh was appointed 1 June 2023 and attended 100% of possible meetings.
130Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Decision Making
The Board is responsible for the overall stewardship of the Company’s affairs and has adopted a schedule of
matters specifically reserved for decision by the Board. Strategic issues and all operational matters of a material
nature are considered at its meetings, including reviewing the Company’s performance by reference to the
Company’s key performance indicators. Each quarterly Board meeting covers every area where the Board
has reserved decision-making power, in addition to receiving reports from key service providers on portfolio
performance, asset valuations and enhancements, operational matters, ESG matters, risk management and
regulatory and industry developments.
The Board delegates certain activities to the AIFM, who then delegates to the Investment Manager, but actively
and continuously supervises the Investment Manager in the performance of its functions and approves all
decisions in relation to investment acquisitions. The Board retains the right to override any advice given by the
Investment Manager if acting on that advice would cause the Company not to be acting in the best interests
of its investors. The Board also has the right to request additional information or updates from the Investment
Manager in respect of all delegated matters.
The Board is able to access independent advice, at the Company’s expense when it deems it necessary
to do so.
Division of Responsibilities
The following sets out the division of responsibilities between the Chair, SID, Board and the
Committee Chairs. Terms of Reference of the Committees are available on the Company’s website
https://octopusrenewablesinfrastructure.com/
Role of the Chair
The Chair is responsible for leading the Board, creating conditions for overall Board and individual director
effectiveness, promoting constructive debate. Role of the Chair includes:
•
Leadership of the Board, ensuring its effectiveness in all aspects of its role
•
Ensuring the Board is provided with sufficient and timely information in order to ensure it is able to
discharge its duties.
•
Ensuring each Board member’s views are considered, and appropriate action taken.
•
Ensuring that each Committee has the support required to fulfil its duties.
•
Engaging the Board in assessing and improving its performance.
•
Overseeing the induction and development of directors.
•
Overseeing the Investment Manager and other service providers.
•
Seeking regular engagement with major shareholders in order to understand their views on governance
and performance against the Company’s investment objective and investment policy.
•
Ensuring that the Board as a whole has a clear understanding of the views of shareholders.
•
Ensure that the Board complies with its obligations under section 172 Companies Act 2006, by taking into
account the needs of the Company’s wider stakeholders
•
Ensuring regular engagement with each service provider; and
•
Keeping up to date with key developments.
Role of the SID
The role of the SID is principally to support the Chair in his role and to work with him and other Directors to
resolve any significant issues that may arise. The role of the SID includes:
•
Providing a sounding board for the Chair;
•
Serving as an intermediary for the other directors and shareholders; and
•
Leading annual appraisal of the Chair’s performance.
131Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Role of Committee Chair includes:
•
Ensuring appropriate papers are considered at the meeting.
•
Ensuring committee members views and opinions are appropriately considered.
•
Seeking engagement with shareholders on significant matters related to their areas of responsibility.
•
Maintaining relationships with advisers and external service providers; and
•
Considering appointing independent professional advice where deemed appropriate.
Role of the Board includes:
•
Reviewing the Board pack ahead of the meeting.
•
Providing appropriate opinion, advice and guidance to the Chair and fellow Board members.
•
Supporting the Chair, the SID, fellow Board members and service providers in fulfilling their role, providing
effective challenge as appropriate; and
•
Providing appropriate support at the Annual General Meeting.
Board Diversity
The Board recognises the benefits of diversity and supports the recommendations of the Davies Report. When
appointing Board members, its priority will always be based on merit, but will be influenced by the strong desire
to maintain Board diversity. Diversity is important in bringing an appropriate range of skills and experience to
the Board. The Board’s policy on diversity, including gender, is to take account of the benefits of this during the
appointment process. The Board is committed to ensuring that its composition reflects ethnic diversity, and
made a meaningful progress on this front through the appointment of a fifth Director. Seepage128 for more
information on the new Director appointment. As at 31 December 2023, the Company had five Directors: out
of which two were female and three were male, and one was from a minority ethnic background.
Statement on Board Diversity – Gender and Ethnic Background
According to new requirements of the Listing Rules LR 9.8.6 R
(
9
)
and
(
11
)
(
applicable for periods from 1 April
2022
)
, the Company is required to include a statement in the annual financial report setting out whether it has
met the following targets on board diversity as at 31 December 2023:
1
)
At least 40% of individuals on its board are women;
2
)
At least one of the senior board positions
70
is held by a woman; and
3
)
At least one individual on its board is from a minority ethnic background.
The following tables set out the prescribed format for information in accordance with the requirements of LR9
Annex 2.
(
a
)
Table for reporting on gender identity or sex
Number of board
members
Percentage of the
board
Number of senior
positions on the
board
(
SID and Chair
)
Men 3 60% 1
Women 2 40% 1
Not specified/prefer not to say – – –
70
The Company considers the positions of the Chair and Senior Independent Director (SID) to be senior positions of the Board.
132Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
(
b
)
Table for reporting on ethnic background
Number of board
members
Percentage of the
board
Number of senior
positions on the
board
(
SID and Chair
)
White British or other White
(
including
minority white groups
)
4 80% 2
Mixed Multiple Ethnic Groups – – –
Asian/Asian British 1 20% –
Black/African/Caribbean/Black British – – –
Other ethnic group, including Arab – – –
Not specified/prefer not to say – – –
The prescribed format includes provisions relating to the role of the chief executive officer
(
CEO
)
, chief financial
officer
(
CFO
)
and executive management. The Board considers these provisions are not relevant to the
Company as it is an externally managed investment company. In particular, all of the Company’s day-to-day
management and administrative functions are outsourced to third parties. As a result, the Company has no
CEO, CFO or executive management.
The Listing Rules require to include an explanation of the Company’s approach to collecting the data used
for the purposes of making the disclosures. The Company Secretary circulated the request for information to
each director to complete individually and collated the responses for inclusion in the annual financial report.
The Company has met the targets on board diversity as required by the Listing Rules as at 31 December 2023.
Board Tenure
The Directors recognise that independence is not a function of service or age, and that experience is an
important attribute within the Board. The Board is mindful that four of the Directors will reach their ninth
anniversary simultaneously in November 2028. In order to ensure stability and continuity, the Board has
adopted a succession plan that allows for gradual changes to its composition, therefore they will begin to
refresh the Board from its sixth anniversary in 2025. It is generally recommended that the Chair should not
hold their post for more than nine years from their initial appointment to the Board. However, a more flexible
approach is taken for the Chair of investment companies to allow for a limited extension of their tenure. This
is to help with effective succession planning in the context of the sector’s different circumstances, while also
ensuring regular refreshment and diversity.
In accordance with the Articles and the AIC Code, all Directors stand for re-election annually.
Board Evaluation
A formal annual Board evaluation process is implemented by the Nomination Committee to assess the
performance of the Board, its committee and individual Directors. Please see page 127 for more details.
Internal Control
The AIC Code requires the Board to review the effectiveness of the Company’s system of internal controls. The
Board recognises its ultimate responsibility for the Company’s system of internal controls and for monitoring
its effectiveness. The system of internal controls is designed to manage rather than eliminate the risk of failure
to achieve business objectives. It can provide only reasonable assurance against material misstatement
or loss. The Board has undertaken a review of the aspects covered by the guidance and has identified risk
133Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
management controls in the key areas of business objectives, accounting, compliance, operations and
secretarial as being matters of particular importance upon which it requires reports from the relevant key
service providers. The Board believes that the existing arrangements, set out below, represent an appropriate
framework to meet the internal control requirements. By these procedures the Directors have kept under
review the effectiveness of the internal control system throughout the year and up to the date of this report.
Financial aspects of internal control
The Directors are responsible for the internal financial control systems of the Company and for reviewing
its effectiveness. The aim of the internal financial control system is to ensure the maintenance of proper
accounting records, the reliability of the financial information upon which business decisions are made and
which is used for publication and that the assets of the Company are safeguarded.
Although the Board has contractually delegated services that the Company requires to external third parties,
they remain fully informed of the internal control framework established by each relevant service provider.
Any changes or amendments to the internal control frameworks of the third-party providers, along with
commentary on the effectiveness of financial controls are discussed at the Audit and Risk Committee.
The Statement of Directors’ Responsibilities in respect of the financial statements is on page 146 and a
statement of Going Concern is on page 122.
The Report of the Independent Auditors is on pages 147 to 155.
Other aspects of internal control
The Board holds at least four regular meetings each year, plus additional meetings as required. Between
these meetings there is regular contact with the Investment Manager and the Company Secretary and
Administrator.
The Administrator, Apex Listed Companies Services
(
UK
)
Limited, reports separately in writing to the Board
concerning risks and internal control matters within its purview, including internal financial control procedures
and company secretarial matters. Additional ad hoc reports are received as required and Directors have
access at all times to the advice and services of the Company Secretary, who is responsible to the Board for
ensuring that Board procedures are followed, and that applicable rules and regulations are complied with.
The contacts with the AIFM, the Investment Manager and the Administrator enable the Board to monitor the
Company’s progress towards its objectives and encompass an analysis of the risks involved. The effectiveness
of the Company’s risk management framework and internal controls systems is monitored regularly and a
formal review, utilising a detailed risk assessment programme, takes place at least annually. This includes a
review of the internal controls reports of the Administrator and the Registrar.
Principal Risks
The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company,
including those that would threaten its business model, future performance, solvency or liquidity. The principal
risks and how they are being managed are set out in the Strategic Report on pages 15 to 114.
Conflicts of Interest
The Directors will be responsible for establishing and regularly reviewing procedures to identify, manage,
monitor, and disclose conflicts of interests relating to the activities of the Company. The Board, the AIFM and
the Investment Manager and their respective directors, officers, service providers, employees and agents and
the Directors are committed to taking measures to identify and prevent or appropriately manage actual or
potential conflicts of interest, including perceived conflicts of interest.
The AIFM and the Investment Manager have a conflict-of-interest policy in place and arrangements have been
established by the AIFM and Investment Manager which are designed to achieve these objectives, including:
•
conflicts management processes and conflicts committee designed to identify and then prevent or
manage actual, potential, or perceived conflicts of interest.
•
an investments allocation policy.
134Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
•
maintenance of insider lists and a register of outside business interests and personal account dealing
rules.
•
controls over the handling and flow of confidential and inside information.
•
general disclosure of the possibility of material interests to clients at an early stage of the relationship; and
•
where appropriate and proportionate, organisationally, and hierarchically keeping certain functions, such
as compliance, separate from client facing teams.
The appointment of the Investment Manager by the AIFM is on a non-exclusive basis. It is expected that the
Company may enter into transactions with other Octopus Managed Funds as a counterparty when acquiring,
coinvesting, or, if the opportunity arises, disposing of certain Renewable Energy Assets. The AIFM and the
Investment Manager address specific actual or potential conflicts through one or more of the following
options:
•
application of the above-mentioned measures and precautions.
•
declining to act.
•
disclosing the conflict or material interests to the client
(
s
)
or other affected parties at the beginning of the
relationship and obtaining its/their consent to the AIFM and/or Investment Manager acting for it/them.
All decisions as to the appropriate management of any conflict of interest are based on two principles, namely:
•
to secure fair treatment of all parties involved; and
•
to mitigate any legal, regulatory, or reputational risk to the AIFM and/or Investment Manager.
Transactions with affiliates of the AIFM and Investment Manager
During the year, the Company entered into one transaction in the ordinary course of business with Octopus
Energy, part of the same group as the Investment Manager. The transaction related to the signing of a 1-year
physical, indexed PPA for Ottringham solar farm in the UK.
As Octopus Energy is an affiliate of the AIFM and the Investment Manager, the Board sought external advice
and determined that the transaction was in the ordinary course of business and on normal market terms,
and as such is not a related party transaction. In accordance with the Disclosure Guidance and Transparency
Rules, the Board was responsible for the decision to award the PPA to Octopus Energy, having reviewed the
tender responses. A summary of the transaction is detailed below:
Description Asset Location
External
counterparty
managing
process
Nominal value
of transaction
Conflicts
policy
followed?
Rationale for transacting
with Octopus Energy
(
“OE”
)
1-year indexed PPA Ottringham UK GAES Limited £1.7 million Yes OE’s offer provided the
highest commercial
value and equivalent
counterparty credit
risk to the other tender
participants
Related Party Transactions
Related party transitions during the year in review are disclosed on page 183.
135Corporate Governance StatementOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Shareholder Relations
The Directors have determined that the AGM will be run as a combined physical and electronic meeting.
Shareholders and their proxies will be able to attend the meeting in person. Shareholders may also follow the
proceedings of the AGM virtually via the Investor Meet Company platform, where they will be able to follow
the proceedings and ask questions. Details of how to follow the proceedings via the Investor Meet Company
platform can be found in the notes to the Notice of AGM on page 211.
Shareholders are encouraged to vote their holdings using the enclosed Form of Proxy or electronically using the
instructions contained in the notes to the Notice of AGM and notes to the Form of Proxy. The Notice of AGM
sets out the business of the AGM and any item not of a routine nature is explained in the Directors’ Report.
Separate resolutions are proposed for each substantive issue. The Company’s Broker and Investment Manager,
together with the Chair, seeks regular engagement with major shareholders in order to understand their views
on governance and performance against the Company’s investment objective and investmentpolicy.
136Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Directors’ Remuneration Report
The Directors’ Remuneration Report for the year to 31 December 2023 has been prepared in accordance
with sections 420-422 of the Companies Act 2006. Shareholders are requested to consider the Directors’
Remuneration Report on an annual basis. The Directors’ Remuneration Report is voted on an advisory and
non-binding basis. The Board is required to put a Directors’ Remuneration Policy to shareholder vote on a
triennial basis in accordance with the requirements of Schedule 8 of the Large and Medium-sized Companies
and Groups
(
Accounts and Reports
)
Regulations 2008, as amended. The law requires the Company’s auditors
to audit certain sections of the Directors’ Remuneration Report and where this is the case the relevant section
has been indicated as such. The Directors’ Remuneration Policy of the Company was approved by shareholders
at the first AGM which was held on 8 April 2021. Arevised Directors’ Remuneration Policy, which is set out in full
on page 137 of this Annual Report, will be submitted for approval at the forthcoming AGM of the Company to
be held on 19 June 2024.
The Remuneration Committee is chaired by Elaina Elzinga and consists of Philip Austin MBE, James Cameron,
Audrey McNair and Sarim Sheikh.
The Remuneration Committee is responsible for reviewing the remuneration payable to the Directors. It does
this by taking into account the relevant circumstances of the Company, the time commitment of the various
roles within the Board, the relevant experience and skills of the members of the Board, the Board remuneration
paid by a range of the Company’s peers, the roles performed by the members of the Board, as well as market
expectations with respect to director remuneration.
The Board determined that it was not appropriate to set performance measures. The Company does not
operate any type of incentive, share, or share option scheme. No discretion was exercised by the Remuneration
Committee when calculating Directors’ remuneration, and there are no agreements in place to compensate
a Board member for loss of office. Letters of appointment set out the terms of each Director’s appointment.
Mindful of its duty to apply the Company’s Directors’ Remuneration Policy in a way that supports strategy and
promotes the long-term sustainable success of the Company, the Company commissioned a benchmarking
review to assist with the review of Directors’ fees. The review, which was completed by independent external
remuneration consultants
(
Ellason LLP
)
, was completed in November 2023. The primary objective of the
benchmarking exercise was to understand the competitive positioning of the current fee arrangements for
the Company’s Board members, assessed on a group of listed investment company peers of comparable size
and investment focus. Ellason LLP did not supply any other services to the Company during the period and
is independent of the Company. The Remuneration Committee was satisfied that the advice received was
objective and independent. The fees for the benchmarking exercise were £4,500 excluding VAT.
Two main comparator groups
(
‘investment focus’ comparators and ‘size’ comparators
)
were used by the
consultants for the review. The benchmarking report noted that the level of fees paid by the Company to the
members of the Board was approximately 15-20% below the industry median, and was in the bottom quartile.
Further, the ‘size’ comparator data revealed that across the market there was a significant premium associated
with being a director of a trust focussed on alternative assets, potentially as a result of both the increased
time commitment expected as compared to other sectors in the investment companies sector and because
the risk profiles of the portfolios tended to be higher. The report also explained that between 33% and 50% of
investment companies also paid a premium to the Senior Independent Director, which the Company did not
do. The report further revealed that almost 80% of the boards within the investment companies sector had
increased their fees during 2023, as well as having committed to an annual fee review.
After careful consideration, the Board concluded that, to properly take into account the element of time
commitment, and to help ensure that the Company remained competitive when it decides to recruit additional
Directors in the future, it would increase in the Directors’ fees, effective 1 January 2024, in order to go some way
to closing the gap between the existing fee levels and the median level in the comparator groups in 2023 . In
arriving at this conclusion, the Board was also on the one hand cognisant that Directors’ fees had not increased
following the fee benchmarking review commissioned by the Board in 2022, even though the findings of
that review appeared to warrant increases, and on the other hand was mindful of the high levels of inflation
during 2023.
137Directors’ Remuneration ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The Committee therefore developed a recommendation to the Board to increase directors’ fees, effective
from 1 January 2024, as follows: the Chair’s annual fee increased by 15% from £60,000 to £69,000; the
Audit Committee Chair’s annual fee increased by circa 11% from £46,000 to £51,000; and the Non-Executive
Director’s annual fee increased by 10% from £40,000 to £44,000. This resulted in a total directors’ remuneration
of £252,000 per annum.
A cap in respect of aggregate Board fees that can be paid in any one year was set at the time of the Company’s
launch and is contained within the Company’s Articles of Association. The total Directors remuneration for
2024 is expected to be £252,000 per annum based on the current Board of five Directors and there is sufficient
headroom between this total and the current aggregate Board fees cap. This cap can only be changed by
shareholders passing an Ordinary resolution.
Directors’ Remuneration Policy
The Remuneration Policy of the Company was approved by shareholders at the Company’s first AGM held on
8 April 2021 for a maximum of three years. Accordingly, and as required under the Large and Medium-sized
Companies and Groups
(
Accounts and Reports
)
(
Amendment
)
Regulations 2013, a resolution to approve the
remuneration policy for a maximum of a further three years will be put before shareholders at this year’s AGM.
All the Directors are non-executive directors. The Company has no other employees, therefore no employee
consultation is required and no employee comparative data is available. To help develop its recommendations,
the Remuneration Committee reviews directors’ fees taking into account the following considerations:
•
Company performance as measured using the KPIs which are monitored by the Board
•
Alignment with the Company’s stakeholders
•
The need to attract candidates of a sufficient calibre who possess the requisite skills and experience
•
The level of time commitment and responsibility
•
The quality of governance as appraised by the Management Engagement Committee and assessed
during periodic board evaluations
•
Levels of board pay of the Company’s peers
In addition, the Remuneration Committee will conduct an annual independent external fee-benchmarking
exercise against an appropriate peer group.
Each Director is entitled to a base fee. The Chair of the Board and the Chair of the Audit and Risk Committee
are paid a higher fee than the other directors to reflect the additional work entailed by the role. There are no
performance-related elements to Directors’ fees and the Company does not operate any type of incentive, share
scheme, award or hold options to acquire shares in the Company. Directors are entitled to be reimbursed for all
expenses incurred in performance of their duties. The Directors do not have service contracts with the Company
but have letters which outline the terms of their appointment. The Directors’ appointments can be terminated, at
the discretion of either party, upon three months’ written notice. The Articles of Association provide that each of
the Directors shall retire at each Annual General Meeting in accordance with Provision 23 of the AIC Code.
No compensation is payable to any Director to compensate for loss of office.
A cap in respect of aggregate Board fees that can be paid in any one year was set at the time of the Company’s
launch and is contained within the Company’s Articles of Association.
The Board will not pay any incentive fees to any person to encourage them to become a Director of the
Company. The Board may, however, pay fees to external agencies to assist the Board in the search and
selection of Directors.
Directors’ Service Contracts
In line with the Remuneration Policy, the Directors have letters which outline the terms of their appointment. The
Directors’ appointments can be terminated, at the discretion of either party, upon three months’ written notice.
The Articles of Association provide that each of the Directors shall retire at each Annual General Meeting in
accordance with Provision 23 of the AIC Code. With the exception of Mr Sheikh, who was appointed during
the period and stands for election at the upcoming AGM, all Directors intend to retire and offer themselves for
re-election at the Annual General Meeting on 19 June 2024.
138Directors’ Remuneration ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Fees payable on recruitment
As permitted by the Company's Remuneration Policy, Nurole Ltd, which is an external recruitment consultancy,
was engaged for the search and selection process of a new non-executive director. Nurole Ltd has no other
relation to the Company and considered independent. For the year ended 31 December 2023, the Company
spent £20,000 on recruitmentfees.
Remuneration Report
(
Audited
)
The table below provides a single figure for the total remuneration of each Director for the year to 31 December 2023.
Director
Fees to
31 December
2023
(
£
)
Expenses
reimbursed to
31 December
2023
(
£
)
Total
(
£
)
Fees to
31 December
2022
(
£
)
Expenses
reimbursed to
31 December
2022
(
£
)
Total
(
£
)
Philip Austin MBE 60,000 3,500 63,500 60,000 5,100 65,100
Audrey McNair 46,000 2,700 48,700 46,000 1,800 47,800
James Cameron 40,000 – 40,000 40,000 – 40 ,000
Elaina Elzinga 40,000 200 40,200 40,000 1,000 41,000
Sarim Sheikh
(
from 1 June 2023
)
23,300 – 23,300 – – –
Total 209,300 6,400 215,700 186,000 7,900 193,900
Directors receive fixed fees and do not receive bonuses or other performance related remuneration, share
options, pension contributions or other benefits apart from the reimbursement of allowable expenses.
