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Foresight Solar Fund Limited Interim results to 30 June 2022

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Foresight Solar Fund Limited, a fund investing in a diversified portfolio of ground-based solar PV and battery storage assets in the UK and internationally, is pleased to announce its results for the six months ended 30 June 2022.

Click here to view the announcement.

Highlights

  • NAV increased to £754.9m (31 December 2021: £660.0m), driven by further upward revisions in power price forecasts and updates to short-term inflation assumptions; NAV per share rose 14.4% to 123.8 pence (31 December 2021: 108.2 pence).
  • Electricity generated by the global portfolio was 2.8% above base case for H1 2022, resulting from high irradiation for the UK portfolio and good operational performance.
  • Consolidated revenues and EBITDA were 18% and 26% ahead of budget for the period, respectively, driven by strong power prices.
  • The Company’s Spanish portfolio has begun to move into operations with the 99MW Lorca Portfolio successfully energising in the period and subsequently reaching full operation.
  • Second investment into standalone battery storage systems with the 50% acquisition of the 50MW Clayfords project in Aberdeenshire, UK (post-period close).
  • The Company’s global portfolio generated enough clean energy to power 189,600 homes in the period (H1 2021: 169,650 homes), avoiding 424,477 tonnes of carbon emissions.
  • Total dividend of 3.56 pence per share related to the period; the Company remains on track to deliver its 2022 target dividend of 7.12 pence.
  • Dividend cover of at least 1.5x forecast for full year 2022 and strong projected cover is expected in the near term; based on current forecasts and prevailing market conditions, the dividend for FY 2023 is expected to be covered by contracted revenues alone.

Key Metrics

 

As at

30 June 2022

As at

31 December 2021

As at

30 June 2021

Net Asset Value (“NAV”)

£754.9m

£660.0m

£596.4m

NAV per Share

123.8p

108.2p

98.0p

Gross Asset Value (“GAV”)

£1,294.9m

£1,172.0m

£1,057.2m

Total Dividend per Share declared for the period

3.56p

6.98p

3.49p

Annualised Total Shareholder Return since IPO

7.7%

5.9%

5.5%

 

Commenting on the Company’s results, Alex Ohlsson, Chairman of Foresight Solar Fund Limited, said:

“Financially and operationally, Foresight Solar performed strongly during the first half of 2022. NAV per Ordinary Share increased by 14.4%, while total revenues and consolidated EBITDA were 18% and 26% ahead of budget, respectively.  We remain firmly on track to deliver our 2022 target dividend of 7.12 pence per share and, based on the strength of the operational performance and the certainty provided by further price fixes this year, are expecting dividend cover for 2022 of at least 1.5 times.  Projected cover is expected to remain strong for the next three years; based on current forecasts and prevailing market conditions, the dividend for 2023 is expected to be fully covered by contracted revenues alone.

“Our diversification strategy is progressing well. The Company’s Spanish portfolio is now entering operations and, post-period close, we completed our second investment in battery storage systems.  Shareholder approval to allocate up to 5% of the Company’s GAV into development stage solar and battery storage assets represents another exciting channel of growth, and we are already well progressed in evaluating several development pipelines in both the UK and Europe. 

“Solar power has an integral part to play in a well-balanced future energy mix and the reduction of wholesale energy prices.   An environment that supports the development of low-cost renewable generation, as well as grid balancing technology, will provide a clear path to energy security and the Company is seeing robust demand from investors to fund the construction of these low carbon technologies.  Given the strength of industry fundamentals across all our core markets and our exciting pipeline of attractive opportunities across solar and battery storage in both the UK and Europe, Foresight Solar remains well positioned for further growth as we look to the rest of 2022 and beyond.”

 

Results presentation

Foresight Solar is holding a webcast presentation for analysts at 09:30 today. Analysts wishing to attend should contact foresightsolar@citigatedewerogerson.com.  The presentation will also be uploaded to the Company’s website.

Dividend Declaration

The Board is pleased to announce the second interim dividend relating to 2022 of 1.78 pence per ordinary share ("the Dividend"). The shares will go ex-dividend on 27 October 2022 and the Dividend will be paid on 25 November 2022 to shareholders on the register as at the close of business on 28 October 2022.

Foresight Solar confirms its dividend target of 7.12 pence per ordinary share for 2022.

The Board will continue to assess the possibility of offering scrip dividends with respect to future quarterly dividends where the scrip reference price is above NAV per ordinary share.

For further information, please contact:

Foresight Group 
+44 (0)20 3911 2318
Nish Sivarajan
InstitutionalIR@ForesightGroup.eu

 

Jefferies International Limited

+44 (0)20 7029 8000

Neil Winward

Gaudi Le Roux

Citigate Dewe Rogerson 
+44 (0)20 7638 9571

foresightsolar@citigatedewerogerson.com

Toby Moore           +44 7768 981 763

Laura Banks         +44 7545 942 738

Lucy Gibbs            +44 7957 596 729

FORESIGHT SOLAR FUND LIMITED

UNAUDITED INTERIM REPORT

FOR THE SIX MONTHS TO 30 JUNE 2022

ABOUT US

Foresight Solar Fund Limited is a closed-ended investment company investing in a diversified portfolio of ground-based solar PV and battery storage assets in the UK and internationally.

The Company aims to deliver sustainable investment returns to investors alongside strong environmental, social and governance (“ESG”) benefits.

INVESTMENT OBJECTIVES

Deliver a sustainable, progressive quarterly dividend

Develop geographical diversity

Preserve and enhance capital value

HIGHLIGHTS

AS AT 30 JUNE 2022

 

£754.9m

NET ASSET VALUE (“NAV”)

(31 December 2021: £660.0m)

123.8p

NAV PER SHARE

(31 December 2021: 108.2p)

£1,294.9m

GROSS ASSET VALUE (“GAV”)

(31 December 2021: £1,172.0m)

3.56p

DIVIDEND PER SHARE DECLARED RELATING TO THE PERIOD

(Full year to 31 December 2021: 6.98p)

7.7%

ANNUALISED TOTAL SHAREHOLDER RETURN SINCE IPO

(31 December 2021: 5.9%)

8.9%

ANNUALISED TOTAL NAV RETURN SINCE IPO

(31 December 2021: 7.3%)

189,600

UK HOMES POWERED IN THE PERIOD

(30 June 2021: 169,650)

  • Further upward revisions in power price forecasts and updates to short-term inflation assumptions drove the NAV to £754.9 million (31 December 2021: £660.0 million). This represented a 14.4% increase in NAV per share to 8 pence (31 December 2021: 108.2 pence)
  • Electricity generated by the global portfolio was 8% above base case for the first half of 2022 driven by high irradiation for the UK portfolio and good operational performance
  • With strong power prices across all markets, this resulted in total revenues and consolidated EBITDA that were 18% and 26% ahead of budget for the period, respectively
  • The Company’s Spanish portfolio has begun to move into operation with the 99MW Lorca portfolio successfully energising in the period and subsequently reaching full operation
  • Second investment into standalone battery storage systems with the 50% acquisition of the 50MW Clayfords project in Buchan, Aberdeenshire, UK (post-period close)
  • Total dividend of 56 pence per share related to the period; the Company remains on track to deliver its 2022 target dividend of 7.12 pence
  • Dividend cover of at least 5x is forecast for full year 2022 and strong projected cover is expected in the near term; the dividend for FY2023 is expected to be fully covered by contracted revenues alone, based on current forecasts and prevailing market conditions

GEOGRAPHIC FOOTPRINT

Our diversified portfolio consists of 59 assets with a total global net peak capacity of 1.043GW.

 

Since IPO, FSFL has grown in the UK and internationally. The portfolio will be further diversified in 2022 through the Spanish assets commencing operations and new investments in battery storage.

UK

Assets:

1

Wymeswold

Solar

2

Castle Eaton

Solar

3

Highfields

Solar

4

High Penn

Solar

5

Pitworthy

Solar

6

Hunters Race

Solar

7

Spriggs Farm

Solar

8

Bournemouth

Solar

9

Landmead

Solar

10

Kencot Hill

Solar

11

Copley

Solar

12

Atherstone

Solar

13

Paddock Wood

Solar

14

Southam

Solar

15

Port Farm

Solar

16

Membury

Solar

17

Shotwick

Solar

18

Sandridge

Solar

19

Wally Corner

Solar

20

Coombeshead

Solar

21

Park Farm

Solar

22

Sawmills

Solar

23

Verwood

Solar

24

Yardwall

Solar

25

Abergelli

Solar

26

Crow Trees

Solar

27

Cuckoo Grove

Solar

28

Field House

Solar

29

Fields Farm

Solar

30

Gedling

Solar

31

Homeland

Solar

32

Marsh Farm

Solar

33

Sheepbridge

Solar

34

Steventon

Solar

35

Tengore

Solar

36

Trehawke

Solar

37

Upper Huntingford

Solar

38

Welbeck

Solar

39

Yarburgh

Solar

40

Abbey Fields

Solar

41

SV Ash

Solar

42

Bilsthorpe

Solar

43

Bulls Head

Solar

44

Lindridge

Solar

45

Manor Farm

Solar

46

Misson

Solar

47

Nowhere

Solar

48

Pen Y Cae

Solar

49

Playters

Solar

50

Roskrow

Solar

51

Sandridge

Battery

Acquisition post-period end:

 

52

Clayfords1

Battery

  1. Acquired on 29 July 2022.

Australia

Assets:

1

Bannerton

Solar

2

Longreach

Solar

3

Oakey 1

Solar

4

Oakey 2

Solar

Spain

Assets:

1

Virgen del Carmen

Solar

2

Los Llanos

Solar

3

Los Salinas

Solar

4

Los Picos

Solar

CHAIRMAN’S STATEMENT

NAV growth for the period was driven by higher than forecast power prices and inflation. Alongside this, Foresight Solar has forward fixed power price contracts providing strong dividend cover for 2022 and beyond.

 

Alexander Ohlsson

Chairman

On behalf of the Board, I am pleased to present the Unaudited Interim Report and Financial Statements for Foresight Solar Fund Limited (the “Company” or the “Fund”) for the six months ended 30 June 2022.

The Company has delivered strong growth over the period, driven by increased wholesale power prices and the effects of higher than budgeted inflation. This has been supported by the Investment Manager’s revenue hedging strategy and a successful refinancing programme, which both contributed to the increase in portfolio valuation.

The war in Ukraine has compounded upward pressure on European gas prices that had already started the year at elevated levels due to supply shortages. In the current environment it is difficult to judge when energy prices and inflation will peak, although present levels are unsustainably high and in need of downward correction.

The Board is pleased with the operational performance of the portfolio during the first half of this year. Strong asset availability has allowed the Company to benefit from particularly high irradiation in the UK, resulting in generation significantly above budget. Availability of the Australian portfolio has also been in line with budget, although irradiation across the country was lower than forecast due to very wet weather.

During the first six months of 2022, the Investment Manager focused on securing new fixed price energy sale agreements for periods up to four years ahead. A flexible approach to power price hedging has allowed the Company to secure strong forecast dividend cover for 2022 and provides greater certainty on future revenues for the coming years, underpinned by attractive rates (see Case Study on page 19).

The Company also achieved a major milestone with the connection of the 99MW Lorca solar portfolio in Spain, which subsequently commenced full operations. The 26MW Virgen del Carmen project now also stands ready to connect. Post-period end, the Company also completed its second investment in battery storage systems (“BSS”) with the acquisition of a 50% stake in the 50MW Clayfords project. The Investment Manager continues to view an attractive pipeline of solar and battery storage projects, including portfolios of development stage assets following the recent change in investment policy.

Operational performance

Generation for the global portfolio was 2.8% above base case in the period, with irradiation levels 2.6% above budget. This positive variance has been predominantly driven by high irradiance in the UK and good availability across the whole portfolio.

Electricity generated by the Company’s UK portfolio was 8.0% above base case, with irradiance 8.9% above budget. The portfolio outperformance was driven by irradiance that was significantly ahead of budget, coupled with high asset availability.

In Australia, the portfolio has performed well with levels of unplanned outages during the period closer to budget assumptions. Whilst energy production for the period was 11.5% below base case, this was almost entirely driven by lower than forecast irradiation (-11.0%). This was due to Queensland and New South Wales experiencing unprecedented levels of wet weather during the Australian summer/autumn, although financially this was more than offset by power prices of over two and half times the same period last year.

Key financials and returns

For the period to 30 June 2022, the NAV per Ordinary Share increased to 123.8 pence (31 December 2021: 108.2 pence). The primary factors that have driven this increase are uplifts to both the power price forecasts and inflation. Further upward revisions in power price projections, based upon the forecasts of the Company’s three independent advisors, resulted in a total increase of 9.4 pence per share for the period. Revisions to the short-term inflation assumption, including actual inflation figures through to May, led to an increase of 5.4 pence per share for the period.

The Company has continued its active management of power price exposure by entering into new fixed priced agreements for UK assets for various periods of up to four years in advance. This has allowed the Company to secure a more stable and predictable income stream in the years ahead which is expected to underpin strong dividend cover for the coming years. Despite the quarter-on-quarter increase in power price forecasts, the Manager was able to secure prices above forecast, delivering a further increase of 0.8 pence per share. The Company’s fixed revenues, as a percentage of total expected revenues, are now 82% in 2023, 80% in 2024 and 72% in 2025. Average price fixes for the UK portfolio are £106/MWh in 2022, £115/MWh in 2023, £96/MWh in 2024 and £87/MWh in 2025.

Dividends

The Company continues to deliver a sustainable and progressive quarterly dividend to investors underpinned by renewable investments across a geographically diverse portfolio of assets.

The Company declared interim dividends totalling 3.56 pence per share in respect of the first half of 2022 and is on track to deliver its target of 7.12 pence per share for the year. The first interim dividend of 1.78 pence was paid on 26 August 2022.

Based on the portfolio’s strong operational performance and the certainty provided by further price fixes this year, the Investment Manager currently forecasts a minimum dividend cover of 1.5x for FY2022 on a cash covered basis. Based on current forecasts and market conditions, it is also expected that the dividend for FY2023 will be fully covered by contracted revenues alone.

Assets under construction

The Company’s Spanish portfolio began to move into operations with the 99MW Lorca solar portfolio in Granada energised across all three sites in late June and reached full commercial operation on 11 August 2022. The 26MW Virgen del Carmen solar park in Huelva also completed all required commissioning during July; although it has required an exceptional authorisation from the Spanish grid operator to allow connection given the current elevated risk of wildfires in the region. A permit has now been granted and the contractor is working to schedule connection as soon as possible.

The 50% investment in Sandridge Battery Storage Limited, a 50MW lithium-ion battery storage system located in the UK, has experienced delays to construction resulting from a deferment to the programme of the grid connection. While this means that operations will now likely commence during 2023, as opposed to the fourth quarter of 2022 as previously expected, the effects of delayed completion are expected to be more than offset by the improved market outlook for large-scale battery assets.

Investments

Post-period end, the Company completed its second investment in a BSS asset with the 50% equity stake in the Clayfords battery storage project. This is a 50MW lithium-ion BSS based in Buchan, Aberdeenshire, UK. In addition, the Investment Manager has secured exclusive positions on several further BSS projects that it expects to convert into acquisitions in the second half of the year.

Change to the investment mandate

Attractive risk-adjusted returns, alongside a balanced development of the portfolio, are central to the Investment Manager’s approach to new investment opportunities. At the AGM in June 2022, Shareholders voted overwhelmingly in support of an allocation of up to five per cent of the Company’s Gross Asset Value (“GAV”) into development stage solar and battery storage assets. The Board views this as an exciting addition to the investment policy that will help drive the Company through its next phase of growth and the Investment Manager is already well progressed in evaluating several development pipelines in both the UK and Europe.

Debt facilities

At 30 June 2022, the total outstanding debt of the Company and its subsidiaries amounted to £540.0 million (31 December 2021: £512.0 million), with long-term debt representing £414.1 million (31 December 2021: £388.6 million). Total gearing represented 41.7% of GAV (31 December 2021: 43.7%) (please refer to the Alternative Performance Measures (“APMs”) shown on page 78).

Long-term structural gearing represented 32.0% of GAV (31 December 2021: 33.2%), well within the 30-40% long-term debt target. See pages 33 and 34 for details of GAV and gearing.

The Company’s £150.0 million revolving credit facility (“RCF”) was drawn to a total of £125.9 million at 30 June 2022. Allowing for the Company’s funding commitments to projects in construction, including recent acquisitions, the Company has a total of £24.2 million available from free cash and undrawn RCF. In addition, it can expect to release at least an additional £15.0 million of free cash generated by the underlying assets early in the final quarter of the year. Furthermore, the Company’s RCF has an uncommitted accordion facility of £30.0 million which is also available for the pipeline of acquisitions.

Earlier in the year, the Company also completed the successful refinancing of the Oakey 1 and Longreach projects in Australia on more favourable terms, providing an uplift of 0.2 pence per share.

The Board and the Investment Manager will continue to evaluate the optimal capital structure for the Company, including considering the possibility of future equity fundraisings to reduce leverage, while maintaining financing capacity for the investment pipeline. The Board believes the current level of debt to be appropriate for the size and revenue profile of the Company.

Sustainability update

The Company continues to build on its well-established sustainability credentials with its portfolio generating enough clean energy to power 189,600 homes for the period. This, in turn, enabled savings of 424,477 tonnes of CO2 equivalent (“tCO2e”) when compared to coal.

As part of its ongoing commitment to transparency, the Company continues to report on its Scope 1 and 2 emissions alongside avoided emissions. This allows for a more holistic view of the Company’s “net carbon position”, which continues to make a meaningful contribution to international decarbonisation goals.

This has driven a focus on further reducing Scope 2 emissions and has seen a material uplift in the number of assets receiving their energy supply from green tariffs, up from 59% of assets at 31 December 2021, to 88% at 30 June 2022.

The Company maintained its central, proactive role within the industry, contributing to Solar Energy UK’s “Responsible Sourcing Task Group” and the PRI’s “Private Markets Human Rights Working Group”, as well as continuing to enhance its own due diligence processes. Further details of the Company’s sustainability performance can be found in the Sustainability and ESG section on pages 24 to 28.

Corporate governance

Board composition remains under regular review by the Company’s Nomination Committee to ensure that the Non-Executive Directors have a diverse range of relevant expertise to guide the Company and to engage with the Investment Manager in the best interests of the Shareholders and all other stakeholders.

Peter Dicks, who has been a Non-Executive Director of the Company since its launch, will be stepping down from the board and the Company will be announcing his successor in the near future.

Outlook

Industry fundamentals remain strong, and the Company is well positioned moving forwards, given its strong pipeline of opportunities and the increasingly important role of solar power in the energy transition.

As this report is published, the energy industry is digesting initial policy announcements from the new UK Government on how it intends to reduce surging energy costs for consumers and businesses.

The Investment Manager has provided input to earlier discussions on this subject both directly and via industry bodies representing the renewable energy sector. Based on these interactions, the Company remains optimistic that the new administration will adopt a practical and progressive approach to existing commitments and towards encouraging the necessary investment in clean energy production that will ultimately reduce wholesale energy prices and improve energy security.

As the UK and the EU seek to lessen the impact of soaring gas prices on energy bills, expectations are for wholesale power prices to remain high in the short to medium term, compared to pre-pandemic levels, due to high commodity prices. This is evident in the forward rates observed by the Investment Manager out to the second half of 2027. Improving domestic energy security and reducing reliance on volatile gas prices can be achieved through the deployment at scale of clean energy generation in conjunction with flexible storage capacity. Solar power has an integral part to play in a well-balanced future energy mix. Solar PV generation enjoys the lowest levelised cost of grid scale energy production, it can be deployed quickly, and it is the perfect complement to wind power, especially as wind resource is often low in the summer months when solar is at peak production. Coupling solar with battery storage also helps to balance the inherently intermittent nature of production.

In the UK, large-scale ground-mounted solar is poised to be deployed rapidly and at scale. A pipeline of over 40GW of new solar sites are currently in development, according to the UK solar industry. Current forecasts are that around 1GW of ground-mounted solar could be added in 2023, with 1-2GW per annum added thereafter for 2024 and 2025.

For utility scale battery storage, a pipeline of more than 20GW (over 800 projects) is on the near-term horizon. The Investment Manager notes that there is robust demand from investors to fund the construction of these low carbon technologies, even on a subsidy-free basis. The Company therefore believes it is logical for the UK Government to create an environment that is supportive of the development of low-cost domestic renewable generation and the balancing of resource. This provides a clear path to energy security and reduces the UK’s reliance on uncontrollable and unpredictable international gas prices.

Climate change commitments will return to the spotlight in November as COP27 takes place in Egypt. Alongside the pledges to combat global warming, governments across Europe are also rapidly seeking to distance themselves from a reliance on Russian oil and gas following the invasion of Ukraine. Whilst large-scale solar is already an integral part of the energy transition away from fossil fuels, it is reasonable to assume that it will also benefit from a drive to improve the security of energy supply. The Company continues to view Spain as a highly attractive market given clarity around the auction process and the Spanish Government’s stated target of delivering an 60GW of renewable capacity by 2030.

Exposure to power price volatility will continue to be actively managed by the Investment Manager, with a focus on securing robust dividend cover for future periods. In this regard, the Company has made good progress during the period, securing a high proportion of contracted revenues at attractive prices out until 2026.

Alexander Ohlsson

Chairman

14 September 2022

INVESTMENT PORTFOLIO

Portfolio summary

As at 30 June 2022, the Company’s portfolio comprised 59 assets with a total net peak capacity of 1.043GW. In the UK, the Company has an operational portfolio of 50 assets representing a total installed capacity of 723MW. In Australia, the Company owns four operational solar assets with an additional installed capacity of 170MW.

