Foresight Solar Fund Limited Intention to Float

Foresight Solar Fund Limited Intention to Float

Not for release, publication, or distribution, directly or indirectly, in whole or in part, to US persons or into or within the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, South Africa, Japan, or any other jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction.

This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information in the prospectus (the "Prospectus") to be published by Foresight Solar Fund Limited in due course in connection with the initial public offering and the admission of its ordinary shares to the premium segment of the Official List of the UK Listing Authority (the "Official List") and to trading on London Stock Exchange plc's main market for listed securities (the "London Stock Exchange"). A copy of the Prospectus will, following publication, be available from the Company's registered office. This announcement is not an offer to sell, or a solicitation of an offer to acquire securities in the United States or in any other jurisdiction. Neither this announcement nor any part of it shall form the basis of, or be relied on, in connection with or act as an inducement to enter into any contract or commitment whatsoever.

 

5 SEPTEMBER 2013

Foresight Solar Fund Limited Intention to Float

Foresight Group announces intention to list Foresight Solar Fund Limited on the Main Market of the London Stock Exchange

Foresight Group CI Limited (the "Investment Manager") together with its group companies and undertakings (the "Foresight Group") today announces the intention to pursue an initial public offering of Foresight Solar Fund Limited ("Foresight Solar Fund" or the "Company") by way of a placing and offer for subscription of up to 200 million ordinary shares of no par value at a price of 100p per ordinary share (the "Issue").

Foresight Solar Fund intends to invest the net proceeds of the Issue in a portfolio of UK ground based solar power plants to achieve its objective of providing shareholders with a sustainable and increasing dividend with the potential for capital growth over the long term.

It is intended that the Company will seek admission of its shares to the premium listing segment of the Official List of the UK Listing Authority and for all such shares to be admitted to trading on the main market of the London Stock Exchange ("Admission"). The Company is structured as a closed-ended infrastructure investment company with an indefinite life.

 

Key Highlights
Opportunity to gain exposure to UK solar power assets through a premium listed vehicle
  • Binding commitments in place to acquire, subject to the satisfaction of certain conditions, an identified portfolio of assets.

 
Stable cash flow profile: attractive, increasing dividend
  • Foresight Solar Fund will aim to provide shareholders with a consistent, stable yield through structured assets underpinned by the UK Government's support regime for operating renewable energy assets.
  • Initial annual dividend target of 6p from 1 January 2014 which is expected to increase in line with inflation.1
  • Retail Price Index ("RPI") and energy price inflation-linked dividend.
 
Growth potential
  • Intention to re-invest surplus returns over initial annual 6p target dividend to to support and grow NAV.
 
Foresight Group’s track record
  • 29 years of fund management experience.
  • Currently managing 16 funds, including five venture capital trusts which are listed on the premium segment of the Official List and are admitted to trading on the main market of the London Stock Exchange.
  • Foresight Group currently has approximately £800 million of assets under management.
 
Proven solar expertise
  • Foresight Group established its solar investment team in 2007 and launched its first solar fund, Foresight European Solar Fund, in early 2008.
  • Foresight Solar VCT plc's NAV has increased from 94.5p at launch in November 2010 to 122.5p3 in March 2013 and it has met its dividend forecasts.
  • Foresight Group currently has approximately £450 million of solar assets under management.
  • Earlier this year, Foresight Group's managed funds issued the largest UK solar index linked bond to date.
 
Government backing of solar as key technology to meet 2020 carbon targets
  • Renewable Obligation Certificate (ROC) regime provides a fixed 20 year RPI-linked revenue stream.
  • Increased revenue certainty through "grandfathering" of the ROC support regime.
 
Strong UK structural growth targets
  • Extensive projected capital requirements for utility scale UK solar power plants are expected by the Company to facilitate future growth and further investment opportunities.
Commenting on the announcement, Jamie Richards, Partner of Foresight Group, said:
"Solar power has been the biggest source of new electricity generation for the past two years in Europe. This year the UK is seeing a significant increase in installed capacity of utility scale solar PV power plants based on Government support in the form of the Renewable Obligation Certificate (ROC) regime which provides a stable 20 year revenue stream that increases in line with RPI. The ROC regime combined with recent significant reductions in the cost of solar equipment provides a timely opportunity to launch this Company coinciding with the new capacity coming on stream. Foresight Group has binding commitments for a portfolio of solar assets that the Company can invest in from the outset, which will give investors access to the more predictable financial returns that UK solar offers over wind."

