We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 86.70 | 86.30 | 86.60 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 162.99M | 154.47M | 0.2610 | 3.32 | 513.04M |
Hot Features
Premium
TIDMFSFL
Annual Results to 31 December 2016 and Dividend Announcement
Highlights
-- The underlying portfolio, which is fully operational and accredited, now
totals 16 assets with an installed capacity of 348MW. The portfolio
generated 319 Gigawatt Hours ("GWh") of clean energy during 2016,
sufficient to power approximately 97,000 UK homes. The total revenues
earned across the portfolio amounted to GBP34.2 million.
-- The Company is on track to pay the target dividend of 6.17 pence per
share for the year to 31 December 2016. Interim dividends of 1.54 pence
per share were paid in June, September and December 2016 and a further
interim dividend of 1.55 pence per share was approved by the Directors on
15 February 2017 and will be paid on 5 May 2017.
-- The Company aims to deliver a full year dividend for the year ending 31
December 2017 of 6.32 pence per share (6.00 inflated by RPI for 2014 -
2016). Since IPO, all target dividends have been achieved.
-- Driven by an improving outlook for the portfolio's revenues and asset
acquisitions, Net Asset Value ("NAV") increased to GBP350.8 million over
the year, taking the NAV per Ordinary Share to 102.9 pence, an increase
of 3.9 pence since 31 December 2015. A substantial average size of over
21MW per solar installation means the portfolio benefits from
efficiencies of scale particularly in terms of lower asset management
costs and operating and maintenance charges.
-- Successful share placings took place in September and October 2016
raising total gross proceeds of GBP60.8 million from new and existing
investors, bringing the total equity capital raised to GBP345.7 million.
-- Minority equity positions totalling 10MW were acquired in three existing
portfolio assets - Southam, Paddock Wood and Atherstone. This is the
first acquisition from a near-term pipeline of operational, fully
accredited and income generating solar facilities with a total capacity
of 132MW over which the Company is in advanced negotiations, and
demonstrates the ability to quickly deploy investor funds into
cash-generating assets.
-- A new GBP160 million long-term debt facility was put in place by the
Company's subsidiary in March 2016 at attractive terms, refinancing a
GBP150 million short-term acquisition facility. A new, short-term
revolving acquisition facility of GBP40 million was also agreed,
providing the necessary flexibility to take advantage of future pipeline
opportunities.
-- An improving outlook for power prices has led to a supportive market for
further acquisitions. As the UK's secondary market for solar assets
matures, further opportunities have been identified and the Company will
continue to selectively pursue these to expand the portfolio and support
cash generation. Active negotiations are underway with 150MW of capacity,
of which 50MW are expected to be acquired imminently.
Following Period End
-- In February the Company announced the acquisition of Shotwick, a solar
park located in Flintshire. At 72MW peak capacity and 50MW AC export
capacity, Shotwick is currently the largest operational solar asset in
the UK. This increases the number of assets in the portfolio to 17 with a
total installed capacity of 420MW.
Dividend Timetable
Dividend Timetable Date
Ex-dividend Date 6 April 2017
Record Date 7 April 2017
Payment Date 5 May 2017
Key Metrics
As at 31 December 2016
Market Capitalisation GBP354.9 million
Share Price 104.1 pence
Total Dividend per Share for the Year 6.17 pence
Gross Asset Value GBP549.0 million
Net Asset Value GBP350.8 million
NAV per Share 102.9 pence
NAV Change per Share 3.9 pence
Total Return (NAV) 7.04%*
Total Shareholder Return 6.58%
Equity Discount Rate 7.5%
Profit after Tax GBP30.7 million
Number of Shares with Voting Rights 340,950,912
* Annualised from IPO on 29 October 2013 and calculated in line with AIC
methodology, which does not include dividends approved but not paid.
Commenting on today's results, Alex Ohlsson, Chairman of Foresight Solar
Fund Limited said:
"Now in its fourth year, the Company has built a strong portfolio of 16
operating solar assets. During 2016, positive progress has been made by
focusing on the consolidation and optimisation of the assets. The
Company is now well-placed to take advantage of the expected recovery in
UK wholesale power prices, which will support the continued delivery of
attractive returns to Shareholders.
The Company has achieved all target dividends to date and is on track to
deliver a 6.17 pence dividend for the year ended 31 December 2016.
In addition to the 72MW acquisition of Shotwick in February 2017, and an
imminent investment in a 50MW asset, the Investment Manager continues to
review a pipeline of c.100MW of assets available in the primary and the
developing secondary market. Opportunities to expand the portfolio in
line with Company's investment objective will be pursued selectively.
