Foresight Solar Fund Regulatory News (FSFL)

16 September 2021

Foresight Solar Fund Limited

('Foresight Solar', 'FSFL' or 'the Company')

Interim Results to 30 June 2021

Foresight Solar, 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 Interim Results for the six months ended 30 June 2021.

Highlights

Key Metrics

*Calculated as NAV plus outstanding debt.

** Annualised from IPO on 29 October 2013

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

"An increase in near-term power prices, a solid UK operational performance and successful active management of power prices all contributed to a strong performance by Foresight Solar over the first six months of 2021.

"Following overwhelming shareholder approval in February to allow the introduction of battery storage systems (BSS) to the portfolio, we were pleased to reach a significant milestone in May with our first BSS investment. We expect battery storage systems, either stand-alone or co-locating with renewable generation, to become increasingly utilised as further grid stability is required and to provide value creating opportunities arising from the energy transition drive in the UK and internationally.

"Looking forward, while we will remain focused on UK acquisitions, the Board believes geographical diversification will benefit shareholders over the longer term and the Investment Manager, through its international reach, continues to review an attractive pipeline of solar and battery assets in the UK and internationally that can deliver growth opportunities. The Board of Foresight Solar, supported by the Investment Manager, will continue to aim to deliver its progressive dividend policy by optimising the operational performance of the portfolio and ongoing active power price management."

Results presentation

Foresight Solar Fund Ltd is holding a webcast presentation for analysts at 08:30 today. Analysts wishing to attend should contact foresightsolar@citigatedewerogerson.com. An investor presentation will also be uploaded to the FSFL website.

Dividend Declaration

The Board is pleased to announce the second interim dividend relating to 2021 of 1.745 pence per ordinary share ("the Dividend"). The shares will go ex-dividend on 28 October 2021 and the Dividend will be paid on 26 November 2021 to shareholders on the register as at the close of business on 29 October 2021.

Foresight Solar confirms its dividend target of 6.98 pence per ordinary share for 2021.

Full details of the scrip dividend alternative that is being offered in respect of the Dividend (the "Scrip Offer") and the Scrip Dividend Scheme can be found in the Scrip Dividend Alternative Offer Document (the "Scrip Document") available on the Company's website to view and/or download at fsfl.foresightgroup.eu/investor-relations/. The Scrip Document is also available on the National Storage Mechanism website at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and copies are also available for inspection at JTC House, 28 Esplanade, St. Helier, Jersey JE2 3QA.

The reference price of the new shares issued under the Scrip Offer will be calculated and published on or around 4 November 2021.

Shareholders will receive the Dividend in cash, unless they have previously completed a standing election (a "Form of Election") to receive new shares pursuant to the Scrip Offer. Shareholders who would like to receive such new shares rather than cash, and who have not previously submitted a Form of Election, should complete the Form of Election at the back of the Scrip Document and return it to the Company's Receiving Agent, Computershare Investors Service (Jersey) Limited by no later than 5.00pm on 15 November 2021.

The expected timetable in relation to the Dividend will be as follows:

For further information, please contact:

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

Jefferies International Limited

+44 (0)20 7029 8000

Neil Winward

Gaudi Le Roux

Citigate Dewe Rogerson +44 (0)20 7638 9571 Toby Moore

Elizabeth KittleLucy Gibbs

Notes to Editors

About Foresight Solar Fund Limited

Foresight Solar is a Jersey registered, closed-end investment company investing in a diversified portfolio of ground-based solar PV and battery assets in the UK and internationally.

Since its IPO in October 2013, FSFL has raised more than £634 million through multiple share placings. It is the largest UK-listed dedicated solar energy investment company by solar installed capacity and market capitalisation.

The Company targets a progressive dividend policy and has paid all target dividends to date. The target dividend for 2021 is 6.98 pence per share.

FSFL is managed by Foresight Group, a leading independent Global Infrastructure & Private Equity manager, which provides FSFL with depth of experience in fund management, deal origination and execution. The Company has a fully independent Board of Directors and is chaired by Alex Ohlsson. The lead Investment Manager for the Company is Ricardo Piñeiro, Partner at Foresight Group.

FORESIGHT SOLAR FUND LIMITED

UNAUDITED INTERIM REPORT

FOR THE SIX MONTHS TO 30 JUNE 2021

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 sustainable, progressive quarterly dividend

Develop geographical diversity

Preserve enhanced capital value

HIGHLIGHTS

AS AT 30 JUNE 2021

GEOGRAPHIC FOOTPRINT

Our diversified portfolio consists of 59 assets with a total global net peak capacity of 1.019GW.

UK

Assets:

51 Assets

Since IPO, FSFL has continued to grow its portfolio in the UK and internationally. In 2021, the portfolio has been further diversified with the first battery storage acquisition.

Australia

Assets:

4 Assets

Spain

Assets:

4 Assets

CHAIRMAN'S STATEMENT

An increase in near-term power prices, a solid UK operational performance and successful active management of power prices all contributed to a strong performance by Foresight Solar over the first six months of 2021.

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 2021.

The Company delivered strong performance over the first six months of the financial year. An increase in near-term power prices, solid UK operational performance and successful active management of power prices were all key factors. The Board is pleased with the support from the Investment Manager and third-party suppliers in delivering a positive response since the first national lockdown was announced in 2020. This support, in optimising the asset management processes, has allowed the Company's portfolio to continue to deliver a strong performance with minimum operational disruptions. In the UK, electricity generation for the period was 3.4% above base case, driven by high asset availability and higher than expected irradiation levels.

The first six months of 2021 have consolidated the power price recovery experienced at the end of 2020, resulting from higher demand for electricity following the easing of COVID-19 pandemic restrictions and strong gas and carbon prices. The Board reiterates the Company's objective of achieving a high degree of cash flow protection by maintaining a large proportion of its revenue fixed via subsidy mechanisms or fixed price agreements.

The aim of this strategy is to deliver a stable dividend distribution policy. The Board has reconfirmed the dividend target for the financial year of 6.98 pence per share, having delivered all its target dividends since IPO, representing a dividend yield of 7.1% based on the share price of 99.0 pence per share as at 30 June 2021.

The Company reached a significant milestone during the period with its first investment in battery storage systems ("BSS") in the UK. The acquisition follows the change of the Company's investment policy allowing an allocation to BSS of up to 10% of the Company's GAV, approved overwhelmingly by Shareholders in February this year. This exciting development is expected to further increase portfolio diversification while enhancing the Company's growth prospects from value creating opportunities arising from the energy transition drive in the UK and internationally.

As global warming and the risk of extreme weather events continue to increase, as recently highlighted by the United Nations Intergovernmental Panel on Climate Change1 ("UN IPCC"), the Company continues to collaborate closely with the Investment Manager and stakeholders to contribute to a reduction of the impact of climate change, by developing clean energy generation and other sustainability‑driven initiatives at portfolio level.

Key financials

In the six months to 30 June 2021, the NAV per Ordinary Share increased to 98.0 pence (31 December 2020: 95.8 pence). One of the key drivers of the increase was an upward revision of UK power price forecasts obtained from independent third-party consultants. This upward revision was a result of the strengthening in commodity and carbon prices in the short and medium term, leading to a positive impact to NAV of 0.7 pence per share for the first half of the year.

The upward revision contrasted with the reduction in forecasts during the first three months of 2021 as reflected in the 31 March 2021 NAV (negative impact on NAV of 2.3 pence per share), prior to the COVID-19 social and economic restrictions being lifted.

The Company continues to actively manage its power price exposure having successfully entered new fixed price agreements for various UK portfolio assets during the period. The new agreements were secured at prices significantly above forecast, delivering an increase in NAV of approximately 0.9 pence per share. Fixed revenues for the whole portfolio, as a percentage of the Company's expected total revenues, increased to 75% in 2021, 74% in 2022 and 57% in 2023.

During the period the Company also successfully refinanced one of its Australian assets, Bannerton. The new five-year term debt facility has been secured on significantly more attractive financing terms resulting in a positive impact on NAV of 0.7 pence per share.

