The Downing Renewables & Infrastructure trust (DORE) is seeking to raise £50m to pay down its debt and help fund a £200m investment pipeline.
The £150.9m trust plans to issue up to 45,669,495 of new ordinary shares at 111p each, representing a 2% premium to its net asset value on 31 March of 110.1p per share.
The latest placing is double the £25m target it set in its first equity raise last October.
Initial proceeds will be used to repay outstanding monies that have been drawn down from DORE’s £17.3m revolving credit facility.
The remainder will fund the company’s pipeline, which has over £200m of near-term opportunities in hydro, solar, wind, batteries and utilities across target geographies and construction phases.
Chair Hugh Little said acquiring additional assets would help further NAV growth, increase the diversity of DORE’s portfolio and allow the trust to continue to provide stable returns to shareholders.
Is DORE’s growth spurt sustainable?
DORE raised £137.4m at IPO in December 2020, undershooting its £200m target. It also came up shy in its first placing last October, raising £14.9m.
Numis said although the trust endured a “relatively weak post-IPO performance”, from mid-2021 its share price has been on the move thanks to strong NAV growth boosted by a strong uplift on acquisition costs of some of its hydro projects and one wind asset. Year-to-date its shares have generated a total return of 11.2%, leaving the trust trading at a 2.6% premium.
Higher inflation and power price assumptions in the model have also benefited NAV, Numis said, noting around 44% of DORE’s forecast revenues are directly linked to inflation.
But the research firm added: “As one of the smallest renewable generation investment companies in the peer group, we believe investors will be particularly interested to know how the business can continue to scale accretively across its target markets. To this end, scrutiny of the circa £200m pipeline will be key.”
See also: Renewable energy infrastructure trusts poised to take off amid rising inflation
Changes to investment policy
The share placement, which opened on Tuesday, will close on 22 June. Results of the initial issue will be released on 24 June with new shares expected to begin trading on 27 June.
In addition to the equity raise, the board is proposing changes to certain restrictions in DORE’s investment policy.
These include boosting its maximum short-term debt limit from 10 to 20% of gross asset value (GAV) and upping the amount it can invest in technology from 50% to 60% of GAV and the geographic investment limit from 60% to 75% of GAV until the trust’s NAV exceeds £300m.
Investors will vote on the proposals at the trust’s general meeting on 23 June.
