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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Foresight Solar Fund Limited | LSE:FSFL | London | Ordinary Share | JE00BD3QJR55 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.30 | 1.50% | 88.00 | 88.00 | 88.30 | 89.00 | 85.10 | 85.10 | 588,290 | 16:29:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 162.99M | 154.47M | 0.2610 | 3.39 | 523.1M |
Hot Features
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TIDMFSFL
Highlights
-- Net Asset Value ("NAV") increased from GBP279.1 million as at 31 December
2015 to GBP279.8 million as at 30 June 2016, taking the NAV per Ordinary
Share to 99.3 pence (31 December 2015: 99.0 pence).
-- Equity discount rate remains unchanged at 7.5%.
-- The Company reached Financial Close on a GBP160 million long-term debt
facility at attractive terms compared to other similar facilities closed
within the renewable sector during the period. The facility wholly
refinanced the Company's GBP150 million short-term acquisition facility
previously in place.
-- In addition, the Company has entered into a new, short-term revolving
acquisition facility of GBP40 million with Santander. The short-term
facility will provide the Company with the flexibility to take advantage
of future pipeline opportunities.
-- Having delivered the target dividend of 6.10 pence for the year to 31
December 2015, the first interim dividend of 1.54 pence per share was
paid on 24 June 2016. The Company has paid all seven target dividends to
date and remains on target to deliver a dividend of 6.17 pence for the
financial year ended 31 December 2016.
-- The 16 asset, 338MW portfolio is fully operational and accredited
following the 30MW Copley asset successfully qualifying for 1.3 Renewable
Obligation Certificate ("ROC") banding.
-- Performance of the assets for the period was below the expectations of
the Investment Manager due to a grid outage at the Bournemouth site and
other isolated, non-recurring incidents. Energy generated from the
portfolio amounted to 163.9 Gigawatt Hours ("GWh"), resulting in revenue
of GBP8.6 million across the Company's portfolio, excluding compensation
expected from insurable events and contracted liquidated damages.
-- Reported profit after tax for the period was GBP9.3 million and earnings
per share of 3.30 pence.
-- The Company continued the asset optimisation process having entered a
five-year Power Purchase Agreement for 15 of the 16 assets in the
portfolio following a wide tender process. The agreement represented a
significant improvement in passthrough rates and embedded benefit prices.
-- The Company has identified an attractive pipeline of 200MW which will
support the growth of the Fund over the next 12 months, including several
secondary opportunities which it expects to complete before year end.
Dividend Timetable
Ex-dividend Date 15 September 2016
Record Date 16 September 2016
Payment Date 30 September 2016
Key Metrics
Net Asset Value GBP279.8 million
Dividends per Share declared for the period 3.08 pence
NAV per Share 99.3 pence
Gross Asset Value GBP445.4 million
Share Price 96.0 pence
Total NAV Return* 5.78%
Market Capitalisation GBP270.5 million
Number of Shares with Voting Rights 281,803,232
Total Shareholder Return* 3.54%
* Annualised from IPO and calculated in line with AIC methodology, which
does not include dividends approved but not paid.
Commenting on today's results, Alexander Ohlsson, Chairman of Foresight
Solar Fund Limited said:
"The Board is pleased with the progress made by the Company over the
period. In a challenging regulatory and trading environment, the Company
has taken a prudent approach to acquisitions and focused on the
consolidation and optimisation of the portfolio. This has resulted in
significant improvements to the commercial terms of many of the
Company's contracts and subsequent cost reductions across the portfolio.
The Board is particularly pleased with the attractive terms that were
achieved on the long-term financing strategy implemented in March,
especially when compared to similar facilities closed in the renewable
sector during the period. This highlights the value that can be created
from the experience of the Investment Manager, and further underpin
returns to investors.
The Company has achieved all seven target dividends to date and is on
track to deliver a 6.17 pence dividend for the year ended 31 December
2016. The 16 asset portfolio is now fully operational and accredited and
generating revenue for the benefit of the Company's Shareholders.
We believe the UK solar sector remains attractive, particularly given
the emergence of an active UK secondary market and the recent recovery
in UK wholesale power prices. The Investment Manager has identified an
attractive 200MW pipeline of assets that will support the growth of the
Company over the next 12 months, and is actively pursuing several
opportunities which it expects to complete before the end of the year."
A conference call for analysts will be held at 9:00am on Monday 15
August 2016. A presentation will be provided separately on before the
call.
A copy of the Report can be found on the Fund's website.
To register for the call, please contact Eleni Menikou at Citigate Dewe
Rogerson at Eleni.Menikou@citigatedr.co.uk, or by phone: +44 (0)20 7282
1086.
For further information, please contact:
Foresight Group
Elena Palasmith epalasmith@foresightgroup.eu +44 (0)203 667 8100
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Mark Bloomfield
Neil Winward
Tunga Chigovanyika
J.P. Morgan Cazenove
William Simmonds +44 (0)20 7742 4000
Notes to Editors
About Foresight Solar Fund Limited ("The Company" or "FSFL")
FSFL is a Jersey-registered closed-end investment company. The Company
invests in ground based UK solar power assets to achieve its objective
of providing Shareholders with a sustainable and increasing dividend
with the potential for capital growth over the long-term.
The Company raised proceeds of GBP150m through an initial public
offering ("IPO") of shares on the main market of the London Stock
Exchange in October 2013, and a further GBP60.1m through an Initial
Placing and Offer for Subscription in October 2014.
About Foresight Group
Foresight Group was established in 1984 and today is a leading
independent infrastructure and private equity investment manager with c.
GBP1.8 billion of assets under management. As one of the UK's leading
solar infrastructure investment teams Foresight funds currently manage
c. GBP1.1 billion in over 70 separate operating Photovoltaic ("PV")
plants in the UK, the USA and southern Europe.
Foresight Group has offices in London, Guernsey, Nottingham, Manchester,
Rome, Sydney and San Francisco.
www.foresightgroup.eu
Chairman's Statement
Results
I am pleased to report, on behalf of the Board, the Unaudited Interim
Financial Statements for Foresight Solar Fund Limited for the six months
ending 30 June 2016.
The NAV per Ordinary Share increased to 99.3 pence from 99.0 pence at 31
December 2015. The increase during the period is more fully described in
the Investment Manager's Report and incorporates a 3.7 per cent. fall
due to the continued reduction in the Company's power price forecasts.
The Company has incorporated two further falls in the power price since
31 December 2015 following updated reports from independent providers of
power price forecasts.
The Profit after Tax for the period was GBPGBP9.3 million resulting in
Earnings per Share of 3.30 pence.
Valuation Policy
Investments held by the Company have been valued in accordance with IAS
39, IFRS 13 and International Private Equity and Venture Capital
Valuation (IPEV) methodology, using Discounted Cash Flow ("DCF")
Principles. The portfolio valuations are prepared by Foresight Group CI
Limited, reviewed and approved by the Board quarterly and subject to an
annual audit.
The equity discount rate applicable to the DCF valuation methodology
remained unchanged during the period at 7.5%.
Dividend and Dividend Growth
As noted in the Company's two Prospectuses but subject to market
conditions, Company performance, financial position and financial
outlook, it is the Directors' intention to pay a sustainable and
inflation-linked level of dividend income to Shareholders.
The Company continues to achieve its dividend objectives, and has paid
all seven target dividends to date. For the year ending 31 December
2015, the Company paid a total dividend of 6.10 pence per share (2014:
6.00 pence) and is on track to deliver the targeted RPI-linked dividend
of 6.17 pence for the year ending 31 December 2016.
Portfolio
Despite reviewing several primary and secondary opportunities, no new
assets were acquired during the period. This reflects the Company's
prudent approach to acquisitions and its strategy to avoid levels of
pricing that could have been dilutive to shareholders in a period of
falling UK wholesale power prices.
In this challenging environment, focus was instead placed on the
consolidation and optimisation of the existing portfolio. This has
resulted in significant improvements to the commercial terms of many of
the Company's contracts and subsequent cost reductions across the
portfolio. Most notably, the Company finalised an agreement with a
single provider to enter into a 5-year Power Purchase Agreement ("PPA")
for 15 of the 16 assets in the portfolio, and completed a portfolio wide
insurance tender, both to the benefit of the Company.
In March 2016, the Company reached Financial Close on a GBP160 million
long-term debt facility, wholly refinancing the GBP150 million
short-term acquisition facility previously in place. The Board was
especially pleased with the attractive terms that were achieved,
particularly when compared to similar facilities that closed within the
renewable sector at the time. This was the result of over nine month's
work by the Investment Manager and demonstrates the value that can be
created for investors as a result of the experience of the team.
Operational Performance
As described more fully in the Investment Manager's report this has been
a challenging operating period for the Company's investments. Lower than
expected levels of irradiation, one-off external grid disconnections and
isolated non-recurrent incidents has meant overall portfolio production
is below expectations for the period. When production levels are
adjusted for contractual protections and expected compensation, the
portfolio performed in line with expectations when compared to the lower
than expected levels of irradiation.
During the period Bournemouth was disconnected from the grid by the
Distribution Network Operator, as allowed by the Connection Agreement.
The length of the disconnection was extremely unusual and would have
continued into the summer were it not for the proactive negotiations of
the Asset Manager. If the site had not been disconnected, production
across the portfolio would have been in line with the expectations of
the Investment Manager for the period, when adjusted for contractual
protections and expected compensation.
Market Environment and Pipeline
The installed capacity of the UK Solar PV market continued to grow over
the period with the Department of Energy and Climate Change ("DECC")
estimating the total UK installed capacity to have exceeded 10GW by the
end of March 2016. We expect this trend to continue over the next nine
months with forecasts estimating an increase to 12GW by the time the ROC
regime ends on 1 April 2017. The scale of UK installed capacity has
created an active market in large scale secondary assets, and we are
currently reviewing a number of attractive secondary opportunities that
we expect to complete before year end. The Company is also able to
invest up to 25% in other jurisdictions which we expect could provide
further attractive pipeline opportunities, supported by the
transactional experience of the Investment Manager's global
Infrastructure teams.
Although UK wholesale power prices continued their downward trend in Q1
2016, an upward shift was experienced in prices verified at the end of
Q2 2016. Given c. 35% of the Company revenues are derived from floating
Power Purchase Agreements ("PPAs"), we believe the Company is well
placed to benefit from any further uplift in power prices if this trend
continues as forecast.
On 23 June 2016, the UK Government held a referendum in which the
majority of the electorate voted for the UK to leave the European Union
("Brexit"). Whilst this result was unexpected, we believe the result
will have a limited impact on the Fund. The fundamentals of the UK solar
sector are not underpinned by any EU regulation or legislation. The
Renewable Obligation and the Levy Control Framework are enshrined in the
Law of England and Wales and do not require transposition from EU
Directives or other legislation.
In July 2016, it was announced that DECC would be dissolved and the
departments functions would be transferred to the new Department of
Business, Energy and Industrial Strategy ("BEIS") a combination of DECC
and the Department of Business, Innovation and Skills ("BIS"). While the
impact this will have on the renewable energy sector is at this point
unclear, there are several positives that may result from the decision
such as the ability for more co-ordinated policy decisions.
The Company will continue to monitor any future impact that Brexit and
the newly created BEIS may have on the Fund and report to Shareholders
in due course.
Treasury Shares
The Company's Placing Programme of up to 200 million Shares closed on 24
September 2015. On 22 September 2015, the Company announced it had
purchased 28,152,143 new Ordinary Shares which are held in Treasury, and
are available to be sold to meet future investor demand and provide the
Company with additional capital to take advantage of its attractive
pipeline.
Outlook
The Board is encouraged by the progress made in the optimisation of the
portfolio during the period, and the continued focus by the Investment
Manager on additional value-enhancing opportunities now available as a
result of the size of the Company's portfolio.
If UK wholesale power prices continue to recover as forecast, the
Company is well placed to continue to provide attractive returns to
Shareholders. Performance will be supported by a combination of the
quality of existing assets and the strong pipeline of potential
opportunities being considered, which will continue to bring associated
benefits of scale over the longer term.
Alexander Ohlsson
Chairman
12 August 2016
Corporate Summary, Investment Objective and Dividends
Corporate Summary
Foresight Solar Fund Limited ("the Company") is a closed-ended company
with an indefinite life and was incorporated in Jersey under the
Companies (Jersey) Law 1991, as amended, on 13 August 2013, with
registered number 113721.
The Company has in issue 309,955,375 Ordinary Shares, of which
28,152,143 are held in Treasury. The total number of voting rights of
the Company is 281,803,232 Ordinary Shares in issue of no par value
which are listed on the premium segment of the Official List and traded
on the London Stock Exchange's Main Market.
The Company's shareholders include a substantial number of blue-chip
institutional investors.
