Foresight Solar Fund Regulatory News (FSFL)

8 August 2024

Foresight Solar Fund Limited

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

Q2 2024 Net Asset Value and Trading Update

Foresight Solar, a sustainability-focused fund investing in solar and battery storage assets in the UK and internationally, announces that its unaudited net asset value (NAV) was £656.8 million at 30 June 2024 (31 March 2024: £665.0 million). This results in a NAV per Ordinary Share of 114.9 pence (31 March 2024: 114.7 pence per share).

Highlights:

· Near and long-term power price forecasts for the UK and Spain trended up in the second quarter, leading to a positive impact on NAV.

· UK electricity production recovered after the wettest first quarter on record: irradiation was 2.7% below budget and generation was 4.3% lower than forecast in the first half. 

· Active treasury management reduced RCF costs by 80bps, equivalent to potential interest savings of £360,000 to the end of the year. The RCF was £74.5 million drawn at 30 June 2024.

· The board increased the buyback programme by up to £10 million, taking the total to up to £50 million. Repurchases have added a cumulative 1.9pps of NAV accretion.

Summary of key NAV drivers:

As consultants updated their assumptions, UK power price forecasts reversed a five-quarter downward trend and increased in the three months to 30 June 2024. The position was similar in Spain, with higher near and long-term forecasts, whilst price forecasts for Australia were marginally down relative to the previous quarter. In aggregate, these moves resulted in a positive impact to NAV of 0.7 pence per share.

Foresight Solar continued its accretive share buyback programme, repurchasing a further 7.9 million shares during the second quarter and delivering an additional 0.4pps of NAV accretion to shareholders. FSFL has now deployed over £35 million of its £40 million initial allocation, resulting in a cumulative 1.9pps uplift to NAV since the Company began buying back its shares in May 2023.

Other movements, totalling a downside net impact of 0.3pps to NAV, included a small foreign exchange movement; higher insurance costs; returning the Lorca portfolio to a DCF valuation following the partial divestment in Q4 2023; and a minor upside from rebalancing discount rates across the Australian portfolio to reflect current market conditions.

Trading update

Improved weather and good availability from April to June in the UK helped FSFL recover from the wettest first quarter on record. The better conditions, however, were not enough to completely mitigate the negative impact of the rainy start to the year. At the end of June, cumulative irradiation for the six months was 2.7% below budget and production was 4.3% lower than expected in FSFL's main market due to unplanned network outages and a small number of inverter issues.

Spain and Australia also suffered from poor weather and network outages. Overall, production for the global portfolio was 7.1% below forecast for the first half of the year - a considerable improvement from Q1, when it was 15.6% behind budget.

Notwithstanding the below-budget start of 2024, Foresight Solar's active power price hedging strategy ensured another quarter of steady cash flow from operations, with cash distributions only modestly down against budget. The directors are confident the Company will meet its target dividend of 8.0pps for the year with a slightly revised net dividend cover of 1.4x.

The investment manager continued to forward-fix electricity sales at attractive rates to provide revenue visibility for the medium term. Overall, the proportion of contracted revenue for the global portfolio now stands at 89% for 2024, 83% for 2025 and 63% for 2026.

Capital allocation

The board and the investment manager recognise the discount that persists between FSFL's net asset value and its share price. The directors have thus allocated up to a further £10 million to Foresight Solar's ongoing share buyback programme, bringing its total to a potential £50 million and extending the renewables sector's largest initiative relative to NAV.

Demonstrating the Company's commitment to a disciplined capital allocation approach, FSFL didn't make any large capital deployments in the period. The divestment programme continues to move ahead, and more details will be provided in the interim report. The board remains focused on returning capital to shareholders and reducing variable-rate debt costs.

Gearing

The gross asset value (GAV) on 30 June 2024 was £1,085.2 million (31 March 2024: £1,094.5 million), with total outstanding debt of £428.4 million, which represented 39.4% of GAV (31 March 2024: £429.5 million and 39.2%) - comfortably within the 50% limit.

The RCF balance was £74.5 million drawn (31 March 2024: £75.0 million). In May, the Company substituted a £43 million tranche of its GBP drawing on the multi-currency revolving credit facility to EUR, better aligning its debt with its investment exposure. The treasury management initiative lowered the expected weighted cost of the interest payable on the RCF by 80 basis points and, based on current rates, has the potential to save at least £360,000 in interest payments by the end of the year.

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