The success of the Company's share placings during the second half of
2016 evidences the appeal to investors of the stable income flows
generated by the portfolio. Underpinned by the current low-interest rate
environment, the Board expects to see positive ongoing demand for
yielding infrastructure assets, such as those held by the Company."
A conference call for analysts will be held at 9:00am on Thursday 16
February 2017.
To register, please contact Shabnam Bashir at Citigate Dewe Rogerson by
email Shabnam.Bashir@citigatedr.co.uk or by phone +44 (0) 20 7282 2822
A presentation will be provided separately before the call.
A copy of the Report can be found on the Fund's website
http://www.foresightgroup.eu/fsfl-home
For further information, please contact:
Foresight Group
Louise Chesworth LChesworth@ForesightGroup.eu +44 (0)20 3667 6932
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. Having raised
GBP150 million at IPO in October 2013, FSFL has since raised a further
GBP195.7 million from institutional investors and private investors.
About Foresight Group
Foresight is a leading independent infrastructure and private equity
investment manager which has been managing investment funds on behalf of
institutions and retail clients for more than 30 years.
Foresight has GBP2.3 billion of Assets Under Management across a number
of funds, including Listed Vehicles, Limited Partnerships, Enterprise
Investment Schemes (EISs) and Venture Capital Trusts (VCTs).
As one of Europe's leading solar infrastructure investment teams,
Foresight funds currently manage more than GBP1.2 billion in over 75
operating Photovoltaic ("PV") plants in the UK, Australia and North
America.
Foresight Group is headquartered in London, with international offices
in Rome, San Francisco and Sydney and regional UK offices in Nottingham,
Manchester and Guernsey.
www.foresightgroup.eu
Foresight Solar Fund Limited: Annual Results to 31 December 2016
Financial Highlights
As at 31 December 2016
Net Asset Value GBP350.8 million
Dividends per Share declared for the period 6.17 pence
NAV per Share 102.9 pence
Gross Asset Value GBP549.0 million
Share Price 104.1 pence
Total NAV Return* 7.04%
Market Capitalisation GBP354.9 million
Number of Shares with Voting Rights 340,950,912
Total Shareholder Return 6.58%
* Annualised from IPO on 29 October 2013 and calculated in line with AIC
methodology, which does not include dividends approved but not paid.
-- The underlying portfolio, which is fully operational and accredited, now
totals 16 assets with an installed capacity of 348MW. The portfolio
generated 319 Gigawatt Hours ("GWh") of clean energy during 2016,
sufficient to power approximately 97,000 UK homes. The total revenues
earned across the portfolio amounted to GBP34.2 million.
-- The Company is on track to pay the target dividend of 6.17 pence per
share for the year to 31 December 2016. Interim dividends of 1.54 pence
per share were paid in June, September and December 2016 and a further
interim dividend of 1.55 pence per share was approved by the Directors on
15 February 2017 and will be paid on 5 May 2017.
-- The Company aims to deliver a full year dividend for the year ending 31
December 2017 of 6.32 pence per share (6.00 inflated by RPI for 2014 -
2016). Since IPO, all target dividends have been achieved.
-- Driven by an improving outlook for the portfolio's revenues and asset
acquisitions, Net Asset Value ("NAV") increased to GBP350.8 million over
the year, taking the NAV per Ordinary Share to 102.9 pence, an increase
of 3.9 pence since 31 December 2015. A substantial average size of over
21MW per solar installation means the portfolio benefits from
efficiencies of scale particularly in terms of lower asset management
costs and operating and maintenance charges.
-- Successful share placings took place in September and October 2016
raising total gross proceeds of GBP60.8 million from new and existing
investors, bringing the total equity capital raised to GBP345.7 million.
-- Minority equity positions totalling 10MW were acquired in three existing
portfolio assets - Southam, Paddock Wood and Atherstone. This is the
first acquisition from a near-term pipeline of operational, fully
accredited and income generating solar facilities with a total capacity
of 132MW over which the Company is in advanced negotiations, and
demonstrates the ability to quickly deploy investor funds into
cash-generating assets.
-- A new GBP160 million long-term debt facility was put in place by the
Company's subsidiary in March 2016 at attractive terms, refinancing a
GBP150 million short-term acquisition facility. A new, short-term
revolving acquisition facility of GBP40 million was also agreed,
providing the necessary flexibility to take advantage of future pipeline
opportunities.
-- An improving outlook for power prices has led to a supportive market for
further acquisitions. As the UK's secondary market for solar assets
matures, further opportunities have been identified and the Company will
continue to selectively pursue these to expand the portfolio and support
cash generation. Active negotiations are underway with 150MW of capacity,
of which 50MW are expected to be acquired imminently.