Significant Shareholders
Shareholders in the Company with more than a 5% holding as at 30 June
2016 are as follows:
Investor % Shareholding in Fund
Blackrock Investment Management Limited 11.8%
Newton Investment Management Limited 9.9%
Schroders Plc 8.3%
Rathbone Investment Management Limited 6.2%
Baillie Gifford & Co Limited 5.4%
Henderson Global Investors 5.0%
Total 46.6%
Investment Objective
The Company seeks to provide investors with a sustainable and
inflation-linked dividend together with the potential for capital growth
over the long-term through investment in a diversified portfolio of
predominantly UK ground-based solar assets.
Investment Policy
The Company will pursue its investment objective by acquiring a
portfolio of ground based, operational solar power plants predominantly
in the UK. Investments outside the UK and assets which are still, when
acquired, under construction will be limited to 25 per cent. of the
Gross Asset Value of the Company, calculated at the time of investment.
Although all assets acquired by the Company to date have been located in
the UK, the Company is currently reviewing a number of attractive
overseas pipeline opportunities. Acquisitions overseas will be supported
by Foresight's established and experienced teams in international
offices.
The Company will seek to acquire majority or minority stakes in
individual ground-based solar assets. When investing in a stake of less
than 100 per cent. in a solar power plant SPV, the Company will secure
its shareholder rights through shareholders' agreements and other legal
transaction documents.
Power purchase agreements will be entered into between each of the
individual solar power plant SPVs in its portfolio and creditworthy
offtakers in the UK. Under the PPAs, the SPVs will sell solar generated
electricity and green benefits to the designated offtaker. The Company
may retain exposure to UK power prices through PPAs that avoid
mechanisms such as fixed prices or price floors.
Investments may be in equity or debt or intermediate instruments but not
in any instruments traded on any investment exchange.
The Company is permitted to invest cash held for working capital
purposes and awaiting investment in cash deposits, gilts and money
market funds.
In order to spread risk and diversify its portfolio, at the time of
investment no single asset shall exceed in value (or, if it is an
additional stake in an existing investment, the combined value of both
the existing stake and the additional stake acquired) 30 per cent. of
the Company's Gross Asset Value post acquisition. The Gross Asset Value
of the Company will be calculated based on the last published gross
investment valuation of the Company's portfolio, including cash, plus
acquisitions made since the date of such valuation at their cost of
acquisition. The Company's portfolio will provide diversified exposure
through the inclusion of not less than five individual solar power
plants and the Company will also seek to diversify risk by ensuring that
a significant proportion of its expected income stream is derived from
green benefits (which will consist of, for example, ROCs and FITs).
Diversification will also be achieved by the Company using a number of
different third party providers such as developers, Engineering,
Procurement and Construction ("EPC") contractors, Operation and
Maintenance ("O&M") contractors, panel manufacturers, landlords and
Distribution Network Operators.
The Articles provide that Gearing, calculated as borrowings as a
percentage of the Company's Gross Asset Value will not exceed 50 per
cent. at the time of drawdown. There will be no asset level borrowings
at Admission. It is the Board's current intention that long-term gearing,
calculated as borrowings as a percentage of the Company's Gross Asset
Value will not exceed 40 per cent. at the time of drawdown.
Any material change to the investment policy will require the prior
approval of Shareholders by way of an ordinary resolution (for so long
as the Ordinary Shares are listed on the Official List) in accordance
with the Listing Rules.
Dividends
At IPO the Company targeted a 6.0 pence annual dividend per Ordinary
Share, increasing in line with inflation, net of all fees and expenses.
The Company has paid all seven target dividends to date.
The fourth and final interim dividend of 1.53 pence for the period
ending 31 December 2015 was paid on the 30 March 2016 bringing the full
year dividend for the period to 6.10 pence.
On 24 June 2016, the first quarterly dividend of 1.54 pence per share
was paid. The Company remains on target to deliver a dividend of 6.17
pence for the financial year ending 31 December 2016.
The Investment Manager
Foresight Group CI - The Investment Manager
The Company's Investment Manager is Foresight Group CI Limited
("Foresight Group CI"). The Investment Manager has appointed Foresight
Group LLP ("Foresight Group" or "The Asset Manager"), a subsidiary of
Foresight Group CI, to act as Investment Advisor in relation to the
Company, overseen by a strong, experienced and majority independent
Board.
Foresight Group, founded in 1984, is a privately-owned infrastructure
and private equity Investment Manager. Foresight Group manages assets of
c. GBP1.8 billion, raised from pension funds and other institutional
investors, UK and international private and high net-worth individuals
and family offices across private equity, environmental waste to energy,
and infrastructure sectors. Foresight's head office is located in The
Shard, London, with further offices in Guernsey, Nottingham, Manchester,
Rome, San Francisco and Sydney.
The Group's dedicated multinational infrastructure team of 38
professionals comprises individuals with operational, financing, legal,
tax and structuring expertise in the renewable energy and PFI sectors
and has been active since 2007. Foresight Group has particular expertise
in the solar PV sector having invested c. GBP1.1 billion in over 70
operating solar plants totalling c. 720MW of existing operational
capacity across Italy, Spain, USA and the UK. Foresight Group is the
second largest solar asset owner in the UK with over 610MW of installed
capacity.
Foresight Asset Management Services
Foresight has developed a best-in-class, in-house asset management team
through the active management of a large portfolio of operational and
construction stage assets. The team incorporates portfolio managers,
electrical engineers, legal assistants and accountants and is further
enhanced by an outsourced back office support function.
Foresight's excellence in asset optimisation has been attained through
continual emphasis on operational efficiencies achieved through the
consolidation of costs across O&M activities and insurances,
consolidation of energy produced to facilitate attractive offtake
pricing and ongoing equipment improvements.
Being an early entrant into the solar market, Foresight has a wealth of
experience in the sector and has been able to develop its own
centralised monitoring system so that all sites can be remotely
monitored in real time. This sophisticated asset management database
forms the basis of all performance analysis and reporting as well as
enabling the enforcement of contractual compliance. This a powerful tool
for being able to assess the performance of the portfolio of sites on a
continuous basis and ensures that all information is consistent,
accurate and relevant. It also allows Foresight's engineers to identify
and notify onsite contractors to incidents quickly and work with them in
order to minimise the impact of portfolio production.
Portfolio Summary
Acquisition Net
Asset Location Status ROCs MWs Date Ownership MWs
Operational
and 2.0 32 November 2013 32
Wymeswold* Leicestershire accredited 1.4 2 March 2015 100% 2
Operational
and
Castle Eaton Wiltshire accredited 1.6 18 June 2014 100% 18
Operational
and
Highfields Essex accredited 1.6 12 June 2014 100% 12
Operational
and
High Penn Wiltshire accredited 1.6 10 June 2014 100% 10
Operational
and
Pitworthy North Devon accredited 1.4 16 June 2014 100% 16
Operational
and September
Hunters Race West Sussex accredited 1.4 11 2014 100% 11
Operational
and
Spriggs Farm Essex accredited 1.6 12 November 2014 100% 12
Operational
and
Bournemouth Dorset accredited 1.4 37 December 2014 100% 37
Operational
and
Landmead Oxfordshire accredited 1.4 46 December 2014 100% 46
Operational
and
Kencot Oxfordshire accredited 1.4 37 March 2015 100% 37
Operational
and
Copley Lincolnshire accredited 1.3 30 June 2015 100% 30
Operational
and
Atherstone** Warwickshire accredited 1.4 15 July 2015 78% 12
Operational
Paddock and
Wood** Kent accredited 1.4 9 July 2015 59% 5
Operational
and
Southam** Warwickshire accredited 1.4 10 July 2015 70% 7
Operational
and
Port Farm Wiltshire accredited 1.4 35 August 2015 100% 35
Operational
and September
Membury Berkshire accredited 1.4 16 2015 100% 16
Total Portfolio 348 338
* The 1.4 ROC banding and March 2015 acquisition date refer to the 2.3MW
Wymeswold extension finalised in March 2015.
** The Atherstone, Paddock Wood and Southam assets were acquired through
a Joint Venture with Big60Limited through which FSFL owns a majority
interest in the assets.
Company Assets
Wymeswold, Leicestershire
Ownership 100%
MWs 34
ROCs 2.0/1.4
Acquisition Date November 2013/March 2015
Solar Panels 142,000
Technology Polycrystaline
Panel Supplier Trina Solar; Suntech Power
EPC Party Lark Energy
O&M Counterparty Brighter Green Engineering
Inverter Supplier LTi REEnery
Grid Operator Western Power Distribution
Castle Eaton, Wiltshire
Ownership 100%
MWs 18
ROCs 1.6
Acquisition Date June 14
Solar Panels 60,000
Technology Polycrystaline
Panel Supplier Canadian Solar
EPC Party SunEdison
O&M Counterparty SunEdison
Inverter Supplier Bonfiglioli
Grid Operator Southern Electric Power
Highfields, Essex
Ownership 100%
MWs 12
ROCs 1.6
Acquisition Date June 14
Solar Panels 38,000
Technology Monocrystaline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty SunEdison
Inverter Supplier Ingeteam
Grid Operator UK Power Networks
High Penn, Wiltshire
Ownership 100%
MWs 10
ROCs 1.6
Acquisition Date June 14
Solar Panels 30,000
Technology Monocrystaline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty SunEdison
Inverter Supplier Bonfiglioli
Grid Operator SSE Power Distribution
UK Power Networks
Pitworthy, North Devon
Ownership 100%
MWs 16
ROCs 1.4
Acquisition Date June 14
Solar Panels 48,000
Technology Monocrystaline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty SunEdison
Inverter Supplier Bonfiglioli
Grid Operator Western Power Distribution
Hunters Race, West Sussex
Ownership 100%
MWs 11
ROCs 1.4
Acquisition Date September 14
Solar Panels 41,000
Technology Polycrystaline
Panel Supplier Hareon Solar
EPC Party Hareon Solar
O&M Counterparty Hareon Solar
Inverter Supplier Power One
Grid Operator SSE Power Distribution
Spriggs Farm, Essex
Ownership 100%
MWs 12
ROCs 1.6
Acquisition Date November 14
Solar Panels 50,000
Technology Polycrystaline
Panel Supplier Talesun
EPC Party Bester Generation
O&M Counterparty Bester Generation
Inverter Supplier Green Power Tech
Grid Operator UK Power Networks
Bournemouth, Dorset
Ownership 100%
MWs 37
ROCs 1.4
Acquisition Date December 14
Solar Panels 146,000
Technology Polycrystaline
Panel Supplier REC
EPC Party Goldbeck
O&M Counterparty Goldbeck
Inverter Supplier SMA
Grid Operator SSE Power Distribution
Landmead, Oxfordshire
Ownership 100%
MWs 46
ROCs 1.4
Acquisition Date December 14
Solar Panels 483,000
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier GE Power Conversion
Grid Operator SSE Power Distribution
Kencot, Oxfordshire
Ownership 100%
MWs 37
ROCs 1.4
Acquisition Date March 15
Solar Panels 144,000
Technology Polycrystaline
Panel Supplier Astronergy
EPC Party Conergy
O&M Counterparty Conergy
Inverter Supplier SMA
Grid Operator Southern Electric Power
Copley, Lincolnshire
Ownership 100%
MWs 30
ROCs 1.3
Acquisition Date June 15
Solar Panels 115,200
Technology Polycrystaline
Panel Supplier Renesola
EPC Party Cofely Fabricom N.V./S.A
O&M Counterparty Cofely Fabricom N.V./S.A
Inverter Supplier SMA
Grid Operator Western Power Distribution
Atherstone, Warwickshire
Ownership 78%
MWs 15
ROCs 1.4
Acquisition Date July 15
Solar Panels 154,200
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier SMA
Grid Operator Western Power Distribution
Paddock Wood, Kent
Ownership 59%
MWs 9
ROCs 1.4
Acquisition Date July 15
Solar Panels 97,200
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier SMA
Grid Operator UK Power Networks
Southam, Warwickshire
Ownership 70%
MWs 10
ROCs 1.4
Acquisition Date July 15
Solar Panels 103,350
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier SMA
Grid Operator Western Power Distribution
Port Farm, Wiltshire
Ownership 100%
MWs 35
ROCs 1.4
Acquisition Date August 15
Solar Panels 135,768
Technology Polycrystalline Silicon
Panel Supplier ReneSola
EPC Party Renesola UK Limited
O&M Counterparty Renesola UK Limited
Inverter Supplier Schneider Electric
Grid Operator SSE
Membury, Berkshire
Ownership 100%
MWs 16
ROCs 1.4
Acquisition Date September 15
Solar Panels 63,288
Technology Polycrystalline Silicon
Panel Supplier ReneSola
EPC Party Renesola UK Limited
O&M Counterparty Renesola UK Limited
Inverter Supplier ABB
Grid Operator SSE
Investment Manager's Report
For the period 1 January 2016 to 30 June 2016
The Company
The Company's IPO on 24 October 2013 raised GBP150 million, creating the
largest dedicated solar investment company listed in the UK at the time.