Other relevant NAV movements include the adjustment of actual inflation figures for the first six months of 2021 (positive impact on NAV of 0.9 pence per share) and the increase in UK corporation tax to 25% from April 2023 (negative impact on NAV of 1.3 pence per share).

Since IPO the Company's shares have delivered a total shareholder return of 50.7% (5.5% annualised) and a total NAV return of 55.8% (5.9% annualised) as at 30 June 2021.

Operational performance

During the first half of the year electricity generation from the Company's UK portfolio was 3.4% above base case, with irradiation levels 2.6% above base case assumptions. The portfolio outperformance was driven by high asset availability of the majority of the UK assets which continued to operate well through the remaining COVID-19 related restrictions.

After including the international portfolio, electricity generation was 2.3% below base case with irradiation levels 0.2% below base case for the period. This is primarily due to the underperformance of the assets in the Australian portfolio, which whilst improving over each period to date and exporting at full capacity, still impact negatively when considering the global performance figures. We further explain the performance of the Australian assets on page 21.

In Spain, the construction of the Virgen del Carmen subsidy-free project continues to progress positively, with the remaining works on site expected to be finalised by the end of September 2021. Grid connection and first electricity export will remain subject to the issuance of the final operational permits from relevant local authorities and transmission network operator, expected in the first quarter of 2022.

In relation to the 99MW subsidy‑free solar portfolio in Spain acquired on 31 December 2020, the Investment Manager continues to evaluate long-term Power Purchase Agreement ("PPA") options with creditworthy counterparties, including European energy suppliers. When finalised later in the year, the agreement will contribute to an increase in the level of contracted revenues across the Company's portfolio.

Acquisitions

In May, the Company announced the acquisition of a 50% equity stake in Sandridge Battery Storage Limited, a 50MW lithium-ion BSS located in the UK, its first acquisition in the sector and one which will provide diversification and operating efficiencies in the portfolio. The asset is adjacent to the Sandridge solar park owned by the Company and is expected to become operational in October 2022.

The acquisition will represent a total investment of up to £12.7 million, including the anticipated construction costs, and will be funded using the Company's existing revolving credit facilities ("RCF").

Dividend

The Company declared interim dividends of 3.49 pence per share in the first half of 2021 and is on track to deliver its target of 6.98 pence per share for the year. The first 2021 interim dividend of 1.745 pence was paid on 27 August 2021.

Cash flows for the 12 months to 30 June 2021 reflect the decrease in UK wholesale power prices since the COVID-19 lockdown measures were implemented. The revenues received in this period do not fully reflect the increase in power prices since the end of 2020 due to the working capital delay resulting from payment terms stipulated under the existing PPAs at portfolio level.

Despite the impact of low power prices on operational cash flows, the Company expects the dividend cover for the year ending 31 December 2021 to reach a minimum of 1.10 times, as it continues to meet its dividend target for the year, as it has done each year since IPO.

Debt facilities

At 30 June 2021, the total outstanding debt of the Company and its subsidiaries amounted to £460.8 million (31 December 2020: £472.4 million), with long-term debt representing £379.9 million (December 2020: £391.5 million). Total gearing represented 43.6% of GAV (December 2020: 44.8%). Long‑term structural gearing represented 35.9% of GAV (December 2020: 37.1%), within the 40% long-term debt target. (See pages 33 and 34 for details of GAV and gearing).

The Company's RCF totalled £130 million at 30 June 2021, of which £49.1 million remained undrawn at the end of the period. Allowing for the Company's funding commitments to recent acquisitions, approximately £13 million remains available for new investments.

The Company continues to benefit from the flexibility offered by the RCF to support further growth, at a competitive cost of capital, while limiting cash drag risk to investors. 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 to the size and revenue profile of the Company.

Sustainability update

The Company continues to build on its well-established sustainability credentials with each passing year. Its portfolio generated enough clean energy to power 169,655 homes1 for the period. This, in turn, enabled savings of 432,704 tonnes of CO2 equivalent (tCO2e).

While COVID-19 lockdown restrictions have inevitably made engagement with communities more challenging than usual, the Company continues to support local communities through grants to local projects. Educational site visits have been able to resume in a controlled fashion, with local schools visiting UK portfolio assets as a means of teaching students about the benefits of transitioning to a low-carbon energy system.

As a signatory to the Principles for Responsible Investment ("PRI"), in its latest assessment the Investment Manager achieved A+ ratings for both Strategy & Governance and Infrastructure, the highest grades achievable, demonstrating the Investment Manager's ongoing commitment to sustainability.

The Investment Manager is a signatory to the statement issued by the UK solar trade association, Solar Energy UK. The statement condemns any human rights abuse taking place in the global energy supply chain and calls for the development of a supply chain transparency protocol. In addition to this, a number of initiatives are being undertaken by the Investment Manager to manage and reduce this risk and engage with its key suppliers.

The Company is committed to maintaining sustainable practices across its supply chain and monitoring for any potential abuses. Hence, one of the focus areas for the Company's sustainability work over the upcoming periods is on supply chain engagement. For further details please refer to our Sustainability and ESG section. (Please refer to page 26).

Following the successful roll‑out of the O&M Sustainability Agreements, the Asset Manager is in the process of implementing sustainability‑focused metrics for each individual asset in the Company portfolio. The Board expects this initiative to deliver a best-in-class approach to the implementation of its sustainability strategy while enhancing the quality of the Company's monitoring and reporting activities.

Outlook

Climate change initiatives and the UK Government net zero targets are expected to continue to create a positive investment environment for renewable energy generation and energy transition acquisitions in the markets in which the Company operates. The UK will be hosting COP26, the 26th UN Climate Change Conference of the Parties, in November this year, a key milestone in the fight against climate change.

Clean energy generation is expected to remain a key component of climate change policies of most OECD countries, creating further growth opportunities in the renewable generation sector. As sustainability‑driven objectives become more prominent within the investment community, the increase in clean energy generation is expected to also be matched by increases in capital allocation. In addition, the power price recovery experienced in 2021 to date is expected to further support the investment in subsidy‑free assets. Consequently, battery storage systems, either standalone or co‑locating with renewable generation, are also anticipated to become increasingly utilised as further grid stability will be required to respond to the intermittent nature of new renewable energy generation.

The Investment Manager, through its international reach, continues to review an attractive pipeline of solar and battery assets in the UK and internationally that can deliver growth opportunities for the Company. While the Company will remain focused on UK acquisitions, the Board believes geographical diversification, within the restrictions of the Company's investment policy, will benefit Shareholders over the longer term. Investment opportunities in subsidised, operational assets will continue to be reviewed on a selective and opportunistic basis, as yield compression in the UK market continues to impact expected returns.

Exposure to power price volatility will continue to be actively managed by the Investment Manager at portfolio level to ensure a high proportion of contracted revenues are secured during the term of the investment.

The portfolio has proven to be very resilient during the COVID-19 pandemic despite the uncertainty experienced at operational level. The strong portfolio performance during recent periods, specifically in the UK, has supported delivery of a stable dividend. The Board, supported by the Investment Manager, will continue to aim to deliver on its progressive dividend policy by optimising the operational performance of the portfolio and ongoing active power price management.

Alexander Ohlsson

Chairman

15 September 2021

INVESTMENT PORTFOLIO

Portfolio summary

As at 30 June 2021, the Company's portfolio comprised 59 assets with a total net peak capacity of 1.019GW. In the UK, the Company has an operational portfolio of 50 assets representing a total installed capacity of 723MW. The Company's first investment into battery storage systems represents 25MW. The Company owns a further four operational assets in Australia which account for 146MW of installed capacity.

Two acquisitions in 2020 comprising an additional four subsidy-free assets in Spain will add 125MW on completion of construction.