The Company owns a further four assets in Spain totalling 125MW of installed capacity. The Lorca portfolio, comprising 99MW, reached full operation post-period end in August and the 26MW Virgen del Carmen project is fully commissioned but awaiting a final connection date. Both projects were treated as remaining in construction at the period end.

Post-period end, in July, the Company completed its second investment in battery storage systems (“BSS”) with the 50% acquisition of Clayfords Energy Storage Limited, adding a further 25MW of capacity to the portfolio.

The Company’s UK solar assets all benefit from regulatory support and are accredited under the Renewables Obligation (“RO”) scheme, except for Yardwall which is a Feed-in Tariff scheme (“FiT”) accredited asset (representing less than 1% of the UK portfolio).

Most of the Australian assets benefit from subsidies in the form of Large-Scale Generation Certificates (“LGCs”). The BSS assets will predominantly trade on a merchant basis, although can also bid for fixed price service contracts under the capacity auctions.

The Company’s Spanish projects do not receive regulatory support; but, all benefit from long-term Power Purchase Agreements (“PPAs”) providing a high proportion of contracted revenues from strong counterparties.

Current portfolio

 

 

 

 

Installed peak

Operational/

Acquisition

Revenue

 

Type

Asset

capacity (MW)

under construction

cost1 (£m)

type2

UK

1

Solar

Wymeswold3

34

Operational

45.0

ROC/Electricity sales

2

Solar

Castle Eaton

18

Operational

22.6

ROC/Electricity sales

3

Solar

Highfields

12

Operational

15.4

ROC/Electricity sales

4

Solar

High Penn

10

Operational

12.7

ROC/Electricity sales

5

Solar

Pitworthy

16

Operational

19.3

ROC/Electricity sales

6

Solar

Hunters Race

10

Operational

13.3

ROC/Electricity sales

7

Solar

Spriggs Farm

12

Operational

14.6

ROC/Electricity sales

8

Solar

Bournemouth

37

Operational

47.9

ROC/Electricity sales

9

Solar

Landmead

46

Operational

52.4

ROC/Electricity sales

10

Solar

Kencot Hill

37

Operational

49.5

ROC/Electricity sales

11

Solar

Copley

30

Operational

32.7

ROC/Electricity sales

12

Solar

Atherstone

15

Operational

16.2

ROC/Electricity sales

13

Solar

Paddock Wood

9

Operational

10.7

ROC/Electricity sales

14

Solar

Southam

10

Operational

11.1

ROC/Electricity sales

15

Solar

Port Farm

35

Operational

44.5

ROC/Electricity sales

16

Solar

Membury

16

Operational

22.2

ROC/Electricity sales

17

Solar

Shotwick

72

Operational

75.5

ROC/Electricity sales

18

Solar

Sandridge

50

Operational

57.3

ROC/Electricity sales

19

Solar

Wally Corner

5

Operational

5.7

ROC/Electricity sales

20

Solar

Coombeshead

10

Operational

36.6

(Acquired as portfolio)

ROC/Electricity sales

21

Solar

Park Farm

13

22

Solar

Sawmills

7

23

Solar

Verwood

21

24

Solar

Yardwall

3

FiT/Electricity sales

25

Solar

Abergelli

8

Operational

3.7

ROC/Electricity sales

26

Solar

Crow Trees

5

Operational

1.8

ROC/Electricity sales

27

Solar

Cuckoo Grove

6

Operational

2.5

ROC/Electricity sales

28

Solar

Field House

6

Operational

3.1

ROC/Electricity sales

29

Solar

Fields Farm

5

Operational

1.7

ROC/Electricity sales

30

Solar

Gedling

6

Operational

1.9

ROC/Electricity sales

31

Solar

Homeland

13

Operational

5.2

ROC/Electricity sales

32

Solar

Marsh Farm

9

Operational

4.0

ROC/Electricity sales

33

Solar

Sheepbridge

5

Operational

1.9

ROC/Electricity sales

34

Solar

Steventon

10

Operational

4.2

ROC/Electricity sales

35

Solar

Tengore

4

Operational

1.3

ROC/Electricity sales

36

Solar

Trehawke

11

Operational

4.7

ROC/Electricity sales

37

Solar

Upper Huntingford

8

Operational

3.1

ROC/Electricity sales

38

Solar

Welbeck

11

Operational

4.4

ROC/Electricity sales

39

Solar

Yarburgh

8

Operational

3.4

ROC/Electricity sales

40

Solar

Abbey Fields

5

Operational

1.5

ROC/Electricity sales

41

Solar

SV Ash

8

Operational

3.4

ROC/Electricity sales

42

Solar

Bilsthorpe

6

Operational

1.9

ROC/Electricity sales

43

Solar

Bulls Head

6

Operational

2.2

ROC/Electricity sales

44

Solar

Lindridge

5

Operational

1.7

ROC/Electricity sales

45

Solar

Manor Farm

14

Operational

6.1

ROC/Electricity sales

46

Solar

Misson

5

Operational

2.0

ROC/Electricity sales

47

Solar

Nowhere

8

Operational

3.7

ROC/Electricity sales

48

Solar

Pen Y Cae

7

Operational

2.9

ROC/Electricity sales

49

Solar

Playters

9

Operational

4.0

ROC/Electricity sales

50

Solar

Roskrow

9

Operational

3.7

ROC/Electricity sales

51

Battery

Sandridge

25

Under construction

12.7

Merchant

UK subtotal

748

 

697.8

 

Australia

1

Solar

Bannerton

534

Operational

22.9

LGC/Long-term PPA

2

Solar

Longreach

17

Operational

5.7

Long-term PPA/

Electricity sales

3

Solar

Oakey 1

30

Operational

9.2

Long-term PPA/ Electricity sales

4

Solar

Oakey 2

70

Operational

34.0

LGC/Electricity sales

Australia subtotal

170

 

71.8

Spain

1

Solar

Virgen del Carmen

26

Commissioned –

awaiting connection

18.0

Long-term PPA/

Electricity sales

Lorca portfolio

2

Solar

Los Llanos

49

Commenced operation in August 2022

64.2

(Acquired as portfolio)

Long-term PPA/Electricity sales

3

Solar

Los Salinas

30

4

Solar

Los Picos

20

Spain subtotal

125

 

82.2

 

 

 

 

Total

1,043

 

851.8

 

 

 

 

Acquisition post-period end

1

Battery

Clayfords5

25

Under construction

14.1

Merchant

  1. Original equity cost at time of acquisition, including transaction costs. For assets under construction, this includes estimated construction costs to start of operations. International acquisition costs converted to GBP including transaction costs at the applicable rate at the time of acquisition.
  2. Definitions of revenue types are as follows: ROC – Renewable Obligation Certificates (UK), FiT – Feed-in Tariff (UK) and LGC – Large-Scale Generation Certificates (Australia).
  3. Includes the 2MW extension acquired in March 2015.
  4. Accounts for the 48.5% stake the Company holds of Bannerton (110MW).
  5. Acquired 29 July 2022.

 

INVESTMENT MANAGER’S REPORT

 

Market developments

United Kingdom

At the time of writing, the energy industry is awaiting further details on the initial policy announcements put forward by the new Government regarding how it intends to intervene in energy markets to reduce spiralling energy costs for consumers and businesses.

The Company’s immediate focus is on any subsequent implications for the renewable generation sector, which may be both near term and involve a future wider reform of the electricity markets. An expansion of the “windfall tax” on oil and gas companies has been firmly ruled out by the new Prime Minister. Such an approach would have proved challenging as most generators, the Company included, typically forward sell power production up to several years in advance, making it difficult to unpick where the benefits of higher power prices were received.

The new administration’s favoured approach to the renewable energy market, now announced, is to encourage generators to move onto long-term fixed-price scheme contracts that are significantly lower than current prices, which appears to be based on the successful Contracts for Difference (“CfD”) system. The intention would be for those generators on legacy Renewable Obligation (“RO”) projects to voluntarily forgo the right to sell capacity at wholesale prices in return for lower fixed rate prices for up to 15 years. Whilst further details are required, this may present a progressive option allowing renewable generators to ‘trade-in’ the right to sell at high near-term power on the wholesale market in return for a long-term stable income stream. The Investment Manager has been providing input to such discussions via its membership of renewable energy trade bodies and is awaiting further details to assess the potential consequences of such a change.

The new Government must also balance moves to rein in high energy prices, and other potential market reforms, whilst creating an environment that encourages the significant investment required to build out clean and flexible energy provision to meet its legally binding target of “net-zero” carbon emissions by 2050. A prolonged period of regulatory uncertainty is not conducive to encouraging the investment in renewable energy required to ultimately improve domestic energy security and produce significant volumes of electricity at a low marginal cost.

Under supportive conditions, capital is readily available for investment in the significant development pipelines of large ground-mounted solar projects and flexible generation, poised to deploy rapidly and at scale in the UK. The Investment Manager observes robust demand from specialised energy investors to fund subsidy-free assets. However, a well-considered regulatory support mechanism will provide confidence for more generalist institutional investors to also allocate capital to the sector and support the construction volumes required.

Regarding the CfD scheme, it was positive to see the results of the fourth-round allocation of the programme in July 2022 that awarded approximately 10GW of capacity across offshore wind, onshore wind and solar PV. Solar PV accounted for 2,209MW of future allocation at a strike price equivalent to around £55/MWh in 2021 prices. The fact that the CfD price is significantly below levels at which UK wholesale energy prices are expected to remain over the medium term demonstrates that renewable energy investors are willing to pass up significant value upside during times of high prices, to benefit from greater revenue certainty over a longer period.

Australia

The Australian market experienced unprecedented volatility in power prices during the first half of the year, which contributed to higher than budgeted revenues for the projects. The other key development during the period was the suspension of the National Electricity Market (“NEM”) by the Australian Energy Market Operator (“AEMO”) between 15 and 22 June due to rolling seven-day spot prices breaching the regulatory cumulative price threshold of A$1.36 million. The direct impact on the Company was that both the Oakey 1 and 2 projects were curtailed for a period of five days. At the same time, however, Australia has continued to experience high volatility in its power prices, which have been skewed to the upside and have contributed to higher revenues for the Company’s assets.

In May 2022 Australia elected its first Labor Government in almost a decade with the new Prime Minister, Anthony Albanese, promising to transform Australia into a “renewable energy superpower”. The new Labor Government has so far not proposed a replacement for the Large-scale Renewable Energy Target (“LRET”), although it has endorsed a domestic emissions reduction target of 43% by 2030, which is higher than the 26-28% target set by the previous Coalition Government. The new Government has also been supportive of the local carbon offset market, reflected in the return of positive sentiment to the Carbon Credits (ACCU) spot markets. In response to the election outcome, the carbon credit spot price grew 18% in late May, closing at A$35.50/t. ACCU prices ranged from A$16-A$18 in the period 2019-2021.

At state level, the New South Wales Government is in the development phase of the state’s first Renewable Energy Zone (“REZ”) in the Central-West Orana region. The REZ promises 10GW of renewables by 2030 and 1GW of pumped hydroelectric power by 2036 that is expected to encourage up to A$5 billion in private investment in the region.

The upgrade of the Queensland-New South Wales interconnector was successfully completed in April, allowing the transmission line to recommence full service. This has reduced the oversupply of production in the Queensland market that had been causing prices to fall in the prior period. Alongside this, the Callide coal power station has been out of service since the first quarter of 2021 and is scheduled to remain out of service until the first quarter of 2023. These two factors exacerbated the supply-demand imbalance in Queensland and New South Wales, resulting in upward price pressure during the period.

Spain

In June 2022, the Governments of Spain and Portugal received European Commission approval to introduce a temporary measure to cap the price of gas used to generate electricity. Both Governments predict that the measure, due to be in effect until 31 May 2023, will on average lead to a 20% reduction in household energy prices. In addition, the suspension of the 7% tax on power generation has been extended until the year end.

The Spanish Government has recently proposed a new bill that would implement an extraordinary new sales tax of 1.2% on domestic sales energy firms. This is not expected to impact the Company’s Spanish portfolio as it is currently only expected to apply to companies with an annual turnover above €1 billion.

The Spanish Government has also announced details of the next “pay-as-you-bid” renewable energy auction for a total capacity of 520MW due to take place on 25 October 2022. This auction will have a specific focus on biomass, concentrated solar-thermal power (“CSP”) and distributed solar PV. The Government also published the criteria for the upcoming “capacity auctions” that will award grid capacity for the development of new renewable energy projects. Whilst the authorities have tightened the criteria for submissions into the auctions, this is expected to favour projects that are better advanced in their stage of development in order to deliver on Spain’s ambitious renewable energy deployment targets.

In terms of market activity, appetite for renewable energy projects remains high and multiple acquisitions and financings have been announced during the period. The Investment Manager continues to track opportunities in the Spanish market, including several pipelines of development stage investments with known counterparties.

Power prices

Historic power prices

United Kingdom

Wholesale power prices during the six-month period remained at all-time highs, peaking in March at £250/MWh before reducing to ~£154/MWh through the second quarter of 2022. High pricing continues to be driven by the commodity market, most notably gas, which remains the most significant driver of wholesale power prices.

The average power price achieved across the UK portfolio during the period, including fixed price arrangements, was £106.69/MWh, versus £56.40/MWh in the first half of 2021, an increase of 89% year-on-year.

As a result of the elevated power price environment, the Company has identified the opportunity to increase the percentage of annual contracted revenues by entering new fixed price arrangements for specific portfolio assets for periods up to 2026. The fixed price arrangements were entered at prices above forecasts for the respective periods. The Company will continue to monitor forward electricity prices and, where appropriate, will enter into new fixed price arrangements.

Australia

During the first half of 2022, the time-weighted average power price across the NEM for the reporting period was A$175/MWh, an increase of 191% compared to the average power price of A$60/MWh in 2021 for the same reporting period. This represents the highest semi-annual average in the last decade.

In Queensland, there were several notable factors that contributed to higher power prices, including 1) the outage at the Callide coal plant, which is expected to continue into 2023; 2) increased heating requirements due to colder than average temperatures in the state; and 3) significant rainfall during the year resulting in lower irradiance and output by rooftop/utility scale solar farms, therefore adding further price pressure via reduced supply. In combination, this resulted in Queensland recording an average price during the period of A$236/MWh compared to A$85/MWh during the first half of 2021.

In Victoria, pressure on supply was not as pronounced given operational coal plants experienced significantly less outages than in Queensland, however, colder weather and higher gas prices still led to an average power price of A$140/MWh for the period compared to A$48/MWh for the first half of 2021.

Marginal Loss Factors (“MLFs”), representing the transmission losses impacting generators’ annual revenues based on the location of the grid connection, were released for FY2023 in April 2022. The renewed MLFs for the four Australian assets have seen an increase of 0.7%-3.4% compared to the loss factors assigned last year, which in turn will have a positive impact on the asset’s net cash position.

Project

2021/22 MLF

2022/23 MLF

Variance

Bannerton solar farm

0.8633

0.8928

3.42%

Longreach solar farm

0.9267

0.9334

0.72%

Oakey 1 solar farm

0.9711

0.98

0.92%

Oakey 2 solar farm

0.9711

0.98

0.92%

Subsidy revenues

Buy-out prices for Renewables Obligation Certificates (“ROCs”) in the 2022/23 annual compliance period increased to £52.88 (2021/22 compliance period: £50.80), reflecting the average monthly percentage change in RPI during 2021. On average, the Company received 1.42 ROC/MWh across the UK portfolio. The 2022/23 FiT rate for the Yardall asset is £79.387/MWh (2021/22: £74.60/MWh).

In Australia, the average LGC price secured by the portfolio assets during the period was A$11.31 per certificate, which was lower than prior years due to significantly higher power prices, thereby reducing the value paid for certain assets. The Company entered new agreements for the sale of LGCs at fixed prices out to 2028-2030, with Origin Energy limiting the impact of LGC market price volatility on the portfolio. For Bannerton, the fixed price with the Victorian Government from July 2023 to June 2028 will be determined by a put/call option. Longreach and Oakey 1 solar farms surrender their LGCs to the Queensland Government as part of the Solar 150 PPAs that are in place until 2030.

Power price forecasts

The Investment Manager uses forward-looking power price assumptions to assess the likely future income of the portfolio assets for valuation purposes. The Company’s assumptions are formed from a blended average of the forecasts provided by three third-party consultants, adjusted by the Investment Manager for the expected capture price discounts for solar generation as deemed appropriate. For assets with fixed price arrangements in place, the contracted values are used in place of the blended forecast. For assets with subsidiary arrangements in place for a period shorter than the assumed useful economic life of the asset, the blended forecast is used for the remaining period.

United Kingdom

During the period, power price forecasts increased materially compared to December 2021 due to the increase in wider commodity prices as discussed in the previous section. As a result of the high short-term price forecasts, the Company’s forecasts reflect an average decrease in power prices in real terms of 4.8% per annum over the duration of the forecasts. The average annual decrease in the longer term is 1.1%, largely reflecting the Company’s view on capture price discounts.

Where the assumed asset life extends beyond 2050, the Investment Manager has assumed no real growth in forecast power prices.

Australia

The significant increase in global thermal commodity prices over the prior period has passed through to electricity prices, with both TWAs (Time Weighted Averages) and DWAs (Dispatch Weighted Averages) resulting in a spike in 2023 prices that is only forecast to return to more normalised levels by 2024-2025. In the medium to long term, power prices are expected to continue rising as coal retires either due to economics or end-of-life, and gas/storage are increasingly used at the margin.

As solar generation continues to build out, the gap between wholesale power prices and solar capture prices is expected to widen as price cannibalisation increases.

Revenue analysis

During the period, approximately 42% of total revenue was derived from subsidies, with the remaining 58% from the sale of electricity. In recent years, subsidised income has typically accounted for between 50-60% of total revenues and the change observed in this period is the direct result of significantly higher merchant prices and fixed power sales accounting for a higher proportion of revenues.

The Company defines “contracted revenues” as those that are under fixed price arrangements and therefore have a high degree of payment certainty. Revenue from both subsidies and PPA fixes are considered contracted, whereas day-ahead electricity sales are considered merchant revenue, or “uncontracted”.

Contracted revenues for the Company portfolio, as a percentage of the total expected revenues, are now forecast as 73% for FY2022, 82% in 2023, 80% in 2024 and 72% in 2025.

On a net present value basis as at 30 June 2022, contracted revenues over the entire investment period represented 55% of the total forecasted revenues.

The Company continues to minimise the impact of power price volatility to future cash flows by entering fixed price arrangements for the sale of electricity to achieve a high percentage of annual fixed revenues in the short and medium term.

This will predominantly be achieved by actively managing the power price exposure of the UK portfolio on a periodic basis, primarily by fixing electricity sales in summer seasons due to the seasonal production profile of solar assets, to support the Company’s dividend policy while allowing it to capture potential upsides of power price volatility.

Note: Forecast revenues remain subject to the portfolio achieving budgeted generation and PPA counterparties fulfilling their obligations.

Key investment metrics

 

 Six months to

Six months to

Year to

30 June

30 June

31 December

2022

2021

2021

Market capitalisation

 £712.4 million

£602.7 million

£618.5 million

Share price

116.8 pence

99.0 pence

101.4 pence

Dividend declared per share for the period

 3.56 pence

3.49 pence

6.98 pence

Gross Asset Value (“GAV”)

 £1,294.9 million

£1,057.2 million

£1,172.0 million

Annual total return (NAV) since IPO

8.9%

5.9%

7.3%

Annual total shareholder return since IPO

 7.7%

5.5%

5.9%

Net Asset Value (“NAV”)

£754.9 million

£596.4 million

£660.0 million

NAV per share

 123.8 pence

98.0 pence

108.2 pence

Profit after tax for the period

£116.1 million

£34.2 million

£117.9 million

The purpose and calculation methodology of the key APMs are shown on page 78.

Investment performance

The Net Asset Value per share as at 30 June 2022 increased by 14.4% to 123.8 pence compared to 108.2 pence as at 31 December 2021.

Movements in Net Asset Value

A breakdown in the movement of the Company’s NAV during the reporting period is shown in the table below.

NAV

NAV

per share

NAV as at 31 December 2021

£660.0m

108.2p

Dividend paid

(£21.3m)

(3.5p)

Fund costs

(£5.0m)

(0.8p)

Time value

£19.7m

3.2p

Other adjustments

(£0.2m)

(0.1p)

Project actuals

£2.9m

0.5p

Foreign exchange movements

£2.7m

0.5p

Power price forecasts

£56.5m

9.3p

PPA fixes

£5.1m

0.8p

Inflation

£33.1m

5.4p

Bannerton refinancing

£1.4m

0.3p

NAV as at 30 June 2022

£754.9m

123.8p

Valuation methodology

The Investment Manager is responsible for providing fair market valuations of the Company’s underlying assets to the Board of Directors. The Directors review and approve these valuations following appropriate examination and challenge. Valuations are undertaken quarterly. A broad range of assumptions are used in the valuation models. These assumptions are based on long-term forecasts and are not materially affected by short-term fluctuations, economic or portfolio technical performance.

It is the policy of the Investment Manager to value with reference to Discounted Cash Flows (“DCF”) from the date of acquisition. Assets under construction are valued at cost until the date of commissioning and start of operations. Revenues accrued during construction, or the commissioning process, do not form part of the DCF calculation in making a fair valuation.

The current portfolio consists of non-market traded investments and valuations are based on a DCF methodology or held at cost where the assets have not yet reached commissioning. This methodology adheres to both IAS 39 and IFRS 13 accounting standards (page 56) as well as the International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines.

The Company’s Directors review and challenge the operating and financial assumptions, including the discount rates, used in the valuation of the Company’s portfolio and approve them based on the recommendation of the Investment Manager.