No fees or payments were made to any other directors who served during the year.
Fees
There was no change to the Board’s fees during the year under review. As set out above, increases in the Board’s
fees were approved and took effect on 1 January 2024.
139Directors’ Remuneration ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Performance
In setting the Directors’ remuneration, consideration is given to the size and performance of the Company.
The following graph shows the performance of the Company’s share price
(
total return
)
since IPO against FTSE
250 index
(
assuming £100 was invested at the point the Company was listed
)
. The Company is part of FTSE
250 Index and has deemed FTSE 250 Index to be the most appropriate comparator for its performance.
Year to
31 December 2023
(
£‘000
)
Year to
31 December 2022
(
£‘000
)
Investment Income 42,694 40,307
Spend on Directors’ fees 209 186
Company’s operating expenses and Investment Manager’s fees 7,118 8,168
Dividends paid and payable to shareholders 31,918 29,265
-30
-40
-20
-10
0
10
20
30
Dec-19 Mar-20 Jun-20 Sep-20 Sep-21 Sep-22 Sep-23Dec-20 Dec-21 Dec-22 Dec-23Mar-21 Mar-22Jun-21 Jun-22 Jun-23Mar-23
Total Return (%)
ORIT LN Share price (including dividends reinvested) FTSE 250 index (including dividends reinvested)
While the above graph can be a helpful benchmark, as well as its performance return target
(
of 7% to 8% per
annum over the medium to long-term
)
, ORIT has a number of impact targets which it holds in equal regard.
Both performance and impact targets were considered when setting Directors’ remuneration, as well as
other factors listed above
(
and in the Remuneration policy
)
.
Relative importance of spend on pay
The following table sets out the total level of Directors’ remuneration compared to the distributions to
shareholders by way of dividends and share buybacks, and the operating expenses and Investment Manager’s
fees incurred by the Company.
The disclosure of the information in the table below is required under The Large and Medium sized Companies
and Groups
(
Accounts and Reports
)
(
Amendment
)
Regulations.
140Directors’ Remuneration ReportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
71
Held jointly with Mrs. J Austin, a PCA of Mr. Austin.
72
Held jointly with Mr. McNair, a PCA of Mrs. McNair.
Philip Austin MBE 165,518 0.029% 165,518
71
James Cameron 65,306 0.012% 65,306
Elaina Elzinga – – –
Audrey McNair 50,437
72
0.009% 51,383
Sarim Sheikh – – –
Shareholders’ views
The Company has not sought individual shareholder views on its remuneration policy. The Remuneration
Committee considers any comments received from shareholders on remuneration policy on an ongoing basis
and takes account of those views in determining the remuneration policy.
Statement
On behalf of the Board and in accordance with Part 2 of Schedule 8 of the Large and Medium-sized Companies
and Groups
(
Accounts and Reports
)
(
Amendment
)
Regulations 2013, I confirm that the above Remuneration
Policy and Remuneration Implementation Report summarises, as applicable, for the year to 31December
2023:
a
)
the major decisions on Directors’ remuneration.
b
)
any substantial changes relating to Directors’ remuneration made during the year; and
c
)
the context in which the changes occurred, and decisions have been taken.
Elaina Elzinga
Chair of the Remuneration Committee
22 March 2024
Directors’ holdings
(
audited
)
At 31 December 2023 and at the date of this report the Directors had the following holdings in the Company. There is no requirement
for Directors to hold shares in the Company. All holdings were beneficially owned.
As at the latest practicable date before the publication of this document, there have been no changes to the Directors’
shareholdings. The Directors have no other share interests or share options in the Company and no share schemes are available.
Director
Ordinary Shares as at
31 December 2023 Percentage Holding
Ordinary Shares as at
31 December 2022
141Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Role of the Audit and Risk Committee
The AIC Code recommends that the Board should establish an Audit and Risk Committee comprising at least
three, or in the case of smaller companies, two independent non-executive Directors. The Board is required
to satisfy itself that the Audit and Risk Committee has recent and relevant financial experience and has
competence relevant to the sector in which the Company operates.
The Company’s Audit and Risk Committee consists of all of the Directors and is chaired by Audrey McNair.
Since the Company’s inclusion in the FTSE 250 in late 2022, the Audit and Risk Committee holds at least
three meetings a year. The Board considers that the members of the Audit and Risk Committee have the
requisite skills and experience to fulfil the responsibilities of the Audit and Risk Committee. The Audit and Risk
Committee will examine the effectiveness of the Company’s control systems. It will review the half-yearly and
annual reports and also receive information from the AIFM and the Investment Manager. It will also review the
scope, results, cost effectiveness, independence and objectivity of the external auditors.
The Audit and Risk Committeee has formal written terms of reference and copies of these are available on the
Company’s website or on request from the Company Secretary. All members of the Audit and Risk Committee
have recent and relevant financial experience and competence relevant to the sector in which the Company
operates.
Membership
The Chair of the Audit and Risk Committee, Audrey McNair, is a fellow of the Chartered Institute of Bankers.
She also served as chair of the audit and risk committees at the companies where she was a non-executive
director
(
including two other listed companies
)
.
Previously Audrey worked in senior positions in financial services, including leading a global risk team at
one of the UK’s largest asset managers. The Board is satisfied that Audrey has recent and relevant financial
experience as required under the UK Corporate Governance Code. The other members of the Audit and
Risk Committee are Philip Austin MBE, James Cameron, Elaina Elzinga and Sarim Sheikh, all of whom have
extensive experience of investment companies, investment management and/or the renewable energy
sector. The qualifications of the Audit and Risk Committee members are outlined in page 126 of the Corporate
Governance Statement.
Internal Audit
The Audit and Risk Committee has considered the need for an internal audit function and considers that this
is not appropriate given the nature and circumstances of the Company as an externally managed investment
company with external service providers. There is no impact on the work of the external auditors as a result of
not having an internal audit function.
Meetings
There were four meetings of the Audit and Risk Committee during the year ended 31 December 2023 and
these were attended by all Committee members. Further Audit and Risk Committee meetings were held in
March 2024 at which all Committee members were in attendance.
Financial statements and significant accounting matters
The Audit and Risk Committee reviewed the financial statements and considered the following significant
accounting matters in relation to the Company’s financial statements for the year ended 31 December 2023.
Report of the Audit and Risk
Committee
142Report of the Audit and Risk CommitteeOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Valuation of investments
The valuation of the Company’s assets is the most material matter in the production of the financial
statements. The Audit and Risk Committee reviewed the procedures in place for ensuring the accurate
valuation of investments. The Investment Manager undertakes valuations of the Renewable Energy Assets
acquired by the Company as at the end of each calendar quarter. The valuations are approved by the AIFM’s
valuation committee before being provided to the Administrator. The Board may ask for an external valuation
to be carried out from time to time at its discretion.
The Administrator calculates the Net Asset Value and the Net Asset Value per Ordinary Share
(
and per C Share
where applicable
)
at the end of each quarter and submits to the Board for its approval, accompanied with a
paper from the Investment Manager detailing key assumptions and explanations for valuation movements
in the quarter. All calculations are at fair value. The valuation principles used to calculate the fair value of
Renewable Energy Assets follow International Private Equity and Venture Capital Valuation Guidelines. Fair
value for operational Renewable Energy Assets is typically derived from a discounted cash flow
(
“DCF”
)
methodology and the results benchmarked against appropriate multiples and key performance indicators
(
“KPIs”
)
, where available for the relevant sector/ industry. For Renewable Energy Assets that are not yet
operational at the time of valuation, the price of recent investment may be used as an appropriate estimate
of fair value initially, but it is likely that a DCF will provide a better estimate of fair value as the asset moves
closer to operation.
In a DCF analysis, the fair market value of the Renewable Energy Asset represents the present value of the
Renewable Energy Asset’s expected future cash flows, based on appropriate assumptions for revenues
and costs and suitable cost of capital assumptions. The AIFM uses its judgement in arriving at appropriate
discount rates. This is based on its knowledge of the market, taking into account market intelligence gained
from bidding activities, discussions with financial advisers, consultants, accountants and lawyers and publicly
available information.
A range of sources are reviewed in determining the underlying assumptions used in calculating the fair market
valuation of each Renewable Energy Asset, including but not limited to:
•
macroeconomic projections adopted by the market as disclosed in publicly available resources.
•
macroeconomic forecasts provided by expert third-party economic advisers.
•
discount rates publicly disclosed by the Company’s global peers.
•
discount rates applicable to comparable infrastructure asset classes, which may be procured from public
sources or independent third-party expert advisers.
•
discount rates publicly disclosed for comparable market transactions of similar assets; and
•
capital asset pricing model outputs and implied risk premia over relevant risk-free rates.
Where available, assumptions are based on observable market and technical data. For other assumptions, the
AIFM may engage independent technical experts such as electricity price consultants to provide long-term
forecasts for use in its valuations. Any value expressed other than in Sterling
(
the functional reporting currency
of the Company
)
(
whether of an investment or cash
)
is converted into Sterling at the rate
(
whether official or
otherwise
)
which the Directors deem appropriate in the circumstances.
Investments into developers and development-stage projects are held at cost until a material change occurs
in relation to the investment. Material changes could include, inter alia, a liquidation event, where value is
crystallised through a sale, project failure, further investment rounds, achievement of or failure to achieve
significant project milestones that would attribute value, significant regulatory or policy changes or any other
factor that the Investment Manager deems to be material to the valuation.
Tax status
The Company may suffer tax on gains on the realisation of investments if investment trust status is not
maintained. The Audit and Risk Committee reviewed the compliance of the Company during the year with
the eligibility conditions in order for investment trust status to be maintained.
143Report of the Audit and Risk CommitteeOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Going concern
The Audit and Risk Committee reviewed the Company’s financial resources and concluded that it is appropriate
for the Company’s financial statements to be prepared on a going concern basis as described in the Directors’
Report on page 122.
FRC review
During the year, the FRC reviewed the financial statements for the year ended 31 December 2022. The FRC’s
review is limited in scope with no detailed knowledge of our business and no reliance should be placed on
the findings of their review. The review highlighted that Note 9 of those financial statements disclosed that
power price forecasts were a key assumption used in the level 3 fair value measurement of the company’s
investments. The note explained that the forecasts included a 20 per cent discount over the 2023 to 2025
period in addition to the normal discounts to reflect the lower prices typically captured by wind and solar
generators. It was, however, considered by the FRC that it was unclear whether the graph depicting forecasted
power only generation weighted prices until 2050 disclosed in the Investment Manager’s Report included
these discounts.
Further, and in relation to IFRS 13 ‘Fair Value Measurement’, paragraph 93
(
d
)
of IFRS 13 includes a requirement
to disclose quantitative information in the annual accounts about the significant unobservable inputs used
in level 3 fair value measurements. The FRC advised that it would, therefore, expect the disclosure of forecast
power prices used in the fair value measurement to include any discounts applied by management, and expect
this to be adequately explained. The quantification of a ‘normal’ discount for wind and solar generators should
also be disclosed, if considered a significant unobservable input. Where these disclosures were presented
outside the annual accounts, the FRC recommended that these should be incorporated into the accounts by
way of cross reference. The FRC further advised that it was also unable to locate comparatives for the price
forecasts.
Further, and in relation to Alternative Performance Measures, the FRC advised that it expected companies to
apply the European Securities and Markets Authority Guidelines on APMs.
While there were no further questions or queries that came out of their review, the FRC did make some
suggested recommendations for the Company to consider in the preparation of the 2023 Annual Report.
Information of these recommendations and how they have been addressed are detailed in the table below.
The Audit and Risk Committee were satisfied that the measures to address these recommendations have been appropriately
reflected in the 2023 Annual Report and Financial Statements.
Financial Statement Area Recommendation How addressed in 2023 Annual Report
IFRS 13 Fair Value
Measurement
•
Expect forecast power prices used in the
fair value measurement to be disclosed;
•
Any discounts applied to power price
forecasts should be adequately
explained;
•
If disclosed outside of the financial
statements, they should be incorporated
by way of cross reference;
•
Comparative price forecasts also
expected.
•
Charts are presented in the ‘Portfolio
Valuation’ section on page 48;
•
Discounts applied to power price
forecasts are explained in the 'Portfolio
Valuation' section;
•
Note 9 now cross references to the power
price charts presented in the ‘Portfolio
Valuation’ section;
•
Comparative graphs also presented in the
‘Portfolio Valuation’ section and cross-
referenced accordingly.
Alternative Performance
Measures
(
“APMs”
)
•
Portfolio revenue and EBITDA metrics to
be highlighted as APMs;
•
Clearer explanation required highlighting
that these relate to the underlying
performance of the Company’s
investments.
•
Portfolio revenue and EBITDA metrics now
include as APMs;
•
Metrics within the ‘portfolio Performance’
section clearly labelled as relating to
underlying performance of Company’s
investments.
144Report of the Audit and Risk CommitteeOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Conclusion with respect to the Annual Report
The Audit and Risk Committee has concluded that the Annual Report for the year to 31 December 2023, taken
as a whole, is fair, balanced and understandable and provides the information necessary for shareholders
to assess the Company’s business model, strategy and performance. The Audit and Risk Committee has
reported its conclusions to the Board of Directors. The Audit and Risk Committee reached this conclusion
through a process of review of the document and enquiries to the various parties involved in the production
of the Annual Report.
Audit Arrangements
PricewaterhouseCoopers LLP
(
“PwC”
)
was selected as the Company’s auditors at the time of the Company’s
launch following a competitive process and review of the auditors’ credentials. The current audit partner,
Jonathan Greenaway, has held the role since that date. The auditors were formally appointed on 1 November
2019. The appointment of the auditors is reviewed annually by the Audit and Risk Committee and the Board
and is subject to approval by shareholders. In accordance with the Financial Reporting Council’s
(
“FRC”
)
guidance, the audit will be put out to tender within ten years of the initial appointment. Additionally, the audit
partner must be rotated every five years and is next eligible for rotation in 2025.
The audit plan was presented to the Audit and Risk Committee at its September 2023 meeting, ahead of
the commencement of the Company’s year-end audit. The audit plan sets out the audit process, materiality
scope and significant risks.
Internal control and risk
The Board together with the AIFM and other service providers carefully considered the Company’s matrix of
risks and uncertainties and appropriate mitigating actions prior to the Company’s IPO. The Chair of the Audit
and Risk Committee, together with the AIFM regularly review the matrix of risks prior to presenting them for
consideration by the Company’s Audit and Risk Committee. The Audit and Risk Committee carefully consider
the risk matrix and the Company’s principal risks can be found on pages 83 to 109.
Although the Board has contractually delegated services that the Company requires to external third parties,
they remain fully informed of the internal control framework established by each relevant service provider. Any
changes or amendments to the internal control frameworks of third-party providers, along with assurances on
the effectiveness of the internal controls are discussed at the Audit and Risk Committee.
The Audit and Risk Committee regularly considers the internal controls reports of its AIFM, Investment Manager,
Registrar and Depositary. The Audit and Risk Committee reviewed these reports and concluded that there
were no significant control weaknesses or other issues that needed to be bought to the Board’sattention.
Auditors’ Independence
The Audit and Risk Committee is satisfied that there are no issues in respect of the independence of the
auditors.
Effectiveness of external audit
The Audit and Risk Committee is responsible for reviewing the effectiveness of the external audit process. The
Audit and Risk Committee received a presentation of the audit plan from the external auditors prior to the
commencement of the audit and a presentation of the results of the audit following completion of the main
audit testing. Additionally, the Audit and Risk Committee received feedback from the Company Secretary,
Administrator and AIFM regarding the effectiveness of the external audit process. Following the above review,
the Audit and Risk Committee has agreed that the re-appointment of the auditors should be recommended
to the Board and the shareholders of the Company.
145Report of the Audit and Risk CommitteeOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Provision of non-audit services
The Audit and Risk Committee has put a policy in place on the supply of any non-audit services provided by
the external auditors. Such services are considered on a case-by-case basis and may only be provided to the
Company if such services are compatible with the “white list” of permissible services under the Revised Ethical
Standards 2019 of the FRC and that the provision of such services is at a reasonable and competitive cost and
does not constitute a conflict of interest or potential conflict of interest which would prevent the auditors from
remaining objective and independent.
Audrey McNair
Audit and Risk Committee Chair
22 March 2024
146Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Statement of directors’ responsibilities in respect of the financial
statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have prepared the financial statements in accordance with UK-adopted international accounting
standards.
Under company law, directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that
period. In preparing the financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
•
state whether applicable UK-adopted international accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements;
•
make judgements and accounting estimates that are reasonable and prudent; and
•
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for safeguarding the assets of the company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records that are sufficient to show and
explain the company’s transactions and disclose with reasonable accuracy at any time the financial position
of the company and enable them to ensure that the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the company’s website. Legislation in
the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
Each of the directors, whose names and functions are listed in the Corporate Governance Statement confirm
that, to the best of their knowledge:
•
the company financial statements, which have been prepared in accordance with UK-adopted
international accounting standards, give a true and fair view of the assets, liabilities, financial position and
profit of the company; and
•
the Directors' Report includes a fair review of the development and performance of the business and the
position of the company, together with a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board
Philip Austin MBE
Chair
22 March 2024
Statement of Directors’
Responsibilities
147Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Independent auditors’ report
to the members of Octopus
Renewables Infrastructure
Trustplc
Report on the audit of the financial statements
Opinion
In our opinion, Octopus Renewables Infrastructure Trust plc’s financial statements:
•
give a true and fair view of the state of the company’s affairs as at 31 December 2023 and of its profit and
cash flows for the year then ended;
•
have been properly prepared in accordance with UK-adopted international accounting standards; and
•
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the statement
of financial position as at 31 December 2023; the statement of comprehensive income, the statement of
cash flows and the statement of changes in equity for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(
UK
)
(
“ISAs
(
UK
)
”
)
and
applicable law. Our responsibilities under ISAs
(
UK
)
are further described in the Auditors’ responsibilities for the
audit of the financial statements section of our report. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
We have provided no non-audit services to the company or its controlled undertakings in the period under
audit.
148Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Our audit approach
Overview
Audit scope
•
As part of designing our audit, we determined materiality and assessed the risks of material misstatement
in the financial statements. In particular, we looked at where the directors made subjective judgements,
for example in respect of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
Key audit matters
•
Valuation of investments held at fair value through profit or loss.
Materiality
•
Overall materiality: £5,990,000
(
2022: £6,182,000
)
based on 1% of net assets.
•
Performance materiality: £4,492,000
(
2022: £4,636,000
)
.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in
the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance
in the audit of the financial statements of the current period and include the most significant assessed risks
of material misstatement
(
whether or not due to fraud
)
identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
149Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Key audit matter How our audit addressed the key audit matter
Valuation of investments held at fair value through
profit or loss
Refer to page 142
(
Report of the Audit and Risk
Committee
)
, page 162
(
Accounting policies
)
and page 171
(
Notes to the Financial Statements
)
.
The company holds its investments at fair value through
profit and loss. The investments represent a material
balance in the financial statements and the valuations
of the investments held by the parent holding company
require the application of estimations, assumptions and
judgement. Changes to the estimates, assumptions
and/or the judgements made can result, either for an
individual investment or in aggregate, in a material
change to the valuation of investments.
There is also a risk that the ongoing macroeconomic
challenges and geopolitical events could adversely impact
the valuation of the investments.
Management have determined appropriate discount rates
for each investment that are reflective of current market
conditions and specific risks of the investment.
Management have applied forecast inflation rates in the
short-term and long-term for the applicable geographies
where the company has investments.
Management have used information from independent
third parties to forecast future power prices and taken
into account government imposed levies and caps in the
valuation of investments.
We obtained an understanding of the relevant controls in
respect of the valuation process adopted by the Investment
Manager and Board, in respect of the valuation models used
at 31 December 2023.
We have assessed whether the valuation methodology
adopted for the underlying investments within the parent
holding company was appropriate and in line with the
accounting guidelines.
We performed targeted substantive audit procedures based
on the size and risk of the fair value of the investments,
which included.
Compared the investment valuations to recently completed
transactions;
Independently assessed, supported by our internal
experts and observable market data and forecasts, the
reasonableness of the key assumptions applied in the
valuations
(
such as discount rate and inflation
)
;
Tested the mathematical accuracy of the valuation models;
Performed substantive procedures on a sample basis to
corroborate inputs to the valuation model, such as power
prices, to contracts and other supporting documents;
We have assessed the independent third parties used by
management to forecast power prices and consider them
to be reputable and independent market experts; We have
reviewed government publications on the mechanisms of
the generation levies and caps and the appropriateness of
their application within the valuation of investments; and
For additional investments during the year, we have
reviewed the share purchase agreements in order to
determine the acquisition cost.
Based on our audit procedures performed and our
benchmarking of the assumptions we concluded that the
assumptions are within the acceptable range and that the
fair value of investments is reasonable.
150Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial statements as a whole, taking into account the structure of the company, the accounting
processes and controls, and the industry in which it operates.
The Company invests in renewable energy infrastructure investments. As the Company is an Investment Trust
it is required to measure its subsidiaries at fair value rather than consolidate on a line-by-line basis and therefore
the Company has been treated as having only one component. The Company has appointed Octopus
AIF Management Limited to be the alternative investment fund manager of the Company
(
the “AIFM”
)
to
manage its assets. The AIFM has delegated portfolio management services to Octopus Renewables Limited,
the Company’s investment manager
(
the “Investment Manager”
)
. The financial statements are prepared for
the Company by and using information from Apex Listed Companies Services
(
UK
)
Limited
(
formerly Sanne
Fund Services
(
UK
)
Limited
)
(
the ‘Administrator’
)
.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact
of climate risk on the Company’s financial statements, and we remained alert when performing our audit
procedures for any indicators of the impact of climate risk. Our procedures did not identify any material
impact as a result of climate risk on the Company’s financial statements. We have involved our internal
specialists to review the appropriateness of disclosures included in the financial statements and have read
the annual report to consider whether other climate change disclosures are materially consistent with the
financial statements and our knowledge obtained in the audit.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Overall company materiality £5,990,000
(
2022: £6,182,000
)
.
