TIDMBSIF
RNS Number : 9113N
Bluefield Solar Income Fund Limited
28 September 2023
28 September 2023
Bluefield Solar Income Fund Limited
('Bluefield Solar' or the 'Company')
Annual Report and Financial Statements for the Year Ended 30
June 2023
Bluefield Solar (LON:BSIF), the London listed income fund
focused on acquiring and managing renewable energy and storage
assets predominantly in the UK , is pleased to announce its Annual
Results for the Year Ended 30 June 2023.
The Annual Report has been submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Highlights
As at 30 June 2023 / 30 June 2022
Net Asset Value (NAV) Dividend Target per Share
GBP854.2m GBP858.4m 8.40pps 8.16pps
NAV per share Actual Dividend Declared
139.70p 140.39p 8.60pps 8.20pps
Underlying Earnings(1) Total Shareholder Return in
(pre amortisation of debt) year(2)
GBP108.4m GBP66.8m -2.03% 14.55%
Underlying Earnings per share(1) Total Return in year(3)
(pre amortisation of debt) 5.45% 28.16%
17.72p 12.04p
Total return to Shareholders
since IPO
89.79% 92.45%
Underlying Earnings per share(1)
(post amortisation of debt)
14.74p 9.54p
Environmental, Social and Governance (ESG)
ESG KPIs
Ø Over 836,231 MWh of renewable energy generated. 624,000
MWh
Ø Over 173,000 tonnes of CO2e savings achieved. 120,000
Ø Equivalent of 280,000 homes powered with renewable energy.
215,000
ESG Highlights
Ø Enhanced ESG governance through policy adoption, quantitative
reporting against a comprehensive set of ESG commitments and
KPIs, and enhanced supply chain practices.
Ø 25 educational workshops delivered to local schools (2022:
0) and GBP253,000 paid to community benefit funds (2022: GBP154,000)
Ø 30 Biodiversity Net Gain (BNG) assessments conducted
across the operational portfolio (2022: 0)
Construction and Development Pipeline
-- 93 MW under construction
-- 595 MW approved
-- 364 MW in planning
-- 377 MW potential capacity
1.43 GW
(956 MW Solar, 473 MW battery)
1. Underlying earnings is an alternative performance measure
employed by the Company to provide insight to the Shareholders by
linking the underlying financial performance of the operational
projects to the dividends declared and paid by the Company. It is
defined in the Alternative Performance Measure appendix.
2. Total Shareholder Return is based on share price movement and
dividends paid in the year. It is defined in the Alternative
Performance Measure appendix.
3. Total Return is based on the NAV movement and dividends paid
in the year. It is defined in the Alternative Performance Measure
appendix.
Results Summary:
For the year For the year
ended ended
30 June 2023 30 June 2022
Total operating income GBP49,069,809 GBP176,141,970
Total comprehensive income before GBP46,793,621 GBP174,572,832
tax
Total underlying earnings (pre GBP108,367,331 GBP66,750,110
amortisation of debt) (1)
Earnings per share (per below) 7.65p 34.91p
Underlying EPS available for distribution(2) 18.13p 11.92p
Total declared dividends per share
for year 8.60p 8.20p
Earnings per share carried forward
(See below) 9.53p 3.39p
NAV per share 139.70p 140.39p
Share price at 30 June 120.00p 131.00p
Total return(3) 5.45% 28.16%
Total Shareholder Return(4) (2.03)% 14.55%
Total Shareholder Return since
inception(5) 89.79% 92.45%
Dividends per share paid since
inception 69.79p 61.45p
1. Underlying earnings is an alternative performance measure
employed by the Company to provide insight to the Shareholders by
linking the underlying financial performance of the operational
projects to the dividends declared and paid by the Company. It is
defined in the Alternative Performance Measure appendix.
2. Underlying EPS is calculated using underlying earnings
available for distribution divided by the average number of
shares.
3. Total return is based on NAV per share movement and dividends
paid in the year.
4. Total Shareholder Return is based on share price movement and
dividends paid in the year .
5. Total Shareholder Return since inception is based on share
price movement and dividends paid since the IPO.
John Scott, Chair of Bluefield Solar, said:
" We are delighted to report on a further period of strong
financial performance in this, the Company's tenth year of
operations. Over that decade, we have experienced significant
changes in the emergence of renewables as an asset class and as a
proportion of UK generation against a variety of backdrops in the
investment environment. Solar and wind have grown from 8.5% to
28.8% of indigenous generation in this time. In this latest period
of strong performance irradiation was above expectations, wind
revenues outperformed our forecasts, we sold our electricity at
record prices, our regulated revenues increased with inflation and
our 129 solar PV plants performed well. Accordingly, we were able
to increase total declared dividends for the period to 8.60pps
(2022/23 8.20pps), ahead of our original target of 8.40pps.
My strong belief is that Bluefield Solar has a major role to
play in the future of Britain's rapidly changing electricity mix
and your Board looks with confidence at the challenges and
opportunities that lie ahead. "
Analyst presentation
A remote call for analysts will be hosted by James Armstrong and
Neil Wood of Bluefield Partners LLP at 09:30am today, 28 September
2023. For details, please contact Buchanan on
BSIF@buchanan.uk.com.
A copy of the presentation is available via the Company's
website and an audio webcast of the presentation will also be made
available at 09:30am today.
https://bluefieldsif.com/
For further information:
Bluefield Partners LLP (Company Investment Tel: +44 (0) 20 7078 0020
Adviser) www.bluefieldllp.com
James Armstrong / Neil Wood / Giovanni
Terranova
Numis Securities Limited (Company Broker) Tel: +44 (0) 20 7260 1000
Tod Davis / David Benda / Matt Goss www.numis.com
Ocorian Administration (Guernsey) Limited Tel: +44 (0) 1481 742 742
(Company Secretary & Administrator) www.ocorian.com
Patrick Ogier
Media enquiries: Tel: +44 (0) 20 7466 5000
Buchanan (PR Adviser) www.buchanan.uk.com
Henry Harrison-Topham / Henry Wilson BSIF@buchanan.uk.com
Notes to Editors
About Bluefield Solar
Bluefield Solar is a London listed income fund focused on
acquiring and managing renewable energy and storage projects in the
UK, to provide long term, growing dividends for its shareholders
whilst furthering the decarbonisation of the energy system. Not
less than 75% of the Company's gross assets will be invested into
UK solar assets. The Company can also invest up to 25% of its gross
assets into other technologies, such as wind and storage. The
majority of the Company's revenue streams are regulated and
non-correlated to short term UK energy market fluctuations.
Bluefield Solar owns and operates a 812MWp UK portfolio, comprised
of 754MWp of solar and 58MWp of onshore wind.
Further information can be viewed at www.bluefieldsif.com
About Bluefield Partners
Bluefield Partners LLP was established in 2009 and is an
investment adviser to companies and funds investing in renewable
energy infrastructure. It has a proven record in the selection,
acquisition and supervision of large-scale energy assets in the UK
and Europe. The team has been involved in over GBP6.5 billion
renewable funds and/or transactions in both the UK and Europe,
including over GBP1 billion in the UK since December 2011.
Bluefield Partners LLP has led the acquisitions of, and
currently advises on, over 100 UK based solar PV assets that are
agriculturally, commercially or industrially situated. Based in its
London office, it is supported by a dedicated and experienced team
of investment, legal and portfolio executives. Bluefield Partners
LLP was appointed Investment Adviser to Bluefield Solar in June
2013.
Corporate Summary
Investment objective
The investment objective of the Company is to provide
Shareholders with an attractive return, principally in the form of
regular income distributions, by being invested primarily in solar
energy assets located in the UK. The Company also invests a
minority of its capital into other renewables assets including wind
and energy storage.
Structure
The Company is a non-cellular company limited by shares
incorporated in Guernsey under the Law on 29 May 2013. The
Company's registration number is 56708, and it is regulated by the
GFSC as a registered closed-ended collective investment scheme and
as a Green Fund after successful application under the Guernsey
Green Fund Rules to the GFSC on 16 April 2019 . The Company's
Ordinary Shares were admitted to the Premium Segment of the
Official List and to trading on the Main Market of the LSE
following its IPO on 12 July 2013. The issued capital during the
year comprises the Company's Ordinary Shares denominated in
Sterling.
The Company makes its investments via its wholly owned
subsidiary Bluefield Renewables 1 Limited (BR1) and has the ability
to use long term and short term debt at the holding company level,
as well as having long term, non-recourse debt at the SPV
level.
Investment Adviser
The Investment Adviser to the Company during the period was
Bluefield Partners LLP which is authorised and regulated by the UK
FCA under the number 507508. In May 2015 Bluefield Services Limited
(BSL), a company with the same ownership as the Investment Adviser,
commenced providing asset management services to the investment
SPVs held within BSIF's portfolio. In August 2017 Bluefield
Operations Limited (BOL), a company with the same ownership as the
Investment Adviser, commenced providing operation and maintenance
services to the Company and provides services to c.80% of the
investment portfolio held by the Company as at year end.
In December 2020 Bluefield Renewable Developments Limited (BRD),
a company with the same ownership as the Investment Adviser,
commenced providing BSIF with new build development opportunities
in addition to arrangements in place with the Company's other
development partners.
Chair's Statement
Introduction
The Company was founded in the summer of 2013 and the Period
under review therefore covers our tenth year of operations; our
first decade has seen remarkable changes in electricity markets and
how they are supplied, notably the emergence of renewables as a
significant contributor to Britain's electricity mix, aided by the
dramatic reduction in capital costs, particularly for solar panels.
Ten years ago, solar and wind power contributed only 8.5% to
indigenous electricity generation; by 2022, that number had grown
to 28.8%.
By most measures, the 2022/23 year was a period of considerable
success for your Company. Irradiation levels were above
expectations, wind revenues outperformed our forecasts (despite low
wind speeds), we sold our electricity at record prices, our
regulated revenues increased with inflation and our 129 solar PV
plants performed well. Progress was made on a number of fronts, but
the main disappointment for your Board is the softening of the
Company's share price (down 8.4% for the year under review),
despite growing profits, a raised dividend, excellent operating
ratios and a robust Net Asset Value (NAV).
The Period was not without its challenges, the problems deriving
in significant part from the rapidly changing UK political
landscape, with the chaotic Johnson regime giving way to the
short-lived Truss administration, whose "mini Budget" was
sufficiently badly received by financial markets for the Premier's
defenestration to follow in short order. None of these events can
be seen as conducive to enhancing Britain's reputation for
financial prudence and stability.
The fallout which has affected Bluefield relates not to our
operations - demand for green electricity continues to grow, and
together with others in our sector we play our part in meeting
this. The main issue we face is that our access to equity markets
is hampered by the discount to NAV at which our shares currently
trade, making it difficult to raise the fresh equity which would in
other circumstances be the cornerstone of the investment programme
which is required if we are to increase our participation in the
UK's quest to decarbonise the economy. In short, we are capital
constrained at a time when renewable electricity is in urgent need
of capital investment, and there are attractive opportunities in
our pipeline.
Highlights of the year
The main features of the year under review are:
-- BSIF generated 836GWh of electricity (2021/22: 688GWh), an increase of 22%;
-- Our installed capacity grew to 754.3MW of solar and 58.3MW of
wind power (2021/22: 707.9MW and 58.3MW, respectively);
-- The Company completed the purchase of a 46.4MW operational
solar portfolio for GBP56.0 million, all accredited under the ROC
regime with approximately 60% of contracted and regulated revenues,
expiring in 2035;
-- Ensuring a focus on increasing future renewable generation
and supporting the UK's transition to Net Zero, 93MW of new build
solar entered construction and c.62MW of solar Contracts for
Difference were secured through the fourth Allocation Round;
-- Momentum on the Company's development pipeline continued
apace, with planning consents being secured on some 350MW of solar
projects and 19MW of battery projects, while the wider pipeline
grew to approximately 950MW of solar and 470MW of battery
storage;
-- The Net Asset Value per share fell marginally to 139.7pps (30
June 2022: 140.39pps), reflecting higher interest and discount
rates, which offset the sharply increased electricity prices that
we have been able to capture through our successful power sales
strategy;
-- BSIF's shares moved to a wider discount to NAV, the closing
price on 30 June 2023 being 14% below the Directors' Valuation (30
June 2022: 7% discount);
-- Total declared dividends for the Period increased to 8.60pps
(2022/23: 8.20pps), ahead of our original target of 8.40pps;
-- The Company successfully re-financed its GBP110 million
three-year term loan with NatWest during the year, increasing the
facility to GBP130 million and extending maturity to December 2039.
Hedging on GBP110 million has been put in place for the tenor of
the loan, at an effective all-in cost of c.2.7%;
-- The Company also increased its GBP100 million revolving
credit facility (RCF) by GBP110 million, with an uncommitted
accordion feature allowing for a further increase of up to GBP30
million;
-- The term of the facility has been extended to May 2025 with
the lender group being diversified further with the introduction of
Lloyds Bank plc, alongside existing lenders RBS International and
Santander UK;
-- Post period end one project received planning permission for
70MW of solar and 40MW of battery storage, and BSIF achieved
allocations of CfDs on all 4 projects submitted to AR5.
At the time of writing, the Group's total outstanding debt
stands at c.GBP597.4 million and its leverage level stands at c.41%
of GAV (June 2022: 35% of GAV).
Underlying Earnings and Dividends
The Underlying Earnings for the Period, before amortisation of
long-term debt, were GBP108.4 million, or 17.72pps, and underlying
earnings available for distribution, post debt repayments of
GBP18.3m (3.00pps), were GBP90.1m (14.74pps). Thus, the Company has
earned comfortably in excess of its dividend target of 8.40pps for
the year to 30 June 2023, thanks to higher power prices and the
strong operational performance of its portfolio.
This has enabled the Board to declare an increased fourth
interim dividend of 2.30pps, bringing the total dividend for the
Period to 8.60pps (30 June 2022: 8.20pps); the yield on our shares
- based on a share price of 118.20pps on 26 September - is 7.3%.
The Company remains the LSE listed solar investment company
sector's highest dividend payer on a pence per share basis.
Notwithstanding its strong dividend cover, the Company's
established policy is to increase distributions on a progressive
basis, and it has set a target dividend for the 2023/24 financial
year of not less than 8.80pps. Retained earnings are being deployed
by the Company to finance further projects emerging from its strong
development pipeline.
Valuation and Discount Rate
Secondary market demand for renewable electricity projects, at
all stages of their lifecycle, remains strong; power prices and
inflation have surged, largely cancelling out the impact of higher
interest rates and operating costs. The Investment Adviser is
currently seeing solar portfolios priced in a range of GBP1.20m/MW
- GBP1.45m/MW, which is very similar to previous years (typically
GBP1.20m/MW - GBP1.40m/MW). Higher interest rates have caused the
Board to increase the discount rate for the 30 June 2023 Directors'
Valuation to 8.0% (June 2022: 6.75%). By valuing the Company's
operational portfolio at an enterprise value of GBP1,195m
(c.GBP1.35m/MW for the solar assets vs. GBP1.38m/MW in June 2022),
the Directors' Valuation as at 30 June 2023 is in line with recent
market transactions and is consistent with the Company's valuation
approach of 'willing buyer/willing seller'.
Inflation
In the past 12 months UK inflation has continued at a high
level, notwithstanding a string of interest rate increases that
have taken the current Base Rate up to 5.25%, from 0.1% less than
two years ago. The UK 5 year gilt rate, which was below 1% for some
3 years prior to January 2022, now stands at approximately 4.5%.
Current UK inflation, on an RPI basis, is close to 9%, with CPI at
6.8%. Interest rates may have further to rise, but for the moment
at least inflation has fallen from its peak, suggesting that the
medicine prescribed by the Bank of England is working, albeit later
in the day than many of us might have wished.
BSIF is a net beneficiary of inflation, since our regulated
income (principally from ROCs) is index-linked, boosting our
regulated revenues faster than the increase in our operating costs.
Our prudent approach to debt, where we have (predominantly) fixed
rate and amortising long term loans, means that the capital
structure has been largely shielded from the rises in interest
rates. The flipside of this, however, is that as gilt yields adjust
upwards in the face of inflation, bond prices go down; in tandem
with others in our sector, the price of your Company's shares has
likewise fallen, as investors seek a concomitant increase in yield
from BSIF to preserve the risk premium between our shares and
Government bonds. We therefore find ourselves in the invidious
position of posting excellent operating results and having built a
robust capital structure well suited to this environment, yet
watching our share price fall to a significant discount to NAV.
Power Prices
Increasing electricity demand and fuel supply concerns following
the onset of Russia's war against Ukraine saw UK electricity prices
in the autumn of 2022 at record levels, with day-ahead power prices
touching c.GBP180/MWh in December 2022. They stabilised in the
first half of 2023, but power prices remain significantly higher
than those seen prior to the March 2022 invasion.
The Company's PPA strategy of fixing power prices for between
one and three years has allowed it to agree power contracts through
the months of rising prices, insulating the portfolio from short
term volatility, and enabling it to create pricing certainty for up
to 36 months ahead. The average weighted prices for these contracts
were GBP190.1/MWh for June 2022, GBP303/MWh for January 2023 and
GBP230/MWh for June 2023.
Environmental, Social and Governance ("ESG")
I am delighted to present the Company's significantly expanded
ESG report and I applaud the commitment shown by the Investment
Adviser in ensuring that the Company implements best practice
policies in this important and rapidly evolving area.
In addition to the Period being the Company's first year for
implementing and monitoring its ESG performance against its KPIs,
it was also the first time BSIF reported against the Level 2
requirements of the EU's Sustainable Finance Disclosure Regulation
("SFDR"). The Company also produced its first Principal Adverse
Impact ("PAI") report.
The Energy Crisis and the Levy
The fuel supply crisis precipitated by the Ukraine war resulted
in energy prices reaching unsustainably high levels and prompted
the UK Government to intervene by introducing caps on domestic
electricity prices to alleviate the widespread hardship being
experienced. In late 2022 the Government introduced the Electricity
Generator Levy (the "Levy"), to operate from January 2023 until
March 2028; the Levy is a 45% charge on revenues from the sales of
electricity in excess of GBP75 per MWh for generators who have
in-scope annual generation in excess of 50GWh. The Government has
also stated that it recognises the need to reform electricity
market arrangements to deliver the pace and scale of change
required to meet its target of decarbonisation of the electricity
system by 2035 and continues to assess its options following a
first round of consultations in 2022. We are active participants in
this debate.
The Board
John Rennocks, having stepped down as Chair at the November 2022
AGM, retired from the Board in February. Much has already been said
about John's contribution to the creation and development of BSIF
so I will simply repeat the deep gratitude we feel to John for what
was achieved during his tenure.
Paul Le Page, another Director who has served from the start and
who has throughout chaired our Audit and Risk Committee with
remarkable skill and diligence, will retire from the Board on 30
September 2023. On behalf of the Board, I thank Paul most sincerely
for what he has done for BSIF in his decade of service. Libby
Burne, whose principal career has been with PwC and who joined the
BSIF Board in 2021, will succeed Paul as Audit and Risk Committee
Chair.
Last October, we welcomed Michael Gibbons to the Board, and he
has assumed the role of Senior Independent Director. Michael has
many years of experience of electricity and other energy markets,
which is already proving to be invaluable to our business.
The AGM and Continuation Vote
The Company's Annual General Meeting will take place at 10am on
28 November 2023 at Floor 2, Trafalgar Court, Les Banques, St Peter
Port, Guernsey. Shareholders who are unable to be present in person
are encouraged to submit questions in advance of the meeting.
Resolution 13 is a continuation vote, seeking the support of
Shareholders for the Company to remain in business for a further
five years. Your Board believes that it has met or exceeded all of
the objectives of its original and subsequent prospectuses,
producing sector-leading returns for investors, while assisting
with the decarbonisation of the economy. The Board is confident
that BSIF is well placed to continue investing in renewable
electricity and thereby delivering value for Shareholders; it is
therefore unanimous in recommending that Shareholders support this
Resolution.
Conclusion
Our business is a relatively straightforward one - we convert
daylight and wind energy into electric power for sale to the
wholesale markets and, in the case of those plants which were
constructed at a time when incentives were required to compensate
for the high cost of equipment, we receive subsidies, typically for
20 years from the date of plant commissioning. In the Period, we
generated 836GWh of electricity which, if used to power electric
cars, would replace over 200 million litres of petrol. Another
measure of our output and our contribution to de-carbonising the
economy is that it represents sufficient electricity to meet the
annual needs of 288,000 homes, or a city the size of Leeds. All of
our generation took place in the UK, with 84% coming from solar PV
and 16% from onshore wind. In 2022/23, we received GBP107 million
from the sale of electricity, GBP77 million from government
subsidies (principally ROCs) and GBP5 million from other sources
which are set out in more detail in the Investment Adviser's
report. We believe that scale is important, and it is our intention
to continue to grow the Company through acquisition and the
construction of new assets, while pursuing our established policy
of paying progressively higher dividends.
Our Investment Adviser, Bluefield Partners, is to be
congratulated for what has been achieved in our first decade. We
raised an initial GBP128 million in July 2013 and today your
Company has an enterprise value of GBP1.2 billion, having in the
past 10 years distributed over GBP270 million in dividends. There
are several important contributors to this result, including
Bluefield Partners' strong record in constructing or purchasing the
plants we now own, and the record of both Bluefield Services and
Bluefield Operations in running these facilities at
industry-leading levels of performance. Particularly in the context
of the past year, I would also identify the forward power sales
strategy implemented by the Investment Adviser as one of the
significant successes of the Company, providing a high degree of
visibility of our income for up to 30 months ahead.
If the world is to reduce its dependence on fossil fuels, we
will need more electricity and much of this must come from
renewable sources; there is, for example, little point in making us
abandon the internal combustion engine in favour of electric cars
if the energy for the latter has to come from a fossil fuelled
power plant. In the UK the additional power is likely to involve
substantially more solar and wind generation, sources which remain
the lowest cost generators, while providing indigenous, clean and
secure supplies of energy. My strong belief is that BSIF has a
major role to play in the future of Britain's rapidly changing
electricity mix and your Board looks with confidence at the
challenges and opportunities which lie ahead.
John Scott
Chair
27 September 2023
The Company's Investment Portfolio
[chart]
Analysis of the Company's Investment Portfolio
[chart]
Report of the Investment Adviser
Introduction from the Managing Partner of the Investment
Adviser
The Period to 30 June 2023 has been the most successful period
in BSIF's decade long history, with the Company delivering record
earnings, record dividend cover, its highest dividend whilst
maintaining parity with its highest recorded NAV. Conversely, it
has also been the first time the share price has been at a
significant discount to NAV.
There is a certain irony to this as the financial shocks to the
system that have precipitated the falls - sharp rises in gilt and
interest rates - have only heightened the Company's five core
strengths, summarised below (and outlined in detail within the
Investment Advisers report):
1. Capital Structure: since its 2013 IPO the Company has focused
on a simple and deliberate strategy of ensuring, outside of the
Company's Revolving Credit Facility, all debt within the structure
is secured at portfolio level with fixed interest rates on fully
amortising terms. This is a prudent use of debt in any environment,
but with a current average cost of debt of c.3.5% on all the
Company's long term borrowings being c.GBP430m as at 30 June 2023,
it looks particularly prescient in today's higher interest rate
environment.
2. Power Sales Strategy: Bluefield Solar focuses on fixing Power
Price Agreements contracts at the short end of the power curve
(6-30 months), through competitive tender processes, enabling it to
maximise value for shareholders from the most liquid part of the
power market. This strategy has not only underpinned the
sector-leading dividends paid since inception, but crucially has
enabled the Company to secure highly attractive power contracts
when power prices reached record highs during the period to June
2023. The result has been record full year earnings and a c.2x
covered dividend (net of debt amortisation and the EGL). This is
creating retained earnings that can be invested into new
opportunities, not least the proprietary pipeline.
3. Active Management: Active Management is a much misused term
in investment. In the context of Bluefield Solar's portfolio it
means a dedicated workforce of 115 (and growing) within Bluefield
Partners and Services, split across specialist teams covering
primary investment, secondary investment, ESG, development,
engineering, construction management, monitoring and reporting,
debt compliance, technical asset management, operation and
maintenance and commercial with 74 different core responsibilities.
These specialist units have been established in the past decade to
deliver an aligned, dedicated and diversely skilled workforce to an
increasingly complex business.
4. Proprietary Pipeline: Bluefield Solar's ability to control
the pipeline has been a major contributor to its success over the
past ten years. Fusing deep rooted relationships across the UK
renewables market with the support of its specialist technical
teams, Bluefield has been able to establish the DNA of the business
around developing the primary pipeline. No better highlight of this
is the 1GW solar and storage proprietary pipeline the Investment
Adviser has built up exclusively for Bluefield Solar. These
transactions, alongside secondary opportunities that are being
evaluated, provide Bluefield Solar with the platform for a further
period of significant growth.
5. Capital Discipline: Adherence to investment principles is
paramount and so despite the fast paced growth of the solar market
in the past decade, uniquely for Bluefield Solar there have still
been periods where the Company elected to cease acquisitions, based
on our view that nothing we saw would provide Shareholder value. To
emphasise this, between 2016 to 2020 BSIF did not go to the market
for an equity raise. This capital discipline has benefitted
Shareholders and has contributed to BSIF's outperformance. This
discipline will continue, as it has been a key pillar in enabling
the Company to achieve exceptional growth - not least during and
after the Covid 19 pandemic.
The solace we take from the current situation is that these
strengths, applied since the Company was founded, cannot be easily
replicated, and will continue to benefit the Shareholders for many
years to come.
We have visibility over earnings that will support the ongoing
progression of our dividend and retained earnings that can deliver
reinvestment into our accretive pipeline, whilst always focusing on
the capital discipline Bluefield Solar is known for. And, thus, as
the Chair has said in his statement, we look forward to the future
with great confidence and with the expectation of a rerating of the
shares in the short term.
James Armstrong
Managing Partner, Bluefield Partners LLP
1. About Bluefield Partners LLP ('Bluefield')
Bluefield was established in 2009 and is an investment adviser
to companies and funds investing in renewable energy
infrastructure. Our team has a proven record in the selection,
acquisition and supervision of large scale energy and
infrastructure assets in the UK and Europe. The Bluefield team has
been involved in over GBP6.5 billion renewable funds and/or
transactions in both the UK and Europe, including over GBP1.4
billion in the UK since December 2011.
Bluefield was appointed Investment Adviser to the Company in
June 2013. Based in its London office, Bluefield's partners are
supported by a dedicated and highly experienced team of investment,
legal and portfolio executives. As Investment Adviser, Bluefield
takes responsibility for selection, origination and execution of
investment opportunities for the Company, having executed over 150
individual SPV acquisitions on behalf of BSIF and European
vehicles.
2. Portfolio: Acquisitions, Performance and Value
Enhancement
Portfolio Overview
As at 30 June 2023, the Company held an operational solar
portfolio of 129 PV plants (consisting of 87 large scale sites, 39
micro sites and 3 roof top sites), 6 wind farms and 109 small scale
UK onshore wind turbines with a total capacity of 812.6MW (30 June
2022: 766.2MW).
During the period to 30 June 2023, the combined solar and wind
portfolio generated an aggregated total of 836.2GWh (30 June 2022:
687.5GWh), representing a Generation Yield of 1,029MWh/MW.
Investment Approach and Acquisitions in the Period
The Company has taken a disciplined approach to the deployment
of capital since listing, deploying capital only when there are
projects of suitable quality at attractive returns to complement
the existing portfolio. Rigorous adherence to restrained capital
deployment inevitably means there can be periods where acquisition
activity falls, even when sector activity appears in contrast, but
this controlled approach is beneficial in driving long term,
sustainable growth for Shareholders, as evidenced by Bluefield
Solar's record of sector leading returns since listing over a
decade ago.
[chart]
In December 2022 the Company completed the acquisition of a
46.4MW operational solar portfolio from Fengate Asset Management.
At the time of the transaction, the enterprise value of the
portfolio was GBP56.0 million, which included the economic benefit
of all cashflows from May 2022. The portfolio contained GBP27.3
million of long-term amortising debt provided by Macquarie Bank
Limited.
The portfolio consists of two ground mounted solar photovoltaic
('PV') plants, a 39.3MW plant (Ravensthorpe) located in Scunthorpe,
Lincolnshire and a 7.1MW facility (Roanhead) located in
Barrow-in-Furness, Cumbria. Both solar sites are accredited under
the Renewable Obligation Certificate ('ROC') regime with a tariff
of 1.4 ROCs.
In May 2023, the Company completed the purchase of three
recently consented ready to build PV projects, totalling 97MW from
its development partners Lightrock Power and Bluefield Renewable
Developments, for a total of GBP3.9m. The projects, which are
located in Devon, East Sussex and Shropshire, have grid connection
dates between 2024 and 2026.
Portfolio Performance and Optimisation
Solar PV Performance
In the 12-months to 30 June 2023, irradiation levels were 6.0%
higher than the Company's forecasts and 3.1% higher than FY
2021/22, whilst generation, being 702.4GWh, was marginally lower
than expectations.
During the year, the solar portfolio achieved a Net PR of 76.16%
(FY 2021/22: 79.38%) against a forecast of 80.63%, due to
availability issues driven primarily by supply chain challenges and
capital improvement works. Consequently, generation yield was
959.88MWh per MW of installed capacity, marginally lower than
recorded in the previous year.
Table 1. Summary of Solar Fleet Performance for 2022/23:
Delta Delta 22/23
FY FY to FY to
2022/23 2022/23 Forecast 2021/22 21/22 Actual
Actual(4) Forecast (% change) Actual (% change)
========================== =========== ========== ============ ========= ==============
Portfolio Total
Installed
Capacity (MW) 754.2 - - 642.9 +17.3%
========================== =========== ========== ============ ========= ==============
Weighted Average
Irradiation (Hrs)(1,
2) 1,260.7 1,189.9 +6.0% 1,222.7 +3.1%
========================== =========== ========== ============ ========= ==============
Total Generation
(MWh) 702,428 703,664 -0.2% 624,651 +12.5%
========================== =========== ========== ============ ========= ==============
Generation Yield
(MWh/MW) 959.9 959.9 0.0% 971.6 -1.2%
========================== =========== ========== ============ ========= ==============
Average Total
Unit Price (GBP/MWh)(3) GBP223.7 GBP187.1 +19.5% GBP132.4 +68.9%
========================== =========== ========== ============ ========= ==============
Notes to Table 1.
1. Periods of irradiation where irradiance exceeds the minimum
level required for generation to occur (50W/m(2) )
2. Excluding grid outages and significant periods of constraint
or curtailment that were outside the Company's control (for
example, DNO-led outages and curtailments)
3. Average Total Unit Price includes all income associated with
the sale of power, all subsidy payments, liquidated damages and
insurance claims amounts. ROC recycle revenue is included assuming
a 10% recycle rate for both Actual and Forecast Revenue
4. Includes 46.4MW of solar assets acquired in December 2022,
not included in the published 2022/23 interim results
[chart]
Total Revenue for the period was GBP157.2m, 19% higher than
forecast and 121% higher than the previous FY. PPA agreements which
commenced during the Period were the principal reason for increased
revenue, as the average power price rose from GBP57/MWh in the
previous FY to GBP141/MWh, a 147% increase.
Operational costs for the Period (incorporating all fixed,
contracted costs such as lease payments, O&M fees etc.)
totalled c.GBP23m, including expenditure associated with the
optimisation & enhancement projects (see below).
Solar PV Optimisation & Enhancement Activity
A core focus of the Investment Adviser's activities is
protecting, optimising, and enhancing the value of the Company's
operational portfolio. Principally, this is done through in-depth
performance monitoring and carefully tailored preventative
maintenance programmes, ensuring that capital spend across the
Company's portfolio (expected to be GBP4m to GBP5m annually over
the next decade) is completed during months of low irradiation
(typically October to February).
A rolling capital investment programme is essential for
optimising the long-term operational performance of the portfolio.
The Investment Adviser has identified that one of the key causes of
lower-than-expected availability is a long lead time for spare
parts for major High Voltage ('HV') components, notably central
inverters, due to industry demand from construction projects and
other operators' repowering works.
Two significant string-inverter repowering projects and the
replacement of 3 transformers at Hall Farm were completed during
the Period to improve both current and future performance of the
assets. Further inverter repowering and optimisation projects are
planned for FY 23/24.
As at 30 June 2023, 494.6 MW (30 June 2022: 401 MW) of the PV
portfolio have leases that allow for terms beyond 30 years (being
66% of the solar PV portfolio), of which 338.2 MW (100% of
applications successful) benefit from planning terms in excess of
30 years, with the Investment Adviser continuing to pursue lease
extensions on the remaining assets in the portfolio.
Onshore Wind Performance
As at 30 June 2023, the Company held an operational onshore wind
portfolio of 135 installations , comprising 109 small scale
turbines (55-250kW) and 26 turbines (850kW-2.3MW), with an
aggregated capacity 58.4MW.
During the reporting period, the portfolio generated 133.8 GWh,
-16.2% below forecasts. This was largely due to reduced wind
resource, combined with lower than forecasted availability during
H1. Availability improved considerably during H2 following the
replacement of the O&M provider for Delabole Wind Farm in
December 2022. Significant liquidated damages were further
recovered from the previous O&M provider for the
underperformance at Delabole.
The average onsite wind speeds recorded were similar to FY
2021/22, which was a period of historically low wind resource.
Table 2. Aggregated Wind Portfolio Performance, FY 2022/23
Delta 22/23
to
FY 2022/23 FY 2022/23 Delta to Forecast FY 2021/22 21/22 Actual
Actual Forecast (% change) Actual (% change)
================= ========== ========== ================= ========== =============
Portfolio
Total Installed
Capacity (MW) 58.4 - - 30.0 +94.5%
================= ========== ========== ================= ========== =============
Total Generation
(MWh) 133,804.0 159,586.3 -16.2% 62,795.6 +113.1%
================= ========== ========== ================= ========== =============
Generation
Yield (MWh/MW) 2,292.7 2,734.5 -16.2% 2,092.5 +9.6%
================= ========== ========== ================= ========== =============
Average Total
Unit Price
(GBP/MWh)(1,2) 208.3 204.2 +2.0% 216.7 -3.9%
================= ========== ========== ================= ========== =============
Notes to Table 2.
1. Actual & Forecast Average Total Power Price exclude ROC Recycle
estimates
2. Average Total Power Price includes LDs, Insurance & Mutualisation
Rebate
The portfolio achieved a Generation Yield of 2,293 MWh per MW of
installed capacity, equivalent to a 9.6% increase from FY 2021/22,
largely due to the improved plant availability. Despite lower than
forecast generation, the portfolio provided total revenues of
GBP27.9 m, with an average revenue per MWh of GBP208.3, 2% above
forecast.
Onshore Wind Optimisation & Enhancement Activity
In Northern Ireland, 17 of the 29 small-scale turbines have been
identified for repowering with replacement EWT 250kW turbines. This
will increase efficiency and output, whilst maintaining their
respective NIRO accreditation status.
As at 30 June 2023, seven turbines have been repowered and
returned to operation, with a further nine having received planning
approval for repowering, with a new 25-year term. A further two
projects have received a turbine delivery, with repowering planned
for FY 2023 /24 . Planning applications for the remaining projects
have been submitted to the relevant Local Planning Authorities.
General Portfolio
OFGEM Audits
As part of the industry-wide audits of FiT and RO-accredited
generating assets, the Investment Adviser and Asset Manager have
been working closely with the regulator on certain assets that have
been selected, at random, for audit. All OFGEM audits completed to
date have been classified as 'satisfactory', with the respective
assets' accreditation being fully compliant.
Health & Safety Activities
The Investment Adviser continues to ensure H&S awareness,
policies, processes and procedures remain at the forefront of every
activity around the portfolio. H&S policies and logs are
reviewed at least annually. All main contractors (including asset
management and O&M providers) are audited annually by a
qualified third-party specialist consultant, with new retained
contractors (associated with operational projects acquired by BSIF,
for example) audited immediately following acquisition.
Cyber Security
The Investment Adviser arranged penetration testing of 48.2% of
the solar PV portfolio (of those plants above 2MW) by a specialist
external consultant, as part of a periodic cyber security review.
Whilst the security across the portfolio was satisfactory, the
Investment Adviser has arranged for all the recommendations to
further enhance cyber security to be undertaken, including both
hardware and software upgrades, with works to commence shortly. The
remainder of the PV portfolio and all wind farms will undergo
similar penetration testing in FY 2023/24.
3. Power Purchase Agreements
The Company actively monitors power market conditions, ensuring
that contract renewals are spread evenly through any 12-month
period with competitive tender processes on both fixed and floating
price options run for each PPA renewal in the 3 months prior to the
commencement of a new fixing period.
Flexibility within the Company's capital structure enables PPA
counterparties to be selected on a competitive basis and not
influenced by lenders requiring long term contracts with one
offtaker.
This means the programme of achieving value and diversification
from contracting with multiple counterparties (which in turn
reduces offtaker risk) is executed for the benefit of shareholders
and not the lenders.
By rolling PPA fixes during the year and targeting the most
liquid area of the power market (one to three years) the Company
was able to complete a number of fixes during periods when
wholesale power prices were at their peak.
Evidence of this is reflected in the BSIF average seasonal
weighted power price, which for the 12 months ending 30 June 2023
increased by 147% from the 12 months ending 30 June 2022, rising
from GBP57/MWh to GBP141/MWh. The rise in the BSIF average seasonal
weighted power price is a result of the 156.2MW fixed secured
during the reporting period from January 2023, at an average fixed
price of GBP118.9/MWh, combined with favourable pricing from
contracts struck in the period preceding the end of December
2022.
As at 30 June 2023, the average term of the fixed-price PPAs
across the portfolio is 26.2 months (FY 2021/22: 25.8 months) and
the Company has a price confidence level of 92% to December 2023
and 86% to June 2024 (including subsidy revenues), representing the
% of the BSIF portfolio that already has a fixed price in place and
thus no exposure to power market uncertainty. Looking ahead, the
strategy has also secured power fixes and thus revenue certainty,
at levels that are materially in excess of the latest forecaster
expectations.
