Octopus Renewables Infrastructure Trust (LSE:ORIT) — Interim Results

0:04 Good afternoon, ladies and gentlemen. Welcome to the OCTOPUS Renewables Infrastructure Trust PLC Interim Results Investor Presentation. The company may not be in a position to answer every question received during the meeting itself. However, the company can read your questions submitted today, we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. I'd now like to hand over to David

0:36 Bird. Good afternoon. Hello, and welcome to the 2024 interim results presentation for OCTOPUS Renewables INFRASTRUCTURE PLC, or ORIT. My name is David Bird, I'm an investment director at Octopus Energy Generation. I'm joined today by my colleagues Chris Gaiden and Jen Legg. We consider ORIT to be the most genuinely diversified renewables investment trust of meaningful scale, with that focus on diversification critically important for protecting investors from concentrations of risk, and for reducing volatility of cash flows. ORIT has a progressive dividend policy, and an established track record of growing the dividend in line with inflation, with that dividend fully covered by operational cash flows.

1:25 In January of this year, the board announced the third consecutive inflation linked increase in the dividend target. ORIT sits as part of a sector which is set for dramatic growth over the coming years, with trillions of dollars a year of investment needed in Europe over the coming decades. And the breadth of ORIT's mandate means that we are particularly well positioned to capitalize on that opportunity. ORIT's portfolio has now reached genuine scale, with over 800 MW of generating capacity across six countries and five technologies, alongside five developer investments prior to the sale of the Lumbion wind farm in Sweden. The portfolio delivered six zero five gigawatt hours of clean electricity generation in the first six months of twenty twenty four. And whilst that includes generation from Lumbion, which has since been sold, there are offsetting increases to come from the Breach and Harvikstan solar sites, which have reached operations in the second half of the year.

2:29 That generation of six zero five GWh was enough to avoid 150,000 tonnes of CO2 emissions, which is the equivalent of planting around 700,000 trees. The company delivered a positive NAV return of 2% during the period. However, market conditions for the shares were challenging, with shareholder return of -16.9 percent, as discounts to NAV widened across the entire sector. We have seen an improvement in the share price since the period end, but clearly there is more to be done. ORIT paid out dividends of 3.01p per share in respect of the first half of the year, in line with the full year target of 6.02p per share.

3:16 These dividends were 1.33x covered by the operational cash flows arising in the period, net of all debt service, including principal repayments. Looking forward, and even accounting for the sale of that Lumbion wind farm following the end of the period, we expect the full year's dividend to be fully covered. As a reminder, that target of 6.02p per share represented a 4% increase on the prior year's dividend, which is the third year in a row in which the Board has been able to increase the dividend in line with inflation. We and the Board have maintained a disciplined approach to capital allocation, selling a number of assets at above NAV and using the proceeds predominantly to pay down short term debt, in addition to launching a share buyback programme of up to During

4:16 the period, that disciplined approach to capital allocation led to just one new investment commitment, which was the EUR7 million follow on investment into the Simply Blue Group. We also entered into a new corporate power purchase agreement, and that PPA with Sky Media in respect of the Cross Dykes wind farm was struck at an attractive price and gave rise to an increase in valuation of £5,400,000 or just under 1p per share. In addition, that PPA benefits from inflation linkage throughout the entire ten year lifetime of the contract. Furthermore, we completed the previously committed acquisition of 199 megawatts of solar farms in Ireland for total consideration of around €160,000,000 That Irish Solar acquisition, which is across four sites, represents the largest solar complex in Ireland.

5:16 The sites had been the subject of a conditional acquisition agreement, dating back to 2021 and the purchase completed in February of this year, once the sites had been fully handed over under their construction contracts. There is a fifth site in the complex called Harlowstown and that too is now fully constructed and has passed its commissioning tests, and so we expect the acquisition of that site to complete in the near future. There is also the potential to add a sixth site, subject of course to capital allocation considerations and full commercial agreement with the developer. All five of the existing sites benefit from a long term PPA with Microsoft, which provides fixed price revenues for the entire output of the complex for fifteen years.

