Given the current conflict in the Middle East, we thought it would be helpful if we focused this latest instalment on discussing how Fern Trading Limited (Fern), the portfolio company investors in the Octopus Inheritance Tax Service (OITS) and OITSPlus hold shares in, navigates power price volatility – and the impact this has on Fern’s share price.
If you missed the last update in the series, you can read it here. Ed Clough, Head of Real Assets, shares his observations since stepping into his role, and what gives him confidence looking ahead.
Below, we set out how energy markets have evolved, what’s driving current conditions, and how Fern manages uncertainty through its strategic approach. In summary:
- Recent energy price movements have been volatile, driven primarily by geopolitical events
- Up to c. 75% of Fern’s energy sector revenues are fixed, limiting exposure to short‑term price volatility
- Long‑dated forward prices initially remained broadly flat, reflecting market expectations that the current Middle East conflict would be short‑lived
- Historically, sustained periods of geopolitical disruption have driven increases in longer‑dated forward power prices, which have been positive for Fern’s share price
- If the conflict persists, forward energy prices may continue to rise, which could in turn be positive for the value of Fern’s energy assets
- While energy prices are likely to remain unpredictable in the near term, Fern’s strategy is set up to manage this uncertainty
To remind you, Fern focuses on three essential sectors: real estate, renewable energy and fibre. These are long-duration, asset-backed markets underpinned by strong structural drivers and form part of the bedrock of a modern UK economy. They are also sectors that consistently feature in the UK’s Industrial Strategy, reflecting their importance as national priorities to drive sustainable long-term growth.
Though Fern’s focus is on sustainable growth over the long-term, its share price is set based on current market conditions and therefore will always reflect prevailing market conditions at the time.
Market view over the past five years
UK wholesale energy prices have experienced periods of volatility over the past five years, driven largely by global geopolitical events. Prices began to rise in 2021 as post pandemic demand recovered and global gas markets tightened, with markets becoming more sensitive to international supply risks.
The most significant disruption came in 2022 following Russia’s invasion of Ukraine. The loss of Russian pipeline gas into Europe triggered a sudden and severe supply disruption, pushing UK and European wholesale energy prices to record highs. Forward markets also adjusted rapidly, reflecting expectations that the disruption would continue. This period represented the most extreme volatility seen in decades.
From late 2022 into 2023, prices stabilised into a higher trading range, but the market remained more volatile than before the Ukraine conflict.
How did this impact Fern?
Fern’s share price rose sharply as wholesale energy prices surged into the 2022 energy shock, benefiting directly from higher forward price expectations and heightened market movement. Fern’s performance was strong, delivering significant outperformance, peaking in late 2023.
As energy prices moved away from the unusually high levels and forward curves began to stabilise, valuation assumptions reset. This reduced the uplift from higher energy price expectations, which negatively impacted Fern’s share price through 2024 and into 2025.
The recent conflict in the Middle East
Following the outbreak of conflict in Iran, power markets responded immediately, driving upward price movements and shorter-term volatility.
The closure of the Strait of Hormuz (a critical shipping route for Gulf oil and gas exports), increased near-term future prices, while longer dated prices initially remained unchanged. This reflected a market view that the disruption would be temporary, with cargo flows expected to resume relatively quickly.
This view shifted on 18 March following attacks on Iran’s South Pars gas field and Qatar’s Ras Laffan gas facilities. The damage was confirmed to have longer term implications for global gas supply, with around 20% of Ras Laffan’s production expected to remain offline for an estimated three to five years, at a reported cost to QatarEnergy of approximately $20 billion. In response, both near term and longer dated power prices rose significantly.
Volatility remains high, with prices responding quickly to developments on the ground and to policy signals from the US. The outlook remains highly uncertain: a deescalation could lead to a rapid easing in prices, while further escalation would be likely to sustain higher pricing for longer.
How does Fern navigate power price volatility?
The Energy Markets Team (EMT) secures the sale of clean energy by structuring and obtaining fixed-price power purchase agreements (PPAs) with major utilities and corporate buyers. PPAs are the mechanism by which energy generators sell the power they produce into the wholesale market and can vary by term length and pricing structure.
By running competitive tenders and leveraging deep industry networks, EMT helps ensure Fern’s energy assets are positioned to maximise long‑term commercial value.
As Fern operates a large and diverse portfolio of renewable assets, it will typically have multiple PPAs in place at any one time, reflecting the scale of the portfolio – which typically generates enough power to supply over one million UK homes.
This allows Fern to benefit from periods of higher pricing as detailed above, while keeping overall exposure to short-term price movements relatively limited. Fern’s approach is broadly consistent with other large owner/operators of energy assets in the UK, albeit at the more conservative end of the spectrum, with a higher proportion of revenues secured at fixed prices, meaning reduced exposure to wholesale price volatility.
What this means for Fern now
Though recent price movements have been smaller than the extremes seen in 2022, they have reinforced the market’s sensitivity to geopolitical risk and the vulnerability of key supply routes and infrastructure. While Fern’s renewables portfolio maintains a high proportion of fixed revenue, the share price is set based on prevailing market conditions, reflecting these dynamics as they evolve and importantly without speculation on what might or might not happen next.
EMT focuses on commercial risk management in line with Fern’s overall strategy. By proactively monitoring market conditions, EMT helps protect the business the best it can from sudden drops in wholesale power prices while retaining the flexibility to lock in pricing when market conditions are favourable. Securing energy sales on a rolling basis reduces the risk of being forced to commit large volumes of power during periods of low market pricing, ensuring assets remain on optimal terms.
While energy prices are likely to remain unpredictable in the near term, Fern’s strategy is set up to manage this uncertainty. The sector focuses on long‑duration assets, contracted revenues and an expert team securing pricing on a rolling basis. That’s how we keep building value from clean energy over the long term, even when headlines drive uncertainty.
Recent highlights
UK
In response to price spikes driven by heightened geopolitical tensions, EMT recently secured proactive price fixes for 166 MW of Fern’s UK onshore wind farms (Fraisthorpe, Cour, Hill of Auquhirie and Beinneun). As a result, the majority of Fern’s UK onshore wind portfolio now benefits from secured, attractive pricing terms for the coming year.
France
The team also recently secured attractive fixed pricing for Fern’s largest French site, Pays de Saint Seine (PSS), building on volumes previously fixed during a strong price environment in June 2025. Beyond price management, EMT is enrolling French assets to take advantage of additional revenue streams available to renewable energy generators. The team has secured a guaranteed new revenue stream for the business, through tolling agreements, while also maintaining some market exposure through variable contracts. EMT expects Fern assets to be among the first active in these markets, having already enrolled PSS back in October 2025. Additionally, Fern is repowering the Marsanne and Grand Bois wind farms with larger, higher-yield turbines, secured on attractive government-backed price guarantee contracts, driving material value uplift.
Poland
At Fern’s 48 MW Polish wind farm, EMT uses monthly data analysis to determine the most profitable days to sell power, in line with government guidelines. This active management generates additional value relative to its business plan. Furthermore, in response to increased periods of negative pricing (where there is too much power on the grid and prices drop below zero), EMT executed a first-of-a-kind contract mechanism to switch between two daily market price benchmarks and curtail output when optimal. This maximises revenues under the new market conditions.
Key risks to bear in mind
- The Octopus Inheritance Tax Service and OITSPlus are high-risk investments. The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
- The shares of unquoted companies could fall or rise in value more than shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