How we determined it 1% of net assets
Rationale for benchmark applied We believe that net assets is the primary measures used
by the shareholders in assessing the performance of the
Company, and this is also a generally accepted auditing
benchmark used for Investment Trusts.
151Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
We use performance materiality to reduce to an appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance
materiality in determining the scope of our audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality
was 75%
(
2022: 75%
)
of overall materiality, amounting to £4,492,000
(
2022: £4,636,000
)
for the company
financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements,
risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount in the
middle of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during
our audit above £299,000
(
2022: £309,000
)
as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern
basis of accounting included:
•
Performing a risk assessment to identify factors that could impact the going concern basis of accounting,
including the impact of external risks including geopolitical and macroeconomic risks;
•
Understanding and evaluating the directors’ going concern assessment, including a stress case scenario,
by obtaining evidence to support the key assumptions and the forecasts, including the severity of the
stress scenarios that were used;
•
Reviewing the directors’ assessment of the company’s financial position as well as their review of the
operational resilience of the Company, forecasted future covenants compliance in respect of debt and
facilities held by the Company’s subsidiaries and oversight of key third party service providers; and
•
Reading and evaluating the adequacy of the disclosures made in the financial statements, including
other information.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue
as a going concern for a period of at least twelve months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to
the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial statements
about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit
opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
152Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an
apparent material inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic Report and Directors’ report, we also considered whether the disclosures required
by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report
certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
Report and Directors’ Report for the year ended 31 December 2023 is consistent with the financial statements
and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of
the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate Governance Statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term
viability and that part of the Corporate Governance Statement relating to the company’s compliance with
the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities
with respect to the corporate governance statement as other information are described in the Reporting on
other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the Corporate Governance Statement is materially consistent with the financial statements and our
knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
•
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal
risks;
•
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to
identify emerging risks and an explanation of how these are being managed or mitigated;
•
The directors’ statement in the financial statements about whether they considered it appropriate to
adopt the going concern basis of accounting in preparing them, and their identification of any material
uncertainties to the company’s ability to continue to do so over a period of at least twelve months from
the date of approval of the financial statements;
•
The directors’ explanation as to their assessment of the company’s prospects, the period this assessment
covers and why the period is appropriate; and
•
The directors’ statement as to whether they have a reasonable expectation that the company will be able
to continue in operation and meet its liabilities as they fall due over the period of its assessment, including
any related disclosures drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the company was substantially
less in scope than an audit and only consisted of making inquiries and considering the directors’ process
supporting their statement; checking that the statement is in alignment with the relevant provisions of the
UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the company and its environment obtained in the
course of the audit.
153Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial statements and
our knowledge obtained during the audit:
•
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the company’s
position, performance, business model and strategy;
•
The section of the Annual Report that describes the review of effectiveness of risk management and
internal control systems; and
•
The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to
the company’s compliance with the Code does not properly disclose a departure from a relevant provision of
the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The directors are also responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the company or to cease operations,
or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs
(
UK
)
will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-
compliance with laws and regulations related to breaches of UK regulatory principles, such as those governed
by the Financial Conduct Authority, and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and regulations that have a direct
impact on the financial statements such as the Statement of Recommended Practice for Financial Statements
of Investment Trust Companies and Venture Capital Trusts
(
“SORP”
)
issued in July 2022 by the Association of
Investment Companies
(
“AIC”
)
, section 1158 of the Corporation tax act 2010 and the Companies Act 2006.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial
statements
(
including the risk of override of controls
)
, and determined that the principal risks were related to
154Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
posting inappropriate journal entries to improve results or increase investments at fair value through profit or
loss and bias in accounting estimates. Audit procedures performed by the engagement team included:
•
Enquiries of the Board of Directors, Alternative Investment Fund Manager, Investment Manager and the
Administrator, including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
•
Challenging of assumptions and judgements made by the Board of Directors and the Investment
Manager in their significant accounting estimates, in particular in relation to the valuation of investments
held at fair value through profit or loss
(
see related key audit matters section
)
;
•
Identifying and testing of selected journal entries;
•
Reviewing relevant meeting minutes, including those of the Board of Directors and Audit and Risk
Committee; and
•
Reviewing of financial statement disclosures including agreeing, where applicable, to underlying
supporting documentation.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that are not closely related to events and transactions
reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly
using data auditing techniques. However, it typically involves selecting a limited number of items for testing,
rather than testing complete populations. We will often seek to target particular items for testing based on
their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where expressly agreed by our prior consent in
writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the company, or returns adequate for our audit have
not been received from branches not visited by us; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
the financial statements and the part of the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
155Independent auditors’ reportOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Appointment
Following the recommendation of the Audit and Risk Committee, we were appointed by the directors on
11November 2019 to audit the financial statements for the period ended 31 December 2020 and subsequent
financial periods. The period of total uninterrupted engagement is 4 years, covering the period ended
31December 2020 to 31 December 2023.
Jonathan Greenaway
(
Senior Statutory Auditor
)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne
22 March 2024
156Section title hereOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Financial Statements
157Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Statement of Comprehensive Income
Year ended 31 December 2023 Year ended 31 December 2022
Note
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Investment income 4 42,694 - 42,694 40,307 - 40,307
Movement in fair value
of investments 9 - -22,976 -22,976 - 37,603 37,603
Total net income/
(
expense
)
42,694 -22,976 19,718 40,307 37,603 77,9 10
Investment
management fees 5 -4,232 -1,411 -5,643 -4,284 -1,428 -5,712
Other expenses 5 -1,368 -107 -1,475 -1,132 -1,280 -2,412
Net finance income 126 - 126 51 - 51
Net foreign exchange
losses - -29 -29 - -1 -1
Profit/
(
loss
)
before
taxation 37,220 -24,523 12,697 34,942 34,894 69,836
Taxation 6 -364 364 - -515 515 -
Profit/loss and total
comprehensive income/
(
expense
)
for the year 36,856 -24,159 12,697 34,427 35,409 69,836
Earnings per Ordinary
Share
(
pence
)
– basic
and diluted 8 6.52p -4.28p 2.24p 6.09p 6.27p 12.36p
The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columns
represent supplementary information prepared under guidance issued by the Association of Investment Companies. All
expenses are presented as revenue items except 25% of the investment management fee, which is charged as a capital item
within the Statement of Comprehensive Income. Costs incurred on aborted transactions and investment acquisitions are
charged as capital items within the Statement of Comprehensive Income.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these financial statements.
158Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Statement of Financial Position
Note
As at
31 December
2023
£’000
As at
31 December
2022
£’000
Non-current assets
Investments at fair value through profit or loss 9 592,121 608,799
Current assets
Trade and other receivables 10 143 775
Cash and cash equivalents 10,012 10,603
10,155 11,378
Current liabilities: amounts falling due within one year
Trade and other payables 11 -3,237 -1,917
-3,237 -1,917
Net current assets 6,918 9,461
Net assets 599,039 618,260
Capital and reserves
Share capital 12 5,649 5,649
Share premium account 12 217,283 217,28 3
Special reserve 13 339,500 339,500
Capital reserve 13,756 37,9 15
Revenue reserve 22,851 17,9 13
Total shareholders’ funds 599,039 618,260
Net assets per Ordinary Share
(
pence
)
14 106.04p 109.44p
The financial statements on pages 157 to 188 were approved by the Board of Directors and authorised for issue on
22 March 2024 and were signed on its behalf by:
Philip Austin MBE
Chair
The accompanying notes are an integral part of these financial statements.
Incorporated in England and Wales with registered number 12257608
159Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Statement of Changes in Equity
Year ended 31 December 2023
Note
Share
capital
£’000
Share
premium
account
£’000
Special
reserve
£’000
Revenue
reserve
£’000
Capital
reserve
£’000
Total
shareholders’
funds
£’000
Opening equity as at 1 January 2023 5,649 217,283 339,500 17,9 13 37,915 618,260
Profit/
(
loss
)
and total comprehensive
income/
(
expense
)
for the year - - - 36,856 -24,159 12,697
Dividends paid 7 - - - -31,918 - -31,918
Closing equity as at 31 December
2023 5,649 217,283 339,500 22,851 13,756 599,039
Year ended 31 December 2022
Note
Share
capital
£’000
Share
premium
account
£’000
Special
reserve
£’000
Revenue
reserve
£’000
Capital
reserve
£’000
Total
shareholders’
funds
£’000
Opening equity as at 1 January 2022 5,649 217,28 3 339,500 12,751 2,506 577,689
Profit and total comprehensive
income for the year - - - 34,427 35,409 69,836
Dividends paid 7 - - - -29,265 - -29,265
Closing equity as at 31 December
2022 5,649 217,28 3 339,500 17,9 13 37,915 618,260
The Company’s distributable reserve consists of the special reserve, capital reserve attributable to realised gains and revenue
reserve.
The accompanying notes are an integral part of these financial statements.
The issued capital and reserves are fully attributable to the shareholders of the Company.
160Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Statement of Cash Flows
Note
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
Operating activities cash flows
Profit before taxation 12,697 69,836
Adjustments for:
Movement in fair value of investments
9
22,976 -37, 6 03
Investment income from investments
4
-42,694 -40,307
Share issue abort costs - 404
Operating cash flow before movements in working capital -7,021 -7,670
Changes in working capital:
Decease/
(
increase
)
in trade and other receivables 632 -325
Increase/
(
decrease
)
in trade payables 1,320 -207
Distributions from investments
9
41,979 38,108
Net cash flow generated from operating activities 36,910 29,906
Investing activities cash flows
Costs associated with acquiring the portfolio of assets
9
-5,583 -83,580
Net cash flow used in investing activities -5,583 -83,580
Financing activities cash flows
Dividends paid to Ordinary Shareholders
7
-31,918 -29,265
Costs in relation to issue of shares - -404
Net cash flow used in financing activities -31,918 -29,669
Net decrease in cash and cash equivalents -591 -83,343
Cash and cash equivalents at start of year 10,603 93,946
Cash and Cash equivalents at end of year 10,012 10,603
The accompanying notes are an integral part of these financial statements.
161Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Notes to the Financial Statements
For the year ended 31 December 2023
1. General information
Octopus Renewables Infrastructure Trust plc
(
“ORIT” or the “Company”
)
is a Public Company Limited by Ordinary Shares
incorporated in England and Wales on 11 October 2019 with registered number 12257608. The Company is a closed-ended
investment company with an indefinite life. The Company commenced its operations on 10 December 2019 when the Company’s
Ordinary Shares were admitted to trading on the premium segment of the main market of the London Stock Exchange. The
Directors intend, at all times, to conduct the affairs of the Company as to enable it to qualify as an investment trust for the
purposes of section 1158 of the Corporation Tax Act 2010, as amended.
The registered office and principal place of business of the Company is 6th Floor, 125 London Wall, London, EC2Y 5AS.
The Company’s investment objective is to provide 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 in Europe and Australia.
The audited financial statements of the Company
(
the “financial statements”
)
are for the year ended 31 December 2023 and
comprise only the results of the Company, as all of its subsidiaries are measured at fair value in accordance with IFRS 10.
The comparatives shown in these financial statements refer to the year ended 31 December 2022.
The Company has appointed Octopus AIF Management Limited to be the alternative investment fund manager of the Company
(
the “AIFM”
)
for the purposes of the Alternative Investment Fund Managers Regulations 2013 and the Commission Delegated
Regulation
(
EU
)
No 231/2013 of 19 December 2012
(
as it applies in the UK by virtue of the European Union
(
Withdrawal
)
Act 2018
)
.
Accordingly, the AIFM is responsible for the portfolio management of the Company and for exercising the risk management
function in respect of the Company. The AIFM has delegated portfolio management services to Octopus Renewables Limited
(
trading as Octopus Energy Generation
)
, the Company’s Investment Manager
(
the “Investment Manager”
)
.
Apex Listed Companies Services
(
UK
)
Limited
(
the “Administrator”
)
provides administrative and company secretarial services to
the Company under the terms of the Administration Agreement between the Company and the Administrator.
2. Basis of preparation
These financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with
the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The financial statements have also been prepared as far as is relevant and applicable to the Company in accordance with
the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts
(
“SORP”
)
issued in July 2022 by the Association of Investment Companies
(
“AIC”
)
.
The financial statements are prepared on the historical cost basis, except for the revaluation of investments measured at fair
value through profit or loss. The principal accounting policies adopted are set out below. These policies are consistently applied.
The financial statements are presented in Sterling, which is the Company’s functional currency and are rounded to the nearest
thousand, unless otherwise stated. They have been prepared on the basis of the accounting policies, significant judgements,
key assumptions and estimates as set out below.
Going concern
The Directors, in their consideration of going concern, have reviewed comprehensive cash flow forecasts prepared by the
Company’s Investment Manager which are based on market data and believe, based on those forecasts, the assessment of the
Company’s subsidiary’s banking facilities and the assessment of the principal risks described in this report, that it is appropriate
to prepare the financial statements of the Company on the going concern basis.
In arriving at their conclusion that the Company has adequate financial resources, the Directors were mindful that the Group
had unrestricted cash of £23 million as at 31 December 2023
(
2022: £11m
)
and available headroom on its revolving credit facility
(
“RCF”
)
of £141 million
(
2022: £169m
)
. The Company’s net assets at 31 December 2023 were £599 million
(
2022: £618m
)
and total
expenses for the year ended 31 December 2023 were £7.1 million
(
2022: £8.0m
)
, which represented approximately 1.2%
(
2022:
162Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
1.3%
)
of average net assets during the year. At the date of approval of this document, based on the aggregate of investments
and cash held, the Company has substantial operating expenses cover.
The Company receives revenue in the form of dividends and interest from its portfolio of assets. These revenues are derived
from the sale of electricity through power purchase agreements in place with large and reputable providers of electricity to
the market. Aprolonged and deep market decline could lead to falling values to the underlying business or interruptions to
cashflow, however the Directors do not foresee any immediate material risk to the Company’s investment portfolio and income
from underlying assets. The Directors are also satisfied and are comfortable that the Company would continue to remain viable
under downside scenarios, including a decline in long-term power price forecasts.
In instances where underlying investments have external debt finance, the covenants associated with these facilities have been
tested and are expected to be compliant, even in downside scenarios.
The major cash outflows of the Company are the payment of dividends, commitments payable for construction projects and
contingent acquisitions and the repayment of the short-term facility which was fully repaid at year end. During the year, the
Company’s intermediate holding company successfully refinanced its RCF to an increased facility of £270.8 million and extended
its term to February 2026. The covenants of the RCF have been tested and are expected to be compliant, even in downside
scenarios. Plausible downside scenarios include a decrease in wholesale energy prices, a decrease in output and an increase in
the discount rate applied to the underlying cash flow forecasts. While in some downside scenarios, the headroom available on
the RCF will be lower, the Directors remain confident that the Company has sufficient cash balances, and headroom in the RCF
held by an intermediate holding company in order to fund the commitments detailed in note 19 to the financial statements,
should they become payable.
Having performed the assessment of going concern, the Directors considered it appropriate to prepare the financial statements
of the Company on a going concern basis. The Company has sufficient financial resources and liquidity and is well placed to
manage business risks in the current economic environment and can continue operations for a period of at least 12 months from
the date of these financial statements.
Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying assumptions are reviewed regularly on an on-going basis. Revisions
to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Significant estimates, judgements and assumptions for the period are set out as follows:
Key estimation and uncertainty: Fair value estimation for investments at fair value
The Company’s investments at fair value are not traded in active markets. Fair value is calculated by discounting at an
appropriate discount rate future cash flows expected to be received by the Company’s intermediate holdings. The discounted
cashflow models use observable data, to the extent practicable. However, the key inputs require management to make
estimates. Changes in assumptions about these factors could affect the reported fair value of investments.
The discount rates used in the valuation exercise represent the Investment Manager’s and the Board’s assessment of the rate
of return in the market for assets with similar characteristics and risk profile. The discount rates are reviewed quarterly and
updated, where appropriate, to reflect changes in the market and in the project risk characteristics.
Unless fixed under PPAs or otherwise hedged, the power prices used in the valuations are based on market forward prices in
the near term, followed by an equal blend of up to two independent and widely used market consultants’ technology-specific
capture price forecasts for each asset. Power prices are updated quarterly in line with the release of updated forecasts. There is
an inherent uncertainty in future wholesale electricity price projection.
Electricity output is based on specifically commissioned yield assessments prepared by technical advisors. Each asset’s valuation
assumes a “P50” level of electricity output, which is the estimated annual amount of electricity generation that has a 50%
probability of being exceeded - both in any single year and over the long-term - and a 50% probability of being underachieved.
The P50 provides an expected level of generation over the long-term.
Short to medium-term inflation assumptions used in the valuations are based on third party forecasts. In the longer-term,
an assumption is made that inflation will increase at a long-term rate. The estimates and assumptions that are used in the
calculation of the fair value of investments is disclosed in Note 9.
163Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The impact of physical and transition risks associated with climate change is assessed on a project by project basis and factored
into the underlying cash flows as appropriate. Further details can be found in the Impact Report.
Further considerations on currency risks, interest rate risks, power price risks, credit risks, and liquidity risks are detailed in Note16.
Key judgement: Equity and debt investment in ORIT Holdings II Limited
The Company classifies its investments based on its business model for managing those financial assets and the contractual
cash flow characteristics of the financial assets. The portfolio of assets is managed, and performance is evaluated on a fair
value basis.
The Company is primarily focused on fair value information and uses that information to assess the assets’ performance and
to make decisions. The Company has not taken the option to irrevocably designate any equity securities as fair value through
other comprehensive income. The contractual cash flows of the Company’s debt securities are solely principal and interest,
however, these securities are not held for the purpose of collecting contractual cash flows. The collection of contractual cash
flows is only incidental to achieving the Company’s business model’s objective. Consequently, all investments are measured at
fair value through profit or loss.
The Company considers the equity and loan investments to share the same investment characteristics and risks and they are
therefore treated as a single unit of account for fair value purposes
(
IFRS 13
)
and a single class for financial instrument disclosure
purposes
(
IFRS 9
)
. As a result, the evaluation of the performance of the Company’s investments is done for the entire portfolio on
a fair value basis, as is the reporting to the key management personnel and to the investors. In this case, all equity, derivatives
and debt investments form part of the same portfolio for which the performance is evaluated on a fair value basis together and
reported to the key management personnel in its entirety.
Key judgement: Basis of non-consolidation
The Company has adopted the amendments to IFRS 10 which states that investment entities should measure all of their
subsidiaries that are themselves investment entities at fair value
(
in accordance with IFRS 9 Financial Instruments: Recognition
and Measurement, and IFRS 13 Fair Value Measurement
)
.
Under the definition of an investment entity, the Company should satisfy all three of the following tests:
i. the Company obtains funds from one or more investors for the purpose of providing those investors with investment
management services;
ii. the Company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation,
investment income, or both; and
iii. the Company measures and evaluates the performance of substantially all of its investments on a fair value basis.
In assessing whether the Company meet the definition of an investment entity set out in IFRS 10 the Directors note that:
i. the Company has multiple investors and obtains funds from a diverse group of shareholders who would otherwise not
have access individually to invest in renewable energy infrastructure investments due to high barriers to entry and capital
requirements;
ii. the Company intends to hold its investments for the remainder of their useful lives for the purpose of capital appreciation and
investment income. The portfolio of assets are expected to generate renewable energy output for 30 to 40 years from their
relevant commercial operation date and the Directors believe the Company is able to generate returns to the investors during
that period; and
iii. the Company measures and evaluates the performance of all of its investments on a fair value basis which is the most
relevant for investors in the Company. Management use fair value information as a primary measurement to evaluate the
performance of all of the investments and in decision making.
The Directors are of the opinion that the Company meets all the typical characteristics of an investment entity and therefore
meets the definition set out in IFRS 10. The Directors are satisfied that investment entity accounting treatment appropriately
reflects the Company’s activities as an investment trust.
164Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The Directors have also satisfied themselves that the Company’s wholly owned direct subsidiary, ORIT Holdings II Limited, meets
the characteristics of an investment entity. ORIT Holdings II Limited has one investor, ORIT, however, in substance ORIT Holdings
II Limited is investing the funds of the investors of ORIT on its behalf and is effectively performing investment management
services on behalf of many unrelated beneficiary investors.
Being investment entities, ORIT and its wholly owned direct subsidiary, ORIT Holdings II Limited are measured at fair value as
opposed to being consolidated on a line-by-line basis, meaning their cash, debt and working capital balances are included in
the fair value of investments rather than the Group’s current assets.
The Directors believe the treatment outlines above provides the most relevant information to investors.
New standards, interpretations and amendments
A number of new standards, amendments to standards are effective for the annual periods beginning after 1 January 2024.
None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial
statements of the Company. The Company intends to adopt the standards and interpretations in the reporting period when
they become effective and the Board does not anticipate that the adoption of these standards and interpretations in future
periods will materially impact the Company’s financial results in the period of initial application although there may be revised
presentations to the financial statements and additional disclosures.