6:08 ORIT's capital recycling program began successfully in 2023, realizing £97,000,000 of proceeds from the sale of two operational wind farms in Poland, which ORIT had acquired during construction in 2021, as well as the exit from the option to acquire 175 megawatts of ready to build Spanish solar assets. That Polish sale was completed at a 21% premium to holding value and gave rise to a 30% IRR over the lifetime of our investment. Sales activity has continued during the first six months of twenty twenty four, culminating in the agreement to sell the Lundvion wind farm in Sweden shortly after the end of the period, at a price above our internal valuations.

6:56 These sales have now realized proceeds of in aggregate, more than £19,000,000 above the previous holding valuations. Now, I'll hand over to Chris to give a bit more color on the portfolio and the operations in the period. Great. Thanks, David, and good morning, everybody. So on this slide, you can see the scale and diversification that we have built into the portfolio. And with the addition of the first four Irish solar projects, the portfolio now sits at over 800 megawatts across 41 assets and that includes the five developer stakes. We've now sold the 48 megawatt L'Hungbjorn wind farm, but we'll also be acquiring the 42 megawatt Harlaxton solar farm in Ireland, which was a commitment we made back at the start of 2023.

7:50 Even with those asset sales, we maintain a spread across different geographies and also balance between wind and solar alongside a small allocation complementary technologies. Barring the development stakes, you can also see that the portfolio is now fully operational, with the Breach solar farm having commenced operations and only the Woven Road battery remaining at the construction stage. ORIT has an option as to whether or not to participate in the small battery project and that option will remain until May 2025. Meanwhile, the allocation towards developers allows us to retain optionality on a proprietary pipeline and that's particularly important in the current macroeconomic environment, where we're not required to make commitments to build out that pipeline.

8:47 Now, taking a look at the operational highlights, so starting at the top left, generation in the first six months of twenty twenty four was six zero five GWh, which was 17% below budget. This was predominantly due to both wind speeds and solar radiance being below long term expectations, as well as a significant amount of grid constraint or economic curtailment. Adjusting for periods where ORIT receives compensation for these constraints or curtailment, effective deemed generation was six fifty one GWh, which was 11% below budget. Moving across to the right, you can see the impact of this reduced generation on the financial performance of the underlying asset portfolio, with revenue of £68,700,000 being 6% below budget and EBITDA of £45,300,000 or 8% below budget.

9:41 Despite generation being below expectation, revenue and EBITDA increased by 11% versus the prior year. Moving down the slide, you can see the contribution of each of the core technologies, with the Lynx offshore wind farm performing strongly as wind speeds in the North Sea were higher than average, in contrast to much of the rest of Europe. And this really highlights the importance of a geographically diverse portfolio. Now, this slide gives some granularity on the generation from the different technologies against their budgets. The onshore wind chart in the middle of the slide shows the significant impact on output during the period of transmission network constraints, in particular in The UK, but also negative prices on the grid in Finland, France and Germany, for example.

10:33 It also shows that ORIT has been compensated for this lost production in the overwhelming majority of cases. During the period, two wind turbines in Finland were affected by main bearing failures, which highlighted a potential issue with a batch of bearings installed in some of the other Finnish turbines. Now, all bearings from this batch are expected to be replaced by the turbine supplier at their cost and although it is not included in the compensation amount shown here, we expect the lost production to be covered by the performance guarantees in the operations and maintenance contracts with the OEMs. Now, you can see that even after the sale of the Lumbion wind farm, generation is expected to increase with the completion of the Breach solar farm and acquisition of Harlaxton.

11:23 The portfolio is expected in an average weather year to produce around 1.4 terawatt hours of green electricity, giving us flexibility to continue pursuit of asset sales without compromising the dividend.

11:40 Now, ORIT is an impact fund and we have continued to support a wide range of initiatives complementary to our investments during the period. This is in addition to the core impact contribution of emissions reductions. And in the first half of the year, the portfolio produced enough electricity to avoid 150,000 tonnes of carbon dioxide emissions, which is equivalent to planting around 700,000 trees. And with that, I'll hand over to Jen, who will review the financial results. Thank you, Chris. So, starting with dividends. Two dividend payments totaling 3.01p per ordinary share were made in respect of the first half of twenty twenty four, in line with the full year target of 6.02p per share.

