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Octopus Renewables Infrastructure Trust: a diversified option as the world looks to renewables

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Renewable energy

Towards the end of 2020 Boris Johnson launched a green plan, vowing to expand the renewable energy sector. This included a pledge to quadruple the capacity of offshore wind power within the next ten years. The UK prime minister also announced his intention to ban the sale of diesel and petrol cars by 2030. 

The policies, in addition to the wider economic mood, has brought on confidence that the renewable energy sector is the place to be for investors in 2021. Investment trusts are an increasingly viable option for investors seeking to gain exposure to renewables while gaining diversification, in addition to helping the environment.

Octopus Renewables Infrastructure Trust (ORIT)

The prospects of the renewable energy sector in the UK and across the world means ORIT (LON:ORIT) is an attractive option to capture growth in the sector. 

ORIT is an investment trust listed on the London Stock Exchange, operating a diversified portfolio of renewable energy assets in Europe and Australia. Managed by Octopus Investments Limited, ORIT aims to provide investors with sizable and sustainable dividends, alongside capital growth. 

The company produces 502GWh of electricity per year, powering 114,000 homes through clean energy. ORIT estimates that 79,000 tonnes of carbon emissions are avoided as a result of its operations. This is the equivalent to 389,000 new trees.

ORIT metrics

The board announced that the unaudited net asset value (NAV) of ORIT as at December 2020 on a cum-income basis was £343.9m or 98.26p per share. This represents a 1.05p increase in ORIT’s NAV per share since September 2020.

Key drivers of the increase in NAV were an increase in the valuation of one of the company’s wind farm investments in Sweden, and an increase in power price forecasts. This allowed the company to secure pricing on its UK solar portfolio. Prices are now fixed until the end of September on seven of the company’s eight UK sites, and until March 2022 on the other one. The resulting minimisation of revenue risk led to a valuation increase in the company.  

In Q4 of 2020 ORIT paid a dividend of 1.06p, which meant the trust met its 3% annualised dividend yield target based on a total dividend payment of 3.18p and an IPO of 100p. The company is setting a target for its 2021 dividend yield at 5%. 

With ORIT’s share price at 113.8p, the company’s premium to NAV is at 15.8%.