Chart 1. PPA Fixed Power Prices (Average Vs Average for Fixes
completed during Reporting Period)
1 July 1 Jan 1 July 1 Jan
Price as at: 23 24 24 25
158.9 173.5 149.2 160.8
(716MW) (678MW)
BSIF Portfolio Weighted Average (473MW) (437MW)
Contract Price (GBP/MWh)
--------- --------- --------- ---------
Blended Average of forecasters
nominal terms power prices per
30 June 2023 valuation (GBP/MWh) 109 117 117 104
--------- --------- --------- ---------
Footnote: MW stated in the BSIF Portfolio Weighted Average
Contract price refers to the total amount of the portfolio fixed
for that period.
The result is the Investment Adviser believes its PPA policy is
the best strategy for Shareholders, who are looking for stable
revenues and forecastable, sustainable dividends with high
visibility of revenues on a rolling multiyear basis. It is this
approach that has delivered almost a decade of sector leading
dividend cover (covered by current earnings and post debt
amortisation).
4. Power Market Summary
Since December 2022, power markets have begun to stabilise after
record highs were seen in August and December 2022, due to Russia's
continuing war against Ukraine exacerbating concerns surrounding
gas supplies to Europe ahead of Winter 2023.
Chart 2. UK Natural Gas & Wholesale Power Prices (1 July
2020 - June 2023)
[chart]
Source data: Bloomberg
Gas prices fell from their recent historic highs, as supply
increased as more liquefaction facilities become available, with
power prices predominantly following gas markets. This is
demonstrated in Chart 2, with day-ahead baseload power prices
falling from highs of GBP180/MWh in mid-December 2022 to lows of
GBP86/MWh at the end of June 2023.
In relation to medium-term market expectations, the gas market
is expected to rebalance by the mid-2020s, with prices set to fall
back to levels seen prior to COVID. As a result, the baseload
wholesale power prices are forecast to fall by 23% on average from
2023 to 2030, driven by lower gas prices.
Over the Company's ten year history, building a proprietary
pipeline and then funding the construction of new projects has been
at the heart of its success. Entering earlier in the value chain
brings some additional risk but if managed appropriately, we
believe it also allows us to control the quality of projects far
better, which ultimately brings enhanced risk-adjusted returns to
Shareholders.
5. Proprietary Pipeline
Over the past four years, the Company has continued to implement
its new build strategy across the solar value chain to ensure that
Bluefield Solar continues to build its market share amongst UK
solar power producers. We have signed co-development agreements to
fund new sites. We have also expanded our strategy to battery
storage, which will enable the diversification of the BSIF's
revenues and allow us to monetise the expected increases in
volatility of power prices in the future.
This focus on development activities has enabled the Company to
build up a significant pipeline of assets which can be built over
the next five years. As our projects progress, we are working with
selected construction contractors to ensure that projects are
designed and built to a high specification for long term
performance.
We are pleased to report that the new build strategy has
delivered well on its objectives thus far: the development pipeline
now stands at over 1.4 GW and the first development to be funded,
Yelvertoft, - is progressing well through construction. This 49MW
project is set to be connected to the grid towards the end of 2023
and it has entered into a Contract for Difference ("CfD") for its
output.
The following sections provide a more detailed update on both
our construction and development programmes.
Construction Programme
As at the end of the period, BSIF had solar assets with a
capacity of 412MW and battery storage assets with 183MW capacity
that are fully consented and are in pre-construction. The projects
have connection dates between 2023 and 2028.
Of these the first projects to enter the construction phase are
Yelvertoft Solar Farm, a 49MW solar PV park in Northamptonshire and
Mauxhall Farm Energy Park, a c.44MW solar PV project in North East
Lincolnshire. Yelvertoft signed a fixed price EPC contract with
Bouygues in September 2022 and is targeting operation in Q4 2023,
while Mauxhall Farm signed a fixed price EPC contract with EQUANS
in March 2023 and is expected to be operational in Q2 2024.
Mauxhall Farm is planned to be a co-located project and
construction of a 25MW battery energy storage scheme is expected to
commence shortly after the solar plant has been commissioned.
As the EPC agreements require contractors to provide full
procurement activity and to supply all materials, the Investment
Adviser completes a full assessment of each contractor's
procurement and supply chain management processes to ensure
compliance with the Company's ESG policies and standards.
Projects with CfDs
In July 2022, the Investment Adviser successfully secured CfDs
on 62.4MW of ready to build PV plants (Yelvertoft, Romsey extension
and Oulton extension). By securing a CfD contract, the plants will
benefit from index-linked (to CPI) revenues over a 15-year duration
at the AR4 solar PV strike price of GBP45.99/MWh (in 2012
equivalent prices) or c.GBP64/MWh (in 2023 equivalent prices). The
contracts commence from 31 March 2025 and the strike prices will be
adjusted appropriately for CPI.
Post period BSIF achieved allocations of CfDs on all 4 projects
submitted to AR5.
Development Programme
The Investment Adviser has been pursuing its development
strategy since 2019 to enable BSIF to continue to be a key player
in the UK renewable energy market. Since this time, a portfolio of
approximately 950MW of solar and over 470MW of batteries has been
built up across 28 projects. BSIF has a 5% investment limit in
pre-construction development stage activities, while less than 1%
is currently committed.
Currently, no value is attributed to projects without planning
consent. Once developments receive planning consent, however, and
move from the development stage to pre-construction, the Investment
Adviser believes it is appropriate to reflect this change in the
Company valuation. At this point in their lifecycle, the projects
will have received all the necessary planning consents, land rights
and valid grid connection offers and so have discernible value
beyond the direct costs of development.
The current pipeline status and valuation is summarised in the
graphic below.
Current pipeline status and valuation
[chart]
6. Analysis of underlying earnings
The total generation and revenue earned in the Period by the
Company's portfolio, split by subsidy regime, is outlined
below:
Subsidy Regime Generation (MWh) PPA Revenue (GBPm) Regulated Revenue (GBPm)
FiT 66,874 6.0 12.1
----------------- ------------------- -------------------------
4.0 ROC 12,773 1.6 3.0
----------------- ------------------- -------------------------
2.0 ROC 23,524 1.6 2.9
----------------- ------------------- -------------------------
1.6 ROC 116,884 14.9 11.3
----------------- ------------------- -------------------------
1.4 ROC 296,183 39.2 25.1
----------------- ------------------- -------------------------
1.3 ROC 71,800 9.8 5.7
----------------- ------------------- -------------------------
1.2 ROC 140,384 21.6 11.2
----------------- ------------------- -------------------------
1.0 ROC 32,838 3.6 1.9
----------------- ------------------- -------------------------
0.9 ROC 74,972 9.1 3.8
----------------- ------------------- -------------------------
Total 836,232 107.4 77.0
----------------- ------------------- -------------------------
The Company includes ROC recycle assumptions within its long
term forecasts and applies a market based approach on recognition
within any current financial period, including prudent estimates
within its accounts where there is clear evidence that participants
are attaching value to ROC recycle for the current accounting
period.
The key drivers behind the changes in Underlying Earnings
between FY 2022/23 and FY 2021/22 are the combined effects of the
acquisitions within the Period and higher PPA pricing.
Underlying Portfolio Earnings
Full year Full year Full year Full year
to to to to
30 June 30 June 30 June 30 June
23 22 21 20
(GBPm) (GBPm) (GBPm) (GBPm)
Portfolio Revenue 184.4 111.4 73.1 65.9
---------- ---------- ---------- ----------
Liquidated damages
and Other Revenue* 5.4 1.6 2.0 3.8
---------- ---------- ---------- ----------
Net Earnings from Acquisitions
in the period 0.0 0.0 5.1 0.0
---------- ---------- ---------- ----------
Portfolio Income 189.8 113.0 80.2 69.7
---------- ---------- ---------- ----------
Portfolio Costs -36.3 -27.8 -17.6 -14.1
---------- ---------- ---------- ----------
Project Finance Interest
Costs -13.6 -4.7 -1.8 -0.6
---------- ---------- ---------- ----------
Total Portfolio Income
Earned 139.9 80.5 60.8 55.0
---------- ---------- ---------- ----------
Group Operating Costs(#)
** -25.4 -8.3 -7.5 -5.8
---------- ---------- ---------- ----------
Group Debt Costs -6.1 -5.4 -4.7 -4.6
---------- ---------- ---------- ----------
Underlying Earnings 108.4 66.8 48.6 44.6
---------- ---------- ---------- ----------
Group Debt Repayments -18.3 -13.8 -9.3 -9.2
---------- ---------- ---------- ----------
Underlying Earnings
available for distribution 90.1 53.0 39.3 35.3
---------- ---------- ---------- ----------
Full year Full year Full year Full year
to to to to
30 June 30 June 30 June 30 June
23 22 21 20
(GBPm) (GBPm) (GBPm) (GBPm)
---------- ---------- ---------- ----------
Brought forward reserves 20.9 13.4 8.4 2.3
---------- ---------- ---------- ----------
Total funds available
for distribution -1 111.0 66.4 47.7 37.6
-------------------------------- ---------- ---------- ---------- ----------
Target distribution*** 51.4 45.2 34.3 29.3
-------------------------------- ---------- ---------- ---------- ----------
Actual Distribution
-2 52.6 45.5 34.3 29.3
---------- ---------- ---------- ----------
Underlying Earnings
carried forward
(1-2) 58.4 20.9 13.4 8.4
---------- ---------- ---------- ----------
* Other Revenue includes ROC mutualisation, ROC recycle late
payment CP20, insurance proceeds, O&M settlement agreements and
rebates received.
#Includes the Company, BR1 and BSIFIL (the UK HoldCos) and any
tax charges within the UK HoldCos.
**Excludes one-off transaction costs and the release of up-front
fees related to the Company's debt facilities
***Target distribution is based on funds required for total
target dividend for each financial period.
The table below presents the underlying earnings on a 'per
share' basis.
Full year Full year Full year Full year
to to to to
30 June 23 30 June 22 30 June 30 June
21 20
(GBPm) (GBPm) (GBPm) (GBPm)
Actual Distribution 52.6 45.5 34.3 29.3
------------ ------------ --------------- ------------
Total funds available
for distribution
(including reserves) 111.0 66.4 47.7 37.6
------------ ------------ --------------- ------------
Average Number of
shares in year* 611,452,217 554,042,715 429,266,617 370,499,622
------------ ------------ --------------- ------------
Target Dividend
(pps) 8.40 8.16 8.00 7.90
------------ ------------ --------------- ------------
Total funds available
for distribution
(pps) 18.13 12.22 11.19 10.13
------------ ------------ --------------- ------------
Total Dividend Declared
& Paid (pps) 8.60 8.20 8.00 7.90
------------ ------------ --------------- ------------
Reserves carried
forward
(pps) ** 9.53 3.39 2.67 2.23
------------ ------------ --------------- ------------
* Average number of shares is calculated based on shares in
issue at the time each dividend was declared.
** Reserves carried forward are based on the shares in issue at
the point of Annual Accounts publication (being c.611m shares for
30 June 2022 and c.496m shares for 30 June 2021).
7. NAV and Valuation of the Portfolio
The Investment Adviser is responsible for advising the Board in
determining the Directors' Valuation and, when required, carrying
out the fair market valuation of the Company's investments.
Valuations are carried out on a quarterly basis at 30 September,
31 December, 31 March and 30 June each year, with the Company
committed to conducting independent reviews as and when the Board
believes it benefits Shareholders.
As the portfolio comprises only non-market traded investments,
the Investment Adviser has adopted valuation guidelines based upon
the IPEV Valuation Guidelines published by the BVCA (the British
Venture Capital Association). The application of these guidelines
is considered consistent with the requirements of compliance with
IFRS 9 and IFRS 13.
Following consultation with the Investment Adviser, the
Directors' Valuation adopted for the portfolio as at 30 June 2023
was GBP1,018.4m (30 June 2022, GBP939.9m).
The table below shows a breakdown of the Directors' valuations
over the last three financial years:
Valuation Component (GBPm) June 2023 June 2022 June 2021
DCF Enterprise Value of Portfolio (EV) 1,195.2 1,180.6 770.1
---------- ---------- ----------
Consented Solar and Battery Storage Development rights 67.5 13.8 1.8
---------- ---------- ----------
Deduction of Project Co debt -430.8 -390.3 -119.8
---------- ---------- ----------
Project Net Current Assets 186.5 135.8 42.4
---------- ---------- ----------
Directors' Valuation 1,018.4 939.9 694.5
---------- ---------- ----------
Portfolio Size (MW) 812.6 766.2 613.0
---------- ---------- ----------
Discounting Methodology
The Directors' Valuation is based on the discounting of
post-tax, projected cash flows of each investment, based on the
Company's current capital structure, with the result then
benchmarked against comparable market multiples, if relevant. The
discount rate applied on the project cash flows is the weighted
average discount rate. In addition, the Board continues to adopt
the approach under the 'willing buyer/willing seller' methodology,
that the valuation of the Company's portfolio be appropriately
benchmarked to pricing against comparable portfolio
transactions.
Key factors behind the valuation
There have been a number of key factors that have been
considered in the Investment Adviser's recommendation to the
Directors' Valuation (and which are quantified in the NAV movement
chart below):
(i) The RPI inflation forecast for 2023 has been increased to 7%
(5.5% in December 2022 and 3.4% in June 2022), reflecting
expectations that UK inflation will remain higher for longer. As
evidence builds that inflation will fall during H2 2023, a rate of
3.5% has been applied for 2024 (2024 inflation forecast previously
used: 4.0% in December 2022 and 3% in June 22);
(ii) The portfolio discount rate has been increased to 8.00%
(7.25% in December 2022 and 6.75% June 2022). This is a result of
increases over the period in both the Bank of England base rate
(rising to 5.0% as at 30 June 2023 , from 3.5% as at 31 December
2022) and 15 year gilt yields (c. 4.8% as at 30 June 2023, from c.
3.9% as at 31 December 2022);
(iii) Inclusion of the latest forecasters' curves as at 30 June
2023, and the corresponding impact of the Electricity Generator
Levy ("the Levy") - a 45% tax on the extraordinary returns made by
electricity generators, announced late in 2022, following sharp
increases in electricity prices. The Levy will be in place from 1
January 2023 until 31 March 2028 and is applied to returns from
sale of electricity in excess of a benchmark price of GBP75 per
MWh, indexed to CPI from April 2024;
(iv) The value attributed to BSIF's development and construction
portfolio has risen during the Period, reflecting sites receiving
planning permission and further progress and investment into
construction projects;
(v) Working capital has grown in the period to Jun 23 reflecting
higher power prices being captured from the Company's successful
PPA strategy.
By reflecting the core factors above within the Directors'
Valuation for 30 June 2023, the EV of the operational portfolio is
GBP 1,195.2 m (June 2022: GBP1,180.6m) with the effective price for
the solar component of GBP1.35m/MW (June 2022: GBP1.38m/MW). These
metrics sit within the pricing range of precedent market
transactions and the 'willing buyer-willing seller' methodology
upon which the Directors' Valuation is based.
Power Prices
A blended forecast of three leading consultants is used within
the latest Directors' Valuation [1] , as shown in the graph below.
This is based on forecasts released in the quarter to end June
2023. For illustration purposes, the graph below also includes the
blended curve used in the Company's accounts for the year ended 30
June 2023.
The curves used in the 30 June 2023 Directors' Valuation reflect
the following key updates:
1. Short-term European fuel prices - gas and coal - have fallen
amid lower gas demand, higher gas storage levels and robust LNG
deliveries, with a similar trend reflected in the wholesale power
price curve;
2. Higher renewable generation capacity deployment levels in the
medium term (with ambitions for up to c.50GW offshore wind by 2030)
as the UK strives to meet its net zero targets and fully
decarbonise its power system by 2035; and
3. Annual demand for power in Great Britain, driven principally
by electrification of heat and transport, is expected to rise from
292TWh in 2023 to 438TWh by 2035.
[chart]
The main contributors to the increase in the Directors'
Valuation from 30 June 2022 to 30 June 2023 were an increase in
power price forecast curves provided by the Company's three
independent advisers, a new acquisition, change in development
portfolio valuation (8.6pps) and updated near-term inflation
assumptions.
Directors' Valuation movement (GBPmillion) As % of
valuation
------------------------------- ------- ------------------ -----------
30 June 2022 Valuation 939.9
------------------------------- ------- ------------------ -----------
New investments acquired 59.4 6.3%
Development uplift 52.8 5.6%
Cash receipts from portfolio (52.6) (5.6%)
Power curve updates (incl.
PPAs) 76.6 8.1%
Inflation updates 17.1 1.8%
Discount rate change (44.9) (4.8%)
Levy tax impact (39.8) (4.2%)
Balance of portfolio return 9.9 1.1%
-------------------------------
30 June 2023 Valuation 1,018.4 8.3%
------------------------------- ------- ------------------ -----------
There have been no material changes to assumptions regarding the
future performance or cost optimisation of the portfolio when
compared to the Directors' Valuation of 30 June 2022.
On the basis of these key assumptions, the Board believes there
remains further scope for NAV enhancement from the potential
extensions of asset life for further projects in the portfolio, as
well as cost optimisation on long term O&M fees.
The assumptions set out in this section remain subject to
continuous review by the Investment Adviser and the Board.
Reconciliation of Directors' Valuation to Balance sheet
Balance at Year End
Category 30 June 2023 30 June 2022 30 June 2021
(GBPm) (GBPm) (GBPm)
---------------------------- ---------------------------- ----------------------------
Directors'
Valuation 1,018.4 939.9 694.5
---------------------------- ---------------------------- ----------------------------
Portfolio
Holding Company
Working Capital (12.5) (13.6) 26.4
---------------------------- ---------------------------- ----------------------------
Portfolio
Holding Company
Debt (153.0) (70.0) (250.6)
---------------------------- ---------------------------- ----------------------------
Financial Assets
at Fair Value
per Balance
sheet 852.9 856.3 470.3
---------------------------- ---------------------------- ----------------------------
Gross Asset
Value 1,438.0 1,316.7 840.7
---------------------------- ---------------------------- ----------------------------
Gearing (% GAV*) 41% 35% 44%
---------------------------- ---------------------------- ----------------------------
* GAV is the Financial Assets, as at 30 June 2023, at Fair Value
of GBP852.9m plus RCF of GBP153.0m and 3(rd) party portfolio debt
of GBP430.8m (giving total debt of GBP583.8m).
Directors' Valuation sensitivities
Valuation sensitivities are set out in tabular form in Note 8 of
the financial statements. The following diagram reviews the
sensitivity of the EV of the portfolio to the key underlying
assumptions within the discounted cash flow valuation.
[chart]
8. Financing
Debt Strategy
Since its IPO the Company has focused on a simple and defensive
approach to debt. This means having debt agreements that have,
primarily, fixed interest rates and are amortising. Debt split into
(1) long-term asset-level debt, and (2) revolving credit facility
at fund-level for short-term funding. Debt in the portfolio is
generally not subject to stringent lender requirements on PPAs,
allowing BSIF to take advantage of more competitive PPA
pricing.
The Company's weighted average cost of long-term debt is 3.5%
and is largely locked-in via fixed interest rates. Whilst BSIF has
some index-linked debt, it also has significant levels of RPI
linked revenues, leaving the Company a net beneficiary of
inflation.
The fund's revolving credit facility (RCF) is the only
floating-rate debt instrument in the portfolio and represents 26%
of the total debt balance. 80% of asset-level debt has a fixed
interest rate. 20% of principal for long-term debt is
inflation-linked.
Revolving Credit Facility
On 22 June 2023, the Company agreed a GBP110 million increase to
its existing committed GBP100 million revolving credit facility
('RCF'), bringing the total committed amount to GBP210 million. The
facility also has an uncommitted accordion feature allowing it to
be increased by up to a further GBP30 million. As part of the
increase, the Company has sought to broaden the lender group
through the introduction of Lloyds Bank Plc, alongside the existing
lenders RBS International and Santander UK. The term of the
facility has been extended to May 2025 and the facility's margin
remains unchanged at 1.9%.
As at 30 June 2023 the Company's subsidiary RP1 had drawn
GBP153m from its RCF.
External Debt
Excluding the Company's RCF, total outstanding loans to
third-party lenders as at 30 June 2023 total GBP431m, with each
loan secured against a portfolio of assets and fully amortising
within the life of the respective asset's subsidies. The average
interest cost, excluding the Company's RCF, across the external
debt facilities in the table below is 3.54%.
Debt Principal Maturity % of Interest All-in Interest
Outstanding Fixed (1) Rate
(GBPm)
Syndicate - Fund
RCF 153 May-25 0% 8.00%
=========================== ============ ======== ============= ===============
Bayern LB - Project
Finance 8 Sep-29 100% 5.50%
=========================== ============ ======== ============= ===============
Syndicate - Project
Finance 72 Dec-33 100% 3.50%
=========================== ============ ======== ============= ===============
Aviva (fixed)
Project Finance 88 Sep-34 100% 2.88%
=========================== ============ ======== ============= ===============
Aviva (index-linked)
Project Finance 67 Sep-34 100% 3.70%
=========================== ============ ======== ============= ===============
Macquarie (fixed)
Project Finance 7 Mar-35 100% 4.60%
=========================== ============ ======== ============= ===============
Macquarie (indexed-linked)
Project Finance 20 Mar-35 100% 4.70%
=========================== ============ ======== ============= ===============
Gravis (index-linked)
Project Finance 38 Jun-35 100% 6.48%
=========================== ============ ======== ============= ===============
NatWest - Project
Finance 130 Dec-39 85% 2.70%
=========================== ============ ======== ============= ===============
Total/Wtd Avg 584 70% 4.71%
=========================== ============ ======== ============= ===============
Total/Wtd Avg
excl. RCF 431 95% 3.54%
=========================== ============ ======== ============= ===============
Note: Index-linked debt treated as fixed for the purposes of
this table as proportion fixed represents interest rate risk
only
NatWest 3-year term loan maturity and refinancing
On 2 May 2023, the Company announced the re-financing of its
GBP110 million three-year term loan with NatWest.
The original loan, 75% hedged with a swap at circa 0.35% over a
notional 18-year period, had a maturity of September 2023 and has
been increased to GBP130 million and extended in maturity to
December 2039.
Hedging has been put in place for the tenor of the loan on
GBP110 million, at an effective all-in cost of c.2.7% (being margin
and swap rate).
The financing is secured against the UK-based portfolio of 31
operational PV plants with a total installed capacity of 139MW and
benefitting from attractive subsidies; 29 of the assets are
accredited under the ROC regime with tariffs ranging from 1.2 - 2.0
ROCs, while two are accredited under the FiT scheme.
The additional debt of GBP20 million is being used to provide
financing for the construction of Yelvertoft, the Company's 49MW
CfD-backed solar PV project in Northamptonshire. Once construction
is complete, expected in Q4 2023, the Company will review whether
to enter hedging arrangements on this tranche.
GAV Leverage
The Group's total outstanding debt, as at 30 June 2023, was
c.GBP584 million and its leverage stands at c.41% of GAV (35% as at
30 June 2022) within the 35% - 45% preferred range the Directors
have previously outlined as desirable for the Company.
9. Market Developments
UK renewable generation capacity and deployment
Latest Government data shows that UK solar photovoltaic (PV)
capacity stands at around 15GW, across c.1.3 million installations.
Of this amount, around 7.3GW (c.48% of the total solar capacity in
the UK) and 5.1GW (34%) is accredited under the RO and FiT schemes,
respectively, and c.2.4GW (16%) is unaccredited. Onshore and
offshore wind installed capacity stands at around 15.2GW and
13.9GW, respectively. The UK has 2.8GW of operational battery
storage capacity, according to data from energy association
RenewableUK.
The UK's total renewable generation capacity is projected to
continue to grow over the coming years as the Government strives to
meet its net zero targets and meet power demand from the
electrification of the domestic heat, transport and industrial
sectors. Deployment is expected to be supported by policies such as
the CfD scheme, which is described in more detail in the next
section of this report.
In March 2023, the UK Government stated its ambition to increase
solar capacity up to 70GW by 2035 and signalled its support for
ground and rooftop solar technologies on brownfield, industrial and
low/medium grade agricultural land. The Government's newly created
Solar Taskforce is expected to publish a roadmap next year to drive
forward its solar growth ambitions. The Government also aims to
develop up to 50GW of offshore wind by 2030.
The chart below illustrates the distribution of total installed
capacity across different renewable generation technologies at the
end of the first quarter of 2023 (the latest data available at the
time of this report) compared with a year earlier.
[chart]
Source: UK government Department for Business, Energy &
Industrial Strategy *Anaerobic Digestion includes sewage sludge
digestion, animal biomass
Secondary market transactions, development and construction
activity
Transactional activity in the UK renewables market has eased to
some extent, as inflation and higher interest rates have increased
investor uncertainty.
Acquisitions across established technologies have totalled
c.150MW in solar, c.1.5GW in offshore wind and c.140MW onshore wind
in the Period [2] .
Activity in the UK development market has continued to be driven
by factors such as ambitious decarbonisation targets, increasing
preferences by customers for clean energy, demand for ESG
investments and the inclusion of solar PV in upcoming CfD auction
rounds. Development activity has been particularly noticeable in
the battery storage area as developers seek to provide solutions to
help manage the grid as larger quantities of intermittent
renewables are added to the system. Solar development activity has,
however, slowed recently, primarily due to grid constraints.
Some construction activity has been observed in the UK solar and
battery storage area, although this is against a backdrop of supply
chain challenges and rising interest rates. Converting the UK's
significant development pipeline into operational solar projects
over the next five years will require developers to adopt an
innovative approach to overcome current macroeconomic challenges as
well as challenges surrounding higher construction costs and grid
connection lead times.
With 754MW of operational solar capacity, the Company maintains
a strong position within the UK solar market, owning about 7.6% of
the country's utility-scale solar PV capacity.
10. Regulatory Environment
The regulatory environment remains under the spotlight as the
Government seeks to support renewable energy deployment under
particularly tough macroeconomic conditions, including high
inflation and rising interest rates. Key themes are outlined
below.
Update on Contracts for Differences (CfD)
In July 2022, the UK Government awarded support for c.10.8GW of
new build renewable generation capacity through its CfD scheme,
allocation round 4 (AR4) - with c.7GW awarded for offshore wind
projects, c.2.2GW for solar and c.0.9MW for onshore wind. The
overall budget for AR4 - across pot 1-3 technologies - was GBP295m
per year.
The UK Government published the CfD allocation round 5 (AR5)
results on 8 September 2023. A total of 3.7GW of renewable energy
projects, with expected deliveries in 2025-28, won contracts with
strike prices at or close to the administrative strike price (ASP)
caps set by the government.
Almost 2GW of solar projects won contracts at the maximum ASP of
GBP47/MWh (in 2012 terms), of which almost 1.4GW is due to come on
line in 2027-28 - the final target delivery year for the auction.
Onshore wind - including remote island wind - won 1.7GW of
contracts at GBP52.29/MWh, while no bids were successful from
offshore wind. This was the first time since the launch of the CfD
scheme in 2015 that no new offshore wind projects won contracts. In
the run-up to the AR5 auction, many potential offshore wind
participants expressed concerns over the low ASPs particularly
given the high inflationary and cost of capital backdrop. The ASP
for offshore wind was set at GBP44/MWh (in 2012 prices) in AR5,
down from GBP46/MWh in AR4. Almost 7GW of offshore wind technology
was successful in AR4 which closed in July 2022.
Further ahead, the Government is also considering introducing
non-price factor legislation for future CfD allocation rounds (AR7
onwards, 2025-30). This would encourage bid applicants to balance
overall costs with other non-price factors, including
sustainability and enabling system flexibility and operability.
UK Carbon Market
In July 2023, the UK Emissions Trading Scheme (UK ETS) Authority
announced several reforms to tighten limits on power, industrial
and aviation sector emissions which are scheduled to become
effective in 2024. The Authority also plans to extend the sector
coverage of the UK ETS from 2026-28 which could incentivise
industries to invest in lower-carbon footprint renewable
technologies.
Electricity Generator Levy
Please refer to 'Key factors behind the valuation' below.
Review of Electricity Market Arrangements
The Government launched its Review of Electricity Market
Arrangements (REMA) consultation last summer to identify the
necessary reforms needed to transition to a cost effective, lower
carbon and secure electricity system. In March 2023, a summary of
the 225 consultation responses was published, with several
wholesale energy market reforms still under consideration,
including zonal and nodal market pricing. The Government intends to
publish a second REMA consultation later this year.
Bluefield Partners LLP
27 September 2023
Environmental, Social and Governance Report
1. Introduction
An introduction from the Chair
Across the globe, the impacts of climate change are becoming all
too apparent. In July, on the same day that wildfires ravaged
Sicily, in Milan planes were grounded by hailstones the size of
tennis balls. This summer, Greece, Algeria, and Tunisia are amongst
the many countries that have experienced an unprecedented level of
wildfires, exacerbated by extreme heat and arid conditions, with
devastating social and economic impacts. Climate change is often
thought of as something which will occur in the future, but it is
happening now, and its effects will amplify as time goes on. As
President Biden said on a recent visit to hurricane-stricken
Florida, "Nobody intelligent can deny the impact of the climate
crisis anymore. Just look around."
As we move towards a Net Zero future, the Company plays a key
role in providing low carbon energy to a decarbonising economy.
However, the transition away from fossil fuels gives rise to
challenges regarding energy security and affordability, heightened
but also accelerated by the fallout from the Russian invasion of
Ukraine. The UK needs rapid, large-scale deployment of renewable
infrastructure to reach Net Zero, which will also deliver energy
security and stabilise energy pricing.
As growth of the renewable energy sector continues to
accelerate, the solar power industry must take accountability and
responsibility for the impacts of its own operations. We believe
consideration of material environmental, social and governance
(ESG) factors is integral to the long-term success of any
investment fund, contributing to both risk management and value
creation.
Last year the Company developed its ESG strategy, which included
a comprehensive set of commitments and KPIs. Delivery of these
commitments has enhanced the Company's ESG governance, including
further developing supply chain management processes, and putting
new policies in place. During the coming year, we will enact these
policies across the Company's operations, as well as continuing to
deliver additional value across our portfolio through our nature
and social initiatives. Building the Company's climate change
resilience will also remain a priority.
The Company continues to integrate ESG across the asset
lifecycle, critically evaluating and improving ESG processes, and
with sharp focus on risks and opportunities most material to the
Company's operations. As the ESG landscape evolves, the Company
will continue to ensure compliance with appropriate ESG regulation
and reporting frameworks, ensuring ESG achievements and challenges
are reported transparently to stakeholders. Doing so will support
the Company in achieving its purpose of delivering renewable energy
responsibly, with the ambition not only to offer a sustainable
product, but also to achieve sustainability throughout its
operations.
John Scott,
Chair
An introduction from the Investment Adviser
The Company has made great progress with its ESG strategy during
the reporting period. In addition to being the first year
implementing, monitoring, and measuring the Company's ESG
performance against its KPIs, it was also the first time the
Company reported in line with the Level 2 requirements of the EU's
Sustainable Finance Disclosure Regulation (SFDR) and produced its
first Principal Adverse Impact (PAI) report .
In a year of 'firsts', the Investment Adviser has taken a robust
approach to both the Company's ESG commitments and regulatory
requirements, reporting comprehensively and transparently. The
Investment Adviser supported the Company with collection of a wide
range of sustainability data, enabling the Company to make its most
quantitative ESG disclosures to date. By continuing to support and
work collaboratively with service providers, we hope to increase
the accuracy and quality of data over time.
Bluefield's ESG team has grown and ESG has continued to be
embedded into every aspect of our operations. The Bluefield group
structure, with four separate but complementary businesses,
facilitates this process, and enables the Company to benefit from
the holistic management of ESG across the asset lifecycle.
Bluefield employees share a passion towards sustainability and
their dedication is reflected in the Company's successes this
year.
Having refreshed its ESG commitments, we look forward to
supporting the Company with the second year of its ESG strategy,
ultimately contributing to its long-term value.
James Armstrong,
Managing Partner of Bluefield Partners LLP
2. ESG Highlights
Covering the reporting period ending 30 June 2023:
-- Powered the equivalent of over 288,000 UK homes with renewable electricity ([3]) .
-- Achieved over 173,000 tonnes of CO2e savings ([4]) .
-- Undertook physical scenario analysis for the first time to
examine the potential impacts of extreme heat on the Company's
solar assets.
-- Adopted a Human Rights Policy, Sustainable Procurement
Policy, Waste Management Policy, and Supplier Code of Conduct.
-- The Board of the Company established an ESG Committee.
-- Conducted thirty Biodiversity Net Gain (BNG) assessments across the operational portfolio.
-- Undertook ten independent ecological assessments.
-- Delivered seventeen in-school workshops and eight solar site
visits to schools surrounding the Company's assets.
3. ESG Landscape
ESG Context
As a renewable energy business, the Company is actively
contributing towards the UK's Net Zero target, but this does not
remove the Company from its broader ESG impacts and
responsibilities. As such, the Company's ESG strategy has
identified a range of priority topics across ESG areas, all of
which will need to be considered as part of the Company's
responsible investment approach. These have been integrated into a
comprehensive framework through which the Company can deliver value
for its stakeholders, and which will support delivery of long-term
returns for shareholders.
ESG Regulation & Framework Alignment
SFDR & EU Taxonomy
Please refer to the Periodic Annex IV presented within Appendix
and the Company's website for further information regarding its
ongoing compliance with the SFDR and EU Taxonomy.
Please note that, as part of the Company's implementation of the
SFDR Regulatory Technical Standards, the Company's Article 23
pre-contractual disclosure was updated on 22 December 2022. This
involved the deletion of the sections titled 'Promotion of
environmental and social characteristics' and 'Taxonomy-alignment',
and the addition of the SFDR annex to provide the relevant
sustainability-related information in the format of the mandated
template. A section titled 'Consideration of principal adverse
impacts of investment decisions on sustainability factors' was also
added to inform investors of the Company's approach to implementing
the PAI requirements.
These changes are intended to comply with the Company's
regulatory obligations and provide greater information to investors
about the Company's sustainability profile and attributes. The most
recent versions of the Company's sustainability-related disclosures
are available on its website.
Task Force on Climate-related Financial Disclosures (TCFD)
The Company has voluntarily adopted the recommendations of the
TCFD and its second TCFD report is presented below.
UK Sustainability Disclosure Requirements & UK Green
Taxonomy
The Company is following progress of the UK Sustainability
Disclosure Requirements (SDR) and UK Green Taxonomy, to ensure it
is well positioned to comply with these new rules and guidance as
and when they come into effect.
Sustainability Disclosure Standards
To better integrate ESG considerations alongside financial
reporting, the ISSB has recently issued two IFRS sustainability
disclosure standards IFRS S1 and S2. The Company will assess its
alignment with the requirements of the IFRS standards over coming
months, in preparation for the adoption of these standards by the
FCA.
How regulatory requirements have been embedded within the
Company's ESG strategy.
Regulatory requirements were a key consideration during
development of the Company's ESG strategy. As a result, regulatory
reporting requirements, such as PAIs, are integrated within the
Company's commitments and KPIs. For transparency, the Company will
signpost where information can be found if it sits outside its main
ESG report, for example as part of standalone SFDR disclosures.
The Company is mindful that regulatory reporting timeframes,
which are typically calendar year, do not run in tandem with the
Company's financial reporting year. As a result, to prevent
duplicate sets of reporting for each metric (which may become
confusing to stakeholders), the Company will typically not
re-report PAI metrics in line with its financial year. Instead,
stakeholders will be referred to the PAI statement to obtain this
information. The exception is the Company's GHG inventory, which is
currently being calculated in relation to both its calendar and
financial year.
4. The Company's ESG Strategy
ESG Strategy
The Company's ESG strategy reflects stakeholder expectations and
has been developed to deliver a positive impact across the
Company's portfolio of investments ([5]) . Material ESG topics are
defined within each of the Company's key pillars:
[chart]
Sustainable Development Goals ([6])
The most relevant United Nations Sustainable Development Goals
(UN SDGs) have been mapped against the Company's ESG pillars,
following the alignment protocol. In total, eight goals have been
identified where the Company believes it can have the greatest
positive impact. The Company's largest contribution will be in
relation to Goal 7, 'Affordable and Clean Energy' and Goal 13,
'Climate Action'. With over 812 MW of installed capacity, the
Company's portfolio generated 836,232 MWh of renewable energy
during the reporting period, supporting domestic energy security
and decarbonisation of the UK energy market. The Company also
endeavours to minimise any negative impacts of its operations, as
described throughout this report.
Commitments & KPIs
Focus this year has been the collection of data to enable the
Company to report against its ESG commitments and KPIs. As this was
the first time baseline data had been collected for most of these
KPIs, data collection processes had to be newly established across
a variety of the Company's operations and service providers.
Whilst relationships between the Bluefield service provider
companies enabled efficient data collection for a large portion of
the Company's portfolio, data collection from external third
parties was more challenging, particularly as many providers across
the industry did not have existing data collection processes in
place. Therefore, whilst every effort has been taken by the
Investment Adviser to ensure the accuracy of the Company's ESG
performance, the Company will implement further processes to
improve the accuracy and quality of ESG data over time.
Key commitments for the FY 23-24 are presented in Table 1 and a
full breakdown of the Company's commitments and KPIs, and
performance against these, is presented within the ESG Appendix [7]
. Commitments and KPIs are renewed annually to ensure alignment
with the Company's evolving ESG approach; the Board approves any
changes made and monitors ongoing progress. As a result, several
new commitments have been adopted this year and minor amendments
made to some existing commitments and KPIs, based on the Investment
Adviser's experience of implementing the strategy over the last
twelve months.
Pillar Key Commitments
Climate Change -- Report our renewable energy generation annually.
Mitigation -- Invest up to GBP50,000 in industry collaborations
annually to support the energy transition.