12:26 This 2024 target is an increase of 4% over FY 'twenty three and marks the third consecutive year that the company has increased its dividend target in line with inflation. The dividends were 1.33x covered by operational cash flows, net of all scheduled debt service, including principal repayments. Excluding principal repayments, the dividend was almost 2x covered. Even with the sale of the Lundion wind farm in Sweden, which completed post period, we expect the FY twenty twenty four dividend to be fully covered, although the full year figure is likely to be less than the half year figure. You can see on this next slide ORIT's growing track record of delivering dividend growth as well as the attractive yield based on the share price at the end of the year at the end of June.

13:22 Moving on from dividend, here are the key financial highlights for the first half of the year. The company delivered a positive NAV total return for the period of 2%. NAV itself decreased from £599,000,000 to £593,000,000 whilst GAV increased from £980,000,000 to just under £1,100,000,000 following the increased borrowing associated with the completion of the Irish solar assets. In what has been a challenging period for the entire sector, total shareholder return for the period was minus 16.9%. However, the strong valuations achieved through the company's capital recycling programme support the fairness of, the NAV and show that the share price does not accurately reflect the underlying valuations of the assets.

14:15 We have seen some promising improvement in the share price since the end of the year, but a material discount to NAV does still remain. Stepping now into valuations. So during the first half of the year, the company's net asset value fell by 0.8p from 106p to 105.2p. Here you can see the valuation bridge. We will run through, the main valuation drivers over the next couple of slides. But you can see that aside from dividends paid to investors and running costs of the company, the main elements which affected the portfolio valuation were: a small gain related to the sale of the Lumbion wind farm, which completed post period a NAV accretive PPA signed in respect of the Cross Dykes wind farm updates to power prices and green certificates and other movements, most of which represent the expected return on the portfolio of assets.

15:13 We'll now run through some of those points in a little bit more detail. Following a number of successful sales during 2023, ORIT agreed the sale of the Lungbeon wind farm post period, with the sale agreement signing shortly after period end and completion occurring a few weeks later. The final agreed sales price at completion represented a £1,400,000 increase over internal valuation as at June 30. Over the lifetime of ORIT's investment, the project delivered an IRR of 11.3%.

15:52 On macroeconomic assumptions, inflation forecasts have been relatively stable in the first half of the year, with a net positive impact on valuations of 700,000 There has been no change to long term assumptions of 2.25% in The UK and 2% across Europe. For FX, sterling appreciated against the euro, resulting in a gross valuation impact negative valuation impact of £8,300,000 However, as a result of ORIT's FX strategy, we have also had a £7,600,000 positive uplift due to FX hedge gains, which substantially have offset the negative impact.

16:37 Power prices have fallen slightly since the end of the year, although ORIT was largely shielded from this due to the high levels of fixed revenues over the next couple of years. The net change in price forecasts led to a negative valuation impact of £1,100,000 but this was more than offset by the uplift from higher green certificate price forecasts, which led to an increase of £3,000,000 We are aware that there has been some variation in the direction of movement in green certificate forecasts across different market consultants. The green certificate forecasts are less well established than the wholesale electricity price forecasts, and we are keeping our adviser selection under review.

17:22 However, for context, merchant green certificate sales represent only around 2% of ORIT's forecast revenues over the next couple of years.

17:36 During H1 twenty twenty four, there were no changes to the core discount rates used to value ORIT's portfolio of assets. Despite this, the weighted average discount rate has decreased slightly from 7.2% to 7%, mainly as a result of reduced risk across ORIT's portfolio. Unwind of construction risk premiums, including the discount rates for construction assets, has also contributed to the decrease. In addition, falls on power prices and additional fixing through PPAs has meant that the proportion of fixed revenues has increased in the portfolio. Our valuation methodology applies a lower discount rate to fixed cash flows than to variable cash flows, and therefore this has also served to decrease the overall blended rate.