The Company's UK assets all benefit from regulatory support and are accredited under the Renewables Obligation ("RO") scheme, with the exception of Yardwall which is a Feed-in Tariff scheme ("FiT") accredited asset (representing less than 1% of the UK portfolio). The Australian assets benefit from subsidies in the form of Large-Scale Generation Certificates ("LGC").

The Company's recently acquired greenfield projects in Spain will not benefit from regulatory support but are expected to benefit from long-term PPAs providing a high proportion of contracted revenues from creditworthy counterparties that, when calculated on a net present value basis over the life of the projects, deliver an attractive risk profile considering the Company's investment objectives.

Current portfolio

INVESTMENT MANAGER'S REPORT

Market developments

United Kingdom

The UK Government remains dedicated to climate change initiatives with the "Build Back Better" and the "Green Recovery" Ten Point Plan representing a firm commitment to the decarbonisation of the economy, including the energy system. The renewable energy industry is expected to have an important role in the Government's agenda for the growth of the UK economy. The UK remains bound by national and international renewable obligations, including the commitment to "net-zero" carbon emissions by 2050 which is expected to continue to deliver further support for renewable energy deployment.

In May, the Department for Business, Energy and Industrial Strategy ("BEIS") confirmed that the fourth round of the Contracts for Difference ("CfD") subsidy scheme will open in December this year. The installed capacity remains unknown, but the market expectation is for the fourth-round capacity to represent a significant increase against the 5.8GW of renewable energy capacity awarded in the 2019 third round. Eligible technologies will include solar, onshore and offshore wind, tidal and floating offshore wind.

In parallel, the UK solar industry continued its sustained growth in a zero-subsidy environment during the period with installed capacity on a subsidy-free basis surpassing 1GW since the subsidy mechanisms were removed by the UK Government.

This growth has been supported by a high level of development activity across solar and BSS, both on a standalone and co-located basis, in recent periods as the economic prospects for subsidy‑free investments in the UK continue to improve. The Investment Manager believes there is a strong pipeline of opportunities for additional deployment into BSS assets in the near-term.

Australia

The Australian market has been recovering from the COVID-19 related impacts in 2020 and has seen increased operational demand, which was largely driven by higher heating demand due to colder than average winter temperatures and relaxation of COVID‑19 restrictions in most of the states.

The Victorian government has conducted a market sounding exercise for its second round of renewable auctions (VRET 2), which is expected to procure a minimum of 600MW of new solar and wind energy capacity for the state.

It has also released an initial proposal to facilitate 16GW of network capacity in the state's Renewable Energy Zones. In June 2021, the Queensland government announced it will invest A$2 billion (up from previously announced A$0.5 billion) into renewable energy and hydrogen jobs as part of both its COVID-19 economic recovery plan and its achievement of the state's Renewable Energy Target (QRET). The New South Wales government is continuing its work on its Electricity Infrastructure Roadmap to enable an additional 12GW large‑scale renewables by 2030.

In the past few years, Australian regulators have been considering numerous changes to the regulatory framework as well as to the network operational mechanisms.

Some of the changes are expected to be delayed and potentially omitted as regulators and Ministers focus on economic growth and jobs. The Investment Manager is actively engaging in the regulatory dialogue through meetings with the regulators, written submissions and participation in industry groups and closely monitoring proposed regulatory changes.

On 25 May, an explosion in the Callide power station in Queensland caused outages across multiple transmission lines and independent generators. The incident affected the supply‑demand balance in Queensland and New South Wales, resulting in phases of significant power price volatility for the remainder of the period. The impact of the incident has renewed criticism regarding the lack of reliability of coal-fired power generators and calls from experts for additional renewable generation and battery storage.

Spain

In January, the Spanish Government announced the result of the first "pay-as-you-bid" renewable energy auction since 2017, with a total awarded capacity of approximately 3GW from a total participation pool of 9.7GW of projects. Solar PV projects represented approximately 2GW of the total capacity awarded, with onshore wind representing the remaining capacity.

The auction forms part of the Spanish Government strategy that aims to deliver 60GW of additional renewable capacity in the country until 2030. A second renewables auction for an additional 3.3GW of capacity has been approved by the Spanish government and is scheduled for October this year.

In June, the Spanish Government announced a three-month suspension of the 7% tax on power generation for the third quarter of 2021 as part of provisional measures to mitigate the impact of high wholesale electricity prices on consumers' bills as power prices remain high since the end of 2020.

In terms of market activity, approximately 31GW of solar projects have been announced in the market during the year to date, highlighting the attractive investment opportunity presented by the Iberian market. The majority of the projects announced are in their development stage so the expected increase in installed capacity remains uncertain.

Power prices

Historic power prices

United Kingdom

Wholesale power prices during the six-month period have been the strongest since the inception of the fund. From a strong recovery during the last six months of 2020 from the low average monthly price of c.£22/MWh in May 2020 to c.£55/MWh by December 2020, power prices have gone from strength to strength with May and June 2021 representing the highest wholesale power average monthly prices since the fund's inception for each respective month. The strong pricing is primarily a function of the commodity market, most notably gas which remains one of the most significant drivers of wholesale power prices. Gas prices in Europe have hit record highs, driven by numerous factors including low inventories, supply disruption from outages, strong demand from Asia and economic activity recovering to pre-COVID-19 levels.

The average power price achieved across the UK portfolio during the period, including fixed price arrangements, was £56.40/MWh, versus £45.38/MWh in the first half of 2020, an increase of 24% year‑on‑year.

As a result of the positive 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 2023. 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

The time-weight average power price across the National Electricity Market ("NEM") for the reporting period was A$60/MWh, an increase of 17% compared to the average power price of A$52/MWh in 2020 for the same reporting period. This increase was driven by a strong rebound in Q2 2021 after two years in decline. The average price of A$85/MWh in Q2 represents the highest quarterly average in almost two years, occurring in what is typically a lower‑priced quarter.

In Queensland, the higher operational demand was driven by an increased underlying demand from 1) increased heating requirements due to colder-than-average temperatures in Brisbane, 2) lifting of COVID-19 restrictions, and 3) increased liquefied natural gas ("LNG") production in Queensland to meet increased demand for LNG export. As a result, Queensland recorded its highest quarterly average price on record at A$128/MWh during Q2 2021. The average price during this reporting period is A$85/MWh comparing to A$44/MWh for the same period in 2020.

In Victoria, the increase in underlying demand was not as significant as seen in Queensland given the state was under COVID-19 restrictions for most of the time during the reporting period. The colder weather and higher gas prices led to an increase in power price from A$25/MWh in Q1 2021 to A$70/MWh in Q2 2021. The average power price for the reporting period was A$48/MWh, down by 20% from A$59/MWh for the same period last year.

The average power price achieved across the Australian portfolio during the period, including fixed price arrangements, was A$45/MWh.

Marginal Loss Factors ("MLFs"), representing the transmission losses impacting generators annual revenues based on the location of the grid connection, were released for FY2022 in July 2021. The renewed MLFs for three of the four Australian assets have seen a 4-7% increase comparing to the loss factor assigned last year.

Subsidy revenues

The Renewables Obligation Certificate ("ROC") buy-out price for the 2020-2021 annual compliance period increased to £50.5 (2019‑2020 compliance period: £48.78), reflecting the average monthly percentage change in RPI during 2020. On average, the Company received 1.42 ROC/MWh across the UK portfolio. The 2020-2021 FiT rate for the Yardall asset is £74.30/MWh (2019-2020: £73.50/MWh).

In Australia, the average LGC price secured by the portfolio assets in the first half of 2021 was A$32.05 per certificate. During the period the Company entered new agreements for the sale of LGCs at a fixed price with Origin Energy until 2030 for Bannerton and Oakey 2, reducing the portfolio exposure to LGC market price volatility. The new contracts had a minor positive impact to NAV due to the higher contracted LGC price against the market price forecast. In the case of Bannerton, the new agreement will target the annual uncontracted LGC volume not sold under the LGC agreement signed with the Victorian government until 2028.