-- Continue to build our climate resilience and
inform our business strategy through climate risk
assessments and scenario analysis.
-- New commitment: Develop a Net Zero pathway.
-------------------------------------------------------------
Pioneering Positive -- Evaluate Biodiversity Net Gain (BNG) across the
Local Impact operational portfolio and achieve at least 20% BNG
on new solar developments.
-- Conduct independent biodiversity assessments
across at least 10% of our sites annually (relating
to assets over 1MW in capacity)
-- Continue to promote positive action within the
communities we operate within through community
benefit funds and educational sessions.
-- New commitment: Develop a Nature Strategy, building
upon our existing biodiversity commitments and encompassing
the recommendations of the TNFD.
-------------------------------------------------------------
Generating Energy -- Ensure 100% of our assets are covered by a Human
Responsibly Rights Policy, which covers UNGC principles and
OECD guidelines.
-- Require adoption of our Supplier Code of Conduct
by key Tier 1 and, where possible, Tier 2 suppliers.
-- New Commitment: Continue to develop our due diligence
mechanisms to identify, prevent and mitigate human
rights impacts across our operations and, where
possible, our supply chain.
-------------------------------------------------------------
Table 1 - key ESG commitments for the 23-24 financial year
5. How ESG is Embedded
ESG Oversight
The Board of the Company has ultimate responsibility and
oversight of ESG risks and opportunities, and ESG is considered by
the Directors as part of Board meetings, investment decisions and
risk management. Daily management of ESG is outsourced to the
Investment Adviser, with the Board regularly updated on ESG
activity through investment committee papers, Board meetings, ad
hoc calls, and written updates. During the reporting period, the
Board established an ESG committee, chaired by Meriel Lenfestey.
The Committee provides a forum for mutual discussion, support, and
challenge to the Investment Adviser with respect to ESG matters.
ESG committee meetings, of which there are at least two a year,
provide an additional forum through which the Board engage on ESG
activity.
The Investment Adviser is responsible for communicating,
embedding, and monitoring ESG initiatives across the portfolio,
ensuring ESG is considered at every stage of the asset lifecycle.
ESG is included as a standing agenda item as part of the Investment
Adviser's quarterly Board meetings and the Investment Adviser's ESG
Manager regularly reports progress to the Managing Partner and
Group General Counsel.
The Company's ESG Governance Structure illustrates how ESG is
integrated across portfolio-related activities, presented in Figure
1.
[chart]
Responsible Investment
Please refer below and the Company's Sustainable Investment
Policy for further information on its responsible investment
approach.
6. Climate Change Mitigation
Key Commitments
-- Report our renewable energy generation annually.
-- Develop a Net Zero pathway.
-- Invest up to GBP50,000 in industry collaborations annually to
support the energy transition.
-- Continue to build our climate resilience and inform our
business strategy through climate risk assessments and scenario
analysis.
Introduction
Critical and ambitious action is needed to address climate
change. The UK has remained firm on its Net Zero commitment, aiming
to reduce emissions by 78% by 2035 ([8]) . In their 2023 'Powering
up Britain' publication, the UK government acknowledged the energy
trilemma, and the role renewable deployment will play in achieving
interim and long-term Net Zero targets, increasing energy
independence, and shielding the UK from volatile energy markets,
ultimately reducing energy prices ([9]) .
As a UK-focused renewable energy business, the Company is well
positioned to support the UK's transition to a low carbon economy
and domestic energy security.
Advocating Renewable Energy
The Company substantially contributes to climate change
mitigation and the UK's decarbonisation agenda through its
generation of renewable energy. During the reporting period the
Company:
-- Generated 836,231 MWh of renewable energy.
-- Powered the equivalent of over 288,000 UK homes with
renewable electricity for a year ([10]) .
-- Achieved over 173,000 tonnes of CO2e savings ([11]) .
-- Had 93MW of solar infrastructure under construction, which on
completion is estimated to generate an additional 91,000 MWh of
renewable energy annually.
Since IPO in 2013, the Company has saved the equivalent of
approximately 1,200,000 tonnes of CO2e from being released into the
atmosphere [12] .
Environmental accreditations - Guernsey Green Fund, TISE
Sustainable, Green Economy Mark
Whilst the Company's activities are central to the UK's Net Zero
agenda, the Company recognises the potential harmful impacts that
come with being part of the renewables industry, and that as the
sector continues to grow, industry players will need to work
together to address emerging social and environmental risks.
End-of-life considerations for renewable generation assets are an
increasingly important topic, particularly with movement towards a
more circular economy.
During the reporting period, the Company identified a potential
partnership with a UK university, focused upon end-of-life options
for solar and wind assets. The Company has elected to allocate its
first-year research budget of up to GBP50,000 to this project,
noting that funds will be transferred once the project is
finalised.
Case study: Supporting the Energy Transition through Industry
Engagement
The Investment Adviser takes a proactive approach to supporting
the energy transition, not only through its advisory role to the
Company, but also by engaging and supporting the government to
create a policy environment which can enable Net Zero. This
includes responding to government consultations, meeting with
senior political leaders across the House to discuss renewable
energy, and working with partners in the sector to engage in
relevant discussions via the government's Solar Energy Taskforce.
Bluefield employees are also members of the industry trade body
Solar Energy UK, and frequently engage in discussions across the
various working groups. Such enables the Company to benefit from a
coherent and broad view on a range of industry matters, whilst
contributing to best practice for the renewables sector.
Carbon Emissions
GHG Inventory
The Company takes account of its carbon impact and reports its
emissions annually. Last year the Company commissioned its first
Lifecycle Assessment (LCA) to estimate the emissions associated
with a solar PV asset across its lifetime. Depending on the future
energy mix modelled, the study found that the solar farm "pays
back" the total emissions consumed during production and
installation in between one to three years; a small proportion of
its expected forty-year lifespan. The study emphasised the positive
contribution that solar assets can offer to a decarbonising grid,
but also enabled the Company to have sight of the absolute
emissions impact of a solar asset, highlighting potential
opportunities for improvement.
Please refer to the Company's TCFD Report below for its GHG
inventory.
The Company's assets consume a small amount of electricity,
derived from the grid. To reduce Scope 2 emissions, and ensure that
its portfolio consumes energy derived from renewable sources, the
Company has been transferring its assets onto renewable energy
import tariffs, where these are not already in place. Looking
forward, to formalise its decarbonisation commitment, the Company
will develop a Net Zero pathway, and will analyse different
target-setting frameworks to ensure the decarbonisation strategy
most suitable for its investments is adopted.
Installed capacity on renewable energy tariffs: 13% (as at 30
June 2022); 85% (as at 30 June 2023).
Climate-related Risks and Opportunities
The assessment of climate-related risks and opportunities is a
continual process for the Company as part of its risk management
processes and strategy. Please refer to the Company's TCFD report
below for further information.
7. Pioneering Positive Local Impact
Key Commitments
-- Evaluate Biodiversity Net Gain (BNG) across the operational
portfolio and achieve at least 20% BNG on new solar
developments.
-- Conduct independent biodiversity assessments across at least
10% of our sites annually (relating to assets over 1MW in
capacity)
-- Develop a Nature Strategy, building upon our existing
biodiversity commitments and encompassing the recommendations of
the Taskforce on Nature-related Financial Disclosures.
-- Continue to promote positive action within the communities we
operate within through community benefit funds and educational
sessions.
Introduction
The topic of nature has been a real area of focus and commitment
for the Company. Its investments have an important role to play at
the local level and the Company seeks to positively impact the
communities and environments it is a part of. The Company has
strengthened how it communicates ESG expectations with its
suppliers and contractors, who manage the Company's investments on
its behalf.
Nature
Climate change and nature are intrinsically linked. The Company
aims to make positive impact in both areas simultaneously, focusing
upon BNG across its portfolio as an additional way to help mitigate
climate change beyond its contribution to Net Zero. The Company has
updated its ESG strategy to reference 'Nature', recognising that
biodiversity represents a critical aspect of this and that the
Company's operations have wider environmental impacts and
dependencies.
Focus during the reporting period was delivery of the Company's
biodiversity implementation plan (adopted alongside its
Biodiversity Policy last year), and the quantification of
biodiversity across the portfolio.
Delivering the Biodiversity Implementation Plan
The biodiversity implementation plan was created to support the
Company in achieving the commitments made within its Biodiversity
Policy. Initial activities have focused upon how to minimise the
adverse impacts of the Company's land management activities on
nature. During the reporting period, the Investment Adviser worked
closely with Bluefield Operations Limited, the Company's principal
O&M contractor, to undertake the following activities:
-- Mapping of the Company's assets to identify sites located
within 1km of a biodiversity-sensitive area [13] and within 500m of
a water course.
-- Creation of systems to record and track threatened and
protected species [14] identified at the Company's assets, using
data from ecological assessments.
-- Conduct a comprehensive review of Landscape and Ecological
Management Plans (LEMPs) to support ongoing LEMP compliance, but
also assess their suitability and practicality.
-- Development and adoption of hierarchies of control for herbicide use and rodent control.
-- Review of grass and hedgerow management practices.
These activities have enabled the Company to better understand
what fauna and flora are present in the localities of its assets,
enabling the identification of assets which could potentially have
greater impacts on, or opportunities to support, nature. Review of
environmental practices and adoption of hierarchies of control will
help ensure negative environmental impacts are minimised and a
best-practice approach to land management is taken.
Quantifying Biodiversity
Wychwood Biodiversity, a leading ecological consultant, were
engaged to undertake ten ecological assessments across the
portfolio to help build the Company's biodiversity data set. Their
findings identified:
-- Twelve red listed bird species, including yellowhammer and skylark.
-- Seventeen amber listed bird species, including marsh harrier and sparrowhawk.
-- Fifteen butterfly species, including small heath, and five
native bee species identified from ten pollinator surveys
(consisting of 129 transects).
Botany [15] and soil [16] data were also collected. These
assessments, along with eleven additional assessments conducted as
part of ongoing LEMP requirements, will be used to inform the
Company's nature-related activities over the coming year.
Biodiversity Net Gain
The Company has been evaluating BNG across its portfolio. BNG is
calculated using the Defra Biodiversity Metric, which assesses the
change in biodiversity units from a baseline state (i.e., before
the site was built) to its post-construction condition, when
habitats specified within the planning conditions, including within
the LEMP, have been established.
In relation to its development pipeline, the Company has
committed to achieving at least 20% BNG on all new solar
developments, despite the 10% BNG provision of the UK Environment
Act not coming into effect until November 2023. This commitment
will be enacted through the Company's development partners and
applies to all planning applications submitted since July 2022.
During the reporting period, several prospective solar applications
were submitted into planning, all of which achieve at least a 20%
BNG uplift. The Company is closely following developments related
to the trade of BNG units, and the opportunities this may present
for the renewables industry as an additional source of revenue.
BNG assessments [17] were undertaken across the operational
portfolio by the land management team within Bluefield Operations
Limited, who gained competency through CIEEM training courses and
engagement with third party specialists. Thirty assessments were
completed, representing approximately 33% of the Company's
operational portfolio (relating to sites over 1MW in capacity). A
variety of the Company's portfolio was sampled, including sites
ranging from 1.8MW to 50MW in capacity, located across England,
Scotland, and Wales. Additional ecological data was collected where
necessary through monitoring and walkover surveys.
On-site % Uplift
Habitat Units Hedgerow Units
-------------- ---------------
Average of the 30 assessed
sites +41% +53%
-------------- ---------------
Table 2 - Results of retrospective Biodiversity Net Gain (BNG)
assessments undertaken across the Company's operational solar
assets.
These results demonstrate the potential of solar infrastructure
to support nature and achieve a considerable uplift in biodiversity
compared to a pre-construction state. The results of the BNG
assessments will be used to identify measures to increase the BNG
of lower scoring sites, with the assessments updated over time as
land conditions change.
Next steps for Nature
-- Develop a Nature Strategy, aligned with the recommendations
of the Task Force on Nature-related Financial Disclosures (TNFD)
and pulling together the progress the Company has made over the
last 18 months in relation to its biodiversity datasets and
enhanced approach to land management.
-- Build a framework through which the Company can manage its
material nature-related risks and opportunities, and develop nature
focused commitments and KPIs to communicate progress.
-- Complement BNG assessments with other forms of biodiversity
assessment (for example industry tools such as SPIES assessment or
Wild Power Scorecard), to ensure a rounded approach.
Community Impact and Initiatives
Community engagement is key across all stages of the asset
lifecycle. During the reporting period, the Company engaged Earth
Energy Education, an organisation dedicated to educating pupils on
the importance of renewable energy through engagement both in and
outside of the classroom. On behalf of the Company, Earth Energy
Education delivered 25 educational workshops, including 17 school
workshops and eight solar site visits between May 2023 and July
2023, delivering educational content to 447 different pupils. 23
Bluefield employees also volunteered as part of the site visits,
providing their solar expertise and experience of working within
different functions of the Bluefield companies, engaging pupils on
green careers.
The Company will continue to work with Earth Energy Education
over the coming year, delivering a sustainability-focused education
programme to even more pupils. Such will support the Company in
strengthening relationships with the local community and upskilling
future generations on the importance of renewables in the climate
emergency.
"My Year 4s really enjoyed the workshop and it was an engaging
introduction to their new Science unit for after half-term on
electricity. The hands-on investigation into solar panels today was
valuable for our future learning on solar power." Year 4 teacher,
Wantage Primary Academy
Case Study: STEM Webinar
As part of the Company's engagement with Earth Energy Education,
a webinar was delivered to 200 pupils in July, hosted by five
Bluefield employees. The webinar provided insight into their roles,
experiences of being a woman in a STEM career, pathways into the
sector and general encouragement and awareness about STEM
careers.
The transition to Net Zero will create significant employment
opportunities ([18]) , and during the reporting period, the
Company's portfolio supported the creation of 42 new positions
within the Bluefield companies. Bluefield has a number of
initiatives in place to encourage entry into green careers, and
during the reporting period supported:
-- Four internships, including two through the '100 Black Interns' scheme.
-- One work experience placement.
-- Two apprenticeships.
-- Engaged with an environmental consultancy firm to support a
project with Norfolk and Suffolk County Councils on green skills
development in the region, including skills shortages and projected
skills needed in the future.
The Company has community benefit funds in place across its
portfolio, which are usually agreed as part of the development
process. During the reporting period, the Company paid over
GBP253,000 to community benefit funds, which are used to support a
range of community projects.
St Margaret's Churchland, West Raynham: Grassland Conservation
Project
In 2017, the local community decided to introduce a new land
management regime to St Margaret's Churchland, located in West
Raynham, to better support the ecology of the site. The predominant
characteristics of the site included thick, overgrown grass and
little floral diversity. After engaging with Norfolk Wildlife
Trust, the grass cutting regime of the site was altered, native
hedgerow planted, and wildflower seed sown. In Autumn 2021, grazing
was also introduced.
Following these changes, a wildflower meadow is now well
established, and surveys indicate that a large variety of
pollinators, mammal and birds use the area, including red and amber
listed species. The first orchids have also been identified; likely
dormant for several years but have re-emerged due to the improved
land conditions.
Since being initiated five years ago, the project has been
supported with over GBP5,000 of funds contributed by West Raynham
Solar site, administered through the West Raynham Solar Fund
Committee. The project has been highly successful both in its
ecological objectives and in creating community interest and
involvement, with an enthusiastic group of local volunteers who
continue to support the project.
Delivery Partnerships
To help ensure ESG expectations are upheld by suppliers, the
Company has adopted a suite of new policies, including: a
Sustainable Procurement Policy; Human Rights Policy; Waste
Management Policy and Supplier Code of Conduct. Policies were
adopted by both SPV Directors and the Board of the Company, and
cover the Company's operational and construction assets. Focus over
the coming year will be to ensure the requirements of these
policies are appropriately disseminated and complied with, helping
drive ethical practices across the Company's operations and supply
chain.
The Supplier Code of Conduct sets out the values and principles
the Company expects its suppliers to follow as a minimum
requirement, and was developed in line with global frameworks,
including the United Nations Guiding Principles on Business and
Human Rights (UNGP), UN Global Compact principles (UNGC), and the
OECD Guidelines. It covers topics including ethics, human and
social rights, environmental, business and supply chain risk, and
whistleblowing. The Company requested that priority suppliers,
i.e., those which made up the largest proportions of the Company's
addressable spend [19] , acknowledge, sign, and conform to the
Supplier Code of Conduct. During the reporting period, twenty-six
of the Company's priority suppliers signed the Supplier Code of
Conduct, representing approximately 75% of the Company's 2022
addressable spend.
Case Study: Engaging Suppliers Through Webinars
To support the rollout of the Supplier Code of Conduct, the
Company delivered two webinars to priority suppliers. The webinars
explained the purpose of the Code, the key principles within it,
and the impact on suppliers. In addition to providing a forum
through which concerns could be raised, suppliers were encouraged
to adopt their own Supplier Code of Conduct if they had not
already, helping cascade best practice across the Company's supply
chain.
Health & Safety ('H&S') is of the highest importance to
both the Company and the Bluefield service provider companies.
Every asset owning SPV holds H&S policies. Main contractors
(including the Bluefield companies) undergo annual H&S audits
by the SPVs, to ensure ongoing compliance. During the reporting
period, the Investment Adviser engaged a H&S adviser to review
the H&S management system across the operating solar portfolio.
The review is ongoing and will ensure each of the SPVs are
complying with the latest H&S guidance and industry
standards.
EPC contractors, O&M contractors, and Asset Managers are
required to regularly submit their H&S performance to the
Company. Relating to the reporting period:
Lost time incident rate [20] : 0
Number of reportable accidents (RIDDOR) [21] : 6
Number of near misses: 154
The majority of near misses were reported by Bluefield
Operations Limited, where identifying, investigating, and reporting
near miss incidents is culturally ingrained within the organisation
(helping reduce the probability of H&S incidents occurring).
Therefore, the relatively high number of near misses is reflective
of a proactive risk management culture. Four of the RIDDOR
incidents related to fire incidents (where no personnel were
injured), and the remaining two incidents involved subcontractors
of the Company's O&M and EPC service providers. Bluefield
Services Limited, acting as asset manager, continues to work with
service providers to improve data collection and reporting
processes.
8. Generating Energy Responsibly
Key Commitments
-- Ensure 100% of our assets are covered by a Human Rights
Policy, which covers UNGC principles and OECD guidelines.
-- Continue to develop our due diligence mechanisms to identify,
prevent and mitigate human rights impacts across our operations
and, where possible, our supply chain.
-- Require adoption of our Supplier Code of Conduct by priority
Tier 1 and, where possible, Tier 2 suppliers.
Human and Labour Rights
Human and labour rights remain an area of focus for the Company.
The Company's Human Rights Policy communicates its commitment to
respect human rights and its ambition to identify, prevent and
mitigate adverse human rights impacts throughout its value chain.
The policy was developed in line with recognised human rights
frameworks.
Whilst human rights due diligence processes are already in
place, these will be reviewed by the Company over the coming year
as commitments made within the Human Rights Policy are embedded
across the asset lifecycle. The Company will also perform a deeper
analysis of how its operations interact with the requirements of
the UNGC and OECD Guidelines, enabling the Company to robustly
evidence its alignment to these frameworks.
The Company acknowledges that supply chains are complex and full
transparency has not yet been achieved, particularly in relation to
solar PV modules and batteries. The Investment Adviser is
continuing to engage with the industry response led by Solar Energy
UK and Solar Power Europe, which is focused on developing systems
and processes to improve transparency and sustainability within the
PV supply chain. The UK solar industry's supply chain statement, to
which the Investment Adviser is a signatory, can be viewed here
.
Examples of existing Human Rights due diligence & management
mechanisms:
- Comprehensive ESG due diligence undertaken on key third parties, such as EPC contractors.
- Human rights considerations embedded within pre-investment due diligence processes.
- External ESG risk analysis conducted on key solar and battery manufacturers.
- Social audits requested for solar manufacturing facilities as part of EPC engagements.
- Enhanced contractual protections.
- Adoption of the Company's Supplier Code of Conduct.
- Participation in industry supply chain initiatives.
Responsible and Sustainable Procurement
Though the Company does not yet undertake direct large-scale
procurement, it has due diligence processes in place to help ensure
that the EPC contractors it engages, and the equipment that they
procure on behalf of the Company, are not associated with material
ESG risks. The Company's Sustainable Procurement Policy includes
principles such as assessing and managing supply chain risks;
upholding human rights; and where possible reducing the
environmental impacts of procurement activity.
To better understand its supply chains, the Company mapped its
Tier 1 supplier spend relating to the 2022 calendar year. Once
consolidated, the Company identified its priority suppliers, i.e.,
those which related to the largest proportion of addressable spend.
Priority suppliers were analysed via a desktop assessment across a
range of social and environmental topics, to identify upstream risk
and improvement opportunities. Several key supply chains were
identified for further focus. The Company will map its supply
chains annually, and will map Tier 2 suppliers in key supply
chains, focusing on those engaged by the Bluefield companies in the
first instance.
During the reporting period, the Bluefield companies completed
their first supply chain audit, undertaken by an external
consultant. Supply chain management processes were assessed in
relation to governance, sourcing, transparency and risk, and the
results will be used to support the Company in benefiting from
robust supply chain practices.
Good Governance and Business Ethics
ESG is increasingly integrated into the Company's corporate
governance. For example, during the reporting period, there has
been ongoing regulatory compliance (including monitoring emerging
reporting requirements and frameworks); creation of an ESG
sub-committee of the Board; adoption of new policies; and enhanced
climate risk analysis. Commitments for the coming year will further
embed ESG within the processes and procedures underpinning the
Company's operations.
As an FCA regulated entity, the Company's Investment Adviser
evidences the highest standards of professional conduct. Key
policies, including in relation to anti-bribery, anti-corruption
and anti-money laundering, conflicts of interest, and compliance
are in place, and third-party compliance advisers are used to
ensure regulatory obligations are met through quarterly reviews and
reports on business activities. The Investment Adviser has recently
implemented new policies and processes relating to Consumer
Duty.
The Board's commitment to diversity is referenced below, and the
Board actively seeks to ensure that diversity is considered in the
board succession process. The Investment Adviser and other
Bluefield companies continue to enhance their approach to
Diversity, Equity, Inclusion and Belonging (DEIB). DEIB is embedded
through an equal opportunities policy in the UK and a DEIB
committee, which has developed a strategy focused around: culture,
talent, and community. Over the coming year, in addition to
launching a "Women in Leadership" programme, the Investment Adviser
will partner with GAIN (Girls are Investors) to create a paid
internship, helping increase gender diversity within the
organisation.
9. Looking Forward
This year, the Company has enhanced its approach to material ESG
topics and reported against its KPIs for the first time, evidencing
an improvement in ESG performance across most indicators. The
second year of the strategy will be just as ambitious, as the
Company responds to growing interest around topics such as climate,
nature, and human rights, perpetuated by evolving ESG regulatory
requirements. Though ESG remains fast-evolving, clarity and
standardisation of reporting requirements should provide much
needed guidance to financial markets and investors on what 'best
practice' looks like.
The Company looks forward to continuing its sustainability
journey, constantly evaluating, and improving its practice as a
renewable energy investor which aims to truly deliver renewable
energy, responsibly.
ESG Appendix
The following table highlights the Company's ESG performance
relating to the financial year ending 30 June 2023. Where data was
available, ESG performance as of 30 June 2022 has been included, to
allow comparison to be made. Where referenced in the below table,
unless otherwise stated, 'assets' refers to operational and
construction assets.
Pillar Commitment Supporting KPIs As at 30 June As at 30 June
2022 2023
Renewable energy > 624,000 MWh >836,231 MWh
generated (MWh)
---------------------------- ------------------------------ ------------------ ---------------------
CO2e savings >120,000 tonnes >173,000 tonnes
achieved (tCO2e)
------------------------------ ------------------ ---------------------
Equivalent houses
powered (#) 215,000 288,000
------------------------------------------------------------------------- ------------------ ---------------------
Additional solar 0 MW 93MW
infrastructure
under construction
(MW)
------------------------------ ------------------ ---------------------
Estimated additional N/A 91,000 MWh
annual renewable
energy generation
(MWh)
------------------------------ ------------------ ---------------------
Report our renewable Battery assets 0 MW 0 MW
energy generation under construction
annually. (MW)
---------------------------- ------------------------------ ------------------ ---------------------
Invest up to Revenue targeting GBP0 GBP50,000 allocated
GBP50,000 in industry collaboration [22]
industry collaborations (GBP)
annually to
support the
energy transition.
---------------------------- ------------------------------ ------------------ ---------------------
Scope 1 GHG Emissions N/A - methodology
(tCO2e) change 19
------------------------------------------------------------------------- ------------------ ---------------------
Scope 2 GHG Emissions N/A - methodology
(tCO2e) change 1,422
------------------------------------------------------------------------- ------------------ ---------------------
Scope 3 GHG Emissions N/A - methodology
(tCO2e) change 27,963
------------------------------------------------------------------------- ------------------ ---------------------
Total GHG Emissions N/A - methodology
(tCO2e) change 29,404
------------------------------------------------------------------------- ------------------ ---------------------
Carbon Footprint N/A Please refer
(tCO2e) New KPI to the Company's
PAI statement
.
------------------------------ ------------------ ---------------------
GHG intensity N/A Please refer
Report against (tCO2e / EUR to the Company's
our carbon emissions Rev) PAI statement
annually. [23] .
---------------------------- ------------------------------ ------------------ ---------------------
Develop a Net Net Zero pathway N/A No
Zero pathway. developed (Y/N)
---------------------------- ------------------------------ ------------------ ---------------------
Installed capacity
with renewable
energy import
tariffs (%) [24] 13 % 85%
------------------------------------------------------------------------- ------------------ ---------------------
Relative percentage N/A Please refer
of renewable to the Company's
and non-renewable PAI statement
energy consumed .
by BSIF (%)
------------------------------ ------------------ ---------------------
Share of non-renewable N/A Please refer
energy consumption to the Company's
and non-renewable PAI statement
energy production .
of investee companies
from non-renewable
Implement renewable energy sources
energy import compared to renewable
tariffs across energy sources
our portfolio. (%)
---------------------------- ------------------------------ ------------------ ---------------------
Continue to Scenario analysis No Yes
build our climate undertaken (Y/N)
resilience and
inform our business
strategy through
climate risk
assessments
and scenario
analysis. [25]
---------------------------- ------------------------------ ------------------ ---------------------
Assets covered
by a climate
adaptation plan
(%) New KPI N/A 0%
------------------------------------------------------------------------- ------------------ ---------------------
Incorporate ESG-related matters Yes Yes; the number
ESG-related in risk register of ESG related
matters into [26] (Y/N) risks within
the Company's the register
risk register. was enhanced
this year.
---------------------------- ------------------------------ ------------------ ---------------------
Undertake a Climate change No Yes
climate change risk and vulnerability
risk and vulnerability assessment undertaken
Climate assessment (CRVA) (Y/N)
Change in line with
Mitigation the TCFD recommendations.
---------------------------- ------------------------------ ------------------ ---------------------
Evaluate BNG
across the operational
portfolio and
Pioneering achieve at least New developments
Positive 20% BNG on new that have had
Local solar developments BNG assessment
Impact [27] . (%) N/A 100%
---------------------------- ------------------------------ ------------------ ---------------------
New solar developments
with at least
20% BNG achieved
(%) N/A 100%
------------------------------------------------------------------------- ------------------ ---------------------
Existing sites
with BNG assessment
[28] (#) 0 30
------------------------------------------------------------------------- ------------------ ---------------------
Operational assets
independently
assessed (relating
to assets over
1MW in capacity)
(%) [29] 11% 11%
------------------------------------------------------------------------- ------------------ ---------------------
Notable species Red listed Red listed bird
identified (e.g., bird species: species: 12
red and amber 13 Amber listed
listed species) Amber listed bird species:
(#) bird species: 17
17
------------------------------ ------------------ ---------------------
Assets without 100% Please refer
a biodiversity to the Company's
protection policy PAI statement
covering operational .
sites owned,
leased, managed
Conduct independent in, or
biodiversity adjacent to,
assessments a protected area
across at least or an area of
10% of our sites high biodiversity
annually (relating value outside
to assets over protected areas
1MW in capacity). (%) [30]
---------------------------- ------------------------------ ------------------ ---------------------
Develop a Nature Nature Strategy N/A No
Strategy, building Developed (Y/N)
upon our existing New KPI
biodiversity
commitments
and encompassing
the recommendations
of the TNFD.
New Commitment
---------------------------- ------------------------------ ------------------ ---------------------
Minimise potential
risks posed
to threatened
species by our
assets and will Assets that are
apply industry located in or
best practice near to [31]
to new sites biodiversity-sensitive
under development. areas (%) N/A 22%
---------------------------- -------------------------------------------- ------------------ ---------------------
Assets that negatively N/A 0% - Please refer
affect biodiversity-sensitive to the Company's
areas (%) PAI statement.
---------------------------- ------------------------------ ------------------ ---------------------
Assets which N/A 0% - Please refer
are deemed to to the Company's
have operations PAI statement.
that affect threatened
species (%)
---------------------------- ------------------------------ ------------------ ---------------------
Revenue given GBP0 GBP20,000
to partnerships
benefiting the
local community
(GBP)
---------------------------- ------------------------------ ------------------ ---------------------
Revenue paid > GBP154,000 >GBP253,000
to community
benefit schemes
(GBP)
------------------------------ ------------------ ---------------------
Young people 0 647 (between
engaged (#) New May - Jul 23).
KPI
------------------------------ ------------------ ---------------------
Continue to Educational workshops 0 25, including
promote positive delivered (including 17 school workshops
action within site visits) and 8 site visits
the communities (#) New KPI (between May
we operate within - Jul 23).
through community
benefit funds
and educational
sessions. [32]
---------------------------- ------------------------------ ------------------ ---------------------
Lost time incident
rate (per 100,000
employees) N/A 0
------------------------------------------------------------------------- ------------------ ---------------------
Number of reportable
accidents (RIDDOR)
(#) N/A 6
------------------------------------------------------------------------- ------------------ ---------------------
Number of near
misses (#) N/A 154
------------------------------------------------------------------------- ------------------ ---------------------
Insist that Bluefield employees N/A 100% (as at 27
our Tier 1 suppliers who have received Sept 23)
that directly H&S training
service the (%)
portfolio [33]
report H&S
performance
on a quarterly
basis.
---------------------------- ------------------------------ ------------------ ---------------------
Tier 1 supply
chains mapped
(%) 0% 100%
------------------------------------------------------------------------- ------------------ ---------------------
Tier 2 supply N/A In progress
chains mapped
Map our supply (relating to
chains, with Bluefield service
priority given providers) (%)
to Tier 1 suppliers. New KPI
---------------------------- ------------------------------ ------------------ ---------------------
Ensure 100%
of our assets
are covered
by a Human Rights
Policy by June
2023, which
covers UNGC
principles and Assets with Human
OECD guidelines. Rights Policy
[34] (%) 0% 100%
---------------------------- -------------------------------------------- ------------------ ---------------------
Assets with a
due diligence
process to identify,
prevent, mitigate,
and address adverse
human rights
impacts (%) 100% 100%
------------------------------------------------------------------------- ------------------ ---------------------
Share of investments N/A Please refer
in assets without to the Company's
policies to monitor PAI statement
compliance with .
Continue to the UNGC principles
develop our or OECD
due diligence Guidelines for
mechanisms to Multinational
identify, prevent Enterprises or
and mitigate grievance /complaints
human rights handling mechanisms
impacts across to address violations
our operations of the UNGC principles
and, where possible, or OECD Guidelines
our supply chain. for Multinational
New Commitment Enterprises (%)
---------------------------- ------------------------------ ------------------ ---------------------
Implement mechanisms Tonnes of hazardous N/A Please refer
to measure our waste and radioactive to the Company's
hazardous waste waste generated PAI statement
ratio by 2023. by assets per .
million EUR invested,
expressed as
a weighted average
---------------------------- ------------------------------ ------------------ ---------------------
Clearly communicate Clear governance Yes Yes
our ESG governance structures in
structure. ESG report (Y/N)
---------------------------- ------------------------------ ------------------ ---------------------
Average ratio
of female to
male board members
expressed as
a percentage
of all board
members (%) 40% 40%
------------------------------------------------------------------------- ------------------ ---------------------
Number of board
positions held
by a woman (#)
[35] 2 2
------------------------------------------------------------------------- ------------------ ---------------------
Number of board
members from
a non-white ethnic
Further diversify minority background
our Board. (#) 0 0
---------------------------- -------------------------------------------- ------------------ ---------------------
Ensure 100%
of our assets
are covered
by a Sustainable
Procurement Assets with Sustainable
Policy by June Procurement Policy
2023. (%) 0% 100%
---------------------------- -------------------------------------------- ------------------ ---------------------
Adopt a Supplier
Code of Conduct
and require
its adoption Tier 1 suppliers
by Tier 1 suppliers signed Supplier
by the end of Code of Conduct
June 2023. (#) [36] 0 26
---------------------------- -------------------------------------------- ------------------ ---------------------
Tier 2 suppliers
signed Supplier
Code of Conduct
(#) New KPI N/A 0
------------------------------------------------------------------------- ------------------ ---------------------
Encourage our
O&M contractors Assets with a
to use the waste Waste Management
hierarchy principles. Policy (%) 0% 100%
---------------------------- -------------------------------------------- ------------------ ---------------------
Task Force for Climate-related Financial Disclosures (TCFD)
1. Introduction
The Company's core objective, to provide attractive returns to
shareholders through investment in renewable energy infrastructure
assets, sets it in an advantageous position to capitalise upon
opportunities that arise from the transition to a low carbon
economy. However, climate change is dynamic and uncertain, and
societal response will be shaped by climate events of varying
severity and impact, depending on the trajectory that global
emissions take. With this in mind, the Company is committed to
ensuring a climate resilient strategy is in place, supported by
scenario analysis and risk management processes, to strengthen its
ability to deliver shareholder value in a changing world. The
following report explains how the Company is working to comply with
all eleven recommendations of the TCFD.
2. Governance
Board oversight
The Board of the Company has ultimate responsibility for and
oversight of climate-related risks and opportunities; please refer
to the Company's ESG report for how the Board oversee progress
against ESG (including climate) commitments and KPIs. The Board
remains well-informed of developing physical and transitional risks
and opportunities associated with climate change, and how these
might materialise in the Company's short, medium, and long-term
future, through close engagement with the Investment Adviser.
Moreover, the Board receives climate risk training on an annual
basis.
Given the nature of the Company, every investment decision
considered by the Board is associated with renewable energy
infrastructure or supporting technologies. Therefore, the Board is
conversant in assessing climate-related opportunities in this
regard. Increased consideration of climate-related risks,
particularly physical risks, has therefore been the main area of
focus for the Company since adopting the TCFD recommendations.
Management
The Investment Adviser is responsible for day-to-day management
of ESG, including climate matters, and progress is regularly
communicated to the Board as described above. ESG is a Board agenda
item for both the Board of the Company and the Investment Adviser,
where it is discussed as part of wider strategic priorities and
risk management.
Roles and responsibilities concerning ESG matters, which include
climate, are defined within the Company's ESG structure above. The
Investment Adviser oversees the implementation of the Company's ESG
Strategy, which includes a Climate Change Mitigation pillar and
specific climate-related commitments and KPIs. In line with this
strategy, the Investment Adviser works with the Company's key
service providers to embed climate considerations across the
investment lifecycle, including pre-investment due diligence, asset
management and reporting. Asset data collected from service
providers is collated by the Investment Adviser and used to inform
the ongoing assessment of climate-related risks and
opportunities.
3. Strategy
During the reporting period, the Company used scenario analysis
[37] to better characterise its most material climate-related risks
and opportunities, and understand how they could materialise over
short, medium, and long-term time horizons (2030, 2040 and 2050,
respectively). Two scenario analyses were undertaken: the first
assessed risks associated with the transition to a low carbon
economy, and the second focused upon the impacts of "extreme heat";
identified as a salient physical risk to the Company during
previous climate screening workshops. The scenarios used for the
analyses are outlined in table 1. The methods used to conduct the
analysis are described in the Risk Management section.
Warming implications
------------ --------------------------------------------- ------------------------
Description of Scenario Physical Transitional
============================================= ========= =============
Net Zero Global cooperation for effective <2degC 1.5degC
by 2050 regulation & mitigation of emissions,
avoiding the worst impacts of climate
change. Shifts occur gradually
toward a more sustainable & inclusive
path, meeting Paris Agreement goals.
============================================= ========= =============
Delayed Progress is delayed; effective 2-4degC <2degC
Transition policies are not introduced until
2030 or later, and in a more rapid
and disruptive manner. Warming
exceeds 2degC and a degree of environmental
degradation occurs, but damages
are constrained by improvements
in energy and resource use.
============================================= ========= =============
Current Continued emphasis on economic >4degC >3degC
policies growth and technological progress.
Effective policies to decarbonise
are not introduced globally and
there is continued reliance on
fossil fuels, leading to high levels
of warming, which could exceed
4degC.
--------------------------------------------- --------- -------------
Table 1: Scenarios used for transitional and physical scenario
analyses, based on established climate models. Broad alignment
exists between each set of scenarios, despite slight differences in
warming implications.
Risk & Opportunities
Extreme Heat
Above a certain temperature threshold (around 25degC), heat can
start to affect multiple components of PV systems, resulting in
efficiency losses in PV modules, accelerated PV cell damage, and
inverter failure. As average temperatures increase with climate
change, the IPCC predicts extreme heat events will become more
frequent and severe [38] , presenting a risk to the Company's
portfolio over the short, medium, and long-term. Extreme heat on PV
systems was therefore the focus of the Company's first physical
scenario analysis.
During the summer of 2022, temperatures in the UK exceeded
40degC for the first time, deemed by the Met Office as "virtually
impossible" [39] without human-induced climate change.