Discount rates for valuation

The Investment Manager regularly reviews the discount rates used across the portfolio to ensure they remain in line with any changes to the market and risk profile of the Company. This analysis is based on valuation information received from participating in multiple transactions with comparable assets, alongside confirmatory views from independent third parties. The discount rate used for the UK portfolio is unchanged at 6.0% on a levered basis (6.0% as at 31 December 2021).

The discount rate used for UK asset cash flows which have received lease extensions beyond the initial investment period of 25 years is 7.00% for subsequent years, reflecting the merchant risk of the expected cash flows beyond the initial 25-year period.

For the Australian portfolio, assets are valued using a discount rate which is dependent on the level of contracted revenues in place. The weighted average discount rate across the Australian portfolio is 7.91% on a levered basis compared to 7.88% as at 31 December 2021.

The weighted average levered discount rate across the portfolio is now 6.23% compared to 6.26% as at 31 December 2021. No changes were made to the underlying rates used in the period.

Non-UK asset valuations are updated quarterly to reflect movements related to exchange rates.

Asset life

The expected weighted average life of the UK portfolio as at 30 June 2022 is 30.7 years (31 December 2021: 30.6 years) from the date of commissioning. This represents a remaining portfolio useful life of 23.5 years when the historical operational periods are taken into consideration.

The average useful economic life across 40 of the 50 operational UK assets goes beyond 25 years, averaging 32.0 years from the date of commissioning. Conservative operational and lifecycle costs are incorporated into the extended useful life period.

The useful economic life for assets located in Australia is 34.4 years (31 December 2021: 34.4 years).

 

Dividends paid

The Company paid dividends of £21.3 million during the six-month period to 30 June 2022, or 3.5 pence per share.

Fund costs

Total costs of £5.0 million, which include management fees, financing, other costs and corporation tax, were incurred by the Company and its subsidiaries on a consolidated basis during the period.

Time value

A value uplift resulting from moving the valuation date forward and therefore bringing future cash flows closer to the present date (and therefore discounting them less).

Other adjustments

Working capital adjustments in relation to the Company and its subsidiaries.

Project actuals

Reflects the cash performance of the portfolio compared with the modelled forecast; the uplift of £2.9 million is primarily driven from generation levels being above budget on the UK portfolio.

Foreign exchange movements

Fluctuations in the exchange rate over the period impacted the GBP valuation of Australian assets.

Power price forecasts

The Company uses forward-looking power price assumptions to assess the likely future income of the portfolio assets for valuation purposes. The Company’s assumptions are based upon a blended average of forecasts provided by third-party consultants and are updated on a quarterly basis.

PPA price fixing

The Company has successfully fixed the pricing of additional PPAs across the UK portfolio at pricing in excess of the current market forecasts used in the valuation modelling.

Inflation

This update reflects actual inflation for the period which has been materially in excess of the 5% forecast used in the valuation modelling for 2022. The forecast for the second half of 2022 remains at 5% (annualised) as previously reported. Assumed inflation for FY2022 is circa 9% comprising of actual inflation to 30 June 2022 of around 6%, blended with 5% for the remainder of the year.

Refinancings

During the period the Company successfully refinanced the Longreach and Oakey 1 assets in Australia for a total facility size of A$59.0 million. The Lorca portfolio in Spain was also refinanced, releasing €28.0 million.

Valuation sensitivities

Where possible, assumptions are based on observable market and technical data. In many cases, such as forward power prices, independent advisors are used to provide evidenced information enabling the Investment Manager to adopt a prudent approach. The Investment Manager has set out the inputs which it has ascertained would have a material effect upon the NAV in note 16 of the Financial Statements. All sensitivities are calculated independently of each other.

CASE STUDY

POWER PRICE FIXING

OVERVIEW

FSFL employs an active hedging strategy for future power prices that is overseen by the Investment Manager’s portfolio team.

Given different market arrangements in each geography, the need for active power price management is led by the revenue structures set at financial close. In Australia, most projects are backed by long-term Power Purchase Agreements (“PPAs”) or CfDs for up to 20 years with a merchant element. Revenues for the Spanish assets are underpinned by ten-year fixed price PPA terms with investment grade counterparties for most of the output.

For the existing UK solar portfolio, revenues comprise a mix of subsidies and the sale of electricity to third-party offtakers, with broadly a 50/50 split. To access the electricity markets, projects contract with energy companies, or offtakers, via a PPA.

It is the offtakers who provide access to the wholesale markets and act as broker to arrange fixed price sales to third parties. PPA arrangements for the Company’s UK portfolio are spread across five primary offtakers, each of which are the trading departments of well-capitalised international energy corporations.

Standard framework PPA contracts in the UK typically range from five to 15 and in their most basic form allow a generator to sell production at the available “day-ahead” wholesale market price, with the offtaker charging a margin. Arrangements generally also offer the ability to fix prices for periods up to several years ahead, liquidity permitting, where the offtaker will match buyers and energy generators at an agreed price. The Company has no relationship with the end purchasers and thus counterparty risk rests with these offtakers whose role it is to hedge energy price exposure by arranging back-to-back contracts.

General PPA arrangement for FSFL’s UK projects

  • Typical PPA contracts allow the Company to fix periods up to five years in advance, subject to liquidity.
  • These periods consist of six-month blocks for “winter” (1 October – 31 March) or “summer” (1 April – 30 September).
  • Periods can also be fixed independently of each other. i.e., no obligation to roll forward consecutive periods.

Active power price management

The portfolio team receives regular updates on forward prices up to five years ahead from its offtake partners. The team compares rates on offer across various periods against internal forecasting models with the primary aim of locking-in prices that build certainty for future dividend cover.

Status of contracted revenues for the portfolio

The table below sets out the average PPA fixed price achieved for the UK portfolio in each calendar year.

As at 29 July 2022

2022

2023

2024

2025

Average fixed price for UK portfolio £/MWh

£106

£115

£96

£87

Scenario projections for dividend cover

The following table sets out the projections of forecast dividend cover based solely on the contracted element of revenues over the forecast period, assuming current forecasts and market conditions.

Dividend cover projections – scenarios

2023

2024

2025

Proportion of contracted revenue for the global portfolio

82%

80%

72%

Scenarios

Scenario 1 – Dividend grows at 5% p.a. from 2023

1.48x

1.09x

0.86x

Scenario 2 – Dividend grows at 3% p.a. from 2023

1.49x

1.12x

0.90x

Scenario 3 – Dividend grows at 1% p.a. from 2023

1.51x

1.16x

0.94x

NB: This data is presented purely for illustrative purposes and should not be interpreted as future dividend guidance. The Company’s dividend for 2023 will be set by the Board alongside the Annual Report for FY2023.

Notes: Forecast revenues remain subject to the portfolio achieving budgeted generation and PPA counterparties fulfilling their obligations.

Scenarios presented assume that the current RCF balance is paid down to 72% of availability as per the five-year trailing average. Also, assumes only fixed PPA revenues from the Spanish portfolio and contracted revenue from the Australian assets. No income from Sandridge or Clayfords BSS assets included as merchant.

ASSET MANAGER’S REPORT

Global portfolio performance

Across the international portfolio, electricity generation for the Company portfolio was 2.8% above base case, with irradiation levels 2.6% above budget. Whilst overall above budget, the global production figure has been impacted by lower than expected irradiation levels in Australia.

UK portfolio performance

Operational performance of the UK portfolio during the period has been higher than expected with electricity generation 8.0% above base case, once adjusting for minor compensation payments received from operation and maintenance (“O&M”) counterparties. Performance has been driven by good plant availability and irradiation 8.9% above budget.

Very few assets were impacted by operational issues during the period. A small number of sites were impacted by supply chain issues (delays on string inverter delivery and repairs) and a theft occurred at one asset (Crow Tree) that briefly impacted performance. Material damage and a proportion of the production losses resulting from the theft were covered by a successful insurance claim.

The Asset Manager continues to foster good relationships with the Distribution Network Operators (“DNOs”) and during the period has proactively negotiated with the network operators to either reduce the number of days required for a DNO outage or to move the outage to a period of lower irradiation. The proactive approach of working with DNOs to reduce the length of outages is demonstrated by the strong performance. Excluding DNO outages, the production during the period would be 8.5% above base case.

Office of Gas and Electricity Markets (“Ofgem”) audits have continued to be requested during the period and the Asset Manager has responded accordingly on all requests made. The Asset Manager is awaiting a response on the open audits but does not anticipate any material issues. Several existing audits have also been closed during the period after satisfying Ofgem. A programme is also underway with an external consultant to complete mock audits across the portfolio to identify any risks that there may be for any of the assets that are still to be audited by Ofgem.

An O&M tender was completed for the five Second Generation Portfolio 1 assets which total 53MW. New O&M contracts with a 15-year term were signed in May with the existing operator (Lightsource BP) that aligned with the other O&M contracts across the UK portfolio, resulting in an uplift in NAV.

The Asset Manager has completed a cyber security review on behalf of the Company to determine any risks that exist at asset and operational level. Those identified risks are being actioned to minimise the risk of cyber-attacks across the portfolio. The work will be rolled out across the global portfolio and integrated into all new build assets and acquisitions.

The Asset Manager continues to explore technical optimisation strategies including the repowering of sites (inverter and modules), installation of EV chargers at assets, whilst continuing to build on its core spare parts procurement strategy. Commercial optimisation through lease extensions is underway with 46MW of lease extensions in advanced discussions with asset landlords or completed.

Australia portfolio performance

The operational performance of the Australian portfolio during the period has been lower than expected with electricity generation 11.5% behind base case. The underperformance has been predominantly driven by low irradiation due to the wet weather and storms, with a colder than usual El Nina year.

The National Electricity Market (“NEM”) was suspended by the Australian Energy Market Operator (“AEMO”) between 15 and 22 June due to rolling seven-day spot prices breaching the regulatory cap. Factors contributing to this event included unscheduled outages of black coal power plants in New South Wales (“NSW”) and Queensland (“QLD”) equating to a total loss of 4GW of baseload capacity, and the colder than usual weather resulted in prolonged high demand and elevated coal and gas prices driven by macro factors. The result was that both the Oakey 1 and 2 projects were curtailed for a period of five days.

Bannerton production was also impacted by AEMO network curtailment, although less than in prior periods. At the same time, however, Australia has continued to experience unprecedented volatility in its power prices which has contributed to higher than budgeted revenues for the Australian portfolio.

Assets under construction

Spanish portfolio

The 99MW Lorca solar portfolio in Andalusia (“Project Lorca”), acquired at the end of 2020, initially energised in late June, and achieved full commencement of operations on 9 August. This marks a major milestone for the Company as the first three Spanish assets come online and the second half of the year will benefit from revenue contributions from these assets.

The 26MW Virgen del Carmen solar park in Huelva also completed all required commissioning during July, however, it has required an exceptional authorisation from the Spanish grid operator to allow connection given the current elevated risk of wildfires in the region. A permit has now been granted, subject to the Contractor adhering to enhanced safety precautions when working with the Grid Operator to energise the site. A revised outage for grid energisation is being sought for the earliest possible date.

Sandridge Battery Storage Limited

The Company’s 50% investment in Sandridge Battery Storage Limited, a 50MW lithium-ion battery storage system located in the UK, has experienced delays to construction due to a programme delay to the grid connection and, to a lesser extent, increased lead times for battery components. While this means that operations will likely now commence in 2023 rather than in the fourth quarter of 2022 as previously expected, the effects of delayed completion are expected to be offset by the improved market outlook for large-scale battery assets.

Electricity generation

The generation figures below have been adjusted, where relevant, for events where compensation has been, or will be, received.

UK

 

 

 

 

 

 

 

Total

 

 

electricity

Generation

Irradiation

Connection

generation

variance vs

variance vs

Site

date

MW

(MWh)

base case

base case

Abbey Fields

March 2016

4.9

2,651

-1.0%

13.2%

Abergelli

March 2015

7.7

3,871

-2.7%

0.7%

Atherstone

March 2015

14.8

8,070

13.1%

12.9%

Bilsthorpe

November 2014

5.7

3,106

9.2%

14.5%

Bournemouth

September 2014

37.3

22,519

9.1%

5.8%

Bulls Head

September 2014

5.5

3,017

11.5%

13.8%

Castle Eaton

March 2014

17.8

9,371

10.2%

11.5%

Coombeshead

December 2014

9.8

5,680

5.4%

4.5%

Copley

December 2015

30.0

16,795

14.1%

14.2%

Crow Trees

February 2016

4.7

2,388

5.3%

21.8%

Cuckoo Grove

March 2015

6.1

3,594

-3.2%

-2.1%

Field House

March 2016

6.4

3,697

9.0%

8.4%

Fields Farm

March 2016

5.0

2,885

16.3%

11.6%

Gedling

March 2015

5.7

3,121

12.3%

15.8%

High Penn

March 2014

9.6

6,751

14.6%

11.8%

Highfields

March 2014

12.2

5,215

8.2%

9.9%

Homeland

March 2014

13.2

7,750

3.9%

1.6%

Hunters Race

July 2014

10.3

5,955

6.2%

5.9%

Kencot Hill

September 2014

37.2

20,682

10.1%

8.6%

Landmead

December 2014

45.9

24,198

8.1%

12.5%

Lindridge

January 2016

4.9

2,552

2.7%

7.7%

Manor Farm

October 2015

14.2

7,512

14.6%

14.2%

Marsh Farm

March 2015

9.1

5,132

4.5%

5.9%

Membury

March 2015

16.5

9,356

12.4%

7.2%

Misson

March 2016

5.0

2,487

-1.3%

10.2%

Nowhere

March 2015

8.1

4,957

18.1%

17.7%

Paddock Wood

March 2015

9.2

5,434

13.1%

10.4%

Park Farm

March 2015

13.2

6,896

10.2%

9.5%

Pen Y Cae

March 2015

6.8

3,084

-11.5%

2.7%

Pitworthy

March 2014

15.6

8,595

12.4%

3.7%

Playters

October 2015

8.6

4,882

6.6%

14.6%

Port Farm

March 2015

34.7

18,792

7.4%

7.9%

Roskrow

March 2015

8.9

4,657

-4.9%

-1.2%

Sandridge

March 2016

49.6

25,832

1.4%

8.1%

Sawmills

March 2015

6.6

3,647

2.7%

3.2%

Sheepbridge

December 2015

5.0

2,462

0.2%

15.2%

Shotwick

March 2016

72.2

37,424

7.3%

6.4%

Southam

March 2015

10.3

5,643

11.1%

8.9%

Spriggs Farm

March 2014

12.0

7,054

16.0%

8.4%

Steventon

June 2014

10.0

5,541

5.8%

11.7%

SV Ash

March 2015

8.4

4,650

13.3%

10.2%

Tengore

February 2015

3.6

2,070

6.3%

3.7%

Trehawke

March 2014

10.6

5,818

0.5%

3.2%

Upper Huntingford

October 2015

7.7

3,955

1.8%

4.9%

Verwood

February 2015

20.7

12,093

9.8%

8.3%

Wally Corner

March 2017

5.0

2,766

6.1%

6.1%

Welbeck

July 2014

11.3

6,239

10.4%

14.4%

Wymeswold

March 2013

34.5

18,642

13.0%

13.7%

Yarburgh

November 2015

8.1

4,569

8.6%

17.1%

Yardwall

June 2015

3.0

1,747

3.5%

1.3%

Total

 

723.1

395,801

 8.0%

 

Weighted total

 

 

 

 

 8.9%

Australia

Total

electricity

Generation

Irradiation

Connection

generation

variance vs

variance vs

Site

date

MW

(MWh)

base case

base case

Bannerton

July 2018

53.4

35,051

-11.7%

-8.3%

Longreach

March 2018

17.3

16,469

-3.6%

-3.2%

Oakey 1

February 2019

29.7

24,342

-5.7%

-9.6%

Oakey 2

May 2019

70.0

41,690

-17.0%

-16.0%

Total

 

170.4

117,553

-11.5%

 

Weighted total

 

 

 

 

-11.0%

Overall portfolio

Total

electricity

Generation

Irradiation

generation

variance vs

variance vs

MW

(MWh)

base case

base case

Total

 

869.6

513,332

2.8%

2.6%

SUSTAINABILITY AND ESG

2022 interim highlights

  • The Company’s assets were responsible for generating 549GWh1 of clean electricity, enough to power 189,600 UK homes
  • Provided GHG emissions savings of 424,477 tonnes of CO2 equivalent (“tCO2e”) that would have been emitted by traditional carbon-intensive energy sources such as coal
  • More than 69 Tier 1 and Tier 2 suppliers have undergone enhanced due diligence to assess forced labour risk within the supply chain for both existing and construction stage assets
  • Use of sustainability KPIs to identify and execute operational efficiencies and improve sustainability performance
  • £100,232 committed to the communities in which it operates via community benefits payments during the period

Approach

Sustainability and environmental, social and governance (“ESG”) considerations are firmly at the centre of the Company’s strategy, helping to inform its investment process and its asset management operations.

Central to this theme is the Company’s ability to quantify, measure and enhance the sustainable impact it achieves as a result of the investments it makes. The nature of the Company’s business activities means it is well positioned to serve the needs of investors seeking to achieve positive environmental and social outcomes alongside attractive financial returns.

Contribution to Sustainable Development Goals

Demonstrating the Company’s commitment to achieving sustainable impact is its ability to report quantitatively against the United Nations Sustainable Development Goals (“SDGs”). The SDGs, which were adopted by all United Nations member states in 2015, comprise the most urgent economic, social and environmental issues to be addressed for peace and prosperity for people and the planet. The following graphics on page 25 represent the Company’s contribution to the SDGs for the period 1 January 2022 to 30 June 2022.

Goal

SDG target

Contribution

3.

Good health & well-being

3.9 Substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination.

Achieved through the reduction of pollution and emitted greenhouse gases (“GHGs”) by the installation and management of low-carbon energy generation assets.

7.

Affordable & clean energy

7.2 Increase substantially the share of renewable energy in the global energy mix.

Achieved by reducing reliance on fossil fuels by investment in utility-scale, renewable energy generation assets.

9.

Industry, innovation and infrastructure

9.1 Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all.

Achieved by raising awareness and improving institutional capacity on climate change mitigation.

13.

Climate action

13.3 Improve education, awareness-raising and human and institutional capacity on climate change mitigation, adaptation, impact reduction and early warning.

Achieved by future-proofing energy systems through investment in de-centralised, interconnected generation assets, using the latest technologies to maximise electrical output.

15.

Life on land

15.5 Take urgent and significant action to reduce the degradation of natural habitats, halt the loss of biodiversity and, by 2020, protect and prevent the extinction of threatened species.

Achieved by preserving the integrity of land through investment in low-impact and low-polluting technologies and introducing environmental initiatives through active asset management, supporting biodiversity and the ecosystem.

  1. This represents the unadjusted generation total for all solar sites in the portfolio irrespective of ownership stakes or loss adjustment.

Good health & well-being

296,914kg

NOx (nitrous oxide) vs energy generated from gas

217,737kg

SOx (sulphur dioxide)

5,169kg

PM10 (μm10 particulate matter)

2,364kg

PM2.5 (μm2.5 particulate matter)

Affordable & clean energy

549GWh

Renewable energy

189,600

Homes powered for a year

Industry, innovation & infrastructure

1,043MW

Of renewable generation capacity added to the electricity grid

Climate action

424,477 tCO2e

Emissions avoided compared to coal

Life on land

47,278 ToE avoided

(Tonnes of oil equivalent) contributing to the avoidance of fossil fuel use

Emissions reporting

As part of its 2021 Annual Report, released earlier this year, the Company voluntarily disclosed its Scope 1 and 2 emissions alongside several associated carbon metrics aligned to the suggested Task Force on Climate-related Financial Disclosures (“TCFD”) core metrics¹.

  1. Weighted Average Carbon Intensity (“WACI”), Total Carbon Emissions, Carbon Footprint, Carbon Intensity and Exposure to Carbon Related Assets.

While these metrics are continually tracked, a full TCFD update will be provided as part of the 2022 Annual Report.

The  below table represents the Company’s key carbon statistics in terms of Scope 1 and 2 emissions.

Sustainability performance indicators

Several initiatives have been implemented by the Company over the past few years to assess the sustainability credentials of assets prior to acquisition and to monitor the portfolio’s ongoing sustainability and ESG performance.

These initiatives are in continual development to ensure alignment with changing regulatory frameworks, investor requirements and industry best practice.

The Investment Manager’s Sustainability Evaluation Tool (“SET”) is a quantitative means of assessing an asset’s sustainability credentials during the acquisition process. It draws on the metrics used in a host of well-recognised and well-established external sustainability and ESG frameworks and is technology specific in terms of analysing the sustainable impact an asset will achieve.

Absolute emissions

Scope 1 (for the six-month period)

0 tCO2e

Scope 2 (for the six-month period)

441.49 tCO2e

 

Total (for the six-month period)

441.49 tCO2e

The five criteria that are assessed in the SET are:

SET criteria

Scored SET features

Sustainable development contribution

Development of affordable and clean energy, improved resource efficiency and contributions to fight climate change.

Environmental impact

Potential environmental impacts such as emissions to air, land and water, effects on biodiversity and noise and light pollution.

Social welfare

Health and safety, local social impact and local economic impact.

Governance

Legal, employment and human rights compliance. Management structure and Board composition.

Third-party interactions

Reputation risk, counterparty ESG performance, supply chain sustainability.

Operational KPIs

To ensure ongoing monitoring of the portfolio’s sustainability performance, quarterly KPI data started being collected in July 2021 (third quarter 2021). The KPIs correlate to the SET and allow for periodic reviews to take place as a means of informing strategic and operational decision making to support the Company in improving its overall sustainability and ESG performance.

Analysis of the KPIs has already led to operational enhancements. An example of this is the increase in portfolio assets whose energy tariff (i.e. imported power necessary to run the systems of a solar farm) is procured from renewable sources. An assessment of into the emissions footprint of the portfolio identified that only 59% of assets were on renewables tariffs as at 31 December 2021. Since then, the proportion of assets on renewables tariffs has increased to 88% of projects as at 30 June 2022.

