Downing renewables trust discount widens

The ‘article 9’ trust saw NAV grow 1.5% during the three months to 30 September


It was a mixed third quarter for Downing Renewables and Infrastructure Trust (DORE), which benefited from sterling weakness but saw its discount widen to 7.7%.

There was no getting away from the fact is was a punishing quarter for many investment trusts, but Downing’s head of energy and infrastructure, Tom Williams (pictured), described its results for the three months ending 30 September as “pleasing”.

DORE saw its net asset value grow 1.5% to £217m by the end of the quarter, with NAV per share sitting at 115.9p at the start of the period and rising to 117.7p by the end of September.

But the majority of the uplift stemmed from foreign currency movements, which added 4.3p per share.

The financial performance of the trust, which is classified as ‘article 9’, also contributed positively to NAV, with the company stating it performed “above expectations” in that regard, adding £2.4m to NAV, or 1.3p per share.

Higher than forecast inflation also helped by add 0.8p per share; while advantageous fixed pricing arrangements, as well as power price forecasts, added 1.6p per share.

Though there were several factors placing upward pressure on NAV, higher discount rates across the portfolio shaved off 4.7p per share. DORE’s results report added that the discount had widened to 7.7% as of 30 September from 7.2% at the start of the quarter. Despite this, the total return for the period was a respectable 2.6%.

However, since DORE recorded its results on 30 September, the trust has endured a fairly volatile period, which saw its share price dip 8% from the end of September to 13 October, hitting 101p, before climbing 12% from that point to 25 October. Shares are now priced at around 112p as of 24 November, with NAV per share at 117p according to data from Hargreaves Lansdown.

Since October’s repayment of a mezzanine debt in the UK solar portfolio, and the acquisition of a seven-asset hydropower portfolio in Sweden, DORE now holds £28m in cash, or 13% of NAV. This has grown from 11% on 30 June.

The closed-ended investment company, which raised £137.4m at IPO in December 2020, now has a market capitalisation of £205m, and its dividend remains at 1.25p per share, as it was at the end of June.

Williams said: “It is a real strength of the company that discount rates can be increased to some of the highest in the sector and still show continued NAV growth despite deleveraging. It is especially pleasing to see the new hydropower acquisition being accretive even at this new benchmark.

“The company’s strategy of meaningful diversification by technology and geography continues to reap benefits as the impact of government interventions in different markets with different energy mixes unfurls.”

The trust believes it falls outside the scope of the UK government’s proposed electricity generator levy, which was announced in the autumn statement on 17 November.

See Also: Fears ‘blunt instrument’ windfall tax could undermine UK net zero goals

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