In addition to PV systems, the impact of extreme heat on battery
storage systems was evaluated. Analysis of technical specifications
revealed that battery storage systems are resilient to the UK
temperature ranges predicted across all three scenarios, with
in-built cooling systems able to maintain internal ambient air
temperature and therefore optimal asset performance. Therefore,
based on the current analysis, it was concluded that extreme heat
is unlikely to present a material risk to the operation of battery
storage systems adopted into the Company's portfolio in the
future.
Table 2: Physical scenario analysis, with focus upon the
potential impact of extreme heat on the Company's current solar PV
portfolio.
Driver Description Risk Impact Opportunity Time
Horizon
Extreme Declines in Yield reductions, which Increased temperatures [L] Impact
heat PV performance translate directly into are unlikely grows
occur above revenue losses, were to present as over
their optimum forecasted in all three an opportunity. time,
operating temperature scenarios modelled, Extreme heat reaching
(25degC). Increasing with the greatest impact can reduce the peak
average annual felt in the >4degC scenario voltage a PV in the
temperatures in the mid-long term. panel can generate long
are set to heighten County-level generation and lower its term.
this chronic and temperature scenarios efficiency. However,
risk, incurring were mapped and overlain, estimated financial
yield losses revealing the South losses are small
of varying degrees East to be potentially compared to projected
depending on most exposed to yield-related revenues, especially
scenario. financial losses, although with high energy
cross-county differences prices. Potential
were small. The extent impact can also
of financial loss will be reduced through
also depend on future proactive maintenance.
energy prices, which
have displayed significant
volatility over the
past few years.
Extreme heat The analysis revealed The Company has [L]
can induce inverter much greater variation an opportunity As above.
and transformer in county-level yield to navigate the
failure, representing losses, enabling the risk through
an acute risk. parts of the portfolio enhanced pre-investment
Portfolio exposure most exposed to this due diligence
was modelled risk to be identified. and targeted
per scenario In a 2-4degC scenario, resilience measures
based on the the majority of the for assets within
number of days Company's generation regions at greatest
incurred over is not located in the risk. Further,
an extreme heat most affected counties. battery technologies
threshold, set However, a greater proportion were assessed
at 33degC based may become exposed in to be resilient
on historic a >4degC scenario, as to extreme heat
events experienced more counties experience impacts in all
by the portfolio. frequent and severe scenarios; supporting
heatwaves. The unpredictable revenues into
nature of acute heat the long-term.
events may result in
non-linear financial
impact. Further, other
risks associated with
extreme heat which were
not modelled, such as
equipment damage and
staff safety & productivity,
may compound costs and
revenue losses.
Changing Changes in wind Turbines can stop generating TBC - analysis TBC -
wind patterns conditions may at high wind speeds to be conducted analysis
impact generation and there is potential in FY23-24. to be
of the Company's for asset damage. conducted
wind portfolio. in FY23-24.
Storms are likely The Company will undertake
to become more a second physical scenario
common and are analysis to better characterise
more unpredictable the impact of changing
compared to wind patterns on its
other physical wind portfolio.
risks.
=============== ======================= ================================= ========================= =============
Transition Risk
The transitional scenario analysis qualitatively assessed the
impact of potential policy, regulatory, technology, and market
changes associated with mitigative and adaptative responses to
climate change.
Table 3: Transitional scenario analysis undertaken in relation
to the Company's investments.
Driver Description Risk Impact Opportunity Time
Horizon
Technology Rapid technological Accelerated asset Advancements in renewable [M] [L]
advances advances stimulated depreciation technologies may result
in the energy by ambitious over the long-term, in greater yields
sector climate policy felt most strongly and therefore higher
action in a in a 1.5degC or <2degC revenues. Technology
1.5degC and scenario , may result advancements in the
<2degC scenario. in significant expenditure 1.5degC and <2degC
to upgrade the portfolio. scenarios would coincide
Service provider costs with asset end of
may increase to support life for most of the
upskilling around new portfolio; repowering
technologies; existing assets with new
risks around technical technologies
labour shortages could could be a significant
be exacerbated. Novel growth opportunity.
technologies, such In the >3degC scenario,
as Carbon Capture and efficiency improvements
Storage (CSS), could are likely, but do
extend the viability not offer the same
of the fossil fuel degree of transformational
industry, prolonging opportunity.
current competition
into the long term.
Business Enhanced scrutiny More decisive policy The 1.5degC scenario [S] [M]
reputation over the Company's action in the 1.5degC stimulates immediate [L]
in the low perceived contribution scenario encourages demand for sustainable
carbon transition to or detraction intensive scrutiny investments and energy
from the transition in the short-term, in the short-term;
to a low-carbon with greater expectations the Company has a
economy is around value chain great opportunity
both a risk oversight. Should this to fulfil this,
and opportunity result in the worst demonstrating
in each scenario. climate damages being climate leadership.
The degree avoided, risks diminish Opportunities are
and timing as sustainability becomes highest in the <2degC
are dependent "the norm". Reputational scenario over the
on business risks are highest in long-term, as there
responses to the mid-term in the will be aggressive
pressure exerted <2degC scenario, as decarbonisation to
by stakeholders. timelines to halt warming try and reach 2050
contract. Policy inertia milestones. The Company's
could also trigger strong reputation
increasing pressure will help catalyse
on companies from further investment.
non-government
stakeholder groups,
as physical climate
impacts heighten.
Policy Stringency Risks are most apparent Opportunities associated [L]
& legal of climate in the 1.5degC and with policy changes
action to policy action <2degC scenarios, in match or exceed the
constrain is a distinguishing the long-term, by virtue level of risk predicted
polluting factor between of decisive policy across all scenarios
activities scenarios; action. The most extensive and time horizons.
knock-on impacts policy & legal action A policy environment
could be felt is needed for <2degC, which favours renewables
in the market as prior government is expected to cause
and on the inaction forces accelerated carbon price spikes
Company's reputation. timescales to reach and channel greater
decarbonisation goals. investment into renewables,
An attractive policy both from ethical
environment may encourage investors and due
renewables market entry to government incentives
by large players, including supporting the clean
those in the oil & energy transition.
gas industry, resulting
in market saturation
and increased
competitivity.
The level Shifts in supply Disruptive market A turbulent market [M] [L]
& timing and demand interventions environment could
of government for certain are anticipated in generate ample
market intervention commodities the medium-term in opportunities
are expected the <2degC scenario, for the Company; a
as they are as governments steer sudden rush to transition
repriced in the economy to limit may cause spikes in
a low-carbon warming. Market volatility the demand for renewables.
economy. Resultant and supply chain shocks Aggressive decarbonisation
impact on financial may impact the Company's in the <2degC scenario
markets could key service providers is expected to offer
create market and suppliers into the greatest opportunity.
uncertainty the long-term, due Opportunities in the
and disruption. to shortages and inflated >3degC scenario remain
costs in spares. Stranded static over the short-
assets and wider economic to long-term, as less
slowdown are possible incentive exists for
as disjointed policy markets to shift to
action curtails economic low carbon energy
growth. sources.
===================== ======================== ============================ ============================ =========
Resilience
Drawing on the results from both analyses, the Company has
assessed its resilience to climate-related risk in each of the
scenarios, summarised below. Work will continue to integrate
findings from the scenario analyses into the Company's risk
management processes, strategic and investment-related decisions,
and financial planning.
Net Zero (1.5degC - 2degC)
Due to the nature of its investments, few transitional risks are
expected to present a high risk to the Company. The greatest risks
in this scenario come from technology change in the long-term. This
could quicken the rate of asset depreciation and require large
scale investment to install new technologies across the portfolio.
However, the Company views the accompanying opportunity as high.
Technological progress may lead to greater yielding PV assets as
well as better battery storage solutions, combining to increase
revenues. Policy and legal shifts are also likely to present high
opportunities over the long-term, which the Company is well placed
for, as they create conditions conducive to growth of the
portfolio.
Delayed Transition (2-4degC)
In a Delayed Transition, the medium-term is more disruptive than
the other scenarios. This is due to significant shifts required to
move to a low-carbon trajectory, compensating for previous
inaction. Again, this creates both risks and opportunities to the
Company. Market shifts are particularly likely: service providers
may face supply chain issues, and revenues may be exposed to risk
from volatility in power prices. However, the opportunity from a
delayed transition is that there is a sudden shift away from fossil
fuels which is likely to cause a demand spike for renewable energy.
With the Company's growing portfolio and development pipeline, it
can facilitate this increased demand. Reputational opportunities
are also highest in this scenario in the long-term, as increased
value is placed on sustainability credentials to limit warming. In
a 2-4degC scenario, chronic physical risk increases over time as PV
cells incur greater yield losses with rising temperatures, but to a
lesser extent than in the >4deg scenario. Similarly, incidences
of acute heat events are likely to increase over time but are less
impactful in this scenario, as much of the Company's generation
capacity is located away from the anticipated worst affected
counties.
Current Policies (>3, >4degC)
The Company is generally exposed to lower transitional risks and
opportunities in this scenario. As a provider of renewable energy,
it stands to gain from a transition to a low carbon economy. If
this does not occur, there may be reduced opportunities to grow the
portfolio, especially compared with other scenarios. A lack of
climate policy and action will result in the greatest increase in
both average and extreme temperature, making the physical risk to
assets most severe in this scenario. It is anticipated that battery
assets will be resilient to these effects, therefore, the Company's
focus will be on using the results of the climate modelling to
inform mitigation measures to enhance the resilience of its solar
portfolio to growing heat-related risk.
4. Risk Management
Risk identification and assessment
Risks, including those relating to climate, are identified,
assessed, and discussed by the Audit and Risk Committee and
included as part of the Company's risk matrix. The Board currently
uses a 1-3 rating to assess the potential likelihood and impact of
any particular risk occurring. The risks are assessed in a pre- and
post- mitigated setting, to map risks into a composite score
ranging from 1-9.
During the reporting period, the Board adopted risk time
horizons; these have been applied against all risks within the
Company's risk register. Principal and emerging risks are disclosed
annually within the Company's Financial Accounts.
Last year, the Company undertook a climate materiality
assessment to identify physical and transitional climate-related
risks considered to have the greatest potential to impact its
investments, revenues, and organisational expenditure. This year,
through the means of scenario analysis, the Investment Adviser
sought to better characterise the impacts of identified material
risks.
Extreme heat was prioritised for the physical analysis,
examining the impacts on solar PV (being the dominant asset class
in the Company's portfolio) and battery storage (an asset class it
intends to grow over coming years). The scenarios used in the
physical analysis were derived from Shared Socioeconomic Pathways
(SSPs) [40] ; the transitional scenarios were derived from global
climate models produced by the Network for Greening the Financial
System (NGFS) [41] . The SSP pathways denote higher warming
potential, which better highlights physical risks, whilst the NGFS
pathways more effectively portray transitional impacts. The results
of this analysis are presented in the 'Strategy' section of this
report and will continue to be developed and integrated into
business strategy and financial planning.
On a daily basis, asset management and O&M service providers
identify, escalate, and respond to climate-related incidents
impacting the Company's assets. Irregularities in generation are
flagged in real time by monitoring teams who diagnose the issue,
classify the risk, and communicate it to asset management and
O&M teams through incident reports. Examples of risks
classified as "climate-related" include string-level identification
of inverter failures during heatwaves and downtime of wind turbines
due to storm activity.
Climate considerations are integrated into pre-investment ESG
due diligence and are a key consideration within the Company's ESG
strategy, ensuring the long-term management of climate matters
post-investment. Development partners, including Bluefield
Renewables Development Limited, ensure that climate factors are
considered during the development process of new assets, for
example through flood risk assessments.
The Company is also taking steps to build a more resilient
supply chain. For instance, the Company has developed a Supplier
Code of Conduct to communicate its ESG expectations, including the
measurement and reduction of greenhouse gas emissions.
Mitigation measures relating to transitional risks are presented
in Table 4; those relating to physical risks are presented within
the Company's 2022 TCFD Report.
Table 4: Mitigation measures used by the Company to manage
transitional climate-related risks.
Technology The Investment Adviser models the operational asset life, taking
advances account of depreciation and physical degradation, to forecast
NAV and portfolio revenue. Outputs feed into the Company's
risk register and are regularly updated to inform long-term
scenario planning. This enables active risk management, including
the arrangement of appropriate contingency funds for equipment
failure and longer-term decision-making around asset repowering
and equipment upgrades, helping reduce NAV depreciation. Diversification
is another important resilience mechanism, allowing the Company
to expand into alternative technologies; it has recently upscaled
battery storage funding in its development pipeline. The Company's
expanding development capacity also gives it greater scope
to implement new technologies as they become commercially viable.
Business The Company's continued transparency regarding the climate
reputation actions it is taking, including voluntary alignment with the
TCFD, will help mitigate against reputational risks. Robust
compliance with ESG regulation will further support this. Within
its ESG report, the Company reports both its achievements (through
a comprehensive set of commitments and KPIs) and challenges,
ensuring a balanced perspective. These actions stand to strengthen
the Company's reputation and financial benefit could be realised
in the form of increased investment, as investor preferences
shift towards low carbon energy.
Policy The Investment Adviser's legal counsel keeps abreast of upcoming
& legal policy and legal changes, and external legal and technical
action advisers support the Company in maintaining compliance with
applicable policy and regulation. The Company has developed
a robust set of policies and procedures to externalise ESG
expectations to third parties, helping cascade best practice
across the wider supply chain. As a FCA regulated entity, the
Investment Adviser evidences the highest standards of professional
conduct.
Market The Company's investment strategy of owning and operating predominantly
disruption subsidised assets provides strong visibility of revenues and
helps protect the Company against future regulatory changes
in power markets. The Investment Adviser supplements this by
continuously monitoring new long-term fixed revenue streams
that are becoming available. For example, it has secured contracts
for difference (CfD) as part of the UK Government's fourth
allocation round, enhancing revenue visibility and security.
In the future, the Company is expected to diversify its revenue
streams through investment in batteries, which benefit from
power price volatility. Novel revenue streams and technologies
are continually evaluated for their ability to enhance the
resilience of the Company's long-term investment objective.
============ ==========================================================================
5. Metrics and Targets
Metrics
The financial performance and overall success of the Company is
intrinsically linked to opportunities that result from the
transition to a low carbon economy. The Company monitors this
through metrics relating to returns and dividends paid to
shareholders, which are underpinned by the total generation yield
of the portfolio.
The Company also tracks its ESG performance against a set of
commitments and KPIs, enabling the Company to manage its ESG risks
and opportunities alongside financial objectives. Insights from
scenarios analyses will be used to inform metrics used by the
Company to assess and monitor climate-related risks and
opportunities.
GHG Inventory results
The Company's GHG inventory relating to the reporting period is
presented in Table 5 ([42]) , calculated in line with the GHG
Protocol Corporate Accounting Standard. DEFRA GHG reporting
conversion factors, DEFRA conversion factors by SIC, and AIB
residual mix emissions factor datasets were used in the analysis
(corresponding with the period emissions were incurred).
Location-Based % of Market-Based % of
Emissions (tCO2e) total Emissions (tCO2e) total
Scope 1 19 0% 19 0%
------------------- ------- ------------------- -------
Scope 2 1,244 4% 1,422 5%
------------------- ------- ------------------- -------
Scope 3 27,963 96% 27,963 95%
------------------- ------- ------------------- -------
Purchased Goods & Services 27,535 27,535
------------------- ------- ------------------- -------
Fuel- and Energy-Related
Activities 427 427
------------------- ------- ------------------- -------
Waste Generated in Operations 1 1
------------------- ------- ------------------- -------
Total 29,226 29,404
------------------- ------- ------------------- -------
Table 5: the Company's GHG emission inventory for the period 1
July 2022 - 30 June 2023, highlighting emission results per
category.
The Company defines its organisational boundaries using the
Operational Control approach as per the GHG Protocol Corporate
Standard. Under this approach, the Company will account for 100% of
the GHG emissions from sources over which it has operational
control.
Table 5 presents the results of the Company's GHG inventory for
the financial year ended 30 June 2023. The Company has enhanced its
GHG accounting methodology since its first inventory (published in
its previous annual report for the financial year ended 30 June
2022), expanding the scope 3: Purchased Goods and Services category
boundary to include spend data from every SPV, holding company and
parent company within the Company structure. For this reason, the
results previously published are not comparable with the data
presented in Table 5.
These changes increased the accuracy of the Company's inventory,
and the Company will continue to evaluate and adjust its GHG
accounting methodology as it evolves its approach. The Company will
review opportunities to enhance the accuracy of scope 3 data, given
that this represents the majority of the footprint. The Company is
working to continually improve its GHG inventory; however, some
aspects of data collection remained challenging, and as a result, a
small proportion of data was estimated or extrapolated.
The Company engages an external consultant to calculate its GHG
inventory. The Company published emissions data relating to the
year ended 31 December 2022 as part of its SFDR PAI statement.
During the calculation of the inventory covering year ended 30 June
2023, an error was identified within the Purchased Goods &
Services category of scope 3, which resulted in an overstatement of
the Company's scope 3 emissions. As a result, a revised methodology
was applied to both inventories. This also involved a review and
update of the emissions factors used within the calculations to
further increase accuracy. The Company has since updated its SFDR
PAI statement to reflect any changes concerning the reference
period ending 31 December 2022.
Climate-related targets
The Company's refreshed ESG commitments and KPIs are presented
above. Most notably, during the coming year the Company has
committed to developing a Net Zero pathway, which will involve the
creation of decarbonisation targets, further enhancing the metrics
used by the Company to manage climate-related risks and
opportunities. The Company will also undertake a second physical
scenario analysis, this time focused upon the impact of changing
wind patterns on the Company's wind assets, to provide a more
holistic view of the potential impacts of climate change on its
portfolio. The results will feed into the creation of a climate
adaptation plan for the portfolio.
Strategic Report
1. Company's Objectives and Strategy
The Company seeks to provide Shareholders with an attractive and
sustainable return, principally in the form of quarterly income
distributions, by investing primarily in solar energy assets
located in the UK. The Company also invests a minority of its
capital into other renewable assets, including wind and energy
storage.
Subject to maintaining a prudent level of reserves, the Company
aims to achieve the quarterly income distributions through
optimisation of asset performance, acquisitions and the use of
gearing. The Company's original dividend target for the financial
year ended 30 June 2023 was 8.40pps. Having now declared four
interim dividends totalling 8.60pps, the Company is pleased to have
exceeded this target.
The Operational and Financial Review section below provides
further information relating to performance during the year.
2. Company's Operating Model
Structure
The Company holds and manages its investments through a UK
limited company, Bluefield Renewables 1 Limited (BR1), in which it
is the sole shareholder.
[chart]
Management
Board and Committees
The independent Board is responsible to Shareholders for the
overall management of the Company. The Board has adopted a Schedule
of Matters Reserved for the Board which sets out the particular
duties of the Board. Such reserved powers include decisions
relating to the determination of investment policy, approval of new
investments, oversight of the Investment Adviser, approval of
changes in strategy, risk assessment, Board composition, capital
structure, statutory obligations and public disclosure, financial
reporting and entering into any material contracts by the
Company.
Through the Committees and the use of external independent
advisers, the Board manages risk and governance of the Company. The
Board consists of five independent non-executive Directors, three
of whom are Guernsey residents. See the Corporate Governance Report
for further details.
Investment Adviser
The Investment Adviser's key responsibilities include
identifying and recommending suitable investments for the Company
and negotiating the terms on which such investments will be
made.
Through a Technical Services Agreement with BR1 the Investment
Adviser is also responsible for all issues relating to the
supervision and monitoring of existing investments. The Company has
appointed BSL, a company with the same ownership as the Investment
Adviser, to provide asset management services for the Company's
portfolio. BOL and BRD also have the same ownership as the
Investment Adviser and provide operational management for the
majority of the Company's investments and a pipeline of development
projects for the Company, respectively.
During the Period the Investment Adviser was paid a fee
equivalent to 0.8% of NAV at 30 June 2023 (0.6% at 30 June 2022),
reflecting the increase in the Company's assets. A summary of the
fees paid to the Investment Adviser is given in Note 16 of the
financial statements. The fees paid to BSL, BRD and BOL, the Solar
Asset Management, New Build Development and Operations and
Maintenance businesses under common ownership with the Investment
Adviser, are also detailed in Note 16.
Administrator
The Board has delegated administration and company secretarial
services to the Administrator. Further details on the
responsibilities assigned to the Investment Adviser and the
Administrator can be found in the Corporate Governance Report.
Employees and Officers of the Company
The Company does not have any employees and therefore policies
for employees are not required. The Directors of the Company are
listed below.
Investment Process
Through its record of investment in the UK renewable energy
market, the Investment Adviser has developed a rigorous approach to
investment selection, appraisal and commitment.
Repeat transaction experience with specialist advisers
The Investment Adviser has worked with a range of specialist
advisers from multiple disciplines in each of the transactions it
has executed in the UK and European markets and is able to source
relevant expertise to address project issues both during and
following a transaction.
Application of standardised terms developed from direct
experience
The Investment Adviser has developed standardised terms which
have been specifically tested by reference to real transaction and
project operational experience. Whilst contract terms are
specifically negotiated and tailored for each individual project,
the Investment Adviser always includes contractual protection
regarding recovery of revenue losses for underperformance and
obligations for correction of defects.
Rigorous internal approval process
All investment recommendations issued to the Company are made
following the formalised review process described below:
(1) Investment origination and review by Managing Partners
Before incurring costs in relation to the preparation of a
transaction, a project is concept reviewed by the Investment
Adviser's Managing Partners, following which a letter of interest
or memorandum of understanding is issued, and project exclusivity
is secured.
(2) Director Concept Approval
In the event that material costs are to be incurred in pursuing
a transaction, a concept paper is issued by the Investment Adviser
for review by the Board. This fixes a project evaluation budget as
well as confirming the project proposal is in line with the
Company's investment policy and strategy and aligned to ESG
principles.
(3) Due diligence
In addition to applying its direct commercial experience in
executing renewable energy acquisitions and managing operational
projects, the Investment Adviser engages legal, technical, ESG and,
where required, insurance and accounting advisers from its
extensive network to undertake independent due diligence.
(4) Bluefield Partners LLP Investment Committee
Investment recommendations issued by the Investment Adviser are
made following the submission of a detailed investment paper to the
Investment Committee. The Investment Committee operates on the
basis of unanimous consent and has a record of making detailed
evaluation of project risks. The investment paper submitted to the
Investment Committee discloses all interests which the Investment
Adviser and any of its affiliates may have in the proposed
transaction.
(5) Board approval
Following approval by the Investment Adviser Investment
Committee, investment recommendations are issued by the Investment
Adviser for review by the boards of the Company and BR1. The boards
undertake detailed review meetings with the Investment Adviser to
assess the recommended projects. If the boards of both the Company
and BR1 approve the relevant transaction, the Investment Adviser is
authorised to execute it in accordance with the Investment
Adviser's recommendation and any condition stipulated in the
boards' approvals. The boards are regularly updated on the pipeline
of potential new investments to help provide context for capital
allocation decisions.
(6) Closing memorandum
Prior to executing the transaction, the Investment Adviser
completes a closing memorandum confirming that the final
transaction is in accordance with the terms presented in the
investment paper to the Investment Committee; detailing any
material variations and outlining how any conditions to the
approval of the Investment Committee and/or Board approval have
been addressed. This closing memorandum is countersigned by an
appointed member of the Investment Committee prior to completing
the transaction.
Managing conflicts of interest
The Investment Adviser is regulated by the FCA and is bound by
conduct of business rules relating to management of conflicts of
interest. The Board has noted that the Investment Adviser has other
clients and has satisfied itself that the Investment Adviser has
procedures in place to address potential conflicts of interest
which, together with any mitigation measures, are disclosed in the
investment recommendation for each investment.
3. Investment Policy
The Company invests in a diversified portfolio of renewable
energy assets, all located within the UK, with a focus on utility
scale assets and portfolios on greenfield, industrial and/or
commercial sites. With a focus on solar the Company has the ability
to invest up to 25% of the Company's GAV into complementary
renewable technologies, principally wind and storage. The Company's
responsible investment approach is discussed in section 4 of the
Strategic Report.
Individual assets or portfolios of assets are held within SPVs
into which the Company invests through equity and/or debt
instruments. The Company typically seeks legal and operational
control through direct or indirect stakes of normally 100% in such
SPVs, but may participate in joint ventures or minority interests
to gain exposure to assets which the Company would not be able to
acquire on a wholly-owned basis. In the situation of joint ventures
or minority interests, the Company would ensure a high degree of
influence over decisions.
The Company may, at holding company level, make use of both
short term debt finance and long term structural debt, but such
holding company level debt (when taken together with the SPV
finance noted above) will not exceed 50% of the GAV. It may also
make use of non-recourse finance at the SPV level to provide
leverage for specific renewable energy infrastructure assets or new
portfolios provided that at the time of entering into (or
acquiring) any new financing, total non-recourse financing within
the portfolio will not exceed 50% of GAV.
While it is not the Company's policy to be a long term holder of
non-UK assets, the Company can invest up to 10% of GAV into assets
outside the UK to enable it to acquire portfolios with a mix of UK
and non-UK assets. Furthermore, up to 5% of the GAV may be invested
into pre-construction UK solar development opportunities. As at 30
June 2023 this is less than 2%. The aggregate exposure to other
renewable energy assets, energy storage technologies, UK solar
development opportunities and non-UK assets will be limited to 30%
of the Company's GAV.
No single asset (excluding any third-party funding or debt
financing in such asset) will represent, on acquisition, more than
25% of the NAV.
The Company derives its revenues from the sale of ROCs, FiTs and
CfDs (or any such regulatory regimes that may replace them from
time to time) alongside the sale of electricity under power
purchase agreements with counterparties such as co-located
industrial energy consumers and wholesale energy purchasers.
The Company may invest up to 5% of GAV into developing further
UK solar development opportunities and purchase assets pre- or
post- construction in order to:
1. Maximise quality and scale of deal flow;
2. Optimise the efficiency of the acquisitions;
3. Minimise risk via appropriate contractual agreements ; and
4. Acquire assets using prudent assumptions.
Listing Rule Investment Restrictions
The Company currently complies with the investment restrictions
set out below and will continue to do so for so long as they remain
requirements of the FCA:
-- neither the Company nor any of its subsidiaries will conduct
any trading activity which is significant in the context of the
Group as a whole;
-- the Company must, at all times, invest and manage its assets
in a way which is consistent with its objective of spreading
investment risk and in accordance with the published investment
policy; and
-- not more than 10% of the GAV at the time the investment is
made will be invested in other closed-ended investment funds which
are listed on the Official List.
As required by the Listing Rules , any material change to the
investment policy of the Company will be made only with the prior
approval of the FCA and Shareholders.
4. Responsible Investment
As an investment company with a long-term horizon, the Company
is well positioned to integrate ESG considerations and evaluate
environmental and social impacts over time. ESG is embedded within
the Company's investment process, and a standalone ESG
questionnaire ensures detailed checks are made in relation to ESG
risks and opportunities, as identified by SASB standards. Diligence
is also undertaken in relation to requirements of the EU SFDR,
including in relation to PAI indicators and climate risk screening,
and the EU Taxonomy's Do No Significant Harm (DNSH) criteria. ESG
due diligence may be outsourced to a competent third party, with
the resulting reports reviewed by both the Investment and ESG
teams.
ESG due diligence is also undertaken on any Operations &
Maintenance (O&M) arrangements which may form part of the
investment opportunity, including in relation to topics such as
human rights, business ethics, and Health and Safety (H&S). ESG
continues to be integrated into the vetting and monitoring of
third-party service providers, including use of a comprehensive ESG
due diligence process in association with engineering, procurement,
and construction ("EPC") site contractors. Further information on
the Company's approach to supply chain management can be found
above.
Post-acquisition, there is active management of sustainability
issues over the operational lifetime of the assets. Each asset will
be subject to routine ESG data reporting to allow the remote
monitoring of ESG performance and fulfilment of ESG reporting
requirements. For a full breakdown of the Company's responsible
investment approach, please refer to the Company's Sustainable
Investment Policy , available on its website.
Principles for Responsible Investment; The Investment Adviser
has been signatory to the PRI since 2019
5. Operational & Financial Review for the period
Key Performance Indicators
As at 30 June As at 30 June
2023 2022
----------------------------------------------- ------------- -------------
Market Capitalisation (GBP'000s) 733,743 801,002
Total dividends per share declared
in relation to the year 8.60p 8.20p
NAV (GBP'000s) 854,189 858,391
NAV per share 139.70p 140.39p
Total Shareholder Return (2.03)% 14.55%
----------------------------------------------- ------------- -------------
Market Capitalisation (1)
The Directors regard the Company's market capitalisation as an
important secondary indicator of the trading liquidity in its
shares. The Company's market capitalisation - the market value of
its Ordinary Shares at the end of the Period - fell to GBP734m,
from GBP801m 12 months earlier. This reflects an increase in the
discount to underlying NAV.
Total Dividends Per Share Declared (1)
BSIF generates returns primarily in the form of distributions
and the Company has a progressive dividend target, so it is
important that the dividend increases each year. During the year
the dividend grew by 4.9% from 8.20pps to 8.60pps.
NAV
The Company's average NAV forms the denominator of the Total
Expense Ratio calculation and is thereby a determinant of BSIF's
total expense ratio. As the variable costs of running the company
tend to reduce with increasing NAV a larger NAV will reduce the
TER. The finite life of renewable asset leases will ultimately lead
to attrition of the Company's NAV. The Directors recognise this as
a significant feature and have expanded the mandate of the Company
in part to mitigate this effect.
NAV Per Share(1)
Whilst the Company's principal goal is to produce income, the
NAV per share movement informs our shareholders and the Board
whether this income has been produced at the expense of capital
growth. The NAV per share fell modestly during the year and
produced a negative return to capital, largely as result of
valuation uplifts deriving from strong demand for electricity and
renewable generation assets being offset by the impact of a higher
cost of capital in the sector.
Total Shareholder Return(1)
This is measure of the combined return to Shareholders from
dividend income and share price movements and whilst this should be
positive in the long-term, short term fluctuations in shareholder
and market sentiment can cause this number to be positive or
negative. The return of -2.03% for 2023 compared to the return of
14.55% in 2022 reflects the significant reduction in share price
during the year to 30 June 2023 following a substantial increase in
UK interest rates.
Acquisitions
See the Investment Adviser's Report in Section 2.
Portfolio Performance
See the Investment Adviser's Report under Sections 2 and 4.
The Company's PPA strategy is to enter into 18 to 36 month
electricity sales contracts, with contracting periods spread
quarterly across the portfolio in order to minimise the portfolio's
sensitivity to short term price volatility.
Summary Statement of Comprehensive Income
Year ended Year ended
30 June 2023 30 June 2022
GBP million GBP million
-------------------------------------------------------------- ------------------------- -------------------------
Total Income (Note 4 of the financial statements) 0.9 0.8
Change in fair value of assets (Note 8
of the financial statements) 48.2 175.4
Administrative expenses (Note 5 of the
financial statements) (2.3) (1.6)
Total comprehensive income 46.8 174.6
-------------------------------------------------------------- ------------------------- -------------------------
Earnings per share 7.65p 34.91p
Income for the period includes interest income and monitoring
fees paid by BR1 to BSIF.
The total comprehensive income before tax of GBP46.8 million
reflects the performance of the Company when valuation movements
and operating costs are included. Further detail on valuation
movements of BSIF's portfolio is given in the Report of the
Investment Adviser.
The Company's ongoing charges ratio for the Period was 1.00%
(2022: 1.02%), calculated in accordance with the AIC recommended
methodology, which excludes non-recurring costs and uses the
average NAV in its calculation. See below for a tabular calculation
of the Company's ongoing charges ratio.
6. Directors' Valuation* of Company's portfolio
The Investment Adviser, or an independent external valuer, is
responsible for preparing the fair market valuation recommendations
for the Company's investments for review and approval by the Board.
Valuations are carried out quarterly, as at 30 September, 31
December, 31 March and 30 June, with an external review as and when
the Board deems appropriate.
The fair market value adopted for the portfolio was GBP1,018.4m
(Note 8 of the financial statements), and is confirmed by an
alternative approach using a combination of discounted cash flows
of income generated from the portfolio of investments.
The Board reviews the recommendations of the Investment Adviser
to form an opinion of the fair value of the Company's investments.
A detailed analysis of the Directors' Valuation is presented in the
Report of the Investment Adviser.
7. Principal and Emerging Risks
Under the FCA's Disclosure Guidance and Transparency Rules, the
Board is required to identify those material risks to which the
Company is exposed and to take appropriate steps to mitigate those
risks.
These inherent risks associated with investments in the
renewable energy sector could result in a material adverse effect
on the Company's performance and value of Ordinary Shares. The
Company's risk register covers five main areas of risk:
-- Portfolio Management
-- Fund Operations
-- External
-- Emerging.
Each of these areas, together with the principal risks
associated with that category, is summarised in the table below and
includes commentary on the mitigating factors. The list is a subset
of a much larger set of risks which the Board reviews on a regular
basis. Emerging risks are identified in the course of Board
discussions and meetings and are recorded in a separate area of the
risk register.
During the Period, whilst the principal risks for the business
have not changed, there have been significant changes in key
assumptions as a result primarily of the continuing progress around
ESG and TCFD reporting, a bottom up review of the risk matrix has
been completed. This has led to the refreshed summary of principal
and emerging risks included in the table below.
* Directors' Valuation is an alternative performance measure to
show the gross value of the SPV investments held by BR1, including
their holding companies. A reconciliation of the Directors'
Valuation to Financial assets at fair value through profit and loss
is shown in Note 8 of the financial statements.
PORTFOLIO MANAGEMENT
Risk Potential Impact Mitigation
1. Portfolio Acquisition Poor investment decisions The Board reviews the
Risk or missed investment Company's
opportunities. investment pipeline with
the Investment Adviser,
who have substantial
experience
in the sector, on a regular
basis. Technical, legal,
financial and ESG due
diligence
is carried out prior to
acquisition of both
secondary
market and development
market assets, and the
Board review market pricing
comparisons where relevant
prior to transaction
approval.
Where large acquisitions
are planned, appropriate
sensitivity scenario
analysis
is carried out to properly
assess the potential
business
risks.
--------------------------------------- ---------------------------------------
2. Portfolio Operational Underperformance of The Investment Adviser
Risk wind, solar or storage presents quarterly
plant versus expectations operational
at acquisition. summaries, prepared by
BSL and BOL, respectively
the Company's Asset Manager
and Operations and
Maintenance
contractor, covering key
performance indicators
of each project performance
(including PR, availability
and generation) with
updates
on remediation programmes
as undertaken in order
to maintain forecasted
plant performance.
--------------------------------------- ---------------------------------------
3. Supply Chain Projects in the Company's BOL the Company's O&M
Risks development pipeline contractor
are becoming more costly has made strategic
to develop and may purchases
be subject to delays of long-lead time critical
due to supply chain components such as
risks. High dependency inverters
on Chinese components and transformers.
could impact availability The Company has a Modern
of components and present Slavery Statement and Human
potential reputational Rights Policy, and 'Human
risk. & Labour Rights' and
The Company is aware 'Responsible
of human rights risks & Sustainable Procurement'
associated with its are priority topics within
component supply chains, the Company's ESG strategy.
and also that these The Company has placed
supply chains are complex; great focus on enhancing
it recognises that its supply chain management
full traceability of practices, including
components is not currently adoption
possible. and roll-out of a Supplier
Code of Conduct during
the reporting period. The
Investment Adviser is part
of the Solar Energy UK
Supply Chain Taskforce,
which is focused upon
developing
systems and processes to
improve transparency and
sustainability within the
PV supply chain.
--------------------------------------- ---------------------------------------
FUND OPERATIONS
Risk Potential impact Mitigation
4. Valuation error Valuations of the SPV Valuations presented by
investments maybe over the Investment Adviser
or understated. are underpinned by comparisons
with other market transactions
and confirmed by the use
of long term DCF modelling.
The valuations are reviewed
and challenged by the Board
as a minimum on a semi-annual
basis.
The Investment Adviser
has recently improved the
valuation model to reduce
the risk of errors. Detailed
controls and internal review
procedures are in place
to mitigate the risk of
error.
Given the high level of
judgement and subjectivity
involved in setting the
assumptions that drive
the model, the Board robustly
challenges assumptions
made on a semi-annual basis
and uses third party data
wherever possible to support
inputs.
For example, to mitigate
the impact of future power
price volatility on the
Company's portfolio valuation,
blended power price curves
from three leading forecasters
are used in the portfolio
cash flow model. The portfolio
benefits from Government
subsidy in the form of
FiT and ROC income.
The Board will consider
the frequency of independent
reviews of the financial
model in conjunction with
the Investment Adviser.
----------------------------------- -------------------------------------------
EXTERNAL
Risk Potential impact Mitigation
5. Physical and Global climate change presents The Company continues
Transitional Climate both risks and opportunities to improve its climate
Related Risks to the Company. Whilst resilience. The Company
the Company is well positioned has embedded climate
to benefit from the opportunities considerations firmly
arising from a decarbonising within its ESG strategy,
economy, physical climate including adopting climate-related
impacts, particularly extreme commitments and KPIs,
heat and changing wind and voluntarily reports
patterns, have the potential in line with the TCFD.
to cause damage to assets Building upon its 2022
and impact generation, climate materiality
ultimately impacting revenues. assessment, in 2023
the Company undertook
its first transitional
and physical scenario
analyses, and this year
will develop a Net Zero
Pathway, in addition
to a Climate Adaptation
Plan for the portfolio.
The results of these
activities will be used
to inform the Company's
strategy and financial
planning, helping build
the climate resilience
of the portfolio over
time.
--------------------------------------------- ------------------------------------
Risk Potential impact Mitigation
6. Changing Electricity Annual income generation The Investment Adviser
Market Conditions of the Company is sensitive regularly updates the
to future power market portfolio cash flow
pricing. model to reflect future
Excessive movement in power market forecasts
power prices could destabilise and other relevant assumptions
the energy markets. including the discount
A major structural shift rate. Potential acquisitions
in power demand or supply are assessed using the
may impact the Company's most recent power market
ability to meet its dividend forecast data available
target. as well as how the revenue
generated from the sale
of electricity and subsidies
supports the Company's
existing portfolio.
