Octopus Renewables - Results analysis from Kepler Trust Intelligence

Octopus Renewables Infrastructure (ORIT)

02/10/2025

Results analysis from Kepler Trust Intelligence

Octopus Renewables Infrastructure's (ORIT) half year results to 30/06/2025 show a NAV total return of -0.2% (H1 2024: +2.0%). The lower NAV per share, 99.5p (31/12/2024: 102.6p) mainly resulted from lower power price forecasts, higher discount rates and dividend payments, partially offset by macro factors (e.g. higher UK RPI inflation, lower corporation tax in Finland).

ORIT's board introduced its 'ORIT 2030' strategy, which sets out its four priorities for the next five years.

Grow: Invest for NAV growth, deploying capital into higher growth investments, including an increased ~20% target allocation to construction assets, maintaining the current 5% allocation to developers. There will also be a greater focus on asset improvement and disciplined capital recycling.

Scale: Target £1 billion net asset value by 2030, to create a more liquid and investable company. Alongside investment growth, this could include corporate M&A. 

Return: Target medium-to-long-term total returns of 9-11% through a combination of capital growth and income, maintaining the progressive dividend policy, while preserving full cover and targeting long-term gearing below 40%. Retain diversification across core technologies and geographies.

Impact:  Aim to build approximately 100 MW of new renewable capacity per annum.

As part of the ORIT 2030 strategy, the board is also recommending that the continuation vote moves to a cycle of every three years, from the current five. The change will be put to a vote at the 2026 AGM, with the next continuation vote then held at the 2028 AGM.

Kepler View

Coming back to the present, ORIT's dividend yield as a spread over 10-year gilts is close to a lifetime high. UK government bond yields have not been playing nice with interest rates this year and are approaching 5%, which accounts for a good deal of the recent price weakness for ORIT, its peers and indeed many other rate-sensitive 'alternatives'. With a set of proposals that reduces costs, puts more alignment between the manager and shareholders in terms of addressing the discount and which plays to the manager's strengths as an experienced constructor and operator, as well as increasing the frequency of continuation votes, we think ORIT's discount of over 30% seems excessively pessimistic. 

CLICK HERE TO READ THE FULL REPORT 

Visit Kepler Trust Intelligence for more high quality independent investment trust research.

Important information

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.