TIDMFSFL
RNS Number : 6086T
Foresight Solar Fund Limited
16 November 2023
16 November 2023
Foresight Solar Fund Limited
(the "Company", "Foresight Solar" or "FSFL")
Q3 2023 Net Asset Value and Divestment Update
Foresight Solar, a sustainability-focused fund investing in
solar and battery storage assets in the UK and internationally,
announces that its unaudited net asset value (NAV) was GBP706.9
million as at 30 September 2023 (30 June 2023: 726.6 million). This
results in a NAV per Ordinary Share of 118.1 pence (30 June 2023:
119.9 pence per share).
Highlights:
-- Foresight Solar had record cash generation from underlying
assets of GBP87.8 million to 30 September driven by favourable
price fixes, despite production being slightly below budget.
-- The discount rate for UK levered solar assets increased by
50bps to 8.0%. Rates for the Australian and Spanish assets also
increased by 25bps to 8.3% and 7.6%, respectively.
-- Following strong cash generation, FSFL paid down GBP10
million of its variable rate revolving credit facility (RCF) in the
period.
-- Post-period, Foresight Solar sold 50% of its 99MW Lorca
portfolio in Spain for EUR26.9 million, a 21% premium to third
quarter holding value. Proceeds will be used to further reduce the
RCF balance.
-- Mindful of the persisting discount to NAV the shares trade
at, the Board has allocated a further GBP20 million to the share
buyback programme, bringing it to a potential total of GBP40
million.
-- Global revenues are 85% contracted for 2024, insulating the
Company from falling near-term power prices. Net dividend cover is
forecast at 1.5x until at least 2025.
-- The Company remains on target to pay its full year dividend.
Summary of NAV key drivers for Q3 2023:
Item p/share movement
NAV on 30 June 2023 119.9
-----------------
Discount rates -3.5
-----------------
REGO update 1.9
-----------------
Power price forecasts -0.8
-----------------
Inflation forecast (2024) 0.4
-----------------
Project actuals -0.3
-----------------
Foreign exchange 0.2
-----------------
Share buyback programme 0.3
-----------------
NAV on 30 September 2023 118.1
-----------------
Yields on reference UK government bonds continued to edge higher
during the third quarter alongside market expectations that
interest rates will remain higher for longer. In response,
Foresight Solar increased its discount rate for UK levered solar
projects by 50bps to 8.0%. The Company also raised discount rates
for its Australian and Spanish portfolios by 25bps, taking the
weighted average discount rates (WADR) to 8.3% and 7.6%,
respectively. The global portfolio's WADR is now 8.0%.
Collectively, these adjustments resulted in a NAV reduction of 3.5
pence per share and mark the second consecutive quarter with an
increase.
Prices for Renewable Energy Guarantees of Origin (REGOs) have
consistently traded above the Company's estimates, which had
remained conservative. Having locked in materially higher prices
for the portfolio's green certificates in coming years, Foresight
Solar has revised its pricing forecast to GBP5/MWh until 2028 and
then GBP2/MWh for the remaining life of the assets. This resulted
in a positive uplift to the NAV of 1.9 pence per share.
During the third quarter, UK power price forecasts continued to
trend down, with the latest blended curves marginally below second
quarter estimates. FSFL has prudently hedged its production into
the next five years, minimising the downside impact. Forecast power
prices for Australia were slightly higher for the quarter, whilst
estimates for the Spanish market were modestly lower. In aggregate,
this resulted in a NAV reduction of 0.8 pence per share.
FSFL's RPI inflation assumptions remain conservative at 6.5% for
2023. Considering the current trajectory and future expectations
for RPI, the Company has raised its forecast for UK inflation to
3.5% in 2024, up from 3%, adding 0.4 pence per share to the NAV.
Assumptions for between 2025 and 2030 (3%) and from 2031 onward
(2.25%) are unchanged and remain prudent.