This is to ensure the
Company continues to
benefit from material
levels of regulated
revenues (currently
c.60% to 2035-37) which
are directly correlated
to inflation. A rolling
programme of PPA contract
expiries is maintained,
ensuring that the Company
in any rolling 12 month
period has limited exposure
to significant movements
in near term power prices.
The Board has introduced
a new policy of fixing
10% of the portfolio
on floating PPAs, which
track the N2EX Day Ahead
market (as opposed to
a fixed price for the
term of the PPA). The
limited exposure to
the Day Ahead market
prices may allow the
capture of price spikes
during the period of
volatility in the wholesale
power market.
The Company is developing
new projects and has,
for Yelvertoft, committed
to a long term CfD.
Following a review of
the benefits of integrating
storage technologies
within its portfolio,
the Company is currently
developing battery storage
projects to benefit
from power price volatility.
----------------------------------- ----------------------------------
7. Changes in tax There may be unfavourable An independent taxation
regime tax related changes including review of the Company
restrictions on renewables, was carried out as part
or no relief on debt structuring. of the long-term debt
Measures to protect UK financing procurement
consumers from power price process. The Company
increases have been implemented engages tax advisers
and energy generators impacted to provide advice for
following the introduction all taxes across the
of the Levy. portfolio but also to
ensure compliance with
regulatory requirements.
This advice has recently
included the EGL implementation.
----------------------------------- ----------------------------------
8. Changes to Government The UK Government is currently The Investment Adviser
Plans consulting with industry provides regular updates
on plans to reform the in this regard within
UK Electricity Market (REMA), the quarterly Board
which may involve controls papers.
on future sales prices The Investment Adviser
for renewable generators. takes a proactive approach
to supporting the energy
transition, not only
through its advisory
role to the Company,
but also by engaging
and supporting the Government
to create a policy framework
which can enable Net
Zero. This includes
responding to government
consultations, meeting
with political leaders
across the political
spectrum to discuss
renewable energy and
working with partners
in the sector to engage
in relevant discussions
via the government's
Solar Energy Taskforce.
----------------------------------- ----------------------------------
9. Cyber risk Key stakeholders could A group head of IT has
exchange corrupt or virus been appointed by our
infected files with key Investment Adviser with
BSIF counterparties. Malicious specific responsibility
software or firmware may for cyber security.
cause damage to hardware Security protocols have
resulting in a loss of been strengthened and
generation or damage to all staff made aware
the grid. of emerging cyber risks
A cyber-attack at the grid with mandatory training
or one of the plants could being carried out. BSL
lead to the loss of generation. arranged penetration
The grid is susceptible testing of 48.2% of
to cyber attacks due to the solar PV portfolio.
its national infrastructure Recommendations are
importance. being implemented across
the portfolio, where
appropriate, to improve
security.
----------------------------------- ----------------------------------
10. Reputational Adverse publicity within Market responses have
risk the Renewable Energy sector been considered and
could damage the Company's agreed at all levels.
ability to raise additional The Board and the Investment
finance and/or acquire Adviser ensure the Company's
new capacity. activities are fairly
Reputational risk could and accurately presented
also arise from the Company's including through the
perceived contribution/detraction Broker, Stock Exchange
from the transition to announcements, press
a low carbon economy. This releases and the Company's
could also lead to an adverse website. Any incidences
impact on the share price of adverse publicity
and the inability to secure are monitored via the
planning permission on Company's PR adviser.
new developments. The Company's continued
transparency regarding
its climate actions,
including voluntary
alignment with the TCFD
and commitments made
within its ESG strategy,
will help mitigate against
reputational risks associated
with the energy transition.
A community engagement
programme is in place
to strengthen local
relationships.
----------------------------------- ----------------------------------
EMERGING RISKS
Risk Potential impact Mitigation
11. Access to capital Equity markets remain challenging. The Company considers
Access to additional equity all finance options
being hampered by the discount available to ensure
to NAV at which the Company's future deals are constructed
shares currently trade. in the most cost effective
Excessive inflation is way. The current level
likely to increase the of gearing, together
Company's cost of capital with a cash generative
and cost of operations. portfolio, will enable
future growth should
appropriate acquisitions
be identified.
Whilst the Company is
a net beneficiary of
inflation it is not
clear how quickly the
Government's actions
will reduce inflation;
these could lead to
a weaker currency and
a higher cost of capital.
The Company has increased
the tenor of its interest
rate hedges providing
protection in the event
of inflation not subsiding,
and the possibility
of more aggressive action
by the Bank of England.
---------------------------------------- ------------------------------
12. Evolving ESG The number of ESG reporting The Company's Investment
Reporting frameworks continues to Adviser works closely
increase, with little standardisation, with legal and technical
resulting in increased experts to remain on
costs and pressure on resources. top of the evolving
Inadequate ESG reporting ESG landscape and prepare
and/or non-compliance could for new frameworks as
lead to shareholder dissatisfaction they emerge. The Company's
and reduced demand for ESG commitments are
the Company's shares. refreshed annually,
to capture new regulatory
and reporting requirements.
Over the coming months,
the Company will assess
its alignment with the
IFRS sustainability
disclosure standards.
---------------------------------------- ------------------------------
Longer term viability statement
Assessing the prospects of the Company
The corporate planning process is underpinned by scenarios that
encompass a wide spectrum of potential outcomes. These scenarios
are designed to explore the resilience of the Company to the
potential impact of significant risks set out below.
The scenarios are designed to be severe but plausible and take
full account of the likely effectiveness of the actions to be taken
to avoid or reduce the impact of the underlying risks and which
would be open to management. In considering the likely
effectiveness of such actions, the conclusions of the Board's
regular monitoring and review of risk and internal control systems,
as discussed above, is taken into account.
The Board reviewed the impact of stress testing the quantifiable
risks to the Company's cash flows above and concluded that the
Company, assuming current and envisaged leverage levels, would be
able to continue to produce distributable income in the event of
the following scenarios:
Strategic
Report Risk
Factor
2. Plant performance degradation
of 1.0% per annum versus 0.4%
per annum
-------------------------------
2. Plant availability reduced to
95%
-------------------------------
5. P90 irradiation
-------------------------------
6. Power price set to GBP20/MWh
-------------------------------
The Board considers that this stress testing based assessment of
the Company's prospects is reasonable in the circumstances of the
inherent uncertainty involved. In accordance with the Articles,
every five years the Board is required to propose an ordinary
resolution that the Company should continue in business for a
further five years. At the 2018 AGM a shareholder vote resulted in
a 99.46% vote to allow the Company to continue in business. The
next continuation vote is due to be held at the 2023 AGM and the
Directors have no reason to believe that shareholders will vote
against continuation.
The period over which we confirm longer term viability
Within the context of the corporate planning framework discussed
above, the Board has assessed the prospects of the Company over a
five year period ending 30 June 2028. The Directors last year
increased the viability period from three to five years, reflecting
the maturity of the Company and the industry, and have determined
that the five year period remains an appropriate period to provide
this viability statement as this period accords with the Group's
planning purposes.
This period is used for our mid-term business plans and has been
selected because it presents the Board with a reasonable degree of
confidence whilst still providing an appropriate longer term
outlook.
Confirmation of longer term viability
Based upon the robust assessment of the principal and emerging
risks facing the Company and its stress testing based assessment of
the Company's prospects, the Board confirms that it has a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
to 30 June 2028.
These inherent risks associated with investments in the
renewable energy sector could result in a material adverse effect
on the Company's performance and value of Ordinary Shares.
The Company's risks are mitigated and managed by the Board
through continual review, policy setting and half yearly review of
the Company's risk matrix by the Audit and Risk Committee to ensure
that procedures are in place with the intention of minimising the
impact of the above mentioned risks. The Board last carried out a
review of the risk matrix at the Audit and Risk Committee meeting
held on 29 August 2023. The Board relies on periodic reports
provided by the Investment Adviser and Administrator regarding
risks that the Company faces. When required, external experts,
including tax advisers, legal advisers and ESG advisers, are
employed.
8. Stakeholder Engagement
Directors' Responsibilities Pursuant to Section 172 of the
Companies Act 2006
The Directors of the Company, by abiding by the AIC Code, aim to
achieve high standards in corporate governance. According to the
AIC Code, all member businesses, regardless of where they are
headquartered, are required to report on the items outlined in
Section 172 of the UK Companies Act 2006.
Section 172 recognises that directors are responsible for acting
in a way that they consider, in good faith, is the most likely to
promote the success of the company for the benefit of its
shareholders as a whole, with focus on the consequences of any
decision in the long term. In doing so, they are also required to
consider the broader implications of their decisions and operations
on other key stakeholders and their impact on the wider community
and the environment. A key stakeholder is one that either has a
direct stake in the Company or directly impacts the long-term
performance of the Company. Key decisions are those that are either
material to the company or are significant to any of the company's
key stakeholders.
The Board considers that the interests of the Company and its
stakeholders must be balanced for the Company to succeed. As a
result, the Board has summarised below some of the methods by which
it develops and maintains connections with its stakeholders, while
also considering the Company's effects on the environment and
broader society.
Stakeholder Group Methods of Engagement
Shareholders and Prospective The Company engages with its
Investors Shareholders through the issue
of regular portfolio updates
Our Shareholders and prospective in the form of RNS announcements
investors are integral to every and quarterly factsheets.
decision made by the Board.
A knowledgeable and supportive The Company provides in-depth
shareholder base is vital to commentary on the investment
the long-term sustainability portfolio performance, corporate
of our business. Understanding governance and corporate outlook
the views and priorities of in its annual and interim reporting.
our Shareholders is, therefore,
crucial to retaining their continued In addition, the Company, through
support. its brokers and Investment Adviser,
undertakes regular meetings
with existing and prospective
investors to solicit their feedback,
understand any areas of concern,
and share forward- looking investment
commentary.
The Company receives quarterly
feedback from its brokers in
respect of their investor engagement
and investor sentiment.
---------------------------------------------
Bluefield Partners LLP (the The Board frequently engages
Investment Adviser) with the Investment Adviser
through planned and ad hoc board
Our Investment Adviser is fundamental and committee meetings for receiving
to the Company's investment updates on operations of existing
and business objectives. Key investments and acquisitions.
responsibilities include identifying
and The Board receives quarterly
recommending suitable investments Board Packs from the Investment
for the Company to the Board Adviser, delivering the most
and negotiating the terms on pertinent and informative data
which such investments will on which the Board can base
be made on behalf of the Board. its decisions.
The Investment Adviser and the
Board review the Company's power
price fixing strategy and portfolio
valuation on a quarterly basis
and detailed cash flow forecasts
are discussed prior to each
dividend declaration.
The Board engages in strategic
planning with the Investment
Adviser with the aim of aiding
the Company in attaining its
investment goals and accomplishing
its purpose.
The Board engages with team
members from the Investment
Adviser's subsidiaries and involved
senior members of the asset
management team at BSL in the
recent audit tender which enhanced
the audit committee's decision-making
process.
---------------------------------------------
Ocorian Administration (Guernsey) The Board interacts with the
Limited (the Administrator, Administrator for day-to-day
Company Secretary & Designated administrative, fund accounting
Manager) and company secretarial services
via emails, calls and formal
Our Administrator provides essential and informal meetings.
services to the Board, ensuring
that Board procedures are followed The Company monitors ongoing
and that it complies with the performance at regular board
Law and applicable rules and meetings and the Management
regulations of the GFSC and Engagement and Service Providers
the LSE. Committee ('MESPC') reviews
terms of engagement and quality
of service provision annually.
The Board worked with Ocorian
to complete a detailed review
of its governance and committee
structure as part of its succession
planning strategy, which resulted
in the formation of an improved
committee structure.
---------------------------------------------
Regulators Activities of the Audit and
Risk Committee ('ARC'), including
Regulators are important stakeholders regular review of principal
in maintaining the Company's and emerging risks, oversight
listing and ensuring a sufficient of the Administrator and Investment
and transparent level of disclosure Adviser's adherence to internal
in its communications and reporting. control systems and procedures,
Because of this, Shareholders and thorough review of the interim
obtain accurate, timely, and and annual report and financial
relevant details regarding the statements ensures compliance
Company. Regulators include with required regulation.
the FCA in its function as the
UK Listing Authority, the FRC The ARC considered and applied
in its supervision of UK governance the FRC draft Minimum Standard
and accounting, as well as the in the design of its audit tender
GFSC. Membership of the AIC process which resulted in a
and compliance with the AIC more competitive, fair, and
Code is a fundamental part of transparent process.
ensuring the Company complies
with relevant guidance and regulation.
---------------------------------------------
Other Key Stakeholders and The Company has identified its
Advisers (Legal Advisors, Brokers, key service providers and on
Auditors, etc.) an annual basis the MESPC undertakes
a review of performance based
Establishing a productive and on a questionnaire through which
collaborative working relationship it seeks feedback. The MESPC
with our other key service providers also regularly reviews all material
and advisers ensures that we contracts for service quality
receive high quality services and value. Conclusions and recommendations
to help deliver the Company's drawn by the MESPC are fed back
investment and business objectives. to the Board for approval.
The MESPC recommended the appointment
of a new Registrar to enhance
service levels as a result of
this process.
The Board and its sub-committees
engage regularly with its service
providers on a formal and informal
basis.
---------------------------------------------
Lenders
The Investment Adviser provides
It is important to maintain quarterly compliance reporting
a strong working relationship to lenders in accordance with
with our existing lenders as the terms of the relevant facility
it is essential for the Company agreements.
to have funding available, as
it is needed, for investment The Company consults with the
and development pipeline purposes. lenders on matters which may
We aim to build strong relationships require their consent under
with existing lenders and potential the relevant facility agreements.
lenders who may provide debt
facilities in the future. The Board reviews the Company's
re-financing needs on a regular
basis and encourages early engagement
with lenders. The recent re-financing
of the NatWest facility involved
the novation of a 15-year residual
tenor 0.35% interest rate swap
which the Board had originally
encouraged the Adviser to secure
following engagement with this
lender.
---------------------------------------------
Government and Policy makers The Board encourages the Investment
Adviser to engage with senior
The Board believes that as the political leaders and their
Company provides a critical respective staff both directly
element of the United Kingdom's in face-to-face meetings and
electricity generation infrastructure indirectly via membership of
and de-carbonisation plans that industry representative bodies
it is important to engage with such as the Solar Industry Association.
both current and prospective
members of HM Government and As a result of this process
their departments to help to the Investment Adviser has been
ensure that the country's required invited to attend high-level
levels of the supply of renewable government briefings to industry
energy are achieved. members which have assisted
the Company in its strategic
planning.
---------------------------------------------
PPA Counterparties The Investment Adviser ensures
that when the PPAs are put in
These are counterparties who place, the end dates of the
purchase the electricity generated contracts are phased to ensure
by BSIF. a constant flow of revenue.
PPA counterparties are selected
on a competitive basis but with
a clear focus on achieving diversification
of counterparty risk. A quarterly
update on the contracts is provided
in the Investment Adviser's
Report presented to the Board.
---------------------------------------------
Portfolio Level Stakeholders The Company has agreements with
O&M providers to provide active
This includes O&M service providers, operation and maintenance services
grid connectors, planning authorities, for the operational portfolio.
landowners, developers, O&M
and other service providers. The Investment Adviser engages
with developers, for example
Light Rock Power Ltd or Bluefield
Renewable Developments, to provide
new build development opportunities
or run the solar farms by joint
venture. These developers interact
with planning authorities, landowners
and local communities and assess
the viability of projects.
---------------------------------------------
Community and Environment The Company has worked with
external consultants to develop
T he Company recognises that robust ESG policies and procedures.
its investments can have an
impact at the local level. Community 'Pioneering Positive Local Impact'
perception of renewable technology is a central pillar within the
is important as it feeds into Company's ESG strategy and social
local decision making, policy and environmental risks are
development and ultimately planning considered within the Company's
requirements. Engagement undertaken risk management processes.
as part of the planning process
helps develop positive relationships Community stakeholders are engaged
with local stakeholders and as part of the development process
obtain community support. Ecological of new assets, and once operational,
improvements, such as enhanced engagement is maintained through
biodiversity, can bring about administration of community
community gain, for example benefit funds. During the reporting
through visual accessibility period, the Company delivered
to nature, education, and conservation. an educational programme to
local schools; please refer
to the ESG report for further
information.
The Company's commitment to
minimising its adverse environmental
impacts and, where possible,
enhancing nature across its
portfolio is communicated via
its publicly available Biodiversity
Policy. The Company's Sustainable
Investment Policy also describes
the Company's approach to social
and environmental considerations.
---------------------------------------------
Based on stakeholder interaction mentioned in the previous
table, by way of example, a few key decisions made in the Period to
meet investor objectives are described in the following table:
Key Decision Impact on Long-term Stakeholder consideration
Success
The Board has approved The optimisation and The Company engaged
an annual investment enhancement of the with asset managers
cycle to facilitate operational portfolio and O&M service providers
a rolling programme will increase longevity to identify potential
of capital works to of the assets. projects and appropriate
optimise and enhance works programmes,
performance of selected then to scope, cost
assets. and deliver agreed
works. The Board believes
that proactive optimisation
of the portfolio will
benefit the performance
of the portfolio,
and in turn, Shareholder
returns.
---------------------------- --------------------------------
The Board has introduced The limited exposure The Company engaged
a new policy of fixing to the Day Ahead market external advisers
10% of the portfolio prices may allow the to assist with the
on floating PPAs, capture of price spikes drafting of a suitable
which track the N2EX during the period PPA template, then
Day Ahead market (as of volatility in the further negotiated
opposed to a fixed wholesale power market. with several licensed
price for the term suppliers including
of the PPA) to capture EDF, Smartest and
high prices during Engie. PPAs were then
periods of volatility executed following
in the wholesale power competitive tenders.
market.
---------------------------- --------------------------------
The Board has approved Increase of portfolio The Company, asset
investment to increase capacity through doubling managers and O&M providers
the capacity of two installed capacity maintain strong relationships
existing operational at each site. With with landowners which
assets. planning permits and result in further
grid capacity available development opportunities
from the original being offered to BSIF.
development phase, Legal advisers have
investment costs to been engaged to structure
extend the plants new lease agreements
are low. and negotiations with
EPC and ICP providers
are in progress.
---------------------------- --------------------------------
The Board approved Funding is available, The Company has further
a GBP110 million increase as needed, for investment diversified the lender
to its existing committed and development pipeline group through the
GBP100 million revolving purposes. engagement of Lloyds
credit facility ('RCF'), Bank Plc, alongside
bringing the total the existing lenders
committed amount to RBS International
GBP210 million. The and Santander UK.
facility also has
an uncommitted accordion
feature allowing it
to be increased in
size by up to a further
GBP30 million.
Enhancement of the Human and labour rights The suggestion to
Company's Modern Slavery are a key consideration further enhance the
Statement. for the Company, particularly Company's Modern Slavery
in relation to supply Statement was made
chains of key infrastructure by a shareholder during
(such as solar PV an ESG meeting with
panels). Association the Investment Adviser.
with human rights
risks may lead to
lack of demand in
Company shares and
reputational damage.
To mitigate risks
in this area and to
help ensure it is
benefitting from ethical
supply chains, the
Company is committed
to building robust
management and due
diligence practices
relating to human
rights, aligned with
global frameworks.
-------------------------------- ----------------------------------
Commitment to develop As a renewable energy The Investment Adviser
a Net Zero strategy. company, the Company relayed to the Board
is well positioned Shareholders' increasing
to support decarbonisation focus on Net Zero
of the UK energy sector. alignment. This was
However, it also takes considered when the
responsibility for Company's Year 2 ESG
its own carbon emissions, commitments were developed
and recognises the and adopted.
importance of reducing
these as part of evidencing
its own commitment
to the Net Zero transition.
-------------------------------- ----------------------------------
The Board has approved The Company's Audit Following an extensive,
the re-appointment and Risk Committee robust, and competitive
of KPMG Channel Islands made this recommendation tender process that
Limited as its external because KPMG offered was overseen by the
auditor for the financial a compelling case Company's Audit and
year ending 30 June for the provision Risk Committee, it
2024, subject to shareholder of a high-quality is the Company's intention
approval at its 2023 audit, while offering to re-appoint KPMG.
Annual General Meeting good value to Shareholders. The selection to re-appoint
KPMG was unanimously
recommended by the
Audit and Risk Committee
to the Board.
The Company notes
that it received some
votes against KPMG's
appointment and remuneration
at the AGM held on
29 November 2022 and
confirms that it has
consulted with the
majority of these
shareholders and determined
that the issues raised
related to a limited
list of approved auditors
preferred by one proxy
agency and the ratio
of non-audit to audit
fees in 2022 when
the Company incurred
corporate finance
fees for its most
recent capital raises.
-------------------------------- ----------------------------------
The Board has engaged Educate stakeholders Build pro-solar allies
with a PR specialist on importance of solar and generate political
to assist in taking power for energy security, relationships to aid
proactive steps to reduced emissions progress on the decarbonisation
influence HM Government and cost-reduction. of the UK energy markets.
on proposed energy
policies and gain
support for renewable
and sustainable energy.
-------------------------------- ----------------------------------
Paul Le Page Elizabeth Burne
Director Director
27 September 2023 27 September 2023
Report of the Directors
The Directors hereby submit the annual report and financial
statements of the Company for the year ended 30 June 2023.
General Information
The Company is a non-cellular company limited by shares
incorporated in Guernsey under the Law on 29 May 2013. The
Company's registration number is 56708, and it has been registered
and is regulated by the GFSC as a registered closed-ended
collective investment scheme and as a Green Fund after successful
application under the Guernsey Green Fund Rules to the GFSC on 16
April 2019. The Company's Ordinary Shares were admitted to the
Premium Segment of the Official List and to trading on the Main
Market of the London Stock Exchange following its IPO which
completed on 12 July 2013.
Principal Activities
The principal activity of the Company is to invest in a
portfolio of large scale UK based solar, wind and renewable energy
infrastructure assets.
The Company has a progressive dividend target. The dividend
target for the financial year ended 30 June 2023 was 8.40pps. Total
declared dividends for the Period have increased to 8.60pps.
Business Review
A review of the Company's business and its likely future
development is provided in the Chair's Statement above, in the
Report of the Investment Adviser above and Strategic Report
above.
Listing Requirements
The Company has complied with the applicable Listing Rules
throughout the year.
Results and Dividends
The results for the year are set out in the financial statements
below.
The dividends for the year are set out in the financial
statements in Note 14 below.
Share Capital
The Company has one class of Ordinary Shares. The issued nominal
value of the Ordinary Shares represents 100% of the total issued
nominal value of all share capital. Under the Company's Articles,
on a show of hands, each shareholder present in person or by proxy
has the right to one vote at general meetings. On a poll, each
shareholder is entitled to one vote for every share held.
Shareholders are entitled to all dividends paid by the Company
and, on a winding up, providing the Company has satisfied all of
its liabilities, the Shareholders are entitled to all of the
surplus assets of the Company. The Ordinary Shares have no right to
fixed income.
Shareholdings of the Directors
The Directors of the Company and their beneficial interests in
the shares of the Company as at 30 June 2023 are detailed
below:
Director Ordinary Ordinary
Shares of Shares of
GBP1 each % holding GBP1 each % holding
held 30 June at held 30 June at
2023 30 June 2022 30 June
2023 2022
------------------ -------------- ------------ -------------- ------------
John Scott* 625,619 0.10 543,312 0.09
Elizabeth Burne 15,000 0.00 15,000 0.00
Michael Gibbons - - N/A N/A
Meriel Lenfestey 7,693 0.00 7,693 0.00
Paul Le Page 35,000 0.01 35,000 0.01
John Rennocks* N/A N/A 290,388 0.05
------------------ -------------- ------------ -------------- ------------
*Including shares held by PCAs
Directors' Authority to Buy Back Shares
The Board believes that the most effective means of minimising
any discount to NAV which may arise on the Company's share price is
to deliver strong, consistent performance from the Company's
investment portfolio in both absolute and relative terms. However,
the Board recognises that wider market conditions and other
considerations will affect the rating of the Ordinary Shares in the
short term would consider share buy backs if it was assessed to be
an economically attractive investment opportunity. The means by
which this might be done could include the Company repurchasing its
Ordinary Shares. Therefore, subject to the requirements of the
Listing Rules, the Law, the Articles and other applicable
legislation, the Company may purchase Ordinary Shares in the market
in order to address any imbalance between the supply of and demand
for Ordinary Shares or to enhance the NAV of Ordinary Shares.
In deciding whether to make any such purchases the Board will
have regard to what it believes to be in the best interests of
Shareholders and to the applicable Guernsey legal requirements
which require the Board to be satisfied on reasonable grounds that
the Company will, immediately after any such repurchase, satisfy a
solvency test prescribed by the Law and any other requirements in
its Articles. The making and timing of any buybacks will be at the
absolute discretion of the Board and not at the option of the
Shareholders. Any such repurchases would only be made through the
market for cash at a discount to NAV.
On incorporation, the Company passed a written resolution
granting the Board general authority to purchase in the market up
to 14.99% of the Ordinary Shares in issue immediately following
Admission. A resolution to renew such authority was passed by
Shareholders at the AGM held on 29 November 2022. Therefore,
authority was granted to the Board to purchase in the market up to
14.99% of the Ordinary Shares in issue immediately following the
AGM held on 29 November 2022 at a price not exceeding the higher of
(i) 5% above the average mid-market values of Ordinary Shares for
the five Business Days before the purchase is made or (ii) the
higher of the last independent trade or the highest current
independent bid for Ordinary Shares. The Board intends to seek
renewal of this authority from the Shareholders at the next AGM
scheduled to be held on 28 November 2023.
Pursuant to this authority, and subject to the Law and the
discretion of the Board, the Company may purchase Ordinary Shares
in the market on an ongoing basis with a view to addressing any
imbalance between the supply of and demand for Ordinary Shares.
Ordinary Shares purchased by the Company may be cancelled or
held as treasury shares. The Company may borrow and/or realise
investments in order to finance such Ordinary Share purchases.
The Company did not purchase any Ordinary Shares for treasury or
cancellation during the Period.
Directors' and Officers' Liability Insurance
The Company maintains insurance in respect of directors' and
officers' liability in relation to their acts on behalf of the
Company. Insurance is in place, having been renewed on 12 July
2023.
Substantial Shareholdings
As at 30 June 2023, the Company had been notified, in accordance
with chapter 5 of the Disclosure Guidance and Transparency Rules of
the following substantial voting rights over 3% as Shareholders of
the Company.
Shareholder Shareholding % Holding
---------------------------------------- ------------- ----------
BlackRock 93,066,301 15.22
Gravis Capital Management 38,053,279 6.22
Newton Investment Management 37,902,512 6.20
Hargreaves Lansdown, stockbrokers (EO) 32,187,797 5.26
abrdn Capital 30,194,736 4.94
CCLA Investment Management 22,337,701 3.65
Legal & General Investment Management 20,791,253 3.40
Interactive Investor (EO) 19,833,929 3.24
Total 294,367,508 48.13
The Directors confirm that there are no securities in issue that
carry special rights with regards to the control of the Company.
The Company also provides the same information as at 4 September
2023, being the most current information available.
Shareholder Shareholding % Holding
--------------------------------------- ------------- ----------
BlackRock 91,683,914 14.99
Gravis Capital Management 33,904,080 5.54
Hargreaves Lansdown, stockbrokers
(EO) 33,765,605 5.52
Newton Investment Management 32,848,618 5.37
abrdn Capital 29,402,398 4.81
CCLA Investment Management 26,183,389 4.28
Interactive Investor (EO) 20,784,520 3.40
Legal & General Investment Management 20,337,280 3.33
Total 288,909,804 47.24
Independent Auditor
KPMG has been the Company's external Auditor since the Company's
incorporation. An audit tender process was undertaken during the
year and after an extensive, robust and competitive process, the
Audit and Risk Committee recommends retaining KPMG as Auditor,
subject to Shareholder approval at the forthcoming AGM. A
resolution will be proposed to reappoint them as Auditor and
authorise the Directors to determine the Auditor's remuneration for
the ensuing year. The Audit and Risk Committee will periodically
review the appointment of KPMG. Further information on the work of
the Auditor is set out in the Report of the Audit and Risk
Committee below.
Articles of Incorporation
The Company's Articles may be amended only by special resolution
of the Shareholders.
Going Concern
At 30 June 2023, the Company had invested in 129 solar plants, 6
wind farms and 109 single stick wind turbines, committing GBP992.3
million to SPV investments. The Company, through its direct
subsidiary, BR1, has access to an RCF which, together with the net
income generated by the acquired projects, is expected to allow the
Company to meet its liquidity needs for the payment of operational
expenses, dividends and acquisition of new renewable energy
infrastructure assets. The Company, through BR1, expects to comply
with the covenants of its long term loans and RCF.
The Board, in its consideration of going concern, has reviewed
comprehensive cash flow forecasts prepared by the Investment
Adviser, as well as the performance of the solar and wind plants
currently in operation. The conflict in Ukraine continues to have a
significant impact on the macro-economic environment in which the
Company operates and has served so far to increase the price of
electricity. The Board and Investment Adviser have been closely
monitoring this and it has been considered as part of the going
concern assessment.
The Board has also considered the potential outcome of the
Company's mandatory five year continuation vote that is due at the
2023 AGM and considers it highly likely that shareholders will vote
in favour of continuation, given the strong performance of the
Company and the support which it has received from its major
shareholders.
In the light of these enquiries, at the time of approving these
accounts the Board has a reasonable expectation that the Company
has adequate resources to continue in operational existence for the
12 months from the date of signing the financial statements and
does not consider there to be any material threat to the viability
of the Company. The Board has therefore concluded that it is
appropriate to adopt the going concern basis of accounting in
preparing the financial statements.
Internal controls review
Taking into account the information on Principal and Emerging
Risks provided above in the strategic report and the ongoing work
of the Audit and Risk Committee in monitoring the risk management
and internal control systems on behalf of the Board, the
Directors
-- are satisfied that they have carried out a robust assessment
of the principal and emerging risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity; and
-- have reviewed the effectiveness of the risk management and
internal control systems and no significant failings or weaknesses
were identified.
Fair, Balanced and Understandable
The Board has considered whether the Annual Report taken as a
whole is fair, balanced and understandable, taking into account the
commentary and tone and whether it includes the requisite
information needed for Shareholders to assess the Company's
business model, performance and strategy. In addition, the Board
also questioned the Investment Adviser on information included and
excluded from the Annual Report, and considered whether the
narrative at the front of the report is consistent with the
financial statements. As a result of this work, each of the Board
members considers that the Annual Report is fair, balanced and
understandable and includes the requisite information needed for
Shareholders to assess the Company's business model, performance
and strategy.
Financial Risks Management Policies and Procedures
Financial Risks Management Policies and Procedures are disclosed
in Note 15.
Principal and Emerging Risks
Principal and Emerging Risks are discussed in the Strategic
Report above.
Annual General Meeting
The AGM of the Company will be held at 10am on 28 November 2023
at Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey.
Details of the resolutions to be proposed at the AGM, together with
explanations, will appear in the Notice of Meeting to be
distributed to Shareholders together with this Annual Report.
Members of the Board will be in attendance at the AGM and will
be available to answer shareholder questions.
By order of the Board
Paul Le Page Elizabeth Burne
Director Director
27 September 2023 27 September 2023
Board of Directors
John Scott (Chair and Chair of the Nomination Committee)
John Scott was appointed as a non-executive director of the
Company on 12 June 2013 and is a former investment banker who spent
20 years with Lazard and has served on the boards of several
investment trusts. Mr Scott was Chair of Impax Environmental
Markets plc between May 2014 and May 2023. He has been Chair of JP
Morgan Global Core Real Assets since its flotation in 2019. In June
2017, he retired as Chair of Scottish Mortgage Investment Trust
PLC. He has an MA in Economics from Cambridge University and an MBA
from INSEAD.
Elizabeth Burne (Chair of the Management Engagement and Service
Providers Committee)
Elizabeth Burne was appointed as a non-executive director of the
Company in October 2021, is a Fellow of the Association of
Chartered Certified Accountants with a First Class Honours degree
in Applied Accounting and over twenty years' experience within the
financial services sector across the Channel Islands and Australia.
Prior to becoming a non-executive director Ms Burne was an audit
director at PwC, working in alternative asset management and
insurance, assisting clients with strategic, financial, risk and
corporate governance matters. Ms Burne holds a portfolio of
non-executive directorships including HarbourVest Global Private
Equity Limited (a constituent of the FTSE 250 Index), as well as a
number of private companies in the venture capital, private equity,
real estate and insurance sectors.
Michael Gibbons (Senior Independent Director)
Michael Gibbons was appointed as a non-executive director of the
Company on 7 October 2022, holds an MA from Downing College,
Cambridge, is a Fellow of the Energy Institute, and was awarded an
OBE in 2008 and CBE in 2015 for services to regulatory reform. Mr
Gibbons has held a very wide range of senior appointments in the
private and public sectors, including chairing the government's
independent Regulatory Policy Committee from 2009 - 2017. The main
part of his private sector career has been in the energy industry,
taking senior positions in ICI, Powergen and Elexon, who run
central systems in the GB wholesale electricity market, and where
he was Chair from 2013-2022. Mr Gibbons has also worked on carbon
capture and storage at Board level for several developers and
became Chair of the Carbon Capture and Storage Association in
2014-2017. He was also Chair of the British Committee of the World
Energy Council from 2009 to 2014.
Meriel Lenfestey (Chair of the Environmental, Social and
Governance Committee)
Meriel Lenfestey was appointed as a non-executive director of
the Company in April 2019. Ms Lenfestey founded Flow Interactive in
1997, a London based Customer Experience Consultancy assisting
clients across many sectors embracing digital transformation. Since
exiting the business in 2016 she has held a portfolio of
non-executive director and advisory roles across Energy, Telecoms,
Transport, Infrastructure, Technology and local charities. She is a
non-executive director at International Public Partnerships (FTSE
250), Boku (FTSE AIM), and Ikigai Ventures (FTSE All share). She
also Chairs Jersey Telecom (privately owned) as well as acting as a
non-executive director at Art for Guernsey, a local charity. Until
February 2023 she was Chair at Gemserv. She has an MA in Computer
Related Design from the Royal College of Art, a Financial Times
Non-Executive Director Diploma, is a Fellow of the RSA and sits on
the Guernsey IoD themselves.
Paul Le Page (Chair of the Audit and Risk Committee)
Paul Le Page was appointed as a non-executive director of the
Company on 12 June 2013 and is a former executive Director and
Senior Portfolio Manager of FRM Investment Management Limited, a
subsidiary of Man Group, and holds non-executive directorships of a
number of investment funds. Mr. Le Page is Audit Committee Chair of
RTW Biotech Opportunity Fund Limited and was previously Audit
Committee Chair of UK Mortgages Limited, Thames River Multi Hedge
PCC Limited and Cazenove Absolute Equity Limited. Mr. Le Page has
19 years' Audit & Risk Committee experience within the closed
end investment fund sector and has a broad-based knowledge of the
global investment industry, fund governance, reporting and product
structures. Mr Le Page graduated from University College London in
Electrical and Electronic Engineering and qualified as a Chartered
Electrical Engineer whilst leading the development of robotic
immunoassay equipment. He obtained an MBA from Heriot Watt
University in 1999 which he used to switch from industrial R&D
to investment fund research with a specialisation in alternative
assets.
Directors' Statement of Responsibilities
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable law and
regulations.
The Law requires the Directors to prepare financial statements
for each financial year. Under the Law, the Directors have elected
to prepare the financial statements in accordance with IFRS as
adopted by the EU and applicable law. The financial statements are
required by Law to give a true and fair view of the state of
affairs of the Company and of its profit or loss for that period.
In preparing these financial statements, the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable, and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time, the
financial position of the Company and enable them to ensure that
the financial statements comply with the Law. They are responsible
for such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
So far as each Director is aware, there is no relevant audit
information of which the Company's Auditor is unaware, and each
Director has taken all the steps that they ought to have taken as a
Director in order to make themself aware of any relevant audit
information and to establish that the Company's Auditor is aware of
that information. This confirmation is given and should be
interpreted in accordance with the provisions of section 249 of the
Law.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website, and for the preparation and dissemination of
Financial Statements. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
By order of the Board
Paul Le Page Elizabeth Burne
Director Director
27 September 2023 27 September 2023
Responsibility Statement of the Directors in Respect of the
Annual Report
Each of the Directors, whose names are set out above in the
Board of Directors section of the annual report, confirms that to
the best of their knowledge that:
-- the financial statements, prepared in accordance with IFRS,
as adopted by the EU give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company;
-- the Management Report (comprising Chair's Statement,
Strategic Report, Report of the Directors and Report of the
Investment Adviser) includes a fair review of the development and
performance of the business and the position of the Company
together with a description of the principal and emerging risks
above; and
Having taken advice from the Audit and Risk Committee, the
Directors consider the annual report and financial statements,
taken as a whole, is fair, balanced and understandable and that it
provides the information necessary for Shareholders to assess the
Company's position, performance, business model and strategy.
By order of the Board
Paul Le Page Elizabeth Burne
Director Director
27 September 2023 27 September 2023
Corporate Governance Report
The Board recognises the importance of sound corporate
governance, particularly the requirements of the AIC Code. The
Company is currently complying with the latest AIC code effective 1
January 2019.
The Company has been a member of the AIC since 15 July 2013. The
Board has considered the principles and provisions of the AIC Code.
The AIC Code provides a 'comply or explain' code of corporate
governance and addresses all the principles set out in the UK Code
as well as setting out additional principles and recommendations on
issues that are of specific relevance to investment companies such
as the Company. The Board considers that reporting against the
principles and recommendations of the AIC Code provides better
information to Shareholders.