New standards and amendments issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the
Company’s financial statements are disclosed below. These standards are not expected to have a material impact on the entity
in future reporting periods and on foreseeable future transactions.
Amendments to IAS 1 Presentation of Financial Statements—Classification of Liabilities as
Current or Non-current
The amendments to IAS 1 clarify that the classification of liabilities as current or non-current is based on rights that are in
existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity
will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the
end of the reporting period, and introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to
the counterparty of cash, equity instruments, other assets or services. The amendments are applied retrospectively for annual
periods beginning on or after 1January 2024, with early application permitted.
Amendments to IAS 1 Presentation of Financial Statements—Non-current Liabilities with
Covenants
The amendments specify that only covenants that an entity is required to comply with on or before the end of the reporting
period affect the entity’s right to defer settlement of a liability for at least twelve months after the reporting date
(
and therefore
must be considered in assessing the classification of the liability as current or noncurrent
)
. Such covenants affect whether the
right exists at the end of the reporting period, even if compliance with the covenant is assessed only after the reporting date
(
e.g.
a covenant based on the entity’s financial position at the reporting date that is assessed for compliance only after the reporting
date
)
. Theamendments are applied retrospectively for annual reporting periods beginning on or after 1 January 2024. Earlier
application of the amendments is permitted.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures—Supplier Finance Arrangements
The amendments add a disclosure objective to IAS 7 stating that an entity is required to disclose information about its supplier
finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s
liabilities and cash flows. In addition, IFRS 7 was amended to add supplier finance arrangements as an example within the
requirements to disclose information about an entity’s exposure to concentration of liquidity risk. The amendments, which
contain specific transition reliefs for the first annual reporting period in which an entity applies the amendments, are applicable
for annual reporting periods beginning on or after 1 January 2024. Earlier application is permitted.
165Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
The amendments to IFRS 16 add subsequent measurement requirements for sale and leaseback transactions that satisfy the
requirements in IFRS 15 to be accounted for as a sale. The amendments require the seller-lessee to determine lease payments
or revised lease payments such that the seller-lessee does not recognise a gain or loss that relates to the right of use retained by
the seller-lessee, after the commencement date. The amendments are effective for annual reporting periods beginning on or
after 1 January 2024. Earlier application is permitted. If a seller-lessee applies the amendments for an earlier period, it is required
to disclose that fact.
3. Significant accounting policies
a
)
Financial instruments
Financial assets and financial liabilities are recognised on the Company’s Statement of Financial Position when the Company
becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual
rights to the cash flows from the instrument expire or the asset is transferred, and the transfer qualifies for derecognition in
accordance with IFRS 9 Financial Instruments: Recognition and Measurement.
Financial assets
As an investment entity, the Company is required to measure its investments its wholly owned direct subsidiaries at fair value
through profit or loss
(
‘FVTPL’
)
. As explained in note 2, the Company has made a judgement to fair value both the equity
and debt investment in its subsidiary together. Subsequent to initial recognition, the Company measures its investments on a
combined basis at fair value in accordance with IFRS 9 Financial Instruments: Recognition and Measurement and IFRS 13 Fair
Value Measurement.
Trade receivables, loans and other receivables that are non-derivative financial assets and that have fixed or determinable
payments that are not quoted in an active market are classified as financial assets at amortised cost. These assets are measured
at amortised cost using the effective interest method, less allowance for expected credit losses. The Company has assessed
IFRS 9’s expected credit loss model and does not consider any material impact on these financial statements.
They are included in current assets, except where maturities are greater than 12 months after the year end date in which case
they are classified as non-current assets.
Regular purchases and sales of investments are recognised on the trade date – the date on which the Company commits to
purchase or sell the investment. Financial assets at FVTPL are initially recognised at fair value. Transaction costs are expensed
as incurred within the Statement of Comprehensive Income. Financial assets are derecognised when the rights to receive cash
flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.
Subsequent to initial recognition, all financial assets and financial liabilities at FVTPL are measured at fair value. For investments
held at early stage or at planning development stage, these are valued at cost and assessed for any impairment.
Gains and losses arising from changes in the fair value of the ‘financial assets at FVTPL’ category are presented in the Statement
of Comprehensive Income within Movements in fair value of investments in the period in which they arise.
Income from financial assets at FVTPL is recognised in the Statement of Comprehensive Income within investment income
when the Company’s right to receive payments is established.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the
contractual arrangement.
The Company’s financial liabilities include trade and other payables and other short-term monetary liabilities which are initially
recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.
Financial liabilities are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured
at amortised cost using the effective interest method, with interest expense recognised on an effective interest rate method.
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or
they expire.
Ordinary Shares are classified as equity. An equity instrument is any contract that evidences a residual interest in the assets of
an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received,
net of direct issue costs. Direct issue costs are charged against the value of ordinary share premium.
166Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
b
)
Taxation
Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital
gains. The Company has successfully applied and has been granted approval as an Investment Trust by HMRC.
Irrecoverable withholding tax is recognised on any overseas income on an accrual basis using the applicable rate of taxation for
the country of origin.
The underlying intermediate holding companies and project companies in which the Company invests provide for and pay
taxation at the appropriate rates in the countries in which they operate. This is taken into account when assessing the value of
the subsidiaries.
c
)
Segmental reporting
The Board is of the opinion that the Company is engaged in a single segment of business, being investment in renewable energy
infrastructure assets to generate investment returns whilst preserving capital. The financial information used by the Board to
manage the Company presents the business as a single segment.
d
)
Investment income
Investment income comprises interest income and dividend income received from the Company’s subsidiaries. Interest income
is recognised in the Statement of Comprehensive Income using the effective interest method. Dividend income is recognised
when the Company’s entitlement to receive payment is established.
e
)
Expenses
All expenses are accounted for on an accrual basis. In respect of the analysis between revenue and capital items presented
within the Statement of Comprehensive Income, all expenses are presented as revenue items except as follows:
Investment Management fees
As per the Company’s investment objective, it is expected that income returns will make up the majority of ORIT’s long-term
return. Therefore, based on the estimated split of future returns
(
which cannot be guaranteed
)
, 25% of the investment
management fee is charged as a capital item within the Statement of Comprehensive Income.
Abort costs
Costs incurred on aborted transactions are charged as capital items within the Statement of Comprehensive Income.
f
)
Foreign currency
Functional currency and presentation currency
The financial statements are presented in Pounds Sterling which is the Company’s functional and presentation currency.
The Board of Directors considers Sterling the currency that most faithfully represents the economic effect of the underlying
transactions, events and conditions. Sterling is the currency in which the Company measures its performance and reports its
results, as well as the currency in which it receives subscriptions from its investors.
Transactions and balances
Transactions denominated in foreign currencies are translated into Sterling at actual exchange rates as at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rates of
exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of
the transaction is included as an exchange gain or loss to capital or revenue in the Statement of Comprehensive Income
as appropriate. Foreign exchange movements on investments are included in the Capital account of the Statement of
Comprehensive Income.
g
)
Cash and Cash Equivalents
Cash and cash equivalents includes deposits held with banks and other short-term deposits with original maturities of three
months or less. It is a highly liquid investment and readily convertible to a known amount of cash, and carries an insignificant
risk of changes in value.
167Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
h
)
Dividends payable
Dividends payable to equity shareholders are recognised in the financial statements when they have been approved by
shareholders and become a liability of the Company. Interim dividends payable are recognised in the period in which they
arepaid.
4. Investment income
Year ended 31 December 2023 Year ended 31 December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Dividend income from investments 16,800 - 16,800 17,25 0 - 17,250
Interest income from investments 25,894 - 25,894 23,057 - 23,057
Total investment income
42,694 - 42,694 40,307 - 40,307
5. Operating expenses
Year ended 31 December 2023 Year ended 31 December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Investment management fees 4,232 1,411 5,643 4,284 1,428 5,712
Directors’ fees 209 - 209 186 - 186
Company’s auditors’ fees:
– in respect of audit services 376 - 376 190 - 190
Other operating expenses 783 107 890 756 1,280 2,036
Total operating expenses
5,600 1,518 7,118 5,416 2,708 8,124
Further details on the Investment Manager’s agreement have been provided in Note 17.
In addition to the fees disclosed above, £163,500
(
2022: £210,100
)
is payable to the Company’s auditors in respect of audit
services provided to unconsolidated subsidiaries and therefore is not included within the Company’s expenses above.
Included within other operating costs is an amount of £107,000
(
2022: £1.28m
)
relating to transaction costs associated with the
acquisition of portfolio of assets and abort costs.
The Company has no employees. Full detail on Directors’ fees is provided in Note 17. The Directors’ fees exclude employer’s
national insurance contribution which is included as appropriate in other operating expenses. There were no other emoluments.
168Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
6. Taxation
(
a
)
Analysis of charge/
(
credit
)
in the year
Year ended 31 December 2023 Year ended 31 December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Corporation tax 364 -364 - 515 -515 -
Tax charge/
(
credit
)
for the year
364 -364 - 515 -515 -
(
b
)
Factors affecting total tax charge/
(
credit
)
for the year:
Per the enactment of the Finance Act 2021, the rate of UK corporation tax was increased from 19% to 25% since April 2023.
Theeffective UK corporation tax rate applicable to the Company for the year is 23.5%
(
2022: 19%
)
. The tax charge/
(
credit
)
differs
(
2022: differs
)
from the charge/
(
credit
)
resulting from applying the standard rate of UK corporation tax for an investment trust
company. The differences are explained below:
Year ended 31 December 2023 Year ended 31 December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Profit/
(
loss
)
before taxation 37,2 20 -24,523 12,697 34,942 34,894 69,836
Corporation tax at 23.5%
(
2022: 19%
)
8,747 -5,763 2,984 6,639 6,630 13,269
Effects of:
Expenses not deductible for tax
purposes - 5,399 5,399 - -7,145 -7,145
Income not taxable -3,948 - -3,948 -3,278 - -3,278
Dividends designated as interest
distributions -4,437 - -4,437 -2,852 - -2,852
Movement in deferred tax not
recognised 2 - 2 6 - 6
Total tax charge/
(
credit
)
for
theyear 364 -364 - 515 -515 -
169Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The Directors are of the opinion that the Company has complied with the requirements for maintaining investment trust status
for the purposes of section 1158 of the Corporation Tax Act 2010. This allows certain capital profits of the Company to be exempt
from UK tax. Additionally, the Company may designate dividends wholly or partly as interest distributions for UK tax purposes.
Interest distributions are treated as tax deductions against taxable income of the Company so that investors do not suffer
double taxation on their returns.
The financial statements do not directly include the tax charges for any of the Company’s intermediate holding companies or
subsidiaries as these are held at fair value. Each of these companies are subject to taxes in the countries in which they operate.
The Company has an unrecognised deferred tax asset of £10,071
(
2022: £8,117
)
based on the excess unutilised operating expenses
of £40,284
(
2022: £32,470
)
at the prospective UK corporation tax rate of 25%
(
2022:19%
)
. A deferred tax asset has not been
recognised in respect of these operating expenses and will be recoverable only to the extent that the Company has sufficient
future taxable revenue.
7. Dividends
The dividends reflected in the financial statements for the year are as follows:
Year ended 31 December 2023 Year ended 31 December 2022
Pence per
Ordinary
Share
Revenue
reserve
£’000
Total
£’000
Pence per
Ordinary
Share
Revenue
reserve
£’000
Total
£’000
Q4 2022 Dividend – paid
24 February 2023
(
2022:
4March2022
)
1.31 7,4 01 7,401 1.25 7,062 7,062
Q1 2023 Dividend – paid
2June2023
(
2022: 27 May 2022
)
1.44 8,135 8,135 1.31 7,401 7,401
Q2 2023 Dividend – paid
1September 2023
(
2022:
26August 2022
)
1.45 8,191 8,191 1.31 7,401 7,401
Q3 2023 Dividend – paid
1December 2023
(
2022:
25November 2022
)
1.45 8,191 8,191 1.31 7,401 7,401
Total
5.65 31,918 31,918 5.18 29,265 29,265
170Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The dividend relating to the year/period, which is the basis on which the requirements of Section 1159 of the Corporation
Tax Act 2010 are considered is detailed below:
Year ended 31 December 2023 Year ended 31 December 2022
Pence per
Ordinary
Share
Revenue
reserve
£’000
Total
£’000
Pence per
Ordinary
Share
Revenue
reserve
£’000
Total
£’000
Q1 2023 Dividend – paid
2June2023
(
2022: 27 May 2022
)
1.44 8,135 8,135 1.31 7,401 7,401
Q2 2023 Dividend – paid
1September 2023
(
2022:
26August 2022
)
1.45 8,191 8,191 1.31 7,401 7,401
Q3 2023 Dividend – paid
1December 2023
(
2022:
25November 2022
)
1.45 8,191 8,191 1.31 7,401 7,401
Q4 2023 Dividend – paid
23February 2024
(
2022:
24February 2023
)
1.45 8,191 8,191 1.31 7,401 7,401
Total
5.79 32,708 32,708 5.24 29,604 29,604
On 29 January 2024 the Company declared an interim dividend of 1.45p per Ordinary Share in respect of the three months to
31 December 2023, a total of £8.2 million. The ex-dividend date was 8 February 2024, the record date was 9 February 2024, and
the dividend was paid on 23 February 2024.
8. Earnings per Ordinary Share
Earnings per Ordinary Share is calculated by dividing the profit/
(
loss
)
attributable to equity shareholders of the Company by the
weighted average number of Ordinary Shares in issue during the year as follows:
Year ended 31 December 2023 Year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Profit/
(
loss
)
attributable to
the equity holders of the
Company
(
£’000
)
36,856 -24,159 12,697 34,427 35,409 69,836
Weighted average number of
Ordinary Shares in issue
(
000
)
564,928 564,928 564,928 564,928 564,928 564,928
Earnings per Ordinary Share
(
pence
)
– basic and diluted 6.52p -4.28p 2.24p 6.09p 6.27p 12.36p
There is no difference between the weighted average Ordinary or diluted number of Shares.
171Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
9. Investments at fair value through profit or loss
As set out in Note 2, the Company accounts for its interest in its wholly owned direct subsidiary as an investment at fair value
through profit or loss.
a
)
Summary of valuation
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
Opening balance
608,799 485,417
Portfolio of assets acquired - 79,194
Additional investment in intermediate holding
companies 5,583 4,386
Distributions received from investments -41,979 -38,108
Investment income 42,694 40,307
Movement in fair value of investments -22,976 37,603
Total investments at the end of the year 592,121 608,799
The additional investment in the intermediate holding companies include acquisition costs associated with the purchase of the
portfolio of assets totalling £2.1 million
(
2022: £3.2m
)
, which have been expensed to the profit and loss in these companies and
£3.4million
(
2022: £1.2m
)
of other expenses paid by the Company on behalf of the intermediate holding companies.
b
)
Reconciliation of movement in fair value of the Company’s investments
The table below shows the movement in the fair value of the Company’s investments. These assets are held through intermediate
holding companies.
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
Opening balance 608,799 485,417
Portfolio of assets acquired 65,224 209,666
Asset disposal -91,817 -
Distributions received -37,489 -40,129
Movement in fair value 161,253 88,760
Fair value of portfolio of assets at the end of the year 705,970 743,714
172Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
Cash held in intermediate holding companies 13,209 4,509
Bank loans held in intermediate holding companies -130,043 -127,200
Fair value of other net assets/
(
liabilities
)
in intermediate holding
companies 2,985 -12,224
Fair value of Company’s investments at the end of the year 592,121 608,799
On 6 December 2023, the Company announced the completion of the sale of the Krzecin and Kuslin wind farms
(
totalling
59MW
)
in Poland, realising net proceeds of approximately £92 million
(
7% of Total value of all Investments at 30 September
2023
)
— a 21% premium over the holding value of the assets at the time of sale. The disposal is for 100% of ORIT’s share.
c
)
Investment
(
loss
)
/gains in the year
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
Movement in fair value of investments -22,976 37,603
(
Loss
)
/gains on investments -22,976 37,603
Of the total distributions received from investments, £23.9 million
(
2022: £10.7m
)
relates to income originated from the
Company’s UK investments and £16.3 million
(
2022: £29.4m
)
relates to income originated from its European investments.
Fair value of portfolio of assets
The Investment Manager has carried out fair market valuations of the investments as at 31 December 2023.
The Directors have satisfied themselves as to the methodology used, the discount rates applied and the valuation. All operational
investments are in renewable energy assets and are valued using a discounted cash flow methodology. As explained in note
3a, the equity and debt instruments are valued as a whole. This is done using a blended discount rate and the value attributed
to debt investments represents their face value, with the residual value attributed to equity investments. The weighted average
costs of capital applied to the portfolio of assets ranges from 5.6% to 8.6%. For development and early-stage assets, investment
values are held at cost or Price of Recent Investment.
173Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The following assumptions were used in the discounted cash flow valuations:
As at
31 December 2023
As at
31 December 2022
UK RPI
(
year-on-year
)
3.7% during 2024, declining to 3.00%
in 2028 and then to 2.25% from 2030
onwards
6.7% during 2023, declining to
3.00% in 2087 and then to 2.25%
from 2030 onwards.
UK RPI
(
annual average
)
4.4% during 2024, declining to 3.00%
in 2028 and then to 2.25% from 2030
onwards
9.8% during 2023, declining to
3.00% in 2028 and then to 2.25%
from 2030 onwards
UK – corporation tax rate 25.00% 19.00% to April 2023; 25.00%
thereafter
Sweden – long-term inflation rate 2.00% 2.00%
Sweden – corporation tax rate 20.60% 20.60%
France – long-term inflation rate 2.00% 2.00%
France – corporation tax rate 25.00% 25.00%
Poland – long-term inflation rate - 2.50%
Poland – corporation tax rate - 19.00%
Finland – long-term inflation rate 2.00% 2.00%
Finland – corporation tax rate 20.00% 20.00%
Germany – long-term inflation rate 2.00% 2.00%
Germany – corporation tax rate 15.83% 15.83%
Euro/sterling exchange rate 1.1539 1.1277
Zloty/sterling exchange rate - 5.3009
Energy yield assumptions P50 case P50 case
Other key assumptions include:
Power Price Forecasts
Unless fixed under PPAs or otherwise hedged, the power price forecasts used in the valuations are based on market forward
prices in the near-term, followed by an equal blend of two independent and widely-used market expert consultants’ relevant
technology-specific capture price forecasts for each asset, see Figure 13 in the Market Outlook section and, Figure 19 in the
Portfolio valuation section respectively.
Asset Lives
The length of the period of operations assumed in the valuation is determined on an asset-by-asset basis taking into account
the lease agreements, permits or planning permissions in place as well as any extension rights, renewal regimes or wider policy
considerations, together with the technical characteristics of the asset.
Decommissioning Costs
Where applicable, the present value of the estimated costs to restore the land back to its original use are included in the
valuations as a cash outflow at the end of the asset life.
Fair value of intermediate holding companies
The other net assets in the intermediate holding companies substantially comprise working capital balances, therefore the
Directors consider the fair value to be equal to the book values. The sensitivity to unobservable inputs is based on management’s
expectation of reasonable possible shifts in these inputs.
The valuation sensitivity of each assumption is shown in Note 15.
174Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
10. Trade and other receivables
As at
31 December 2023
£’000
As at
31 December 2022
£’000
Other receivables 143 775
Total 143 775
11. Trade and other payables
As at
31 December 2023
£’000
As at
31 December 2022
£’000
Accrued expenses 3,237 1,917
Total 3,237 1,917
12. Share capital
Year ended
31 December 2023
Year ended
31 December 2022
Allotted, issued and fully paid:
Number of
shares
Nominal
value of
shares
(
£
)
Number of
shares
Nominal
value of
shares
(
£
)
Opening balance 564,927,536 5,649,275 564,927,536 5,649,275
Allotted following admission to LSE
Share issuance - - - -
Closing balance 564,927,536 5,649,275 564,927,536 5,649,275
As at 31 December 2023, the Company had total share premium of £217.3 million
(
2022: £217.3m
)
.
175Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
13. Special reserve
As indicated in the Company’s prospectus dated 19 November 2019, following admission of the Company’s Ordinary Shares to
trading on the London Stock Exchange, the Directors applied to the Court and obtained a judgement on 18 February 2020 to
cancel the amount standing to the credit of the share premium account of the Company.
As stated by the Institute of Chartered Accountants in England and Wales
(
“ICAEW”
)
and the Institute of Chartered Accountants
in Scotland
(
“ICAS”
)
in the technical release TECH 02/17BL, The Companies
(
Reduction of Share Capital
)
Order 2008 SI 2008/1915
(
“the Order”
)
specifies the cases in which a reserve arising from a reduction in a company’s capital
(
i.e., share capital, share
premium account, capital redemption reserve or redenomination reserve
)
is to be treated as a realised profit as a matter of
law. The Order also disapplies the general prohibition in section 654 on the distribution of a reserve arising from a reduction of
capital. The Order provides that if a limited company having a share capital reduces its capital and the reduction is confirmed
by order of court, the reserve arising from the reduction is treated as a realised profit unless the court orders otherwise.
The amount of the share premium account cancelled and credited to the Company’s Special reserve is £339.5 million, which can
be utilised to fund distributions by way of dividends to the Company’s shareholders.
