LONDON, UK: The Downing Renewables & Infrastructure Trust plc has acquired its first Icelandic asset, Urðarfellsvirkjun, a 1.1MW hydropower plant, located in south-central Iceland with an annual average production of c. 8 GWh. The total investment was c. £5m (EUR 6m).
The run-of-river plant has been operational since 2018 and derives its water from both natural springs and rainfall. Unlike the Swedish hydropower portfolio, where the freehold land is owned, this facility has a 65-year lease agreement, with strong rights to extend.
The Icelandic hydropower market provides an attractive investment proposition for the Company, with electricity producers benefitting from 100% inflation-linked take-or-pay offtake arrangements with no exposure to merchant power pricing for the duration of the offtake agreement. Investing in Icelandic hydropower offers returns that are accretive to DORE’s return target and also provides the potential for significant precipitation diversification to the existing portfolio.
The Company obtains the benefit of the facility’s cashflows with effect from (and including) 1 December 2023 and financed the acquisition through the utilisation of the debt facilities at Downing Hydro AB.
Tom Williams, Partner, Head of Energy and Infrastructure at Downing LLP, commented: “We are pleased to acquire our first asset in Iceland, which we think is a very attractive market with huge potential for the Company. We remain committed to our investment strategy of diversification across geography, technology, revenue and project stage.”