The GFSC issued a Guernsey Code which came into effect on 1
January 2012. The introduction to the Guernsey Code states that
"Companies which report against the UK Code or the AIC Code of
Corporate Governance are also deemed to meet this Code". Therefore,
AIC members which are Guernsey-domiciled and which report against
the AIC Code are not required to report separately against the
Guernsey Code.
The AIC Code is available on the AIC's website
(www.theaic.co.uk). The UK Code is available from the FRC's website
( www.frc.org.uk ). The Guernsey code is available from the GFSC's
website (www.gfsc.gg).
Throughout the year ended 30 June 2023, the Company has complied
with the provisions of the AIC Code and the provisions of the UK
Code, except to the extent highlighted below.
Provision A.2.1 of the UK Code requires a chief executive to be
appointed; as an investment company, however, the Company has no
employees and therefore has no requirement for a chief executive.
As all the Directors, including the Chair, are non-executive and
independent of the Investment Adviser, the Company has not
established a remuneration committee which is not in accordance
with provisions B.2.1 and D.2.1 of the UK Code, and Principle 7 of
the AIC Code respectively. The Board is satisfied that as a whole,
any relevant issues can be properly considered by the Board. The
absence of an internal audit function is discussed in the Report of
the Audit and Risk Committee below.
The Board
The Directors' biographies are provided above which set out the
range of investment, financial and business skills and experience
represented.
John Scott and Paul Le Page were appointed on 12 June 2013,
Meriel Lenfestey was appointed on 1 April 2019, Elizabeth Burne was
appointed on 7 October 2021 and Michael Gibbons was appointed on 7
October 2022. The Board appointed Michael Gibbons as Senior
Independent Director effective from 29 November 2022 to fulfil any
function that is deemed inappropriate for the Chair to perform.
Paul le Page will retire from the Board on 30 September 2023 and
his position as Chair of the Audit & Risk Committee will be
assumed by Elizabeth Burne. The other four Directors submit
themselves for re-election at the next AGM, which is due to take
place on 28 November 2023.
Any Director who is elected or re-elected at that meeting is
treated as continuing in office throughout. If they are not elected
or re-elected, they shall retain office until the end of the
meeting or (if earlier) when a resolution is passed to appoint
someone in their place or when a resolution to elect or re-elect
the Director is put to the meeting and lost.
The Board is of the opinion that members should be re-elected
because they believe that they have the right skills and experience
to continue to serve the Company. As recommended in Principle 7 of
the AIC Code, the Board has considered the need for a policy
regarding tenure of service. As at 30 June 2023, two of the
directors had been on the Board for approximately ten years; of
these Paul le Page is not seeking re-election and will retire on 30
September The Board is cognisant of the AIC guidance around Board
member tenure and has taken positive action to address this by
implementing a carefully thought through succession plan that
manages the transition of corporate knowledge, recognises the
benefits of bringing new perspectives and diversity, all whilst
ensuring independence.
The Board meets at least four times a year in Guernsey, with
unscheduled meetings held where required to consider investment
related or other issues. In addition, there is regular contact
between the Board, the Investment Adviser and the Administrator.
Furthermore, the Board requires to be supplied in a timely manner
with information by the Investment Adviser, the Company Secretary
and other advisers in a form and of a quality appropriate to enable
it to discharge its duties.
The Company has adopted a share dealing code which applies to
the Board and any persons discharging managerial responsibilities.
This is to ensure compliance by the Board, and relevant personnel
of the Investment Adviser, with the requirements of the UK Market
Abuse Regulations.
The Board monitors developments in corporate governance to
ensure the Board remains aligned with best practice, especially
with respect to the increased focus on diversity. The Board
acknowledges the importance of diversity, including gender (as
stated in Principle 7 of the AIC Code), for the effective
functioning of the Board and commits to supporting diversity in the
boardroom. It is the Board's ongoing aspiration to have
well-diversified representation and it continues to value directors
with diverse skill sets, capabilities and experience gained from
different geographical and professional backgrounds that enhance
the Board by bringing a wide range of perspectives to the Company.
The Board is satisfied with the current composition and functioning
of its members and notes that we have 40% female representation,
exceeding the Hampton-Alexander Review target.
Gender identity Number of Number of
Board members Percentage senior positions
of the Board on the Board
------------------------------------ --------------- -------------- ------------------
Men 3 60% 2
Women 2 40% -
Ethnic background
------------------------------------ --------------- -------------- ------------------
White British or other White
(including minority-white groups) 5 100% 2
Other ethnic group - -% -
The Company has only two of the senior roles specified by the
Listing Rules, that is the position of Chair and Senior Independent
Director. Both of these roles are occupied by men. However, the
Board considers that the chairs of its permanent sub-committees are
all senior positions. Currently the Management Engagement and
Service Providers Committee and the ESG Committee are both chaired
by women. It is intended that Elizabeth Burne has been appointed as
Chair of the Audit and Risk Committee in succession to Mr Le Page,
who retires on 30 September. The Board is cognisant that it does
not currently have minority ethnic representation and this is a key
focus of its succession planning.
Directors' Remuneration
The Chair was entitled to an annual remuneration of GBP68,906
(2022: GBP62,500). The other Directors were entitled to an annual
remuneration of GBP43,050 (2022: GBP39,000). Paul Le Page received
an additional annual fee of GBP8,768 (2022: GBP8,000) for acting as
Chair of the Audit and Risk Committee. Meriel Lenfestey received an
additional annual fee of GBP5,250 (2022: N/A) for acting as Chair
of the Environmental, Social and Governance Committee. Elizabeth
Burne received an additional annual fee of GBP3,150 (2022: N/A) for
acting as Chair of the Management Engagement and Service Providers
Committee.
The remuneration earned by each Director in the past two
financial years was as follows:
Director 2023 2022
GBP GBP
-------------------------------------------- ------- -------
John Scott (appointed Chair on 29 November
2022) 58,326 40,000
Elizabeth Burne (appointed 7 October 2021) 45,389 29,689
Michael Gibbons (appointed 7 October 2022) 31,267 N/A
Meriel Lenfestey 46,965 40,000
Paul Le Page 51,759 48,175
Laurence McNairn (retired 17 February
2022) N/A 24,892
John Rennocks (retired 22 February 2023) 37,928 64,062
-------------------------------------------- ------- -------
The total Directors' fees expense for the year amounted to
GBP271,634 (2022: GBP240,818). As disclosed in Note 16, John Scott
and Michael Gibbons are directors of BR1, and have received
remuneration in respect of BR1.
All of the Directors are non-executive and each is considered
independent for the purposes of Chapter 15 of the Listing
Rules.
In accordance with Article 22 of AIFMD, the Company shall
disclose the total amount of remuneration for the financial year,
split into fixed and variable remuneration, paid by the AIFM to its
staff, and number of beneficiaries, and, where relevant, carried
interest paid by the AIF. As the Company is categorised as an
internally managed Non-EU AIFM for the purposes of AIFMD,
Directors' remuneration reflects this amount.
Duties and Responsibilities
The Board has overall responsibility for optimising the
Company's success by directing and supervising the affairs of the
business and meeting the appropriate interests of shareholders and
relevant stakeholders, while enhancing the value of the Company and
also ensuring the protection of investors. A summary of the Board's
responsibilities is as follows:
-- statutory obligations and public disclosure;
-- strategic matters and financial reporting;
-- investment strategy and management;
-- risk assessment and management including reporting, compliance, governance, monitoring and control; and
-- other matters having a material effect on the Company.
The Directors have access to the advice and services of the
Administrator, who is responsible to the Board for ensuring that
Board procedures are followed and that it complies with the Law and
applicable rules and regulations of the GFSC and the LSE. Where
necessary, in carrying out their duties, the Directors may seek
independent professional advice and services at the expense of the
Company.
The Company maintains appropriate directors' and officers'
liability insurance in respect of legal action against its
Directors.
The Board's responsibilities for the annual report are set out
in the Directors' Responsibilities Statement above. The Board is
also responsible for issuing appropriate half-yearly financial
reports and other price-sensitive public reports.
The attendance record of the Directors for the year to 30 June
2023 is set out below:
Management
Engagement
and Service
Ad-hoc Audit and Providers Nomination
Scheduled Board Risk Committee Committee ESG Committee Committee
Board Meetings Meetings Meetings Meetings Meetings Meetings
Director (max 4) (max 15) (max 9) (max 4) (max 2) (max 1)
------------------ ---------------- ---------- ---------------- ------------- -------------- -----------
John Scott 4 13 9 4 2 1
Elizabeth
Burne 4 15 9 4 2 1
Michael Gibbons 3 (max 3) 9 (max 5 (max 5) 4 (max 4) 2 (max 2) 1 (max 1)
(appointed 11)
7 October
2022)
Meriel Lenfestey 4 13 9 4 2 1
Paul Le Page 4 15 9 4 2 1
John Rennocks 3 (max 3) 7 (max 6 (max 7) 1 (max 1) 1 (max 1) 1 (max 1)
(retired 22 9)
February 2023)
------------------ ---------------- ---------- ---------------- ------------- -------------- -----------
15 ad-hoc Board Meetings were held during the period to formally
review and authorise each investment made by the Company and to
consider interim dividends, amongst other items.
The Board believes that, as a whole, it comprises an appropriate
balance of skills, experience, age, knowledge and length of
service. The Board also believes that diversity of experience and
approach, including gender diversity, amongst Board members is of
great importance and it is the Company's policy to give careful
consideration to issues of Board balance when making new
appointments. Any new Director appointed to the Board will be
provided with a bespoke induction programme tailored to the
individual needs of the Director.
Performance Evaluation
In accordance with Principle 7 of the AIC Code, the Board is
required to undertake a formal and rigorous evaluation of its
performance on an annual basis . A formal evaluation of the
performance of the Board as a whole, and the Chair, is scheduled
for completion by the end of this calendar year. The evaluation is
undertaken utilising self-appraisal questionnaires and is followed
by a detailed discussion of the outcomes which includes an
assessment of the Directors' continued independence.
Committees of the Board
Audit and Risk Committee
The Board established an Audit and Risk Committee in 2013. It is
chaired by Paul Le Page and following his retirement it will be
chaired by Elizabeth Burne. At the date of this report the
committee comprised all of the Directors set out above. The report
of the role and activities of this committee and its relationship
with the Auditor is contained in the Report of the Audit and Risk
Committee below. The Committee operates within clearly defined
terms of reference which are available on the Company's website (
www.bluefieldsif.com ).
Nomination Committee
The Board established a Nomination Committee in 2022. It is
chaired by John Scott and at the date of this report comprised all
of the Directors set out above. The principal functions of the
Committee are to assist the Board in filling vacancies on the Board
and its committees and to review and make recommendations regarding
Board structure, size and composition. The Committee shall meet at
least once a year.
Management Engagement and Service Providers Committee
The Board established a Management Engagement and Service
Providers Committee in 2022. It is chaired by Elizabeth Burne and
at the date of this report comprised all of the Directors set out
above. The principal function of the Committee is to review
annually the contractual relationships with, and scrutinise and
hold to account the performance of, the Investment Adviser .
Additionally, the Committee shall review annually the performance
and terms of engagement of any other key service providers to the
Company as considered appropriate. The Committee shall meet at
least once a year.
The primary matters discussed and activities undertaken by the
Committee during the year were:
-- received a presentation from the Investment Adviser summarising their performance and key differentiating factors;
-- carried out a formal review of the Investment Advisory
Agreement, with the key outcomes of review to be finalised;
-- Board members performed on-site visits to the Investment
Adviser's offices in Bristol as well as a local solar farm
site;
-- conducted a detailed review of the performance of the Company's key service providers;
-- recommended to the Board the change of registrar from Link
Market Services (Guernsey) Limited to Computershare Investor
Services (Guernsey) Limited; and
-- reviewed its terms of reference.
ESG Committee
The Board established an ESG Committee in 2022. It is chaired by
Meriel Lenfestey and at the date of this report comprised all of
the Directors set out above. The principal function of the
Committee is to provide a forum for mutual discussion, support and
challenge of the Investment Adviser with respect to ESG including,
with respect to the policies adopted by the Company, in respect to
investment and divestment and by the Investment Adviser with
respect to asset management activities and their reporting on ESG
matters to the Committee and Board. The Committee will also assist
on such other matters related to ESG as may be referred to it by
the Board. The Committee shall meet at least once a year.
Internal Control and Financial Reporting
The Board acknowledges that it is responsible for establishing
and maintaining the Company's system of internal control and
reviewing its effectiveness. Internal control systems are designed
to manage rather than eliminate the failure to achieve business
objectives and can only provide reasonable but not absolute
assurance against material misstatements or loss. The Audit and
Risk Committee reviews all controls including operations,
compliance and risk management. The key procedures which have been
established to provide internal control are:
-- the Board has delegated the day-to-day operations of the
Company to the Administrator and Investment Adviser; however, it
remains accountable for all of the functions it delegates;
-- the Board clearly defines the duties and responsibilities of
the Company's agents and advisers and appointments are made by the
Board after due and careful consideration. The Board monitors the
ongoing performance of such agents and advisers;
-- the Board monitors the actions of the Investment Adviser at
regular Board meetings and is also given frequent updates on
developments arising from the operations and strategic direction of
the underlying investee companies; and
-- the Administrator provides administration and company secretarial services to the Company.
The Administrator maintains a system of internal control on
which it reports to the Board.
The Board has reviewed the need for an internal audit function
and has decided that the systems and procedures employed by the
Administrator and Investment Adviser, including their own internal
controls and procedures, provide sufficient assurance that a sound
system of risk management and internal control, which safeguards
shareholders' investment and the Company's assets, is maintained.
An internal audit function specific to the Company is therefore
considered unnecessary.
The systems of control referred to above are designed to ensure
effectiveness and efficient operation, internal control and
compliance with laws and regulations. In establishing the systems
of internal control, regard is paid to the materiality of relevant
risks, the likelihood of costs being incurred and costs of control.
It follows therefore that the systems of internal control can only
provide reasonable but not absolute assurance against the risk of
material misstatement or loss.
The Company has delegated the provision of all services to
external service providers whose work is overseen by the Board at
its quarterly meetings. Each year a detailed review of performance
pursuant to their terms of engagement is completed by the
Management Engagement and Service Providers Committee and
recommendations made to the Board.
Investment Advisory Agreement
In accordance with Listing Rule 15.6.2(2)R, the Directors
formally appraise the performance and resources of the Investment
Adviser.
The Investment Adviser, Bluefield Partners, is led by its
managing partners, James Armstrong and Giovanni Terranova, who
founded the Bluefield business in 2009 following their prior work
together in European solar energy. Neil Wood, who joined in 2013,
was appointed partner in 2020 and runs the Investment Adviser
alongside the two founders. The Investment Adviser's team has a
combined record, prior to and including Bluefield Partners LLP, of
investing more than GBP1.4 billion in renewable projects. The
Investment Adviser's non-executive team includes Mike Rand,
Bluefield Partners founder and former Managing Partner, William
Doughty, the founding CEO of Semperian; Dr. Anthony Williams, the
former chair of the Risk Committee for the Fixed Income, Currencies
& Commodities Division, and Partner at Goldman Sachs & Co;
and Jon Moulton, former managing partner and founder of Alchemy
Partners.
The Board of BSIF has considered the substantial level of
resource at the disposal of the Investment Adviser and thereby
available to the Company. The Board has also looked at the
extensive record of investment and operational performance
delivered by the Company, both during the Period and in the ten
years since the launch of BSIF, and the sector-leading
distributions to Shareholders. Having considered this record, in
the opinion of the Directors the continuing appointment of the
Investment Adviser is in the interests of the Shareholders as a
whole.
Dealings with Shareholders
The Board welcomes Shareholders' views and places great
importance on communication with its shareholders. The Company's
AGM will provide a forum for shareholders to meet and discuss
issues with the Directors of the Company. Members of the Board will
also be available to meet with shareholders at other times, if
required. In addition, the Company maintains a website which
contains comprehensive information, including regulatory
announcements, share price information, financial reports,
investment objectives and strategy and information on the
Board.
Principal and Emerging Risks
Each Director is aware of the risks inherent in the Company's
business and understands the importance of identifying, evaluating
and monitoring these risks. The Board has adopted procedures and
controls that enable it to manage these risks within acceptable
limits and to meet all of its legal and regulatory obligations.
The Board considers the process for identifying, evaluating and
managing any significant risks faced by the Company on an ongoing
basis and these risks are reported and discussed at Board meetings.
It ensures that effective controls are in place to mitigate these
risks and that a satisfactory compliance regime exists to ensure
all applicable local and international laws and regulations are
upheld.
The Company's Principal and Emerging Risks are discussed in
detail above in the Strategic Report. The Company's financial
instrument risks are discussed in Note 15 to the financial
statements.
Changes in Regulation
The Board monitors and responds to changes in regulation as they
affect the Company and its policies.
AIFMD
The EU Alternative Investment Fund Managers Directive ("EU
AIFMD") was introduced in 2014 in order to harmonise the regulation
of alternative investment fund managers ("AIFMs") and imposed
obligations on AIFMs who manage or distribute alternative
investment funds ("AIFs"), such as the Company, in the EU (which at
that time also included the UK) or who wished to market shares in
such funds to professional investors in the EU (including the UK).
Since Brexit, EU AIFMD has been transposed into UK domestic law by
virtue of the European Union (Withdrawal) Act 2018, as amended,
("UK AIFMD" and together with EU AIFMD, "AIFMD"), with EU AIFMD
continuing to regulate AIFMs' activities in the EU and the
marketing of an AIF's shares to professional investors in the EU,
and UK AIFMD similarly applying to such activities in the UK and
the marketing of an AIF's shares to UK professional investors.
The Company was established in Guernsey in 2013 as a
self-managed Non-EU/Non-UK AIF. Additionally, upon the
implementation of EU AIFMD, the Company took advice on and
implemented sufficient and appropriate policies and procedures that
enable the Board to fulfil its role in relation to the functions of
both portfolio management and risk management. The Company is
therefore categorised as an internally managed Non-EU/Non-UK AIFM
for the purposes of AIFMD and as such neither it nor the Investment
Adviser is required to seek authorisation under AIFMD.
The marketing of shares in AIFs that are established outside the
UK and the EU (such as the Company) to UK professional investors or
to professional investors in any EU member state is prohibited
unless certain conditions are met. Certain of these conditions are
outside the Company's control as they are dependent on the
regulators of the relevant third country (in this case Guernsey)
and the UK (or relevant EU member state, as applicable) entering
into regulatory co-operation agreements with one another.
Currently, the Company is only able to market its shares to
professional investors in the UK and the EU to the extent that it
complies with the applicable National Private Placing Regime
("NPPR"), if any.
The Board is currently permitted to market the Company's shares
to professional investors in the UK pursuant to Regulation 59 of
the UK Alternative Investment Fund Managers Regulations 2013 (as
amended). In addition, the Company is also permitted to market its
shares to professional investors in The Republic of Ireland, the
Netherlands and Luxembourg pursuant to their respective NPPRs. The
Board works with the Company's professional advisers to ensure the
necessary conditions are met, and all required notices and
disclosures are made under each applicable NPPR to enable the
Company to continue marketing its shares to professional investors
in the UK and the other relevant EU member states. In conjunction
with the Company's professional advisers, the Board also monitors
any developments in AIFMD which might impact the Company in the
future.
Any regulatory changes arising under AIFMD, the applicable NPPRs
or otherwise that limit the Company's ability to market future
issues of its shares to professional investors in the UK and/or the
EU may materially adversely affect the Company's ability to carry
out its investment policy successfully and to achieve its
investment objectives, which in turn may adversely affect the
Company's business, financial condition, results of operations, NAV
and/or the market price of its shares.
FATCA and CRS
The Company is registered under FATCA and continues to comply
with FATCA and the Common Reporting Standard's requirements to the
extent relevant to the Company.
PRIIPs
The Company is in compliance with the requirement to publish a
key information document ("KID") under both the EU and UK PRIIPs
Regulations. The most current KIDs (one prepared in accordance with
the EU PRIIPs Regulation and the other prepared in accordance with
the UK PRIIPs Regulation) are available on the Company's
website.
Consumer Duty
On 31 July 2023 the FCA introduced a new Principle for
Businesses (Principle 12) applicable to authorised firms in the UK
which carry on 'retail market business' and who can determine, or
materially influence retail customer outcomes. This new Principle
12 was accompanied by a package of rules and guidance, which are
collectively known as the Consumer Duty.
The Company is not subject to the Consumer Duty as it is not an
FCA authorised firm. However, the Company is aware that its shares
may be held by or on behalf of retail customers, and that other
firms within the distribution chain of its shares are within scope
of the Consumer Duty requirements. Accordingly, it is the Board's
intention that the Company will respond to information and other
requests from UK authorised firms in the distribution chain of the
Company's shares in such a way as to support their compliance with
the Consumer Duty.
NMPI
The UK Financial Conduct Authority's rules (the "FCA Rules")
restrict the marketing within the UK of certain pooled investments
or funds referred to in the FCA Rules as "non mainstream pooled
investments" ("NMPIs") to ordinary retail clients. These rules took
effect on 1 January 2014. The Company conducts its affairs such
that its shares are excluded from the FCA's restrictions which
apply to NMPI products because its shares are shares in an
investment company which, if it were domiciled in the UK, would
currently qualify as an "investment trust". It is the Board's
intention that the Company will make all reasonable efforts to
continue to conduct its affairs in such a manner that its shares
can continue to be recommended by independent financial advisers to
UK retail investors in accordance with the FCA Rules relating to
NMPIs.
Guernsey Green Fund Status
The Guernsey Green Fund aims to provide a platform for
investments into various green initiatives and gives investors a
trusted and transparent product that contributes to the
internationally agreed objectives of mitigating environmental
damage and climate change. The Company successfully obtained
Guernsey Green Fund Status on 16 April 2019.
Following an application to the GFSC, the Company was deemed to
have met the following investment criteria outlined in the Guernsey
Green Fund Rules, 2021:
-- The Property of a Guernsey Green Fund shall be invested with
the aim of spreading risk and with the ultimate objective of
mitigating environmental damage resulting in a net positive outcome
for the environment;
-- A Guernsey Green Fund shall comprise 75% assets by value that
meet the Guernsey Green Fund Rules criteria. The remaining 25% must
not lessen or reduce the Guernsey Green Fund's overall objective of
mitigating environmental damage nor comprise an investment of a
type specified within schedule 3 of the Guernsey Green Fund Rules,
2021;
-- A Guernsey Green Fund shall only comprise assets permitted to
be held under its principal documents or prospectus and of a nature
described in its prospectus; and
-- A Guernsey Green Fund shall not be invested in contravention
of limits or restrictions imposed under its principal documents or
prospectus.
The Company fulfils the above investment criteria by investing
in a diversified portfolio of renewable energy assets, each located
within the UK, with a focus on utility scale assets and portfolios
on greenfield sites. The Group targets long life renewable energy
infrastructure, expected to generate energy output over asset lives
of at least 25 years. The Company incorporates Environmental Social
& Governance policies into its investment processes and is
actively monitoring and working to improve its environmental and
social impact. The production of renewable energy equates to a
significant amount of CO2 emissions saved, representing a
sustainable and ethical investment.
By order of the Board
Paul Le Page Elizabeth Burne
Director Director
27 September 2023 27 September 2023
Report of the Audit and Risk Committee
The Audit and Risk Committee, chaired by Paul Le Page and
comprising all of the Directors set out above, operates within
clearly defined terms of reference (which are available from the
Company's website, www.bluefieldsif.com) and includes all matters
indicated by Rule 7.1 of the UK FCA's DTRs and the AIC Code. It is
also the formal forum through which the Auditor will report to the
Board of Directors.
The Audit and Risk Committee meets no less than three times a
year, and at such other times as the Audit and Risk Committee shall
require, and meets the Auditor at least twice a year. Any member of
the Audit and Risk Committee may request that a meeting be convened
by the company secretary. The Auditor may request that a meeting be
convened if they deem it necessary. Any Director who is not a
member of the Audit and Risk Committee, the Administrator and
representatives of the Investment Adviser shall be invited to
attend the meetings as the Directors deem appropriate.
The Board has taken note of the requirement that at least one
member of the Committee should have recent and relevant financial
experience and is satisfied that the Committee is properly
constituted in that respect, with one of its members who is a
qualified accountant and three members with an investment
background.
Responsibilities
The main duties of the Audit and Risk Committee are:
-- monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the Company's
financial performance and reviewing significant financial reporting
judgements contained in them;
-- reporting to the Board on the appropriateness of the Board's
accounting policies and practices including critical judgement
areas;
-- reviewing the valuation of the Company's investments prepared
by the Investment Adviser, and making a recommendation to the Board
on the valuation of the Company's investments;
-- meeting regularly with the Auditor to review their proposed
audit plan and the subsequent audit report and assess the
effectiveness of the audit process and the levels of fees paid in
respect of both audit and non-audit work;
-- making recommendations to the Board in relation to the
appointment, reappointment or removal of the Auditor and approving
their remuneration and the terms of their engagement;
-- monitoring and reviewing annually the Auditor's independence,
objectivity, expertise, resources, qualification and non-audit
work;
-- considering annually whether there is a need for the Company
to have its own internal audit function;
-- keeping under review the effectiveness of the accounting and
internal control systems of the Company;
-- reviewing and considering the UK Code, the AIC Code, the FRC
Guidance on Audit and Risk Committees and the Company's
institutional investors' commitment to the UK Stewardship code;
and
-- reviewing the risks facing the Company and monitoring the risk matrix.
The Audit and Risk Committee is required to report formally to
the Board on its findings after each meeting on all matters within
its duties and responsibilities.
The Auditor is invited to attend the Audit and Risk Committee
meetings as the Board deems appropriate and at which they have the
opportunity to meet with the Committee without representatives of
the Investment Adviser or the Administrator being present at least
once per year.
Financial Reporting
The primary role of the Audit and Risk Committee in relation to
the financial reporting is to review with the Administrator,
Investment Adviser and the Auditor the appropriateness of the
interim and annual financial statements, concentrating on, amongst
other matters:
-- the quality and acceptability of accounting policies and practices;
-- the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements;
-- material areas in which significant judgements have been
applied or there has been discussion with the Auditor;
-- whether the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy; and
-- any correspondence from regulators in relation to the Company's financial reporting.
To aid its review, the Audit and Risk Committee considers
reports from the Administrator and Investment Adviser and also
reports from the Auditor on the outcomes of their half year review
and annual audit. Like the Auditor, the Audit and Risk Committee
seeks to display the necessary professional scepticism their role
requires.
Meetings
The Committee has met formally on 9 occasions in the year
covered by this report. The matters discussed and challenged at
those meetings were:
-- consideration and agreement of the terms of reference of the
Audit and Risk Committee for approval by the Board;
-- review of the Company's risk matrix;
-- review of the accounting policies and format of the financial statements;
-- review and approval of the audit plan of the Auditor and
timetable for the interim and annual financial statements;
-- review of the valuation policy and methodology of the
Company's investments applied in the interim and annual financial
statements;
-- detailed review of the interim and annual report and financial statements;
-- assessment of the effectiveness of the external audit process as described below;
-- a review of the process used to determine the viability of the Company; and
-- detailed discussions and recommendation to the Board of the audit tender process.
The Audit and Risk Committee chair or other members of the Audit
and Risk Committee appointed for the purpose, shall attend each AGM
of the Company, prepared to respond to any shareholder questions on
the Audit and Risk Committee's activities.
Primary Area of Judgement
The Audit and Risk Committee determined that the key risk of
misstatement of the Company's financial statements is the fair
value of the investments held by the Company in the context of the
high degree of judgement involved in the assumptions and estimates
underlying the discounted cash flow calculations.
As outlined in Note 8 of the financial statements, the fair
value of the BR1's investments (Directors' Valuation) as at 30 June
2023 was GBP1,018,350,175 (2022: GBP939,947,842). Market quotations
are not available for these investments so their valuation is
undertaken using a discounted cash flow methodology. The Directors
have also considered transactions in similar assets and used these
to infer the discount rate. Significant inputs such as the discount
rate, rate of inflation, power price forecast and the amount of
electricity the renewable energy infrastructure assets are expected
to produce are subjective and include certain assumptions. As a
result, this requires a series of judgements to be made as
explained in Note 8 in the financial statements.
The valuation of the BR1's portfolio of renewable energy
infrastructure assets (Directors' Valuation) as at 30 June 2023 has
been determined by the Board based on information provided by the
Investment Adviser.
The Audit and Risk Committee also reviewed and suggested factors
that could impact BR1's portfolio valuation and its related
sensitivities to the carrying value of the investments as required
in accordance with IPEV Valuation Guidelines.
Risk Management
The Company's risk assessment process and the way in which
significant business risks are managed is a key area of focus for
the Committee. The work of the Audit and Risk Committee is driven
primarily by the Company's assessment of its Principal and Emerging
Risks as set out above in the Strategic Report, and it receives
reports from the Investment Adviser and Administrator on the
Company's risk evaluation process and reviews changes to
significant risks identified.
Internal Audit
The Audit and Risk Committee considers at least once a year
whether there is a need for an internal audit function. Currently
it does not consider there to be a need for an internal audit
function, given that there are no employees in the Company and all
outsourced functions are with parties who have their own internal
controls and procedures.
External Audit
KPMG has been the Company's external Auditor since the Company's
inception.
The Auditor is required to rotate the audit partner every five
years. The current Audit Partner is in his second year of tenure.
There are no contractual obligations restricting the choice of
external auditor. An extensive, robust and competitive audit tender
process was undertaken during the Period and the Audit and Risk
Committee agreed that, of those firms who participated in the
tender, KPMG offered the most compelling case for the provision of
a high quality audit at good value for Shareholders and is
therefore recommending that they are re-appointed at the upcoming
AGM.
The objectivity of the Auditor is reviewed by the Audit and Risk
Committee which also reviews the terms under which the external
Auditor may be appointed to perform non-audit services. The Audit
and Risk Committee reviews the scope and results of the audit, its
cost effectiveness and the independence and objectivity of the
Auditor, with particular regard to any non-audit work that the
Auditor may undertake. In order to safeguard Auditor independence
and objectivity, the Audit and Risk Committee ensures that any
other advisory and/or consulting services provided by the external
Auditor do not conflict with its statutory audit responsibilities.
Advisory and/or consulting services will generally cover only
reviews of interim financial statements and capital raising work.
Any non-audit services conducted by the Auditor outside of these
areas will require the consent of the Audit and Risk Committee
before being initiated.
The external Auditor may not undertake any work for the Company
in respect of the following matters: preparation of the financial
statements; provision of investment advice; taking management
decisions; advocacy work in adversarial situations; provision of
tax and tax compliance services; promotion of, dealing in, or
underwriting the Company's shares; provision of payroll services;
design or implementation of internal control or risk management or
financial information technology systems, provision of valuation
services, provision of services related to internal audit; and
provision of certain human resources functions.
The Committee reviews the scope and results of the audit, its
cost effectiveness and the independence and objectivity of the
Auditor, with particular regard to the level of non-audit fees.
During the Period, KPMG was also engaged to provide a review of the
Company's interim information for Shareholders. Total fees paid by
the Company and its subsidiaries amounted to GBP864,174 (2022:
GBP611,400), fees for the Company itself amounted to GBP157,325 for
the year ended 30 June 2023 (30 June 2022: GBP230,608) of which
GBP112,325 related to audit and audit related services to the
Company (30 June 2022: GBP97,975) and GBP45,000 in respect of
non-audit services (30 June 2022: GBP132,633). The increase in fees
paid by subsidiaries to KPMG is due to the completion of the phased
two-year programme transitioning the audit work to KPMG in order to
further enhance audit efficiency, this saw an increased scope from
92 subsidiary entities to 174 subsidiary entities audited by
KPMG.
Notwithstanding such services, which have arisen in connection
with review of the interim financial statements, the Audit and Risk
Committee considers KPMG to be independent of the Company and that
the provision of such non-audit services is not a threat to the
objectivity and independence of the conduct of the audit as
appropriate safeguards are in place.
To fulfil its responsibility regarding the independence of the
Auditor, the Audit and Risk Committee has considered:
-- discussions with or reports from the Auditor describing its
arrangements to identify, report and manage any conflicts of
interest; and
-- the extent of non-audit services provided by the Auditor and
arrangements for ensuring the independence and objectivity and
robustness and perceptiveness of the Auditor and their handling of
key accounting and audit judgements.
To assess the effectiveness of the Auditor, the Committee has
reviewed and challenged:
-- the Auditor's fulfilment of the agreed audit plan and variations from it;
-- discussions or reports highlighting the major issues that
arose during the course of the audit;
-- feedback from other service providers evaluating the performance of the audit team;
-- arrangements for ensuring independence and objectivity; and
-- robustness of the Auditor in handling key accounting and audit judgements.
The Audit and Risk Committee is satisfied with KPMG's
effectiveness and independence as Auditor, having considered the
degree of diligence and professional scepticism demonstrated by
them.
In line with the FRCs recommendations on audit tendering and in
particular the requirement to put the external audit out to tender
at least every ten years, the Audit and Risk Committee sought to
conduct a tender exercise for the external audit of the Company, as
previously communicated. This is the tenth year of KPMG's
appointment as the Company's auditor. The competitive audit tender
exercise actioned by the Audit and Risk Committee concluded within
the year. The tender exercise allowed sufficient time such that any
potential new audit firm appointed could benefit from a cooling-off
period before their appointment (should they already be providing
services to the Company and/or Group that require such a
cooling-off period).
The tender process took into consideration best practice in line
with the AIC Code and the FRC Minimum Standard for Audit
Committees. This ensured a fair, robust and independent tender
process could be commenced to ensure the Company appointed the most
suitable firm. The Audit and Risk Committee issued a request for an
introductory meeting to five firms in December 2022, which included
two smaller firms. The two smaller firms did not wish to tender and
one big four firm that has historically provided tax advice to the
group declined to tender. Following a review by the Audit and Risk
Committee, a request for proposal was issued to two of those firms
and the current auditors KPMG in March 2023 to invite them to
tender for the external audit of the Company.
The two challenger firms were given access to a shared data room
containing information about the Company and were also given equal
amounts of exclusive time with the current and future Audit and
Risk Committee chair (Paul Le Page and Elizabeth Burne,
respectively) as well as representatives of the Investment Adviser
and Administrator to aid them in their submissions.
Following this, members of the Audit and Risk Committee,
together with representatives of the Investment Adviser and
Administrator, who were key stakeholders in the process, reviewed
the tender submissions. The Audit and Risk Committee invited KPMG
and a challenger firm to present their submissions in person in May
2023. After the Audit and Risk Committee review of submissions, the
Committee members resolved to recommend the continuing appointment
of KPMG as auditors because KPMG offered the best case for the
provision of a high-quality audit, while representing best value to
Shareholders. Having satisfied itself that the Auditor remains
independent and effective, and having concluded a full audit tender
process, the Audit and Risk Committee has recommended to the Board
that KPMG be reappointed as Auditor for the year ending 30 June
2024.
The Company notes that it received some votes against KPMG's
appointment and remuneration at the AGM held on 29 November 2022
and confirms that it has consulted with the majority of these
shareholders and determined that the issues raised related to a
limited list of approved auditors preferred by one proxy agency and
the ratio of non-audit to audit fees in 2022 when the Company
incurred corporate finance fees for its most recent capital
raises.
The incoming Chair of the Audit and Risk Committee will be
available at the AGM to answer any questions about the work of the
Committee.
On behalf of the Audit and Risk Committee
Paul Le Page
Chair of the Audit and Risk Committee
27 September 2023
Independent Auditor's Report
I ndependent Auditor's Report to the Members of Bluefield Solar
Income Fund Limited
Our opinion is unmodified
We have audited the financial statements of Bluefield Solar
Income Fund Limited (the "Company"), which comprise the statement
of financial position as at 30 June 2023, the statements of
comprehensive income, changes in equity and cash flows for the year
then ended, and notes, comprising significant accounting policies
and other explanatory information.
In our opinion, the accompanying financial statements:
-- give a true and fair view of the financial position of the
Company as at 30 June 2023, and of the Company's financial
performance and cash flows for the year then ended;
-- are prepared in accordance with International Financial
Reporting Standards as adopted by the EU; and
-- comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including the FRC Ethical
Standard as required by the Crown Dependencies' Audit Rules and
Guidance. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matter was as follows (unchanged
from 2022):
The risk Our response
========================= ========================= ================================================================
Valuation of financial Basis : Our audit procedures
assets held at fair The Company's investment included, but were not
value through profit in its immediate limited to:
or loss subsidiary Control evaluation:
GBP852,844,000 (2022: is carried at fair We assessed the design
GBP856,380,000) value through profit and implementation of
Refer to Report of or loss and represents the control over the
the Audit Committee a significant proportion Valuation of financial
above, note 2(j) of the Company's net assets held at fair value
accounting policy assets (2023: 99.8%; through profit or loss.
and note 8 disclosures. 2022: 99.8%). The fair Valuation model integrity
value of the immediate and model inputs:
subsidiary, which * We tested the valuation model for mathematical
reflects accuracy including, but not limited to, material
its net asset value, formulae errors;
predominantly comprises
of the fair value
(GBP1,018,350,000) * We verified key inputs into the valuation model, such
of underlying special as power price forecasts, contracted revenue and
purpose vehicle operating costs to supporting documentation;
renewable
project investments
("SPVs") and the * We agreed a value driven sample of balances within
immediate the residual net asset amounts at subsidiary level to
subsidiary level debt supporting documentation, such as independent bank
(see note 8). confirmations and other source documentation;
The fair value of the
SPVs has been determined
using the income * We obtained and vouched significant additions to non
approach, operational renewable assets during the year to
discounting the future supporting documentation; and
cash flows of underlying
renewable projects
(the "Valuations"), * In order to assess the reliability of management's
for which there is forecasts, for a risk based selection, we assessed
no liquid market. The the historical accuracy of the cash flow forecasts
Valuations incorporate against actual results.
certain assumptions
including discount
rate, power price
forecasts, Benchmarking the valuation
inflation, useful assumptions:
economic With support from our
life and other KPMG valuation specialist,
macro-economic we challenged the appropriateness
assumptions. The of the Company's valuation
non-operational methodology and key assumptions
renewable asset SPVs including discount rate,
are valued at their power price forecasts,
costs as an inflation, and other
approximation macro-economic assumptions
of their fair value. applied, by:
In determining the * assessing the appropriateness of the valuation
discount rate used methodology applied by the Investment Adviser;
in the Valuations,
the relevant long term
government bond yields, * benchmarking against independent market data and
cost of debt, specific relevant peer group companies; and
asset risk and evidence
of recent market
transactions * using our KPMG valuation specialist's experience in
are considered. valuing similar investments.