The Company will seek to increase the proportion of assets using renewables tariffs across the portfolio as part of its continued commitment to carbon neutrality.

Data completeness

The Company acknowledges that data completeness can impact the accuracy of the data presented. However, it continues to work with its suppliers and stakeholders to improve data quality and reporting. Improvements in data quality and consistency will help to identify further opportunities for enhanced sustainability performance across the portfolio.

CASE STUDY

Community benefits

So far this year, the fund has committed £100,232 to initiatives undertaken by the community groups that live and work in and around the Company’s solar sites. As ever, the Manager takes an active interest in understanding how these contributions are used to the benefit of the designated community groups.

At Marsh Farm, to mark the celebration of the Queen’s Platinum Jubilee, the Hilperton Parish Council used the money received this year to invest in new playground equipment for the Village Hall play area.

Meanwhile, at Verwood the local Scout and Guide group installed new infrastructure to improve the security of the car park and made a contribution to the local Dementia Friendly Community Association, a group that lays on a number of activities for both those suffering from dementia and the carers that support them.

Key sustainability metrics (data as at 30 June 2022)1

GHG emissions

Zero

(2021: Zero)

Scope 1 GHG emissions (tCO2e)

441.49

(FY2021: 1252.69)

Scope 2 GHG emissions1 (tCO2e)

441.49

(FY2021: 1,252.69)

Total GHG emissions (tCO2e)

Carbon footprint

0.58

(2021: 1.9)

Carbon footprint (tCO2e/£1m invested)

Weighted Average Carbon Intensity (WACI) of investee companies

5.05

(2021: 10.66)

WACI of investee companies (tCO2e/£1m revenue)

Share of non-renewable energy consumption and production

88%

(2021: 59%)

% share of assets with a renewables tariff for on-site consumption.

76%

(2021: 54%)

% of overall portfolio consumption from renewable sources

100%

(2021: 100%)

% of energy generated from renewable sources

Board gender diversity

40% female

(2021: 40% female)

Average ratio of female to male board members

60% male

(2021: 60% male)

Average ratio of male to female board members

  1. 2021 represents annual figures, 2022 is only for the first six months.

CASE STUDY

Partnership with the Eden Project

 

Foresight Group and The Eden Project

In June 2022, the Investment Manager announced its new partnership with the Eden Project. In partnering with such a well-known organisation that is focused solely on the protection, maintenance and improvement of biodiversity, the Investment Manager plans to demonstrate and give visibility to the role of business in facilitating nature recovery as well as creating social and environmental value across its portfolio.

The UK Government’s Dasgupta review, a detailed report focused on the economics of biodiversity, remarks that humankind’s “demands on nature far exceed its capacity to supply.1” The report puts front and centre the need to “increase nature’s supply relevant to its current level,” in order to start restoring balance.

In the first instance, the partnership has been established to:

  • Define how a business such as Foresight Group and the companies it manages can respond to nature recovery
  • Demonstrate tangible positive outcomes for nature through the Company’s portfolio of assets
  • Engage with stakeholders, internally and externally, to explain about the importance of nature recovery and how they can participate

The Company has reviewed a number of sites for their suitability as potential pilot projects and has opted to use Sandridge solar farm as the first. As one of the Company's larger sites, it offers huge potential for the implementation of nature recovery interventions that will create meaningful change to the overall biodiversity of the site.

Progress updates on the partnership and the associated plans for the Company’s portfolio will continue to be provided in future fund reporting.

  1. The Economics of Biodiversity: The Dasgupta Review.

RISK AND RISK MANAGEMENT

Risk and risk management

The Company is exposed to a number of risks that have the potential to materially affect the Company’s valuation, reputation and financial or operational performance. The nature and levels of risk are identified according to the Company’s investment objectives and existing policies, with the levels of risk tolerance ultimately defined by the Board. The principal risks and uncertainties affecting the Company are considered substantially unchanged from those reported in pages 54 to 59 of the audited Annual Report and Financial Statements for the year ended 31 December 2021. Read more about our risks in our Annual Report, which can be found at: fsfl.foresightgroup.eu/investor-relations/publications/

Changes to the level of risk and uncertainty assessed by the Board during the period, or emerging risks that can have a short to medium-term impact, are identified below.

The Directors consider the following as the principal risks and uncertainties to the Company at this time:

  • Risks relating to regulatory changes, including changes to subsidies
  • Risks relating to long-term energy prices
  • Risks relating to near term energy prices
  • Risks relating to new market participants
  • Risks relating to access to capital
  • Risks relating to the development and construction of solar PV and BSS assets
  • Risks relating to supply chain procurement
  • Risks relating to financial gearing
  • Risks relating to project grid connections
  • Risks relating to climate change and severe weather

The following represent the most relevant emerging risks as viewed by the Board and the Investment Manager:

Risks related to subsidies

Changes in political support for renewable energy have the potential to adversely impact the levels of subsidy and incentives available for renewable generation, whether on a prospective or retrospective basis. If a government were to implement a change with a retrospective effect this may adversely impact the Company’s valuation and ability to meet its return targets. Any changes having a prospective effect (which was the case with the closure of the Renewable Obligation scheme for projects commissioned after 31 March 2017) may also impact the availability of assets for acquisition and future growth prospects.

In a time of surging energy prices and pressures, there is a heightened risk of Government considering changes to subsidy regimes with a view to save costs and reduce prices. At the same time, there are examples where this has been implemented retrospectively with a seriously detrimental impact on investment. Given most governments are currently pursuing net zero targets and require significant investment in renewable technologies, it is logical for them to work with industry to find progressive ways to lower electricity prices and improve energy security.

Risks related to the sale of electricity

A long-term decline in power forecasts and prices has the potential to significantly affect the price of electricity generated by the Company’s solar PV and battery storage assets and thus impact the NAV and the Fund’s ability to meet its future obligations and dividend payments.

Power curve forecasts issued by independent consultants in recent years have all generally assumed that long-term prices for the UK will trend down to 2030 and then remain broadly flat in real terms until 2050. In Australia, real power prices are forecast to rise until around 2035 and then trend down to 2050. Notwithstanding the recent surge in electricity prices, driven by the short supply of gas, this remains the case as it is projected that the large-scale deployment of renewable generation producing at marginal cost will lower electricity prices during the next decade.

Spiralling energy costs across all key markets have led to the point where governments are now directly intervening in the electricity markets to protect both consumers and business from unaffordable price rises. Across Europe this has led to the introduction of energy price caps, although governments continue to pick up the balance to the true wholesale price. At the time of writing, the new UK Government has announced a significant package of support to freeze electricity bills and assistance for business. As part of measures to reduce electricity prices in the near term, it has also announced a desire to move renewable energy generators onto new longer-term contracts at significantly lower rates, although fixed up for up to 15 years. Risk remains that if such a move is enforced unilaterally without further consultation that this may result in a significant reduction in near-term revenues, which could impact the ability to pay dividends.

Whilst this remains a possibility, it is deemed less likely as such direct intervention in private sector contracts would have a highly negative impact on investor sentiment towards the UK energy markets. What appears more feasible is that proposals will be designed to tempt renewable generators to ‘trade in’ their right to sell energy at current elevated prices for a lower long-term fixed price. If approached in such a progressive manner then this could be attractive for both generators and investors who are likely to favour long-term price certainty for yielding assets over short-term gain and less certainty in the future.

Additionally, earlier in the year, the Department for Business, Energy and Industrial Strategy (“BEIS”) set out a wide range of potential options for future reform of the UK electricity markets. The Review of Electricity Market Arrangements (“REMA”) is being led through consultation by the Office of Gas and Electricity Markets (“Ofgem”), in consultation with industry. REMA currently remains at an early stage though represents the largest review of UK electricity market arrangements in over 30 years. Under consideration are proposals including: separating the wholesale market between renewable energy and other generation, location based pricing and evolutionary change to existing markets such at CfDs, Capacity Markets and system operation. At present it remains too early to speculate what the direct impact will be on the renewable industry and the Company’s portfolio, however, the stated intention is to restructure the market to accommodate factors such as increased renewable energy penetration, which it can also be hoped will be supportive of investment.

Risks related to supply chain issues

The solar and battery storage supply chains have come under significant disruption and pressure following the COVID-19 pandemic. Most of the production for solar panels and battery cells is in China that continues to be impacted by the lingering effects of the pandemic and lockdowns in key industrial hubs that potentially disrupt manufacturing. At the same time there is ever increasing demand for solar panels and lithium-ion batteries, especially in the global push towards electric vehicle roll-out. Global shipping lines remain disrupted, and this will take time to return to normal pre-pandemic levels of service. In this respect, the Company is taking a prudent view on delivery schedules and pricing for new acquisitions.

Additionally, the solar supply chain has been under increased scrutiny following articles published in the UK and international press covering the subject of forced labour and modern slavery in China. The Investment Manager recognises the need for further supply chain due diligence in order to be leaders in sustainable practises and in response to concerns regarding the solar supply chain affecting the wider solar industry. Whilst this issue was originally focused on modern slavery exposure, improving due diligence will improve the quality of the Company governance processes and bring its key counterparties in line with sustainability objectives and desired credentials. In response to these concerns the Investment Manager has appointed the consultancy ethiXbase to conduct enhanced sustainability and ESG due diligence on the Company’s primary counterparties.

Risks related to climate change and extreme weather conditions

A change in climate or weather-related events may have a direct impact on the Company’s assets or ability to generate and thus have a negative impact on its abilities to meet its obligations. In the short to medium term there is heightened risk of weather-related catastrophic events damaging or impacting performance of Company assets, causing disruption to the business model. On a longer time horizon, climate change impacts place a greater strain on natural resources required for the operation of Company assets or changing climate patterns can fundamentally alter the availability of renewable resources such as solar irradiation. Assets may be directly damaged by climate conditions leading to a loss of generation. The Company’s financial projections are based on historic irradiation data and if actual sunshine hours are lower than forecast, less revenue will be generated.

FINANCIAL REVIEW

The Company applies IFRS 10 and Investment Entities: Amendments to IFRS 10, IFRS 12 and IAS 28, which states that investment entities should measure all their subsidiaries that are themselves investment entities at fair value. The Company accounts for its interest in its wholly owned direct subsidiary Foresight Solar (UK Hold Co) Limited as an investment at fair value through profit or loss.

The primary impact of this application, in comparison to consolidating subsidiaries, is that the cash balances, the working capital balances and borrowings in the intermediate holding companies are presented as part of the Company’s fair value of investments.

The Company’s intermediate holding companies provide services that relate to the Company’s investment activities on behalf of the parent which are incidental to the management of the portfolio.

The Company and its intermediate holding companies (the “Group”) hold investments in 59 portfolio assets which make distributions in the form of interest on loans and dividends on equity as well as loan repayments and equity redemptions.

For more information on the basis of accounting and Company structure please refer to the Notes to the Financial Statements on pages 48 to 77.

Key financial metrics for the period ended 30 June 2022

Period ended

Year ended

30 June

31 December

All amounts presented in £million (except as noted)

2022

2021

Net Asset Value (“NAV”)1

754.9

660.0

Gross Asset Value (“GAV”)2

1,294.9

1,172.0

Operating income and gains on fair value of investments

120.2

124.9

NAV per share

123.8p

108.2p

Distributions from underlying investments

36.9

82.9

Profit before tax

116.1

117.9

  1. Total equity as per the Statement of Financial Position on page 45.
  2. Calculated as the sum of the NAV and total outstanding debt on page 34.

Net assets

Net assets increased from £660.0 million at 31 December 2021 to £754.9 million at 30 June 2022, primarily due to increased power price forecasts and inflation, detailed further in the Investment Manager’s Report on page 16.

The net assets of £754.9 million comprise the £1,211.7 million portfolio of UK, Australian and Spanish solar and UK BSS investments, the Group’s cash balance of £84.9 million offset by £414.1 million long-term debt, £125.9 million of RCF outstanding debt and other net liabilities of £1.7 million.

Analysis of the Group’s net assets at 30 June 2022

 

At

At

30 June

31 December

All amounts presented in £million (except as noted)

2022

2021

Gross portfolio value1

1,211.7

1,107.8

Intermediate holding companies’ cash

81.9

56.4

Intermediate holding companies’ long-term debt

(414.1)

(388.6)

Intermediate holding companies’ revolving credit facility

(125.9)

(123.4)

Intermediate holding companies’ other liabilities

(1.5)

(3.0)

Fair value of the Company’s investment in portfolio

752.1

649.2

Company’s cash

3.0

11.0

Company’s other liabilities

(0.2)

(0.2)

Net Asset Value

754.9

660.0

Number of shares

609,958,720

609,958,720

Net Asset Value per share

123.8p

108.2p

  1. Classified as the gross fair value of the underlying assets in the portfolio.

Third-party debt arrangements and gearing position

As at 30 June 2022, total outstanding long-term debt was £414.1 million, representing 32.0% of the GAV (calculated as NAV plus outstanding debt) of the Company and its subsidiaries (31 December 2021: £388.6 million or 33.2% of GAV).

As at 30 June 2022, total outstanding debt including RCFs was £540.0 million, representing 41.7% of GAV (31 December 2021: £512.0 million or 43.7% of GAV).

The Company’s Group net debt position, after deducting existing Group cash balances, is £455.1 million, representing 35.1% of GAV.

Long-term facilities

As at 30 June 2022, £414.1 million of long-term debt facilities were outstanding.

Inflation-linked debt facilities represent £85.5 million of total long-term debt outstanding as at 30 June 2022.

At 30 June 2022, the average cost of long-term debt was 2.46% per annum, including the cost of inflation-linked facilities of 1.28% per annum. The cost of the inflation-linked facility is expected to increase over time assuming the Company’s long-term annual RPI expectations of 3% in the medium term and 2.25% post-2030 to reflect RPI reform.

During the period the Company successfully refinanced the Longreach and Oakey 1 assets in Australia for a total facility size of A$59.0 million with ANZ Bank New Zealand and Deutsche Bank, and the Lorca portfolio in Spain for €28.0 million with BayernLB.

Revolving credit facilities

Until February 2022, the Company held two separate revolving credit facilities totalling £130.0 million.

In February, the Company announced that the two RCFs had been refinanced and replaced by a new £150.0 million sustainability-linked revolving credit facility with a £30.0 million uncommitted accordion facility.

The facility is a sterling and euro facility, and the interest is linked to the Company’s sustainability performance, with the Company incurring a premium or discount to its margin and commitment fee based on its performance against defined targets. These sustainability targets include:

  • A year-on-year increase in the total renewable generation and battery energy storage system capacity
  • An increase in the value of the Company’s annual contributions to community funds
  • The implementation of enhanced ESG reporting for suppliers to the Company’s portfolio of assets

Performance against these sustainability targets will be measured annually with the cost of the RCF being amended accordingly in the following year.

At the date of this report, the RCF totalled £125.9 million, with £24.1 million remaining undrawn at 30 June 2022.

At 30 June 2022, the weighted total cost of the RCF was 2.07%.

Debt structure

The following table summarises the debt position of the Company as at 30 June 2022.

Holding

Facility

Outstanding

Applicable

Borrower

vehicle

Provider

type

(m)

Maturity

rate

FS Holdco

FS Intermediate Holdco

MIDIS

Fixed rate, fully amortising

£56.8

March 2034

3.78%

MIDIS

Inflation linked, fully amortising

£59.51

March 2034

RPI Index + 1.08%

Santander

Term loan, fully amortising

£10.2

March 2024

SONIA + 1.70%

Total

 

 

 

£126.5

 

 

FS Debtco

FS Holdco 2

SMBC

Term loan, fully amortising

£0.0

March 2022

SONIA + 1.20%

Helaba

Term loan, fully amortising

£154.3

March 2036

SONIA + 1.30% (margin step to 1.35% in 2029)

Total

 

 

 

£154.32

 

 

Second Generation Portfolio 1

FS Holdco 3

MIDIS

Fixed rate, fully amortising

£3.5

August 2034

4.40%

Inflation linked, fully amortising

£26.01

August 2034

RPI Index + 1.70%

Total

 

 

 

£29.4

 

 

Global Solar Energy 27 SL (Lorca)

FS Holdco 4

BayernLB

Senior loan

€26.1

December

2031

Double tranche: €20m at 1.61% fixed rate, €8m at Euribor + 210bps

Foresight Solar Australia Pty Ltd

FS Holdco 4

CEFC

Term loan

A$38.43

June

2026

Base rate (0.96375%) + margin (2.00%)

Longreach

ANZ/Deutsche

Term loan

A$22.6

April

2027

BBSY Base rate + margin (1.20%)

Oakey 1

ANZ/Deutsche

Term loan

A$36.4

April

2027

BBSY Base rate + margin (1.20%)

Oakey 2 Finco Pty Ltd

CEFC

Term loan

A$46.3

October 2022

Base rate (2.48%) + 2.25%

Total

 

 

 

A$143.6

 

 

Total long-term debt

 

 

 

£414.1

 

 

RCF Debtco

UK Holdco

AIB/Barclays/Lloyds/NatWest

Revolving credit

£125.9

March

2025

SONIA + 1.9%

Total revolving debt

 

 

 

£125.9

 

 

Total debt

 

 

 

£540.0

 

 

  1. Nominal loan balance as at 30 June 2022 with the applicable RPI applied.
  2. Interest rate swap for 100% of the outstanding debt during the initial five years, 75% from years six to ten and 50% thereafter.
  3. Australian debt prorated for Company’s share of asset ownership. AUD/GBP exchange rate of 0.566 as at 30 June 2022.

The Company continues to have limited exposure to benchmark rate movements in the UK and Australia as a result of the long-term interest rate swaps in place to protect the Company from underlying interest rate movements. Sterling-denominated debt facilities priced over SONIA benefit from interest rate swaps hedging between 80% and 100% of the outstanding debt during the terms of the loans, depending on the facility. In Australia, during the five-year legal tenor of the current debt facilities entered into with the CEFC and Australia and New Zealand Banking Group Limited (“ANZ”) and Deutsche Bank AG (“Deutsche”), the assets have no exposure to the Bank Bill Swap Bid Rate (“BBSY”) as the rate was fixed at financial close either under the facility agreement or through interest rate swaps. In addition, the debt facilities for Oakey 1 and Longreach have further hedging in place for an additional five years.

Company performance

Profit and loss

The Company’s profit before tax for the period ended 30 June 2022 was £116.1 million, generating profits of 19.0 pence per share.

In the period to 30 June 2022, the operating income and gains on fair value of investments was £120.2 million, which comprised the receipt of £18.3 million of interest on the Foresight Solar (UK Hold Co) loan notes and £101.9 million net gains on investments at fair value incurred in the period.

Operating expenses included in the income statement for the period were £4.1 million, in line with expectations. These comprise investment management fees of £3.6 million and £0.5 million of operating expenses. The details on how the investment management fees are charged are set out in note 5 to the Financial Statements.

Period ended

Period ended

Period ended

30 June

30 June

31 December

All amounts presented in £million (except as noted)

2022

2021

2021

Interest received on Foresight Solar (UK Hold Co) loan notes

18.3

18.9

38.1

Net gains on investments at fair value

101.9

18.6

86.8

Operating income and gains on fair value of investments

120.2

37.5

124.9

Operating expenses

(4.1)

(3.3)

(7.0)

Profit before tax

116.1

34.2

117.9

Earnings per share

19.0p

5.6p

19.4p

Cash flow

The Company had a total cash balance at 30 June 2022 of £3.0 million (31 December 2021: £11.0 million). This amount excludes cash held in subsidiaries. The breakdown of the movements in cash during the year is shown below.

Cash flows of the Company only for the period to 30 June 2022 (£million)

 

Period ended

Period ended

Period ended

30 June

30 June

31 December

All amounts presented in £million

2022

2021

2021

Cash balance at 1 January

11.0

16.9

16.9

Interest on loan notes received from Foresight Solar (UK Hold Co)

17.3

7.0

41.1

Directors’ fees and expenses

(0.1)

(0.1)

(0.3)

Investment management fees

(3.5)

(2.8)

(6.0)

Administrative expenses

(0.4)

(0.3)

(0.7)

Dividends paid in cash to Shareholders

(21.3)

(20.0)

(40.0)

Company cash balance at period end

3.0

0.7

11.0

Consolidated profit and loss of underlying investments

The underlying operating investments in the UK and Australia generated an operating profit of £71.0 million in the period to 30 June 2022. Strong power prices in all markets, good availability and high irradiation for the UK portfolio resulted in revenues 18% above expectations for the six months and total operating profit 26% above expectations for the period.

Consolidated profit and loss of the underlying investments for the period to 30 June 2022 (£million)

UK

Australia

Consolidated

For the period ended 30 June 2022

£m

A$m

£m

Revenue

 

 

 

Wholesale revenue

41.7

8.1

46.3

Subsidised revenue

31.4

5.7

34.7

Other income

1.5

0.0

1.5

Total revenue

74.6

13.8

82.5

Operating expenditure

 

 

 

O&M quarterly

(2.9)

(0.7)

(3.4)

O&M variable

(0.7)

(0.1)

(0.8)

Other operating costs

(6.1)

(2.4)

(7.3)

Total expenditure

(9.7)

(3.2)

(11.5)

Total operating profit

64.9

10.6

71.0

The Australian assets are consolidated based on the fund’s ownership, using an average AUD/GBP exchange rate of 0.5688.

Cash flows of the Company and intermediate holding companies for the six-month period to 30 June 2022 (£million)

During the six months to 30 June 2022 the underlying solar assets paid £36.9 million of distributions to the intermediate holding companies, 17.5% ahead of expectations due to high power prices received by the UK and Australian assets.