18:25 The average discount rate is calculated at the portfolio level and only on the assets where discounted cash flow is used for valuations. It therefore omits the return impact of FX hedging, the high returns from the developer investments and also the return improvement which should be expected from the additional gearing at the level of the RCF.

18:47 Accounting for these factors, the expected adjusted return on the portfolio before PLC costs is 8.2%. Overall in the period, overall leverage increased from 39% to 46% following the acquisition of the Irish Solar assets. Post period, the proceeds of the Swedish wind farm sale were used to repay a portion of the RCF, reducing gearing to close to 43%. The long term debt in the portfolio is highly hedged, around 91% and overall low cost. This means, even with base rates high, the average cost of debt at period end was 2.6% and around 4.4% after you include the RCF borrowings.

19:37 Work is well underway to replace around £100,000,000 of the expensive RCF borrowings with lower cost term debt, which would bring average borrowing costs to Baal under four percent. Over the short to medium term, we expect to maintain gearing levels below 40% of gross asset value, and we expect gearing levels to drop below 40% during 2025. I'll now hand back over to David to talk through the outlook. Thanks, Jim. On this slide, we set out some of the key activities which have either recently completed or are ongoing. You can see in the middle section of the slide that construction activity is now substantially complete, with both Breach and Harlowstown Solar Farms fully operational, and the latter of those due to be acquired shortly.

20:26 So the Woven Road battery is the only project remaining in construction, and there, battery containers have arrived on-site and as Chris mentioned, ORIT has optionality on whether or not to participate in that project fully up until May 2025. In the bottom section of the slide, we set out some of the asset sales that have completed, as well as ongoing activities related to debt optimisation and capital allocation. A share buyback programme of was launched during the period, and a little over a quarter of that has been spent so far. With the share price showing some improvement recently, some construction and development opportunities are beginning to look more attractive from the point of view of capital allocation. However, we do remain focused, as a priority, on bringing that overall level of gearing down below 40%, and that will require further asset sales.

21:21 We're also working on reducing the cost of that borrowing, by converting around £100,000,000 of the RCF borrowings into a term loan. You can see on this chart the overall level of revenue fixing that we have in place over the coming years, which protects ORIT from volatility in power prices. At the end of June, 84% of revenues for the following two years were fixed price in nature, which is an increase from 81% at year end. And that figure increases further to 86%, once you take into account the sale of the Swedish asset, which had a lot of unhedged revenues.

22:05 The portfolio also benefits from a high level of inflation linked revenues. 48% of the expected revenues over the next ten years were explicitly contractually inflation linked at the end of June, and again that figure rises to 50% once the Swedish sale is taken into account. And those inflation linked revenues are particularly valuable in supporting the company's progressive dividend policy. Some of you might have seen some commentary in the press, including a recent article over the weekend, about the sharp increase in the volume of periods in which their electricity price becomes negative.

22:48 ORIT's active management of the portfolio means that our assets have been well protected from this in the near term, either through attractive power purchase agreement terms, or by our active management of the portfolio, whereby we turn generators off when prices are negative, and that allows us to continually receiving the relevant government support schemes, for example in France and Germany. Furthermore, if you look further into the future, the assumptions that we have used for our valuations already account for a significant increase in the number of periods where prices are at or below zero, and well beyond anything that we've seen so far.

23:32 Now, I'll hand over to Chris to cover the last few slides. Okay, thanks David. So ORIT continues to have a powerful and well established tailwind as society continues to respond to climate change, which is driving the energy transition. Trillions of pounds of investment will be needed over the coming years in order to solve the energy trilemma of achieving an energy system that is secure, zero carbon and affordable. ORIT is very well placed to play a part in this and to build on its track record. Strategically, we think our ability to invest at construction stage and in developers means we're best placed to capture maximum value from this very large opportunity, while also maximizing the impact we can have by developing and building new renewable capacity, rather than just bucking operational projects.