The Valuations are
adjusted for other
specific assets and
liabilities of the .
SPVs.
Risk :
The Valuations represent
both a risk of fraud
and error associated
with estimating the
timing and amounts
of long term forecast
cash flows alongside
the significant
judgement
involved in the
selection,
and application, of
appropriate assumptions.
Changes to long term
forecast cash flows
and/or the selection
and application of
different assumptions
may result in a
materially
different valuation
of financial assets
held at fair value
through profit or loss.
We therefore determined
that the Valuations
have a high degree
of estimation
uncertainty
giving rise to a
potential
range of reasonable
outcomes greater than
our materiality for
the financial statements
as a whole. The
financial
statements disclose
in note 8 the
sensitivities
estimated by the
Company.
========================= ========================= ================================================================
Assessing transparency:
We considered the appropriateness
of the Company's investment
valuation policies and
the adequacy of the Company's
disclosures in relation
to the use of estimates
and judgements in arriving
at fair value (see note
3).
We assessed whether the
disclosures around the
sensitivities to changes
in key assumptions reflect
the risks inherent in
the valuation of the
underlying investment
portfolio (see note 8).
-----------------------------------
Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
GBP17,400,000, determined with reference to a benchmark of net
assets of GBP854,189,000, of which it represents approximately 2.0%
(2022: 2.0%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance
materiality for the Company was set at 75% (2022: 75%) of
materiality for the financial statements as a whole, which equates
to GBP13,000,000. We applied this percentage in our determination
of performance materiality because we did not identify any factors
indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding GBP870,000, in addition to other
identified misstatements that warranted reporting on qualitative
grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered
the inherent risks to the Company's business model and analysed how
those risks might affect the Company's financial resources or
ability to continue operations over the going concern period. The
risks that we considered most likely to affect the Company's
financial resources or ability to continue operations over this
period were:
-- Availability of capital to meet operating costs and other financial commitments; and
-- The outcome of the upcoming continuation vote.
We considered whether these risks could plausibly affect the
liquidity in the going concern period by comparing severe, but
plausible downside scenarios that could arise from these risks
individually and collectively against the level of available
financial resources indicated by the Company's financial
forecasts.
We also considered the risk that the outcome of the continuation
vote could affect the Company over the going concern period, by
considering outcomes of previous votes held by the Company,
inspecting summaries of discussions held with the broker, and
considering key financial metrics including discount of the
Company's share price against its reported net asset value per
share, over the past 12 months.
We considered whether the going concern disclosure in note 2(b)
to the financial statements gives a full and accurate description
of the directors' assessment of going concern.
Our conclusions based on this work:
-- we consider that the directors' use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate;
-- we have not identified, and concur with the directors'
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast
significant doubt on the the Company's ability to continue as a
going concern for the going concern period; and
-- we have nothing material to add or draw attention to in
relation to the directors' statement in the notes to the financial
statements on the use of the going concern basis of accounting with
no material uncertainties that may cast significant doubt over the
Company's use of that basis for the going concern period, and that
statement is materially consistent with the financial statements
and our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
Fraud and breaches of laws and regulations - ability to
detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-- enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether
management have knowledge of any actual, suspected or alleged
fraud;
-- reading minutes of meetings of those charged with governance; and
-- using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, and taking into account
possible incentives or pressures to misstate performance and our
overall knowledge of the control environment, we perform procedures
to address the risk of management override of controls, in
particular the risk that management may be in a position to make
inappropriate accounting entries, and the risk of bias in
accounting estimates such as the valuation of unquoted investments.
On this audit we do not believe there is a fraud risk related to
revenue recognition because the Company's revenue streams are
simple in nature with respect to accounting policy choice, and are
easily verifiable to external data sources or agreements with
little or no requirement for estimation from management. We did not
identify any additional fraud risks.
We performed procedures including:
-- identifying journal entries and other adjustments to test
based on risk criteria and comparing any identified entries to
supporting documentation;
-- incorporating an element of unpredictability in our audit procedures; and
-- assessing significant accounting estimates for bias.
Further detail in respect of valuation of unquoted investments
is set out in the key audit matter section of this report.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our sector experience and through discussion with
management (as required by auditing standards), and from inspection
of the Company's regulatory and legal correspondence, if any, and
discussed with management the policies and procedures regarding
compliance with laws and regulations. As the Company is regulated,
our assessment of risks involved gaining an understanding of the
control environment including the entity's procedures for complying
with regulatory requirements.
The Company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our
procedures on the related financial statement items.
The Company is subject to other laws and regulations where the
consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation or impacts on the
Company's ability to operate. We identified financial services
regulation as being the area most likely to have such an effect,
recognising the regulated nature of the Company's activities and
its legal form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of management and inspection of regulatory
and legal correspondence, if any. Therefore if a breach of
operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remains a higher risk of
non-detection of fraud, as this may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report but does not include the financial statements and our
auditor's report thereon. Our opinion on the financial statements
does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks and longer term
viability
We are required to perform procedures to identify whether there
is a material inconsistency between the directors' disclosures in
respect of emerging and principal risks and the viability
statement, and the financial statements and our audit knowledge. we
have nothing material to add or draw attention to in relation
to:
-- the directors' confirmation within the viability statement
(above) that they have carried out a robust assessment of the
emerging and principal risks facing the Company, including those
that would threaten its business model, future performance,
solvency or liquidity;
-- the emerging and principal risks disclosures describing these
risks and explaining how they are being managed or mitigated;
-- the directors' explanation in the viability statement (above)
as to how they have assessed the prospects of the Company, over
what period they have done so and why they consider that period to
be appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to review the viability statement, set out
above under the Listing Rules. Based on the above procedures, we
have concluded that the above disclosures are materially consistent
with the financial statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the directors' corporate
governance disclosures and the financial statements and our audit
knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
-- the directors' statement that they consider that the annual
report and financial statements taken as a whole is fair, balanced
and understandable, and provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy;
-- the section of the annual report describing the work of the
Audit Committee, including the significant issues that the audit
committee considered in relation to the financial statements, and
how these issues were addressed; and
-- the section of the annual report that describes the review of
the effectiveness of the Company's risk management and internal
control systems.
We are required to review the part of Corporate Governance
Statement relating to the Company's compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review. We have nothing to report in this respect.
We have nothing to report on other matters on which we are
required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out above, the
directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities .
The purpose of this report and restrictions on its use by
persons other than the Company's members as a body
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors, Guernsey
27 September 2023
Statement of Financial Position
As at 30 June 2023
30 June 2023 30 June 2022
Note GBP'000 GBP'000
------------------------------------------------------------ ----- ------------- -------------
ASSETS
Non-current assets
Financial assets held at fair value through profit or loss 8 852,844 856,380
Total non-current assets 852,844 856,380
------------------------------------------------------------ ----- ------------- -------------
Current assets
Trade and other receivables 9 910 882
Cash and cash equivalents 10 969 1,619
Total current assets 1,879 2,501
------------------------------------------------------------ ----- ------------- -------------
TOTAL ASSETS 854,723 858,881
------------------------------------------------------------ ----- ------------- -------------
LIABILITIES
Current liabilities
Other payables and accrued expenses 11 534 490
Total current liabilities 534 490
------------------------------------------------------------ ----- ------------- -------------
TOTAL LIABILITIES 534 490
------------------------------------------------------------ ----- ------------- -------------
NET ASSETS 854,189 858,391
------------------------------------------------------------ ----- ------------- -------------
EQUITY
Share capital 663,809 663,809
Retained earnings 190,380 194,582
----- ------------- -------------
TOTAL EQUITY 13 854,189 858,391
------------------------------------------------------------ ----- ------------- -------------
Ordinary Shares in issue at year end 13 611,452,217 611,452,217
------------------------------------------------------------ ----- ------------- -------------
Net asset value per Ordinary Share (pence) 7 139.70 140.39
------------------------------------------------------------ ----- ------------- -------------
These financial statements were approved and authorised for
issue by the Board of Directors on 27 September 2023 and signed on
their behalf by:
Paul Le Page Elizabeth Burne
Director Director
27 September 2023 27 September 2023
The accompanying notes form an integral part of these financial
statements.
Statement of Comprehensive Income
For the year ended 30 June 2023
Year ended Year ended
30 June 2023 30 June 2022
Note GBP'000 GBP'000
------------------------------------------------------------------------- ----- ------------- -------------
Income
Income from investments 4 900 834
Bank interest 6 -
------------------------------------------------------------------------- ----- ------------- -------------
906 834
Net gains on financial assets held at fair value through profit or loss 8 48,164 175,308
Operating income 49,070 176,142
------------------------------------------------------------------------- ----- ------------- -------------
Expenses
Administrative expenses 5 2,277 1,569
------------- -------------
Operating expenses 2,277 1,569
------------------------------------------------------------------------- ----- ------------- -------------
Operating profit 46,793 174,573
------------------------------------------------------------------------- ----- ------------- -------------
Profit and total comprehensive income for the year 46,793 174,573
------------------------------------------------------------------------- ----- ------------- -------------
Earnings per share:
Basic and diluted (pence) 12 7.65 34.91
------------------------------------------------------------------------- ----- ------------- -------------
All items within the above statement have been derived from
continuing activities.
The accompanying notes form an integral part of these financial
statements.
Statement of Changes in Equity
For the year ended 30 June 2023
Note Number of Share capital Retained earnings Total equity
Ordinary Shares
GBP'000 GBP'000 GBP'000
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shareholders' equity at
1 July 2022 611,452,217 663,809 194,582 858,391
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Dividends paid 13,14 - - (50,995) (50,995)
Total comprehensive income for the
period - - 46,793 46,793
Shareholders' equity at
30 June 2023 611,452,217 663,809 190,380 854,189
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
For the year ended 30 June 2022
Note Number of Share capital Retained earnings Total equity
Ordinary Shares
GBP'000 GBP'000 GBP'000
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shareholders' equity at
1 July 2021 406,999,622 413,215 58,210 471,425
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shares issued during the period:
Ordinary Shares issued via placing 13 204,452,595 255,100 - 255,100
Share issue costs - (4,506) - (4,506)
Dividends paid 13,14 - - (38,201) (38,201)
Total comprehensive income for the
period - - 174,573 174,573
Shareholders' equity at
30 June 2022 611,452,217 663,809 194,582 858,391
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
The accompanying notes form an integral part of these financial
statements.
Statement of Cash Flows
For the year ended 30 June 2023
Year Year ended
ended
30 June 2023 30 June 2022
Note GBP'000 GBP'000
------------------------------------------------------------------------- ----- ------------- ------------------
Cash flows from operating activities
Total comprehensive income for the year 46,793 174,573
Adjustments:
Increase in trade and other receivables (28) (109)
Increase in other payables and accrued expenses 44 85
Net gains on financial assets held at fair value through profit or loss 8 (48,164) (175,308)
Net cash used in operating activities* (1,355) (759)
------------------------------------------------------------------------- ----- ------------- ------------------
Cash flows from investing activities
Purchase of investments held at fair value through
profit or loss 8 - (250,282)
Receipts from investments held at fair value through
profit or loss** 8 51,700 39,492
Net cash generated from/(used in) investing activities 51,700 (210,790)
------------------------------------------------------------------------- ----- ------------- ------------------
Cash flow from financing activities
Proceeds from issue of Ordinary Shares - 251,410
Issue costs paid - (816)
Dividends paid 14 (50,995) (38,201)
Net cash (used in)/generated from financing activities (50,995) 212,393
------------------------------------------------------------------------- ----- ------------- ------------------
Net increase in cash and cash equivalents (650) 844
Cash and cash equivalents at the start of the year 1,619 775
Cash and cash equivalents at the end of the year 10 969 1,619
------------------------------------------------------------------------- ----- ------------- ------------------
The accompanying notes form an integral part of these financial
statements.
*Net cash used in operating activities includes GBP900,000
(2022: GBP833,887) of investment income.
**Receipts from investments held at fair value through profit or
loss includes GBP21.8 million (2022: GBP14.1 million) of
interest.
Notes to the Financial Statements for the year ended 30 June
2023
1. General information
The Company is a non-cellular company limited by shares and was
incorporated in Guernsey under the Law on 29 May 2013 with
registered number 56708 as a closed-ended investment company. It is
regulated by the GFSC.
The financial statements for the year ended 30 June 2023
comprise the financial statements of the Company only (see Note 2
(c)).
The investment objective of the Company is to provide
Shareholders with an attractive return, principally in the form of
quarterly income distributions, by being invested primarily in
solar energy assets located in the UK. It also has the ability to
invest a minority of its capital into wind, hydro and energy
storage assets.
The Company has appointed Bluefield Partners LLP as its
Investment Adviser.
2. Accounting policies
a) Basis of preparation
The financial statements included in this annual report have
been presented on a true and fair basis and prepared in accordance
with IFRS as adopted by the EU and the DTRs of the UK FCA.
These financial statements have been prepared under the
historical cost convention with the exception of financial assets
measured at fair value through profit or loss, and in compliance
with the provisions of the Law.
Standards, interpretations and amendments to published standards
adopted in the period
New and Revised Standards
The Company has not adopted any new standards, amendments or
interpretations to existing standards because none applicable to
the Company have been published in the accounting period.
The Company has not adopted early any standards, amendments or
interpretations to existing standards that have been published and
will be mandatory for the Company's accounting periods beginning
after 1 July 2023 or later periods.
At the date of authorisation of these financial statements,
certain new standards, and amendments to existing standards have
been published by the IASB that are not yet effective and have not
been adopted early by the Company.
The Board expects that all relevant pronouncements will be
adopted in the Company's accounting policies for the first period
beginning after the effective date of the pronouncement. New
standards, interpretations and amendments are not expected to have
a material impact on the Company's financial statements.
b) Going concern
The Board, in its consideration of going concern, has reviewed
comprehensive cash flow forecasts prepared by the Investment
Adviser, as well as the performance of the solar and wind plants
currently in operation. The conflict in Ukraine continues to have a
significant impact on the macro-economic environment in which the
Company operates. The Board and Investment Adviser have been
closely monitoring this and it has been considered as part of the
going concern assessment.
The Board has also consulted with its broker on the likelihood
of the Company receiving support from Shareholders to allow it to
continue operations in its mandatory five year continuation vote
that is due at the 2023 AGM and regards this as very likely, given
the strong performance of the Company and the support which it has
received from its major shareholders.
In the light of these enquiries, at the time of approving these
accounts the Board has a reasonable expectation that the Company
has adequate resources to continue in operational existence for the
12 months from the date of signing the financial statements and
does not consider there to be any material threat to the viability
of the Company. The Board has therefore concluded that it is
appropriate to adopt the going concern basis of accounting in
preparing the financial statements.
c) Accounting for subsidiaries
The Company makes its investments in the SPVs through its wholly
owned subsidiary, BR1 (previously BSIFIL).
In light of the December 2014 amendments to IFRS 10 (the
Consolidation Exception Amendments), which clarified the scope of
the exceptions to mandatory non-consolidation amendments, the Board
considered the investment entity status of BR1 and concluded that
it is, like the Company, an investment entity. As such the Company
is not permitted to consolidate BR1 in the preparation of its
financial statements and all subsidiaries are recognised at fair
value through profit or loss.
d) Functional and presentation currency
These financial statements are presented in Sterling, which is
the functional currency of the Company as well as the presentation
currency. All amounts are stated to the nearest thousand unless
otherwise stated. The Company's funding, investments and
transactions are all denominated in Sterling.
e) I ncome
Monitoring fee income is recognised on an accruals basis.
Interest income on cash and cash equivalents is recognised on an
accruals basis using the effective interest rate method.
f) Expenses
Operating expenses are the Company's costs incurred in
connection with the ongoing administrative costs and management of
the Company's investments. Operating expenses are accounted for on
an accruals basis.
g) Finance costs
Finance costs are recognised in the Statement of Comprehensive
Income in the period to which they relate on an accruals basis
using the effective interest rate method. Arrangement fees for
finance facilities are amortised over the expected life of the
facility.
h) Dividends
Dividends declared and approved are charged against equity. A
corresponding liability is recognised for any unpaid dividends
prior to year end. Dividends approved but not declared will be
disclosed in the notes to the financial statements.
i) Segmental reporting
IFRS 8 'Operating Segments' requires a 'management approach',
under which segment information is presented on the same basis as
that used for internal reporting purposes.
The Board has considered the requirements of IFRS 8 'Operating
Segments', and is of the view that the Company is engaged in a
single segment of business, being investment in UK renewable energy
infrastructure assets via its holding company and SPVs, and
therefore the Company has only a single operating segment.
The Board, as a whole, has been determined as constituting the
chief operating decision maker of the Company. The key measure of
performance used by the Board to assess the Company's performance
and to allocate resources is the total return on the Company's NAV,
as calculated under IFRS, and therefore no reconciliation is
required between the measure of profit or loss used by the Board
and that contained in these financial statements.
The Board has overall management and control of the Company and
will always act in accordance with the investment policy and
investment restrictions set out in the Company's latest Prospectus,
which cannot be radically changed without the approval of
Shareholders. The Board has delegated the day-to-day implementation
of the investment strategy to its Investment Adviser but retains
responsibility to ensure that adequate resources of the Company are
directed in accordance with their decisions. Although the Board
obtains advice from the Investment Adviser, it remains responsible
for making final decisions in line with the Company's policies and
the Board's legal responsibilities.
j) Financial instruments
Classification and measurement of financial assets and financial
liabilities
Financial assets and financial liabilities are recognised in the
Company's Statement of Financial Position when the Company becomes
a party to the contractual provisions of the instrument.
i) Financial assets held at fair value through profit or loss
Classification
The Company's investment in BR1 is accounted for as a financial
asset rather than consolidated as the Company qualifies as an
investment entity under IFRS 10, therefore the Company's investment
is held at fair value through profit or loss in accordance with the
requirements of IFRS 9.
Recognition and de-recognition
Purchases and sales of investments are recognised on the trade
date - the date on which the Company commits to purchase or sell
the investment. A financial asset is de-recognised either when the
Company has transferred all the risks and rewards of ownership; or
it has neither transferred nor retained substantially all the risks
and rewards and when it no longer has control over the assets or a
portion of the asset; or the contractual right to receive cash flow
has expired.
Measurement
Subsequent to initial recognition, investment in BR1 is measured
at each subsequent reporting date at fair value. The Company holds
all of the shares in the subsidiary, BR1, which is a holding
vehicle used to hold the Company's SPV investments. The Directors
believe it is appropriate to value this entity based on the fair
value of its portfolio of SPV investment assets held plus its other
assets and liabilities. The SPV investment assets held by the
subsidiary are valued semi-annually as described in Note 8 on a
discounted cash flow basis which is benchmarked against market
transactions.
Gains or losses, through profit or loss, are made up of BR1's
profit or loss, which comprises mainly cash receipts from its SPVs,
the fair value movement of BR1's SPV portfolio and cash received in
respect of Eurobond instrument interest. Furthermore, cash receipts
made to the Company by BR1 are accounted for as a repayment of
loans and not reflected in the Company's income, apart from
monitoring fees (see Note 4).
ii) Cash and cash equivalents and trade and other
receivables
Cash and cash equivalents comprise cash on hand and short term
deposits with an original maturity of three months or less that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value. Other receivables are
non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. These financial assets are
included in current assets, except for maturities greater than
twelve months after the reporting date, which are classified as
non-current assets. They are initially recognised at fair value
plus transaction costs that are directly attributable to the
acquisition, and subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
iii) Financial liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics.
All financial liabilities are initially recognised at fair value
net of transaction costs incurred. All purchases of financial
liabilities are recorded on the trade date, being the date on which
the Company becomes party to the contractual requirements of the
financial liability.
The Company's financial liabilities consist of only financial
liabilities measured at amortised cost.
Financial liabilities measured at amortised cost
These include trade payables and other short term monetary
liabilities, which are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest
rate method.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Company has extinguished its contractual obligations, it
expires, or is cancelled. Any gain or loss on derecognition is
taken to profit and loss.
k) Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised as the proceeds received, net of direct issue costs.
Direct issue costs include those incurred in connection with the
placing and admission which include fees payable under the Placing
Agreement, legal costs and any other applicable expenses.
3. Critical accounting judgements, estimates and assumptions in
applying the Company's accounting policies
The preparation of these financial statements under IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates.
The area involving a high degree of judgement and/or complexity
and/or area where assumptions and estimates are significant to the
financial statements has been identified as the valuation of the
Company's investment in BR1 which is estimated predominantly on the
valuation of the portfolio of investments held by BR1 (see Note
8).
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future period
if the revision affects both current and future periods.
As disclosed in Note 8, the Board believes it is appropriate for
the Company's portfolio to be benchmarked on a GBPm/MW basis
against comparable portfolio transactions and on this basis a
weighted average discount rate of 8.00% (6.75% as at 30 June 2022)
has been utilised.
Use of a blended power forecast is unchanged, but the inflation
assumption has been increased to 7.0% in 2023 and 3.5% in 2024 to
reflect market forecasts, after this a medium-term rate at 3% (June
2022: 3%) has been extended to June 2029 before reverting to a
reduced long term assumption of 2.25% (June 2022: 2.25%)
thereafter.
The Directors' Valuation as at 30 June 2023 is based on a
weighted average life of the portfolio of 28 years (vs. 25 years in
June 2022), reflecting both new acquisitions and asset life
extensions.
4. Income from investments
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
Monitoring fee in relation to loans supplied (Note 16) 900 834
------------- -------------
900 834
============= =============
The Company provides monitoring and loan administration services
to BR1 (previously BSIFIL) for which an annual fee is charged,
payable in arrears.
5. Administrative expenses
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
---------------------------------------------- ------------- -------------
Investment advisory base fee * (see Note 16) 729 491
Legal and professional fees 300 166
Administration fees 542 395
Directors' remuneration 272 241
Audit fees 112 98
Non-audit fees 45 40
Broker fees 50 52
Regulatory Fees 58 50
Registrar fees 88 35
Insurance 12 11
Listing fees 45 37
Other expenses 24 (47)
2,277 1,569
============= =============
*The Investment advisory base fee is paid by both the Company
(10%) and BR1 (90%). The amount shown above reflects the amount
paid by the Company only. Note 16 shows the full fee paid to the
Investment Adviser.
Investment Advisory Agreement
The Company, BR1 and the Investment Adviser have entered into an
Investment Advisory Agreement, under which the Investment Adviser
has overall responsibility for the non-discretionary management of
the Company's assets and any of BR1's SPVs (including uninvested
cash) in accordance with the Company's investment policies,
restrictions and guidelines.
The Investment Adviser is entitled to a base fee, which is
payable quarterly in arrears, on the following scale:
-- NAV up to and including GBP750,000,000, 0.8% per annum
-- NAV above GBP750,000,000> GBP1,000,000,000, 0.75% per annum
-- NAV above GBP1,000,000,000, 0.65% per annum.
The fee is based on the NAV reported in the most recent
quarterly NAV calculation.
On 11 June 2014, BSIFIL (as the previous holding company)
entered into a Technical Services Agreement with the Investment
Adviser, with a retrospective effective date of 25 June 2013, in
order to delegate the provision of the consultancy services to the
Investment Adviser in its capacity as technical adviser to the
SPVs. On the same date the Group entered into a base fee offset
arrangement agreement, whereby the aggregate technical services fee
and base fee payable (under the Investment Advisory Agreement)
shall not exceed the base fee that would otherwise have been
payable to the Investment Adviser in accordance with the Investment
Advisory Agreement had no fees been payable under the Technical
Services Agreement.
The fees incurred for the Period and the amount outstanding at
the Period end are shown in Note 16.
Administration Agreement
The Administrator has been appointed to provide day-to-day
administration and company secretarial services to the Company, as
set out in the Administration Agreement dated 24 June 2013.
Under the terms of the Administration Agreement, the
Administrator is entitled to an annual fee, at a rate equivalent to
10 basis points of NAV up to and including GBP100,000,000, 7.5
basis points of NAV above GBP100,000,000 and up to and including
GBP200,000,000 and 5 basis points of the NAV above GBP200,000,000,
subject to a minimum fee of GBP100,000 per annum. The fees are for
the administration, accounting, corporate secretarial services,
corporate governance, regulatory compliance and stock exchange
continuing obligations provided to the Company. In addition, the
Administrator will receive an annual fee of GBP7,500 and GBP3,000
for the provision of a compliance officer and money laundering
reporting officer, respectively.
The Administrator is entitled to an investment related
transaction fee charged on a time spent basis, which is capped at a
total of GBP5,000 per investment related transaction. All
reasonable costs and expenses incurred by the Administrator in
accordance with this agreement are reimbursed to the Administrator
quarterly in arrears.
The Administrator also receives a fee of GBP5,000 per annum in
relation to the administration of the Company's Guernsey Green Fund
Status.
For the year ended 30 June 2023, the Company incurred fees to
the Administrator of GBP542,176 (2022: GBP395,329), of which
GBP135,992 (2022: GBP204,162) was outstanding at Period-end.
6. Taxation
The Company has obtained exempt status under the Income Tax
(Exempt Bodies) (Guernsey) Ordinance 1989 for which it paid an
annual fee of GBP1,200 (2022: GBP1,200) (included within regulatory
fees).
The income from the Company's investments is not subject to any
further tax in Guernsey although the subsidiary and underlying
SPVs, as UK based entities, are subject to the current prevailing
UK corporation tax rate. The standard rate of UK corporation tax is
25% (2022: 19%).
7. Net asset value per Ordinary Share
The calculation of NAV per Ordinary Share is based on NAV of
GBP854,189,487 (2022: GBP858,390,982 ) and the number of shares in
issue at 30 June 2023 of 611,452,217 (2022: 611,452,217) Ordinary
Shares.
8. Financial assets held at fair value through profit or
loss
The Company's accounting policy on the measurement of these
financial assets is discussed in Note 2(j)(i) and below.
30 June 2023 30 June 2022
Total Total
GBP'000 GBP'000
------------------------------------------------------------------------------------ ------------- -------------
Opening balance (Level 3) 856,380 470,282
Additions - funds passed to BR1/BSIFIL - 250,282
Change in fair value of financial assets held at fair value through profit or loss (3,536) 135,816
------------- -------------
Closing balance (Level 3) 852,844 856,380
============= =============
Analysis of net gains on financial assets held at fair value through profit or loss (per
statement of comprehensive income)
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
Unrealised change in fair value of financial assets held at fair value through
profit or loss (3,536) 135,816
Cash receipts from non-consolidated subsidiary* 51,700 39,492
Net gains on financial assets held at fair value through profit or loss 48,164 175,308
============= =============
* Comprising of repayment of Loans and Eurobond interest
Investments at fair value through profit or loss comprise the
fair value of the SPV investment portfolio held by BR1 and the fair
value of BR1's cash, working capital and debt balances. BR1 is the
Company's single direct subsidiary, which changed from BSIFIL to
BR1 in May 2022 to facilitate arrangement of the new RCF. This is
valued semi-annually by the Directors. A reconciliation of the SPV
investment portfolio value to financial assets at fair value
through profit or loss shown on the Statement of Financial Position
is also shown below.
30 June 2023 30 June 2022
Total Total
GBP'000 GBP'000
SPV investment portfolio, Directors' Valuation 1,018,350 939,948
Immediate Holding Company
Cash 26,407 13,102
Working capital (38,913) (26,670)
Debt (153,000) (70,000)
-------------- -------------
(165,506) (83,568)
Financial assets at fair value through profit or loss 852,844 856,380
============== =============
Fair value measurements
IFRS 13 'Fair Value Measurement' requires disclosure of fair
value measurement by level. The level of fair value hierarchy
within the financial assets or financial liabilities is determined
on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities
are classified in their entirety into only one of the three
levels.
The fair value hierarchy has the following levels:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the assets or
liabilities, either directly (i.e. as prices) or indirectly
(i.e. derived from prices); and
-- Level 3 - inputs for assets or liabilities that are not based
on observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires
significant 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 only financial instrument carried at fair value is the
investment held by the Company, BR1, which is fair valued at each
reporting date. The Company's investment has been classified within
Level 3 as BR1's investments are not traded and contain
unobservable inputs.
Transfers during the period
There have been no transfers between levels during the year
ended 30 June 2023. Any transfers between the levels will be
accounted for on the last day of each financial period. Due to the
nature of the investments, these are always expected to be
classified as Level 3.
Directors' Valuation methodology and process
The same valuation methodology and process for operational
assets is followed in these financial statements as was applied in
the preparation of the Company's financial statements for the year
ended 30 June 2022.
Before planning has been achieved, no value is attributed
(beyond costs incurred), to the Company's development pipeline.
However, once the projects receive planning permission they are
then valued according to the following criteria:
-- Projects purchased by the Company from developers are valued
at investment cost (deemed to approximate fair value).
-- Other projects in the Company's pipeline are valued on an
asset-by-asset basis and benchmarked against values from wider
market processes.
During the construction stages assets continue to be valued at
investment cost (deemed to be approximate fair value). The
Investment Adviser intends for newly built projects to be valued on
a DCF basis shortly after they become operational.
Investments that are operational are valued on a DCF basis over
the life of the asset (typically more than 25 years) and, under the
'willing buyer-willing seller' methodology, prudently benchmarked
on a GBP/MW basis against comparable transactions for large scale
portfolios.
Each investment is subject to full UK corporate taxation at the
prevailing rate with the tax shield being limited to the applicable
capital allowances from the Company's SPV investments.
The Investment Adviser recommends the fair value on a quarterly
basis, which includes a complete review of all valuation
assumptions on a semi-annual basis, subject to the Board's
approval. The key inputs, as listed below, are derived from various
internal and external sources. The key inputs to a DCF based
approach are: the equity discount rate, the cost of debt
(influenced by interest rate, gearing level and length of debt),
power price forecasts, long term inflation rates, asset life,
irradiation forecasts, average wind speeds, operational costs and
taxation. Given discount rates are a product of not only the
factors listed previously but also regulatory support, perceived
sector risk and competitive tensions, it is not unusual for
discount rates to change over time. Evidence of this is shown by
way of the revisions to the original discount rates applied between
the first renewable acquisitions and those witnessed in the past
twelve months.
This year sees the inclusion of the new Electricity Generator
Levy ("the Levy") on excess profits produced by electricity
generators as announced by the Chancellor of the Exchequer in the
Autumn Statement in November 2022. The Levy is a temporary 45% tax
on the extraordinary returns made by electricity generators late
last year while European energy prices soared in the wake of
Russia's invasion of Ukraine. The Levy will be in place from 1
January 2023 until 31 March 2028, with the benchmark price linked
to UK Consumer Price Inflation. The Investment Adviser previously
sought external advice from its legal and tax advisers on how to
model the Levy within the valuation methodology.
Given discount rates are subjective, there is sensitivity within
these to the interpretation of factors outlined above.
Judgement is used by the Board in increasing the weighted
average discount rate to 8.00% as at 30 June 2023 (2022: 6.75%)
with three key factors that have impacted the adoption of this rate
outlined below:
a. Transaction values are currently c.GBP1.20-1.45/MW for large
scale solar portfolios, which the Board have used to determine that
an effective price of GBP1.35m/MW is an appropriate basis for the
valuation of the BSIF portfolio as at 30 June 2023;
b. Inclusion of the latest long term power forecasts from the
Company's three providers;
c. Increase of inflation assumptions;
d. Increase in the cost of debt.
In order to smooth the sensitivity of the valuation to forecast
timing or opinion taken by a single forecast, the Board continues
to adopt the application of blended power curves from three leading
forecasters.
The fair values of operational SPVs are calculated on a
discounted cash flow basis in accordance with the IPEV Valuation
Guidelines. The Investment Adviser produces fair value calculations
on a semi-annual basis as at 30 June and 31 December each year.
Sensitivity analysis
The table below analyses the sensitivity of the fair value of
the Directors' Valuation to an individual input, while all other
variables remain constant.
The Directors consider the changes in inputs to be within a
reasonable range based on their understanding of market
transactions. This is not intended to imply that the likelihood of
change or that possible changes in value would be restricted to
this range.
30 June 2023 30 June 2022
-------------------------------------- ---------------------------------------
Change in fair value Change in fair value
of Directors' Change in NAV of Directors' Change in NAV
Valuation per share Valuation per share
Input Change in input GBPm (pence) GBPm (pence)
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Discount rate + 0.5% (18.8) (3.07) (21.8) (3.57)
-------------------
- 0.5% 19.4 3.17 23.1 3.77
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Power prices +10% 54.2 8.86 62.2 10.17
-------------------
-10% (56.9) (9.31) (63.8) (10.43)
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Inflation rate* + 0.5% 31.7 5.19 25.0 4.09
-------------------
- 0.5% (30.2) (4.94) (26.1) (4.28)
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Energy yield 10 year P90 (105.0) (17.17) (100.2) (16.39)
-------------------
10 year P10 111.9 18.30 100.5 16.43
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Operational costs +10% (9.1) (1.49) (10.5) (1.72)
-------------------
-10% 9.1 1.49 10.5 1.72
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Subsidiaries and Associates
The Company holds investments through subsidiary companies which
have not been consolidated as a result of the adoption of IFRS 10:
Investment entities exemption to consolidation. Below is the legal
entity name and ownership percentage for the SPVs which are all
incorporated in the UK except for Bluefield Durrants GmBH which is
incorporated in Germany .
Name Ownership percentage Name Ownership percentage
Bluefield Renewables 1 Limited 100 Gypsum Solar Farm Limited 100
Bluefield Renewables 2 Limited 100 Holly Farm Solar Park Limited 100
Bluefield SIF Investments Limited 100 Kellingley Solar Farm Limited 100
Bunns Hill Solar Limited 100 Little Bear Solar Limited 100
Place Barton Farm Solar Park
HF Solar Limited 100 Limited 100
Hoback Solar Limited 100 Willows Farm Solar Limited 100
Littlebourne Solar Farm Limited 100 Southwick Solar Limited 100
Molehill PV Farm Limited 100 Butteriss Down Solar Farm Limited 100
Pashley Solar Farm Limited 100 Goshawk Solar Limited 100
ISP (UK) 1 Limited 100 Kite Solar Limited 100
Solar Power Surge Limited 100 Peregrine Solar Limited 100
West Raynham Solar Limited 100 Promothames 1 LTD 100
Sheppey Solar Limited 100 Rookery Solar Limited 100
Capelands Solar Farm Limited 100 Mikado Solar Projects (2) Limited 100
North Beer Solar Limited 100 Mikado Solar Projects (1) Limited 100
WEL Solar Park 2 Limited 100 KS SPV 5 Limited 100
Hardingham Solar Limited 100 Eagle Solar Limited 100
Redlands Solar Farm Limited 100 Kislingbury Solar Limited 100
WEL Solar Park 1 Limited 100 Thornton Lane Solar Farm Limited 100
Saxley Solar Limited 100 Gretton Solar Farm Limited 100
Frogs Loke Solar Limited 100 Wormit Solar Farm Limited 100
Old Stone Farm Solar Park Limited 100 Langlands Solar Limited 100
Bradenstoke Solar Park Limited 100 Bluefield Merlin LTD 100
GPP Langstone LLP 100 Harrier Solar Limited 100
Ashlawn Solar Limited 100 Rhydy Pandy Solar Limited 100
Betingau Solar Limited 100 New Energy Business Solar Ltd 100
Grange Solar Limited 100 Corby Solar Limited 100
Hall Farm Solar Limited 100 Falcon Solar Farm Limited 100
Oulton Solar Limited 100 Folly Lane Solar Limited 100
Romsey Solar Limited 100 New Road Solar Limited 100
Salhouse Solar Limited 100 Blossom 1 Solar Limited 100
Tollgate Solar Limited 100 Blossom 2 Solar Limited 100
Trethosa Solar Limited 100 New Road 2 Solar Limited 100
Welbourne LLP 100 GPP Eastcott LLP 100
Barvills Solar Limited 100 GPP Blackbush LLP 100
Clapton Farm Solar Park Limited 100 GPP Big Field LLP 100
Court Farm Solar Limited 100 WSE Hartford Wood Limited 100
East Farm Solar Park Limited 100 Oak Renewables 2 Limited 100
Galton Manor Solar Park Limited 100 Oak Renewables Limited 100
Good Energy Creathorne Farm Solar 100 Wind Energy Scotland (Fourteen 100
Park (003) Limited Arce Fields) Limited
Good Energy Lower End Farm Solar 100 Wind Energy Scotland (Birkwood 100
Park (026) Mains) Limited
Good Energy Woolbridge Solar Park Wind Energy Scotland (Holmhead)
(010) Limited 100 Limited 100
Good Energy Rook Wood Solar Park
(057) Limited 100 Moscliff Power 5 Limited 100
Good Energy Carloggas Solar Park
(009) Limited 100 Mosscliff Power 10 Limited 100
Good Energy Cross Road Plantation
Solar Park (028) Limited 100 Mosscliff Power 2 Limited 100
Good Energy Delabole Windfarm
Limited 100 Mosscliff Power 3 Limited 100
Good Energy Hampole Windfarm
Limited 100 Mosscliff Power 4 Limited 100
Good Energy Generating Assets No.1
Limited 100 Mosscliff Power 6 Limited 100
Good Energy Holding Company No.1
Limited 100 Mosscliff Power 7 Limited 100
Aisling Renewables LTD 100 Mosscliff Power Limited 100
Wind Energy 3 Hold Co 100 E2 Energy PLC 100
Wind Energy (NI) Limited 100 Wind Energy One Limited 100
Ash Renewables No 3 Limited 100 Wind Energy Two Limited 100
Ash Renewables No 4 Limited 100 New Road Wind Limited 100
Ash Renewables No 5 Limited 100 Yelvertoft Solar Farm Limited 100
Ash Renewables No 6 Limited 100 Peradon Solar Farm Limited 100
Wind Beragh Limited 100 Lower Tean Leys Solar Farm Limited 60
Wind Camlough Limited 100 Lower Mays Solar Farm Limited 100
Wind Cullybackey Limited 100 Longpasture Solar Farm Limited 60
Wind Dungorman Limited 100 Leeming Solar Farm Limited 60
Wind Killeenan Limited 100 Wallace Wood Solar Farm Limited 60
Wind Mowhan Limited 100 LEO1B Energy Park Limited 60
Wind Mullanmore Limited 100 LH DNO Grid Services Limited 60
Carmoney Energy Limited 100 Sweet Briar Solar Farm Limited 60
Errigal Energy Limited 100 BF31 WHF Solar Limited 60
Galley Energy Limited 100 BF27 BF Solar Limited 60
S&E Wind Energy Limited 100 BF13A TF Solar Limited 60
Wind Energy 2 Hold Co 100 HW Solar Farm Limited 100
Boston RE Ltd 100 AR108 Bolt Solar Farm Limited 100
DC21 Earth SPV Limited 100 BF33C LHF Solar Limited 60
E5 Energy Limited 100 AR006 GF Solar Limited 100
E6 Energy Limited 100 Mauxhall Farm Energy Park Limited 100
E7 Energy Limited 100 BF16D BHF Solar Limited 100
Hallmark Powergen 3 Limited 100 BF33E BHF Solar Limited 60
BF58 Hunts Airfield Solar Ltd
Warren Wind Limited 100 under 60
Wind Energy Three Limited 100 Lightning 1 Energy Park Limited 100
Wind Energy Holdings Limited 100 Abbots Ann Farm Solar Park Limited 100
Wind Energy 1 Hold Co 100 Canada Farm Solar Park Limited 100
Crockbaravally Wind Holdco Limited 100 Kinetica 846 Limited 100
Crockbaravally Wind Farm Limited 100 Kinetica 868 Limited 100
Dayfields Solar Limited 100 Twineham Energy Limited 60
Farm Power Apollo Limited 100 Sheepwash Lane Energy Barn Limited 100
Whitehouse Farm Energy Barn
Freathy Solar Park Limited 100 Limited 100
IREEL FIT TopCo Limited 100 Bluefield Durrants GmBH 100
IREEL FIT HoldCo Limited 100
IREEL Wind TopCo Limited 100
IREEL Solar HoldCo Limited 100
IREL Solar HoldCo Limited 100
Ladyhole Solar Limited 100
Morton Wood Solar Limited 100
Nanteague Solar Limited 100
Newton Down Wind HoldCo Limited 100
Newton Down Windfarm Limited 100
Padley Wood Solar Limited 100
Peel Wind Farm (Sheerness) Limited 100
Port of Sheerness Wind Farm
Limited 100
Sandys Moor Solar Limited 100
St Johns Hill Wind Holdco Limited 100
St Johns Hill Wind Limited 100
Trickey Warren Solar Limited 100
Whitton Solar Limited 100
LPF UK Equityco Limited 100
LPF UK Solar Limited 100
LPF Kinetica UK Limited 100
9. Trade and other receivables
30 June 2023 30 June 2022
GBP'000 GBP'000
Current assets
Income from investments 900 834
Other receivables 10 43
Prepayments - 5
910 882
============= =============
There are no material past due or impaired receivable balances
outstanding at the period end.
