Foresight Sust Regulatory News (FSF)

25 January 2022

Foresight Sustainable Forestry Company Plc

Update on Seed Portfolio Transaction and confirmation that planting has commenced at Banc Farm

Foresight Sustainable Forestry Company Plc ("FSF", "the Company"), an investment company that invests in UK forestry and afforestation assets, today announces updates on its asset prioritisation and acquisition sequencing exercise (as referenced in FSF's RNS announcement of 6 December 2021) and on its Banc Farm afforestation scheme.

Seed assets portfolio

The Company is pleased to confirm that it has agreed a variation to the option agreement to acquire from Foresight Inheritance Tax Fund a seed assets portfolio. The prioritisation exercise will have the net result of increasing the allocation, by value, of afforestation assets from 27% to 34%, closer towards the Company's target afforestation allocation of 40-50%. The established forestry assets in the revised seed assets portfolio provide useful cash flow generation for the Company during the establishment stage of the business and the revised consideration leaves the Company with an optimal mix of seed assets, capital for acquisition and working capital. The Company continues to develop and transact upon a strong pipeline of additional attractive acquisition opportunities which will positively contribute to the Company's growth strategy, alongside the seed assets transaction.

In order to appropriately scale the seed assets portfolio to the capital available, the variation sees eight assets removed from the seed assets portfolio register (as set out in FSF's Prospectus), seven of those being located in Scotland and one in Wales. Five of the removed assets are established forestry properties and three of the removed assets are afforestation properties. FSF's substantial seed assets portfolio therefore comprises 26 assets in total (covering 8,000 hectares) including Banc Farm, Rorie Hill and Auchenbrack.

The valuations agreed as part of the seed assets portfolio remain an arm's length transaction, with the support of the independent board of FSF, and continue to be informed by the third-party RICS Red Book report provided by Savills. The seed assets transaction is scheduled to become finalised in February 2022. Further updates in relation to the seed assets transaction will be provided in due course.

Commencement of planting at Banc Farm

FSF is also pleased to announce that Blackmead Forestry Limited, which FSF has an option to acquire, has received full planning approval and confirmation of grant funding for Banc Farm, an afforestation scheme. These key development milestones mean that the site has now commenced planting.

Banc Farm is located in the Welsh region of Carmarthenshire, consists of 149.5 hectares and has a planting scheme area of 90.8 hectares. Planting at the site commenced in January 2022 and is expected to take 6-8 weeks to complete.

The project aims to plant approximately 229,320 trees, 75% of which will be commercial conifers, and 25% of which will be non-commercial. The commercial tree planting is forecast to deliver 48,153 tonnes of sustainable timber production for each c.35-year rotation. The scheme appears on the UK Land Carbon Registry and is already registered with the Woodland Carbon Code ("WCC"). Once planting has been completed, the process for full accreditation and award of the carbon units by the WCC can take place. Once fully established, the site is expected to sequester 21,218 tCO2, and generate associated voluntary carbon credits.

Wales is one of the least forested countries in Europe, with c.14.5% of land area tree covered in 2020. As a result, Welsh timber production is insufficient to support domestic demand, with 80% of timber used imported from outside the UK. The Welsh Government, as part of its 2050 Net Zero plan and in response to the climate emergency that has been declared by the Environment Minister in Wales, has a stated target to increase tree planting to at least 2,000 hectares per year, aiming to increase this to 4,000 hectares as rapidly as possible from 2020-2050. The Welsh Government's overall aim is to increase Welsh tree cover to c.17.8 - 20.7% by 2050. The establishment of the Banc Farm afforestation scheme alone makes an approximately 4.5% contribution to the Welsh Government's 2022 woodland creation target.

The diverse planting scheme at Banc Farm comprises 50% Sitka Spruce, 15% Douglas Fir, 10% Norway Spruce, 10% Silver Birch, 10% Sycamore and 5% Oak and tree species that are designated as rare and endangered. The planting of 350 Black Poplar trees, recognised by the Forestry Commission as one of the UK's rarest native species, is expected to increase the total UK population of the tree species by c.5%. The rare and endangered tree planting also includes 1,500 Holm Oak and 300 Juniper trees, both of which are on the International Union for Conservation of Nature's 'Red List'. The project also involves the restoration of 25 hectares of non-commercial native oak woodland by re-introducing the rotational coppicing of selected trees, the introduction of mountain biking trails, and the construction of a car park for visitors. Banc Farm will see the creation of 25-30 jobs for the local community during the first year from planting commencing.

An independent ecologist has been appointed to confirm the bio-diversity improvement achieved by the Banc Farm afforestation scheme. Using DEFRA's Biodiversity Metric 3.0, the scheme will improve Banc Farm's baseline biodiversity habitat unit value by 60% over the next five years.

Richard Kelly, Co-Head of Foresight Sustainable Forestry Company, said:

"This is an exciting milestone for Foresight Sustainable Forestry. We are proud to have started planting at our first afforestation scheme so soon after the IPO. Successfully developing land for afforestation is a key part of our strategy and will help drive returns in the form of capital appreciation and access to voluntary carbon credits. At the same time, Banc Farm will also be making a direct and meaningful contribution to the twin fights against climate change and biodiversity loss, through a combination of carbon sequestration and the restoration and establishment of non-commercial trees."

About the Company

Foresight Sustainable Forestry Company Plc ("the Company") is an externally managed investment company investing in a diversified portfolio of UK forestry and afforestation assets. Targeting a net total return of more than CPI +5%, the Company provides investors with the opportunity for real returns and capital appreciation driven by the prevailing global imbalance between supply and demand for timber; the inflation-protection qualities of UK land freeholds; and biological tree growth of 3% to 4% not correlated to financial markets. It also offers outstanding sustainability and ESG attributes and access to carbon units related to carbon sequestration from new afforestation planting. The Company targets value creation as the afforestation projects successfully achieve development milestones in the process of converting open ground into established commercial forest and woodland areas. The Company is seeking to make a direct contribution in the fight against climate change through forestry and afforestation carbon sequestration initiatives and to preserve and proactively enhance natural capital and biodiversity across its portfolio. It is managed by Foresight Group LLP. https://fsfc.foresightgroup.eu/ 

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This announcement does not constitute, and may not be construed as, an offer to sell or an invitation to purchase investments of any description, or the provision of investment advice by any party. No information set out in this announcement is intended to form the basis of any contract of sale, investment decision or any decision to purchase securities in the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will", "targeting" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.