Cash received from underlying solar investments covers the long-term debt repayments, financing costs and the operating and administrative expenses of the Company and the intermediate holding companies as well as the dividends declared to Shareholders.

During the period, the Group received £21.3 million following the successful introduction of third-party debt to the Spanish Lorca portfolio and the subsequent release of cash.

Acquisition costs in the period are in relation to Sandridge Battery Storage Limited and further investment into the Spanish portfolio to fund construction milestones, which have both been funded through excess cash generated by the portfolio.

Of the £84.9 million closing cash balance, the Group has £25.0 million above any lender security which is net of all working capital and dividend requirements to fund further acquisitions in addition to £24.1 million of undrawn RCF. The cash under the lender security totals £47.8 million, which will be partly used to repay principal and interest on third-party debt on 30 September 2022. The Company has a total of £24.2 million available from free cash and undrawn RCF and can expect to release at least a further £15.0 million from lender security and to become available for acquisitions. This is also prior to utilisation of the Company’s uncommitted accordion £30.0 million, which is also available for pipeline acquisitions.

Six-month

Six-month

12-month

period ended

period ended

period ended

30 June

30 June

31 December

2022

2021

2021

Cash distributions from underlying investments

36.9

18.5

78.6

Cash released from compensation accounts on behalf of solar investments

0.0

1.1

4.3

Administrative expenses

(1.0)

(1.1)

(2.3)

Directors’ fees and expenses

(0.1)

(0.1)

(0.3)

Investment management fees

(3.5)

(2.8)

(6.0)

Financing costs (net of interest income)

(4.3)

(4.4)

(7.2)

Repayment of long-term debt facilities

(8.6)

(7.8)

(18.8)

Cash flow from operations

19.4

3.4

48.3

Compensation account payments

0.0

(4.5)

(7.7)

Acquisition of new assets

(2.5)

(14.3)

(61.2)

Proceeds from RCF borrowings

2.5

0.0

42.5

Refinancing proceeds

21.3

0.0

0.0

Debt arrangement fees

(1.9)

0.0

(0.3)

Dividends paid in cash to Shareholders

(21.3)

(20.0)

(40.0)

Cash movement in the period

17.5

(35.4)

(18.5)

Opening cash balance

67.4

85.9

85.9

Group cash balance

84.9

50.4

67.4

Dividend cover

Strong operational performance of the underlying investments has resulted in increased cash distributions from the underlying investments to the fund. Based on the continuation of good operational performance and forecasted fund level costs, the Investment Manager forecasts a target minimum dividend cover of 1.5 times for the 12 months to 31 December 2022.

Dividends

The Company is targeting a full-year dividend in respect of the year ending 31 December 2022 of 7.12 pence. The Company has met all target dividends since IPO and follows a progressive dividend policy, aiming to grow its dividend over time.

Dividend timetable for FY2022

 

Amount

Status

Payment date

Interim 1

1.78 pence

Paid

26 August 2022

Interim 2

1.78 pence

Declared

25 November 2022

Interim 3

1.78 pence

Targeted

Q1 2023

Interim 4

1.78 pence

Targeted

Q2 2023

Total

7.12 pence

On 14 September 2022, the Board approved the second interim dividend relating to 2022 of 1.78 pence per share.

Dividend timetable – Interim 2

Date

Ex-dividend date

27 October 2022

Record date

28 October 2022

Payment date

25 November 2022

The Board will continue to assess the possibility of offering scrip dividends with respect to future quarterly dividends where the scrip reference price is above NAV per ordinary share.

Foreign exchange

The Company is exposed to foreign exchange movements in respect of its investments in Australia and Spain. As such, the Company continues to implement a hedging strategy to reduce the possible impact of currency fluctuations and to minimise the volatility of equity returns and cash flow distributions.

Foreign exchange hedging will not be applied to the cost of the equity investments, considering the long-term investment strategy of the Company.

For Australian assets, the Company has entered into a rolling two-year forward contracts strategy for an amount equivalent to approximately 75% of its expected distributable foreign currency cash flows at project level.

For the Spanish assets recently acquired, the Company has implemented a ten-year rolling foreign currency hedging strategy covering c.80% of the expected annual cash flows.

The Company reviews its foreign exchange strategy on a regular basis with the objective of limiting the short-term volatility in sterling distributable cash flows caused by foreign exchange fluctuations and optimising the costs of the hedging instruments.

Ongoing charges

The ongoing charges ratio for the period to 30 June 2022 was 1.14% (31 December 2021: 1.14%). This has been calculated using methodology as recommended by the Association of Investment Companies (“AIC”). Asset management fees charged by Foresight Group LLP on an arm’s length basis at project level are excluded from the ongoing charges ratio.

CORPORATE SUMMARY

The Company is the largest UK-listed dedicated solar energy investment company by installed capacity and has a diversified portfolio invested in both solar energy and battery storage assets.

 

Corporate summary

The Company is a closed-ended investment company with an indefinite life and was incorporated on 13 August 2013 in Jersey under the Companies (Jersey) Law 1991, as amended on 2 March 2021, with registration number 113721.

The Company’s Initial Public Offering on 24 October 2013 raised £150 million, creating the largest dedicated solar investment company listed in the UK at the time.

Following multiple equity raises since launch, the Company has grown steadily and now owns a portfolio with a Gross Asset Value of £1,294.9 million as at 30 June 2022. It is the largest UK-listed dedicated solar energy investment company by installed capacity and one of the largest by market capitalisation.

As at 30 June 2022, the Company has 609,958,720 Ordinary Shares in issue which are listed on the Premium Segment of the Official List and traded on the London Stock Exchange’s Main Market.

The inclusion of the Company in the FTSE 250 as of 1 August 2022 also reflects its continued growth and progress.

Operating structure and business model

As an investment company, the Company has no direct employees and outsources all operations to a number of key service providers.

The Company makes its investments through intermediate holding companies and underlying Project Vehicles/Special Purpose Vehicles (“SPVs”).

The operating structure and key service providers are detailed in the graphic below:

Significant Shareholders

The Company’s Shareholders include a large mix of institutional and retail investors.

Shareholders in the Company with more than a 5% holding as at 30 June 2022 are as follows:

% shareholding

Investor

in fund

BlackRock Inc

13.32

Schroders Plc

8.68

Valu-Trac Investment Management Ltd

6.60

Legal & General Investment Management Ltd

5.71

Total

34.31%

Investment policy

The Company pursues its investment objective by acquiring ground-based, operational solar power plants.

The Company is also permitted to invest in utility scale battery storage systems up to a limit of 10% of the GAV of the Company, calculated at the time of investment.

Investments in assets which are, when acquired, still under construction will be limited to 25% of the GAV of the Company and subsidiaries, calculated at the time of investment.

Investments outside the UK will be limited to 25% of the GAV of the Company and subsidiaries, calculated at the time of investment.

Amendments to the investment policy

At a General Meeting of the Company held on 15 June 2022, Shareholders voted in favour of proposals to amend the Company’s investment policy. The policy change permits investment of up to 5% of the GAV in development stage assets being solar or battery storage system (“BSS”) opportunities that are pre-construction and may not have secured grid connection rights or planning consent at the date of investment.

More specifically, such assets would be defined as assets that are in a pre-construction development stage, where they have a delivery plan and have either secured the necessary land rights, or options to obtain such land rights, but require additional work to be completed before the project is ready to commence construction.

The change to the Company’s current investment policy will have the following benefits for Shareholders:

  • Create access to a further pipeline of investment opportunities in which the Company has had active oversight of the development process
  • Provide the Company with an enhanced ability to secure fully consented projects through either direct acquisition of development stage assets or acquisition rights under the terms of joint venture agreements (or other similar structures). As a result, the Company may be able to acquire project development rights or projects that are construction-ready at more competitive rates than those being brought to the market at “Ready to Build”
  • Whilst investment in the earlier stages of project development is not without risks, it can allow the Company to benefit directly from enhanced returns on a modest level of investment. This represents an attractive option for investment of surplus cash currently generated by the operational portfolio
  • Partnering with experienced developers may present opportunities to enter new markets with instant access to a pipeline of scale
  • Opportunities to develop investment opportunities and realise additional value within the Fund’s existing portfolio through proprietary development

Investment strategy

The Company will seek to build a diversified portfolio of assets by acquiring majority or minority stakes in individual ground-based solar assets and BSS opportunities.

When investing in a stake of less than 100% in a solar power plant 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 portfolio and creditworthy offtakers. Under the PPAs, the SPVs will sell solar generated electricity and/or green benefits to the designated offtaker.

The Company may retain exposure to power prices through PPAs that do not include mechanisms such as fixed prices or price floors.

Investment may be made in equity, debt or intermediate instruments but not in 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.

Investment restrictions

In order to spread risk and diversify its portfolio, at the time of investment no single asset shall exceed 30% of the Company’s GAV post-acquisition. If the investment is an additional stake in an existing investment, the combined value of both the existing stake and the additional stake acquired should also not exceed 30%.

The GAV of the Company will be calculated based on the last published gross investment valuation of the Company’s portfolio, including cash, plus acquisitions made since the date of such valuation at their cost of acquisition. The Company’s portfolio will provide diversified exposure through the inclusion of not less than five individual solar power plants and the Company will also seek to diversify risk by ensuring that a significant proportion of its expected income stream is derived from regulatory support (which will consist of, for example, without limitation, ROCs and FiTs for UK assets). Diversification will also be achieved by the Company using a number of different third-party providers such as developers, engineering, procurement and construction (“EPC”) contractors, operation and maintenance (“O&M”) contractors, panel manufacturers, landlords and distribution network operators.

The Articles provide that gearing, calculated as Group borrowing (including any asset-level gearing) as a percentage of the Company’s GAV, will not exceed 50% at the time of drawdown. It is the Board’s current intention that long-term gearing (including long-term, asset-level gearing), calculated as Group borrowings (excluding intra-group borrowings (i.e. borrowing between members of the Group) and revolving credit facilities) as a percentage of the Company’s GAV will not exceed 40% at the time of drawdown.

Investments in BSS will be limited to 10% of the GAV of the Company and subsidiaries, calculated at the time of investment.

Any material change to the investment policy will require the prior approval of Shareholders by way of an ordinary resolution (for so long as the Ordinary Shares are listed on the Official List) in accordance with the Listing Rules.

Investment Manager

The Company’s Investment Manager, Foresight Group LLP, is responsible for the acquisition and management of the Company’s assets, including the sourcing and structuring of new acquisitions and advising on the Company’s borrowing strategy. Foresight Group is authorised and regulated by the Financial Conduct Authority.

Foresight Group was founded in 1984 and is a leading listed infrastructure and private equity investment manager. With a long-established focus on ESG and sustainability-led strategies, it aims to provide attractive returns to its institutional and private investors from hard-to-access private markets. Foresight manages over 330 infrastructure assets with a focus on solar and onshore wind assets, bioenergy and waste, as well as renewable energy enabling projects, energy efficiency management solutions, social and core infrastructure projects and sustainable forestry assets. Its private equity team manages ten regionally focused investment funds across the UK and an SME impact fund supporting Irish SMEs. This team reviews over 2,500 business plans each year and currently supports more than 200 investments in SMEs. Foresight Capital Management manages four strategies across six investment vehicles with an AUM of over £1.6 billion.

Foresight operates from 12 offices across six countries in Europe and Australia with AUM of £12.2 billion1. Foresight Group Holdings Limited listed on the Main Market of the London Stock Exchange in February 2021. https://www.fsg-investors.com/

  1. Based on FSG unaudited AUM as at 30 June 2022 and Infrastructure Capital’s AUM as at 31 March 2022.

Foresight’s infrastructure team consisted of 110 full-time employees as at 31 March 2022. The team is comprised of:

  • An investment management team of professionals responsible for originating, assessing and pricing assets, managing due diligence, and executing transactions
  • An asset management team with expertise across electrical and civil engineering, finance, and legal disciplines

The Foresight infrastructure team has substantial experience in sourcing and executing all required elements of the capital structure of an investment across geographies, including project-level debt finance and other required forms of finance.

The key strengths of the infrastructure investment team include: (a) sourcing and execution of asset acquisitions; (b) experience of pricing complex revenue streams; (c) pricing wholesale power exposure; (d) managing construction projects; and (e) finance and structuring, including bank debt and project finance.

The asset management team consists of individuals with engineering, consulting and operations backgrounds, accountants and in-house personnel responsible for the process of “on-boarding” and managing acquired assets as well as a technical team of specialist infrastructure engineers that help by evaluating an asset’s operational and physical characteristics during due diligence, construction management and assist the asset management team to manage the assets by identifying and implementing optimisations post-acquisition. Members of these teams work together throughout the investment lifecycle.

The asset management services provided ensure the day-to-day operation of the sites is robust, with commercial and strategic decisions clearly communicated to the O&M counterparties. The services also include:

  • Portfolio optimisation including negotiation of project contracts, component warranties and insurance policies, spare part and replacement strategy and technology improvements
  • Oversight of operation and maintenance counterparties and operational performance
  • Contractual compliance of all contracts
  • Reporting to debt providers and other debt compliance services
  • Accounting, bookkeeping, tax compliance and statutory reporting of all SPVs
  • Corporate governance activities including health and safety compliance

Read more about the Investment Manager at: fsfl.foresightgroup.eu

 

Alternative Investment Fund Management Directive (“AIFMD”)

The AIFMD, which was implemented across the EU on 22 July 2013, aims to harmonise the regulation of Alternative Investment Fund Managers (“AIFMs”) and imposes obligations on managers who manage or distribute Alternative Investment Funds (“AIFs”) in the EU or who market shares in such funds to EU investors. Under the AIFMD, the Company is self-managed and acts as its own Alternative Investment Fund Manager.

The Company is located outside the European Economic Area (“EEA”) but the Company’s marketing activities in the UK are subject to regulation under the UK AIFMD and the UK National Private Placement Regime.

Read more about our Directors at: fsfl.foresightgroup.eu

Read more about S172 in our Annual Report, which can be found at: fsfl.foresightgroup.eu

 

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Disclosure Guidance and Transparency Rules (“DTR”) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Unaudited Half-Yearly Financial Report for the six months ended 30 June 2022.

The Directors confirm to the best of their knowledge that:

  • The condensed set of Financial Statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer
  • The interim management report includes a fair review of the information required by DTR 4.2.7 R
  • The interim management report includes a fair review of the information required by DTR 4.2.8 R

Alexander Ohlsson

Chairman

For and on behalf of Foresight Solar Fund Limited

14 September 2022

STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD 1 JANUARY 2022 TO 30 JUNE 2022

Unaudited

Unaudited

Audited

Period

Period

Year

1 January

1 January

1 January

2022 to

2021 to

2021 to

30 June

30 June

31 December

2022

2021

2021

Notes

£’000

£’000

£’000

Revenue

 

Interest income

4

18,339

18,896

38,066

Gains on investments at fair value through profit or loss

14

101,892

18,612

86,816

120,231

37,508

124,882

Expenditure

 

Administration fees

5

(97)

(96)

(199)

Directors’ fees

6

(130)

(130)

(260)

Management fees

7

(3,598)

(2,858)

(5,854)

Other expenses

8

(261)

(216)

(677)

Total expenditure

(4,086)

(3,300)

(6,990)

Profit before tax for the period/year

116,145

34,208

117,892

Taxation

Profit for the period/year

116,145

34,208

117,892

Other comprehensive income

Profit and total comprehensive income for the period/year

116,145

34,208

117,892

Earnings per Ordinary Share (pence per share)

9

19.04

5.63

19.37

All items above arise from continuing operations; there have been no discontinued operations during the period.

The accompanying notes on pages 48 to 77 form an integral part of these Financial Statements.

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2022

Unaudited

Unaudited

Audited

30 June

30 June

31 December

2022

2021

2021

Notes

£’000

£’000

£’000

Assets

 

Non-current assets

 

Investments held at fair value through profit or loss

14

690,994

520,898

589,102

Total non-current assets

690,994

520,898

589,102

Current assets

 

Interest receivable

10

61,095

75,033

60,103

Trade and other receivables

11

275

275

275

Cash and cash equivalents

12

3,022

668

10,964

Total current assets

64,392

75,976

71,342

Total assets

755,386

596,874

660,444

Equity

 

Retained earnings

124,965

(32,312)

30,108

Stated capital

17

629,892

628,687

629,892

Total equity

754,857

596,375

660,000

Liabilities

 

Current liabilities

 

Trade and other payables

13

529

499

444

Total current liabilities

529

499

444

Total liabilities

529

499

444

Total equity and liabilities

755,386

596,874

660,444

Net Asset Value per Ordinary Share

18

123.76

97.96

108.2

The Financial Statements on pages 44 to 77 were approved by the Board of Directors and signed on its behalf on 14 September 2022 by:

Alexander Ohlsson

Chairman

The accompanying notes on pages 48 to 77 form an integral part of these Financial Statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD 1 JANUARY 2022 TO 30 JUNE 2022 (UNAUDITED)

Stated

Retained

 

capital

earnings

Total

Notes

£’000

£’000

£’000

Balance as at 1 January 2022

629,892

30,108

660,000

Total comprehensive income for the period:

 

 

 

Profit for the period

116,145

116,145

Transactions with owners, recognised directly in equity:

 

 

 

Dividends paid in the period

21

(21,288)

(21,288)

Balance as at 30 June 2022

629,892

124,965

754,857

FOR THE PERIOD 1 JANUARY 2021 TO 30 JUNE 2021 (UNAUDITED)

Stated

Retained

capital

earnings

Total

Notes

£’000

£’000

£’000

Balance as at 1 January 2021

627,649

(45,491)

582,158

Total comprehensive income for the period:

Profit for the period

34,208

34,208

Transactions with owners, recognised directly in equity:

Dividends paid in the period

21

(19,991)

(19,991)

Issue of scrip dividends

17

1,038

(1,038)

Balance as at 30 June 2021

628,687

(32,312)

596,375

FOR THE PERIOD 1 JANUARY 2021 TO 31 DECEMBER 2021 (AUDITED)

Stated

Retained

capital

earnings

Total

Notes

£’000

£’000

£’000

Balance as at 1 January 2021

627,649

(45,491)

582,158

Total comprehensive income for the year:

Profit for the year

117,892

117,892

Transactions with owners, recognised directly in equity:

Dividends paid in the year

21

(40,050)

(40,050)

Issue of scrip dividends

17

2,243

(2,243)

Balance as at 31 December 2021

629,892

30,108

660,000

The accompanying notes on pages 48 to 77 form an integral part of these Financial Statements.

STATEMENT OF CASH FLOWS

FOR THE PERIOD 1 JANUARY 2022 TO 30 JUNE 2022

Unaudited

Unaudited

Audited

Period

Period

Year

1 January

1 January

1 January

2022 to

2021 to

2021 to

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Profit for the period/year after tax from continuing operations

116,145

34,208

117,892

Adjustments for:

 

Unrealised (profit) on investments

(101,892)

(18,612)

(86,816)

Operating cash flows before changes in working capital

14,253

15,596

31,076

(Increase)/decrease in interest receivables

(992)

(11,896)

3,034

Increase in trade and other payables

85

84

29

Net cash inflow from operating activities

13,346

3,784

34,139

Financing activities

 

Dividends paid

(21,288)

(19,991)

(40,050)

Net outflow from financing activities

(21,288)

(19,991)

(40,050)

Net decrease in cash and cash equivalents

(7,942)

(16,207)

(5,911)

Cash and cash equivalents at the beginning of the period/year

10,964

16,875

16,875

Cash and cash equivalents at the end of the period/year

3,022

668

10,964

The accompanying notes on pages 48 to 77 form an integral part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD 1 JANUARY 2022 TO 30 JUNE 2022

 

  1. Company information

Foresight Solar Fund Limited (the “Company”) is a closed-ended public company with an indefinite life and was incorporated in Jersey under the Companies Law (Jersey) 1991, as amended, on 13 August 2013, with registered number 113721. The address of the registered office is: 28 Esplanade, St Helier, Jersey, JE4 2QP.

The Company has one investment, Foresight Solar (UK Hold Co) Limited (“UK Hold Co”). The principal activity of the Company through its direct and indirect subsidiaries, as per the structure chart on the following page, is investing in operational and development stage ground-based solar power plants and battery storage systems in the UK, Australia and Spain.

UK Hold Co has three investments: FS RCF Debtco Limited (“RCF Debtco”), FS Holdco 4 Limited (“FS Holdco 4”) and Sandridge Battery Storage Holdings Limited (“SBSHL”).

RCF Debtco has three investments: FS Top Holdco 1 Limited (“FS Topco 1”), FS Top Holdco 2 Limited (“FS Topco 2”) and FS Holdco 3 Limited (“FS Holdco 3”).

FS Topco 1 has one investment in FS Intermediate Holdco Limited (“FSIH”). FSIH in turn has one investment in FS Holdco Limited (“FS Holdco”).

FS Topco 2 has one investment in Foresight Intermediate Solar Holdings Limited (“FISH”). In turn, FISH has one investment in FS Holdco 2 Limited (“FS Holdco 2”) which has one investment in FS Debtco Limited (“FS Debtco”).

FS Holdco 3 Limited has one investment in Second Generation Portfolio 1 Holdings Limited (“SGP Holdings 1”).

FS Holdco, FS Debtco, SGP Holdings 1 and FS Holdco 4 invest in further holding companies (the “SPVs”) which then invest in the underlying solar investments.

In February 2022, the Group underwent a reorganisation of the Group structure (“the Reorganisation”) ahead of the refinancing of the revolving credit facilitates on 28 February 2022.

On 10 February 2022, FSIH acquired the whole of the issued share capital of FS Holdco and issued consideration shares to UK Hold Co in exchange.

FS Topco 1 then acquired consideration shares in FSIH and issued consideration shares to UK Hold Co. RCF Debtco then acquired the consideration shares in FS Topco 1 and issued consideration shares to UK Hold Co in exchange.