In September 2014, the Company announced a Placing Programme of up to
200 million New Ordinary Shares, which closed in September 2015, having
raised GBP134.9 million.
In September 2015, the Company announced an issue of Equity and
Repurchase into Treasury of 28,152,143 new Ordinary Shares under its
Placing Programme.
The Company has a GBP160 million long-term debt facility in place
provided by Macquarie Infrastructure Debt Investment Solutions ("MIDIS")
and Abbey National Treasury Services ("Santander"). This facility wholly
refinanced the Company's GBP150 million short-term acquisition facility
previously in place. In addition, the Company entered into a new GBP40
million short-term revolving acquisition facility at favourable terms
with Santander. The short-term facility will provide the Company with
the flexibility to take advantage of future pipeline opportunities.
Investment Portfolio
The Investment Manager believes that the portfolio of assets has been
acquired at attractive pricing levels and offers both panel manufacturer
and geographical diversification across the UK. The Company's 16 asset,
338MW portfolio is fully operational and accredited. In keeping with
the Company's low risk strategy, 15 of the 16 assets within the
portfolio were operational when acquired and subject to certain
conditions having been achieved by the developer of the plant, including
the assets being built to specified performance standards and successful
connection to the grid.
On 25 June 2015, the Company announced it had signed a binding contract
to fund its first construction asset, the 30MW Copley asset in
Nottinghamshire. The Company believed that the enhanced returns from
providing construction funding for the Copley asset were justified given
that the construction and connection timetable allowed sufficient lead
time to meet the grace period deadline of 31 March 2016. The asset
connected to the grid ahead of schedule in December 2015 and qualified
for the 1.3 ROC banding under the Renewable Obligation ("RO") 12-month
grace period for projects greater than 5MW.
During the period, although a number of potential asset acquisitions
were evaluated, none were completed, reflecting the Investment Manager's
prudent approach to only acquire assets when confident that they will be
accretive in value to Shareholders. The Investment Manager was
particularly cautious to acquire new assets in an environment of
decreasing UK wholesale power prices, due to the disparity it believed
it created in pricing expectations between asset vendors and buyers.
Regulatory and Market Changes
Following the consultations in July 2015, the Department of Energy and
Climate Change announced in December 2015 it would close the Renewable
Obligation Scheme ("RO Scheme") to new solar PV of 5MW and below from 1
April 2016 onwards, subject to certain Grace Periods. This was driven by
the significant increase in the installed capacity of UK solar in recent
years, with the Solar Trade Association estimating that UK solar
capacity surpassed 10GW at the end of March 2016. DECC had previously
flagged that it would continue to monitor the deployment of new
installations and the subsequent impact this would have on the Levy
Control Framework ("LCF"). It should be noted that the changes to the RO
described above had no impact on the existing installed capacity of the
Company portfolio or any of the projects in its immediate pipeline.
In July 2015, DECC also announced the postponement of the 2015 auction
under the Contracts for Difference ("CfD") scheme for large renewables
projects. In November 2015, the mechanism was suspended indefinitely
amidst a purported overspend within the LCF and in February 2016, the
then Energy Secretary Amber Rudd confirmed that there are currently no
plans for large-scale solar to be handed future contracts under the CfD
mechanism.
The rapid growth and scale of UK installed solar capacity over the past
5 years has created an active market in large-scale secondary assets.
The Investment Manager's market position and credibility gives it
priority access to many transactions and it seeks to lever its
relationship with prospective vendors of assets in order to obtain the
highest possible quality of assets whilst avoiding competitive auction
processes for assets. This allows acquisitions to be expedited in a
timely manner, while securing attractive investment returns. The
Investment Manager currently expects 2 to 3GW to become available in the
secondary market over the next 24 months, supporting the expected
Company growth in the short to medium term.
On 23 June 2016, the UK Government held a referendum in which the
majority of the electorate voted for the UK to leave the European Union
("Brexit"). Whilst unexpected, we expect the result to have limited, if
any, impact on the Company. The fundamentals of the UK solar sector are
not underpinned by any EU regulation or legislation. The Renewable
Obligation and the Levy Control Framework are enshrined in the Law of
England and Wales and do not require transposition from EU Directives or
other legislation. Asset revenue streams are driven by UK Government
subsidies and UK wholesale power prices and all of the Company's
operational costs are denominated in Pound Sterling. The main costs to
the portfolio are land leases and O&M contracts which have been secured
under long term contracts. Financing costs also have a limited exposure
to interest rate movements with only c. 4% of the Company's long term
debt facilities directly linked to LIBOR.
In July 2016, it was announced that DECC would be dissolved and the
department's functions would be transferred to the new Department of
Business, Energy and Industrial Strategy a combination of DECC and the
Department of Business, Innovation and Skills. The new department will
be led by the Rt. Hon. Greg Clark, the former Communities Secretary who
has also held the position of shadow Energy Secretary in the past. The
appointment has been broadly well-received by those in the renewable
industry, as the Minister has previously been vocal of his support for
renewable energy and the green economy. While the impact this will have
on the renewable energy sector is at this point unclear, there are
several positives that may result from the decision such as the ability
for more co-ordinated policy decisions.
Following these announcements, the Investment Manager does not
anticipate any further regulatory changes that may impact the UK's
renewable initiatives or the Government's commitment to the 2008 Climate
Change Act targets. Indeed, on 30 June 2016 the Government approved the
Fifth Carbon Budget demonstrating its continued commitment to the
development of renewable and low carbon energy supply.
Power Prices
UK power prices continued a downward trend throughout Q1 2016, driven in
part by lower gas prices due to stockpiles of liquefied gas and above
average winter temperatures during the fourth quarter of 2015. The
market experienced a recovery in spot prices in Q2 2016 supported by an
increase in gas prices with average power prices increasing to levels
above GBP40/MWh by the end of the quarter. Despite this recovery, the
Company has revised downwards its forecast power prices by an average of
c. 5.5% over the period for valuation purposes, in line with the most
recently published advisor reports.
Since the IPO in October 2013, the Company has revised downwards its
forecast power curve nine times, by a cumulative average of c. 29%. The
Company's power curve assumptions are solely based on a blended average
of the forecasts provided by a number of third party consultants and the
Investment Manager believes that the recent power price declines have
been appropriately reflected. It should be noted that the Company's
forecasts continue to assume an increase in power prices in real terms
over the medium to long-term of 2.0% per annum. As at 31 December 2015,
the comparative increase was disclosed as 1.8% per annum in real terms.
The increase in the average increase is due to the relative fall in near
time power prices.
It should also be noted that although the Investment Manager
incorporates the latest curves published by its third party consultants
in the Company's NAV calculations, the reports are published relatively
infrequently and tend to display a lag to actual market developments. As
such, the recent recovery in spot prices has not yet been reflected in
the Company's NAV.
The impact of falling power prices can be mitigated, to a certain extent,
by the fact that c. 65% of portfolio revenues received are from fixed
electricity price contracts, subsidies and associated green benefits
which are grandfathered and index-linked. As such, there remains a
buffer for power prices to experience further reductions whilst still
supporting the Company's long-term dividend targets.
Even in a scenario where a flat nominal power curve at current levels
were to be assumed for the remaining life of the assets, the Company
would be able to deliver an average annual target dividend of 6 pence
per share. However, a flat power curve for the term of investment would
be considered an extreme sensitivity considering current power price
expectations in the medium to long-term.
Subsidy and Revenue Breakdown
The operational assets within the portfolio benefit from a combination
of 2.0, 1.6, 1.4 and 1.3 ROC subsidy accreditation. The Company's income
is derived from a mix of subsidy revenues and those received from the
sale of electricity via Power Purchase Agreements as shown below.
Operational Portfolio RO Accreditation Split 30 June 2016
ROC MW %
1.3 ROC 30 9%
1.4 ROC 225 66%
1.6 ROC 52 15%
2.0 ROC 32 10%
Total 338 100%
Operational Portfolio Revenue Split 30 June 2016
Subsidy Income 60%
PPA Income 40%
Total 100%
As of 30 June 2016, c. 10% of the portfolio has fixed price PPA
arrangements in place.
During the period, 60% of the Company's operational portfolio revenue
came from the sale of ROCs and other green benefits. These revenues are
directly and explicitly linked to inflation for 20 years from the
accreditation date under the ROC regime and subject to Retail Price
Index ("RPI") inflationary increases applied by Ofgem in April of each
year.
The majority of the remaining 40% of revenues derive from electricity
sales which are subject to wholesale electricity price inflation. These
are correlated in the long term with RPI as a component of the RPI index
basket of goods and services. This implicit indexation of revenues
derived from ROC benefits and the degree of inflation linkage of the
wholesale electricity price provides cash flows that are highly
correlated with long-term inflation.
PPAs are entered into between each individual solar power asset and
off-takers in the UK electricity supply market. Under the PPAs, each
asset owning SPV will sell generated electricity and ROCs to the
designated off-taker.
Portfolio Optimisation
The Asset Manager has run a number of concurrent processes to maximise
the free cash being generated by the portfolio. As well as increasing
the technical efficiency of the sites, the asset management team has
been able to significantly improve the commercial terms across a number
of contracts.
Power Purchase Agreements
To date, the Company has adopted a PPA strategy that seeks to optimise
revenues from power generated, whilst maintaining the flexibility to
manage a rapidly growing portfolio appropriately. Having reached an
installed capacity of 338MW, the Asset Manager believed the portfolio
was of a significant scale in order to optimise the PPA and commercial
terms of the portfolio.
At the end of Q1 2016, the Company entered into new five year PPA
contracts for 15 of the 16 assets in the portfolio following a portfolio
wide tender earlier in the year. The remaining asset, the Wymeswold
solar asset, had already secured a long-term contract in 2013 with fixed
price arrangements until Q4 2017. The Wymeswold solar asset represents
10% of the total portfolio installed capacity.
By entering the new PPA contracts the Company secured an increase in
passthrough rates for the sale of both ROCs and electricity against the
original contracts, resulting in an increase of 3% for ROC passthrough
rates and 4.6% for electricity sales passthrough rates.
At the end of the period, 35% of the Company's operational portfolio
revenues were linked to spot power prices. This will allow the Company
to benefit from further upward movements if power prices continue to
increase as forecast. At the same time, the existing PPA contracts allow
the Investment Manager to fix the price at any time by giving notice to
the offtaker, thereby mitigating the risk of dividend reductions from
significant downward movements in prices. It should be noted that the
PPAs also provide the flexibility to incorporate new technologies such
as batteries and storage, which may provide potential upside in the
future.
Project Insurance
Over the past two years the like for-like cost of insurance across the
portfolio has fallen by over 50%. This reduction in cost has been
achieved at the same time as improving the terms of cover such as
lowering the level of claim deductibles. The Asset Manager has fixed the
current price for a three-year period, subject to certain loss limits
not being breached.
O&M Service
O&M costs are expected to decrease in the short and medium term as the
increase in total UK solar installed capacity allows for market
consolidation and economies of scale. The Asset Manager aims to improve
cost efficiency by renegotiating the majority of the existing O&M
agreements as the assets in the portfolio reach the end of the two-year
guaranteed performance period. This will allow the Company to secure
competitive renewal terms while ensuring the standard of work expected
by the Investment Manager is met, either by entering new contracts with
the existing O&M contractor or by appointing a new contractor.
As part of this process, Brighter Green Engineering ("BGE") was
appointed as O&M contractor to the Wymeswold site in December 2015. This
has resulted in a decrease in annual fees and a significant uplift in
asset performance since the company took over the site, driven by the
company's technical expertise and market leading incident response
times.
Further to the reduction in cost, the new contract provides for a
comprehensive scope of work in excess of that typically offered by
competitors, including:
-- Full turnkey scope including, but not limited to, unlimited corrective
maintenance (with key components replaced), response times, high-voltage
works, plant security and monitoring;
-- Frequent module and panel cleaning;
-- Annual thermographic study of all modules, with further investigation
and/or laboratory testing in case of malfunctions as required in
preparation of claims;
-- Annual testing of IV curve tracing for strings with exact methodology
defined;
-- Assistance with laboratory testing of up to 50 modules annually
(including demounting, mounting, transport);
-- Annual testing of transformer oil and two-yearly testing of partial
discharge activity on all switchgear. These activities are typically only
recommended by the equipment manufacturers but the Asset Manager has
included it in the scope as mandatory, recognising the importance of
high-voltage equipment on site, regarding their replacement cost in case
of catastrophic faults, and particularly the associated plant downtime
and costs; and
-- Full management of Landscape and Environmental Management Plans, ensuring
compliance with planning conditions and collaborations with ecologists to
enhance biodiversity.
We expect similar efficiencies to be secured for the remaining assets in
the portfolio once the existing O&M contractual terms reach either the
end of their two-year guaranteed performance period, when applicable, or
final contract term, further reducing costs to the Company.