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 in the short to medium term increased materially compared to December 2020 due to the increase in wider commodity prices as discussed in the previous section. Longer-term price forecasts are lower compared to December 2020 due to greater renewable capacity forecast to enter the generation mix which given the lower levelized cost of energy ("LCOEs"), applies downward pressure to wholesale prices.

As a result of the decrease in expected wholesale prices in the long-term as well as the increasing solar capture price discounts, the Company's forecasts reflect an average decrease in power prices in real terms in the long term of 1.3% per annum.

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

Australia

During the period, Queensland and Victoria power price forecasts decreased by 7.1% and 9.6% respectively, mainly due to assumptions around commodity prices and electricity demand.

The Company's forecasts assume an increase in Queensland and Victoria power prices in real terms over the medium to long term of 1.5% and 1.9% respectively, per annum.

Revenue analysis

During the period, approximately 56% of revenue was derived from subsidies, with the remaining 44% from the sale of electricity.

Contracted revenues for the Company portfolio, as a percentage of the total expected revenues, increased to 75% in 2021, 74% in 2022 and 57% in 2023 during the period, as a result of the new fixed electricity price arrangements entered by certain UK portfolio assets.

On an NPV basis as at 30 June 2021, contracted revenues over the entire investment period represented 50% of the total forecasted revenues.

The Company intends 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 be predominantly 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 dividend policy while allowing it to capture potential upsides of power price volatility.

Key investment metrics

Investment performance

The Net Asset Value per share as at 30 June 2021 increased by 2.3% to 98.0 pence compared to 95.8 pence as at 31 December 2020.

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.

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 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 57) 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 a number of tender processes to acquire comparable assets. The discount rate used for the UK portfolio is unchanged at 6.50% on a levered basis (6.50% as at December 2020).

The discount rate used for UK asset cash flows which have received lease extensions beyond the initial investment period of 25 years is 7.50% 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 8.41% on a levered basis compared to 8.60% as at December 2020.

The weighted average levered discount rate across the portfolio is now 6.71% compared to 6.74% as at 31 December 2020.

Non-UK assets 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 2021 is 30.6 years (31 December 2020: 30.6 years) from the date of commissioning. This represents a remaining portfolio useful life of 24.3 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 30 years (31 December 2020: 30 years).

Dividends paid

The Company paid dividends of £19.9 million during the six-month period to 30 June 2021 or 3.3 pence per share.

Fund costs

Total costs of £4.9 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

Exceptional uplifts in the period include, amongst others, the release of £3.7 million from compensation accounts under the existing debt facilities for historical rectification works.

Bannerton refinancing

The Australian asset Bannerton was successfully refinanced in the period, which has generated a NAV uplift via improved terms.

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 PPA across the UK portfolio at pricing in excess of the current market forecasts used in the valuation modelling.

Discount rate changes

As reported, this change reflects the reduction of the Australian weighted average discount rate ("WADR") from 8.60% to 8.41%.

UK corporation tax change

The corporation tax forecasts now assume 25% from April 2023 and remains at this level for the duration of the asset lives.

Inflation

This update reflects actual inflation for the period which has been in excess of the 3% forecast used in the valuation modelling. The forecast for H2 2021 remains at 3% as previously reported.

Operational assumptions

The Company has adjusted the generation forecast at a selection of assets which have displayed consistent overperformance above budget. The Company has also recognised operating running cost reductions where deemed appropriate.

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

SANDRIDGE BATTERY STORAGE ACQUISITION

Wiltshire, UK

Rationale:

Co-located Battery Storage Systems ("BSS") will offer the Company:

The Company has identified the opportunity to acquire 50% of the development rights of a 50MW battery storage located next to FSFL's Sandridge solar site in Melksham, UK. The project will be located on currently unused arable land adjacent to the solar PV site.

The project will be connected to Southern Electric Power Distribution plc's distribution network and has a 50MW import and export connection. The distribution network point of connection will be shared with the Sandridge solar park already in operation.

The opportunity to share grid infrastructure with the Sandridge solar park made it a desirable initial battery storage investment, with no adverse impact on the Sandridge solar park valuation or its operations.

The project will add stability and strength to the grid in multiple ways, by providing services which can include frequency management, supply/demand management via Balancing Mechanism, volatility reduction and load-shifting through wholesale trading, and provision of capacity for peak demand via Capacity Market.

The lithium-ion technology the project employs benefits from high efficiency, lower response time, lower cost, and availability of throughput warranty. In addition to this lithium phosphate is used which is cobalt‑free, ensuring a sustainable supply chain. The ability to replace the cells with new technology in the future, as well as the available space on site allowing for increasing capacity, ensures the project remains future-proof and flexible in terms of the future services that might be needed.

The transition risk of climate change poses the primary threat in that storage assets are reliant on grid provided electricity to 'charge' the system and are therefore intrinsically linked to the grid's own transition risk susceptibility. The project is considered to be generally resilient to extreme weather events, given the key equipment is housed within a maritime container.

The portfolio expansion into battery storage offers an attractive risk adjusted return, with a premium to conventional renewable projects. The project provides diversification for the fund away from baseload wholesale power price. The development contributes to building a diversified, robust and sustainable portfolio and will support the progressive dividend policy.

Investment overview

ASSET MANAGER'S REPORT

The operational performance of the UK portfolio during the period has been higher than expected driven by good plant availability and irradiation 2.6% above base case.

Portfolio performance

The operational performance of the UK portfolio during the period has been higher than expected with electricity generation 3.4% above base case, when adjusted for minor compensation payments received from O&M counterparties. Performance has been driven by good plant availability and irradiation 2.6% above base case.

The impact of COVID-19 on operational performance has remained negligible with site operators acting promptly when reactive maintenance was required in the field. Similarly to 2020, where preventative maintenance activities were postponed due to restrictions, they are still to be completed within the contractual year.

There have been minor performance-related issues during the period that were promptly rectified and a number of short DNO outages (Paddock Wood, Upper Huntingford, Lindridge). Response times to material incidents for the period have been good, with a number of transformer failures (Park Farm, Manor Farm, Wymeswold, Marsh Farm) which were repaired promptly using the spare transformers available.

Where possible, the failed transformers are being refurbished and retained as spares to avoid potential long lead times for a new replacement.

When including the international portfolio, electricity generation for the Company portfolio was 2.3% below base case, with irradiation levels 0.2% below base case. This is primarily due to lower than expected irradiation levels affecting the Australian portfolio and negative power pricing events driven by the extensive maintenance works on the Queensland to New South Wales interconnector, affecting the performance of the portfolio assets located in Queensland during the period as the assets ramp down production. The works are expected to last until October 2021. The performance of the Australian assets has continued to improve period on period despite the lower than expected generation during the first six months of 2021. When network-related events are excluded, the majority of the Australian assets are presenting technical performance levels in line with expectations. In the case of Oakey 2, the asset was also affected by irradiation levels below base case during the period. The project continues to export at 100% of its nominal capacity and has progressed its staged commissioning process. The project is expected to be fully commissioned in late 2021.

Assets under construction

In Iberia, construction of the Virgen del Carmen project commenced in mid-February and has progressed well during the period. The key milestones in relation to construction have been achieved and all plant and equipment was ordered and is being delivered to the site in accordance with the construction schedule. Testing and inspection of the delivered modules was carried out as part of the scope of works to maintain quality control. Construction works on site are expected to finalise in September, with grid connection and first electricity export expected in the first quarter of 2022 subject to the issuance of the final operational permits from relevant local authorities and transmission network operator.

In relation to the Andalusia portfolio acquired at the end of 2020, construction works started in July and key equipment is expected to be delivered on site from September. The Manager continues to evaluate long-term Power Purchase Agreement options with major European energy suppliers for the portfolio, with the intention to enter a Power Purchase Agreement and introduce a project finance facility at portfolio level to partially fund construction milestones before the end of 2021.

On the Sandridge Battery Storage asset, final design works are ongoing with construction scheduled to start in January 2022. Energisation and commercial operations are scheduled to commence in October 2022.

