Octopus Renewables Infrastructure Trust

Octopus Renewables Infrastructure (ORIT)

26/09/2023

Results analysis from Kepler Trust Intelligence

Over the six months to 30 June 2023, total shareholder return (TSR) and NAV total return were -4.9% and 0.9% respectively. Since IPO in December 2019, the TSR is 6.1% and NAV TR 27.0%.

The board increased the target dividend to 5.79p for FY 2023, representing an increase of 10.5% over FY 2022, which is in line with CPI inflation. Targeted dividends are expected to be fully covered by the operating portfolio's cashflows.

Once fully invested, the portfolio has the potential to power the equivalent of 536,000 homes with clean energy, an estimated 598,000 tonnes of carbon emissions avoided, up from 521,000 homes and 482,000 tonnes of carbon in 2022, respectively.

In our view ORIT, with its diversified strategy not only across technologies and geographies, but also development stages, is well-placed, even as the discount means that for almost all investment trusts there is a hiatus for raising new capital. ORIT's ability to recycle capital into projects at development and construction stages means that a relatively small amount of capital can, over the long-term, make a big difference to its portfolio. This means the team won't simply have to wait things out until a new cycle of capital raising begins, but can continue to develop the portfolio. It's an interesting coincidence that ORIT's results were published the same day that the Bank of England didn't raise UK interest rates, after 14 consecutive rate hikes. This was on the back of an unexpected drop in inflation. This doesn't necessarily mean we can conclude that rising rates are over, but it's a positive sign, and if this trend establishes itself, we think it could be a positive catalyst for ORIT's discount to narrow towards NAV.

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