14. Net assets per Ordinary Share
(
pence
)
As at
31 December 2023
As at
31 December 2022
Total shareholders’ equity
(
£’000
)
599,039 618,260
Number of Ordinary Shares in issue
(
‘000
)
564,928 564,928
Net asset value per Ordinary Share
(
pence
)
106.04p 109.44p
176Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
15. Financial instruments by category
As at 31 December 2023
Financial
assets at
amortised
cost
£’000
Financial
assets at
fair value
through
profit or loss
£’000
Financial
liabilities at
amortised
cost
£’000
Total
£’000
Non-current assets
Investments at fair value through profit or loss - 592,121 - 592,121
Current assets
Trade and other receivables 143 - - 143
Cash and cash equivalents
10,012 - - 10,012
Total assets 10,155 592,121 - 602,276
Current liabilities
Trade and other payables - - -3,237 -3,237
Total liabilities - - -3,237 -3,237
Net assets 10,155 592,121 -3,237 599,039
As explained in Note 3a, the Company values its investments as a whole. In the tables above of the total figure of £592.1 million
for financial assets at fair value through profit or loss, £513.3 million relates to the face value of debt investments. Investments
at fair value through profit and loss takes into account additions and disposals in the year, see section Investments and capital
recycling programme page 29.
177Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
As at 31 December 2022
Financial
assets at
amortised
cost
£’000
Financial
assets at
fair value
through
profit or loss
£’000
Financial
liabilities at
amortised
cost
£’000
Total
£’000
Non-current assets
Investments at fair value through profit or loss - 608,799 - 608,799
Current assets
Trade and other receivables 775 - - 775
Cash and cash equivalents
10,603 - - 10,603
Total assets 11,378 608,799 - 620,177
Current liabilities
Trade and other payables - - -1,917 -1,917
Total liabilities - - -1,917 -1,917
Net assets 11,378 608,799 -1,917 618,260
As explained in Note 3a, the Company values its investments as a whole. In the table above of the total figure of £608.8 million
for financial assets at fair value through profit or loss, £506.5 million relates to the face value of debt investments.
In the tables above, the fair value of the financial instruments that are measured at amortised cost do not materially differ from
their carrying values.
IFRS 13 requires the Company to classify its investments in a fair value hierarchy that reflects the significance of the inputs used
in making the measurements. IFRS 13 establishes a fair value hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The three levels of fair value hierarchy under IFRS 13 are as follows:
Level 1: fair value measurements are
those derived from quoted prices
(
unadjusted
)
in active markets for
identical assets or liabilities
Level 2: fair value measurements are
those derived from inputs other than
quoted prices included within Level 1
that are observable for the asset or
liability, either directly
(
i.e., as prices
)
or
indirectly
(
i.e., derived from prices
)
Level 3: fair value measurements
are those derived from valuation
techniques that include inputs to the
asset or liability that are not based on
observable market data
(
unobservable
inputs
)
178Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
As at 31 December 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Financial assets
Investments at fair value through profit or loss - - 592,121 592,121
Total financial assets - - 592,121 592,121
As at 31 December 2022
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Financial assets
Investments at fair value through profit or loss - - 608,799 608,799
Total financial assets - - 608,799 608,799
There were no Level 1 or Level 2 assets or liabilities during the year. There were no transfers between Level 1 and 2, Level 1 and 3
or Level 2 and 3 during the year.
Included within investments at fair value through profit or loss is an amount of £20 million in relation to derivative option in
Ireland associated with the conditional acquisition in Ireland
(
2022: £5.0m relating to two derivative options associated with the
conditional acquisitions in Spain and Ireland
)
recognised in an intermediate holding company.
Reconciliation of Level 3 fair value measurement of financial assets and liabilities
An analysis of the movement between opening to closing balances of the investments at fair value through profit or loss
(
all
classified as Level 3
)
is given in Note 9.
The fair value of the investments at fair value through profit or loss includes the use of Level 3 inputs. Refer to Note 9 for details
on the valuation methodology.
Valuation Sensitivities
(
including conditional acquisitions
)
Discount rate
The discount rate is considered the most significant unobservable input through which an increase or decrease would have a
material impact on the fair value of the investments at fair value through profit or loss.
An increase of 0.50% in the discount rate
(
levered cost of equity
)
would cause a decrease in total portfolio value of 6.0p per
Ordinary Share
(5.6%
decrease
)
and a decrease of 0.50% in the discount rate would cause an increase in total portfolio value of
6.5p per Ordinary Share
(6.1%
increase
)
.
Inflation rate
The sensitivity of the investments to movement in inflation rates is as follows:
A decrease of 0.50% in inflation rates would cause a decrease in total portfolio value of -4.4p per Ordinary Share
(
4.2% decrease
)
and an increase in inflation rates would cause an increase in total portfolio value of 4.8p per Ordinary Share
(
4.5% increase
)
.
179Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Power price
Wind and solar assets are subject to movements in power prices. The sensitivities of the investments to movement in power
prices are as follows:
A decrease of 10% in power price would cause a decrease in the total portfolio value of 9.7p per Ordinary Share
(
9.2% decrease
)
and
an increase of 10% in power price would cause an increase in the total portfolio value of 9.7p per Ordinary Share
(9.1
%increase
)
.
Generation
Wind and solar assets are subject to power generation risks. The sensitivities of the investments to movement in level of power
output are as follows:
The fair value of the investments is based on a “P50” level of power output being the expected level of generation over the
long-term. An assumed “P90” level of power output
(
i.e. a level of generation that is below the “P50”, with a 90% probability of
being exceeded
)
would cause a decrease in the total portfolio value of -19.6p per Ordinary Share
(
18.5% decrease
)
. An assumed
“P10” level of power output
(
i.e. a level of generation that is above the “P50”, with a 10% probability of being achieved
)
would
cause an increase in the total portfolio value of 19.0p per Ordinary Share
(
17.9% increase
)
.
Foreign exchange
The sensitivity of the investments to movement in FX rates is as follows:
An increase of 10% in FX rates would cause an increase in total portfolio value of 1.3p per Ordinary Share
(
1.2% increase
)
and a
decrease of 10% in FX rates would cause a decrease in total portfolio value of 1.3p per Ordinary Share
(
1.2% decrease
)
.
Of the portfolio as at 31 December 2023, 52%
(
2022: 59%
)
of the NAV is denominated in non-sterling currencies.
16. Financial risk management
The Company’s activities expose it to a variety of financial risks; including foreign currency risk, interest rate risk, power price
risk, credit risk and liquidity risk. The Board of Directors has overall responsibility for overseeing the management of financial
risks, however the review and management of financial risks are delegated to the AIFM. Each risk and its management are
summarised below.
(
i
)
Currency risk
Foreign currency risk is defined as the risk that the fair values of future cashflows will fluctuate because of changes in foreign
exchange rates. The Company seeks to manage its exposure to foreign exchange movements to ensure that
(
i
)
the sterling
value of known future construction commitments is fixed;
(
ii
)
sufficient near term distributions from nonsterling investments
are hedged to maintain healthy dividend cover;
(
iii
)
the volatility of the Company’s NAV with respect to foreign exchange
movements is limited; and
(
iv
)
all settlements and potential mark-to market payments on instruments used to hedge foreign
exchange exposure are adequately covered by the Company’s cash balances and undrawn credit facilities.
The portfolio of assets in which the Company invests all conduct their business and pay interest, dividends and principal in
sterling, with the exception of the euro and zloty-denominated investments which at 31 December 2023 comprised 46%
(
2022:
48%
)
and 0%
(
2022: 11%
)
of the total value of all investments respectively. The valuation sensitivity to FX rates is shown in Note15.
(
ii
)
Interest rate risk
The Company’s interest rate risk on interest bearing financial assets is limited to interest earned on cash and loan investments
into project companies, which yield interest at a fixed rate. The portfolio’s cashflows are continually monitored and reforecast,
both over the near future and the long-term, to analyse the cash flow returns from investments.
The Group may use borrowings to finance the acquisition of investments and the forecasts are used to monitor the impact of
changes in borrowing rates against cash flow returns from investments as increases in borrowing rates will reduce net interest
margins. The Group’s policy is to ensure that interest rates are sufficiently hedged to protect the Group’s net interest margins
from significant fluctuations when entering into material medium/ long-term borrowings. This includes engaging in interest rate
swaps or other interest rate derivative contracts.
180Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The Company’s interest and non-interest bearing assets and liabilities are summarised below:
As at 31 December 2023
Interest
bearing
£’000
Non-interest
bearing
£’000
Total
£’000
Assets
Cash and cash equivalents - 10,012 10,012
Trade and other receivables - 143 143
Investments at fair value through profit or loss 513,280 78,841 592,121
Total assets 513,280 88,996 602,276
Liabilities
Trade and other payables - -3,237 -3,237
Total liabilities - -3,237 -3,237
As at 31 December 2022
Interest
bearing
£’000
Non-interest
bearing
£’000
Total
£’000
Assets
Cash and cash equivalents - 10,603 10,603
Trade and other receivables - 775 775
Investments at fair value through profit or loss 506,482 102,317 608,799
Total assets 506,482 113,695 620,177
Liabilities
Trade and other payables - -1,917 -1,917
Total liabilities - -1,917 -1,917
In the tables above, the interest bearing asset value for investments at fair value through profit or loss relates to the face value
of debt investments.
(
iii
)
Power Price risk
The wholesale market price of electricity and gas is volatile and is affected by a variety of factors, including market demand
for electricity and gas, the generation mix of power plants, government support for various forms of power generation, as well
as fluctuations in the market prices of commodities and foreign exchange. Whilst some of the Company’s renewable energy
projects benefit from fixed prices, others have revenue which is in part based on wholesale electricity and gas prices. The
Investment Manager continually monitors energy price forecast and aims to put in place mitigating strategies, such as hedging
arrangements or fixed PPA contracts to reduce the exposure of the Company to this risk.
Further information on the impact of power prices over the year is provided in the Portfolio Valuation section of the Investment
Manager’s report on page 56.
181Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
(
iv
)
Credit risks
Credit risk is the risk that a counterparty of the Group will be unable or unwilling to meet a commitment that it has entered
into with the Group. The credit standing of subcontractors is reviewed, and the risk of default estimated for each significant
counterparty position. Monitoring is on-going, and year end positions are reported to the Board on a quarterly basis. The Group’s
largest credit risk exposure to a project at 31 December 2023 was to Goldbeck Solar Limited on Breach Solar representing 1% of
the portfolio by total value of all investments
(
2022: 6%
)
.
The Group ’s investments enter into Power Price Agreements
(
“PPA”
)
with a range of providers through which electricity is sold.
The largest PPA provider to the portfolio at 31 December 2023 was EDF who provided PPAs to projects in respect of 25% of the
portfolio by total value of all investments
(
2022: Npower: 18%
)
.
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions. The Company and its subsidiaries mitigate their risk on cash investments and derivative transactions by only
transacting with major international financial institutions with high credit ratings assigned by international credit rating
agencies.
The Company has assessed IFRS 9’s expected credit loss model and does not consider any material impact on these financial
statements. No trade and other receivables balances are credit-impaired at the reporting date.
The Company’s commitment in respect of its conditional acquisition in Ireland is accounted for partly as a derivative option and
partly for the pre commissioning revenues in an intermediate holding company.
(
v
)
Liquidity risks
Liquidity risk is the risk that the Group may not be able to meet its financial obligations as they fall due. The AIFM and the Board
continuously monitor forecast and actual cashflows from operating, financing, and investing activities to consider payment
of dividends, repayment of trade and other payables or funding further investing activities. The Group ensures it maintains
adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows
and matching the maturity profiles of financial assets and liabilities.
The Group’s investments are generally in private companies, in which there is no listed market and therefore such investment would
take time to realise, and there is no assurance that the valuations placed on the investments would be achieved from any such
saleprocess.
Financial assets and liabilities by maturity at the year are shown below:
31 December 2023
Less than
1 year
£’000
1-5 years
£’000
More than
5 years
£’000
Total
£’000
Assets
Investments at fair value through profit or loss - - 592,121 592,121
Trade and other receivables 143 - - 143
Cash and cash equivalents 10,012 - - 10,012
Liabilities
Trade and other payables -3,237 - - -3,237
6,918 - 592,121 599,039
182Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
31 December 2022
Less than
1 year
£’000
1-5 years
£’000
More than
5 years
£’000
Total
£’000
Assets
Investments at fair value through profit or loss - - 608,799 608,799
Trade and other receivables 775 - - 775
Cash and cash equivalents 10,603 - - 10,603
Liabilities
Trade and other payables -1,917 - – -1,917
9,461 - 608,799 618,260
Capital management
The Company’s capital management objective is to ensure that the Company will be able to continue as a going concern while
maximising the return to equity shareholders. The Company’s investment objective is to provide 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 in the UK, Europe and Australia.
The Company considers its capital to comprise ordinary share capital, special reserve and retained earnings. The Company
is not subject to any externally imposed capital requirements. The Company’s total share capital and reserves shown in the
Statement of Financial Position are £599.0 million
(
2022: £618.3m
)
.
The Company has implemented an efficient financing structure that enables it to manage its capital effectively. The Company’s
capital structure comprises equity only
(
refer to the statement of changes in equity
)
.
The Company’s direct subsidiary, ORIT Holdings II Limited, has a £270.8 million revolving credit facility with Allied Irish Banks,
National Australia Bank, NatWest and Santander. The facility was £130.0 million drawn at 31 December 2023
(
2022: £77.2m
)
.
The Board, with the assistance of the Investment Manager, monitors and reviews the Company’s capital on an ongoing basis.
•
Share capital represents the 1 penny nominal value of the issued share capital.
•
The share premium account arose from the net proceeds of issuing new shares.
•
The capital reserve reflects any increases and decreases in the fair value of investments which have been recognised in the
capital column of the Statement of Comprehensive Income.
183Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
17. Related party transactions
During the year, interest totalling £25.9 million
(
2022: £23.1m
)
was earned, in respect of the long-term interest-bearing loan
between the Company and its subsidiaries. At the year end, no interest earned was outstanding.
AIFM and Investment Manager
The Company has appointed Octopus AIF Management Limited to be the Alternative Investment Fund Manager of the Company
(
the “AIFM”
)
for the purposes of Directive 2011/61/EU of the European Parliament and of the Council on Alternative Investment
Fund Managers. Accordingly, the AIFM is responsible for the portfolio management of the Company and for exercising the
risk management function in respect of the Company. The AIFM has delegated portfolio management services to Octopus
Renewables Limited
(
trading as Octopus Energy Generation
)
, the Company’s Investment Manager.
The AIFM is entitled to a management fee of 0.95% per annum of Net Asset Value of the Company up to £500 million and 0.85%
per annum of Net Asset Value in excess of £500 million, payable quarterly in arrears. No performance fee or asset level fees are
payable to the AIFM under the Management Agreement.
During the year, the Investment management fee charged to the Company by the AIFM was £5.64 million
(
2022: £5.71m
)
, of
which £2.83 million
(
2022: £1.45m
)
remained payable at the year end date.
During the year, the Company entered into one transaction in the ordinary course of business with Octopus Energy, part of the
same group as the Investment Manager. The transaction related to the signing of a 1-year physical, indexed PPA for Ottringham
solar farm in the UK. The nominal value of the transaction was £1.7 million.
Directors
The Company is governed by a Board of Directors
(
the “Board”
)
, all of whom are independent and non-executive. During
the year, the Board received fees for their services of £209,300
(
2022: £186,000
)
and were paid £6,400
(
2022: £7,900
)
in
expenses. As at the year end, there were no outstanding fees payable to the Board.
The Directors had the following shareholdings in the Company, all of which were beneficially owned.
Ordinary
Shares as at date
of this report
Ordinary
Shares as at
31 December 2023
Ordinary
Shares as at
31 December 2022
Philip Austin MBE
73
165,518 165,518 165,518
James Cameron 65,306 65,306 65,306
Elaina Elzinga - - -
Audrey McNair
74
50,437 50,437 51,383
Sarim Sheikh - - -
73
With effect from 23 November 2021, Mr. Austin’s shares have been held jointly with Mrs. J Austin, a PCA of Mr. Austin.
74
Ms McNair’s husband holds 20,991 shares of the total holding displayed in this table..
184Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
18. Subsidiaries, joint ventures and associates
As a result of applying Investment Entities
(
Amendments to IFRS 10, IFRS 12 and IAS 27
)
, no subsidiaries have been consolidated
in these financial statements. The Company’s subsidiaries, joint ventures and associates are listed below:
Name Category
Place of
business
Registered
Office
75
Ownership
interest
ORIT Holdings II Limited Direct Intermediate
Holdings UK A 100%
ORIT Holdings Limited Intermediate Holdings UK A 100%
ORIT UK Acquisitions Limited Intermediate Holdings UK A 100%
Abbots Ripton Solar Energy Limited Project company UK A 100%
Chisbon Solar Farm Limited Project company UK A 100%
Jura Solar Limited Project company UK A 100%
Mingay Farm Limited Project company UK A 100%
NGE Limited Project company UK A 100%
Sun Green Energy Limited Project company UK A 100%
Westerfield Solar Limited Project company UK A 100%
Wincelle Solar Limited Project company UK A 100%
Heather Wind AB Project company Sweden B 100%
Solstice 1A GmbH Portfolio-level Holdings Germany C 100%
SolaireCharleval SAS Project company France D 100%
SolaireIstres SAS Project company France D 100%
SolaireCuges-Les-Pins SAS Project company France D 100%
SolaireChalmoux SAS Project company France D 100%
SolaireLaVerdiere SAS Project company France D 100%
SolaireBrignoles SAS Project company France D 100%
SolaireSaint-Antonin-du-Var SAS Project company France D 100%
Centrale Photovoltaique de IOVI 1 SAS Project company France D 100%
Centrale Photovoltaique de IOVI 3 SAS Project company France D 100%
Arsac 2 SAS Project company France D 100%
185Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Name Category
Place of
business
Registered
Office
75
Ownership
interest
Arsac 5 SAS Project company France D 100%
SolaireFontienne SAS Project company France D 100%
SolaireOllieres SAS Project company France D 100%
Eylsia SAS Portfolio-level Holdings France E 100%
CEPE Cerisou Project company France F 100%
Cumberhead Wind Energy Limited Project company UK A 100%
ORIT Irish Holdings 2 Limited Portfolio-level Holdings UK A 100%
ORIT Irish Holdings Limited Portfolio-level Holdings UK A 100%
Nordic Power Development Limited Portfolio-level Holdings UK A 100%
Saunamaa Wind Farm Oy Project company Finland H 100%
Vöyrinkangas Wind Farm Oy Project company Finland H 100%
ORI JV Holdings Limited Portfolio-level Holdings UK A 50%
ORI JV Holdings 2 Limited Portfolio-level Holdings UK A 50%
Simply Blue Energy Holdings Limited Portfolio-level Holdings Ireland I 19%
South Kilbraur Wind Farm Limited Project company UK J 25%
Windburn Wind Farm Limited Project company UK J 25%
Wind 2 Project 2 Limited Project company UK J 25%
Wind 2 Project 5 Limited Project company UK J 25%
Wind 2 Project 3 Limited Project company UK J 25%
Kirkton Wind Farm Limited Project company UK J 25%
Bwlch Gwyn Wind Farm Limited Project company UK J 25%
Wind 2 Project 6 Limited Project company UK J 25%
Lairdmannoch Energy Park Limited Project company UK J 25%
ORI JV Holdings 3 Limited Portfolio-level Holdings UK A 50%
Nordic Renewables Limited Portfolio-level Holdings UK A 50%
Nordic Renewables Holdings 1 Limited Portfolio-level Holdings UK A 50%
186Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Name Category
Place of
business
Registered
Office
75
Ownership
interest
ORI JV Holdings 4 Limited Portfolio-level Holdings UK A 50%
ORI JV Holdings 5 Limited Portfolio-level Holdings UK A 51%
ORI JV Holdings 5 Holdco Limited Portfolio-level Holdings UK A 51%
ORI JV Holdings 6 Limited Portfolio-level Holdings UK A 50%
ORIT Lincs Holdco Limited Portfolio-level Holdings UK A 100%
ORI Lincs Holdings Limited Portfolio-level Holdings UK A 50%
Clyde SPV Limited Portfolio-level Holdings UK K 50%
Blota Germany GmbH Portfolio-level Holdings Germany L 100%
Blota GP GmbH Portfolio-level Holdings Germany L 100%
UKA Windenergie Leeskow GmbH Portfolio-level Holdings Germany M 100%
UGE Leeskow Eins GmbH & Co. KG
Umweltgerechte Energie Portfolio-level Holdings Germany M 100%
Infrastrukturgesellschaft Leeskow mbH &
Co. KG Project company Germany M 100%
Burwell 11 Solar Limited Project company UK A 100%
Crossdykes WF Limited Project company UK N 51%
UK Green Investment Lyle Limited Portfolio-level Holdings UK K 50%
Lincs Wind Farm
(
Holding
)
Limited Portfolio-level Holdings UK O 15.5%
Lincs Wind Farm Limited Project company UK P 15.5%
HYRO Energy Limited Portfolio-level Holdings UK Q 25%
Green Hydrogen 11 Limited Project company UK Q 25%
Green Hydrogen 2 Limited Project company UK Q 25%
Green Hydrogen 3 Limited Project company UK Q 25%
Green Hydrogen 4 Limited Project company UK Q 25%
Green Hydrogen 5 Limited Project company UK Q 25%
Gridsource
(
Woburn Rd
)
Limited Project company UK A 50%
187Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Name Category
Place of
business
Registered
Office
75
Ownership
interest
Haaponeva SPC Oy Project company Finland G 50%
BHill SPC Oy Project company Finland G 50%
Luola S SPC Oy Project company Finland G 50%
Mikkeli S SPC Oy Project company Finland G 50%
Eero S SPC Oy Project company Finland G 50%
S Tuuli SPC Oy Project company Finland G 50%
KNorgen SPC Oy Project company Finland G 50%
Trio Power Limited Portfolio-level Holdings UK A 100%
75
Registered offices:
A – Uk House, 5th Floor, 164-182 Oxford Street, London, United Kingdom, W1D 1NN
B – Lilla Nygatan 1, 111 28 Stockholm, Sweden
C – Maximilianstraße, 3580539 München, Germany
D – 52 Rue de la Victoire 75009, Paris, France
E – 4 Rue de Marivaux, 75002 Paris, France
F – Z.I de Courtine, 330 rue du Mourelet, 84000. Avignon, France
G – c/o Nordic Generation Oy, Tekniikantie 14, 02150 ESPOO
H – Teknobulevardi 3-5, 01530 Vantaa, Finland
I – Woodbine Hill, Kinsalebeg, Youghal, Co. Cork, Ireland
J – Wind 2 Office, 2 Walker Street, Edinburgh, Scotland, EH3 7LB
K – 8 White Oak Square, London Road, Swanley, Kent, United Kingdom, BR8 7AG
L – c/o Ashurst LLP, OpernTurm, Bockenheimer Landstraße 2-4, 60306 Frankfurt
M – Dorfstraße 20a, 18276 Lohmen
N – 58 Morrison Street, Edinburgh, United Kingdom, EH3 8BP
O – 5 Howick Place, London, United Kingdom, SW1P 1WG
P – 13 Queens Road, Aberdeen, Scotland, AB15 4YL
Q – Beaufort Court, Egg Farm Lane, Kings Langley, United Kingdom, WD4 8LR
As shown in Annual Report, ORIT Holdings II Limited is the only direct subsidiary of the Company. All other subsidiaries are
held indirectly.