24:24 And to that end, we wanted to highlight our developer investment portfolio, which you can see summarized here. ORIT now has five developer investments, four of which so all except for BLC Energy are co owned with another OCTOPUS Energy Generation managed fund. And what we think is particularly exciting about these investments is the access to the very large pipelines of projects that they are developing and which ORIT will have the ability to invest in over the coming years. Across these platforms, there is a multi gigawatt pipeline

24:59 and we have preferential funding rights, which are proportionate to our shareholding. And crucially, all of this future project funding is optional, which allows us and the board to maintain a disciplined approach to capital allocation.

25:14 So, finally, just to conclude, I'd like to reiterate that ORIT has a sizable and truly diversified portfolio. Our valuations have been validated through our recent asset sales, and the portfolio has shown robust performance in a difficult economic climate, with a positive NAV return and a fully covered dividend. Having said that, we continue to invest in our team and focus on the underlying portfolio, seeking improvements wherever possible.

25:44 We think there is a very positive outlook for the Fund through further asset sales, reducing interest costs and a disciplined approach to capital allocation. And its broad mandate means it is very well positioned to capture growth opportunities as the share price improves. So thanks for your time. We can now move to Q and A and I'll hand over to Mark. That's great. Chris, David, Jen, thank you very much indeed for updating investors. Ladies and gentlemen, please do continue to submit your questions just using the Q and A tab on the right hand corner of your screen. I just want remind

26:15 you that the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your Investor Me company dashboard. Chris, as you can see, you've had a number of questions from investors throughout your presentation today. So thank you, everybody, for your engagement this afternoon. I may, Chris, just hand back to you to read out those questions. And where appropriate, I'll pick up from you at the end. Okay. Thank you very much, Mark.

26:37 So we've got a question here from John. The H1 twenty twenty four dividend cover was 1.33x. Do you foresee maintaining this level of dividend coverage for the remainder of the year, especially with the share buyback program ongoing? So we do expect to have a fully covered dividend for the full year. I think we guided during the presentation that it's more likely than not the level of cover will be slightly less than the 1.3 times, particularly as we've sold the Lumion wind farm. The share buybacks actually, although they're using cash, they're also, reducing the number of shares. So actually, that contributes to both sides of the equation there. But yes, overall, we do expect to maintain a fully covered dividend, albeit not necessarily at the same 1.3 times level.

27:29 Okay. Have a question from Andrew. So there were auctions for offshore wind in Great Britain in September of this year. Does ORIT currently have or expect to have any exposure to these upcoming developments? I think I can probably pick that one up. So

27:50 short answer is that ORIT doesn't have any exposure to those in the very near term, but through our development platforms, we are developing a multi gigawatt pipeline,

28:03 a proportion of which is in The UK. And as those projects approach consenting, then we would likely look to participate in those CFD auctions. Alongside that, we consider other options, including continuing our program of partnering with corporates and putting in place corporate power purchase agreements.

28:29 So, there's a question here from Sam. How does ORIT determine which assets to include in the recycling program? Is there a strategic focus on certain geographic regions or technologies? So yeah, that and that's one where there's, quite a few different elements actually. So we are very focused on ensuring that the portfolio post any sales continues to offer what we've been delivering to investors throughout the, the four or five years that the company has been in existence. So in particular, diversification. So we want to ensure that after any sales, we still have strong diversification both geographically and a nice sort of balance between wind and solar.

29:14 Then we're also looking at what what attributes

29:16 are left in the portfolio in terms of attractive levels of fixed revenues and inflation linkage. So those are amongst the considerations. And then clearly, we're also looking at what each asset is offering to investors, whether we think we can get a more attractive returns by selling one asset and either reinvesting or by paying down debt. So there's no sort of starting point where we're saying, well, there's a country we particularly don't like. We think all of the assets we've had in the portfolio have been attractive.

29:45 But we're we're really focused on where can we deliver a solid sales process, good value to investors, and still leave the portfolio looking really strong after the sale is completed. Okay. I've got a question here from Vasko. Where there are variable rather than fixed and known revenues years into the future, do changes in energy prices affect asset values?

