As an investment director at Octopus Renewables, the specialist clean energy investor arm of Octopus Group, Peter Dias co-leads a team of 20 people investing in new renewables projects, principally in wind and solar. Founded in 2000, Octopus has been investing in renewables for more than a decade and now has a team of more than 70 people working in Octopus Renewables. In that time, Octopus has grown to become Europe’s largest investor in commercial solar and a leading UK investor in onshore wind.
Coronavirus has impacted the renewables market in many ways, though the immediate operational impact when lockdown was imposed was not as bad as feared. With £3 billion of energy assets under management at the firm, Dias says: “Octopus has a large portfolio of assets, so the immediate priority for us was to ensure we had operational procedures in place that complied with Covid related lockdown measures in their geographies. While there was some initial concern that this could be a difficult task, actually it seems the wider power industry has coped very well with ensuring plants kept high availability and good operational status, and that’s credit to the individuals involved. It has in fact turned out to be a success story in terms of the industry’s ability to adapt and continue generating.”
One thing that has hit the industry harder is a drop in power prices, caused by the drop-off in demand. “That’s a temporary impact on profitability,” says Dias. “It’s not been anywhere near as bad as some other infrastructure sectors, such as transport, and prices have started to recover now.”
On the investment side, Octopus has not changed its appetite to do deals thanks to continuing demand from its investors to deploy capital. It turns out others in the market felt the same: “Initially, we expected maybe a bit of a softening in competition in the renewables sector,” says Dias. “The outturn has probably been the opposite and the market has been just as competitive. There is still a lot of demand to invest in the renewables sector.”
In July, Octopus acquired a 9.1MW portfolio of residential rooftop solar assets covering more than 2,700 rooftops across the UK, mainly in Manchester and Birmingham, as well as two UK onshore wind farms with a combined capacity of 16.8MW. “If you have something that really appeals to investors and is core to many funds, such as solar, onshore wind and some of the secondary market opportunities for government subsidised assets, then you will find there is a lot of appetite to invest out there,” says Dias. “If you’re trying to fund a trickier technology, then you may see some drop-off in this demand and interest.”
Dias says the Octopus strategy has not changed as a result of the coronavirus, as the strong tailwinds that were supporting the renewables sector have not been dampened – if anything, the commitment to ESG by investors has increased and the focus on a ‘green recovery’ in many countries is likely to lead to a doubling down on renewables.
“We are not seeing ESG move down the agenda at all,” says Dias. “If anything, it’s becoming increasingly core to our investment process and to our monitoring of operations and projects. Certainly, in terms of reporting, our investors are much more focused on ensuring they have got the right managers with the right ESG credentials managing their money. The significance of the ‘green recovery’ in the UK and in other geographies is also only going to drive further interest in the sector.”
Octopus took steps to develop its offshore wind offering over the summer, hiring offshore wind energy specialist Partha Vasudev as an investment director. Dias says: “That is a sector where, notwithstanding Covid, we have seen some interesting relative returns and feel now is the time to build a presence.”
With competition for assets fierce and investor appetite showing no sign of cooling, Dias says his priority for the year ahead is straightforward: “For us, we remain focused on continuing to deploy money into good quality projects on behalf of our investors, and that hasn’t changed because of Covid. In fact, the virus has probably only sharpened our focus.”
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