Electricity generation

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

UK

Australia

Overall portfolio

SUSTAINABILITY AND ESG

ESG considerations are firmly at the centre of the Company's strategy.

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.

The first half of 2021 marked a period of continued development in how the Company embeds sustainability and ESG considerations. The Company recognises that such factors are of increasing importance to global investors.

The nature of the Company's business means it is well positioned to serve the needs of investors seeking to achieve positive environmental and social outcomes alongside attractive financial returns.

Sustainable development contribution

How do the assets contribute to global sustainability?

How can this be tracked against the UN's SDGs?

Environmental footprint

Do the assets follow good practice for limiting or mitigating their environmental impact, in the context of its industry?

How do they encourage the responsible use of the world's resources?

Social welfare

What impact do the assets have on their stakeholders and society as a whole?

Are they taking steps to improve the lives of others, either directly, such as through job creation, or indirectly?

Governance

Do the assets and their leadership team demonstrate integrity?

Are the correct policies and structures in place to ensure they meet legislative and regulatory requirements?

Third-party interactions

Is the principle of corporate responsibility evidenced in the assets' supply chain?

How do the assets promote ESG values and share best practice?

2021 interim highlights

Contribution to Sustainable Development Goals

Demonstrating Foresight Group's commitment to sustainability is the Company's 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 table represents the Company's contribution to the SDGs for the period 1 January-30 June 2021:

EU Taxonomy asset accreditation

The EU Taxonomy is a classification system that stipulates a list of environmentally sustainable economic activities as a means of enabling the scale up of sustainable investment to help implement the European Green Deal. It intends to create security for investors and protect them from greenwashing, whilst helping to move capital to where it is most needed.

During 2020 the Company took the landmark step of seeking independent validation of its compliance with the EU Taxonomy for Sustainable Finance framework. The Company submitted two of its assets for validation with environmental consultant Aardvark Consulting Ltd, both of which were declared compliant with the Taxonomy in December 2020.

This approach has been continued with new assets, with the Virgen del Carmen project achieving validation in May 2021.

Details of the EU Taxonomy for Sustainable Activities is available on the European Commission website:

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en

Reducing risk of forced labour and modern slavery within the solar supply chain

When acquiring a project, Foresight Group instructs third parties to carry out technical due diligence checks on the module manufacturer from which the EPC is sourcing products. For greenfield projects these typically include obtaining documentation around health and safety, remuneration and training, working conditions and environmental issues relating to the module manufacturing facilities. To date, checks have not been carried out on companies further down the supply chain, such as those that produce solar cells, wafers or polysilicon. Wafer manufacturers usually blend polysilicon from different suppliers, which means that a solar cell can contain polysilicon from various sources. Panel manufacturers sometimes also source solar cells from various suppliers.

In 2016, only 9% of the world's solar-grade polysilicon came from Xinjiang, but in 2019 about one-third of polysilicon used to make solar cells was sourced from that region. In 2020, China accounted for roughly 80% of global polysilicon capacity while manufacturers in Xinjiang supplied about 45% of the world's supply.

It is widely recognised that the supply chain that supports the manufacture of solar panels is complex and that it is particularly difficult to have full visibility over the procurement of every material used in panel production. To promote greater transparency, Foresight Group signed a statement issued by the trade association, Solar Energy UK, on 12 April 2021. This statement condemns any human rights abuses taking place anywhere in the global energy supply chain and calls for the development of a supply chain transparency protocol.

Signed by many of the UK's leaders in solar energy, the aim is to raise the profile of this issue and encourage greater transparency throughout the broader supply chain. The Investment Manager has since been working with a consultant to develop its own Modern Slavery Statement, which is due for publication by October 2021. This will be shared with our key counterparties and be made publicly available.

As members of Solar Energy UK's "Responsible Sourcing Task Group" the Investment Manager is undertaking a two-pronged approach to address due diligence directly in relation to forced labour, with an initial focus on three key counterparty categories:

The Investment Manager has developed a questionnaire requesting information directly around modern slavery policies, practices and responsible procurement processes. This will be sent to all suppliers that fall within the above three categories. This will help identify risk areas and suppliers that may require further support or work to ensure their processes are more robust.

The Investment Manager is currently engaging with external agencies that offer supply chain diligence. They cover key ESG areas including anti-corruption, human rights, labour and environment. Where risks or poor performance are identified through this due diligence process, direct engagement with the supplier will take place to request further clarity to enable an informed decision as to whether the issue can be rectified and the working relationship can continue.

Sustainability Key Performance Indicators

Following the successful roll‑out of the O&M Sustainability Agreements and the appointment of the Investment Manager's portfolio Sustainability Lead, each asset is now expected to report quarterly on a series of sustainability and ESG metrics. Operations and maintenance contractors have been made aware of these requirements where appropriate.

All data will be reported through our asset management system "Sennen" which is currently being developed to include the suite of sustainability KPIs required. The KPIs will evolve over time with strategies and plans to be drawn up to support the Company in continually improving sustainability and ESG performance. In 2022, Foresight will look to set sustainability objectives and targets based on the data collated as a result of these newly established KPIs.

Key themes:

The first half of 2021 marked a period of continued development in how the Company embeds sustainability and ESG considerations.

Sustainability and ESG priorities and progress in 2021

As has been stated in previous Annual Reports, Foresight's Sustainability Evaluation Tool ("SET")1 is used as a means of assessing an asset's sustainability credentials. While the criteria an asset is assessed under remain the same, the scoring is now completed using more quantitative data, making the assessment less subjective. The five criteria are:

1. Sustainable Development Contribution

This theme supports reporting on the development of affordable and clean energy, improved resource and energy efficiency and contributions to the fight against climate change.

In the first half of 2021, the Company's operational portfolio produced over 492GWh of renewable energy. Furthermore, using Ofgem's assessment that the average UK household consumes 2.9MWh per year, it can be inferred that the Company's portfolio generated enough clean electricity to power 169,655 UK homes during the period.

2. Environmental Footprint

Each asset is closely monitored for its localised environmental impact. As such, this criterion assesses potential environmental impacts such as emissions to air, land and water, effects on biodiversity and noise and light pollution. The Asset Manager ensures that solar power plants are managed in a manner that maximises the agricultural, landscape, biodiversity and wildlife potential, which can also contribute to lowering maintenance costs and enhancing security.

The Asset Management team has continued to pursue a number of initiatives to ensure the solar power plants are being effectively managed for agriculture, landscape and biodiversity. Such schemes include:

3. Social Welfare

During the acquisition process, and throughout an asset's lifecycle, the Asset Manager engages with contractors, local residents, community organisations, landowners and local authorities to promote public support for the project, maximising the local benefit and minimising any actual or perceived negative effects. This has been achieved through a number of initiatives:

4. Governance

The Asset Manager actively reviews the regulatory and property consents of every solar asset to ensure compliance with the permissions and conditions attached to each site and actively engages with local government organisations to ensure ongoing compliance. In addition to ensuring the Company is protected from potential legal issues, this promotes trust with the sites' local communities.

As of February 2021, all of the Company's UK assets have adopted a suite of sustainability and ESG‑focused policies for the year 2021/22. These policies include:

These policies were reviewed and approved by the Board of each SPV and will continue to be adopted on an annual basis.

Compliance

Integral to the maintenance of the Company's reputation is its regulatory compliance and adherence to relevant laws. The Company is committed to carrying out business fairly, honestly and in compliance with laws and regulations and the Investment Manager has established policies and procedures to prevent bribery within its organisation. The Company is also committed to a policy to conduct all its business in an honest and ethical manner, taking a zero‑tolerance approach to facilitation of tax evasion, whether under Jersey Law, UK law or under the law of any foreign country.

As a means of ensuring that sustainability considerations are at the forefront of the investment process, the Investment Manager delivers "Best Practice" sessions to its staff. These sessions focus on how the sustainability performance of a given asset can be assessed, measured and improved, whilst also demonstrating how good ESG management can result in financial benefits. Foresight Group's staff are taken on induction tours of the assets and educated on how the sites are managed for biodiversity and habitat gain, as well as the processes undertaken to ensure the sites are in compliance with environmental and planning laws.