30:11 And if so, do you use any hedging to mitigate against this? JEAN Yeah, I can take that. So short answer to the second part of the question of do changes in energy prices affect asset values? The answer is yes, where the revenue is variable, so linked to merchant revenues. In the short term, we have a substantial amount of fixed revenues, which means that that's through fixed price contracts, PPAs, etcetera, which means it's not exposed to those merchant revenues. We have an energy markets team that are constantly looking at hedging opportunities, particularly with the sale of the Lumbion Wound Farm, which did have quite a lot of merchant revenues, particularly in the short term.

30:59 We are consistently looking at ways to mitigate the power price exposure by hedging through a range of different revenue structures.

31:11 Great. Thanks, Jen. So a question here from David. What is your opinion on vanadium flow batteries for long duration energy storage? David? I think vanadium flow batteries are things that certainly we've seen being developed going back for probably more than ten years now. What has happened over those ten years is that lithium ion batteries have become cheaper and cheaper and extended into longer and longer durations. So I think there's still an open question around at what point does a technology like vanadium become more competitive than lithium ion? Or are there other ways of dealing with long duration storage, be that using hydrogen or some other vector,

31:57 more pumped hydro, for example. So in the grander scheme of things, vanadium flow could have a role to play. For ORIT right now, it's not sufficiently proven economically for us to spend a lot of time focusing on it. We do agree that long duration energy storage is one of the sort of key elements of the energy transition that needs a lot more work,

32:19 and something which would be complementary to renewable generation in a portfolio. But our core is very much on renewable generation, on wind and solar in particular. So we're not actively looking at vanadium right now. Great. Thanks, David. So question here from Miguel. How do you build curtailment into your estimates of production going forward? And have you revised upwards your estimate of lost production due to curtailment? So with regards to economic curtailment in particular, price forecast that we are going into our valuations do include estimates in relation to this.

33:10 Again, with the extensive, fixing that we've got, particularly in the near term, our, exposure to curtailment, is fairly limited. Ultimately, in terms of have we we haven't seen a dramatic increase in the expectation of curtailment out in the long run, though that is something where those external market consultants have been including some assumptions on curtailment for some time.

33:38 And so we haven't seen dramatic movement in that sort of 2030s, 2040s picture in particular from our consultants so far. Okay. Have a question here from Vasco. So is ORIT's aim to invest in assets during the construction phase, but then sell some after construction rather than continuing as operating assets?

34:02 What is the strategy and how do you decide if and when to sell? And perhaps I'll take that one. So yes, it's correct to say that we are

34:19 assets. And I think if the market conditions are right, then we will look to sell them. Recall from our investment strategy, our ambition is to provide an additional element of capital growth through construction and development activities. There will be some projects which we continue to operate for the long term. It really depends on the balance of the portfolio, whether that's exposure to wholesale energy prices or individual markets or grid networks or regulatory regimes. So it's really when we look at the portfolio, it's really we take a high level portfolio view and then we'll make our asset recycling decisions then.

35:09 Anything to add to that? No. Okay. So again, another question from Vasco. So what, in your opinion, is causing the significant share price discount to NAV? And are there prospects for this to correct in the future as far as you can see? Can you take that one? Yes, I'll kick off on that one. So first thing I'd just, I guess, remind on this question is that we absolutely don't think that the current share price is indicative of the underlying value of the assets, hence why there's a discount to NAV. We think the NAV is fair. We think we've proven that through the various asset sales. But also, you've seen asset sales more widely across the sector, which have consistently been at or above net asset value.

35:54 We've also seen transactions in the private markets. We've seen a sale of wind farms from Aviva recently. We've got funds in the private side of things elsewhere within our stable, which are able to raise new money from investors with the plan to invest that in the market at prices consistent with our NAV. So I think that tells you some that some of the discount is driven by the kinds of investors in the investment trust universe more generally, a lot of focus on yield. And whilst we think, again, our yield is very attractive at the end of the period where the share price was, it was offering a dividend yield of over 8%. But over the last couple of years, clearly, investors have been able to find interesting yield levels in fixed income and in gilts and corporate bonds in a way they might not have done in the earlier part of the decade.