Impact on Operating profit
In addition to the improved terms and scope of the contractual terms, it
is anticipated that they will provide an 8% increase in operating
profits across the portfolio from 2017 onwards. This increase is
measured against the terms of contracts inherited at acquisition of
assets assuming power prices and production are held constant.
Financing
Long-Term Refinancing
On 01 April 2016, the Company announced that it had reached Financial
Close on a GBP160 million long-term debt facility. This facility wholly
refinanced the Company's GBP150 million short-term acquisition facility
that was previously in place.
The long-term facility was provided by Macquarie Infrastructure Debt
Investment Solutions ("MIDIS") and Abbey National Treasury Services
("Santander") as shown below:
Size
Lender Tranche (GBP Million) Tenor Applicable Rate
Fixed-rate, fully
MIDIS amortising 63 18 years 3.78%
MIDIS Inflation linked, 63 18 years RPI index + 1.08%
fully amortising
Santander Term Loan, fully 34 8 years LIBOR + 1.70%
amortising
The Term Loan tranche is priced over the London Interbank Offered Rate
("LIBOR") and benefits from an interest rate swap hedging 80% of the
outstanding debt during the term of the loan. At Financial Close of the
long-term facility, the average interest cost of debt was 2.6%.
As at 30 June 2016, the Company's total outstanding long-term debt was
GBP160 million, representing approximately 36% of GAV.
The long-term refinancing was the result of more than nine months of
complex structuring, detailed negotiation and execution of the debt
facilities. The detailed knowledge and experience of the Investment
Manager enabled a competitive process to be run which resulted in
attractive debt terms when compared to similar facilities closed within
the renewable sector during the period. The competitive tender process
was run exclusively by the Investment Manager.
In addition, the debt facilities secured allow the Company to maintain
its strategy of retaining exposure to UK power prices through PPAs that
don't require mechanisms such as fixed prices or price floors.
Acquisition Facility
In conjunction with the Financial Close of the long-term facility, the
Company entered into a new, short-term revolving acquisition facility
with Santander at a favourable rate as follows:
Lender Size Tenor Applicable rate
(GBP Million)
Santander 40 3 years LIBOR + 2.05%
The applicable rate of 2.05% represents a decrease of 12 basis points
against the average applicable rate of the revolving facilities
refinanced in March 2016.
This short-term facility will provide the Company with the flexibility
to take advantage of future pipeline opportunities and to reduce the
interest expense.
Dividends
At the time of the IPO, the Company targeted a 6.0 pence annual dividend
per Ordinary Share increasing in line with inflation from 1 January
2014, net of all fees and expenses. The Company achieved this objective
for the past two full financial periods ending 31 December 2014 and 31
December 2015.
As noted in the Company's 2014 Annual Accounts, the Directors approved
an increase in the frequency of dividend payments from semi-annually to
quarterly. Since the IPO, the Company has met all target dividends to
date.
For the period 1 January 2015 to 31 December 2015
Dividend Amount Status Payment Date
Interim 1 1.52 pence Paid 30 June 2015
Interim 2 1.52 pence Paid 30 September 2015
Interim 3 1.53 pence Paid 31 December 2015
Interim 4 1.53 pence Paid 30 March 2016
TOTAL 6.10 pence
For the period 1 January 2016 to 31 December 2016
Dividend Amount Status Payment Date
Interim 1 1.54 pence Paid 24 June 2016
Interim 2 1.54 pence Approved 30 September 2016
Interim 3 1.54 pence Expected 31 December 2016
Interim 4 1.55 pence Expected 30 March 2017
TOTAL 6.17 pence
Dividend Timetable
The second quarterly dividend of 1.54 pence was approved by the Board on
12 August 2016 and will paid on 30 September 2016.
The Company is targeting a full year dividend for the period ending 31
December 2016 of 6.17 pence.
Date
Ex-dividend Date 15 September 2016
Record Date 16 September 2016
Payment Date 30 September 2016
Dividend Cover
Dividends of GBP17.25 million were paid during the year to 30 June 2016.
Against the relevant net cash flows of the fund, these dividends were
covered 1.01x when excluding dividends paid to newly issued equity. The
dividend is presented on a 12-month basis to remove intra-period
differences caused by the seasonality of the production profile.
The Bournemouth planned outage represented an impact on dividend cover
of 0.04 times. If the impact of this non-recurrent incident is excluded
the resulting dividend cover would be 1.05x.
Portfolio Performance
Operational performance of the assets for the first 6 months of 2016 was
below the expectation of the Investment Manager, with total portfolio
electricity production of 163.9 GWh for the period. The expectations of
the Investment Manager are based on those used at the time of
acquisition and are not adjusted.
The irradiation levels recorded for the period were on average 2.0%
below the irradiation forecasts produced at the time of acquisition and
validated by independent technical advisers. The irradiation variance
for the period is not representative of the expected long term
irradiation levels considering the irradiation forecasts produced at the
time of acquisition are prepared based on a normal probability
distribution of long term historical annual irradiation data and don't
incorporate intra-period volatility. For reference, the irradiance
variance verified during the initial six months of 2015 was 7.7% above
forecast versus an irradiance variance of 0.6% for the full year of
2015.
The total portfolio production for the period was 9.8% below the
expectations of the Investment Manager. This was mainly driven by a grid
outage at the Bournemouth site which resulted in 12.8 GWh of lost
production. This is described in more detail below. If the impact of
the Bournemouth outage were to be excluded, total portfolio production
for the period would be 3.1% below the expectations of the Investment
Manager.
Main factors affecting Production Variance
Bournemouth
Production at the Bournemouth site was affected by a planned grid outage
announced by Distribution Network Operator ("DNO") required in order to
increase the line capacity. The original timetable for the program of
works anticipated a maximum planned outage of eight weeks starting from
February 2016. As the work progressed, additional faults with the line
were identified which took a further month to rectify. During this time,
the Asset Manager worked closely with the DNO to limit the amount of
additional down time to the Bournemouth plant. This resulted in the site
being re-energised before the work had been fully completed to minimise
the impact on production during the summer months when irradiation
levels are at their highest. Since re-energisation, the Asset Manager
has remained in continued dialogue with the DNO to agree a timetable to
revisit the site later in the year when irradiance is lower and repair
any minor faults. The oversight and influence applied by the Asset
Manager during the incident were significant and helped limit the losses
to the Company in relation to the disconnection. External grid
disconnections are not currently insurable events.
Pitworthy
An inverter station at Pitworthy caught fire in December which
temporarily halted production at the plant. As the fire was caused by
factors outside of the O&M contractor's control, an insurance claim has
been made. The claim is currently being processed and the underwriters
have confirmed that the incident will be covered by the policy. Once
received, compensation for this incident will account for 5.6% of the
asset's expected production for the period.
Wymeswold
During the period, the Wymeswold asset was the first in the portfolio to
begin its Final Acceptance Certificate ("FAC") testing. As an asset
approaches its FAC, members of the technical team make numerous visits
to the site and a Technical Advisor ("TA") is appointed to ensure that
all elements provided under the asset's EPC contract have been met.
During the Wymeswold FAC process, the Asset Manager filed a compensation
claim against the EPC contractor in relation to defects that had not
been rectified to its satisfaction. The project has received a cash
settlement amount enabling the SPV to repay a larger proportion of its
shareholder loan during the period than anticipated.
Because of a large amount of preventative maintenance at the site there
was a negative impact on performance. However, we believe this will lead
to improved performance of the asset over the medium to long-term.
Technical Performance
The performance ratio assumptions in our valuation models have
historically been linked to contractually guaranteed performance and the
initial technical due diligence findings at the time of acquisition. The
long term assumptions are adjusted on an ongoing basis as more data
becomes available, recognising the actual performance ratios experienced
across the portfolio on an asset by asset basis. This approach is
applied on a regular basis to ensure our valuation assumptions better
reflect the actual performance of our sites. The conservative movements
in assumed performance ratios are implemented at a rate that ensures
short term fluctuations do not over inflate performance potential.
Investment Performance
The NAV at 31 December 2015 was 99.0 pence per share. The NAV per share
as at 30 June 2016 rose to 99.3 pence, after dividends of 1.53 and 1.54
pence per share were paid in March and June respectively.
A breakdown in the movement of the NAV is shown in the table below.
GBP Million NAV per share
NAV as at 31 December 2015 279.11 99.0
Dividend paid - 8.65 -3.1
Interest earned 13.21 4.7
Loan repayment 1.00 0.4
Management fee -1.40 -0.5
Finance costs - 2.90 -1.0
Corporation tax - 0.67 -0.2
Other costs - 0.40 -0.1
Unwinding of discount rate (see explanation below) 5.34 1.9
Portfolio optimisation 5.27 1.9
Power price - 10.46 -3.7
Inflation Assumption 1.22 0.3
Other movements -0.92 -0.3
NAV as at 30 June 2016 279.75 99.3
Discount Rate
The Company continues to adopt an equity discount rate of 7.5% which the
Investment Manager believes appropriately reflects the risk profile of
the operational assets that have been acquired, the total installed
capacity at portfolio level and asset diversification.
The Company does not adopt the Weighted Average Costs of Capital
("WACC") as a discount rate for investments as the Investment Manager
believes this does not appropriately reflect the greater level of risk
to equity associated with levered portfolios.
Following the closing of the long-term refinancing, and assuming an
illustrative long-term gearing level of 25%, the Company's Weighted
Average Cost of Capital ("WACC") is 6.19%. For illustrative purposes, if
the Company were to adopt the WACC valuation methodology, the NAV per
share would increase to 117.3 pence per share (i.e. 18% higher than
current NAV per share).
Unwinding of the Discount Rate
This represents moving the valuation date forward by six months. The
discount rate remains unchanged.
Inflation Assumptions
The Investment Manager has increased its medium/long-term inflation
assumption from 2.50% to 2.75%. This reflects increases in market
inflation expectations due to a number of factors including the result
of the EU referendum, weaker Sterling and announced further loosening of
monetary policy. The Investment Manager expects there will be an element
of 'lag' before higher inflation filters through, and has therefore
assumed a 2.25% annual rate of inflation for 2017 before assuming annual
inflation of 2.75% thereafter. The Investment Manager will continue to
monitor actual outturn inflation rates and inflation expectations going
forward.
Other Movements
Operational efficiencies achieved outside of those mentioned above are
included within this movement as well as any additional cost increases
observed. Changes to long term UK corporation tax changes are also
included.
Valuation of the Portfolio
The Investment Manager is responsible for providing fair market
valuations of the Group's assets to the Directors. The Directors review
and approve these valuations following appropriate challenge and
examination. Valuations are undertaken quarterly. A broad range of
assumptions are used in our valuation models. These assumptions are
based on long-term forecasts and are not affected by short-term
fluctuations, be it economic or technical.
The current portfolio consists of non-market traded investments and
valuations are based on a Discounted Cash Flow ("DCF") methodology. This
methodology adheres to both IAS 39 and IFRS 13 accounting standards as
well as International Private Equity and Venture Capital Valuation
(IPEV) methodology.
It is the policy of the Investment Manager to value with reference to
DCF at the later of commissioning or completion. This is partly due to
the long periods between agreeing an acquisition price and financial
completion of the acquisition. Quite often this delay incorporates
construction as well as time spent applying for, and achieving, ROC
accreditation upon which the Company's acquisition of assets is usually
contingent. Revenues generally accrue for the benefit of the purchaser.
Revenues accrued do not form part of the DCF calculation when making a
fair and proper valuation.
The Company's independent Board reviews the operating and financial
assumptions, including the discount rates, used in the valuation of the
Company's portfolio and approves them based on the recommendation of the
Investment Manager. These assumptions are reviewed as part of the annual
audit by KPMG.
Useful Economic Life of Asset
The DCF methodology used to value the assets within the portfolio
assumes a 25-year asset life with no residual value at the end of this
period. This assumption is based upon the market standard lease terms
that have been achieved for the properties on which the Company's solar
assets are located and planning consent periods granted by local
planning offices.
The Investment Manager believes that this is a prudent approach, however
there are several factors that justify the incorporation of residual
value within the portfolio valuation including:
-- The useful operating life of the equipment in the portfolio is
anticipated to be, according to independent technical advisers, at least
40 years if the equipment is properly maintained;
-- All of the assets' connection agreements provide the right to generate
electricity into the Grid with no specified expiry date; and
-- Five of the lease agreements in place have the option to extend beyond
the initial consented period to an average of 32 years.
As such, the Asset Manager has begun to explore the option of extending
leases and planning authority across the portfolio. Three sites,
Wymeswold, Bournemouth and Hunters Race, which together represent 30% of
installed portfolio capacity, already have in place extended lease
periods and planning authority for a period of 30, 40 and 35.5 years
respectively from the start of operations. Applying current assumptions
and incorporating enhanced capital expenditure to the contractually
assured extended asset life would have an immediate uplift on NAV of 2.4
pence.
