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4 May 2023 07:00
4 May 2023
Foresight Solar Fund Limited
(the "Company" or "Foresight Solar")
Q1 2023 Net Asset Value, Trading Update and Share Buyback Programme
Foresight Solar Fund Limited, a fund investing in a diversified portfolio of ground-based solar PV and battery storage assets in the UK and internationally, announces that its unaudited net asset value (NAV) was £757.5 million on 31 March 2023 (31 December 2022: £771.5 million). This results in a NAV per Ordinary Share of 124.2 pence (31 December 2022: 126.5 pence per share).
Highlights:
● | NAV reduction driven by lower near-term power price forecasts, albeit mitigated by the high proportion of power price hedges and reduced windfall tax payments. |
● | The Company's contracted revenues reached 88% for 2023, 82% for 2024 and 70% for 2025. |
● | Price hedges across the UK portfolio averaged £197/MWh for the period, generating cash to comfortably underpin the 7.55p dividend target and support the 1.5x dividend cover. |
● | In recognition of the current discount to NAV that the shares have been trading on, Foresight Solar today separately announced a share buyback programme of up £10 million. |
Summary of NAV key drivers for Q1 2023:
Item | p/share movement |
NAV on 31 December 2022 | 126.5 |
Power price forecasts | -2.3 |
Reduction in Electricity Generator Levy | +2.0 |
Project actuals | -1.4 |
Foreign exchange | -0.5 |
Operational updates | +0.3 |
Inflation | +0.1 |
Other adjustments | -0.5 |
NAV on 31 March 2023 | 124.2 |
Near term power price and revenue forecasts for the period between 2023 and 2026 were notably lower, while there was a modest increase in long-term estimates. On a standalone basis, the net impact of these movements led to a 2.3 pence per share downside adjustment to the NAV for Q1. The resulting near-term blended consultant curves are now more closely aligned to forward rates currently attainable on the market.
The fall in near-term UK power prices also lowered forecast payments for the Electricity Generator Levy. This reduction culminated in an upward movement of 2.0 pence per share for the NAV.
Revenue for the period to 31 March 2023 was below budget, driven by considerably lower merchant power prices than forecast and, to a lesser extent, by reduced electricity production in the UK due to adverse weather. The lower-than-expected financial and operational performance for the period had an overall negative impact of 1.4 pence per share on the net asset value, reflected in "project actuals".
The Asset Manager completed several performance enhancements during the quarter, the most notable of which was the negotiation of a replacement O&M contract for the Bannerton solar farm in Australia with favourable outcome. In total, these improvements added 0.3 pence per share to NAV.
Higher than expected inflation in the first three months of the year was incorporated into Foresight Solar's net asset value, adding 0.1 pence per share. The actual figures reinforced the Investment Manager's estimate for short-term UK inflation of 6.5% in 2023. Medium and long-term assumptions also remained unchanged at 3.0% from 2024.
Trading update
Electricity generated by the global portfolio was 3.8% below base case for the first quarter of the year, predominantly driven by inclement weather in the UK in March. Whilst Australian production was marginally below expectations, the Company's Spanish assets provided helpful diversification with electricity generation above budget - a favourable start to their first full year of operation.
Power price hedging and dividend cover
The Investment Manager continues to forward-fix electricity sales at attractive rates under power purchase agreements and build on the proportion of contracted revenue for the medium term. In the UK, which accounted for 82% of revenue, price fixes averaged £197/MWh in the quarter. Overall, the proportion of contracted revenue for the global portfolio stands at 88% for 2023, 82% for 2024 and 70% for 2025.
This active hedging strategy substantially insulated FSFL against the fall in merchant power prices. It also provides stability in revenue and confidence in the targeted 1.5x dividend cover for the full year.
Share buyback programme
In light of the discount to NAV at which the Company's shares have traded relative to its strong underlying performance and prospects, Foresight Solar's Board today announced it will initiate a share buyback programme with an initial allocation of up to £10 million.
The Directors will review this quota on an ongoing basis considering the Company's liquidity position, the pipeline of investment opportunities available, and the discount to NAV the shares trade at.
Portfolio optimisation and pipeline
During the quarter, FSFL and its advisors moved ahead with the review of the global portfolio, which will identify specific opportunities to recycle capital and realise value.
In terms of delivering on the change in investment policy, Foresight Solar announced in March it had secured a 467MWp pipeline of development-stage solar projects in Spain (Project Lynx). The Company continues to review further development-stage opportunities which it views as an attractive potential way to recycle capital with modest upfront payments.
Gearing update
The Gross Asset Value (GAV), including Company and subsidiaries, on 31 March 2023, was £1,268.2 million (31 December 2022: £1,296.3 million). The Company's total outstanding debt is £510.7 million, representing 40.2% of GAV (31 December 2022: 40.5%), comfortably within the 50% limit.
A video summary of this announcement is available on Foresight Solar's website: fsfl.foresightgroup.eu/.
For further information, please contact:
Foresight Group | |
Matheus Fierro | +44 (0)20 3911 2318 |
(InstitutionalIR@ForesightGroup.eu) | |
Jefferies International Limited | +44 (0)20 7029 8000 |
Gaudi Le Roux | |
William Brown | |
Harry Randall | |
Citigate Dewe Rogerson | +44 (0)20 7638 9571 |
Toby Moore | |
Lucy Gibbs |
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