8 February 2024
Foresight Solar Fund
Limited
(the
"Company", "Foresight Solar" or "FSFL")
Q4 2023 Net Asset Value
Update
Foresight Solar, a
sustainability-focused fund investing in solar and battery storage
assets in the UK and internationally, announces that its
unaudited net asset value (NAV) was £697.9 million as at 31
December 2023 (30 September 2023: £706.9 million). This results in
a NAV per Ordinary Share of 118.4 pence (30 September 2023: 118.1
pence per share).
Highlights:
·
The uplift from the sale of the Lorca portfolio
stake at a 21% premium to holding value mitigated the negative
impacts from updated power price forecasts and actual
inflation.
·
Proceeds from the Lorca transaction, along with
free cash, were used to pay down debt, reducing the balance of the
RCF to the previously announced £75 million target. Total gearing
is now 38.8% of GAV and the Board intends to reduce leverage
further through divestments.
·
Foresight Solar continued its share buyback
programme, providing a NAV uplift of 0.4 pence per share for the
quarter. The Company has utilised £20 million for repurchases,
resulting in NAV upside of 1.1 pence per share for the full
year.
·
FSFL closed 2023 with record cash distributions
from underlying assets of £120.4 million.
·
The Company is on target to deliver an annual
dividend of 7.55 pence per share. Dividend cover was 1.61x for
FY23. Net dividend cover for FY24 remains in line with previous
guidance.
Summary of key NAV
drivers:
Item
|
Pence per share
movement
|
NAV on 30
September 2023
|
118.1p
|
Lorca stake sale and revaluation
|
+1.6p
|
Power price, UK capture discount
forecasts
|
-1.1p
|
Inflation
|
-1.3p
|
Share buyback programme
|
+0.4p
|
Other movements
|
+0.7p
|
NAV on 31
December 2023
|
118.4p
|
In the first phase of Foresight
Solar's divestment programme, the Company sold a 50% stake in the
Lorca portfolio at a 21% premium to the third quarter holding
value, leading to a 1.6 pence per share increase in NAV. This
includes the value from the cash gain on the divestment and the
revaluation of the remaining 50% of the portfolio. The deal was a
clear example of FSFL's approach to capital recycling and its
commitment to reduce variable interest rate debt.
Near term power price forecasts
continued to trend down in most markets during the period, whilst a
slight increase in medium to long-term estimates was observed
across all geographies. When considered against the Company's
well-hedged near-term position and reduced Electricity Generator
Levy payments, the overall impact was negligible. In the fourth
quarter, Foresight Solar also re-benchmarked its UK solar capture
price assumptions against actual observed portfolio performance,
resulting in a modestly more conservative forecast for potential
discounts. The combination of these factors led to a 1.1pps
downside to NAV.
At 6.5%, Foresight Solar's RPI
inflation assumptions for 2023 proved to be above the year's final
5.2% measure. The inclusion of actual numbers in valuation models
had a negative impact of 1.3pps to NAV. For 2024, the Company
forecasts UK RPI inflation to be 3.5%, moderating to 3% between
2025 and 2030, before falling to 2.25% from 2031 onward.
The ongoing share buyback programme,
which was extended to up to £40 million in Q3, delivered an
additional 0.4pps of NAV accretion in the final three months of
2023, bringing the total benefit to shareholders to 1.1pps since
the repurchases started in May 2023.
Other movements include an increased
estimate of interest receipts on cash balances, tax adjustments,
and the periodic impact of rolling forward the valuation. In total,
these changes added 0.7pps to the net asset value.
Trading
update
Stronger-than-expected operational
performance in the UK and in Spain was countered by unusually high
economic curtailment in Australia. Overall, electricity generated
by the global portfolio was a modest 1.9% below budget for the
year.
Portfolio
valuation
The recent sales of significant
ROC-backed portfolios in the UK offered a market benchmark for
similar assets. The price at which the latest deal closed indicates
a value per megawatt more than 10% above Foresight Solar's
valuation of its own portfolio in the country. Further analysis
will be provided in the Company's 2023 Annual Report.
Capital
allocation
As announced in November, FSFL
committed capital from its record cash distributions, in addition
to the proceeds from the sale of the Lorca portfolio stake, to pay
down £30 million of its variable-rate revolving credit facility,
bringing the balance to £75 million.
The Investment Manager continues in
discussions for the next phases of the c.200MW divestment
programme, reflecting the Board's commitment to reduce debt further
while also maintaining its active share buyback
programme.
Power price
hedging and dividend cover
The Investment Manager continues to
forward-fix electricity sales at attractive rates under power
purchase agreements and build on the proportion of contracted
revenue. In the UK, which accounted for 89% of turnover, price fixes averaged £120.70/MWh across FY23 - compared to the
mean N2EX day-ahead price of £94.20/MWh during the same
period.
This active hedging strategy
insulated Foresight Solar from falls in near-term merchant power
prices during 2023. The Company remains on target to pay its
full-year dividend, and the revenue stability and solid cash
distribution provide confidence in a robust net dividend
cover.
Gearing
The Gross Asset Value (GAV), including Company
and subsidiaries, on 31 December 2023 was
£1,140.5 million (30 September 2023:
£1,196.0 million). Foresight Solar's total outstanding debt was
£442.6 million, representing 38.8% of GAV (30 September 2023:
40.9%), comfortably within the 50% limit.
Dividend
The Company remains on target to deliver its
7.55 pence per share dividend for the year ending 31 December 2023.
The Board's intention is to declare the last interim dividend
payment of 1.895 pence per share with the annual report next
month.
2023 annual results
date
Foresight Solar expects to publish its annual
results for the full year to 31 December 2023 on 12 March 2024. A
Notice of Results announcement with more details will be released
in due course.
For more information, follow Foresight Solar on
LinkedIn or
contact:
Foresight
Group
Matheus Fierro
(fsflir@foresightgroup.eu)
|
+44 (0)20 3911 2318
|
Jefferies
International Limited
Gaudi Le Roux
Harry Randall
|
+44 (0)20 7029 8000
|
Singer Capital
Markets
Robert Peel
Alaina Wong
|
+44 (0)20 7496 3000
|
Powerscourt
Justin Griffiths
Gilly Lock
|
+44 (0)20 7250 1446
|