Alex Ohlsson, Non-Executive Chairman, Foresight Solar Fund, said:
"The Foresight Solar Fund gives investors the opportunity to secure a sustainable and increasing yield in a listed fund managed by a highly experienced team with proven expertise in solar investment. We are targeting an initial annual dividend of 6p1 which we currently intend to increase in line with inflation as well as provide investors with the potential for capital growth."
 

Enquiries
Foresight Group
Jamie Richards
Richard Thompson
Ricardo Pineiro
Ben Thompson
01732 471 800
RBC Europe Limited
Dai Clement
Lorna Shearin
Darrell Uden
Matthew Coakes
020 7653 4000
Winterflood Securities Limited
Darren Willis
020 3100 0000
Citigate Dewe Rogerson
Michael Berkeley
Caroline Merrell
Malcolm Robertson
Chris Gardner
020 7638 9571
 

Investment Objective and Target Returns
The Company's investment objective is to provide investors with a sustainable and increasing dividend together with the potential for capital growth over the long term from investing in a diversified portfolio of predominantly UK ground based solar assets.

Whilst not forming part of its investment policy, the Company intends to pay an initial annual dividend of 6p per ordinary share from 1 January 2014¹. The Board intends to increase the dividend in line with inflation. The Company will seek to enhance these returns through active management of its solar power plants and will seek to grow its investment portfolio through additional asset acquisitions throughout its life.
 

Investment Opportunity
The Directors believe that an investment in the Company offers the following attractive characteristics:

Strong regulatory support, favourable radiation levels and low radiation variability
The UK Government has provided strong regulatory support for renewable energy and has included solar as a "key technology" to meet its 2020 carbon targets. The ROC regime provides a stable 20 year subsidised revenue stream that increases over time in line with RPI. Solar irradiance is less variable than wind speed and the UK has favourable radiation levels particularly in the south of England where they are consistent with those of Germany, the world’s largest solar market by installed capacity. This combination of Government support and consistent, favourable radiation levels is expected to enable the Company to provide investors with an attractive and predictable financial return from a portfolio of operational ground based solar power plants predominantly in the UK.
 

Identified portfolio
Binding agreements to acquire, subject to the satisfaction of certain conditions, investments in a seed portfolio comprising interests in six utility scale solar power plants in the UK. Exclusivity agreements have also been entered into to acquire a pipeline portfolio comprising interests in two utility scale solar power plants in the UK. If acquired, the seed portfolio and the pipeline portfolio would represent an aggregate investment of approximately £195.5 million.
 

Potential for future acquisitions
The UK has a legally binding obligation to ensure that 15 per cent. of primary energy use is derived from renewable sources by 2020 and the UK Government has included solar as a "key technology" in its strategy to meet these carbon targets. As a result of the stability of the ROC incentive mechanism in the short to medium term the Directors of the Company believe that there will be an expansion of the solar sector in the UK and that the Company will be able, through Foresight Group's strong connections to developers and position in the market, to acquire future solar power plants to benefit from the growth opportunity.
 

Controlled exposure to power prices
Approximately 60 per cent. of the Company’s revenues are expected by the Directors to be derived from "green benefits" which are payments, primarily from sales of ROCs, for generating renewable energy. The Directors consider that this provides sufficient revenue stability to allow the Company to retain long-term exposure to electricity prices on the remaining 40 per cent. of revenues therefore benefiting from the long term real growth in electricity prices, as is forecast by well recognised independent industry power advisers.
 

Inflation linkage
The express indexation of revenues derived from green benefits and the degree of inflation linkage of the wholesale electricity price and operating costs provide the Company with cash flows which the Company expects to be correlated with inflation, over the long term.
 

Majority independent Board and experienced Investment Manager
The Board comprises individuals from relevant and complementary backgrounds offering experience in the investment management of listed funds, as well as in the energy sector from both a public policy and commercial perspective.

The Company has appointed Foresight Group CI Limited, a member of the Foresight Group which has an experienced management team in the solar and renewable infrastructure sectors, as its investment manager.
 

Prospects for the UK solar market
The UK energy market currently faces the challenge of replacing coal and nuclear generation and capacity while complying with policy objectives to cut carbon emissions. In the latest UK Renewable Energy Roadmap Update (2012), the DECC classified solar as a "key technology", with analysis suggesting that generation capacity could reach 7 to 20 GW by 2020.

The UK solar market has undergone significant growth over recent years driven in part by falling costs which have decreased by up to 50 per cent. between summer 2011 and March 2012. Solar PV generation capacity increased further to 2GW in Q1 2013 and is expected to exceed 3GW by the end of 2013.

The UK’s ROC regime provides a stable 20 year subsidised revenue stream that increases over time in line with RPI. ROC banding levels for ground-based solar to the year 2017 have been announced and the UK Government is committed to the principle of "grandfathering" whereby when banding levels are changed, existing generating plants already accredited under the scheme maintain their original banding level.
 