36:46 And it seems to be taking a little bit of time for the expectation of falling interest rates to to fully feed through into the share price. There's lots of other things that have been going on in the investment trust sector, lots of debate about cost disclosure, for example, and perhaps some progress there could also help overall investor sentiment. But for us, we don't think that the share price is reflective of any expectation that valuations are going to come down. Really, it just shows that the shares are offering good value versus the underlying quality and fair market value of the assets. Okay. Question here from Sandy. So on the question of wind speeds being below expectations, I watched a video on the ft.com website some months ago that suggested that the earth is getting more still, meaning slower wind speeds due to climate change.

37:42 Would you say the wind speed effect that you are seeing is part of a global issue? Or is there something else at play resulting in the wind being less than expected? Happy to have a go at that one. So guess the headline is there's various schools of thought on the impact of climate change on long term wind speeds. I think the video that you might be referring to talks about how warming in the polar regions is leading to lower temperature differentials and therefore, reducing jet stream speeds and then having an impact on wind speeds at ground level. There's also been other studies that we've seen which suggest that there will be areas around the world, including parts of Europe, where wind speeds might increase.

38:40 It is a developing science and one that we seek to deal with through diversification across our portfolio and also across different technologies. So if wind speeds start to slow down, potentially, that has a positive impact on the performance of the solar projects. Just a couple of things I might add to that. One is, in the annual report I can't remember actually if it was for 2023 or 2022, but we have done quite a bit of work in accordance with the TCFD reporting requirements around long term impacts of climate change on the portfolio, including getting some external consultants to look at whether the spread of risk for long term weather patterns were skewed in one direction or the other.

39:27 And the conclusion there was ultimately that it wasn't, and the long term impacts were not expected to be material. And the second thing is I don't have the reference to hand, unfortunately, but I've definitely read a study within the last couple of months, which referenced exactly that exactly that sort of question as to whether there could be long term, reduction in wind speeds and saying that some more recent science was suggesting perhaps it could be completely opposite, and in fact, average wind speeds go up. So it's just too early

39:57 to know exactly what will happen, but there's no sort of overall sense that there's material skew of risk in one direction or the other. Another question here from Miguel. So if you assume longer periods in the future of zero or negative power prices and curtailment is another concern, will you increase storage capacity in your existing asset base? So maybe just a quick comment on that and maybe David will have some further thoughts. So

40:31 first of all, I think the impact of zero or negative power prices coming into future forecasts will improve a sort of standalone battery revenue stack. We have a couple of projects, as we mentioned, couple of battery projects, which we have the option to invest into in the portfolio.

40:51 But where it stands today, those revenue stacks and revenue forecasts are not yet sufficient for us to get comfortable with and decide to proceed with the construction of those projects. But it's something that we monitor on a very frequent basis. I think one of the other potential benefits of batteries is that it could provide an element of the natural hedge within the portfolio. If there is an overbuild of renewables, then the impact of that will be lowering electricity prices but increasing volatility. And so where the wind and the solar might potentially lose from an overbuild, the batteries could benefit. And the opposite is also true.

41:39 So it's one that we continue to monitor,

41:42 at an individual asset level, I. E, the battery revenues and at a portfolio level, in case we can identify a natural hedge. So we've got another question here from Sandeep. So we seem to be entering into a period of falling interest rates. What would the effect be on ORIT over the coming couple of years? I'll hand that to Jen. Yes, I can take that. So

42:11 it's worth just kind of pointing out the differences in interest rate exposure on our short term debt and our long term debt. So our short term debt, which is mainly made up of RCF borrowing, is exposed to variable interest rates. So a decrease in interest rates would de... Result in a decrease in borrowing costs on that part of the debt structure. On the long term debt, we do have some exposure to variable interest rates, but all of that long term debt, which is fully your amortizing over the project lives,

42:45 is hedged between 75% and a 100%. So the variability of borrowing costs on that part of the debt is pretty stable. So overall, decrease in interest rates would reduce the borrowing costs on the portfolio, but to varying degrees across the debt structure. Perhaps one thing just to add on on interest. Falling interest rates is one reason why you might expect. Clearly, we can't predict the share price, but we, you know, we think one of the reasons it has been where it is is other forms of income have been more attractive. If interest rates fall and therefore bond yields fall, then then perhaps that growing inflation linked dividend that we've had over the past few years and the ability to keep growing the dividend progressively perhaps comes more attractive and feeds through into the share price. That's certainly what we'd hope.