More details of the Company's approach to governance are contained in the Corporate Governance Report. Please refer to the Audited Annual Report and Financial Statements for the year ended 31 December 2020, which can be found at: fsfl.foresightgroup.eu/investor‑relations/publications/annual-results/

5. Third-Party Interactions

Counterparty due diligence forms an essential part of ensuring that key counterparties are reputable, experienced, competent and that they have robust and sustainable supply chains and have an approach to governance, compliance and ESG aligned with the Company, which must be evidenced by appropriate policies.

Two initiatives are being undertaken by the Investment Manager to further enhance these processes, with a view to improving overall asset performance and protecting the Company against reputational risk.

RISK AND RISK MANAGEMENT

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

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 to be unchanged from those reported in pages 16 to 19 of the Audited Annual Report and Financial Statements for the year ended 31 December 2020. Read more about our risks in our Annual Report, which can be found at: fsfl.foresightgroup.eu/investor‑relations/publications/annual-results/

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.

Risks related to COVID-19

The long-term financial and social impact of the COVID-19 pandemic remains uncertain. As the financial cost associated with the pandemic continues to increase, the introduction of measures to limit the governmental borrowing required to fund emergency COVID-19 economic support measures, including changes to tax legislation and periods of high inflation, can impact the Company performance and valuation.

The disruption to freedom of movement during pandemic-related lockdowns in 2020 resulted in little disruption to the Company's operations but future restrictions could hinder the Company's ability to service its assets as a result of shortage of qualified personnel and supply chain disruptions. The Company continues to work closely with the Investment Manager and key operational counterparties to mitigate risks related to unforeseen construction and operational disruptions.

Risks related to the sale of electricity

A decline in the wholesale price of electricity could materially adversely affect the price of electricity generated by solar PV assets and thus the Company's business, financial position, results of operations and business prospects. The restrictions implemented as a result of the Covid-19 pandemic in 2020 led to a collapse in demand for electricity and a sharp fall in power prices in the second quarter of 2020. Prices have recovered strongly since, with the first six months of 2021 confirming a period of high electricity prices supported partially by the higher demand of electricity resulting from the easement of the COVID-19 restrictions.

Further economic and social disruption from global pandemics and decreases in commodity and carbon prices remain principal risks to the Company performance. The Company will aim to limit its electricity price exposure by contracting a high proportion of its annual cash flows via subsidy mechanisms or fixed electricity price agreements.

Risks related to Brexit

The UK left the European Union on 31 January 2020. The EU-UK Trade and Cooperation Agreement was agreed on 24 December 2020 and ratified by the UK Parliament on 30 December 2020.

The impact of the agreement to the UK energy market and impact to the regulatory environment, legal and commercial operations of the portfolio assets remain uncertain.

During the period the level of disruption to supply chains between the UK and European countries has generally increased. A prolonged period of disruption to European supply chains could have a negative economic impact and affect the Company operations.

The Company and the Investment Manager will continue to closely monitor the impact of the EU-UK Trade and Cooperation Agreement on the Company portfolio, with no meaningful disruption identified to date.

Risks related to sustainability objectives

As the focus on climate change and sustainability targets intensifies, there is an increasing risk the Company's investment and asset management activities negatively impact its reputation and market value. The Company recognises that risks traditionally considered to be non‑financial, such as climate change, have the potential to impact long-term Shareholder returns. The Company aims to have sustainability and environmental, social and governance considerations at the centre of its investment process and asset management activities.

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 starting on pages 50 to 78.

Key metrics for the period ended 30 June 2021

Net assets

Net assets increased from £582.2 million at 31 December 2020 to £596.4 million at 30 June 2021, detailed in the Investment Manager's Report.

The net assets of £596.4 million comprise £1,004.2 million portfolio value of UK, Australian and Spanish investments and the Company's cash balance of £0.7 million, the intermediate holding companies' cash balances of £49.7 million and the intermediate holding companies' other assets of £2.8 million, offset by £460.8 million of intermediate holding companies' net liabilities, which comprises of long‑term debt of £379.9 million and a £80.9 million RCF, and the Company's other net liabilities of £0.2 million.

Analysis of the Group's net assets at 30 June 2021

Third-party debt arrangements and gearing position

As at 30 June 2021, total outstanding long-term debt was £379.9 million, representing 35.9% of the GAV (calculated as NAV plus outstanding debt) of the Company and its subsidiaries (31 December 2020: £391.5 million or 37.1% of GAV).

As at 30 June 2021, total outstanding debt including RCFs was £460.8 million, representing 43.6% of GAV (31 December 2020: £472.4 million or 44.8% of GAV).

The Company's Group net debt position, after deducting existing Group cash balances, is £410.4 million, representing 38.8% of GAV.

Long-term facilities

As at 30 June 2021, £379.9 million of long-term debt facilities were outstanding.

Inflation-linked debt facilities represent £79.8 million of total long-term debt outstanding as at 30 June 2021.

At 30 June 2021, the average cost of long-term debt was 2.82% per annum, including the cost of inflation-linked facilities of 1.37% 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 Bannerton project senior debt facility. The new facility will have a five-year term and has been secured on a financing cost approximately 250bps lower compared against the previous facility. The size of the debt facility has remained unchanged.

The refinancing of the senior debt facilities for the Longreach and Oakey 1 assets is expected to take place in the upcoming months and is expected to be secured on financing terms more attractive than the existing facilities.

Revolving credit facilities

The Company currently holds two separate RCFs totalling £130.0 million. The £65.0 million RCF provided by NatWest was upsized in the period to £90.0 million. As at 30 June 2021, £49.1 million remained undrawn.

At 30 June 2021, the weighted total cost of the RCFs was 2.3%.

The existing RCFs will expire in March and August 2022 and are expected to be refinanced during the second half of the year.

Debt structure

The following table summarises the debt position of the Company as at 30 June 2021.

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 LIBOR 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, debt facilities entered into with the CEFC have no exposure to the Bank Bill Swap Bid Rate ("BBSY") as the rate was fixed at financial close. Debt facilities provided by Mitsubishi UFJ Financial Group ("MUFG") have in place interest rate swaps on a decreasing nominal amount for a notional tenor of 20 years.

In March 2021, the Financial Conduct Authority ("FCA") announced that most LIBOR panels, including sterling panels, would cease to be effective from 31 December 2021. LIBOR-linked facilities are therefore required to transition to an alternative Risk-Free Reference Rate. A transition to Sterling Overnight Index Average ("SONIA") has been agreed in principle with each of the lenders of the facilities with a LIBOR base rate within the Group.

Company performance

Profit and loss

The Company's profit before tax for the period ended 30 June 2021 is £34.2 million, generating profits of 5.6 pence per share.

In the period to 30 June 2021, the operating income and gains on fair value of investments was £37.5 million, which comprised the receipt of £18.9 million of interest on the Foresight Solar (UK Hold Co) loan notes and £18.6 million net gains on investments at fair value incurred in the period.

Operating expenses included in the income statement for the period were £3.3 million, in line with expectations. These comprise Investment Management fees of £2.9 million and £0.4 million of operating expenses. The details on how the Investment Management fees are charged are set out in note 5 to the Financial Statements.

Cash flow

The Company had a total cash balance at 30 June 2021 of £0.7 million (31 December 2020: £16.9 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 2021 (£million)

Consolidated profit and loss of underlying investments

The underlying operating investments in the UK and Australia generated an operating profit of £44.7 million in the period to 30 June 2021, in line with expectations.

Consolidated profit and loss of the underlying investments for the period to 30 June 2021 (£million)

The Australian assets are consolidated based on the fund's ownership, using an average AUD/GBP exchange rate of 0.5481.

Subsidised revenues consist of ROC, ROC recycle, Feed-in Tariff, embedded benefits and Large-Scale Generation Certificates ("LGCs").