Summary of the Company’s investment policy
The Company will pursue its investment objective by acquiring a portfolio of ground based, operational solar power plants predominantly in the UK. Investments outside the UK and assets which are still under construction will be limited to 25 per cent. of the gross asset value of the Company, calculated at the time of investment.

The Company will seek to acquire majority or minority stakes in individual ground-based solar assets. When investing in a stake of less than 100 per cent. in a solar power plant special purpose vehicle ("SPV"), the Company will secure its shareholder rights through shareholders’ agreements and other legal transaction documents.

Power purchase agreements ("PPAs") will be entered into between each of the individual solar power plant SPVs in the Company’s portfolio and creditworthy off-takers in the UK. Under the PPAs, the SPVs will sell solar generated electricity and green benefits to the designated off-taker. The Company may retain exposure to UK power prices through PPAs that avoid mechanisms, such as fixed prices or price floors.

Investment may be made in equity or debt or intermediate instruments but not in any instruments traded on any investment exchange.

The Company is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.

In order to spread risk and diversify its portfolio, at the time of investment no single asset shall exceed in value (or, if it is an additional stake in an existing investment, the combined value of both the existing stake and the additional stake acquired) 30 per cent. of the Company's gross asset value post acquisition. Diversification will also be achieved by the inclusion of not less than five individual power plants in the Company's portfolio, by seeking to ensure that a significant proportion of the Company's expected income stream is derived from green benefits (for example ROCs) and by the Company using a number of different third party providers.

There will be no asset level borrowings at Admission. It is the Board's current intention that gearing, calculated as borrowings as a percentage of the Company's gross asset value (excluding intra-group borrowings) will not exceed 40 per cent. at the time of drawdown.
 

The Investment Manager
Foresight Group CI Limited is the investment manager of the Company and will advise the Company on the acquisition of its portfolio and the development and management of assets within its portfolio. Foresight Group has extensive fund management experience with approximately £800 million of assets under management. It established its solar investment team in 2007, launched its first solar fund, Foresight European Solar Fund, in early 2008 and currently has approximately £450² million of solar assets under management. Foresight Solar VCT plc was launched in November 2010 and has invested in four utility scale UK solar projects each of which is generating returns in line with the Company’s target return. Foresight Solar VCT plc’s NAV increased from 94.5p at launch to 122.5p³ as at 31 March 2013. It has also paid all forecast dividends. Earlier this year, Foresight Group's managed funds issued the largest UK Solar index linked bond to date.
 

The Board
Foresight Solar Fund is a newly established Jersey incorporated closed-ended infrastructure investment company, with a strong Board of non-executive directors with relevant sector and listed company experience. The Board will be chaired by Alexander Ohlsson, managing partner for the law firm Carey Olsen in Jersey and an Advocate of the Royal Court of Jersey. The Board will also comprise Christopher Ambler, Chief Executive of Jersey Electricity, and Peter Dicks, currently a director of a number of quoted and unquoted companies including Polar Capital Technology Trust plc and Graphite Enterprise Trust plc. In addition, Peter Dicks has been Chairman of Foresight VCT plc and Foresight 2 VCT plc since their launch in 1997 and 2004 respectively and has been Chairman of Foresight 3 VCT plc and Foresight 4 VCT plc since July 2004. He is also Chairman of Unicorn AIM VCT plc and Private Equity Investor Plc.
 

Listing and Admission to the Main Market
The Company is offering up to 200 million ordinary shares under the Issue. The Directors may have the option to, in their sole discretion, increase the size of the Issue while it remains open for acceptance if they are of the view that the Issue is or is likely to be oversubscribed and additional assets are able to be identified into which any additional funds may be invested. It is intended that the Company will seek admission of its ordinary shares to the premium listing segment of the Official List of the UK Listing Authority and for all such shares to be admitted to trading on the main market of the London Stock Exchange. It is currently expected that a prospectus will be available in mid September 2013 with Admission currently expected to take place by late October.

RBC Capital Markets has been appointed as sole Global Co-ordinator, Sponsor and Bookrunner to the Company. Winterflood Securities Limited has been appointed as the Co-Lead Manager.
 

Footnotes
  1. These are targets only and not profit forecasts. There can be no assurance that these targets can or will be met and it should not be seen as an indication of the Company's expected or actual results or returns. Accordingly investors should not place any reliance on these targets in deciding whether to invest in ordinary shares or assume that the Company will make any distributions at all.
  2. Based on unaudited Foresight Group figures. Includes £266 million of solar debt.
  3. Based on unaudited figures.
 