43:36 Okay. A question here from James. So would you consider taking management fees off the market cap figure rather than the NAV? That seems fairer for shareholders and makes everyone even more in line with closing the discount. Yes. So this is something we've seen in one or two instances in the broader investment trust sector. Haven't seen a lot of it in the renewables focused funds. There's a few thoughts, I suppose, I have. And, one one is that we are a very active manager. We... We're not just, taking money, investing it in in an asset and then sort of sitting on that asset for twenty years. We've been selling assets. We're putting in place, fixed price PPAs and and delivering NAV accretion that way. We're delivering projects through construction and development. So we are a very hands on manager with a large team. So we think the the fees that are currently being charged to the company represent a really good value for investors.

44:32 And and to to make a change as as suggested there, think, wouldn't be consistent with the level of work that's required to manage a portfolio of over 800 megawatts of assets as actively as we do and nor is it as yet consistent with the peer group. As for the other general thing on alignment is in the sector, generally, investors have had some aversion to performance fees, which is clearly another way that you could deliver an alignment. An alignment definitely shouldn't be sort of a a one way bet. But, no, overall, clearly, we're not making any any sort of commitments around fees on this call. If people have strong views, I'd certainly suggest that they sort of feed those in. And particularly, the board are clearly always going to be interested in hearing shareholder views on fees and on manager alignment.

45:22 Okay. Finally, we have a couple of questions here, which are both related to hydrogen. So, firstly from Sandeep, what plans for ORIT taking exposure to hydrogen projects?

45:36 And from Victor, will ORIT have any future link with hydrogen generation as a storage method for wind generated power? Hydrogen is a really interesting one and there's a huge amount of somewhat fierce debate in the industry about the role that it will play in decarbonizing economies around the world. Our view is that if it's possible to electrify something, that's what you should be doing. We shouldn't be using it for heating in homes, for example, or for electric vehicles, both of which are easily electrified. But there are harder to reach parts of the economy

46:22 which where a molecular solution could be the right one. So, things like displacing existing uses of grey and blue hydrogen, possibly in sustainable airline fuels and the like. In terms of our involvement, we have one of our development platforms is called Hiro. And that platform is looking at helping industrial users, in particular of hydrogen, to replace their existing sources with

46:59 hydrogen from electrolyzers, which are powered by renewable energy. And we have a pipeline of opportunities in there. And then specifically to the question on is it a way of storing excess wind power? Possibly, I think is the somewhat unhelpful answer. I think actually more likely it will be through sort of improved battery chemistries as a means of short term storage. But there's a lot of R and D going into electrolyzers, making them sort of more grid friendly is the way of putting it and perhaps more economic as well. And hydrogen, obviously, can give you a long term storage opportunity, albeit at some cost.

47:46 Chris, David Jen, think you've taken all the questions from investors this afternoon. So thank you once again to everybody for your engagement. Chris, David Jenner, investor feedback will be important to you both, to all of you, and I'll shortly redirect those on the call to give you their thoughts and expectations. But before doing so, if I may, David, just come back to you maybe for a couple of closing comments. Yes. So just want to say, firstly, thank you to everyone for joining and for taking the time to listen to us. As we said during the presentation, we think that the opportunities out there for ORIT are really quite exciting over the coming years. If there are any questions that people haven't covered, then please do feel to get in touch either through this platform or through the ORIT email address, which was on screen a minute ago. But with that, yeah, just thanks again, and have a good rest of your day. That's great. Thank you very much indeed.

48:35 Company is asking investors not to close the session as we're now automatically redirect you for the opportunity to provide your feedback in order management could better understand your views and expectations. Gonna It's take a few minutes to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Ultibul... Ultibul's Renewables INFRASTRUCTURE TRUST PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.