Cash flows of the Company and intermediate holding companies for the 12-month period to 30 June 2021 (£million)

During the 12 months to 30 June 2021 the underlying solar assets paid £74.1 million of ordinary distributions to the intermediate holding companies, in line with expectations.

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 released £4.5 million from compensation accounts in relation to legacy issues within some UK assets; £1.1 million of this cash was in relation to lost revenue and therefore available for distribution.

Acquisition costs in the period are in relation to Sandridge Battery Storage Limited and further investment into the Spanish portfolio acquired in December 2020 to fund construction milestones.

Dividend cover

Cash flows for the 12 months to 30 June 2021 reflect the decrease in UK wholesale power prices over the same period, in particular since COVID-19 lockdown measures were implemented. The revenues received in this period do not fully reflect the recent increase in power prices due to the working capital delay caused by payment terms stipulated under the PPAs.

Despite the low power price environment, the Company is showing a cash dividend cover of 1.05 times, when adjusting for the additional quarterly Investment Management fee invoice paid in the period. The Company expects the dividend cover for the year ending 31 December 2021 to be a minimum 1.10 times, as it continues to meet its dividend target for the year, as it has done each year since IPO.

Dividends

The Company is targeting a full-year dividend for the year ending 31 December 2021 of 6.98 pence, representing a 1.00% increase compared with the dividend declared for the 2020 financial year. 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 FY2021

On 15 September 2021 the Board approved the second interim dividend relating to FY2021 of 1.745 pence per share.

Full details of the scrip dividend alternative that is being offered in respect of the dividend (the "Scrip Offer"), its timetable and the Scrip Dividend Scheme can be found in the Scrip Dividend Alternative Offer Document (the "Scrip Document") available on the Company's website to view and/or download at fsfl.foresightgroup.eu/investor-relations/. The Scrip Document is also available on the National Storage Mechanism website at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and copies are also available for inspection at JTC House, 28 Esplanade, St. Helier, Jersey JE2 3QA.

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 in order 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 2021 was 1.18% (31 December 2020: 1.18%). 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 market capitalisation.

Corporate summary

The Company is a closed-ended company with an indefinite life and was incorporated 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 £1,057.2 million as at 30 June 2021. It is the largest UK-listed dedicated solar energy investment company by installed capacity and market capitalisation.

As at 30 June 2021, the Company has 608,779,514 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.

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 2021 are as follows:

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 post-period end on 15 February 2021, Shareholders overwhelmingly voted in favour of proposals to amend the Company's investment policy. The policy change permits investment into BSS of up to 10% of the GAV of the Company.

Energy generated from renewable sources is expected to represent an increasing proportion of the total energy generation capacity versus other forms of generation. The intermittent nature of primary renewable technologies (particularly solar and wind) results in increased risk of imbalance between demand and supply on the grid, leading to increased price volatility. BSS support a rebalancing of the grid and prevent loss of inertia for the system operator. In return, a number of financial incentives are available to BSS in addition to potential arbitrage opportunities relating to the wholesale market price itself.

Foresight Group was an early investor into the UK battery storage market investing in c.100MW of battery storage assets since 2017. Foresight Group is also monitoring the landscape for BSS across other countries, including those in which the Company holds investments.

Although the new investment policy permits the Company to invest in BSS assets without them having to be co-located on the Company's solar power plants sites, co‑located opportunities, greenfield or alongside the existing solar portfolio assets, represent an attractive accessible opportunity‑base. Co‑locating BSS with the Company's existing solar power plants ensures a lower capital cost for BSS development versus investing in standalone storage assets.

This is achieved by sharing existing infrastructure with the site, most importantly the grid connection, but also the land, access tracks and security arrangements.

In addition to delivering higher diversification of cash flows available for distribution, the co-location of battery storage, when retrofitted onto an existing portfolio solar power plant site, is not expected to impact the value of the solar power plant investment, as the batteries will operate within the excess grid capacity outside of the solar generation profile.

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.

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, operations 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 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 Group manages over 300 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 five regionally focused investment funds across the UK, supporting over 100 SMEs. Foresight Group operates from 12 offices across six countries in Europe and Australia with AUM of £7.8 billion as at 30 June 2021. Foresight Group Holdings Limited listed on the Main Market of the London Stock Exchange in February 2021. https://www.fsg-investors.com/

Foresight Infrastructure's team consisted of 85 full-time employees as at 30 March 2021. The team is comprised of:

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:

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

Read more about S172 in our Annual Report, which can be found at: www.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 2021.

The Directors confirm to the best of their knowledge that:

Alexander Ohlsson

Chairman

For and on behalf of Foresight Solar Fund Limited

15 September 2021

STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD 1 JANUARY 2021 TO 30 JUNE 2021

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

The accompanying notes on pages 50 to 78 form an integral part of these Financial Statements.

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2021

The Financial Statements on pages 46 to 78 were approved by the Board of Directors and signed on its behalf on 15 September 2021 by:

Alexander Ohlsson

Chairman

The accompanying notes on pages 50 to 78 form an integral part of these Financial Statements.

STATEMENT OF CHANGES IN EQUITY

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

FOR THE PERIOD 1 JANUARY 2020 TO 30 JUNE 2020 (UNAUDITED)

FOR THE PERIOD 1 JANUARY 2020 TO 31 DECEMBER 2020 (AUDITED)

The accompanying notes on pages 50 to 78 form an integral part of these Financial Statements.

STATEMENT OF CASH FLOWS

FOR THE PERIOD 1 JANUARY 2021 TO 30 JUNE 2021

The accompanying notes on pages 50 to 78 form an integral part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD 1 JANUARY 2021 TO 30 JUNE 2021

1. Company information

Foresight Solar Fund Limited (the "Company") is a closed-ended 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, JE2 3QA.

The Company has one investment, Foresight Solar (UK Hold Co) Limited ("UK Hold Co").

UK Hold Co has investments in five subsidiaries: FS Holdco Limited ("FS Holdco"), FS Holdco 3 Limited ("FS Holdco 3"), FS Holdco 4 Limited ("FS Holdco 4"), FS Top Holdco 2 Limited ("Topco") and a 50% shareholding in a new investment purchased during the period, Sandridge Battery Storage Holding Limited ("SBSHL"). FS Holdco 3 in turn has an investment in a subsidiary, SGP Holdings 1 Limited ("SGP Holdings 1") which in turn holds has an investment in Second Generation Portfolio 1 ("SGP 1"). Topco in turn has an investment in a subsidiary, Foresight Intermediate Solar Holdings Limited ("FISH"); FISH in turn has an investment in a subsidiary, FS Holdco 2 Limited ("FS Holdco 2") and FS Holdco 2 in turn has an investment in a subsidiary, FS Debtco Limited ("FS Debtco"). FS Holdco, FS Debtco, FS Holdco 3, SGP 1 and FS Holdco 4 invest in further holding companies (the "SPVs") which then invest in the underlying solar investments. SBSHL invests in the underlying battery asset Battery Storage Limited ("SBSL").

The principal activity of the Company, UK Hold Co, FS Holdco, Topco, FISH, FS Holdco 2, FS Debtco, FS Holdco 3, SGP Holdings 1, SGP 1 and FS Holdco 4 (together "the Group") is investing in UK, Spanish and Australian ground‑based solar power plants. On 15 February 2021, Shareholders voted in favour of proposals to amend the Company's Investment Policy. The policy change permits investment into BSS of up to 10% of the GAV of the Company.

In 2021 the Company announced the acquisition of a 50% equity stake in SBSHL, the shareholder of SBSL. SBSL holds the development rights to construct the Sandridge battery storage project, a 50MW lithium-ion battery energy storage system based in Melksham, UK, adjacent to the Sandridge solar park which is already owned by the Company.

2. Summary of significant accounting policies

2.1 Basis of presentation

The Unaudited Interim Financial Statements (the "Interim Financial Statements") for the period 1 January 2021 to 30 June 2021 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 2020.