The Directors consider that the carrying amount of all
receivables approximates to their fair value.
10. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Company and
short term bank deposits held with maturities of up to three
months. The carrying amount of these assets as at 30 June 2023 was
GBP968,878 (2022: GBP1,619,313) and approximated their fair value.
Cash held by BR1, the Company's immediate wholly owned subsidiary,
as at 30 June 2023 is shown in Note 8.
11. Other payables and accrued expenses
30 June 2023 30 June 2022
GBP'000 GBP'000
Current liabilities
Investment advisory fees 164 121
Administration fees 136 204
Audit fees 109 95
Directors' fees 72 60
Other payables 53 10
534 490
============= =============
The Company has financial risk management policies in place to
ensure that all payables are paid within the agreed credit period.
The Directors consider that the carrying amounts of all payables
approximate to their fair value.
12. Earnings per share
Year ended Year ended
30 June 2023 30 June 2022
------------------------------------------------------------------------------------- -------------- ---------------
Profit attributable to Shareholders of the Company GBP46,793,621 GBP174,572,832
Weighted average number of Ordinary shares 611,452,217 500,110,688
Basic and diluted earnings from continuing operations and profit for the year (pence
per
share) 7.65 34.91
============== ===============
13. Share capital
The authorised share capital of the Company is represented by an
unlimited number of Ordinary Shares of no par value which, upon
issue, the Directors may designate into such classes and denominate
in such currencies as they may determine.
Year ended Year ended
Number of Ordinary Shares 30 June 2023 30 June 2022
Number Number
--------------------------- -------------- --------------
Opening balance 611,452,217 406,999,622
Shares issued for cash - 204,452,595
Closing balance 611,452,217 611,452,217
============== ==============
Year ended Year ended
Shareholders' Equity 30 June 2023 30 June 2022
GBP'000 GBP'000
--------------------------------- -------------- --------------
Opening balance 858,391 471,425
Ordinary Shares issued for cash - 255,100
Share issue costs - (4,506)
Dividends paid (50,995) (38,201)
Retained earnings 46,793 174,573
Closing balance 854,189 858,391
============== ==============
Rights attaching to shares
The Company has a single class of Ordinary Shares, which are
entitled to dividends declared by the Company. At any general
meeting of the Company, each ordinary Shareholder is entitled to
have one vote for each share held. The Ordinary Shareholders also
have the right to receive all income attributable to those shares
and participate in distributions made and such income shall be
divided pari passu among the holders of Ordinary Shares in
proportion to the number of Ordinary Shares held by them.
14. Dividends
On 2 August 2022, the Board declared a third interim dividend of
GBP12,534,770, in respect of the year ended 30 June 2022 , equating
to 2.05pps (third interim dividend in respect of the year ended 30
June 2021: 2.00pps), which was paid on 31 August 2022 to
Shareholders on the register on 12 August 2022.
On 30 September 2022, the Board declared a fourth interim
dividend of GBP12,779,351 in respect of the year ended 30 June
2022, equating to 2.09pps (fourth interim dividend in respect of
the year ended 30 June 2021: 2.00pps), which was paid on 4 November
2022 to Shareholders on the register on 14 October 2022.
On 23 January 2023, the Board declared its first interim
dividend of GBP12,840,497, in respect of the year ended 30 June
2023, equating to 2.10pps (first interim dividend in respect of the
year ended 30 June 2022: 2.03pps), which was paid on 3 March 2023
to Shareholders on the register on 3 February 2023.
On 11 May 2023, the Board declared a second interim dividend of
GBP12,840,497, in respect of the year ended 30 June 2023, equating
to 2.10pps (second interim dividend in respect of the year ended 30
June 2022: 2.03pps), which was paid on 12 June 2023 to Shareholders
on the register on 19 May 2023.
15. Risk management policies and procedures
The Company is exposed to a variety of financial risks,
including market risk (including price risk, currency risk and
interest rate risk), credit risk, liquidity risk and portfolio
operational risk. The Investment Adviser and the Administrator
report to the Board on a quarterly basis and provide information to
the Company which allows it to monitor and manage financial risks
relating to its operations.
The Company's overall risk management programme focuses on the
unpredictability of financial markets and government energy policy
and seeks to minimise potential adverse effects on the Company's
financial performance, as referenced in the Principal and Emerging
Risks section in the Strategic Report.
The Board is ultimately responsible for the overall risk
management approach within the Company. The Board has established
procedures for monitoring and controlling risk. The Company has
investment guidelines that set out its overall business strategies,
its tolerance for risk and its general risk management
philosophy.
In addition, the Investment Adviser monitors and measures the
overall risk bearing capacity in relation to the aggregate risk
exposure across all risk types and activities. Further details
regarding these policies are set out below:
Market price risk
Market price risk is defined as the risk that the fair value of
future cash flows of a financial instrument held by the Company, in
particular through the Company's subsidiary, BR1, will fluctuate
because of changes in market prices.
Market price risk will arise from changes in electricity prices
whenever PPAs expire and are renewed. The timing of these is
staggered to minimise risk .
BR1's future SPV investments are subject to fluctuations in the
price of secondary assets which could have a material adverse
effect on the BR1's ability to source projects that meet its
investment criteria and consequently its business, financial
position, results of operations and business prospects.
The Company's overall market position is monitored by the
Investment Adviser and is reviewed by the Board of Directors on an
ongoing basis.
Currency risk
The Company does not have any direct currency risk exposure as
all its investments, borrowings and other transactions are in
Sterling. The Company is however indirectly exposed to currency
risk on future equipment purchases, made through BR1's SPVs, where
equipment is imported.
Interest rate risk
Interest rate risk is the risk that the value of financial
instruments and related income from the cash and cash equivalents
will fluctuate due to changes in market interest rates.
The Company is also exposed, through BR1, to interest rate risk
on drawings under its RCF. Please see above in the Investment
Adviser's report for details of the third party debt within the
Company's subsidiaries.
The Company's interest bearing financial assets consist of cash
and cash equivalents. The interest rates on the short term bank
deposits are fixed and do not fluctuate significantly with changes
in market interest rates.
The following table shows the portfolio profile of the financial
assets at year end:
Total as at
30 June 2023
Interest rate GBP'000
--------------- -------------- --------------
Floating rate
RBSI 1.70 % 753
Fixed rate
Lloyds 0.00 % 216
969
==============
Total as at
30 June 2022
Interest rate GBP'000
--------------- -------------- --------------
Floating rate
RBSI 0.00 % 1,508
Fixed rate
Lloyds 0.00 % 111
1,619
==============
The valuation of BR1's SPV investments is subject to variation
in the discount rate, which are themselves subject to changes in
interest rate risk due to the discount rates applied to the
discounted cash flow technique when valuing the investments. The
Investment Adviser reviews the discount rates semi-annually and
takes into consideration market activity to ensure appropriate
discount rates are recommended to the Board. The Group is exposed
to interest rate risk on the Directors' Valuation of GBP1,018.4m
(2022: GBP939.9m).
Credit risk
Credit risk is the risk that a counterparty will be unable to
pay amounts in full when due. At the reporting date BR1's SPVs held
performance bonds totalling GBPnil (2022: GBP1,830,000) with banks
that have a credit rating which is of investment grade.
The underlying SPVs are contracted only with investment grade
counter parties, mitigating PPA counterparty risk. The Directors do
not have any concerns around the continuing purchasing of power
through its current PPAs.
The Company's credit risk exposure is due to a portion of the
Company's assets being held as cash and cash equivalents and
accrued interest. The Company maintains its cash and cash
equivalents and borrowings across two different banking groups to
diversify credit risk. The total exposure to credit risk arises
from default of the counterparty and the carrying amounts of
financial assets best represent the maximum credit risk exposure at
the period end date. As at 30 June 2023, the maximum credit risk
exposure in relation to cash and cash equivalents held by the
Company was GBP968,878 (2022: GBP1,619,313). If the cash and cash
equivalents held by BR1 are included, this increases to
GBP27,375,878 (2022: GBP14,721,105). All cash and cash equivalents
held by the Company and BR1 is with banks that have a credit rating
which is of investment grade.
Total as at
Cash Fixed deposit 30 June 2023
GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------------
RBSI 753 - 753
Lloyds - 216 216
-------- -------- -------------- --------------
753 216 969
======== ============== ==============
Total as at
Cash Fixed deposit 30 June 2022
GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------------
RBSI 1,508 - 1,508
Lloyds - 111 111
-------- -------- -------------- --------------
1,508 111 1,619
======== ============== ==============
The carrying amount of these assets approximates their fair
value.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its liabilities as they fall due. The Investment Adviser and
the Board continuously monitor forecasted and actual cash flows
from operating, financing and investing activities.
As the Company's investments, through BR1, are in the SPVs,
which are private companies that are not publicly listed, the
return from these investments is dependent on the income generated
or the disposal of renewable energy infrastructure assets by the
SPVs and will take time to realise.
The Company, through BR1, expects to comply with the covenants
of its revolving credit facility.
The following table details the Company's expected maturity for
its financial assets and liabilities. These are undiscounted
contractual cash flows:
Total as at
Less than one year Between one and five years After five years 30 June 2023
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------------- --------------------------- ----------------- --------------
Assets
Financial assets held at fair
value through profit or loss* - - 454,460 454,460
Trade and other receivables** 910 - - 910
Cash and cash equivalents 969 - - 969
Liabilities
Other payables and accrued
expenses (534) - - (534)
1,345 - 454,460 455,805
=================== =========================== ================= ==============
* the Company passes debt to BR1 under loan agreements; as at
the year end there is an additional amount of non-contractual cash
which is not reflected above in addition to the interest income
**excluding prepayments
As part of the financing terms provided by all third party
leaders to companies within the Group, lenders have security
packages which include charges over the shares of the borrower
entity and any wholly owned subsidiaries.
Total as at
Less than one year Between one and five years After five years 30 June 2022
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------------- --------------------------- ----------------- --------------
Assets
Financial assets held at fair
value through profit or loss* - - 484,322 484,322
Trade and other receivables** 877 - - 877
Cash and cash equivalents 1,619 - - 1,619
Liabilities
Other payables and accrued
expenses (490) - - (490)
2,006 - 484,322 486,328
=================== =========================== ================= ==============
* the Company passes debt to BR1 under loan agreements; as at
the year end there is an additional amount of non-contractual cash
which is not reflected above
**excluding prepayments
Portfolio operational risk
Portfolio operational risk is defined as the risk that renewable
energy infrastructure assets perform below expectation after
acquisition and revenue received from the sale of electricity is
reduced. This risk is mitigated by BSL ensuring that operation and
maintenance contractors are compliant with their contractual
obligations including reaction times, maintenance plans and service
levels.
Concentrations of risk
Concentrations of risk arise from financial instruments that
have similar characteristics and are affected similarly by changes
in economic or other conditions. The concentrations of the
Company's assets by geography, construction contractor and revenue
type are shown above. This analysis forms an integral part of the
financial statements.
Capital management policies and procedures
The Company's capital management objectives are to ensure that
the Company will be able to continue as a going concern while
maximising the capital return to equity Shareholders.
In accordance with the Company's investment policy, the
Company's principal use of cash (including the proceeds of any
share issuance and loan facilities) is to fund BR1's projects, as
well as expenses related to fundraising, the share issues, ongoing
operational expenses and payment of dividends and other
distributions to Shareholders in accordance with the Company's
dividend policy.
The Board, with the assistance of the Investment Adviser,
monitors and reviews the broad structure of the Company's capital
on an ongoing basis.
The Company has no imposed capital requirements.
The capital structure of the Company consists of issued share
capital and retained earnings.
16. Related party transactions and Directors' remuneration
In the opinion of the Directors, the Company has no immediate or
ultimate controlling party.
The Chair was entitled to an annual remuneration of GBP68,906
(2022: GBP62,500). The other Directors were entitled to an annual
remuneration of GBP43,050 (2022: GBP39,000). Paul Le Page received
an additional annual fee of GBP8,768 (2022: GBP8,000) for acting as
Chair of the Audit and Risk Committee. Meriel Lenfestey received an
additional annual fee of GBP5,250 (2022: N/A) for acting as Chair
of the Environmental, Social and Governance Committee. Elizabeth
Burne received an additional annual fee of GBP3,150 (2022: N/A) for
acting as Chair of the Management Engagement and Service Providers
Committee.
The total Directors' fees expense for the period amounted to
GBP271,634 (2022: GBP240,818) of which GBP71,517 was outstanding at
30 June 2023 (2022: GBP59,750) .
At 30 June 2023, the number of Ordinary Shares held by each
Director is as follows:
2023 2022
Number of Number of
Ordinary Shares Ordinary Shares
John Scott* 625,619 543,312
Elizabeth Burne 15,000 15,000
Michael Gibbons - N/A
Meriel Lenfestey 7,693 7,693
Paul Le Page 35,000 35,000
John Rennocks* N/A 290,388
683,312 891,393
================= =================
*Including shares held by PCAs
John Scott and Michael Gibbons are Directors of BR1. They
received an annual fee of GBP6,565 (2022: GBP6,250) each for their
services to this company. Neil Wood and James Armstrong, who are
partners of the Investment Adviser, are also Directors of BSIFIL
and BR1.
The Company and BR1's investment advisory fees for the year
amounted to GBP7,052,064 (2022: GBP5,131,527) of which GBP554,919
(2022: GBP494,485) was outstanding at the year end. James
Armstrong, Giovanni Terranova and Neil Wood, who are partners of
the Investment Adviser, hold a 0.03%, 0.06% and 0.01% interest in
the Company as at 30 June 2023, respectively.
Fees paid during the period by SPVs to BSL, a company which has
the same ownership as that of the Investment Adviser totalled
GBP4,456,173 (2022: GBP3,199,594). BSL provides asset management
and other services relating to the operation of daily management
activities of the renewable energy project companies.
Fees paid during the period by SPVs to BOL, a company which has
the same ownership as that of the Investment Adviser totalled
GBP10,156,959 (2022: GBP5,788,585). BOL provides O&M and other
services relating to the operation of daily management activities
of the renewable energy project companies.
Fees paid during the period by SPVs to BRD, a company which has
the same ownership as that of the Investment Adviser, totalled
GBP1,624,024 (2022: GBP691,280). BRD locates and manages a pipeline
of development projects for the Company and the amount includes
GBP966,681 for BRD's share in the development project, Brick House
Lane.
The Company's monitoring fee income received from BR1 amounted
to GBP900,000 (2022: GBP833,887) of which GBP900,257 was
outstanding at the year end (2022: GBP833,887).
17. Subsequent events
The following events happened after the end of the Company's
reporting period on 30(th) June
Post year end, on 7 August 2023, the Board declared a third
interim dividend of GBP12,840,497, in respect of the year ended 30
June 2023 , equating to 2.10pps (third interim dividend in respect
of the year ended 30 June 2022: 2.05pps), which was paid on 1
September 2023 to Shareholders on the register on 18 August
2023.
Post year end, John Scott bought an additional 18,310 Ordinary
Shares and Michael Gibbons bought an additional 17,800 Ordinary
Shares in the Company.
Post year end, on 27 September 2023, the Board approved a fourth
interim dividend of GBP14,063,401 in respect of the year ended 30
June 2023, equating to 2.30pps (fourth interim dividend in respect
of the year ended 30 June 2022: 2.09pps), which will be declared on
28 September 2023 and paid on or around 6 November 2023 to
Shareholders on the register on 6 October 2023.
Glossary of Defined Terms
Administrator means Ocorian Administration (Guernsey)
Limited
AGM means the Annual General Meeting
AIC means the Association of Investment Companies
AIC Code means the Association of Investment Companies Code of
Corporate Governance
AIF means Alternative Investment Fund
AIFM means Alternative Investment Fund Management
AIFMD means the Alternative Investment Fund Management
Directive
Articles means the Memorandum of 29 May 2013 as amended and
Articles of Incorporation as adopted by special resolution on 7
November 2016
Auditor means KPMG Channel Islands Limited (see KPMG)
Aviva Investors means Aviva Investors Limited
BEIS means The Department for Business, Energy and Industrial
Strategy
BEPS means Base erosion and profit shifting
Bluefield means Bluefield Partners LLP
Bluefield Group means Bluefield Partners LLP and Bluefield
Companies
BOL means Bluefield Operations Limited
Board means the Directors of the Company
BR1 means Bluefield Renewables 1 Limited being the only direct
subsidiary of the Company
BRD means Bluefield Renewable Developments Limited
Brexit means departure of the UK from the EU
BSIF means Bluefield Solar Income Fund Limited
BSIFIL means Bluefield SIF Investments Limited
BSL means Bluefield Asset Management Services Limited
BSUoS means Balancing Services Use of System charges: costs set
to ensure that network companies can recover their allowed revenue
under Ofgem price controls
Business days means every official working day of the week,
generally Monday to Friday excluding public holidays
CAGR means compound annual growth rate
Calculation Time means The Calculation Time as set out in the
Articles of Incorporation
CCC means Committee on Climate Change
CfD means Contract for Difference
Company means Bluefield Solar Income Fund Limited
Companies Law means the Companies (Guernsey) Law 2008, as
amended (see Law)
Consolidation Exception Amendments means the 18 December 2014
further amendments to IFRS 10 Investment Entities: Applying the
Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS
28)
Cost of debt means the blended cost of debt reflecting fixed and
index-linked elements
CO2e means Carbon Dioxide emissions
CRS means Common Reporting Standard
C shares means Ordinary Shares approved for issue at no par
value in the Company
CSR means Corporate Social Responsibility
DCF means Discounted Cash Flow
DECC means the Department of Energy and Climate Change
Defect Risk means that there is an over-reliance on limited
equipment manufacturers which could lead to large proportions of
the portfolio suffering similar defects
Directors' Valuation means gross value of the SPV investments
held by BR1, including their holding companies.
DNO means Distribution Network Operator
DSCR means debt service cover ratio
DTR means the Disclosure Guidance and Transparency Rules of the
UK's FCA
EBITDA means Earnings before interest, tax, depreciation and
amortisation
EGM means Extraordinary General Meeting
EIS means Enterprise Investment Scheme
EPC means Engineering, Procurement & Construction
EPS means Earning per share
ESG means Environmental, Social & Governance
EU means the European Union
EV means enterprise valuation
FAC means Final Acceptance Certificate
FATCA means the Foreign Account Tax Compliance Act
Financial Statements means the audited annual financial
statements
FiT means Feed-in Tariff
GAV means Gross Asset Value
GDPR means General Data Protection Regulation
GFSC means the Guernsey Financial Services Commission
GHG means greenhouse gas
GHG Protocol supplies the world's most widely used greenhouse
gas accounting standards
Group means Bluefield Solar Income Fund Limited and Bluefield
Renewables 1 Limited
Guernsey Code means the Guernsey Financial Services Commission
Finance Sector Code of Corporate Governance
GWh means Gigawatt hour
GW means Gigawatt peak
IAS means International Accounting Standard
IASB means the International Accounting Standards Board
IFRS means International Financial Reporting Standards as
adopted by the EU
Investment Adviser means Bluefield Partners LLP
IPEV Valuation Guidelines means the International Private Equity
and Venture Capital Valuation Guidelines
IPO means initial public offering
IRR means Internal Rate of Return
IVSC The International Valuation Standards Council
KID means Key Information Document
KPI means Key Performance Indicators
KPMG means KPMG Channel Islands Limited (see Auditor)
kWh means Kilowatt hour
kW means Kilowatt peak
Law means Companies (Guernsey) Law, 2008 as amended (see
Companies Law)
LD means liquidated damages
Listing Rules means the set of FCA rules which must be followed
by all companies listed in the UK
Lloyds means Lloyds Bank Group plc
LSE means London Stock Exchange plc
LTF means long term facility provided by Aviva Investors
Limited
Main Market means the main securities market of the LSE
MW means Megawatt (a unit of power equal to one million
watts)
MWh means Megawatt hour
NatWest means NatWest International plc
NAV means Net Asset Value as defined in the prospectus
NMPI means Non-mainstream Pooled Investments and Special Purpose
Vehicles and the rules around their financial promotion
NPPR means the AIFMD National Private Placement Regime
O&M means Operation and Maintenance
OECD means The Organisation for Economic Cooperation and
Development
Official List means the Premium Segment of the UK Listing
Authority's Official List
Ofgem means Office of Gas and Electricity Markets
Ordinary Shares means the issued ordinary share capital of the
Company, of which there is only one class
Outage Risk means that a higher proportion of large capacity
assets hold increased exposure to material losses due to
curtailments and periods of outage
P10 means Irradiation estimate exceeded with 10% probability
P90 means Irradiation estimate exceeded with 90% probability
PCA means Persons Closely Associated
PPA means Power Purchase Agreement
pps means pence per share
PR means Performance Ratio (the ratio of the actual and
theoretically possible energy outputs)
PRIIPS means Packaged Retail and Insurance-Based Investment
Products
PV means Photovoltaic
RBSI means Royal Bank of Scotland International Limited
RCF means Revolving Credit Facility
RO Scheme means the Renewable Obligation Scheme which is the
financial mechanism by which the UK Government incentivises the
deployment of large-scale renewable electricity generation by
placing a mandatory requirement on licensed UK electricity
suppliers to source a specified and annually increasing proportion
of the electricity they supply to customers from eligible renewable
sources, or pay a penalty
ROC means Renewable Obligation Certificates
ROC recycle means the payment received by generators from the
redistribution of the buy-out fund. Payments are made into the
buy-out fund when suppliers do not have sufficient ROCs to cover
their obligation.
RPI means the Retail Price Index
Santander UK means Santander UK plc
SASB means Sustainability Accounting Standards Board
SDG means the United Nations Sustainable Development Goals
SFDR means the Sustainable Finance Disclosure Regulation
SONIA means Sterling Overnight Index Average
SPA means Share Purchase Agreement
SPVs means the Special Purpose Vehicles which hold the Company's
investment portfolio of underlying operating assets
Sterling means the Great British pound currency
TCFD means Task Force for Climate-related Financial
Disclosures
TISE means The International Stock Exchange (formerly CISE,
Channel Islands Securities Exchange)
UK means the United Kingdom of Great Britain and Northern
Ireland
UK Code means the United Kingdom Corporate Governance Code
UK FCA means the UK Financial Conduct Authority
UNGC means the United Nations Global Compact
United Nations Principles for Responsible Investment means an
approach to investing that aims to incorporate environmental,
social and governance factors into investment decisions, to better
manage risk and generate sustainable, long-term returns
Alternative Performance Measures (Unaudited)
APM Definition Purpose Calculation
Total return The percentage A key measure The change in NAV
increase/(decrease) of the success for the period plus
in NAV, inclusive of the Investment any dividends paid
of dividends paid, Adviser's divided by the initial
in the reporting investment NAV.
period. strategy. (139.70-140.39+2.05+2.09+2.10+2.10)/140.39=5.45%
---------------------- ------------------ ---------------------------------------------------
Total Shareholder The percentage A measure of the The change in share
Return increase/(decrease) return that could price for the period
in share price, have been plus any dividends
inclusive of obtained paid divided by
dividends by holding a the initial share
paid, in the share price.
reporting over the (120.00-131.00+2.05+2.09+2.10+2.10)/131.00=(2.03)%
period. reporting The measure excludes
period. transaction costs.
---------------------- ------------------ ---------------------------------------------------
Total Dividends This is the sum A measure of the The linear sum of
Declared of the dividends income that the each dividend declared
in Period that the Board company has paid in the reporting
has declared relating to shareholders period
to the reporting that can be
period. compared
to the Company's
target dividend.
---------------------- ------------------ ---------------------------------------------------
Underlying Total net income A measure to link Total income of
Earnings of the Company's the underlying the Company's portfolio
investment portfolio. financial minus Group operating
performance costs minus Group
of the debt costs.
operational
projects to the
dividends
declared
and paid by the
Company.
---------------------- ------------------ ---------------------------------------------------
Market The total value This is a key The price per share
Capitalisation of the Company's indicator of the multiplied by the
issued share capital. Company's number of shares
liquidity. in issue.
---------------------- ------------------ ---------------------------------------------------
NAV per The Company's A measure of the The net assets attributable
Ordinary closing NAV per value of one to Ordinary Shares
Share share at the period Ordinary on the statement
end. Share. of financial position
(GBP854.2m) divided
by the number of
ordinary shares
in issue (611,452,217)
as at the calculation
date.
---------------------- ------------------ ---------------------------------------------------
Sale of The total proportion A measure to The amount of revenue
Electricity of revenue generated understand attributable to
by the Company's the proportion electricity sales
portfolio that of revenue divided by the total
is attributable attributable revenue generated
to electricity to sales of by the Company's
sales. electricity. portfolio, expressed
as a percentage.
---------------------- ------------------ ---------------------------------------------------
Total Revenue Total net income A measure to Total income of
of the Company's outline the Company's portfolio
investment portfolio. the Total revenue owned for a full
of the portfolio 12 months.
on per MW basis.
---------------------- ------------------ ---------------------------------------------------
PPA Revenue Revenue generated A measure to Total revenue from
through PPAs. outline all power price
the revenue sales during the
earned period from the
by the portfolio Company's portfolio.
from power sales.
---------------------- ------------------ ---------------------------------------------------
Regulated Revenue generated A measure to Total revenue from
Revenue from the sale outline all subsidy income
of FiTs and ROCs. the revenue earned earned during the
by the portfolio period from the Company's
from government portfolio.
subsidies.
-------------------- -------------------- -------------------------------------------------------
Ongoing The recurring A measure of the Calculated in accordance
charges costs that the minimum gross with the AIC methodology
ratio Company and its profit that the detailed in the table
Immediate Holding Company needs below.
Company has to produce to
incurred make a positive
during the period return for
excluding Shareholders.
performance
fees and one off
legal and
professional
fees expressed
as a percentage
of the Company's
average NAV for
the period.
-------------------- -------------------- -------------------------------------------------------
Weighted A relative A measure of the Total Regulated Revenue
Average indicator Company's portfolio received by the portfolio
ROC of the regulatory earnings as a divided by the product
revenues within proportion of of the current market
a renewable its assets. value of a ROC and
portfolio. the annual generation
capacity of the portfolio.
-------------------- -------------------- -------------------------------------------------------
Weighted The average A measure of the The sum of the product
Average operational Company's progress of each plant's operational
Life life of the in extending the capacity in MW and
Company's life of its the plant's expected
portfolio. portfolio life divided by the
beyond the end total portfolio capacity
of the subsidy in MW.
regime in 2036.
-------------------- -------------------- -------------------------------------------------------
Directors' The gross value An estimate of A reconciliation of
Valuation of the SPV the sum that would the Directors' Valuation
Investments be realised if to Financial assets
held by BR1, the Company's at fair value through
including portfolio was profit and loss is
their holding sold on a willing shown in Note 8 of
companies minus buyer, willing the financial statements.
Project level seller basis.
debt.
-------------------- -------------------- -------------------------------------------------------
Gross Asset The Market Value A measure of the The total assets attributable
Value of all Assets total value of to Ordinary Shares
within the Company. the Company's on the Statement of
Assets. Financial Position.
-------------------- -------------------- -------------------------------------------------------
Total Outstanding The total A measure that The sum of the Sterling
Debt outstanding is used to equivalent values
balances of all establish of all loans held
debt held within the Company's within the Company.
the Company and level of gearing.
its subsidiaries.
-------------------- -------------------- -------------------------------------------------------
Ongoing Charges Year to 30 June 2023
Immediate Holding
The Company Company Total
GBP'000s GBP'000s GBP'000s
------------------------- ------------ ------------------ ------------
Fees to Investment
Adviser 729 6,230 6,959
Legal and professional
fees 240 106 346
Administration fees 542 - 542
Directors' remuneration 272 13 285
Audit fees 112 16 128
Other ongoing expenses 257 102 359
Total ongoing expenses 2,150 6,467 8,617
------------ ------------------ ------------
Average NAV 863,508,987
Ongoing Charges (using AIC methodology) 1.00%
------------
General Information
Board of Directors (all non-executive)
John Scott (Chair and Chair of Nomination Committee)
Elizabeth Burne (Chair of Management Engagement and Service Providers
Committee)
Michael Gibbons CBE (Senior Independent Director) (appointed 7 October
2022)
Meriel Lenfestey (Chair of Environmental, Social and Governance Committee)
Paul Le Page (Chair of Audit and Risk Committee)
John Rennocks (retired 22 February 2023)
Registered Office Investment Adviser
PO Box 286 Bluefield Partners LLP
Floor 2, Trafalgar Court 6 New Street Square
Les Banques, St Peter Port London, EC4A 3BF
Guernsey, GY1 4LY
Administrator, Company Secretary Sponsor, Broker and Financial
and Designated Manager Adviser
Ocorian Administration (Guernsey) Numis Securities Limited
Limited 45 Gresham Street
Floor 2, Trafalgar Court London, EC2V 7BF
Les Banques, St Peter Port
Guernsey, GY1 4LY
Independent Auditor Legal Advisers to the Company
KPMG Channel Islands Limited (as to English law)
Glategny Court, Glategny Esplanade Norton Rose Fulbright LLP
St Peter Port 3 More London Riverside
Guernsey, GY1 1WR London, SE1 2AQ
Registrar Legal Advisers to the Company
Computershare Investor Services (Guernsey) (as to Guernsey law)
Limited* Carey Olsen
13 Castle Street PO Box 98, Carey House
St Helier Les Banques, St Peter Port
Jersey, JE1 1ES Guernsey, GY1 4BZ
Link Market Services (Guernsey) Limited** Principal Bankers
Mont Crevelt House NatWest International plc
Bulwer Avenue, St Sampson 35 High Street
Guernsey, GY2 4LH St Peter Port
Guernsey, GY1 4BE
*appointed 10 March 2023
**resigned 10 March 2023
[1] Please note, the blended forecast varies depending on
whether the asset is a solar or a wind project, reflecting
different forecasts for technology specific capture rates. The
solar forecast is shown in the chart.
[2] According to Bloomberg New Energy Finance and Bluefield
internal data
[3] Based on Ofgem's Typical Domestic Consumption Values.
[4] Based on generation data aligned with an appropriate
Government CO2e conversion factor.
[5] Please refer to the Company's 2022 Annual Report for further
information on the strategy development process.
[6] Disclaimer: The content of this publication has not been
approved by the United Nations and does not reflect the views of
the United Nations or its officials or Member States.
[7] The FY 23-24 commitments reiterated throughout the ESG
report may differ slightly from those presented in the ESG
Appendix; this is because some commitments have been updated for
the upcoming year. The original commitments are presented in the
ESG Appendix to highlight the Company's performance against them
during the reporting period.
[8]
https://www.gov.uk/government/news/uk-enshrines-new-target-in-law-to-slash-emissions-by-78-by-2035
[9]
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1147340/powering-up-britain-joint-overview.pdf
[10] Based on Ofgem's Typical Domestic Consumption Values
[11] Based on generation data aligned with an appropriate
Government CO2e conversion factor
[12] Through the displacement of fossil fuel generated energy
supplying the grid.
[13] As defined by Annex I of Annex II of the Commission
Delegated Regulation (EU) 2022/1288, in addition to UK statutory
land-based designations.
[14] As defined in Section 7 of Annex II to Delegated Regulation
(EU) 2021/2139), as well as UK Biodiversity Action Plan (UKBAP)
threatened species and UK protected species.
[15] Including total species diversity; total grass species;
total flowering herb species; sward height variation; and % bare
ground cover.
[16] Including soil type; pH; % soil organic matter; carbon
content and phosphorus, potassium, and magnesium level.
[17] Assumptions and limitations: assumptions on baseline
environmental conditions and habitat extents were made where data
was lacking; some data were collected outside of optimal survey
seasons. In all cases, a precautionary approach was taken.
[18]
https://www.theccc.org.uk/2023/05/24/net-zero-offers-real-levelling-up-but-government-must-get-behind-green-jobs/
[19] Addressable spend relates to procurement categories that
the Company can influence, and so excludes categories such as
government bodies, business rates, tax authorities, utilities spend
etc.
[20] Calculated per 100,000 employees.
[21] RIDDOR: Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013. Metric reflects incidents which
occurred on the Company's sites.
[22] The Company is currently engaging with a UK University on a
potential partnership. Once finalised, the funds will be
transferred.
[23] Market-based emissions are shown.
[24] KPI updated to reflect installed capacity instead of
AUM.
[25] Updated from: We will undertake scenario analysis for
material physical and transitional climate related risks and
opportunities within the next twelve months.
[26] Metric updated from (#) to (Y/N). As this is now complete,
this commitment and KPI will be removed from the strategy moving
forwards.
[27] Relating to planning applications submitted by the
Company's development partners during the reporting period.
[28] Updated from: Existing sites with evidenced BNG (%)
[29] 'AUM' replaced with 'operational assets'.
[30] 'AUM' replaced with 'assets'; this change has been made
throughout the table.
[31] Defined as within 1KM of a biodiversity-sensitive area.
[32] Updated from: We will continue to promote positive action
within the communities we operate within.
[33] Suppliers relates to EPC, O&M, and Asset Management
contractors.
[34] Combined with the following commitment: 'we will ensure
100% of our assets are covered by policies covering UNGC principles
and OECD Guidelines by June 2023'.
[35] The word 'senior' has been removed as all Board members are
non-executive directors.
[36] Metric changed from (%) to (#)
[37] Assumptions and limitations: The Company acknowledges the
uncertainty offered by climate change scenarios, and thus the
results of the scenario analyses will be used as an approximate,
rather than definitive, guide.
[38] Chapter 11: Weather and Climate Extreme Events in a
Changing Climate | Climate Change 2021: The Physical Science Basis
(ipcc.ch)
[39] A milestone in UK climate history - Met Office
[40] The SSPs are a range of new "pathways" built by an
international team of climate scientists, economists and energy
systems modellers that examine how global society, demographics and
economics might change over the next century with climate
change.
[41] The NGFS, established at the Paris "One Planet Summit" in
2017 by eight central banks and supervisors, has developed global
climate models to provide granular data on transition pathways and
climate impacts, to understand how climate change, climate policy
and technology trends could evolve in different futures.
[42] Calculation of the carbon footprint was supported by a
third party consultant, but it has not been externally
verified.
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END
FR KDLFLXKLEBBX
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September 28, 2023 02:00 ET (06:00 GMT)
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