188Notes to the Financial StatementsOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
19. Guarantees and other commitments
The Company guarantees the foreign exchange hedges entered into by its intermediate holding companies to enable it to
minimise its exposure to changes in underlying foreign exchange rates.
As at 31 December 2023, the Company has guarantees in respect of the future investment obligations associated with the
Breach Solar plant totalling £4.1 million
(
2022: £41.5m
)
.
As at 31 December 2023 the Company’s subsidiaries had future investment obligations totalling £175.6 million
(
2022: £111.2m
)
relating to its wind farms post construction, solar farm in construction and its conditional acquisitions in Ireland. The intermediate
holding companies have provided guarantees in respect of these commitments.
20. Contingent acquisition
On 26 July 2021 an intermediate holding company, ORIT Holdings Limited, entered into a Share Purchase Agreement
(
“SPA”
)
for
the acquisition of a 100% interest in a portfolio of five solar PV assets in Ireland. As at 31 December 2023, the acquisition of the
five sites were conditional upon the sites becoming fully operational. The total consideration for the five sites was estimated at
€185-€193million
(
c. £160.6 million to £167 million
)
which is payable on completion, apart from deferred consideration in respect
of the fifth site. The Company has secured a fully amortising debt facility of up to €114 million
(
c. £98.8 million
)
from Allied Irish
Banks plc and LaBanque Postale to part finance the acquisition of the operational sites and a further pre agreed debt facility
up to €25.8million to acquire the fifth site. A derivative asset of £20 million
(
2022: £3.3m
)
has been recognised in respect of this
transaction as at 31December 2023 in an intermediate holding company.
21. Post-year end events
On 29 January 2024 the Company declared an interim dividend in respect of the three months ended 31 December 2023 of
1.45 pence per Ordinary Share for £8.2million based on a record date of 9 February 2024 and ex-dividend date of 8 February
2024 and the number of Ordinary Shares in issue being 564,927,536. This dividend was paid on 23 February 2024.
On 2 February 2024 the Company announced that it has completed the conditional acquisition of four newly-constructed solar
farms located close to Dublin, Ireland following the sites becoming operational in December 2023. The solar complex totals
199MW and was acquired from Statkraft Ireland Limited, which developed and constructed the projects under ORIT’s oversight.
The total acquisition cost of €160.6million was in part financed using a €80.6million drawdown from the debt facility provided
by Allied Irish Banks and LaBanquePostale.
189Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Other Information
Alternative Performance Measures
In reporting financial information, the Company presents alternative performance measures, “APMs”, which are not defined or
specified under the requirements of IFRS. The Company believes that these APMs, which are not considered to be a substitute for or
superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the Company. The APMs
presented in this report are shown below:
Performance of Company’s underlying operational investments
Output Revenue Opex EBITDA
Operational portfolio
1,110GWh
(
2022: 1,005GWh
)
£117.4 million
(
2022: £112.0m
)
£43.6 million
(
2022: £35.7m
)
£73.8 million
(
2022: £76.3m
)
Solar
(
excluding Irish portfolio
)
275GWh
(
2022: 292GWh
)
£35.2 million
(
2022: £33.7m
)
£9.2 million
(
2022: £8.3m
)
£26.0 million
(
2022: £25.4m
)
Onshore wind
682GWh
(
2022: 565GWh
)
£42.7 million
(
2022: £51.3m
)
£12.0 million
(
2022: £7.5 m
)
£30.7 million
(
2022: £43.8m
)
Offshore wind
152GWh
(
2022: 148GWh
)
£39.5 million
(
2022: £27.0m
)
£22.4 million
(
2022: £19.9m
)
£17.0 million
(
2022: £7.1m
)
Gross asset value
(
GAV
)
The Company’s gross assets comprise the net asset values of the Company’s Ordinary Shares and the debt held in unconsolidated
subsidiaries
As at
31 December 2023
As at
31 December 2022
£million £million
NAV a 599.0 618.3
Debt b 381.3 454.3
Total GAV a + b 980.3 1,072.6
190Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Total value of all investments
A measure of committed asset value including total debt and equity commitments
As at
31 December 2023
As at
31 December 2022
£million £million
GAV a 980.3 1,072.6
Commitments on existing portfolio b 19.1 68.3
Commitments on conditional acquisitions c 173.4 17 7.0
GAV before adjusting for cash available for commitments
(
a+b+c
)
= d 1,172.8 1, 317.9
Less Company and holding company assets e -23.1 -1.7
Less asset level cash f -22.6 -15.5
Total value of all investments d + e + f 1,127.1 1,304.2
Total return since IPO
A measure of performance since IPO that includes both income and capital returns. This takes into account capital gains and
reinvestment of dividends
(
where beneficial
)
paid out by the Company into the Ordinary Shares of the Company on the
ex-dividenddate.
31 December 2023 Share price NAV
Value at IPO
(
10 December 2019
)
– pence a 100.00 98.00
Value at 31 December 2023 – pence b 90.00 106.04
Benefits of reinvesting dividends – pence d -1.09 2.26
Dividends paid since IPO – pence c 17.76 17.76
Total return
[(
b+c+d
)
÷a
]
-1 6.7% 28.6%
Annualised total return 1.6% 6.4%
191Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
31 December 2022
76
Share price NAV
Value at IPO
(
10 December 2019
)
– pence a 100.00 98.00
Value at 31 December 2022 – pence b 100.00 109.44
Benefits of reinvesting dividends – pence d -0.52 1.8
Dividends paid since IPO – pence c 12.11 12.11
Total return
[(
b+c+d
)
÷a
]
-1 11.6% 25.9%
Annualised total return 3.6% 7.8%
Total return for the year
A measure of performance for the year that includes both income and capital returns. This takes into account capital gains and
reinvestment of dividends paid out by the Company into the Ordinary Shares of the Company on the ex-dividend date.
31 December 2023 Share price NAV
Value at 31 December 2022 – pence a 100.00 109.44
Dividends paid to 31 December 2022 – pence b 12.11 12.11
Value plus dividends paid to 31 December 2022 – pence a + b = c 112.11 121.55
Value at 31 December 2023 – pence d 90.00 106.04
Benefits of reinvesting dividends – pence e -0.57 0.35
Dividends paid in the year – pence f 5.65 5.65
Total return
[(
b+d+e+f
)
÷c
]
-1 -4.4% 2.1%
31 December 2022
76
Share price NAV
Value at 31 December 2021 – pence a 110.80 102.26
Dividends paid to 31 December 2021 – pence b 6.93 6.93
Value plus dividends paid to 31 December 2021 – pence a + b = c 117.73 109.19
Value at 31 December 2022 –pence d 100.00 109.4 4
Benefits of reinvesting dividends – pence e -0.76 1.18
Dividends paid in the year - pence f 5.18 5.18
Total return
[(
b+d+e+f
)
÷c
]
-1 -5.4% 12.4%
76
Restated from December 2022 KPI reported in the FY22 Annual Report.
192Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
(
Discount
)
/Premium to NAV
The amount, expressed as a percentage, by which the share price is less or more than the NAV per Ordinary Share.
As at
31 December 2023
As at
31 December 2022
NAV per Ordinary Share - pence a 106.04 109.4 4
Share price – pence b 90.00 100.00
(
Discount
)
/Premium
(
b÷a
)
-1 -15.1% -8.6%
Ongoing charges ratio
A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running the Company per
Ordinary Share. This has been calculated and disclosed in accordance with the AIC methodology.
Year ended
31 December 2023
£’000
Year ended
31 December 2022
£’000
Average NAV a 605,111 611,342
Annualised expenses b 7,011 6,844
Ongoing charges ratio
(
b÷a
)
1.16% 1.12%
193Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Article 9 Disclosures
The Company has sustainable investment as its objective and therefore is required, pursuant to the
EU’s Sustainable Finance Disclosure Regulation, to make periodic disclosures for the financial product
referred to in Article 9, paragraphs 1 to 4a, of Regulation
(
EU
)
2019/2088 and Article 5, first paragraph, of
Regulation
(
EU
)
2020/852.
Product Name: Octopus Renewables Infrastructure Trust plc
Legal entity identifier: 213800B81BFJKWM2JV13
To what extent was the sustainable investment objective of this financial
product met?
The core sustainable investment objective of the Company is to accelerate the transition to net zero
through its investments, building and operating a diversified portfolio of Renewable Energy Assets to help
facilitate the transition to a more sustainable future, consistent with the long-term temperature goal of
the Paris Agreement through the avoidance of greenhouse gas emissions.
Investments in solar photovoltaic production, wind power and other Renewable Energy Assets are
considered as substantially contributing to climate change mitigation under the EU Taxonomy Regulation
2020/852
(
“EU Taxonomy”
)
.
Sustainable investment objective
Did this financial product have a sustainable investment objective?
Yes
No
It made sustainable investments
with an environmental objective:
100%
in economic activities that
qualify as environmentally
sustainable under the EU
taxonomy
in economic activities that do
not qualify as environmentally
sustainable under the EU
taxonomy
It made sustainable investments
with a social objective: 0%
It promoted Environmental/Social
(
E/S
)
characteristics and while it
does not have as its objective a
sustainable investment, it will have
a minimum proportion of _% of
sustainable investments
with an environmental objective
in economic activities that
qualify as environmentally
sustainable under the EU
taxonomy
with an environmental objective
in economic activities that do
not qualify as environmentally
sustainable under the EU
taxonomy
with a social objective
It promoted E/S characteristics,
but did not make any sustainable
investments
The EU Taxonomy is a
classification system laid
down in Regulation
(
EU
)
2020/852, establishing a
list of environmentally
sustainable economic
activities. That Regulation
does not include a list
of socially sustainable
economic activities.
Sustainable investments
with an environmental
objective might be aligned
with the Taxonomy or not.
Sustainable investment
means an investment
in an economic activity
that contributes to an
environmental or social
objective, provided that
the investment does not
significantly harm any
environmental or social
objective and that the
investee companies follow
good governance practices.
194Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
During the year the Company managed and made new investments into Renewable Energy Assets,
consistent with its core sustainable investment objective to accelerate the transition to net zero.
As at 31 December 2023, the Company owns a portfolio of 37 Renewable Energy Assets
(
including five
developer investments
)
. The Investment Manager places environmental, social and governance
(
“ESG”
)
considerations at the core of the Company’s investment focus. In addition to having a no fossil fuel
investments policy, ESG risk management is ingrained in the way the Investment Manager seeks to
originate and execute investment decisions, as well as in ongoing portfolio and asset management. The
Investment Manager’s approach is based around three fundamental stakeholder lenses: Performance,
Planet and People. This framework embeds ESG risk factors and considerations alongside measuring and
tracking the positive impact that the Company’s investments have on its investors, the environment and
society. These measures enable the Company to responsibly achieve its mission to promote the transition
to a future powered by renewable energy.
l How did the sustainability indicators perform?
The sustainability indicators defined for this financial product are:
Indicator Year - 2023
1. Capital invested into renewable energy
assets
£1,127m total value of investments, committed
into renewables
2. GWh of renewable energy produced
a. Actual generation during the reporting
period
b. Potential generation once fully
operational
a. 1,312 GWh
b. 1,569 GWh
3. Number of homes powered by clean energy
a. Estimated number of homes powered
during the reporting period
b. Estimated potential number of homes
powered once fully operational
a. 354,880
b. 384,463
4. Tonnes of carbon avoided alongside carbon
avoided equivalents.
a. Estimated tonnes of carbon avoided
during the reporting period, and
i. Estimated number of trees required to
avoid same carbon,
ii. Estimated number of cars off the road
to avoid the same carbon
b. Estimated potential tonnes of carbon
avoided once fully operational, and
i. Estimated number of trees required
to avoid same carbon,
ii. Estimated number of cars off the
road to avoid the same carbon
a. 366,424
i. 1,797,221
ii. 186,020
b. 399,679
i. 1,960,330
ii. 202,902
5. tCO
2
e per £m revenue estimated carbon
intensity
3.74 tCO
2
e/£m revenue
6. EU Taxonomy qualifying % 100%
Sustainability
indicators
measure how
the sustainable
objectives of this
financial product
are attained.
195Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
The Investment Manager tracks the above indicators to measure the performance of the
Company against its sustainability objective to accelerate the transition to net zero. Given the
nature of these indicators, it is difficult to set meaningful targets for “improvement”. For example,
indicators 1-4 are directly affected by the amount of capital raised by the Company and the
GWh produced. For indicators 5 and 6, the Investment Manager has set only a qualitative target
to reduce the carbon intensity of its assets where possible and to maintain 100% EU Taxonomy
qualifying investments. More quantitative targets around these indicators are inappropriate
given the indicators are largely affected by the types of investments made during the year rather
than how the Company has managed these assets.
l
...and compared to previous years?
Indicator 2023
2022
1. Capital invested into renewable energy assets £1,127 total value
of investments,
committed into
renewables
£1,304m
total value of
investments,
committed into
renewables
2. GWh of renewable energy produced
a. Actual generation during the reporting period
a. 1,312 GWh a. 1,005 GWh
b. Potential generation once fully operational b. 1,569 GWh b. 1,740 GWh
3. Number of homes powered by clean energy
a. Estimated number of homes powered during
the reporting period
a. 354,880
a. not measured
b. Estimated potential number of homes
powered once fully operational
b. 384,463 b. 522,278
4. Tonnes of carbon avoided alongside carbon
avoided equivalents
a. Estimated tonnes of carbon avoided during
the reporting period, and
i. Estimated number of trees required to avoid
same carbon,
ii. Estimated number of cars off the road to
avoid the same carbon
a. 366,424
i. 1,797,221
ii. 186,020
a. not measured
b. Estimated potential tonnes of carbon avoided
once fully operational, and
i. Estimated number of trees required to avoid
same carbon,
ii. Estimated number of cars off the road to
avoid the same carbon
b. 399,679
i. 1,960,330
ii. 202,902
b. 580,161
i. 2,845,551
ii. 318,198
5. tCO
2
e per £m revenue estimated carbon
intensity
3.74 11.52
6. EU Taxonomy qualifying % 100% 100%
196Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Reductions observed between ORIT’s 2022 vs. 2023 potential renewable energy production and equivalent
impact KPIs are driven in part by the sale of the Polish wind portfolio midway through 2023, and by
a change in the methodology for calculating potential generation, which now accounts for expected
degradation across the portfolio. Figures for carbon avoided use country-specific grid intensity factors,
which are updated on a periodic basis to reflect the changing composition of the grid’s energy sources.
Increasing renewable capacity on the grids in which ORIT’s assets are located has resulted in a reduction
in the tCO
2
e avoided per MWh of renewable energy generation on a like for like basis.
The carbon intensity, or WACI, of ORIT’s investee companies has decreased from 2022. Since this metric
considers the current value of investee companies as at 31 December 2023, this reduction is in part
driven by the sale of the Polish wind portfolio during the reporting period. The WACI is primarily driven
by the Scope 1 emissions associated with the construction of the Cumberhead wind farm, which started
generating revenues during the reporting period. As such, the Investment Manager expects the carbon
intensity of the portfolio to remain in line with the 2023 figure going forwards.
l
How did the sustainable investments not cause significant harm to any sustainable investment
objective?
All investments were screened as part of the ESG Risk Matrix assessment against areas that could
significantly harm. The ESG Risk Matrix contains sections on Planet
(
environmental factors such as
biodiversity, water and waste
)
and People
(
social and employee matters, human rights, anti corruption
and anti-bribery matters
)
and aims to ensure that any potential adverse impacts are mitigated.
Evaluation of investments into renewable energy assets were also assessed at investment through
the ESG Risk Matrix to confirm that investment does not significantly harm any of the environmental
objectives set out in the EU Taxonomy and compliance with the minimum safeguards are adhered
to. All investments meet the minimum sustainability criteria, as determined by the ESG Risk Matrix,
completed during the investment process. The ESG Risk Matrix has a total score of 15. All investments
achieved or exceeded the minimum score of 9 in the year. This minimum score is equivalent to “do no
significant harm”.
Ongoing sustainability risks for the portfolio are monitored, managed and reported to the Asset Board
which has responsibility for ensuring that each investment adheres to the ESG strategy. There were no
material sustainability incidents across the portfolio during the year.
The Investment Manager undertook a review of the specific renewable energy assets in relation to the
EU Taxonomy technical screening criteria in the year to confirm whether the investments continued
to meet the qualification criteria. ORIT’s investments met the criteria for do no significant harm to
“Climate Change Adaptation”, “Circular Economy” and “Biodiversity”. Do no significant harm
to “Water” and “Pollution prevention” was categorised as not applicable for the majority of ORIT’s
investments according to the EU Taxonomy criteria. For ORIT’s investment into hydrogen, “Water” and
“Pollution prevention” categories are included in the EU Taxonomy criteria but were not assessed given
the criteria was not applicable to the current phase and or design of the hydrogen projects.
197Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
77
https://www.octopusrenewablesinfrastructure.com/sustainability-related-disclosures
l
How were the indicators for adverse impacts on sustainability factors taken into account?
The Company considers principal adverse impacts of its investment decisions on sustainability factors
as part of its investment due diligence processes, ensuring that investments do no significant harm to
any environmental or social objective.
The Company considers that for renewable energy investments, the following principle adverse impacts
on sustainability factors are the most material.
Climate and other environmental-related factors
Carbon emissions 1 - GHG Emissions
2 - Carbon footprint
3 - GHG intensity of investee companies
Biodiversity 7 - Activities negatively affecting
biodiversity-sensitive areas
Additional indicator: Natural species and
protected areas
Social and Employee matters
Health and safety of workforce Additional Indicator: Number of days lost
to work-related injuries, accidents, ill health
and fatalities
Human Rights in supply chain 10 - Violations of UN Global Compact
principles and Organisation for Economic
Cooperation and Development
(
OECD
)
Guidelines for Multinational Enterprises
Additional indicator: Lack of a supplier code
of conduct
Bribery and corruption Additional Indicator: Lack of anti-corruption
and anti-bribery policies
Community Relations Additional Indicator: Number of community
complaints
(
own PAI
)
ORIT’s Principal Adverse Impact Statement can be found on the ORIT website
(
see: here
)
.
77
During the acquisition process and over the life of an investment, adverse impacts on sustainability
factors were assessed. During the investment cycle for each deal undertaken during the period, the
ESG Risk Matrix assessed indicators that would indicate presence or absence of a principal adverse
impact. These most material indicators are included in the table above, but other indicators include
those relating to environmental damage
(
carbon, biodiversity, water and waste
)
through environmental
impact assessment, habitat management plans, resource minimisation strategies, carbon reduction
and measuring, alongside assessing policies for social and employee matters
(
anti-bribery, corruption,
human slavery, equality, diversity and opportunity
)
, health and safety, unfair advantage, supplier code
of conduct and community relations
(
complaints, engagement and community benefit initiatives
)
.
All proposed investments must meet the minimum sustainability criteria, as determined by the ESG
Risk Matrix, completed during the investment process. The ESG Risk Matrix has a total score of 15.
Aminimum score of 9 must be achieved and is equivalent to “do no significant harm” with a target
score of 10.
The Investment Manager continues to work with a range of external service providers to manage the
Company’s portfolio of investments, for example with developers, construction managers, operations
and maintenance providers, and external asset managers. To address any adverse impacts on a
continuous basis, the Investment Manager is committed to carrying out an annual ESG review on each
of the Company’s Portfolio Businesses as well as material third-party service providers and this includes
reviewing policies in relation to human rights, anti-corruption and anti-bribery. This seeks to ensure that
strategies to reduce any new adverse impacts are put in place in a timely manner.
Principal adverse
impacts are the
most significant
negative impacts
of investment
decisions on
sustainability
factors
relating to
environmental,
social and
employee
matters, respect
for human rights,
anti-corruption
and anti-bribery
matters.
198Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Adverse impacts associated with health and safety were assessed and monitored continuously by
the directors of the project companies and/or Health and Safety Executive
(
“HSE”
)
consultants with
indicators such as days lost metrics. No investment was made without an appropriate HSE sign off
and quality and competency reviews were periodically conducted by the HSE consultants and will be
continued for the duration of the investment.
l
How are the sustainable investments aligned with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights?