These are not statutory accounts in accordance with Article 105 of the Companies Law (Jersey) 1991, as amended, and the financial information for the periods ended 30 June 2021 and 30 June 2020 has been neither audited nor formally reviewed. Statutory accounts in respect of the period to 31 December 2020 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 2020 have been reported on by the Company's auditors or delivered to the Registrar of Companies.

2.2 Going concern

Throughout the period to 30 June 2021, market conditions have continued to stabilise, and captured power prices have continued to recover from the impact of COVID-19. In addition, short‑term, medium‑term and long‑term power price forecasts have also continued to recover. Despite the recovery, the impact of COVID-19 continues to be monitored along with the potential for another global economic slowdown following further outbreaks of the virus.

Although the pandemic impacted the Financial Statements as at 31 December 2020 as a result of lower power price forecasts, the short‑term power price curves have since shown a recovery in 2021 from the impact of COVID-19 and therefore the Directors do not see any further impact on cash flows and are confident that the Group's cash flow will remain stable beyond 30 June 2021. The Directors also do not believe the Financial Statements as at 30 June 2021 have been further impacted by COVID-19 and the Directors do not believe there is any impact on the Company's ability to continue as a going concern. The Directors refer to cash flow forecasts prepared by the Investment Manager for the period of at least 12 months following the date of these accounts, which includes an assessment of the severe possible downside of a six‑month period with no income.

In making this assessment the Investment Manager has considered the largely predictable revenue streams stemming from the underlying portfolio companies trading on solar sites, a large proportion of which are fixed through PPAs as well as government‑backed subsidies.

The Directors have concluded that the impacts of movements in market prices do not significantly impact the Company's ability to continue as a going concern. The Directors have considered forward-looking power prices assumptions by third-party providers in making this assessment.

The Manager continues to monitor developments relating to COVID-19 and continues to coordinate its operational response based on existing business continuity plans and on guidance from global health organisations, relevant governments, and general pandemic response best practices.

After the completion of Brexit, the Company faces certain risks in relation to the operation of the UK solar portfolio (discussed in note 19.4) and the Asset Manager continues to monitor the robust spare parts provision in the UK and continues to work with the operating and maintenance providers and their downstream suppliers to ensure any downtime is minimised across the portfolio as much as possible.

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, its cash flows, liquidity position and borrowing facilities are referred to in the Chairman's Statement, Investment Manager's Report and Notes to the Financial Statements. In addition, the Financial Statements include the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to credit risk and liquidity risk.

The subsidiaries of the Company, FS Holdco Limited, FS Debtco Limited and Foresight Intermediate Solar Holding Limited, are required to complete quarterly debt compliance reporting. The three covenants that the subsidiaries are required to report on are the 12 months look back debt service cover ratio, the 12 months look forward debt service cover ratio and the loan life cover ratio. The Directors are happy to confirm that there were no instances of non-compliance throughout the period or subsequently.

The Company has sufficient financial resources together with investments and income generated. Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for the 18‑month period ending 31 December 2022 and have therefore prepared the Financial Statements on a going concern basis.

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 2021 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 2021 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:

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

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.

3. 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; 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.

The Board considers that the determination that the Company meets the definition of an investment entity involves significant judgement.

In assessing whether the Company meets the definition of an investment entity set out in IFRS 10, the Board used the below criteria to make their significant judgement:

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 Board considers that the fair value of the underlying investments not quoted in an active market involves critical accounting estimates because it is determined by the Directors using their own valuation models, which are based on valuation methods and techniques generally recognised as standard within the industry and in line with the applicable standards. Directors rely on significant unobservable inputs about the output of the asset (including assumptions such as solar irradiation and technological performance of the asset), power prices, operating costs, discount, inflation rates applied to the cash flows, and the duration of the useful economic life of the asset. The Directors calculate the fair value of the investments based on information received from the Investment Manager.

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 a discounted cash flow valuation methodology. Furthermore, changes in these inputs and assumptions could affect the reported fair value of financial instruments. The determination of what constitutes "observable" requires judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The COVID-19 pandemic has impacted the Net Asset Value of the investments as a result of lower power price forecasts used in determining the valuation of investments.

4. Interest income

Loan notes were issued by the Company to UK Hold Co for the purchase of investments. Interest is payable 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 2020: £250,000,000, 31 December 2020: £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 2020: £304,316,450, 31 December 2020: £304,316,450). These loans form part of the fair value of the investments as per note 14.

5. 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 to 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 2021, the Investment Manager was entitled to a management fee of £2,858,257 (1 January 2020 to 30 June 2020: £2,907,302, 1 January 2020 to 31 December 2020: £5,795,475) of which £140,443 was outstanding as at 30 June 2021 (30 June 2020: £136,500, 31 December 2020: £34,410).

6. 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 (2020: £156,000) payable quarterly in arrears. For the period ended 30 June 2021, total administration and accountancy fees were £95,550 (1 January 2020 to 30 June 2020: £91,000, 1 January 2020 to 31 December 2020: £188,925) of which £91,000 was outstanding as at 30 June 2021 (30 June 2020: £136,500, 31 December 2020: £91,100).

7. Directors' fees

No members of staff were employed during the period (period ended 30 June 2020: nil, year ended 31 December 2020: nil).

Total Directors' fees were £130,000 (1 January 2020 to 30 June 2020: £107,500, 1 January 2020 to 31 December 2020: £229,552).

8. Other expenses

Included within legal and professional fees is £20,270 (1 January 2020 to 30 June 2020: £18,850, 1 January 2020 to 31 December 2020: £40,641) relating to the accrual of the 2021 audit fees. The total audit fee paid to KPMG LLP in relation to the audit of the Group was £200,000 for the year ended 31 December 2020. There were no other fees paid to the auditors for non-audit services (1 January 2020 to 30 June 2020: £nil, 1 January 2020 to 31 December 2020: £nil).

9. Earnings per Ordinary Share - basic and diluted

The basic and diluted profit per Ordinary Share for the Company is 5.63 pence per share (period ended 30 June 2020: 4.42 loss, year ended 31 December 2020: 1.19 loss). This is based on the profit for the period of £34,208,116 (1 January 2020 to 30 June 2020: £26,743,535 loss, 1 January 2020 to 31 December 2020: £7,196,980 loss) and on 607,996,259 (1 January 2020 to 30 June 2020: 605,680,167, 1 January 2020 to 31 December 2020: 606,924,133) Ordinary Shares, being the weighted average number of shares in issue during the period.

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

10. Interest receivable

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

11. Trade and other receivables

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

12. Cash and cash equivalents

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

13. Trade and other payables

14. Investments at fair value through profit or loss

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

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 five investments in FS Holdco Limited ("FS Holdco"), FS Holdco 3 Limited ("FS Holdco 3"), FS Holdco 4 Limited ("FS Holdco 4"), FS Top Holdco 2 Limited ("Topco") and Sandridge Battery Storage Limited ("SBSL"). FS Holdco 3 has one investment in SGP Holdings 1 Limited ("SGP Holdings 1") which in turn has one investment in Second Generation Portfolio 1 ("SGP 1"). Topco has one investment in Foresight Intermediate Solar Holdings Limited ("FISH"). FISH has one investment in FS Holdco 2 and FS Holdco 2 has one investment in FS Debtco Limited ("FS Debtco"). 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 period 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 Holdco 3, SGP Holdings 1, FS Holdco 4, FISH, FS Holdco 2 and Topco are fair valued using their Net Asset Value as reported at period end.

In turn, FS Holdco, FS Debtco, FS Holdco 3, SGP 1 and FS Holdco 4'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. SBSL is held at cost as it is not yet operational.

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:

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 period.

As at 30 June 2021:

As at 30 June 2020:

As at 31 December 2020:

Sensitivity analysis

Due to the nature of the Group structure and the underlying valuation basis of UK Hold Co, FS Holdco, Topco, FISH, FS Holdco 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.

15. Subsidiaries and associates

Investments in subsidiaries