On the same date, RCF Debtco acquired the total issued share capital of FS Topco 1 and FS Topco 2 and issued consideration shares to UK Hold Co in exchange.

Following that, RCF Debtco then acquired the whole of the issued share capital of FS Holdco 3 and issued consideration shares to UK Hold Co in exchange.

After the reorganisation, UK Hold Co owns 100% of the share capital of RCF Debtco.

Structure chart

The following chart shows the Group structure as at 30 June 2022 after the reorganisation:

  1. Summary of significant accounting policies

2.1 Basis of presentation

The Unaudited Interim Financial Statements (the “Interim Financial Statements”) for the period 1 January 2022 to 30 June 2022 have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”).

The Interim Financial Statements do not include all the information and disclosures required in the annual Financial Statements, and should be read in conjunction with the annual Financial Statements as at 31 December 2021.

These are not statutory accounts in accordance with Article 105 of the Companies Law (Jersey) 1991, as amended and the financial information for the period ended 30 June 2022 and 30 June 2021 has been neither audited nor formally reviewed. Statutory accounts in respect of the period to 31 December 2021 have been audited and reported on by the Company’s auditors and delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under Article 113B (3) or 113B (6) of the Companies Law (Jersey) 1991. No statutory accounts in respect of any period after 31 December 2021 have been reported on by the Company’s auditors or delivered to the Registrar of Companies.

2.2 Going concern

Towards the end of 2021, high power prices were largely attributable to increased demand following the easing of COVID-19 lockdown restrictions, the tightening of the supply of natural gas with low reserves as well as a low wind-yielding year across Northern Europe. However, high prices at the start of 2022 were pushed even higher by the Ukraine conflict and the subsequent sanctions on Russia and reduced reliance on its fossil fuel exports.

The Company’s exposure to wholesale power prices is reduced in the medium term by maintaining a substantial proportion of electricity generation on fixed price arrangements under Power Purchase Agreements (“PPAs”). This provides protection if power prices are to decline. As the Company’s PPAs are all contracted across of a pool of five UK energy suppliers and a further five energy suppliers in the Australian market, the counterparty risk on existing energy suppliers is required to be continually monitored by the Investment Manager.

The high-power price environment has increased the risk of insolvency of the energy suppliers that provide PPAs to renewable energy generators. This is a key risk for the Company due to the high proportion of revenues that are contracted with these energy suppliers. Accordingly, the Investment Manager periodically monitors the counterparty risk on the Company’s energy suppliers and will consider new PPAs if the counterparty risk of existing energy suppliers is of concern.

In the spring of 2022, the Chancellor of the Exchequer announced a temporary windfall tax on the profits of oil and gas firms, given the exceptionally high energy prices.

In September 2022, the new UK Prime Minister has firmly ruled out the extension of the windfall tax to other generators in favour of other proposals to reduce electricity prices.

The preferred option for renewable energy generators appears to be to persuade the industry to forgo the right to sell electricity at current elevated prices in return for longer-term fixed price contracts at lower prices. Precise details of how this will be implemented are awaited.

The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in this report. The financial position of the Company, the financial performance, its cash flows, liquidity position and borrowing facilities are referred to in the Chairman’s Statement, Investment Manager’s Report and Notes to the Accounts.

In addition, the Financial Statements include the Company’s objectives, policies and procedures for managing its capital; its financial risk management objectives; and its exposures to credit and liquidity risk.

The subsidiaries of the Company, FS Holdco Limited, FS Debtco Limited and RCF Debtco Limited, are all required to complete quarterly debt compliance reporting. The covenants that FS Holdco and FS Debtco are required to report on are the six-month look-back debt service cover ratio, the six-month look-forward debt service cover ratio and the loan life cover ratio.

The debt service cover ratio (“DSCR”) is a measure of how each portfolio can use its generated cash to repay its debt obligations in any given six-month calculation period. It is calculated as the cash generated from operations and available to pay debt service divided by the debt principal and interest in any given six-month period.

RCF Debtco is required to report an interest cover ratio (“ICR”). ICR is a measure of how the cash generated by the borrower can be used to repay the RCF interest generated in a six-month calculation period. It is calculated as the cash generated by the borrower divided by the RCF interest accrued in a six-month calculation period.

The Directors are happy to confirm that there were no instances of non-compliance throughout the period or subsequently.

An evaluation of going concern was prepared by the Company’s Investment Manager, then reviewed and approved by the Audit and Risk Committee and subsequently by the Board. This included cash flow workings from 1 July 2022 until 31 December 2023 which clearly demonstrates that the Company can continue operations for the going concern assessment period, even when five separate downside economic sensitivities and two severe and beyond plausible downside economic scenarios were applied.

Cash flow analysis was completed to consider the following negative scenarios. These scenarios were completed individually as well as combined. In each of the scenarios, the forecasts display a significant level of headroom above minimum cash and debt covenant requirements throughout the going concern assessment period.

  • All investments consistently generate a P90 level of electricity output. The Directors deem this is an appropriate, market standard stress test with a relevant example being the UK onshore wind market experiencing a very low yielding year in 2021
  • Power prices with merchant pricing exposure were reduced by 50% across the portfolio. This downside scenario represents the volatility of power prices as a result of the tightening of the supply of natural gas further exacerbated by the Ukraine conflict. During 2022, captured power prices have exceeded four times forecasted prices within the portfolio to date
  • A 10% reduction in UK asset yields in response to the profits attributable to the high electricity prices and the political uncertainty as to whether the windfall tax be extended to renewable electricity generators or an alternative mechanism will be introduced to reduce revenues received at asset level
  • A 10% increase in inflation is assumed for 2023 and has been applied to retail price index (“RPI”) linked debt and costs. This downside scenario represents the possibility that the high inflation of 2022 continues into 2023
  • The PPA provider that the Group is most exposed to fails to settle PPA & Embedded Benefits revenue

This downside scenario represents the risk of insolvencies of PPA offtakers in response to the high number of insolvencies during 2021, which continue into 2022 linked to the extremely high power price market

If any of these sensitivities or scenarios were to materialise, the Company could still meet its target dividend paid per share for the going concern assessment period. However, the Board would continue to review on a periodic basis whether the dividend paid per share is appropriate considering the reduced cash flow. The cash flow forecasts show that operating costs would still be covered, but the cash balance would reduce gradually during the going concern assessment period, without causing any issues with operational ability.

Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for the going concern assessment period and has therefore prepared the Financial Statements on a going concern basis.

The Financial Statements do not include any adjustments that would result from the basis of preparation being inappropriate.

2.3 Changes in accounting policies and disclosures

New and revised IFRSs adopted by the Company

The accounting policies adopted are consistent with those of the previous financial year. Management have assessed all new standards and amendments to standards and interpretations that are effective for annual periods after 1 January 2022 and have deemed none of them to be applicable to the Company.

New and revised IFRSs in issue but not yet effective

There are no standards, amendments or interpretations in issue at the reporting date which are effective after 1 January 2022 that are deemed to be material to the Company.

2.4 Consolidation

Subsidiaries

Subsidiaries are entities over which the Company has control. The Company controls an entity when the Company is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Associates

Associates are entities over which the Company has significant influence, being the power to participate in the financial and operating policy decisions of the investee (but not control or joint control).

Investment entity exemption

Qualifying entities that meet the definition of an investment entity are not required to produce a consolidated set of Financial Statements and instead account for subsidiaries, joint ventures and associates at fair value through profit or loss.

Under the definition of an investment entity, the entity should satisfy all three of the following tests:

  • Obtains funds from one or more investors for the purpose of providing those investors with investment management services
  • Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both (including having an exit strategy for investments)
  • Measures and evaluates the performance of substantially all its investments on a fair value basis

In assessing whether the Company meets the definition of an investment entity set out in IFRS 10, the Directors note that:

  • The Company is an investment company that invests funds obtained from multiple investors in a diversified portfolio of solar energy infrastructure assets and related infrastructure assets and has appointed the Investment Manager to manage the Company’s investments
  • The Company’s purpose is to invest funds for investment income and potential capital appreciation and will exit its investments at the end of their economic lives or when their planning permissions or leasehold land interests expire (unless it has repowered their sites) and may also exit investments earlier for reasons of portfolio balance or profit
  • The Board evaluates the performance of the Company’s investments on a fair value basis as part of the quarterly management accounts review and the Company values its investments on a fair value basis twice a year for inclusion in its annual and interim Financial Statements with the movement in the valuations taken to the income statement and, therefore, is measured within its earnings

Taking these factors into account, the Directors are of the opinion that the Company has all the typical characteristics of an investment entity and meets the definition set out in IFRS 10.

The Directors believe the treatment outlined above provides the most relevant information to investors.

As UK Hold Co is not consolidated, its subsidiaries (plus their underlying investments) are not separately presented at fair value through profit or loss in the Company’s accounts. Should subsidiaries fail to meet the definition of an investment entity the Company would have to consolidate its subsidiaries.

  1. Critical accounting estimates and judgements

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The Board considers that the only areas where management make critical estimates that may have a significant effect on the Financial Statements are in relation to the valuation of investments held at fair value through profit and loss, and the most significant judgement is related to the determination that the Company meets the definition of an investment entity. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and underlying assumptions are reviewed on an ongoing basis.

Key judgements

The Board considers that the determination that the Company meets the definition of an investment entity involves significant judgement. The Board has concluded that the Company continues to meet the definition of an investment entity, as its strategic objective of investing in portfolio investments and providing investment management services to investors for the purpose of generating returns in the form of investment income and capital appreciation remains unchanged.

Key source of estimation uncertainty: Investments at fair value through profit or loss

The Company recognises its investment in UK Hold Co at fair value, which requires the determination of fair value of the underlying investments.

The Board considers that determining the fair value of the underlying investments not quoted in an active market involves critical accounting estimates. The discount rate, power price curve, inflation and useful economical life of assets are considered the most significant unobservable inputs through which an increase or decrease would have a material impact on the fair value of the investments at fair value through profit or loss.

The discount rates are subjective and therefore it is feasible that a reasonable alternative assumption may be used, resulting in a different value. The discount rates applied to the cash flow are reviewed by the Investment Manager and approved by the Board on a quarterly basis, taking into consideration market transactions with similar nature. Independent advisors are used to provide evidenced forward power price curves and therefore it is feasible that a reasonable alternative assumption may be used, resulting in a different value.

The power price curves are reviewed by the Investment Manager and approved by the Board on a quarterly basis. Inflation forecasts such as that of the Office for Budget Responsibility (“OBR”) are used alongside in-house views of the Investment Manager to determine this assumption, therefore it is feasible that a reasonable alternative assumption may be used, resulting in a different value. The inflation assumptions are reviewed by the Investment Manager and approved by the Board on a quarterly basis.

Useful economic life (“UEL”) of assets are based on the Investment Manager’s estimates of the period over which the assets will generate revenue, which are periodically reviewed for continued appropriateness. The UEL of the assets are based on the underlying lease contract of the individual assets. The expected weighted average life of the UK portfolio as at 30 June 2022 is 30.7 years from the date of commissioning. The UEL of the Australian portfolio is 34.4 years. The Investment Manager fully expects to be able to renew any lease of the underlying investments. These key assumptions used in determining the fair value of underlying investment and the associated sensitivities are disclosed in note 16 Fair values of investments in unconsolidated entities.

  1. Interest income

 

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Interest on loan notes

15,279

15,836

31,895

Interest on Shareholder loans

3,060

3,060

6,171

18,339

18,896

38,066

Loan notes were issued by the Company to UK Hold Co for the purchase of investments. Interest accrues at 9% per annum in arrears on each Interest Payment Date (28/29 February and 31 August each year). Where interest is not paid on the payment date, it will compound and future interest shall accrue at 11% per annum from the due date up to the date of actual payment, compounding on each Interest Payment Date. The loan notes balance at period end on which interest is charged is £250,000,000 (30 June 2021: £250,000,000, 31 December 2021: £250,000,000). These loans form part of the fair value of the investments as per note 14.

A Shareholder loan is created when the total amount paid by the Company on behalf of UK Hold Co to acquire the underlying investments is more than the total loan notes issued by the Company to UK Hold Co. Interest is accrued at 2% per annum and is repayable in full on demand. The Shareholder loan balance at period end is £304,316,450 (30 June 2021: £304,316,450, 31 December 2021: £304,316,450). These loans form part of the fair value of the investments as per note 14.

  1. Management fees

The investment manager of the Fund is Foresight Group LLP (the “Investment Manager”).

The Investment Manager receives an annual fee of 1% of the Net Asset Value (“NAV”) of the Company up to £500 million – NAV in excess of this is charged at 0.9% per annum. This is payable quarterly in arrears and is calculated based on the published quarterly NAV. For the period ended 30 June 2022, the Investment Manager was entitled to a management fee of £3,598,332 (1 January 2021 to 30 June 2021: £2,858,257, 1 January 2021 to 31 December 2021: £5,854,281) of which £69,094 was outstanding as at 30 June 2022 (30 June 2021: £140,443, 31 December 2021: £nil).

  1. Administration and accountancy fees

Under an Administration Agreement, the Administrator of the Company, JTC (Jersey) Limited, is entitled to receive minimum annual administration and accountancy fees of £156,000 (2021: £156,000) payable quarterly in arrears. For the period ended 30 June 2022, total administration and accountancy fees were £96,635 (1 January 2021 to 30 June 2021: £95,550, 1 January 2021 to 31 December 2021: £198,822) of which £91,000 was outstanding as at 30 June 2022 (30 June 2021: £91,000, 31 December 2021: £91,000).

  1. Directors’ fees

No members of staff were employed during the period (period ended 30 June 2021: nil, year ended 31 December 2021: nil).

Total Directors’ fees were £130,000 (1 January 2021 to 30 June 2021: £130,000, 1 January 2021 to 31 December 2021: £260,000).

  1. Other expenses

 

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Legal and professional fees

241

162

432

Other expenses

20

54

245

261

216

677

Included within legal and professional fees is £64,608 (1 January 2021 to 30 June 2021: £20,270, 1 January 2021 to 31 December 2021: £129,216) relating to the accrual of the 2022 audit fees. The total audit fee paid to KPMG LLP in relation to the audit of the Group was £229,000 for the year ended 31 December 2021. There were no other fees paid to the auditors for non-audit services (1 January 2021 to 30 June 2021: £nil, 1 January 2021 to 31 December 2021: £nil).

  1. Earnings per Ordinary Share – basic and diluted

The basic and diluted profit per Ordinary Share for the Company is 19.04 pence per share (period ended 30 June 2021: 5.63 pence, year ended 31 December 2021: 19.37 pence). This is based on the profit for the period of £116,145,206 (1 January 2021 to 30 June 2021: £34,208,166 profit, 1 January 2021 to 31 December 2021: £117,891,220 profit) and on 609,958,720 (1 January 2021 to 30 June 2021: 607,996,259, 1 January 2021 to 31 December 2021: 608,759,067) Ordinary Shares, being the weighted average number of shares in issue during the period.

There is no difference between the weighted average ordinary or diluted number of shares.

  1. Interest receivable

 

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Interest receivable on loan notes

27,904

48,012

30,131

Interest receivable on Shareholder loan

33,191

27,021

29,972

61,095

75,033

60,103

Information about the Company’s exposure to credit and market risk and impairment losses for interest receivable is included in note 19.

  1. Trade and other receivables

 

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Prepaid expenses

25

25

25

Other receivables

250

250

250

275

275

275

Information about the Company’s exposure to credit and market risk and impairment losses for trade and other receivables is included in note 19.

  1. Cash and cash equivalents

 

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Cash at bank

3,022

668

10,964

3,022

668

10,964

Information about the Company’s exposure to credit and market risk and impairment losses for cash and cash equivalents is included in note 19.

  1. Trade and other payables

 

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Accrued expenses

342

312

257

Amounts due to subsidiaries1

187

187

187

529

499

444

  1. Amounts due to subsidiaries are unsecured, interest free and repayable on demand.

  1. Investments at fair value through profit or loss

The following table presents the Company’s investments at fair value through profit or loss:

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

Investment in UK Hold Co

– Equity

– Loans

690,994

520,898

589,102

690,994

520,898

589,102

Book cost as at 1 January

554,315

554,315

554,315

Opening investment holding gains/(losses)

34,787

(52,029)

(52,029)

Valuation as at 1 January

589,102

502,286

502,286

Movements during the period

 

Purchase at cost (loans drawn down)

Investment holding gains

101,892

18,612

86,816

Valuation as at 30 June/31 December

690,994

520,898

589,102

Book cost as at 30 June/31 December

554,315

544,315

554,315

Closing investment holding gains/(losses)

136,679

(33,417)

34,787

690,994

520,898

589,102

The Company has one investment in Foresight Solar (UK Hold Co) Limited (“UK Hold Co”). This investment consists of both debt and equity (share capital of £100) and is not quoted in an active market. Accordingly, the investment in UK Hold Co has been valued using its net assets.

In turn, UK Hold Co has three investments in RCF Debtco, FS Holdco 4 Limited and SBSHL. RCF Debtco has three investments in FS Top Holdco 1, FS Top Holdco 2 and FS Holdco 3 Limited. FS Topco 1 has one investment in FSIH. FSIH has one investment in FS Holdco. FS Topco 2 has one investment in FISH. FISH has one investment in FS Holdco 2. FS Holdco 2 has one investment FS Debtco. FS Holdco 3 has one investment in SGP Holdings 1 which in turn has one investment in Second Generation Portfolio 1 (“SGP 1”). These investments also consist of both debt and equity and are not quoted in an active market. FS Holdco and FS Debtco are fair valued using their Net Asset Value as reported at year end, with adjustments to their long-term external debt to reflect the fact that the carrying value at amortised cost is not considered to be the best approximation of their fair value. FS Topco 1, FS Topco 2, FS Holdco 4, FSIH, FS Holdco 3 and FISH are fair valued using their Net Asset Value as reported at period end.

FS Holdco, FS Debtco, SGP 1 and FS Holdco 3’s investment portfolios consist of unquoted investments in solar projects, the valuations of which are based on a discounted cash flow methodology (as set out in note 16) for solar projects that are operational. FS Holdco 4 consists of operational Australian assets, the valuations of which are too based on a discounted cash flow methodology. However, the Spanish assets in FS Holdco 4 are not yet operational therefore the price of the investment acquired by the Group is used to approximate their fair value.

SBSL is also held at cost as it is not yet operational and price of the recent investment acquired by the Group, SBSHL, approximates its fair value.

Fair value hierarchy

IFRS 13 Fair Value Measurement requires disclosures relating to fair value measurements using a three-level fair value hierarchy. The level within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement.

Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability. The following table shows investments recognised at fair value, categorised between those whose fair value is based on:

  • Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities
  • Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
  • Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

All investments held at fair value through profit or loss are classified as level 3 within the fair value hierarchy.

As UK Hold Co’s Net Asset Value is not considered observable market data, the investment in UK Hold Co has been classified as level 3. There were no movements between levels during the year, categorised between those whose fair value is based on:

As at 30 June 2022:

 

Level 1

Level 2

Level 3

Total

£’000

£’000

£’000

£’000

Unquoted investment

690,994

690,994

690,994

690,994

As at 30 June 2021:

Level 1

Level 2

Level 3

Total

£’000

£’000

£’000

£’000

Unquoted investment

520,898

520,898

520,898

520,898

As at 31 December 2021:

Level 1

Level 2

Level 3

Total

£’000

£’000

£’000

£’000

Unquoted investment

589,102

589,102

589,102

589,102

Sensitivity analysis

Due to the nature of the Group structure and the underlying valuation basis of UK Hold Co, RCF Debtco, FS Topco 1, FSIH, FS Holdco, FS, Topco 2, FS Debtco, FS Holdco 3, FS Holdco 4 and the underlying solar project investments, the valuation of the Company’s investment at fair value through profit or loss is directly linked to the valuation of the underlying solar investments. Therefore, the unobservable inputs driving the valuation of the Company’s investments in UK Hold Co are directly attributable to the valuation of the unquoted investments in FS Holdco, FS Debtco, FS Holdco 3 and FS Holdco 4, which are discussed further in note 16.