For illustration purposes, in addition to incorporating the extensions
mentioned above, if the remaining 13 assets were to be valued on a
35-year basis from connection, the Company's NAV would increase by a
further 9.4 pence. The table below illustrates the impact on NAV of
extended asset lives.
Recognise
NAV Using extended
Current life of
lease Recognise extended life where lease and planning already all other
Discount Rate assumptions available (3 assets) assets
7.5% 99.3 101.7 111.1
6.19% (Company
WACC) 117.3 120.8 134.0
Valuation Sensitivities
Where possible, assumptions are based on observable market and technical
data. In many cases, such as the forward power prices, professional
advisors are used to provide reliable and evidenced information while
often applying a more prudent approach than our information providers.
We set out the inputs we have ascertained would have a material effect
upon the NAV in note 16 of the financial statements. All sensitivities
are calculated independently of each other.
Ongoing Charges
The ongoing charges ratio for the period under review is 1.21% (2015:
1.24%). This has been calculated using methodology as typically
recommended by the Association of Investment Companies ("AIC") code of
corporate governance.
Alternative Investment Fund Management Directive ("AIFMD")
The AIFMD, which was implemented across the EU on 22 July 2013 with the
transition period ending 22 July 2014, aims to harmonise the regulation
of Alternative Investment Fund Managers ("AIFMs") and imposes
obligations on managers who manage or distribute Alternative Investment
Funds ("AIFs") in the EU or who market shares in such funds to EU
investors. Under the AIFMD, the Company is self-managed and acts as its
own Capitalised Alternative Investment Fund Manager.
Both the Company and the Investment Manager are located outside the
European Economic Area ("EEA") but the Company's marketing activities in
the UK are subject to regulation under the AIFMD.
Risk Management
Reliance is placed on the internal systems and controls of the
Investment Manager and external service providers such as the
Administrator to effectively manage risk across the portfolio. Foresight
has a comprehensive Risk Management framework in place which is reviewed
on a regular basis by the Directors.
A full list of relevant risks can be found in the Prospectus dated 20
September 2013 and in the Annual Report for the year to 31 December
2015.
Taxation Environment
The Manager reviews the taxation structure and status of the Company on
a regular basis. The Company and Group is subject to a wide range of
taxation legislation including VAT, capital allowances and transfer
pricing. In the current political environment, there is a risk that
changes in tax legislation could negatively impact the long term
performance of the Company.
As announced in the March 2016 budget, new rules in relation to the tax
deductibility of corporate interest expense are to be included in the
Finance Bill 2017. These rules represent the UK's response to the
proposals as outlined by the OECD in October 2015 in relation to Base
Erosion and Profit Shifting ("BEPS") Action 4. At present the new
legislation has not been formally drafted with the latest consultation
published by HMRC in May 2016.
The new interest deductibility rules will be effective from April 2017
and the current proposals are, broadly, to cap the amount of tax relief
for interest payments to 30% of EBITDA under the 'fixed ratio rule'. The
fixed ratio rule can be replaced by the 'group ratio' test, at the
Company's election, which is designed to allow increased levels of
deductibility for groups that have higher leverage for genuine
commercial purposes.
We do not expect grandfathering of debt instruments that are currently
in place. The cap is applicable after all other rules that currently
impact on the tax paid are applied, such as the transfer pricing
legislation that the Company is currently subject to. Other proposals
include de minimis thresholds.
The Investment Manager will not be in a position to comment on the level
of any impact that BEPS will have on the Company until the Finance Bill
is finalised.
Outlook
The Investment Manager is encouraged that the entire 16 asset, 338MW
portfolio is now fully operational and accredited. Having focused on the
consolidation and optimisation of the portfolio the Investment Manager
has leveraged its experience in the sector to implement several
value-enhancing strategies to the benefit of Shareholders.
The UK solar market remains attractive. The announcement of the closure
of the ROC regime in its entirety from 01 April 2017 has driven large
amounts of activity in terms of new capacity being installed, with
reports estimating that total UK capacity could surpass 12GW by Q1 2017.
This scale of installed capacity has created an active secondary market
in large-scale secondary assets, with the Investment Manager estimating
between 2 to 3GW will become available for sale over the next 24 months.
As the UK wholesale power market continues to stabilise, the Investment
Manager will explore a number of attractive pipeline opportunities which
it expects to complete in the short term. The opportunities are a
combination of primary asset acquisitions eligible under the 1.2 ROC
Grace Period and larger portfolios of secondary assets. We have
identified an attractive pipeline of over 200MW and are actively
pursuing several opportunities which we expect to complete before year
end.
As one of the largest solar asset managers in the UK, with over 620MW of
UK solar assets under management, the Investment Manager is uniquely
positioned to identify, price, acquire and optimise these assets driving
value for investors. We seek to lever our relationship with prospective
vendors of assets in order to obtain the highest possible quality of
assets. This approach often allows us to avoid competitive auction
processes for assets and consequently expedites asset acquisitions in a
timely manner, whilst minimising the acquisition consideration paid. The
Company is also able to invest up to 25% in other jurisdictions which we
expect could provide further attractive pipeline opportunities,
supported by the transactional experience of our international
infrastructure teams.
The market dynamics will improve further if the recent recovery in UK
wholesale power market continues as forecast. We believe the Company is
well positioned through its floating PPA exposure to benefit from any
additional upward movements resulting in increased revenue generation,
further underpinning returns to Shareholders.
Whilst we do not expect Brexit and the resulting dissolution of DECC to
have an immediate impact on the Fund, we will continue to monitor
developments carefully, and report to investors in due course.
Over the next six months, the Investment Manager will continue to focus
on maximising the operational performance of the existing portfolio,
whilst looking to make further acquisitions that are accretive to the
Company. We expect to take advantage of our near-term pipeline through
the short-term acquisition facility, or through the issuance of Treasury
Shares, subject to investor demand.
Foresight Group CI Limited
Investment Manager
12 August 2016
Environmental Social and Governance Considerations
The Company believes Environmental, Social and Governance ("ESG")
considerations play an important part in delivering responsible and
sustainable growth for the long term. These factors have been integrated
into all stages of the investment process, and are actively supported by
all involved, regardless of seniority. With that in mind, the Company
has developed its Responsible Investment Framework to provide a suitable
operational framework in matters related to the investment process, such
that ESG has become part of the normal day-to-day operation.
Health and Safety
There were no health and safety incidents reported during the period.
The Asset Manager has appointed a health and safety consultant to review
all portfolio assets to ensure they not only meet, but exceed, industry
and legal standards.
Environmental
The 338MW portfolio produced 163.94 GWh of clean energy during the
period. This is the equivalent of:
- 50,000 UK homes powered for one year; or
- 97,315 tonnes of CO(2) emissions prevented. This means 33,213 tonnes
of coal have not been burned; or
- 872,718km flown on a long haul international flight.
Further to the environmental advantages of large scale renewable energy,
each investment is closely scrutinised for localised environmental
impact. Where improvements can be made, the Company will work with
planning and local authorities to minimise visual and auditory impact of
sites.
Biodiversity Assessments
The Investment Manager is actively exploring ways of maximising the
biodiversity and wildlife potential for all of its UK solar assets. As
such, the Investment Manager has prepared a series of site specific
biodiversity enhancement and management plans to secure long-term gains
for wildlife such as:
- Management of grassland areas within the security fencing;
- Management of hedgerows and associated hedge banks;
- Management of field boundaries between security fencing and hedgerows;
- Management of woodland blocks;
- Installation of Herptile/Reptile hibernacula;
- Installation of boxes for bats, owls and kestrels; and
- Installation of bee hives.
As part of our EPC contracts, contractors are obliged to design plants
in such a way that they allow for sheep grazing. Currently our Kencot,
Copley and Wymeswold assets have active sheep grazing.
Social
The Investment Manager has actively sought to engage with the local
communities of the solar assets. Open days have been arranged for local
residents, businesses and schools to visit the sites where they can
learn more about the benefits of solar and the need for more stable
renewable policy support.
Numerous educational visits have also taken place across the portfolio,
from small school and college tours to Loughborough University students
conducting research assignments at the Wymeswold plant.
Foresight Receives Five Star Rating from 3D Investing
The Company has been awarded a five-star rating by 3D Investing.
Five star funds are the real pioneers in the industry. They are
required to demonstrate at least a fair financial performance, excellent
transparency, a high social impact and a lack of exposure to ethically
controversial companies.
3D Investing provides research and communication services to help
investment managers and advisers to deliver a high quality and
distinctive service for the socially motivated investor.
For further details please refer to the website www.3dinvesting.com
Signatory of UNPRI
Foresight Group is a signatory to the United Nations Principles for
Responsible Investment ("UNPRI"). The UNPRI, established in 2006, is a
global collaborative network of investors working together to put the
six Principles for Responsible Investment into practice. As
institutional investors, we have a duty to act in the best long-term
interests of our beneficiaries. In this fiduciary role, we believe that
environmental, social, and corporate governance (ESG) issues can affect
the performance of investment portfolios (to varying degrees across
companies, sectors, regions, asset classes and through time). We also
recognise that applying these Principles may better align investors with
broader objectives of society. Therefore, where consistent with our
fiduciary responsibilities, we commit to the following:
1. We will incorporate ESG issues into investment analysis and
decision-making processes.
2. We will be active owners and incorporate ESG issues into our
ownership policies and practices.
3. We will seek appropriate disclosure on ESG issues by the entities in
which we invest.
4. We will promote acceptance and implementation of the Principles
within the investment industry.
5. We will work together to enhance our effectiveness in implementing
the Principles.
6. We will each report on our activities and progress towards
implementing the Principles.
Directors
The Directors, who are Non-Executive and, other than Mr Dicks,
independent of the Investment Manager, are responsible for the
determination of the investment policy of the Company, have overall
responsibility for the Company's activities including its investment
activities and for reviewing the performance of the Company's portfolio.
The Directors are as follows:
Alexander Ohlsson (Chairman)
Mr Ohlsson is Managing Partner for the law firm Carey Olsen in Jersey.
He is recognised as a leading expert in corporate and finance law in
Jersey and is regularly instructed by leading global law firms and
financial institutions. He is the independent chairman of the States of
Jersey's Audit Committee and an Advisory Board member of Jersey Finance,
Jersey's promotional body. He is also a member of the Financial and
Commercial Law Sub-Committee of the Jersey Law Society which reviews as
well as initiates proposals for legislative changes. He was educated at
Victoria College Jersey and at Queens' College, Cambridge, where he
obtained an MA (Hons) in Law. He has also been an Advocate of the Royal
Court of Jersey since 1995.
Mr Ohlsson was appointed as a Non-Executive Director and Chairman on 16
August 2013.
Chris Ambler
Mr Ambler has been the Chief Executive of Jersey Electricity plc since 1
October 2008. He previously held various senior positions in the global
industrial, energy and materials sectors working for major corporations,
such as ICI/ Zeneca, the BOC Group and Centrica/British Gas as well as
in strategic consulting roles. Mr Ambler is a Chartered Engineer and a
Member of the Institution of Mechanical Engineers. He holds a first
class Honours Degree from Queens' College Cambridge and an MBA from
INSEAD.
Mr Ambler is a Director on other boards including a Non-Executive
Director of Apax Global Alpha Limited, another listed fund which
launched on the London Stock Exchange on 15 June 2015.
Mr Ambler was appointed as a Non-Executive Director on 16 August 2013.
Peter Dicks
Mr Dicks is currently a Director of a number of quoted and unquoted
companies. In addition, he was the Chairman of Foresight VCT plc and
Foresight 2 VCT plc from their launch in 1997 and 2004 respectively
until 2010 and since then he has continued to serve on the Board of the
now merged Foresight VCT plc. He is also on the Board of Foresight 3 VCT
plc, Foresight 4 VCT plc, Graphite Enterprise Trust plc and Mears Group
plc. and Chairman of Unicorn AIM VCT plc, Private Equity Investor plc
and SVM Emerging Fund.
Mr Dicks was appointed as a Non-Executive Director on 16 August 2013.
Statement of Directors' Responsibilities
For the period 1 January 2016 to 30 June 2016
The Disclosure and Transparency Rules ("DTR") of the UK Listing
Authority require the Directors to confirm their responsibilities in
relation to the preparation and publication of the Unaudited Half-Yearly
Financial Report for the six months ended 30 June 2016.