The energy sector
(
like every other sector
)
could be subject to human rights abuse that needs to be
mitigated and the Investment Manager ensures appropriate due diligence is performed, and that human
rights, equality, anti-bribery and corruption, taxation and fair competition policies and/or processes are
in place for portfolio companies and service providers alongside the Investment Manager’s own policies
and processes. This ensures that investments are aligned with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and
rights set out in the eight fundamental conventions identified in the Declaration of the International
Labour Organisation on fundamental Principles and Rights at Work and the International Bill of Human
Rights. This is primarily achieved by only working with suppliers who align to a supplier code of conduct.
All investee companies align to the supplier code of conduct and we can confirm for each investee
company that;
l there is no clear indication that the investee company does not adequately implement human rights
due diligence resulting in human rights abuses
(
the company nor its top management has not been
convicted on a breach of human rights due diligence laws, the company has not been approached
by an OECD NCP or been involved in an allegation on the Business and Human Rights Resource
Centre digital platform
)
.
l the company has not been finally convicted for tax evasion or for breaking competition laws.
l the senior management of investee companies have not been finally convicted of bribery.
199Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
How did this financial product consider principal adverse impacts on
sustainability factors?
The ESG Risk Matrix contains sections on Planet
(
environmental factors, such as biodiversity, water and
waste
)
and People
(
social and employee matters, human rights, anti-corruption and anti-bribery matters
)
and aims to identify principal adverse impacts of the investment and ensure that any potential adverse
impacts are mitigated such that the investment is sustainable. The ESG Risk Matrix is completed as part
of the investment process and is considered by the Investment Committee
(
“IC”
)
. This is to ensure that
ESG risks are identified and mitigated as soon as possible in the investment process and ensures that
appropriate consideration is given to principle adverse impacts on sustainability factors. The ESG Risk
Matrix comprises of approximately 30 questions and assesses an investment opportunity three times
during the investment process: at “Approval in Principle”, “Final Investment Committee” and at the
“Pre-Completion Stage”. The ESG Risk Matrix has a total score of 15, with a score of 9 or more required to
indicate compliance with the ESG Policy and “Do no significant harm”. All investments in the year met
the minimum standard.
The Company’s ESG Policy seeks to implement the principles contained in the Investment Manager’s
“Responsible Investment Policy”. The “Responsible Investment Policy” sets out the approach to identifying
and managing ESG matters. These principles are in line with the UN Principles for Responsible Investment
(
“UN PRI”
)
. During the period, the ESG Policy was reviewed by the Company’s board in relation to the
Company, and the Investment Manager confirms that all operations were in line with the ESG Policy.
Sustainability KPIs and Indicators were published in the Company’s Interim and Annual Report alongside
the ESG & Impact Strategy which is available on the Company website.
What were the top investments of this financial product?
Largest
investments Sector % Assets Country
UK ROC solar Renewables
(
solar
)
20.31 UK
Finnish Wind Renewables
(
onshore wind
)
18.89 Finland
Lincs Renewables
(
offshore wind
)
11.25 UK
Cumberhead Renewables
(
onshore wind
)
11.14 UK
Ljungbyholm Renewables
(
onshore wind
)
9.80 Sweden
Breach Renewables
(
solar
)
6.92 UK
French solar Renewables
(
solar
)
5.93 France
Crossdykes Renewables
(
onshore wind
)
5.49 UK
Leeskow Renewables
(
onshore wind
)
3.19 Germany
Simply Blue
Group
Renewables
(
developer
)
3.12 Ireland
Cerisou Renewables
(
onshore wind
)
2.97 France
Wind2 Renewables
(
developer
)
0.52 UK
Norgen Renewables
(
developer
)
0.20 Finland
HYRO Renewables
(
developer
)
0.18 UK
Woburn Road Renewables
(
battery
)
0.06 UK
The list includes
the investments
constituting
the greatest
proportion of
investments
of the financial
product during
the reference
period which is:
1 January 2022
– 31
st
December
2022.
200Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
What was the proportion of sustainability-related investments?
l
What was the asset allocation?
The Company targets investment in Renewable Energy Assets or associated energy infrastructure assets
and businesses, and expects all investments to be sustainable, contributing or enabling a reduction in
carbon emissions, and is aiming for all investments to be Taxonomy-aligned. During the year this was
the asset allocation:
#1 Sustainable covers sustainable investments with environmental or social objectives.
100% of investments were environmentally sustainable during the period.
(
a
)
All investments contribute substantially to one or more of the environmental objectives
Environmental Objectives
(
Article 9 of Regulation
(
EU
)
2020/852
)
Breakdown of
investments
(
a
)
climate change mitigation; 100%
(
b
)
climate change adaptation; 0%
(
c
)
the sustainable use and protection of water and marine
resources;
0%
(
d
)
the transition to a circular economy; 0%
(
e
)
pollution prevention and control; 0%
(
f
)
the protection and restoration of biodiversity and ecosystems. 0%
(
b
)
did not significantly harm any of the environmental objectives
Environmental Objectives
(
Article 9 of Regulation
(
EU
)
2020/852
)
Breakdown of
investments
(
a
)
climate change mitigation; N/A
(
b
)
climate change adaptation; 100%
(
c
)
the sustainable use and protection of water and marine
resources;
N/A
(
d
)
the transition to a circular economy; 100%
(
e
)
pollution prevention and control; N/A
(
f
)
the protection and restoration of biodiversity and ecosystems. 100%
N/A indicates that the environmental objective is not relevant for the assets class and/or asset.
For ORIT’s investment into hydrogen, “Water” and “Pollution prevention” categories are included
in the EU Taxonomy criteria but were categorised as not applicable given the current phase and/or
design of the hydrogen projects.
(
c
)
was carried out in compliance with the minimum safeguards
100% of investments were carried out in compliance with the minimum safeguards.
All assessments have been performed by the Investment Manager supported by external due diligence
technical advisors and through utilising the EU Taxonomy Compass Tool. Final results of the assessments
have not been reviewed or audited by an external auditing party.
Investments #1 Sustainable Environmental
100% Taxonomy-
aligned
201Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
l
In which economic sectors were the investments made?
Investments were made in the Electricity, Gas, Steam and Air conditioning supply sector and the
construction sector. Sectors taken from Sectors listed in Annex I to Regulation
(
EC
)
No 1893/2006.
Proportion of investments broken down by total invested basis in accordance with the Company’s
investment policy.
Sector Sub-sector Proportion of
investments
D- Electricity, Gas, Steam
and Air conditioning supply
Production of electricity
92.8%
D- Electricity, Gas, Steam
and Air conditioning supply
Manufacture of Gas
(
Hydrogen
gas
)
0.2%
F - Construction Construction of utility
projects for electricity and
telecommunications
7%
Taxonomy-
aligned activities
are expressed as
a share of:
- turnover
reflecting
the share of
revenue from
green activities
of investee
companies.
- capital
expenditure
(
CapEx
)
showing
the green
investments
made by
investee
companies, e.g.
for a transition
to a green
economy.
- operational
expenditure
(
Opex
)
reflecting green
operational
activities
of investee
companies.
100%
100%
100%
0% 50% 100%
Turnover
CapEx
Opex
Taxonomy aligned investments
Other investments
100%
100%
100%
0% 50% 100%
Turnover
CapEx
Opex
Taxonomy aligned investments
Other investments
1. Taxonomy-alignment of investments
including sovereign bonds*
2. Taxonomy-alignment of investments
excluding sovereign bonds*
*for the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposures. The Company
does not have any sovereign exposures and therefore this would not have contributed to any
environmentally sustainable economic activities.
To what extent were sustainable investments with an environmental
objective aligned with the EU Taxonomy?
100% of investments with an environmental objective aligned with the EU Taxonomy. All investments
contributed substantially to climate change mitigation, did no significant harm to the applicable
environmental objectives and met the minimum safeguards criteria. The graphs below demonstrate
this 100% taxonomy alignment.
l Did the financial product invest in fossil gas and/or nuclear energy related activities complying
with the EU Taxonomy?
Yes:
No
In fossil gas
In nuclear energy
The graphs below show in green the percentage of investments that were aligned with the EU
Taxonomy. As there is no appropriate methodology to determine the taxonomy-alignment
of sovereign bonds*, the first graph shows the Taxonomy alignment in relation to all the
investments of the financial product including sovereign bonds, while the second graph shows
the Taxonomy alignment only in relation to the investments of the financial product other than
sovereign bonds.
202Other InformationOctopus Renewables Infrastructure Trust Plc 2023 Annual Report
Sustainable
investments are
an environmental
objective that
do not take
into account
the criteria for
environmentally
sustainable
economic
activities
under the EU
Taxonomy.
Reference
benchmarks
are indexes to
measure whether
the financial
product attains
the sustainable
investment
objective.
Enabling
activities directly
enable other
activities to make
a substantial
contribution to
an environmental
objective
Transitional
activities are
economic
activities
for which
low-carbon
alternatives are
not yet available
and that have
greenhouse gas
emission levels
corresponding
to the best
performance.
l
What was the share of investments in transitional and enabling activities?
The minimum share of investments in transitional and enabling activities were:
0.25% in enabling activities
(
HYRO and Woburn Road
)
0% in transitional activities
Enabling activities are those as defined by Article 16 of Regulation
(
EU
)
2020/852 and for the portfolio
of assets these are the investments made into energy storage
(
Woburn Road
)
and hydrogen developer
and projects
(
HYRO
)
.
l
How did the percentage of investments aligned with the EU Taxonomy compare with previous
reference periods?
N/A.
What was the share of sustainable investments with an environmental
objective that was not aligned with the EU Taxonomy?
As explained above, all investments qualify to the EU Taxonomy and either contribute to climate change
mitigation or enable climate change mitigation. All investments met the minimum safeguards criteria
and the DNSH criteria.
What was share of sustainable investments with a social objective?
N/A. 0% of the Company’s investments are socially sustainable investments. The Company does not
target sustainable investments with a social objective.
What investments were included under “not sustainable”, what was
their purpose and were there any minimum environmental or social
safeguards?
N/A all investments were under “#1 Sustainable”.
What actions have been taken to attain the sustainable investment
objective during the reference period?
An overview of actions undertaken to attain the sustainable investment objective during the reference
year can be seen in ORIT’s annual report and ORIT’s annual impact report. Some of these actions include,
adherence to the ESG policy and strategy, engagement with external service providers on performance
and ESG factors and ongoing management of renewable energy assets in the portfolio.
How did this financial product perform compared to the reference
sustainable benchmark?
N/A – no reference sustainable benchmark available.
203Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Glossary
AGM Annual General Meeting
AIC Association of Investment Companies
AIFM Alternative Investment Fund Manager; Octopus AIF Management Limited
APM Alternative Performance Measures
ARC Audit and Risk Committee
BESS Battery Energy Storage System
CfD Contract for Difference
CPPA Corporate Power Purchase Agreement
DCF Discounted Cash Flow
DNO Distribution Network Operator
EBITDA Earnings before interest, taxes, depreciation, and amortisation
ESG Environmental, Social and Governance
EU European Union
FATCA Foreign Account Tax Compliance Act
FCA Financial Conduct Authority
First Issue Shares issued at IPO on 10 December 2019
FiT Feed-in-Tariff
FRC Financial Reporting Council
FTSE 250 The Financial Times-Stock Exchange 250 share index
FVTPL
Fair value through profit or loss
FX
Foreign exchange
FY
Financial year
GAV Gross Asset Value
GDPR The EU general data protection regulation
GHG Greenhouse gases
Group the Company along with all its subsidiaries
(
as disclosed in note 18
)
GW Gigawatt
GWh Gigawatt hour
H&S Health and Safety
HMRC His Majesty’s Revenue & Customs
HSE Health and Safety Executive
IAS International Accounting Standards
ICAEW Institute of Chartered Accountants in England and Wales
ICAS Institute of Chartered Accountants in Scotland
IFRS International Financial Reporting Standards
IIGCC Institutional Investors Group on Climate Change
Investment Manager Octopus Renewables Limited
IPO Initial Public Offering
204Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Glossary
IRR Internal rate of return
Issue Price Share price at First Issue - £1.00
JV Joint-venture
KPI Key Performance Indicators
LSE London Stock Exchange
M&A Mergers and Acquisitions
Management
Agreement
The Alternative Investment Fund Management Agreement between the Company and the AIFM
MAR Market Abuse Regulations
MW Megawatt
MWh Megawatt hour
NAV Net Asset Value
O&M Operations and Maintenance
OCR Ongoing Charges Ratio
Octopus Managed
Funds
Funds, finance vehicles or accounts managed or advised by a member or members of the Octopus
Group or the Octopus Energy Group
OE Octopus Energy Group
OECD The Organisation for Economic Cooperation and Development
OEGEN
Octopus Energy Generation
(
trading name of Octopus Renewables Limited
)
, the Investment Manager
of ORIT delegated by the AIFM
OSS Operational support system
P50
The forecast electricity generation number above which there is a 50% chance of the actual output
exceeding the forecast
P90
The forecast electricity generation number above which there is a 90% chance of the actual output
exceeding the forecast
PIU Pending Issuance Unit
Portfolio of assets The 37 renewable energy assets in which the Company had an investment as at 31 December 2023
PPA Power Purchase Agreement
PV Photovoltaic
RCF Revolving Credit Facility
RCP Representative Concentration Pathway
RIDDOR Reporting of Injuries, Diseases and Dangerous Occurrences Regulations
ROC Renewable Obligation Certificates
SDR Sustainable Disclosure Requirements
SGD Sustainable Development Goals
SH&E Safety, Health & Environment
SID Senior Independent Director
SORP Statement of Recommended Practice
SPV Special Purpose Vehicle
TCFD Task Force on Climate-related Financial Disclosures
tCO
2
e
Carbon dioxide equivalent, meaning the number of metric tons of CO
2
emissions with the same
global warming potential as one metric ton of another greenhouse gas
the Company or ORIT Octopus Renewables Infrastructure Trust plc
TNFD Taskforce on Nature-related Financial Disclosures
205Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
UK AIFM Directive UK AIFM Directive shall mean the UK’s implementation of Directive 2011/61/EU of the European
Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers, together
with Commission Delegated Regulation
(
EU
)
No. 231/2013 which forms part of UK law by virtue of
the European Union
(
Withdrawal
)
Act 2018, and any transposing legislation incorporating the same
into UK law
(
including, but not limited to, the UK Alternative Investment Fund Managers Regulations
2013
(
SI 2013/1773
)
, as amended by The Alternative Investment Fund Managers
(
Amendment etc.
)
(
EU Exit
)
Regulations 2019
)
, all as may be amended or supplemented from time to time.
UN SDG The United Nations Sustainable Development Goals
WCU Woodland Carbon Unit
Glossary
206Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
78
Registered in England and Wales No. 12257608.
Company Information
DIRECTORS, INVESTMENT MANAGER AND ADVISERS
Directors
(
all non-executive
)
Philip Austin MBE
(
Chairman
)
Audrey McNair
(
SID
)
James Cameron
Elaina Elzinga
Sarim Sheikh
(
from 1 June 2023
)
Administrator and Company Secretary
Apex Listed Companies Services
(
UK
)
Limited
6th Floor
125 London Wall
London
EC2Y 5AS
Broker
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Solicitors to the Company
Gowling WLG
(
UK
)
LLP
4 More London Riverside
London
SE1 2AU
Registered Office
78
6th Floor
125 London Wall
London
EC2Y 5AS
Alternative Investment Fund Manager
(
“AIFM”
)
Octopus AIF Management Limited
6th Floor
33 Holborn
London
EC1N 2HT
Investment Manager
Octopus Renewables Limited
(
trading as Octopus Energy Generation
)
UK House
5th Floor
164-182 Oxford Street
London
W1D 1NN
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Depositary
BNP Paribas Trust Corporation UK Limited,
10 Harewood Avenue
London
NW1 6AA
Independent Auditors
PricewaterhouseCoopers LLP
Level 5 and 6
Central Square South
Orchard Street
Newcastle upon Tyne
NE1 3AZ
207Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
Notice is hereby given that the Annual General Meeting of
Octopus Renewables Infrastructure Trust plc will be held at
the offices of Apex Listed Company Services
(
UK
)
Limited,
6th Floor, 125 London Wall, London EC2Y 5AS on 19 June 2024
at 10.00 a.m. for the following purposes:
To consider and if thought fit pass the following resolutions of
which resolutions 1 to 12 will be proposed as ordinary resolutions
and resolutions 13 to 16 will be proposed as special resolutions.
1. To receive the Company’s Annual Report and Accounts for
the year ended 31 December 2023
(
the “Annual Report”
)
.
2. To approve the Directors’ Remuneration Report included
in the Annual Report.
3. To approve the Directors’ Remuneration Policy included
in the Annual Report.
4. To re-elect Philip Austin as a director of the Company.
5. To re-elect James Cameron as a director of the Company.
6. To re-elect Elaina Elzinga as a director of the Company.
7. To re-elect Audrey McNair as a director of the Company.
8. To elect Sarim Sheikh as a director of the Company.
9. To re-appoint PricewaterhouseCoopers LLP as auditors
to the Company.
10. To authorise the Directors to fix the remuneration of the
auditors until the conclusion of the next Annual General
Meeting of the Company.
11. That the Directors be authorised to declare and pay all
dividends of the Company as interim dividends and for the
last dividend referable to a financial year not be categorised
as a final dividend that is subject to shareholder approval.
12. That, in accordance with section 551 of the Companies
Act 2006
(
the “Companies Act”
)
, the Directors be and
are hereby generally and unconditionally authorised to
exercise all powers of the Company to allot ordinary shares
of 1 penny each in the Company
(
“Ordinary Shares”
)
up to
an aggregate nominal value of £1,355,826.08
(
equivalent
to 24% of the issued share capital of the Company as at
the date of this notice of this Annual General Meeting
)
and
that this authority shall expire
(
unless previously varied,
revoked or renewed by the Company in General Meeting
)
at the conclusion of the Annual General Meeting of the
Company to be held in 2025 or, if earlier, on the expiry of
15 months from the passing of this resolution, save that
the Company may, at any time prior to the expiry of such
authority, make an offer or enter into an agreement which
would or might require the allotment of Ordinary Shares
in pursuance of such an offer or agreement as if such
authority had not expired.
13. That, subject to the passing of resolution 12, the Directors
be and are hereby empowered, pursuant to sections 570
and 573 of the Companies Act, to allot Ordinary Shares
for cash pursuant to the authority conferred by resolution
12 and/or sell Ordinary Shares from treasury for cash as if
section 561 of the Companies Act did not apply to such
allotment or sale provided that such authority shall be
limited to:
(
a
)
the allotment of Ordinary Shares or sale of
Ordinary Shares from treasury to any person up
to an aggregate nominal amount of £564,927.536
(
equivalent to 10% of the issued share capital of the
Company as at the date of this notice of this Annual
General Meeting
)
; and
(
b
)
the allotment of Ordinary Shares or sale of Ordinary
Shares from treasury
(
otherwise than pursuant to
paragraph
(
a
)
of this resolution
)
to any person up to
an aggregate nominal amount equal to 20% of any
allotment of Ordinary Shares or sale of Ordinary Shares
from treasury from time to time under paragraph
(
a
)
of this resolution, such authority to be used only for
the purposes of making a follow-on offer which the
Board determines to be of a kind contemplated by
paragraph 3 of Part 2B of the Statement of Principles
on Disapplying Pre-Emption Rights published by the
Pre-Emption Group in 2022, and that this power shall
expire
(
unless previously varied, revoked or renewed by
the Company in General Meeting
)
at the conclusion
of the Annual General Meeting of the Company to be
held in 2025 or, if earlier, on the expiry of 15 months
from the passing of this resolution, save that the
Company may, at any time prior to the expiry of such
authority, make an offer or enter into an agreement
which would or might require the allotment or sale
of Ordinary Shares in pursuance of such an offer or
agreement as if such authority had not expired.
14. That, subject to the passing of resolution 12, the
Directors be and are hereby empowered, in addition
to any authority granted under resolution 13, pursuant
to sections 570 and 573 of the Companies Act, to allot
Ordinary Shares for cash pursuant to the authority
conferred by resolution 12 and/or sell Ordinary Shares
from treasury for cash as if section 561 of the Companies
Act did not apply to such allotment or sale provided that
such authority shall be limited to:
(
a
)
the allotment of Ordinary Shares or sale of Ordinary
Shares from treasury up to an aggregate nominal
amount of £564,927.536
(
equivalent to 10% of the
issued share capital of the Company as at the date
of this notice of this Annual General Meeting
)
, to be
Notice of Annual General Meeting
208Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Notice of Annual General Meeting
used only for the purpose of financing
(
or refinancing,
if the authority is to be used within 12 months after the
original transaction
)
a transaction which the Board
determines to be either an acquisition or a specified
capital investment of a kind contemplated by the
Statement of Principles on Disapplying Pre-Emption
Rights published by the Pre-Emption Group in 2022;
and
(
b
)
the allotment of Ordinary Shares or sale
of Ordinary Shares from treasury
(
otherwise than
pursuant to paragraph
(
a
)
of this resolution
)
to any
person up to an aggregate nominal amount equal
to 20% of any allotment of Ordinary Shares or sale
of Ordinary Shares from treasury from time to time
under paragraph
(
a
)
of this resolution, such authority
to be used only for the purposes of making a follow
on offer which the Board determines to be of a kind
contemplated by paragraph 3 of Part 2B of the
Statement of Principles on Disapplying Pre-Emption
Rights published by the Pre-Emption Group in 2022,
and that this power shall expire
(
unless previously
varied, revoked or renewed by the Company in General
Meeting
)
at the conclusion of the Annual General
Meeting of the Company to be held in 2025 or, if
earlier, on the expiry of 15 months from the passing
of this resolution, save that the Company may, at
any time prior to the expiry of such authority, make
an offer or enter into an agreement which would or
might require the allotment or sale of Ordinary Shares
in pursuance of such an offer or agreement as if such
authority had not expired.