  1. Subsidiaries and associates

Investments in subsidiaries

 

Proportion

Direct

of shares

or indirect

Country of

and voting

Name

holding

incorporation

Principal activity

rights held

Foresight Solar (UK Hold Co) Limited (“UK Hold Co”)

Direct

UK

Holding Company

100%

FS Holdco Limited (“FS Holdco”)

Indirect

UK

Holding Company

100%

FS Top Holdco 2 Limited (“FS Topco 2”)

Indirect

UK

Holding Company

100%

Foresight Intermediate Solar Holdings Limited (“FISH”)

Indirect

UK

Holding Company

100%

FS Holdco 2 Limited (“FS Holdco 2”)

Indirect

UK

Holding Company

100%

FS Debtco Limited (“FS Debtco”)

Indirect

UK

Holding Company

100%

FS Holdco 3 Limited (“FS Holdco 3”)

Indirect

UK

Holding Company

100%

FS Holdco 4 Limited (“FS Holdco 4”)

Indirect

UK

Holding Company

100%

Sandridge Battery Storage Holding Limited (“SBSHL”)

Indirect

UK

Holding Company

50%

FS RCF DebtCo Limited (“RCF Debtco”)

Indirect

UK

Holding Company

100%

FS Top Holdco 1 Limited (“FS Topco 1”)

Indirect

UK

Holding Company

100%

FS Intermediate Holdco Limited (“FSIH”)

Indirect

UK

Holding Company

100%

FS Wymeswold Limited

Indirect

UK

SPV Holding Company

100%

FS Castle Eaton Limited

Indirect

UK

SPV Holding Company

100%

FS Pitworthy Limited

Indirect

UK

SPV Holding Company

100%

Foresight Solar Germany Holding GmbH

Indirect

Germany

SPV Holding Company

100%

FS Highfields Limited

Indirect

UK

SPV Holding Company

100%

FS High Penn Limited

Indirect

UK

SPV Holding Company

100%

FS Hunter’s Race Limited

Indirect

UK

SPV Holding Company

100%

FS Spriggs Limited

Indirect

UK

SPV Holding Company

100%

FS Bournemouth Limited

Indirect

UK

SPV Holding Company

100%

FS Landmead Limited

Indirect

UK

SPV Holding Company

100%

FS Kencot Limited

Indirect

UK

SPV Holding Company

100%

FS Copley Limited

Indirect

UK

SPV Holding Company

100%

FS Port Farm Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Membury Limited

Indirect

UK

SPV Holding Company

100%

FS Southam Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Atherstone Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Paddock Wood Solar Farm Limited

Indirect

UK

SPV Holding Company

100%

Southam Holdco Limited

Indirect

UK

SPV Holding Company

100%

Atherstone Holdco Limited

Indirect

UK

SPV Holding Company

100%

Paddock Wood Holdco Limited

Indirect

UK

SPV Holding Company

100%

FS Shotwick Limited

Indirect

UK

SPV Holding Company

100%

FS Sandridge Limited

Indirect

UK

SPV Holding Company

100%

FS Wally Corner Limited

Indirect

UK

SPV Holding Company

100%

Acquisition Co 4 Limited

Indirect

UK

SPV Holding Company

100%

FS Welbeck Limited

Indirect

UK

SPV Holding Company

100%

FS Trehawke Limited

Indirect

UK

SPV Holding Company

100%

FS Homeland Limited

Indirect

UK

SPV Holding Company

100%

FS Marsh Farm Limited

Indirect

UK

SPV Holding Company

100%

FS Steventon Limited

Indirect

UK

SPV Holding Company

100%

FS Fields Farm Limited

Indirect

UK

SPV Holding Company

100%

FS Gedling Limited

Indirect

UK

SPV Holding Company

100%

FS Sheepbridge Limited

Indirect

UK

SPV Holding Company

100%

FS Tengore Limited

Indirect

UK

SPV Holding Company

100%

FS Cuckoo Limited

Indirect

UK

SPV Holding Company

100%

FS Field House Limited

Indirect

UK

SPV Holding Company

100%

FS Upper Huntingford Limited

Indirect

UK

SPV Holding Company

100%

FS Abergelli Limited

Indirect

UK

SPV Holding Company

100%

FS Crow Trees Limited

Indirect

UK

SPV Holding Company

100%

FS Yarburgh Limited

Indirect

UK

SPV Holding Company

100%

FS Nowhere Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Bilsthorpe Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Bulls Head Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Roskrow Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Abbeyfields Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Lindridge Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Misson Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Playters Solar Limited

Indirect

UK

SPV Holding Company

100%

FS PS Manor Farm Solar Limited

Indirect

UK

SPV Holding Company

100%

FS SV Ash Solar Park Limited

Indirect

UK

SPV Holding Company

100%

FS Pen Y Cae Solar Limited

Indirect

UK

SPV Holding Company

100%

Second Generation Portfolio Holdings 1 (“SGP Holdings 1”)

Indirect

UK

SPV Holding Company

100%

Second Generation Portfolio 1 (“SGP 1”)

Indirect

UK

SPV Holding Company

100%

FS Oakey 2 Pty Limited

Indirect

Australia

SPV Holding Company

100%

Foresight Solar Spain Holding S.L (“FSSH”)

Indirect

Spain

SPV Holding Company

100%

Sandridge Battery Storage Limited (“SBSL”)

Indirect

UK

SPV Holding Company

50%

Wymeswold Solar Farm Limited (“Wymeswold”)

Indirect

UK

Investment

100%

Castle Eaton Solar Farm Limited (“Castle Eaton”)

Indirect

UK

Investment

100%

Pitworthy Solar Farm Limited (“Pitworthy “)

Indirect

UK

Investment

100%

Highfields Solar Farm Limited (“Highfields”)

Indirect

UK

Investment

100%

High Penn Solar Farm Limited (“High Penn”)

Indirect

UK

Investment

100%

Hunter’s Race Solar Farm Limited (“Hunter’s Race”)

Indirect

UK

Investment

100%

Spriggs Solar Farm Limited (“Spriggs”)

Indirect

UK

Investment

100%

Bournemouth Solar Farm Limited (“Bournemouth”)

Indirect

UK

Investment

100%

Landmead Solar Farm Limited (“Landmead”)

Indirect

UK

Investment

100%

Kencot Hill Solar Farm Limited (“Kencot”)

Indirect

UK

Investment

100%

Copley Solar Limited (“Copley”)

Indirect

UK

Investment

100%

Port Farm Limited (“Port Farm”)

Indirect

UK

Investment

100%

Membury Solar Limited (“Membury”)

Indirect

UK

Investment

100%

Atherstone Solar Farm Limited (“Atherstone”)

Indirect

UK

Investment

100%

Southam Solar Farm Limited (“Southam”)

Indirect

UK

Investment

100%

Paddock Wood Solar Farm Limited (“Paddock Wood”)

Indirect

UK

Investment

100%

Shotwick Solar Limited (“Shotwick Solar”)

Indirect

UK

Investment

100%

Sandridge Solar Power Limited (“Sandridge”)

Indirect

UK

Investment

100%

Wally Corner Limited (“Wally”)

Indirect

UK

Investment

100%

Foresight Solar Australia Pty Limited

Indirect

Australia

Investment

100%

RE Oakey Pty Limited

Indirect

Australia

Investment

100%

Oakey Network Pty Limited

Indirect

Australia

Investment

100%

Longreach Asset Company Pty Limited

Indirect

Australia

Investment

100%

Second Generation Yardwall Limited (“Yardwall”)

Indirect

UK

Investment

100%

Second Generation Verwood Limited (“Verwood”)

Indirect

UK

Investment

100%

Second Generation Park Farm Limited (“Park Farm”)

Indirect

UK

Investment

100%

Second Generation Coombeshead Limited (“Coombeshead”)

Indirect

UK

Investment

100%

Second Generation Sawmills Limited (“Sawmills”)

Indirect

UK

Investment

100%

Welbeck Limited (“Welbeck”)

Indirect

UK

Investment

100%

Trehawke Limited (“Trehawke”)

Indirect

UK

Investment

100%

Homeland Limited (“Homeland”)

Indirect

UK

Investment

100%

Marsh Farm Limited (“Marsh Farm”)

Indirect

UK

Investment

100%

Steventon Limited (“Steventon”)

Indirect

UK

Investment

100%

Fields Farm Limited (“Fields Farm”)

Indirect

UK

Investment

100%

Gedling Limited (“Gedling”)

Indirect

UK

Investment

100%

Sheepbridge Limited (“Sheepbridge”)

Indirect

UK

Investment

100%

Tengore Limited (“Tengore”)

Indirect

UK

Investment

100%

Cuckoo Limited (“Cuckoo”)

Indirect

UK

Investment

100%

Field House Limited (“Field House”)

Indirect

UK

Investment

100%

Upper Huntingford Limited (“Upper Huntingford”)

Indirect

UK

Investment

100%

Abergelli Limited (“Abergelli”)

Indirect

UK

Investment

100%

Crow Trees Limited (“Crow Trees”)

Indirect

UK

Investment

100%

Yarburgh Limited (“Yarburgh”)

Indirect

UK

Investment

100%

Nowhere Solar Limited (“Nowhere Solar”)

Indirect

UK

Investment

100%

Bilsthorpe Solar Limited (“Bilsthorpe Solar”)

Indirect

UK

Investment

100%

Bulls Head Solar Limited (“Bulls Head Solar”)

Indirect

UK

Investment

100%

Roskrow Solar Limited (“Roskrow Solar”)

Indirect

UK

Investment

100%

Abbeyfields Solar Limited (“Abbeyfields Solar”)

Indirect

UK

Investment

100%

Lindridge Solar Limited (“Lindridge Solar”)

Indirect

UK

Investment

100%

Misson Solar Limited (“Misson Solar”)

Indirect

UK

Investment

100%

Playters Solar Limited (“Playters Solar”)

Indirect

UK

Investment

100%

PS Manor Farm Solar Limited (“PS Manor Farm Solar”)

Indirect

UK

Investment

100%

SV Ash Solar Park Limited (“SV Ash Solar Park”)

Indirect

UK

Investment

100%

Pen Y Cae Solar Limited (“Pen Y Cae Solar”)

Indirect

UK

Investment

100%

Global Solar Energy Veintisiete, S.L

Indirect

Spain

Investment

100%

Virgen del Carmen Solar S.L (“Virgen”)

Indirect

Spain

Investment

100%

Solar Energy Veintisiete S.L (“Lorca”)

Indirect

Spain

Investment

100%

Solar de la Contraviesa 5 S.L.U

Indirect

Spain

Investment

100%

Solar de la Contraviesa 6 S.L.U

Indirect

Spain

Investment

100%

Solar de la Contraviesa 7 S.L.U

Indirect

Spain

Investment

100%

Fotovoltaica Puerto Cruz II.SI

Indirect

Spain

Investment

100%

Longreach New Holdco Pty Limited

Indirect

Australia

SPV Holding Company

100%

Oakey 1 New Holdco Pty Limited

Indirect

Australia

SPV Holding Company

100%

Investments in associates

 

Proportion

Direct

of shares

or indirect

Country of

and voting

Name

holding

incorporation

Principal activity

rights held

Kiamco Hanwha Foresight Bannerton Pty Limited

Indirect

Australia

SPV Holding Company

48.50%

  1. Fair value of the investments in unconsolidated entities

Valuation process

Valuations are the responsibility of the Board of Directors. The Investment Manager is responsible for submitting fair market valuations of Group assets to the Directors. The Directors review and approve these valuations following appropriate challenge and examination. Valuations are carried out quarterly. The current portfolio consists of non-market traded investments and valuations are based on a discounted cash flow methodology. The Investment Manager’s assessment of fair value of investments is determined in accordance with the International Private Equity and Venture Capital 2018 (“IPEVC”) Valuation Guidelines, using levered and unlevered discounted cash flow principles. The Investment Manager and Directors consider that the discounted cash flow methodology used in deriving a fair value is in accordance with the fair value requirements of IFRS 13. The assets in construction were valued at cost at 30 June 2022 and have therefore been omitted from the sensitivity analysis on the following pages.

Sensitivity analysis of significant changes in unobservable inputs within level hierarchy of underlying investments

The majority of the Company’s underlying investments (indirectly held through its unconsolidated subsidiaries FS Holdco, FS Debtco, FS Holdco 3 and FS Holdco 4) are valued with reference to the discounted value of future cash flows. The Directors consider the valuation methodology used, including the key assumptions and discount rate applied, to be appropriate. The Board reviews, at least annually, the valuation inputs and, where possible, makes use of observable market data to ensure valuations reflect the fair value of the investments. A broad range of assumptions are used in the valuation models. These assumptions are based on long-term forecasts and are not affected by short-term fluctuations in inputs, be it economic or technical. The Investment Manager has adjusted the sensitivities calculation methodology from an asset level cash flows only basis to a calculation based on asset level cash flow less holding company level debt cash outflows. This has resulted mainly in a reduction of the discount rate sensitivity disclosed below. The base valuation of £713.8 million represents the levered discounted value of future cash flows of the underlying operational assets with assets under construction held at cost, less the long-term debt held at holding company level. The valuation of the Australian assets is net of debt. The base valuation of £713.8 million is equal to the NAV of £754.9 million less items deemed not subject to the sensitivities applied.

30 June

2022

£m

Base case for sensitivities

 713.8

Items not subject to sensitivities:

 

Cash in underlying assets

23.6

Assets in construction valued at cost

61.0

Company and intermediate holding companies’ cash

84.9

RCF outstanding

(125.9)

Company and intermediate companies’ net liabilities

(1.7)

Other adjustments

(0.8)

Net Asset Value at 30 June

754.9

The Directors consider the following to be the most significant inputs to the discounted cash flows (“DCF”) calculation.

Discount rate

The weighted average discount rate used is 6.23% (2021: 6.26%). The Directors do not expect to see a significant change in the discount rates applied within the solar infrastructure sector. Therefore, a variance of +/-0.5% is considered reasonable factored into the analysis. In terms of the climate change risk, the discount rate is benchmarked against a similar asset base to ensure the underlying climate risk exposure is factored into the analysis.

-0.50%

-0.25%

Base

+0.25%

+0.50%

Portfolio valuation (£m)

739.3

726.3

713.8

701.7

689.9

Change in portfolio valuation (£m)

25.5

12.5

-12.1

-23.9

NAV per share change (pence)

4.2

2.1

123.8

-2.0

-3.9

Power price

Power price DCF models assume power prices that are consistent with the Power Purchase Agreements (“PPAs”) currently in place. At the PPA end date, the model reverts to the power price forecast. The power price forecasts are updated quarterly and based on power price forecasts from leading independent sources. The forecast assumes an average annual decrease in power prices in real terms of approximately 5.1% (2021: decrease of 3.1%). During the period, c.42% of the investments’ operational revenues came from regulatory support mechanisms. The remaining c.58% of revenue is derived from electricity sales which are partially subject to power price movements. On a net present value basis, future electricity sales which are subject to price movements represent c.52% of total revenues.

-20.0%

-10.0%

Base

+10.0%

+20.0%

Portfolio valuation (£m)

598.1

655.3

713.8

768.2

822.0

Change in portfolio valuation (£m)

-115.7

-58.5

54.4

108.2

NAV per share change (pence)

-19.0

-9.6

123.8

8.9

17.7

Inflation

A variable of 0.5% to 1.0% is considered reasonable given the long-term inflation rate of 3.00% (2021: 3.00%).

-1.0%

-0.5%

Base

+0.5%

+1.0%

Portfolio valuation (£m)

655.9

684.6

713.8

743.0

771.5

Change in portfolio valuation (£m)

-57.9

-29.2

29.1

57.7

NAV per share change (pence)

-9.5

-4.8

123.8

4.8

9.5

Whilst the above relates to the long-term inflation rate, the Company has also analysed the impact on share price of higher inflation for FY2023 alone over the current assumption of 3.00%, with the following results:

Case

NAV impact

NAV per share impact

+1%

£5.7m

0.9p

+2%

£11.4m

1.9p

+3%

£17.8m

2.9p

Useful economic lives (“UELs”)

The valuation of the Company’s investments is determined based on the discounted value of future cash flows of those investments over their UELs. The UEL of individual assets is determined by reference to a fixed contractual lease term. However, the Board notes that if extended contractual lease terms were negotiated for individual assets, this would increase the value of those assets. Similarly, if the assets did not operate for the duration of the fixed contractual period, this would reduce the value of those assets.

-1 Year

Base

+1 Year

Portfolio valuation (£m)

706.7

713.8

718.8

Change in portfolio valuation (£m)

-7.2

5.0

NAV per share change (pence)

-1.2

123.8

0.8

The Directors also consider the following to be important inputs to the discounted cash flows calculation.

Production

Base case production is a function of a number of separate assumptions including irradiation levels, availability of the sites and technical performance of the equipment. A sensitivity of +/-10% is considered reasonable given stable levels of irradiation, contractual availability guarantees and understanding of future performance levels of the equipment.

-10.0%

Base

+10.0%

Portfolio valuation (£m)

590.1

713.8

830.6

Change in portfolio valuation (£m)

-123.7

116.8

NAV per share change (pence)

-20.3

123.8

19.1

Operating costs (investment level)

Operating costs include operation and maintenance (“O&M”), insurance and lease costs. Other costs are fixed and are therefore not considered to be sensitive to changes in unobservable inputs. Base case costs are based on current commercial agreements. We would not expect these costs to fluctuate widely over the life of the assets and are comfortable that the base case is prudent. A variance of +/-5.0% is considered reasonable, a variable of 10.0% is shown for information purposes.

-10.0%

-5.0%

Base

+5.0%

+10.0%

Portfolio valuation (£m)

732.1

723.0

713.8

703.0

692.6

Change in portfolio valuation (£m)

18.3

9.2

-10.9

-21.2

NAV per share change (pence)

3

1.5

123.8

-1.8

-3.5

Tax rate

On 3 March 2021, the UK Chancellor announced his intention to increase the rate of UK corporation tax from 19% to 25% from 2023. The impact of this proposal is reflected in the 30 June 2022 valuation. On that basis, a variable of 1.0% is considered reasonable given historic information.

-1.0%

Base

+1.0%

Directors' valuation (£m)

717.1

713.8

710.3

Change in portfolio valuation (£m)

3.3

-3.5

NAV per share change (pence)

0.5

123.8

-0.6

Potential reversal of UK Corporation Tax increase

The UK’s new Government has signalled its intention to reverse the scheduled rise in Corporation Tax from 19% to 25% in April 2023. If this were to be followed through on, based on the latest revenue projections we believe this would have a positive impact to NAV of £18.1m or 3.0 pence per share.

AUD/GBP exchange rate

The Fund is directly exposed to fluctuations in foreign currency due to its investments in Australian dollar denominated assets. Whilst the Group mitigates its exposure to fluctuations in AUD through the use of forward contracts, the valuations of these assets will be directly impacted. Whilst we would not expect to see fluctuations quite this large, a variable of 20% is considered appropriate. Following the acquisition of the Spanish assets, the Fund is exposed to fluctuations in EUR. A sensitivity has not been included for EUR/GBP exchange rates as the Spanish assets are currently held at cost.

-20.0%

-10.0%

Base

+10.0%

+20.0%

Directors’ valuation (£m)

704.3

709.1

713.8

718.6

723.3

Change in portfolio valuation (£m)

-9.5

-4.7

4.7

9.5

NAV per share change (pence)

-1.6

-0.8

123.8

0.8

1.6

  1. Stated capital and share premium

The share capital and share premium of the Company consists solely of Ordinary Shares of nil par value and therefore the value of the stated capital relates only to share premium. At any General Meeting of the Company each Shareholder will have, on a show of hands, one vote and on a poll one vote in respect of each Ordinary Share held. Stated capital is the net proceeds received from the issue of Ordinary Shares (net of issue costs capitalised). The holders of the Ordinary Shares are entitled to receive dividends from time to time.

Authorised Ordinary Shares 

 

30 June

30 June

31 December

2022

2021

2021

Shares

Shares

Shares

Ordinary Shares – nil par value

Unlimited

Unlimited

Unlimited

Issued Ordinary Shares         

 

30 June

30 June

31 December

2022

2021

2021

Shares

Shares

Shares

Opening balance

609,958,720

607,711,311

607,711,311

Issued during the period/year

Scrip dividends issued during the period/year

1,068,203

2,247,409

Closing balance

609,958,720

608,779,514

609,958,720

 

30 June

30 June

31 December

2022

2021

2021

Shares

Shares

Shares

Opening balance

629,892

627,649

627,649

Proceeds from share issue

Value of scrip dividends issued

1,038

2,243

Less: issue costs capitalised

Closing balance

629,892

628,687

629,892

  1. NAV per Ordinary Share

The Net Asset Value (“NAV”) per redeemable Ordinary Share for the Company at 30 June 2022 was 123.76 pence (period ended 30 June 2021: 97.96 pence, year ended 31 December 2021: 108.2 pence). This is based on the Net Asset Value at the reporting date of £754,856,992 (30 June 2021: £596,374,983, 31 December 2021: £659,999,331) and on 609,958,720 (30 June 2021: 608,779,514, 31 December 2021: 609,958,720) redeemable Ordinary Shares, being the number of Ordinary Shares in issue at the end of the period.

  1. Financial instruments and risk profile

The Company holds cash and liquid resources as well as having receivables and payables that arise directly from its operations. The underlying investments of the Company’s investment activities indirectly expose it to various types of risk associated with solar power. The main risks arising from the Company’s financial instruments are market risk, liquidity risk, credit risk and interest rate risk.

The Directors regularly review and agree policies for managing each of these risks and these are summarised below:

19.1 Market risk

(a) Foreign exchange risk

Foreign currency risk, as defined in IFRS 7, arises as the values of recognised monetary assets and monetary liabilities denominated in other currencies fluctuate due to changes in foreign exchange rates. Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to pounds sterling at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in income.

The Company has no direct exposure to foreign currency risk, however through its underlying investment in FS Holdco 4 it has indirect exposure. FS Holdco 4 is directly exposed to fluctuations in foreign currency due to its investments in assets and cash denominated in euros and Australian dollars. The Group mitigates its exposure to fluctuations in foreign currency through the use of forward exchange contracts.

The carrying amount of FS Holdco 4’s foreign currency exposure at the reporting date is as follows:

30 June

30 June

31 December

2022

2021

2021

£’000

£’000

£’000

AUD – Investment assets

59,126

46,396

53,567

EUR – Investment assets

57,765

39,741

77,816

AUD – Cash

24,801

3

3

EUR – Cash

5

50

The FX rate applied at 30 June 2022 was AUD/GBP 0.5679 (30 June 2021: 0.5421, 31 December 2021: 0.5369) and EUR/GBP 0.8613 (30 June 2021: EUR/GBP 0.8571) (31 December 2021: 0.8407).

The sensitivities linked to the assets denominated in Australian dollars and euros are set out in note 16 as these assets are held in the underlying investments.

(b) Price risk

The Company’s investments are susceptible to market price risk arising from uncertainties about future values of the instruments. The Company’s Investment Manager provides the Company with investment recommendations. The Investment Manager’s recommendations are reviewed and approved by the Board before the investment decisions are implemented. To manage the market price risk, the Investment Manager reviews the performance of the investments on a regular basis and is in regular contact with the management of the non-current investments for business and operational matters. Price risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. At 30 June 2022, the Company’s only investment was valued at net assets excluding the outstanding loans issued by the Company. Were this value to increase by 10%, the increase in net assets attributable to Shareholders for the year would have been £69,099,407 (30 June 2021: £52,089,824, 31 December 2021: £58,910,204). The impact of changes in unobservable inputs to the underlying investments is considered in note 16.