Foresight Solar continued repurchasing shares through its GBP20
million buyback programme, acquiring 7.5 million more to 30
September and delivering an additional 0.3 pence per share of NAV
accretion to shareholders. Since the Company's buyback programme
started this May, it has delivered a cumulative 0.4 pence per share
uplift to net asset value.
Trading update
Higher-than-expected irradiation in the UK culminated in
production above forecast during the period. This positive
performance was countered by below-expectation generation in
Australia and Spain, where economic curtailment and poor weather
affected operations. Overall, electricity generated by the global
portfolio was 1.7% below budget in the year to 30 September.
Divestment programme
Delivering on the first stage of its phased divestment
programme, Foresight Solar sold a stake in the Lorca portfolio. A
specialist fund advised by EB-SIM, the sustainable investment arm
of Evangelische Bank, paid EUR26.9 million for a 50% share of the
three Spanish solar farms, a 21% premium to their third quarter
holding value. This represents an exit IRR of 12.1% on funds
invested to date in the stake sold. The post-period deal
demonstrates the appetite for these assets and provides a
market-based proof point for the valuation at year end.
The Investment Manager continues to advance discussions on the
next phases of the c.200MW divestment programme, which will
continue into 2024.
Capital allocation
Following record cash generation in the year, Foresight Solar
paid down GBP10 million of its variable rate RCF in the third
quarter. The facility is now GBP105 million drawn, with GBP45
million available. The proceeds from the Lorca transaction will be
fully used to pay down the RCF and, with additional repayments from
free cash flow, reduce the balance to about GBP75 million.
The Board and the Investment Manager recognise there remains a
wide disconnect between the Company's share price and the
underlying portfolio value. The Directors have thus elected to
allocate up to a further GBP20 million to Foresight Solar's ongoing
share buyback programme, bringing its total to a potential GBP40
million, and aiming to deliver additional NAV accretion.
As disclosed at half-year, the Company expects the 50MW/50MWh
Sandridge BESS to reach energisation in the first half of 2024. The
majority of capital for the project is now fully committed and
there are no contractual requirements from the Clayfords and
Lunanhead BESS assets, which Foresight Solar plans to progress in
due course. FSFL's only other contractual capital commitments
relate to projects that reach read-to-build status under the
Spanish development pipeline.
Power price hedging and dividend cover
The Investment Manager continues to forward-fix electricity
sales at attractive rates under power purchase agreements and build
on the proportion of contracted revenue for the medium term. In the
UK, which accounted for 91 % of revenue, p rice fixes averaged
GBP101/MWh in the third quarter - compared to the average N2EX Day
Ahead price of GBP78/MWh during the same period.
Overall, the proportion of contracted revenue for the global
portfolio now stands at 85 % for 2024, 77 % for 2025 and 57 % for
2026. The active hedging strategy has substantially insulated
Foresight Solar from the fall in near-term merchant power prices.
The Company remains on target to pay its full year dividend, and
the revenue stability and solid cash distribution provide
confidence in the targeted 1.5x net dividend cover until at least
2025.
Gearing
The Gross Asset Value (GAV) on 30 September 2023 was GBP 1,196.0
million (30 June 2023: GBP1,236.8 million). The Company's total
outstanding debt was GBP489.0 million, representing 40.9 % of GAV
(30 June 2023: 41.3%), comfortably within the 50% limit.
For further information, please contact:
Foresight Group
Matheus Fierro
(fsflir@foresightgroup.eu) +44 (0)20 3911 2318
Jefferies International Limited
Gaudi Le Roux
Harry Randall +44 (0)20 7029 8000
Singer Capital Markets
Robert Peel
Alaina Wong +44 (0)20 7496 3000
Powerscourt
Justin Griffiths
Gilly Lock +44 (0)20 7250 1446
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END
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(END) Dow Jones Newswires
November 16, 2023 02:00 ET (07:00 GMT)
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