15. That the Company be and is hereby generally and
unconditionally authorised in accordance with section 701
of the Companies Act to make market purchases
(
within
the meaning of section 693
(
4
)
of the Companies Act
)
of
Ordinary Shares, provided that:
(
a
)
the maximum number of Ordinary Shares hereby
authorised to be purchased shall be 84,682,637
(
representing 14.99% of the Company’s issued share
capital at the date of this notice of Annual General
Meeting
)
;
(
b
)
the minimum price
(
exclusive of any
expenses
)
which may be paid for an Ordinary Share
is 1 penny;
(
c
)
the maximum price
(
exclusive of any
expenses
)
which may be paid for each Ordinary Share
is not more than the higher of
(
i
)
5% above the average
of the middle market quotations for the Ordinary
Shares for the five business days immediately before
the day on which that Ordinary Share is contracted
for purchases and
(
ii
)
the higher of the price of the
last independent trade and the highest then current
independent bid for the Ordinary Shares on the
trading venue where the purchase is carried out;
(
d
)
the authority hereby conferred shall expire at the
conclusion of the Annual General Meeting of the
Company to be held in 2025 or, if earlier, on the expiry
of 15 months from the passing of this resolution, unless
such authority is renewed or revoked by the Company
prior to such time; and
(
e
)
the Company may make
a contract to purchase Ordinary Shares under the
authority hereby conferred prior to the expiry of
such authority, which will or may be executed wholly
or partly after the expiration of such authority and
may purchase Ordinary Shares pursuant to any such
contract as if the authority had not expired.
16. That a General Meeting of the Company other than an
Annual General Meeting may be called on not less than
14 clear days’ notice, provided that this authority shall
expire at the conclusion of the Company’s next Annual
General Meeting after the date of the passing of this
resolution.
By order of the Board
For and on behalf of Apex Listed Company Services
(
UK
)
Limited
Company Secretary
Registered Office:
6th Floor
125 London Wall
London
EC2Y 5AS
22 March 2024
209Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Notice of Annual General Meeting
Explanatory Notes to the Notice of
Annual General Meeting
The Notice of the Annual General Meeting
(
the “Notice”
)
to
be held on 19 June 2024
(
the “AGM”
)
is set out on pages 207
and 208. Thefollowing notes provide an explanation as to why
the resolutions set out in the Notice are being put to shareholders.
Resolutions 1 to 12 are proposed as Ordinary Resolutions which
means that more than half of the votes cast must be in favour
of the resolution. Resolutions 13 to 16 are proposed as Special
Resolutions, which means that for each of those resolutions to
be passed, at least three-quarters of the votes must be in favour.
Resolution 1
Under the Companies Act 2006
(
the “Act”
)
, the Directors
are required to present the annual accounts and reports
of the Company to shareholders at a general meeting.
These are contained in the Company’s Annual Report and
financial statements for the year ended 31 December 2023
(
the“AnnualReport”
)
.
Resolution 2
In accordance with the provisions of the Act, the Directors’
Remuneration Report is being put to an annual shareholder
vote by ordinary resolution. This resolution is an advisory vote,
as provided by law, m eaning that the Directors’ entitlements
to remuneration are not conditional upon the resolution being
passed. The report is set out in full on pages 136 to 140 of the
Annual Report.
Resolution 3
This resolution is for the approval of the Directors’ Remuneration
Policy. The text of the Remuneration Policy is set out in full on
page 137 of the Annual Report.
Resolutions 4 to 8
Under the Company’s Articles of Association, all Directors are
required to retire from office at each AGM, except any Director
appointed after notice of the AGM has been given and before
the AGM has been held.
Accordingly, four of the Directors will retire and stand for
re-election and one will stand for election at the AGM. The
Directors’ biographies are shown on page 126 of this Annual
Report. As set out in the Corporate Governance Statement in this
Annual Report, taking into account the board evaluation, the
Board considers that the performance of each of the Directors
during the year ended 31 December 2023 has been effective
and that each Director has made a valuation contribution to
the Company and demonstrated commitment to the role, and
therefore is recommending the re-election and election of all of
the Directors.
Resolution 9
The Company’s auditors must offer themselves for appointment
at each AGM at which accounts are presented. The Board, on
the recommendation of the Audit and Risk Committee, is
recommending the re-appointment of PricewaterhouseCoopers
LLP as the Company’s auditors.
Resolution 10
This resolution authorises the Directors to determine the
Auditors’ remuneration.
Resolution 11
To allow regular distributions, the Company intends to pay all
dividends as interim dividends and does not intend to declare
a final dividend. For the 2024 financial year, dividends are
expected to be declared in respect of the quarterly periods
ending March, June, September and December and paid in
May, August, November and March respectively.
Resolution 12
The Directors of the Company may only allot shares if authorised
to do so by the Shareholders in general meeting. This resolution
would give the Directors the authority to allot ordinary
shares up to an aggregate nominal amount of £1,355,826.08
(
representing 135,582,608 ordinary shares of £0.01 each
)
. This
amount represents approximately 24 per cent. of the issued
share capital of the Company as at the date of the notice of the
Annual General Meeting.
The authority sought under this resolution will expire at the
conclusion of the Annual General Meeting of the Company held
in 2025 or if earlier, on the expiry of 15 months from the passing
of the resolution. The Directors have no present intention to
exercise the authority sought under this resolution.
As at the date of the Notice of the Annual General Meeting, no
shares are held by the Company in treasury.
210Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Notice of Annual General Meeting
Resolutions 13 and 14
Resolutions 13 and 14 are to approve the disapplication of
pre-emption rights. The passing of these resolutions would
allow the Directors to allot Ordinary Shares for cash and/or sell
Ordinary Shares from treasury without first having to offer such
shares to existing shareholders in proportion to their existing
holdings.
The authority under Resolution 13 would be limited to:
(
a
)
allotments or sales up to an aggregate nominal amount of
£56 4,927.5 36
(
representing 56,492,753 ordinary shares of £0.01
each
)
which represents approximately 10% of the Company’s
issued share capital as at the date of notice of the Annual
General Meeting; and
(
b
)
allotments or sales
(
otherwise than
under paragraph
(
a
)
above
)
up to an aggregate nominal
amount equal to 20% of any allotment of Ordinary Shares or
sale of Ordinary shares from treasury from time to time under
paragraph
(
a
)
above for the purposes of making a follow-on
offer which the Board determines to be of a kind contemplated
by paragraph 3 of Part 2B of the Statement of Principles on
Disapplying Pre Emption Rights published by the Pre-Emption
Group in 2022
(
the “Statement of Principles”
)
. Resolution 11
would give the Directors authority to
(
a
)
allot a further 10% of the
issued share capital of the Company as at the date of notice of
the Annual General Meeting for the purposes of financing or re-
financing a transaction which the Directors determine to be an
acquisition or a specified capital investment contemplated by
the Statement of Principles and
(
b
)
allot or sell shares
(
otherwise
than under paragraph
(
a
)
above
)
up to an aggregate nominal
amount of equal to 20% of any allotment of Ordinary Shares or
sale of Ordinary Shares from treasury from time to time under
paragraph
(
a
)
above for the purposes of making a follow-on
offer which the Board determines to be of a kind contemplated
by paragraph 3 of Part 2B of the Statement of Principles.
The disapplication authorities under Resolutions 13 and 14 are
in line with guidance set out in the Statement of Principles.
The Statement of Principles allows the annual disapplication
of pre-emption rights
(
a
)
up to 10% of a company’s issued
share capital for use on an unrestricted basis, with a further
disapplication for up to 2% to be used only for the purposes of
a follow on offer which the Board determines to be of a kind
contemplated by paragraph 3 of Part 2B of the Statement of
Principles and
(
b
)
up to a further 10% of a company’s issued share
capital for use in connection with an acquisition or specified
capital investment as defined in the Statement of Principles.
The authorities will expire at the conclusion of the Annual
General Meeting of the Company held in 2025 or if earlier, on
the expiry of 15 months from the passing of the resolutions.
Ordinary Shares issued under any authorities granted pursuant
to resolutions 13 and 14
(
inclusive
)
will only be issued at a
premium to the NAV
(
cum income
)
. Ordinary share issues are at
the discretion of the Board.
Resolution 15
Resolution 15 a special resolution, gives the Company authority
to buy back its own Ordinary Shares in the market as permitted
by the Companies Act 2006. The authority limits the number of
shares that could be purchased to a maximum of 84,682,637
(
representing approximately 14.99% of the Company’s issued
Ordinary Share Capital as at the date of the Notice of Annual
General Meeting
)
. The Directors have no present intention of
exercising the authority to purchase the Company’s Ordinary
Shares but will keep the matter under review, taking into
account the financial resources of the Company, the Company’s
share price and any discount to NAV, and future investment
opportunities. The authority will be exercised only if the Directors
believe that to do so would be in the best interest of shareholders
as a whole. Any shares bought back will either be cancelled or
held in treasury at the determination of the Directors. Holding
shares in treasury provides the Company with the ability to
re-issue Ordinary Shares quickly and cost effectively, thereby
improving liquidity and providing the Company with additional
flexibility in the management of its capital base. No Ordinary
Shares will be sold from treasury at a price less than the
(
cum-
income
)
NAV per existing Ordinary Share at the time of their sale
unless they are first offered pro rata to existing shareholders. At
the year end the Company did not hold any shares in treasury.
Unless otherwise authorised by shareholders, Ordinary Shares
will not be issued at less than NAV and Ordinary Shares held in
treasury will not be sold at less than NAV This authority will expire
at the Annual General Meeting to be held in 2025 or, if earlier,
on the expiry of 15 months from the passing of this resolution,
unless such authority is renewed or revoked by the Company
prior to such time.
Resolution 16
This is a special resolution that will give the Directors the
flexibility to convene general meetings, other than annual
general meetings, on a minimum of 14 clear days’ notice. The
minimum notice period for annual general meetings will remain
at 21 clear days. The Company will have to offer facilities for
all shareholders to vote by electronic means for any general
meeting convened on 14 days’ notice. The Directors do not
intend to use the shorter notice period as a matter of course
and will only call a general meeting on 14 days’ notice where
they consider it to be required by the nature of the business of
the meeting and in the interests of shareholders as a whole. The
authority will expire at the AGMfollowing the 2025 AGM.
211Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Notice of Annual General Meeting
Voting and Questions
Even if you intend to attend the AGM, all shareholders are
encouraged to cast their vote by proxy and to appoint the “Chair
of the Meeting” as their proxy. Details of how to vote, either
electronically, by proxy form or through CREST, can be found in
the Notes to the Notice of AGM below. Shareholders are invited
to send any questions for the Board or the Investment Manager
in advance by email to oritcosec@apexfs.group by close of
business on 17 June 2024.
Virtual access arrangements
In order to ensure that shareholders are able to follow the
proceedings of the AGM without attending in person, the
Company will provide access online via the Investor Meet
Company platform. However, please note that shareholders will
not be able to vote online at the AGM via the platform and are
therefore requested to submit their votes via proxy, as early as
possible.
Shareholders that wish to follow the proceedings of the AGM
remotely should register for the event in advance by using
the following link: https://www.investormeetcompany.com/
octopus-renewablesinfrastructure-trust-plc/register-investor
Recommendation
Full details of the above resolutions are contained in the Notice.
The Directors consider that all of the resolutions to be proposed
at the AGM are in the best interests of the Company and
shareholders as a whole. The Directors unanimously recommend
that shareholders vote in favour of all resolutions, as they intend
to do in respect of their own beneficial holdings.
If you are in any doubt about the contents of this document,
you should immediately consult your stockbroker, bank
manager, solicitor, accountant or other independent financial
adviser authorised under the Financial Services and Markets Act
2000, or if outside the United Kingdom, another appropriately
authorised financial adviser, without delay. If you have sold or
otherwise transferred all of your shares in the Company you
should immediately send this document, together with the
accompanying form of proxy, to the stockbroker, bank or other
agent through whom the sale or transfer was effected, for
transmission to the purchaser or transferee.
Notes
1. Holders of ordinary shares of one penny each in the capital
of the Company
(
“Shares”
)
are entitled to attend, speak and
vote at the AGM. A Shareholder entitled to attend, speak
and vote at the AGM may appoint one or more persons as
his/her proxy to attend, speak and vote on his/her behalf
at the AGM. A proxy need not be a shareholder of the
Company. If multiple proxies are appointed, they must not
be appointed in respect of the same Shares. To be effective,
the enclosed form of proxy
(
“Form of Proxy”
)
, together with
any power of attorney or other authority under which it is
signed or a certified copy thereof, should be lodged at the
office of the Company’s Registrar, Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol BS99
6ZY by no later than 10.00 a.m. on 17 June 2024.
2. If you return more than one proxy appointment, either by
paper or electronic communication, that validly received
last by the Registrar before the latest time for the receipt
of proxies will take precedence. You are advised to read
the terms and conditions of use carefully. Electronic
communication facilities are open to all shareholders and
those who use them will not be disadvantaged.
3. As an alternative to completing the Form of Proxy,
shareholders can appoint a proxy electronically via the
Registrar’s online voting portal www.investorcentre.co.uk/
eproxy. For an electronic proxy appointment to be valid,
your appointment must be received by the Registrar no
later than 10.00 a.m. on 17 June 2024.
4. The appointment of a proxy will not normally prevent a
Shareholder from attending the AGM, speaking and voting
if he/she so wishes. The Articles provide that
(
subject to
certain exceptions
)
at the AGM each Shareholder present in
person or by proxy shall have one vote on a show of hands
and on a poll every Shareholder present in person or by
proxy shall have one vote for every Share of which he/she
is the holder. The termination of the authority of a person
to act as proxy must be notified to the Company in writing
by no later than 10.00 a.m. on 17 June 2024. Amended
instructions must be received by the Registrar by the
deadline for receipt of proxies. Where you have appointed
a proxy using the Form of Proxy and would like to change
the instructions using another hard-copy Form of Proxy,
please contact the Registrar’s helpline on 0370 707 1346
(
or +44 370 707 1346 from outside the UK
)
. Lines are open
8.30 a.m. to 5.30 p.m. Monday to Friday excluding public
holidays in England and Wales
)
.
5. To appoint more than one proxy, Shareholders will need
to complete a separate Form of Proxy in relation to each
appointment, stating clearly on each Form of Proxy the
number of Shares in relation to which the proxy is appointed.
A failure to specify the number of Shares to which each proxy
appointment relates or specifying an aggregate number of
Shares in excess of those held by the Shareholder will result
in the proxy appointment being invalid. Please indicate if the
proxy instruction is one of multiple instructions being given.
If you require additional Forms of Proxy, please contact the
Registrar’s helpline on 0370 707 1346
(
or +44 370 707 1346
from outside the UK
)
. Lines are open 8.30 a.m. to 5.30 p.m.
Monday to Friday
(
excluding public holidays in England and
Wales
)
. All Forms of Proxy must be signed and should be
returned together in the same envelope if possible.
212Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Notice of Annual General Meeting
6. In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted.
Seniority is determined by the order in which the names
of the joint holders appear in the Company’s register of
members in respect of the joint holders
(
the first named
being the most senior
)
.
7. Only those Shareholders registered in the register of
members of the Company as at 6.30 p.m. on 17 June
2024
(
the “specified time”
)
shall be entitled to vote at the
AGM in respect of the number of Shares registered in their
name at that time. Changes to entries on the relevant
register of securities after 6.30 p.m. on 17 June 2024 shall
be disregarded in determining the Octopus Renewables
Infrastructure Trust plc. Other information 244 rights of any
person to vote at the AGM. If the AGM is adjourned to a time
not more than 48 hours after the specified time applicable
to the original Meeting, that time will also apply for the
purpose of determining the entitlement of Shareholders
to vote
(
and for the purpose of determining the number of
votes they may cast
)
at the adjourned Meeting. If however
the AGM is adjourned for a longer period then, to be so
entitled, Shareholders must be entered on the Company’s
register of members at the time which is 48 hours before
the time fixed for the adjourned Meeting, or if the Company
gives notice of the adjourned Meeting, at the time specified
in that notice.
8. Shareholders who hold their Shares electronically may
submit their votes through CREST. Instructions on how to
vote through CREST can be found by accessing the following
website: www.euroclear.com.
9. CREST members who wish to appoint a proxy or proxies
by utilising the CREST electronic proxy appointment
service may do so for the AGM and any adjournment
(
s
)
thereof by following the procedures described in the CREST
manual
(
available via www.euroclear.com
)
. CREST personal
members or other CREST sponsored members, and those
CREST members who have appointed a voting service
provider
(
s
)
, should refer to their CREST sponsor or voting
service provider
(
s
)
, who will be able to take the appropriate
action on their behalf.
10. In order for a proxy appointment or instruction made
by means of CREST to be valid, the appropriate CREST
message
(
a “CREST Proxy Instruction”
)
must be properly
authenticated in accordance with Euroclear UK & Ireland
Limited’s specifications and must contain the information
required for such instructions, as described in the CREST
manual
(
available via www.euroclear.com
)
. The message, in
order to be valid, must be transmitted so as to be received
by the Company’s agent, ID: 3RA50, by the latest time for
receipt of proxy appointments specified in note 1 above. For
this purpose, the time of receipt will be taken to be the time
(
as determined by the timestamp applied to the message
by the CREST Applications Host
)
from which the Company’s
agent is able to retrieve the message by enquiry to CREST
in the manner prescribed by CREST. After this time, any
change of instructions to proxies appointed through CREST
should be communicated to the appointee through other
means.
11. CREST members and, where applicable, their CREST
sponsors or voting service providers should note that
Euroclear UK & International Limited does not make
available special procedures in CREST for any particular
messages. Normal system timings and limitations will
therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member
concerned to take
(
or, if the CREST member is a CREST
personal member or sponsored member or has appointed
a voting service provider
(
s
)
, to procure that his/her CREST
sponsor or voting service provider
(
s
)
take
(
s
))
such action as
shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time.
12. In this connection, CREST members and, where applicable,
their CREST sponsors or voting service providers are referred,
in particular, to those sections of the CREST manual
concerning practical limitations of the CREST system and
timings.
13. The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35
(
5
)
(
a
)
of the
Uncertificated Securities Regulations 2001.
14. A person to whom this Notice of AGM is sent who is a
person nominated under section 146 of the Companies Act
2006 to enjoy information rights
(
a “Nominated Person”
)
may, under an agreement between him/her and the
Shareholder by whom he/she was nominated, have a right
to be appointed
(
or to have someone else appointed
)
as
a proxy for the AGM. If a Nominated Person has no such
proxy appointment right or does not wish to exercise it, he/
she may, under any such agreement, have a right to give
instructions to the Shareholder as to the exercise of voting
rights. The statements of the rights of members in relation
to the appointment of proxies in note 1 above do not apply
to a Nominated Person. The rights described in those
notes can only be exercised by registered Shareholders of
the Company. Shareholders and Nominated Persons are
reminded that there are restrictions on attendance at the
AGM, as set out in these Notes.
213Octopus Renewables Infrastructure Trust Plc 2023 Annual Report Notice of Annual General Meeting
15. As at the date of this Notice, the Company’s issued share
capital amounted to 564,927,536 Shares carrying one vote
each. No Shares were held in treasury. Therefore, the total
voting rights of the Company as at the date of this Notice of
AGM were 564,927,536.
16. Any corporation which is a Shareholder may appoint one
or more corporate representatives who may exercise on
its behalf all of its powers as a Shareholder provided that
they do not do so in relation to the same Shares. Corporate
shareholders may also appoint one or more proxies in
accordance with note 5.
17. While Shareholders are welcome to attend the AGM, they
are also invited to submit questions in advance by email
to oritcosec@apexfs.group by the close of business on
17June 2024. The Company must cause to be answered any
question asked by a Shareholder relating to the business
being dealt with at the Meeting unless:
(
a
)
answering the
question would interfere unduly with the preparation for the
Meeting or involve the disclosure of confidential information;
(
b
)
the answer has already been given on a website in the
form of an answer to a question; or
(
c
)
it is undesirable in the
interests of the Company or the good order of the Meeting
that the question be answered.
18. Any person holding 3% or more of the total voting rights
of the Company who appoints a person other than the
Chair of the Meeting as his/her proxy is to ensure that
both he/she and his/her proxy comply with their respective
disclosure obligations under the UK Disclosure Guidance
and Transparency Rules.
19. Copies of the letters of appointment of the Directors of
the Company and existing articles of association will be
available for inspection at the registered office of the
Company during normal business hours on any weekday
(
Saturdays, Sundays and public holidays excepted
)
from
the date of this notice until the conclusion of the annual
general meeting and on the date of the annual general
meeting at the location of the meeting from 9.45 am until
the conclusion of the meeting.
20. This Notice of AGM, the information required by section
311A of the Companies Act 2006 and, if applicable, any
members’ statements, members’ resolutions or members’
matters of business received by the Company after the date
of this Notice of AGM, will be available on the Company’s
website at www.octopusrenewablesinfrastructure.com.
21. Shareholders may not use any electronic address provided
either in the Notice of AGM or any related documents
(
including the Form of Proxy
)
to communicate with the
Company for any purpose other than those expressly
stated.
Octopus Renewables Infrastructure Trust Plc 2023 Annual Report
ORIT@octopusrenewables.com
www.octopusrenewablesinfrastructure.com