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term borrowing to its subsidiary. At the period end the Company had no long-term borrowings with third parties (1 January 2021 to 30 June 2021: £nil, 1 January 2021 to 31 December 2021: £nil).

 

 

Weighted

 

Weighted

average time

Total

average

for which

portfolio

interest rate

rate is fixed

30 June 2022

30 June 2022

 30 June 2022

£’000

%

Days

Loan notes

250,000

11.00%

2,241

Shareholder loans

304,316

2.00%

2,748

Cash

3,022

0.05%

557,338

 

 

Weighted

Weighted

average time

Total

average

for which

portfolio

interest rate

rate is fixed

30 June 2021

30 June 2021

30 June 2021

£’000

%

Days

Loan notes

250,000

11.00%

1,508

Shareholder loans

304,316

2.00%

2,015

Cash

668

0.05%

554,984

Weighted

Weighted

average time

Total

average

for which

portfolio

interest rate

rate is fixed

31 December

31 December

31 December

2021

2021

2021

£’000

%

Days

Loan notes

250,000

11.00%

1,876

Shareholder loans

304,316

2.00%

2,383

Cash

10,964

0.05%

565,280

19.2 Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due as a result of the maturity of assets and liabilities not matching. An unmatched position potentially enhances profitability but can also increase the risk of losses. Liquidity could be impaired by an inability to access secured and/or unsecured sources of financing to meet financial commitments. The Board monitors the Company’s liquidity requirements to ensure there is sufficient cash to meet the Company’s operating needs.

The following are the expected maturities of the financial assets and liabilities at period end based on contractual undiscounted payments:

30 June 2022:

Carrying

Contractual

Less than

6 to

Greater than

amount

total

6 months

12 months

12 months

£’000

£’000

£’000

£’000

£’000

Financial assets

 

 

 

 

 

Investments

690,994

690,994

690,994

Trade and other receivables

275

275

275

Interest receivable

61,095

61,095

61,095

Cash and cash equivalents

3,022

 3,022

3,022

Total financial assets

755,386

755,386

64,392

690,994

Trade and other payables

(529)

(529)

(529)

Total financial liabilities

(529)

(529)

(529)

Net position

754,857

754,857

63,862

690,994

30 June 2021:

 

Carrying

Contractual

Less than

6 to

Greater than

amount

total

6 months

12 months

12 months

£’000

£’000

£’000

£’000

£’000

Financial assets

Investments

520,898

520,898

520,898

Trade and other receivables

275

275

275

Interest receivable

75,033

75,033

75,033

Cash and cash equivalents

668

668

668

Total financial assets

596,874

596,874

75,976

520,898

Trade and other payables

(499)

(499)

(499)

Total financial liabilities

(499)

(499)

(499)

Net position

596,375

596,375

75,477

520,898

31 December 2021:

 

Carrying

Contractual

Less than

6 to

Greater than

amount

total

6 months

12 months

12 months

£’000

£’000

£’000

£’000

£’000

Financial assets

Investments

589,102

589,102

589,102

Trade and other receivables

275

275

275

Interest receivable

60,103

60,103

60,103

Cash and cash equivalents

10,964

10,964

10,964

Total financial assets

660,444

660,444

71,342

589,102

Trade and other payables

(444)

(444)

(444)

Total financial liabilities

(444)

(444)

(444)

Net position

660,000

660,000

70,898

589,102

19.3 Credit risk

  1. a) Exposure to credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.

The Company places cash with authorised deposit-takers and is therefore potentially at risk from the failure of such institutions.

In respect of credit risk arising from other financial assets and liabilities, which mainly comprise of cash and cash equivalents, exposure to credit risk arises from default of the counterparty with a maximum exposure equal to the carrying amounts of these instruments. In order to mitigate such risks, cash is maintained with major international financial institutions. During the period and at the reporting date, the Company maintained relationships with the following financial institutions:

 

30 June

Moody’s

2022

credit rating

£’000

Cash in hand:

 

 

Royal Bank of Scotland International Limited

 P2

3,022

Total cash balances held by banks

 

3,022

30 June

Moody’s

2021

credit rating

£’000

Cash in hand:

Royal Bank of Scotland International Limited

P2

668

Total cash balances held by banks

668

31 December

Moody’s

2021

credit rating

£’000

Cash in hand:

Royal Bank of Scotland International Limited

P2

10,964

Total cash balances held by banks

10,964

The Company is also indirectly exposed to credit risk through its investment in UK Hold Co. The Board of UK Hold Co has determined that the maximum exposure to credit risk in relation to investments is £767,946,703, being the portion of UK Hold Co investments that are made up of loans as at 30 June 2022 (30 June 2021: £646,785,870, 31 December 2021: £766,652,395). Included within this are the related party loans as disclosed within note 22 as well as external long-term debt facilities entered into by FS Holdco, FS Debtco and RCF Debtco with Santander, NatWest, AIB, Lloyds and Barclays respectively. The balance of the external debt facilities as at period end amounted to £394,402,388 (30 June 2021: £366,972,423, 31 December 2021: £400,155,598).

The Company’s ability to meet the debt covenants described in note 2.2 Going concern is directly impacted by power prices. If the debt covenants were not met, the Company may not be able to repatriate cash through the structure. In the debt calculation before the date of this report, the DSCR for FS Holdco was 2.34:1 and for FS Debtco it was 4.06:1.

  1. b) Expected credit loss assessment

Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.

The Company applies the simplified approach to measuring expected credit losses, as permitted by IFRS 9, which uses a lifetime expected credit loss allowance for all trade receivables. The expected credit loss on trade receivables and the balance at year end was deemed by management to be not material and therefore no impairment adjustments were accounted for.

19.4 Other risks

Political and economic risk

The value of Ordinary Shares may be affected by uncertainties such as political or diplomatic developments, social and religious instability, changes in government policies, taxation or interest rates, currency repatriation and other political and economic developments in law or regulations and, in particular, the risk of expropriation, nationalisation, and confiscation of assets and changes in legislation relating to the level of foreign ownership.

Governmental authorities at all levels are actively involved in the promulgation and enforcement of regulations relating to taxation, land use and zoning and planning restrictions, environmental protection, safety and other matters. The introduction and enforcement of such regulations could have the effect of increasing the expense and lowering the income or rate of return from, as well as adversely affecting the value of, the Company’s assets.

For the last two years the impact of the COVID-19 pandemic has prompted the Directors and the Investment Manager to assess the risks to the Company and the portfolio. The key risk COVID-19 poses to the Company is a negative impact on the power price market, therefore adversely affecting the distributions received from underlying solar investments.

Towards the end of 2021, the UK experienced a surge in power prices partly because of the tightening of the supply of natural gas into the EU. In February 2022 Russia invaded Ukraine, which has caused many countries, including the UK, to place sanctions on the usage of Russian fossil fuels. This, in turn, has driven the power price market even higher that increases the likelihood that Governments will intervene in the electricity markets to reduce the costs to consumers and business. Precisely how this may impact the Company, remains to be seen.

Therefore, the Directors note geopolitical tensions impacting the natural gas supply are additional risks that could negatively impact on the power price market.

The Directors also note further risks from political decisions such as, but not limited to, energy market reform and Government interventions in the markets to reduce spiralling electricity prices for consumers and business. All have potential impacts on the Company, which are currently difficult to evaluate.

The Directors continue to monitor and review the macro-political environment and its impact on the Company under its risk management framework. The power prices are therefore continuously reviewed by the Investment Manager, with a proportion of the assets opting to fix the power prices they receive in the short term, in line with the price fixing strategy.

  1. Capital management

The Company’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for Shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the number of dividends paid to Shareholders, return capital to Shareholders, issue new shares (up to its authorised number of shares) or sell assets to reduce debt.

  1. Dividends

 

30 June

2022 Pence/

30 June

2021 Pence/

31 December

2021 Pence/

2022

Ordinary

2021

Ordinary

2021

Ordinary

£’000

Share

£’000

Share

£’000

Share

Quarter 1

10,644

1.745

10,345

1.730

10,345

1.730

Quarter 2

10,644

1.745

9,646

1.730

9,646

1.730

Quarter 3

N/A

 

N/A

N/A

9,607

1.745

Quarter 4

N/A

 

N/A

N/A

10,452

1.745

21,288

 

19,991

40,050

On 16 June 2022, the Company announced the first interim dividend, in respect of the period 1 January 2022 to 31 March 2022, of 1.78 pence per Ordinary Share. The shares went ex-dividend on 21 July 2022 and the dividend was paid on 26 August 2022 to Shareholders on the register as at the close of business on 22 July 2022.

  1. Related party disclosures

For the purposes of these Financial Statements, a related party is an comp who are able to exercise significant influence directly or indirectly on the Company.

As noted in note 2, the Company does not consolidate its subsidiaries. However, the Company and its subsidiaries (direct and indirect) are a Group and, therefore, are considered to be related parties.

Transactions with UK Hold Co

For the period ended 30 June 2022:

 

Opening balance

 

Closing balance

as at

Movement

as at

1 January

during

30 June

2022

the period

2022

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

614,419

992

615,411

Non-interest-bearing loans

187

187

For the period ended 30 June 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

30 June

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

617,453

11,896

629,349

Non-interest-bearing loans

187

187

For the year ended 31 December 2021:

Opening balance

Closing balance

as at

Movement

as at

1 January

during

31 December

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding Interest

617,453

(3,034)

614,419

Non-interest-bearing loans

187

187

Transactions with RCF Debtco and UK Hold Co

For the period ended 30 June 2022:

 

Opening balance

 

Closing balance

as at

Movement

as at

1 January

during

30 June

2022

the period

2022

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

416,413

416,413

No prior period transactions with RCF Debtco due to company not being incorporated until 9 November 2021.

Transactions between UK Hold Co and its underlying subsidiaries

Transactions with FS Holdco

For the period ended 30 June 2022:

 

Opening balance

 

Closing balance

as at

Movement

as at

1 January

during

30 June

2022

the period

2022

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

406,930

(406,930)

Interest-bearing loans and outstanding interest

(47,253)

47,253

Non-interest-bearing loans

(143,504)

143,504

Non-interest-bearing loans

875

(875)

For the period ended 30 June 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

30 June

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

403,505

4,172

407,677

Interest-bearing loans and outstanding interest

(45,253)

(992)

(46,245)

Non-interest-bearing loans

(143,504)

(143,504)

Non-interest-bearing loans

875

875

For the year ended 31 December 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

31 December

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

403,505

3,425

406,930

Interest-bearing loans and outstanding interest

(45,253)

(2,000)

(47,253)

Non-interest-bearing loans

(143,504)

(143,504)

Non-interest-bearing loans

875

875

Transactions with FS Topco 1

For the period ended 30 June 2022:

 

Opening balance

 

Closing balance

as at

Movement

as at

1 January

during

30 June

2022

the period

2022

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

271,167

(271,167)

Non-interest-bearing loans

(26,524)

26,524

For the period ended 30 June 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

30 June

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

208,123

208,123

Non-interest-bearing loans

(22,288)

(4,243)

(26,531)

For the year ended 31 December 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

31 December

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

208,123

63,044

271,167

Non-interest-bearing loans

(22,288)

(4,236)

(26,524)

Transactions with FISH

There were no transactions between UK Hold Co and FISH.

Transactions with FS Holdco 2

There were no transactions between UK Hold Co and FS Holdco 2.

Transactions with FS Debtco

For the period ended 30 June 2022:

 

Opening balance

 

Closing balance

as at

Movement

as at

1 January

during

30 June

2022

the period

2022

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

68,019

(68,019)

Non-interest-bearing loans

140

(140)

For the period ended 30 June 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

30 June

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

65,269

1,364

66,633

Non-interest-bearing loans

140

140

For the year ended 31 December 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

31 December

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

65,269

2,750

68,019

Non-interest-bearing loans

140

140

Transactions with FS Holdco 3

For the period ended 30 June 2022:

 

Opening balance

 

Closing balance

as at

Movement

as at

1 January

during

30 June

2022

the period

2022

£’000

£’000

£’000

Interest-bearing Ioans and outstanding interest

37,930

(37,930)

Non-interest-bearing loans

(6,165)

6,165

For the period ended 30 June 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

30 June

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

36,124

896

37,020

Non-interest-bearing loans

(6,165)

(6,165)

For the year ended 31 December 2021:

Opening balance

Closing balance

as at

Movement

as at

1 January

during

31 December

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

36,124

1,806

37,930

Non-interest-bearing loans

(6,165)

(6,165)

Transactions with FS Holdco 4

For the period ended 30 June 2022:

 

Opening balance

 

Closing balance

as at

Movement

as at

1 January

during

30 June

2022

the period

2022

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

159,683

2,865

162,548

Non-interest-bearing loans

1,434

41

1,475

For the period ended 30 June 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

30 June

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

99,249

14,723

113,972

Non-interest-bearing loans

1,243

164

1,407

For the year ended 31 December 2021:

 

Opening balance

Closing balance

as at

Movement

as at

1 January

during

31 December

2021

the period

2021

£’000

£’000

£’000

Interest-bearing loans and outstanding interest

99,249

60,434

159,683

Non-interest-bearing loans

1,243

191

1,434

Transactions between FS Holdco, FS Debtco, FS Holdco 3, FS Holdco 4 and their SPVs

All of the SPVs are cash-generating solar farms (except for the non-operational Spanish investments and UK battery assets in construction). On occasion, revenues are received and expenses are paid on their behalf by FS Holdco, FS Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4. All of these transactions are related party transactions.

For the period ended 30 June 2022:

Opening balance

 

 

 

receivable/(payable)

Amounts

 

Net amount

as at 1 January

paid on behalf

Amounts received

(payable)/receivable

2022

of SPV 2022

from SPV 2022

as at 30 June 2022

£’000

£’000

£’000

£’000

FS Holdco and its SPVs

(34,191)

33,376

(26,759)

(27,574)

FS Debtco and its SPVs

(20,538)

14,908

(22,181)

(27,811)

For the period ended 30 June 2021:

Opening balance

receivable/(payable)

Amounts

Net amount

as at 1 January

paid on behalf

Amounts received

(payable)/receivable

2021

of SPV 2021

from SPV 2021

as at 30 June 2021

£’000

£’000

£’000

£’000

FS Holdco and its SPVs

(33,646)

13,823

(8,909)

(28,732)

FS Debtco and its SPVs

(11,092)

14,688

(8,304)

(4,708)

For the year ended 31 December 2021:

Opening balance

Net amount

receivable/(payable)

Amounts

(payable)/receivable

as at 1 January

paid on behalf

Amounts received

as at 31 December

2021

of SPV 2021

from SPV 2021

2021

£’000

£’000

£’000

£’000

FS Holdco and its SPVs

(33,646)

33,612

(34,157)

(34,191)

FS Debtco and its SPVs

(11,092)

29,729

(39,175)

(20,538)

Transactions with the manager

The investment manager of the Fund is Foresight Group LLP (the “Investment Manager”).

Foresight Asset Management Limited (“FAML”), a related party of the Investment Manager, charged asset management fees to the underlying projects of £914,950 during the period (1 January 2021 to 30 June 2021: £792,182, 1 January 2021 to 31 December 2021: £1,610,038).

  1. Commitments and contingent liabilities

There are no commitments nor contingent liabilities.

  1. Controlling party

In the opinion of the Directors, there is no controlling party as no one party has the ability to direct the financial and operating policies of the Company with a view to gaining economic benefits from its direction.

  1. Post balance sheet events

On 1 August 2022, the Company announced the acquisition of a 50% equity stake in Clayfords Energy Storage Limited (“CESL”) from Intelligent Land Investment Group through its subsidiary UK Hold Co. CESL holds the development rights to construct a 50MW lithium-ion battery energy storage plant based in Buchan, Aberdeenshire, UK.

There were no other post balance sheet events requiring disclosure.

ALTERNATIVE PERFORMANCE MEASURES

APM

Purpose

Calculation

Annualised total NAV return since IPO

Annualised measure of financial performance, indicating the movement of the value of the Fund since IPO and expressed as a percentage

Closing NAV per share as at 30 June 2022 plus all dividends since IPO assumed reinvested, divided by the NAV at IPO, to the power of 1 over the number of years since IPO, expressed as a percentage

Annualised Total Shareholder Return since IPO

Annualised measure of financial performance, indicating the total return derived from holding the stock since IPO and expressed as a percentage

Closing share price as at 30 June 2022 plus all dividends since IPO assumed reinvested, divided by the share price at IPO, to the power of 1 over the number of years since IPO, expressed as a percentage

NAV per share

A measure of the value of one Ordinary Share

The net assets divided by the number of Ordinary Shares in issuance

Ongoing charges ratio

A measure of the annual reduction in shareholder returns because of operational expenses based on historical data

Total ongoing expenses including Investment Manager fees, administration fees, Directors’ fees, audit fees, ongoing legal and professional fees and other ongoing costs expressed as a percentage of average NAV through the year

Market capitalisation

Provides an indication of the size of the Company

Closing share price as at 30 June 2022 multiplied by closing number of Ordinary Shares in issuance

Gross Asset Value (“GAV”)

A measure of the value of the Company’s total assets

The sum of the total assets of the Company as shown on the Statement of Financial Position and the total debt of the Group and underlying investments as shown on page 34

Gearing

A measure of financial risk on the balance sheet of the Company

Total debt of the Group and underlying investments as shown on page 34 as a percentage of GAV

Cash distributions from underlying investments

A measure of performance from the underlying portfolio

Total cash received from investments in the period

Cash dividend cover

A measure of excess cash generated from the Group after payment of dividend

Net operating cash flow divided by dividend paid within the period, including scrip impact

ADVISORS

Administrator & Company Secretary

JTC (Jersey) Limited

JTC House

28 Esplanade

St. Helier

Jersey JE2 3QA

Registrar

Computershare Investor Services (Jersey)

Queensway House

Hilgrove Street

St. Helier

Jersey JE1 1ES

Corporate Broker

Jefferies International Limited

100 Bishopsgate

London EC2N 4JL

Investment Manager

Foresight Group LLP

The Shard

32 London Bridge Street

London SE1 9SG

Legal Advisors to the Company as to English Law

Dickson Minto W.S.

Broadgate Tower

20 Primrose Street

London EC2A 2EW

Legal Advisors to the Company as to Jersey Law

Ogier

Ogier House

The Esplanade

St. Helier

Jersey JE4 9WG

Legal Advisors to the Company as to the acquisition of solar assets

Osborne Clarke

One London Wall

London EC2Y 5EB

Independent Auditor

KPMG LLP

15 Canada Square

London E14 5GL

GLOSSARY OF TERMS

AIC

The Association of Investment Companies

AIFs

Alternative Investment Funds

AIFMs

Alternative Investment Fund Managers

AIFMD

The Alternative Investment Fund Managers Directive

Asset Manager

The Company’s underlying investments have appointed Foresight Group LLP, a subsidiary of Foresight Group CI, to act as Asset Manager

BBSY

Bank Bill Swap Bid Rate

BSS

Battery storage systems

CEFC

The Clean Energy Finance Corporation

Company

Foresight Solar Fund Limited

DCF

Discounted cash flow

DNO

Distribution Network Operator

EEA

European Economic Area

EPC

Engineering, Procurement and Construction

ESG

Environmental, social and governance

FCA

Financial Conduct Authority

FiT

Feed-in Tariff. The Feed-in Tariff scheme is the financial mechanism introduced on 1 April 2010 by which the UK Government incentivises the deployment of renewable and low-carbon electricity generation of up to 5MW of installed capacity

GAV

Gross Asset Value on investment basis including debt held at SPV level

Group borrowing

Group borrowing refers to all third-party debt by the Company and its subsidiaries

GWh

Gigawatt hour

Hibernacula

A shelter occupied during the winter by a dormant animal

IAS

International Accounting Standard

IFRS

International Financial Reporting Standards as adopted by the EU

Investment Manager

Foresight Group CI Limited

IPEV Valuation Guidelines

International Private Equity and Venture Capital Valuation Guidelines

IPO

Initial Public Offering

KPMG LLP

KPMG is the Company’s auditor

LCOE

Levelised cost of energy

LGC

Large-Scale Generation Certificate

LIBOR

London Interbank Offered Rate

Listing Rules

The set of FCA rules which must be followed by all companies listed in the UK

LRET

Large-scale Renewable Energy Target. The LRET creates a financial incentive in Australia for the establishment and growth of renewable energy power stations, such as wind and solar farms, or hydroelectric power stations

Main Market

The main securities market of the London Stock Exchange

MIDIS

Macquarie Infrastructure Debt Investment Solutions

MLF

Marginal Loss Factor

MUFG

Bank of Tokyo-Mitsubishi UFJ

MWh

Megawatt hour

NAV

Net Asset Value

Official List

The Premium Segment of the UK Listing Authority’s Official List

Ofgem

Office of Gas and Electricity Markets (UK Government regulator)

O&M

Operation and maintenance contractors

PPA

Power Purchase Agreements

PRI

Principles for Responsible Investment

PV

Photovoltaic

RCF

Revolving credit facility

RO Scheme

The financial mechanism by which the UK Government incentivises the deployment of large-scale renewable electricity generation by placing a mandatory requirement on licensed UK electricity suppliers to source a specified and annually increasing proportion of electricity they supply to customers from eligible renewable sources or pay a penalty

ROC

Renewables Obligation Certificates

RPI

The Retail Price Index

SDG

United Nations Sustainable Development Goal

SPVs

The Special Purpose Vehicles which hold the Company’s investment portfolio of underlying operating assets

UK

The United Kingdom of Great Britain and Northern Ireland

[ENDS]