Notes to Editors
Foresight Group was established in 1984 and is now the investment manager to 16 investment funds including five venture capital trusts whose shares are listed on the Official List of the UK Listing Authority and traded on the main market of the London Stock Exchange. Foresight Group's assets under management are currently approximately £800 million2. The group has offices in the United States and Italy as well as in the UK.
 

Important Notices
The contents of this announcement, which have been prepared by and are the sole responsibility of Foresight Solar Fund Limited ("Foresight Solar Fund" or the "Company"), have been approved by Foresight Group LLP solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 ("FSMA").

This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of the information in the prospectus (the "Prospectus") to be published by the Company in due course in connection with the admission of the shares of the Company to the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange plc's main market for listed securities ("Admission"). Copies of the Prospectus will, following publication, be available from the Company's registered office.

This announcement does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities in the Company, nor shall this announcement (or any part of it) be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the shares of the Company. Any decision to purchase securities of the Company must be made solely on the individual's own investigation and analysis of the Company on the basis of information contained in the Prospectus.

RBC Europe Limited (trading as RBC Capital Markets) ("RBC"), which is authorised by the Prudential Regulation Authority (the "PRA") and regulated by the Financial Conduct Authority ("FCA") and the PRA in the United Kingdom, is acting as sole global co-ordinator, sponsor and bookrunner in connection with the initial public offering and Admission. Winterflood Securities Limited ("Winterflood" and, together with RBC, the "Managers"), which is authorised and regulated in the United Kingdom by the FCA, is acting as co-lead manager to the initial public offering and Admission. The Managers are acting exclusively for the Company and for no one else and will not regard any other person as a client in relation to the initial public offering and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to clients of the Managers or for providing advice in relation to the initial public offering and Admission, the contents of this announcement or any transaction or arrangement or other matter referred to herein.

The information in this announcement is for information purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purposes whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment when the definitive Prospectus is published. In particular, the proposals referred to herein are tentative and are subject to verification, material updating, revision and amendment.

None of the Company, Foresight Group, RBC and Winterflood and any of their respective affiliates accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or undertakes any obligation to update or revise any statement made in this announcement (including, without limitation any forward looking statements) or any other information relating to the Company, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. The Company, Foresight Group, RBC and Winterflood and their respective affiliates accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.

The shares to be issued by the Company have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States. The securities may not be offered, sold, resold, pledged, delivered, distributed or otherwise transferred, directly or indirectly, into or within the United States, or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act). No public offering of the securities is being made in the United States. The Company has not been and will not be registered under the US Investment Company Act of 1940 (the "Investment Company Act") and, as such, holders of the shares will not be entitled to the benefits of the Investment Company Act. No offer, sale, resale, pledge, delivery, distribution or transfer of the securities may be made except under circumstances that will not result in the Company being required to register as an investment company under the Investment Company Act.

This announcement, and the information contained herein, is not for viewing release, distribution or publication in or into the United States, Canada, Australia, South Africa or Japan or any other jurisdiction where applicable laws prohibit its release, distribution or publication, and will not be made available to any national, resident or citizen of the United States, Canada, Australia or Japan. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes must inform themselves about, and observe, any such restrictions. Any failure to comply with the restrictions may constitute a violation of the federal securities law of the United States and the laws of other jurisdictions. This announcement does not contain or constitute an offer for sale of, or the solicitation of an offer or an invitation to buy or subscribe for, securities to any person in the United States, Australia, Canada, South Africa or Japan.

The initial public offering timetable, including the date of Admission, may be influenced by a range of circumstances such as market conditions. There is no guarantee that the initial public offering and the Admission will occur and you should not base your financial decisions on the Company's intentions in relation to the initial public offering and Admission at this stage. Acquiring securities to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning the initial public offering. The value of securities can decrease as well as increase. Potential investors should consult a professional adviser as to the suitability of the initial public offering for the person concerned. Past performance or information in this announcement or any of the documents relating to the initial public offering cannot be relied upon as a guide to future performance.

In connection with the initial public offering and the Admission, each of RBC and Winterflood and any of their respective affiliates, acting as investors for their own accounts, may purchase securities and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such securities and other securities of the Company or related investments in connection with the initial public offering and the Admission or otherwise. Accordingly, references in the Prospectus, once published, to the securities being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by any of RBC and Winterflood and any of their affiliates acting as investors for their own accounts. RBC and Winterflood do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Company's board of directors' current beliefs and expectations about future events. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, the results of operations, financial condition prospects, growth and dividend policy of the Company and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance.

These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. Forward looking statements speak only as of the date of this announcement.

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly with the total figure given.