The Directors confirm to the best of their knowledge that:
(a) the summarised set of financial statements has been prepared in
accordance with the pronouncement on interim reporting issued by the
Accounting Standards Board;
(b) the Unaudited Half-Yearly Financial Report for the six months ended
30 June 2016 includes a fair review of the information required by DTR
4.2.7R (indication of important events during the first six months of
the year and a description of principal risks and uncertainties that the
Company faces for the remaining six months of the year);
(c) the summarised set of financial statements give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company as required by DTR 4.2.4R; and
(d) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
For and behalf of the Board
Alexander Ohlsson
Chairman
12 August 2016
Condensed Consolidated Statement of Comprehensive Income
For the period 1 January 2016 to 30 June 2016
Unaudited Unaudited Audited
Period Period Period
1 January 2016 1 January 2015 1 January 2015
Notes to 30 June 2016 to 30 June 2015 to 31 December 2015
GBP'000 GBP'000 GBP'000
Revenue
Interest revenue 4 13,221 10,383 22,782
Gains on investments at fair value through profit
or loss 15 1,443 - 290
14,664 10,383 23,072
Expenses
Losses on investments at fair value through profit
or loss 15 - (1,559) -
Finance costs 5 (2,902) (1,652) (3,696)
Management fees 6 (1,396) (1,158) (2,551)
Administration and accountancy expenses 7 (118) (90) (152)
Directors' fees 8 (76) (100) (170)
Other expenses 9 (210) (264) (620)
Total expenses (4,702) (4,823) (7,189)
Profit before tax for the period 9,962 5,560 15,883
Taxation 10 (671) (178) (669)
Profit and total comprehensive income for the
period 9,291 5,382 15,214
Earnings per Ordinary Share (pence per Share) 11 3.30 2.32 5.91
All items above arise from continuing operations, there have been no
discontinued operations during the period.
The accompanying notes below form an integral part of these Condensed
Consolidated Interim Financial Statements.
Unaudited Unaudited Audited
Notes 30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Investments held fair
value through profit or
loss 15 422,065 320,590 421,627
Total non-current assets 422,065 320,590 421,627
Current assets
Trade and other
receivables 12 13,599 8,222 2,100
Cash and cash equivalents 13 9,713 44,477 15,531
Total current assets 23,312 52,699 17,631
Total assets 445,377 373,289 439,258
Equity
Retained earnings 343 (1,534) (297)
Stated capital 17 279,403 279,448 279,403
Total equity 279,746 277,914 279,106
Liabilities
Non-current liabilities
Long-term borrowings 19 161,994 90,000 96,003
Total non-current
liabilities 161,994 90,000 96,003
Current liabilities
Trade and other payables 14 3,506 5,375 14,149
Short-term borrowings 19 131 - 50,000
Total current liabilities 3,637 5,375 64,149
Total liabilities 165,631 95,375 160,152
Total equity and
liabilities 455,377 373,289 439,258
Net Asset Value per 18 GBP0.99 GBP0.99 GBP0.99
Ordinary Share
The Condensed Consolidated Interim Financial Statements on below
approved by the Board of Directors and signed on its behalf on 12 August
2016 by:
Alexander Ohlsson
Chairman
The accompanying notes below an integral part of these Condensed
Consolidated Interim Financial Statements.
Stated Capital Retained Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1
January 2016 279,403 (297) 279,106
Total comprehensive income
for the period:
Profit for the period - 9,291 9,291
Transactions with
owners, recognised
directly in equity:
Dividends paid in the
period - (8,651) (8,651)
Issue of Ordinary
Shares 17 - - -
Capitalised issue
costs 17 - - -
Balance as at 30 June
2016 279,403 343 279,746
For the period 1 January 2015 to 30 June 2015 (unaudited):
Stated Retained
Capital Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January 2015 206,226 3,607 209,833
Total comprehensive income for the
period:
Profit for the period - 5,382 5,382
Transactions with owners,
recognised directly in
equity:
Dividends paid in the period - (10,523) (10,523)
Issue of Ordinary Shares 17 74,784 - 74,784
Capitalised issue costs 17 (1,562) - (1,562)
Balance as at 30 June 2015 279,448 (1,534) 277,914
For the period 1 January 2015 to 31 December 2015 (audited):
Stated Capital Retained Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1
January 2015 206,226 3,607 209,833
Total comprehensive income
for the period:
Profit for the
period - 15,214 15,214
Transactions with
owners, recognised
directly in equity:
Dividends paid in
the period - (19,118) (19,118)
Issue of Ordinary
Shares 17 74,784 - 74,784
Capitalised issue
costs 17 (1,607) - (1,607)
Balance as at 31
December 2015 279,403 (297) 279,106
Condensed Consolidated Statement of Cash Flows
For the period 1 January 2016 to 30 June 2016
Unaudited Audited
Unaudited Period Period
Period 1 January 2015 to 1 January 2015 to
1 January 2016 to 30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Profit for the period before tax from continuing
operations 9,962 5,560 15,883
Adjustments for:
Unrealised loss/(gain) on investments (1,443) 1,559 (290)
Financing income - - -
Investment income (13,221) (10,375) (22,769)
Finance costs 2,902 1,652 3,696
Operating cash flows before movements in working
capital (1,800) (1,604) (3,480)
(Increase)/decrease in trade and other receivables 47 (32) (28)
Increase/(decrease) in trade and other payables 1,456 244 (283)
Net (payments to)/receipts from investments (4,519) (854) 2,509
Investment income 3,531 9,053 -
Net cash outflow from operating activities (1,285) 6,807 (1,282)
Investing activities
Advances for future investments - - -
Proceeds from loan repayment by SPV 1,005 - 3,303
Investment income - - 25,213
Acquisition of investments (11,148) (72,253) (166,458)
Net cash outflow from investing activities (10,143) (72,253) (137,942)
Financing activities
Dividends paid (8,651) (10,523) (19,118)
Finance costs paid (5,735) (1,779) (3,970)
Bank facility drawn down 169,500 41,895 108,898
Repayment of bank facility drawn down (149,504) - (11,000)
Capitalised issue costs paid - (1,222) (1,607)
Proceeds from issue of shares - 74,784 74,784
Net cash inflow from financing activities 5,610 103,155 147,987
Net increase in cash and cash equivalents (5,818) 37,709 8,763
Cash and cash equivalents at the beginning of the
period 15,531 6,768 6,768
Cash and cash equivalents at the end of the period 9,713 44,477 15,531
The accompanying notes form an integral part of these Condensed
Consolidated Interim Financial Statements.
Notes to the Condensed Consolidated Interim Financial Statements
For the period 1 January 2016 to 30 June 2016
1. Company information
Foresight Solar Fund Limited (the "Company") is a closed-ended company
with an indefinite life and was incorporated in Jersey under the
Companies Law (Jersey) 1991, as amended, on 13 August 2013, with
registered number 113721. The address of the registered office is:
Elizabeth House, 9 Castle Street, St Helier, Jersey, JE2 3RT.
The Company has one investment, Foresight Solar (UK Hold Co) Limited
("UK Hold Co"). On 11 January 2016, UK Hold Co incorporated a subsidiary,
FS Holdco Limited ("FS Holdco"). On 31 March 2016, UK Hold Co
transferred all equity investments and related shareholder loans in
directly held subsidiaries to FS Holdco in return for 16 ordinary shares
issued by FS Holdco Limited and a loan receivable on a pari passu basis.
FS HoldCo invests in further holding companies (the "SPVs") which then
invest in the underlying investments. The principal activity of the
Company, UK Hold Co and FS Holdco (together "the Group") is investing in
operational UK ground based solar power plants.
2. Summary of significant accounting policies
2.1 Basis of presentation
The Unaudited Condensed Consolidated Interim Financial Statements (the
"Interim Financial Statements") for the period 1 January 2016 to 30 June
2016 have been prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting' ("IAS 34").
The Interim Financial Statements do not include all the information and
disclosures required in the annual financial statements, and should be
read in conjunction with the annual financial statements as at 31
December 2015.
These are not statutory accounts in accordance with S436 of the
Companies Act 2006 and the financial information for the six months
ended 30 June 2016 and 30 June 2015 has been neither audited nor
reviewed. Statutory accounts in respect of the year to 31 December 2015
have been audited and reported on by the Company's auditor and delivered
to the Registrar of Companies and included the report of the auditor
which was unqualified and did not contain a statement under S498(2) or
S498(3) of the Companies Act 2006. No statutory accounts in respect of
any period after 31 December 2015 have been reported on by the Company's
auditor or delivered to the Registrar of Companies.
2.2 Going concern
The Directors have considered the Group's cash flow projections for a
period of no less than twelve months from the date of approval of these
Interim Financial Statements together with the Group's borrowing
facilities. These projections show that the Group will be able to meet
its liabilities as they fall due. The Directors have therefore prepared
the Interim Financial Statements on a going concern basis.
2.3 Changes in accounting policies and disclosures
Application of new and revised International Financial Reporting
Standards ("IFRSs")
All standards, amendments and interpretations which are effective for
the financial year beginning 1 January 2015 are not material to the
Group.
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these Financial Statements, the
following standards and interpretations, which have not been applied in
these Financial Statements, were in issue but not yet effective:
-- IFRS 9, 'Financial Instruments - Classification and Measurement'. There
is currently no mandatory effective date, however the IASB has
tentatively proposed that this will be effective for accounting periods
commencing on or after 1 January 2018 (EU endorsement is outstanding).
2.3 Changes in accounting policies and disclosures
These standards and interpretations will be adopted when they become
effective. The Directors are currently assessing the impact of these
standards and interpretations on the Financial Statements and anticipate
that the adoption of the majority of these standards and interpretations
in future periods will not have a material impact on the Interim
Financial Statements or results of the Group.
2.4 Consolidation
Details of the Undertakings which the Company held as at 30 June 2016
are listed below:
Direct or
indirect Country of Principal Proportion
Name holding incorporation activity of shares and voting rights held
Foresight Solar
(UK Hold Co) Holding
Limited Direct UK Company 100%
Holding
FS Holdco Limited Indirect UK Company 100%
FS Wymeswold
Limited Indirect UK SPV 100%
FS Castle Eaton
Limited Indirect UK SPV 100%
FS Pitworthy
Limited Indirect UK SPV 100%
FS Highfields
Limited Indirect UK SPV 100%
FS High Penn
Limited Indirect UK SPV 100%
FS Hunter's Race
Limited Indirect UK SPV 100%
FS Spriggs Limited Indirect UK SPV 100%
FS Bournemouth
Limited Indirect UK SPV 100%
FS Landmead
Limited Indirect UK SPV 100%
FS Kencot Limited Indirect UK SPV 100%
FS Copley Limited Indirect UK SPV 100%
FS Port Farms
Solar Limited Indirect UK SPV 100%
FS Membury Limited Indirect UK SPV 100%
FS Southam Solar
Limited Indirect UK SPV 100%
FS Atherstone
Solar Limited Indirect UK SPV 100%
FS Paddock Wood
Solar Farm
Limited Indirect UK SPV 100%
Atherstone Hold Co
Limited Indirect UK SPV 78%
Southam Hold Co
Limited Indirect UK SPV 70%
Paddock Wood Hold
Co Limited Indirect UK SPV 59%
Wymeswold Solar
Farm Limited
("Wymeswold") Indirect UK Investment 100%
Castle Eaton Solar
Farm Limited
("Castle Eaton") Indirect UK Investment 100%
Pitworthy Solar
Farm Limited
("Pitworthy") Indirect UK Investment 100%
Highfields Solar
Farm Limited
("Highfields") Indirect UK Investment 100%
High Penn Solar
Farm Limited
("High Penn") Indirect UK Investment 100%
Hunter's Race
Solar Farm
Limited
("Hunter's
Race") Indirect UK Investment 100%
Spriggs Solar Farm
Limited
("Spriggs") Indirect UK Investment 100%
Bournemouth Solar
Farm Limited
("Bournemouth") Indirect UK Investment 100%
Landmead Solar
Farm Limited
("Landmead") Indirect UK Investment 100%
Kencot Hill Solar
Farm Limited
("Kencot") Indirect UK Investment 100%
Copley Solar
Limited
("Copley") Indirect UK Investment 100%
2.5 Consolidation (consolidation)
Port Farms Solar Limited ("Port Farm") Indirect UK Investment 100%
Membury Solar Limited ("Membury") Indirect UK Investment 100%
Atherstone Solar Farm Ltd ("Atherstone") Indirect UK Investment 78%
Southam Solar Farm Ltd ("Southam") Indirect UK Investment 70%
Paddock Wood Solar Farm Ltd ("Paddock
Wood") Indirect UK Investment 59%
The direct subsidiary (UK Hold Co) and indirect subsidiary (FS Holdco)
are included in these Interim Financial Statements; all other indirect
subsidiaries are held at fair value through profit or loss as the Group
meets the definition of an 'investment entity' under IFRS 10.
3. Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the
related actual results. Revisions to accounting estimates are recognised
in the year in which the estimate is revised if the revision only
affects that year or in the year of the revision and future years if the
revision affects both current and future years. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the
next financial year are addressed below.
3.1 Fair value of investments
The fair value of the investments is determined by using valuation
techniques. The Directors base the fair value of the investments based
on information received from the Investment Manager. The Investment
Manager's assessment of fair value of investments is determined in
accordance with the International Private Equity and Venture Capital
("IPEVC") Valuation Guidelines, using unlevered Discounted Cash Flow
principles (unless a more appropriate methodology is applied).
As described more fully in the Investment Manager Report above, such as
these entail assumptions about solar irradiance, power prices,
technological performance, discount rate, operating costs and inflation
over a 25-year period. It is in the opinion of the Investment Manager
that the IPEVC valuation methodology used in deriving a fair value is
not materially different from the fair value requirements of IAS 39.
4. Interest revenue
Period Period Period
1 January 2016 to 1 January 2015 to 1 January 2015 to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Loan
interest
receivable 13,208 10,357 22,697
Other
interest
receivable - - 50
Bank
interest
receivable 13 26 35
13,221 10,383 22,782
5. Finance costs
Period Period Period
1 January 2016 to 1 January 2015 to 1 January 2015 to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Credit facility agreement arrangement fees (see note
19) 824 472 695
Credit facility agreement commitment fees (see note
19) 129 141 226
Interest on credit facility drawn down (see note 19) 1,949 998 2,716
Other finance costs - 41 59
2,902 1,652 3,696
6. Management fees
The Investment Manager of the Group, Foresight Group CI Limited,
receives an annual fee of 1% of the Net Asset Value ("NAV") of the
Group. This is payable quarterly in arrears and is calculated based on
the published quarterly NAV. For the period 1 January 2016 to 30 June
2016, the Investment Manager was entitled to a management fee of
GBP1,395,586 (1 January 2015 to 30 June 2015: GBP1,157,593; 1 January
2015 to 31 December 2015: GBP2,551,085 of which GBP699,064 was
outstanding as at 30 June 2016 (30 June 2015: GBP617,428; 31 December
2015: GBP5,535).
7. Administration and Accountancy fees
Under an Administration Agreement, the Administrator of the Company, JTC
(Jersey) Limited, is entitled to receive minimum annual administration
and accountancy fees of GBP80,000 payable quarterly in arrears. From
December 2014 this increased to a minimum of GBP100,000 per annum
resulting from an increase in stated capital. For the period 1 January
2016 to 30 June 2016, total administration and accountancy fees were
GBP118,032 (1 January 2015 to 30 June 2015: GBP89,652; 1 January 2015 to
31 December 2015: GBP151,533) of which GBP58,985 was outstanding as at
30 June 2016 (30 June 2015 GBP54,462; 31 December 2015: GBP4,200).
8. Directors' fees
Remuneration of the Directors of the Group is currently paid at a total
rate of GBP140,000 per annum (1 January 2015 to 30 June 2015: GBP140,000
per annum; 1 January 2015 to 31 December 2015: GBP140,000 per annum). In
addition, pursuant to the prospectus, the Director may also be paid
reasonable travelling, hotel and other expenses properly incurred in
connection with the exercise of their powers and discharge of their
duties as well as other one off fees. For the year ended 31 December
this amounted to GBP30,349 (13 August 2013 to 31 December 2014; GBPnil).
All of the Directors are Non-Executive Directors. The Directors of UK
Hold Co and FS Holdco, Jamie Richards, and Ricardo Pineiro, do not
receive any remuneration. Remuneration due for the period 1 January 2016
to 30 June 2016 is detailed below:
Period
1 January 2016 Period Period
to 1 January 2015 to 1 January 2015 to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Peter Dicks 19 27 45
Alexander
Ohlsson 32 40 70
Christopher
Ambler 25 33 55
76 100 170
9. Other Expenses
Period Period Period
1 January 2016 to 1 January 2015 to 1 January 2015 to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Bank charges - 2 -
Annual fees 19 53 92
Listing fees - - 1
Legal and
professional
fees 191 209 527
210 264 620
Included in legal and professional fees, are audit fees of GBP25,150
payable to KPMG LLP for the period (1 January 2015 to 30 June 2015:
GBP9,422; 1 January 2015 to 31 December 2015: GBP46,000) of which
GBP18,000 was outstanding as at 30 June 2016 (30 June 2015: GBP9,422; 31
December 2015: GBP46,000).
10. Taxation
The Company is currently registered in Jersey and is subject to the
Jersey standard tax rate of 0%.
Tax arises in the United Kingdom in respect of UK Hold Co and FS Holdco.
The standard rate of Corporation Tax in the UK is 20% and as the tax
rate has not changed this year, the effective tax rate is also 20%.
Finance (No. 2) Act 2015 was enacted on 18 November 2015 and introduced
a reduction in the rate of corporation tax to 19% from 1 April 2017 and
to 18% from 1 April 2020. As a result, the measurement of deferred tax
reflects the enactment of this Act.
At Budget 2016, the government announced a further reduction to the
Corporation Tax main rate for the year starting 1 April 2020, setting
the rate at 17%. This reduction was not substantially enacted at the
balance sheet date and the reduction announced is not expected to have a
material impact on these financial statements. The tax arising on
Group's profit before tax for the period 1 January 2016 to 30 June 2016
is as follows:
Period Period Period
1 January 2016 to 1 January 2015 to 1 January 2015 to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Profit on
ordinary
activites 9,962 5,560 15,883
Expected tax
charge 1,993 1,140 3,216
Effects of:
Lower tax rate
in Jersey (2,509) (1,678) (4,418)
Expenses not
deductible for
tax purposes 1,462 396 2,400
Unrealised
gains not
taxable (289) 320 (59)
Rate change 14 - -
Utilisation of
previously
unrecognised
tax losses - - (470)
671 178 669
11. Earnings per Ordinary share - basic and diluted
The basic and diluted profits per Ordinary Share for the Company of 3.30
pence are based on the profit for the period of GBP9,291,221 (1 January
2015 to 30 June 2015: GBP5,382,818; 1 January 2015 to 31 December 2015:
GBP15,214,912) and on 281,803,232 (1 January 2015 to 30 June 2015:
232,282,312; 1 January 2015 to 31 December 2015: 257,246,283) Ordinary
Shares, being the weighted average number of shares in issue during the
period.
12. Trade and other receivables
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Accrued interest receivable 11,708 5,783 2,018
Prepaid expenses - 56 28
Other receivables 35 30 54
Amounts receivable from
Wymeswold - 1 -
Amounts receivable from
Bournemouth 193 439 -
Amounts receivable from
Copley 1,644 - -
Amounts receivable from
Membury 19
Amounts receivable from
Landmead - 1,913 -
13,599 8,222 2,100
13. Cash and cash equivalents
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Cash at bank 9,713 37,877 15,531
Cash in transit - 6,600 -
9,713 44,477 15,531
14. Trade and other payables
31 December
30 June 2016 30 June 2015 2015
GBP'000 GBP'000 GBP'000
Accrued issue costs - 340 -
Accrued investment costs - - 10,397
Taxation payable 1,340 178 669
Accrued expenses 2,166 1,093 420
Amounts payable to Castle Eaton - 626 -
Amounts payable to Highfields - 586 -
Amounts payable to High Penn - 89 -
Amounts payable to Pitworthy - 700 -
Amounts payable to Spriggs - 204 -
Amounts payable to Hunters Race - 1,169 -
Amounts payable to Kencot - 390 -
Amounts payable to Copley - - 2,000
Amounts payable to Paddock Wood - - 212
Amounts payable to Atherstone - - 329
Amounts payable to Southam - - 122
3,506 5,375 14,149
15. Investments held at fair value through profit or loss
Period 1 January 2016 to 30 June 2016
Cost as at Move- Movement - share- Cost as at Unrealised gain/(loss) as at
1 January 2016 ment - equity holder loans 30 June 2016 1 January 2016 Movement on unrealised gain/(loss) Unrealised gain/(loss) as at 30 June 2016 Fair value as at 30 June 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Wymeswold 44,247 - (500) 43,747 4,817 466 5,283 49,030
Castle Eaton 22,508 - - 22,508 (756) (64) (820) 21,688
Pitworthy 19,272 - - 19,272 (734) (760) (1,494) 17,778
Highfields 15,403 - - 15,403 (785) (26) (811) 14,592
High Penn 12,623 - - 12,623 (1,105) (59) (1,164) 11,459
Hunter's Race 12,239 - - 12,239 900 27 927 13,166
Spriggs 14,437 - - 14,437 271 (216) 55 14,492
Bournemouth 47,911 - - 47,911 1,682 535 2,217 50,128
Landmead 52,416 - - 52,416 (65) 521 456 52,872
Kencot 48,442 - - 48,442 (563) (256) (819) 47,623
Copley 32,680 - - 32,680 2,956 129 3,085 35,765
Paddock Wood 6,335 - - 6,335 (154) 345 191 6,526
15. Investments held at fair value through profit or loss (continued)
Period 1 January 2016 to 30 June 2016 (continued)
Cost as at Move- Movement - share- Cost as at Unrealised gain/(loss) as at
1 January 2016 ment - equity holder loans 30 June 2016 1 January 2016 Movement on unrealised gain/(loss) Unrealised gain/(loss) as at 30 June 2016 Fair value as at 30 June 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Atherstone 12,595 - - 12,595 156 45 201 12,796
Southam 7,702 - - 7,702 108 179 287 7,989
Port Farms 44,502 - (505) 43,997 267 823 1,090 45,087
Membury 21,671 - - 21,671 (351) (246) (597) 21,074
414,983 - (1,005) 413,978 6,644 1,443 8,087 422,065
Period 1 January 2015 to 30 June 2015
Movement Movement -
Cost as at - shareholder Cost as at Unrealised gain/(loss) as at Movement on
1 January 2015 equity loans 30 June 2015 1 January 2015 unrealised gain/(loss) Unrealised gain/(loss) as at 30 June 2015 Fair value as at 30 June 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Wymeswold 45,046 - - 45,046 3,684 40 3,724 48,770
Castle Eaton 22,508 - - 22,508 192 (260) (68) 22,440
Pitworthy 19,272 - - 19,272 243 75 318 19,590
Highfields 15,403 - - 15,403 247 (280) (33) 15,370
High Penn 12,623 - - 12,623 (123) (210) (333) 12,290
Hunter's Race 13,036 - - 13,036 (26) 120 94 13,130
Spriggs 14,621 - - 14,621 699 (590) 109 14,730
Bournemouth 47,911 - - 47,911 249 1,230 1,479 49,390
Landmead 52,416 - - 52,416 1,189 425 1,614 54,030
Kencot - 19,121 30,338 49,459 - (2,109) (2,109) 47,350
Copley - - 23,500 23,500 - - - 23,500
242,836 19,121 53,838 315,795 6,354 (1,559) 4,795 320,590
Period 1 January 2015 to 31 December 2015
Period 1 January 2015 to 31 December 2015 (continued)
Cost as at Move- Movement -share- Repayments-shareholder loans Cost as at Unrealised gain/(loss) as at
1 January 2015 ment - equity holder loans GBP'000 31 December 2015 1 January 2015 Movement on unrealised gain/(loss) Unrealised gain/(loss) as at 31 December 2015 Fair value as at 31 December 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Paddock Wood - 459 5,876 - 6,335 - (154) (154) 6,181
Atherstone - 8 12,587 - 12,595 - 156 156 12,751
Southam - 7 7,695 - 7,702 - 108 108 7,810
Port Farms - 7,259 37,243 - 44,502 - 267 267 44,769
Membury - 4,444 17,733 (506) 21,671 - (351) (351) 21,320
242,836 41,673 133,777 (3,303) 414,983 6,354 290 6,644 421,627
16. Fair value of assets and liabilities
Fair value hierarchy
IFRS 13 "Fair Value Measurement" requires disclosures relating to fair
value measurements using a three-level fair value hierarchy. The level
within which the fair value measurement is categorised in its entirety
is determined on the basis of the lowest level input that is significant
to the fair value measurement. Assessing the significance of a
particular input requires judgement, considering factors specific to the
asset or liability. The following table shows investments recognised at
fair value, categorised between those whose fair value is based on:
1. Level 1 - Quoted (unadjusted) market prices in active markets for
identical assets or liabilities;
2. Level 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable; and
3. Level 3 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
All investments held at fair value through profit or loss are classified
as level 3 within the fair value hierarchy.
Valuation process for Level 3 valuations
Valuations are the responsibility of the Board of Directors.
The Investment Manager is responsible for submitting fair market
valuations of Group assets to the Directors. The Directors review and
approve these valuations following appropriate challenge and
examination. Valuations are carried out quarterly.
The current portfolio consists of non-market traded investments and
valuations are based on a discounted cash flow methodology.
The Investment manager's assessment of fair value of investments is
determined in accordance with the International Private Equity and
Venture Capital Valuation Guidelines ("IPEVCV"), using unlevered
Discounted Cash Flow principles. It is in the opinion of the Investment
Manager and Directors that the IPEVCV methodology used in deriving a
fair value is not materially different from the fair value requirements
of IFRS 13.
Sensitivity analysis to significant changes in unobservable inputs
within Level hierarchy
The Groups' investments are valued with reference to the discounted
value of future cash flows. The Directors consider the valuation
methodology used, including the key assumptions and discount rate
applied, to be appropriate. The Board review, at least annually, the
valuation inputs and where possible, make use of observable market data
to ensure valuations reflect the fair value of the investments.
A broad range of assumptions are used in the valuation models. These
assumptions are based on long-term forecasts and are not affected by
short term fluctuations in inputs, be it economic or technical.
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy together with a
quantitative sensitivity analysis as at 30 June 2015 are as shown below:
The Discounted Cash Flow ("DCF") valuations of the solar assets form the
majority of the NAV calculation. The Directors consider the following
assumptions to be significant inputs to the DCF calculation.
Discount rate
The weighted average discount rate used is 7.5%. The Directors do not
expect to see a significant change in the discount rates applied within
the Solar Infrastructure sector. Therefore a variance of +/- 0.5% is
considered reasonable.
-0.50% -0.25% Base +0.25% +0.50%
Directors' valuation (GBPm) 440.0 430.9 422.1 413.5 405.3
NAV per share (pence) 105.6 102.4 99.3 96.2 93.3
Change vs Base Case (%) 4.3 2.1 0.0 (2.0) (4.0)
Energy yield
Base case assumptions are based on P50 forecasts (50 per cent
probability of exceedance) produced by market experts. P10 (10 per cent
probability of exceedance) and P90 (90 per cent probability of
exceedance) variances are given to offer comparison across the industry.
Energy yield is a function of solar irradiance and technical
performance.
P10 Base P90
Directors' valuation (GBPm) 458.4 422.1 383.2
NAV per share (pence) 112.1 99.3 85.5
Change vs Base Case (%) 8.6 0.0 (9.2)
Power Price
DCF models assume power prices that are consistent with the Power
Purchase Agreements ("PPA") currently in place. The average PPA period
remaining as at 30 June 2016 is 4.5 years. At the PPA end date, the
model reverts to the power price forecast.
The power price forecasts are updated quarterly and based on power price
forecasts from leading independent sources. The Investment Manager
adjusts where more conservative assumptions are considered appropriate
and applies expected PPA sales discounts. The forecast assumes an
average annual increase in power prices in real terms of approximately
1.8%.
-20.0% -10.0% Base +10.0% +20.0%
Directors' valuation (GBPm) 375.6 399.4 422.1 443.7 464.9
NAV per share (pence) 82.8 91.2 99.3 107.0 114.5
Change vs Base Case (%) (11.0) (5.4) 0.0 5.1 10.1
Inflation
A variable of 1.0% is considered reasonable given historic fluctuations.
We assume inflation will remain constant at 2.5%.
-1.0% -0.5% Base +0.5% +1%
Directors' valuation (GBPm) 390.7 406.2 422.1 438.3 455.2
NAV per share (pence) 88.1 93.6 99.3 105.0 111.0
Change vs Base Case (%) (7.4) (3.8) 0.0 3.8 7.9
Operating costs (investment level)
Operating costs include operating and maintenance ("O&M"), insurance and
lease costs. Base case costs are based on current commercial agreements.
We would not expect these costs to fluctuate widely over the life of the
assets and are comfortable that the base case is prudent. A variance of
+/- 5.0% is considered reasonable, a variable of 10.0% is shown for
information purposes.
-10.0% -5.0% Base +5.0% +10.0%
Directors' valuation (GBPm) 427.8 424.9 422.1 419.2 416.2
NAV per share (pence) 101.3 100.3 99.3 98.2 97.2
Change vs Base Case (%) 1.4 0.7 0.0 (0.7) (1.4)
Level 3 reconciliation
The following table shows a reconciliation of all movements in the fair
value of investments categorised within Level 3 between the beginning
and the end of the reporting period:
Period 1 January 2016 to 30 June 2016
Total
GBP'000
Balance at 1 January 2016 421,627
Total gains and (losses) in Condensed Consolidated
Statement of Comprehensive Income:
-- unrealised from fair value adjustments 1,443
Loan repayment (1,005)
Balance at 30 June 2016 422,065
Period 1 January 2015 to 30 June 2015
Total
GBP'000
Balance at 1 January 2015 249,190
Total gains and (losses) in Consolidated Statement
of Comprehensive Income:
-- unrealised from fair value adjustments (1,559)
Purchases at cost 72,959
Balance at 30 June 2015 320,590
Period 1 January 2015 to 31 December 2015
Total
GBP'000
Balance at 1 January 2015 249,190
Total gains and (losses) in Consolidated Statement
of Comprehensive Income:
-- unrealised from fair value adjustments 290
Purchases at cost 175,450
Loan repayment from SPVs (3,303)
Balance at 31 December 2015 421,627
17. Stated Capital
The stated capital of the Company consists solely of Ordinary Shares of
nil par value. At any General Meeting of the Company each Shareholder
will have, on a show of hands, one vote and on a poll one vote in
respect of each Ordinary Share held. Stated capital is the net proceeds
received from the issue of Ordinary Shares (net of issue costs
capitalised).
Ordinary Shares
30 June 30 June 31 December
2016 2015 2015
Shares Shares Shares
Opening balance 281,803,232 208,000,000 208,000,000
Issued during the period - 73,803,232 101,955,375
Repurchased and held in Treasury - - (28,152,143)
Closing balance 281,803,232 281,803,232 281,803,232
28,152,143 Ordinary Shares are held in Treasury as at 30 June 2016 (30
June 2015: nil; 31 December 2015: 28,152,143).
Stated Capital
30 June 30 June 31 December
2016 2015 2015
GBP'000 GBP'000 GBP'000
Opening balance 279,403 206,226 206,226
Proceeds from share issue - 74,784 74,784
Less: issue costs capitalised - (1,562) (1,607)
Closing balance 279,403 279,448 279,403
18. NAV per Ordinary Share
The Net Asset Value ("NAV") per redeemable Ordinary Share for the
Company is based on the Net Asset Value at the reporting date of
GBP279,745,961 (30 June 2015: GBP277,914,346; 31 December 2015:
GBP279,106,101) and on 281,803,232 (30 June 2015: 281,803,232; 31
December 2015: 281,803,232) redeemable Ordinary Shares, being the number
of Ordinary Shares in issue at the end of the period. Treasury shares
issued on 22 September 2015 totalling 28,152,143 are excluded from the
calculation.
19. Borrowings
30 June 30 June 31 December
2016 2015 2015
GBP'000 GBP'000 GBP'000
Opening balance 146,003 48,105 48,105
Drawn down during the period 169,500 41,895 108,898
Repaid during the period (149,503) - (11,000)
Deferred debt cost (4,587) - -
Swap revaluation loss 712 - -
Closing balance 162,125 90,000 146,003
Borrowings due in less than 12 months
(short-term) 131 0 50,000
Borrowings due in more than 12 months
(long-term) 161,994 90,000 96,003
On 21 July 2015, UK Holdco entered into a GBP150,000,000 Revolving
Credit Facility Agreement (the "Facility Agreement") with The Royal Bank
of Scotland Plc as agent and Santander Global Banking and Markets and
The Royal Bank of Scotland Plc as arrangers who have agreed a Facility
Commitment of GBP75,000,000 and GBP75,000,000 respectively. The
GBP150,000,000 is split into two tranches of GBP50,000,000 ("Facility
A1") and GBP100,000,000 ("Facility A2").
On 31 March 2016, FS Holdco entered into a new GBP160,000,000 Long-term
Debt Facility agreement with Macquarie Infrastructure Debt Investment
Solutions ("MIDIS") and Abbey National Treasury Services ("Santander").
On 14 April 2016, these funds were used to refinance the UK Hold Co's
acquisition facility, i.e. GBP149,503,500 drawn at aforementioned date.
In addition, FS Holdco also entered into a GBP40,000,000 Short-term
revolving acquisition facility ("RCF facility") with Santander.
The interest payable for the period 1 January 2016 to 30 June 2016
amounted to GBP1,948,951 (1 January 2015 to 30 June 2015: GBP997,953; 1
January 2015 to 31 December 2015: GBP2,715,542) of which GBP842,668 was
outstanding as at 30 June 2016 (30 June 2015: GBP131,544; 31 December
2015: GBP31,448).
For the period, arrangement fees totalled GBP824,326 whilst commitment
fees totalled GBP128,566 (1 January 2015 to 30 June 2015: GBP471,653 and
GBP140,769 respectively; 1 January 2015 to 31 December 2015: GBP695,325
and GBP226,017 respectively) of which GBP121,401 of commitment fees were
outstanding as at 30 June 2016 (30 June 2015: GBP20,167 and GBP53,723
respectively; 31 December 2015: GBP20,167 and GBP7,243 respectively).
20. Capital Management
The Group's objectives when managing capital are to safeguard the
Group's ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares (up to its authorised number of shares)
or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on
the basis of the gearing ratio. This ratio is calculated as net debt
divided by total capital. Net debt is calculated as total borrowings
(including 'current and non-current borrowings' as shown in the
consolidated balance sheet) less cash and cash equivalents. Total
capital is calculated as 'equity' as shown in the Consolidated Statement
of Financial Position plus net debt. The gearing ratio as at 30 June
2016 was as follows:
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Total borrowings 161,994 90,000 146,003
Less: cash and cash
equivalents (9,713) (44,477) (15,531)
Net debt 152,281 45,523 130,472
Total equity 279,746 277,914 279,106
Total capital 436,034 323,437 409,578
Gearing ratio 35.84% 14.07% 31.85%
21. Dividends
Dividends paid during the period comprise a final dividend in respect of
the period from 1 October 2015 to 31 December 2015 of 1.53 pence per
Ordinary Share and an interim dividend in respect of the period from 1
January 2016 to 31 March 2016 of 1.54 pence per Ordinary Share.
22. Transactions with the manager and Related parties
For the purposes of these Interim Financial Statements, a related party
is an entity or entities who are able to exercise significant influence
directly or indirectly on the Group's operations or the operations of
its investments. Transactions between the Company and its subsidiary,
which is a related party, have been eliminated on consolidation and are
not disclosed in this note.
All the SPVs of the Group are cash generating solar farms with all
revenues and expenses being related party transactions. During the
period, the Group was entitled to loan interest on the shareholder loans,
from the SPVs, totalling GBP13,208,420 (1 January 2015 to 30 June 2015:
GBP10,356,789; 1 January 2015 to 31 December 2015: GBP22,696,708) of
which GBP11,707,505 was outstanding as at 30 June 2016 (30 June 2015:
GBP5,697,051; 31 December 2015: GBP2,018,173). During the period, UK
Hold Co paid certain expenses on behalf of the SPVs. The net
intercompany receivables and payables positions are stated in notes 12
and 14.
Foresight Group CI Limited, acting as investment manager to the Group in
respect of its investments, earned fees of GBP1,395,586 during the
period (1 January 2015 to 30 June 2015: GBP1,157,593; 1 January 2015 to
31 December 2015: GBP2,551,085), of which GBP699,064 was outstanding as
at 30 June 2016 (30 June 2015: GBP617,428; 31 December 2015: GBP5,535).
Foresight Group CI Limited charged fees to FS Hold Co of GBP680,000
during the period in relation to the arrangement and transaction advice
of the long term refinancing (1 January 2015 to 30 June 2015: GBPnil; 1
January 2015 to 31 December 2015: GBPnil), of which GBPnil was
outstanding as at 30 June 2016 (30 June 2015: GBPnil; 31 December 2015:
GBPnil).
Foresight Group LLP, a related party of Foresight Group CI, charged
asset management fees to the underlying projects of GBP256,000 during
the period (1 January 2015 to 30 June 2015: GBP146,290; 1 January 2015
to 31 December 2015: GBP368,350.
Pursuant to the terms of the Prospectus, the total launch costs to be
borne by the Shareholders of the Company were capped at 2% of the launch
proceeds of GBP150,000,000 (i.e. GBP3,000,000) with any excess launch
costs being reimbursed to the Company from Foresight Group CI Limited.
Launch costs to be reimbursed from Foresight Group CI Limited amounted
to GBP213,644 of which GBPnil was receivable as at 30 June 2016 (30 June
2015: GBP29,671; 31 December 2015: GBPnil).
24. Commitments and contingent liabilities
There are no commitments nor contingent liabilities.
25. Controlling party
In the opinion of the Directors, there is no controlling party as no one
party has the ability to direct the financial and operating policies of
the Group with a view to gaining economic benefits from its direction.
26. Post balance sheet events
There were no post balance sheet events requiring disclosure.
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Foresight Solar Fund Limited via Globenewswire
HUG#2035179
(END) Dow Jones Newswires
August 15, 2016 02:00 ET (06:00 GMT)
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