Following Period End
-- In February the Company announced the acquisition of Shotwick, a solar
park located in Flintshire. At 72MW peak capacity and 50MW AC export
capacity, Shotwick is currently the largest operational solar asset in
the UK. This increases the number of assets in the portfolio to 17 with a
total installed capacity of 420MW.
Chairman's Statement
Now in its fourth year, the Company has built a strong portfolio of 16
operating solar assets. During 2016, positive progress has been made by
focusing on the consolidation and optimisation of the assets. The
Company is now well-placed to take advantage of the expected recovery in
UK wholesale power prices, which will support the continued delivery of
attractive returns to Shareholders.
The Company has achieved all target dividends to date and is on track to
deliver a 6.17 pence dividend for the year ended 31 December 2016.
In addition to the 72MW acquisition of Shotwick in February 2017, and an
imminent investment in a 50MW asset, the Investment Manager continues to
review a pipeline of c.100MW of assets available in the primary and the
developing secondary market. Opportunities to expand the portfolio in
line with Company's investment objective will be pursued selectively.
The success of the Company's share placings during the second half of
2016 evidences the appeal to investors of the stable income flows
generated by the portfolio. Underpinned by the current low-interest rate
environment, the Board expects to see positive ongoing demand for
yielding infrastructure assets, such as those held by the Company.
Alex Ohlsson, Chairman
Financial Results
On behalf of the Board, I am pleased to present the Audited Annual
Report and Financial Statements for Foresight Solar Fund Limited (the
"Company") for the year to 31 December 2016. The portfolio, which is
fully operational and accredited, now totals 16 solar assets across the
UK with an installed capacity of 348MW.
During the period, the Net Asset Value per Ordinary Share increased by
3.9 pence from 99.0 pence as at 31 December 2015 to 102.9 as at 31
December 2016. This positive valuation movement, which is more fully
described in the Investment Manager's Report, reflects an improving
outlook for the revenues generated by the portfolio assets. Across the
period as a whole, power price forecasts have had a negative impact on
NAV as the UK electricity market remained suppressed during the first
half of the year. However, with electricity prices increasing during the
third and fourth quarters of the year and independent third party
consultants predicting that this trend will continue, the Board remains
optimistic about the future earnings of the solar assets in the
portfolio.
The Profit after Tax for the period was GBP30.7 million resulting in
Earnings per Share of 10.38 pence.
Annual General Meeting
The Next Annual General Meeting ("AGM") will be held on 12 June 2017 at
9.30am. Resolutions to include:
(i) To approve the Directors' Remuneration Report for the period ended
31 December 2016; and
(ii) To approve the Directors' Remuneration Policy
Dividend and Dividend Growth
The Company continues to achieve its dividend objectives and has paid
all target dividends since IPO. The Company remains on track to deliver
the targeted RPI-linked dividend of 6.17 pence for the year ending 31
December 2016 (2015: 6.10 pence). In line with the growth of the UK's
RPI, the Company is targeting a full year dividend of 6.32 pence for the
period ending 31 December 2017, to be paid in four equal quarterly
distributions.
As noted in the Company's Prospectuses, subject to market conditions and
Company performance, it is the Directors' intention to pay a sustainable
and inflation-linked level of dividend income to Shareholders.
Operational Performance
As described more fully in the Investment Manager's report, the
production of the underlying portfolio during the underlying period was
5.3% below expectations. The Asset Manager continues to work hard to
mitigate the impact of incidents such as the external grid disconnection
which occurred at Bournemouth. Unusual in its length, this unavoidable
period of grid maintenance carried out by the Distribution Network
Operator had originally been scheduled to include peak production months
however, intervention by the Asset Manager was successful in minimising
its impact. The strong technical expertise and proactive negotiations of
the Asset Manager have also been instrumental in driving discussions
with EPC contractors towards satisfactory outcomes with regard to
technical issues. Irradiation levels during the year were in line with
forecasts.
Capital Raising and Financing
With support from both existing and new investors, the Company took
advantage of strong market demand in the second half of 2016 to raise
total additional equity capital of GBP60.8 million. Both the placing of
shares held in Treasury and the tap issue of new Ordinary Shares, in
September and October 2016 respectively, were oversubscribed. The
Company may consider launching a new placing programme in due course
subject to market conditions and investor demand.
In March 2016, a subsidiary of the Company agreed 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. 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. A new, short-term revolving acquisition
facility of GBP40 million was also agreed, providing the necessary
flexibility to take advantage of future pipeline opportunities.
Portfolio Development
With this additional capital available, the Company has been well-placed
to selectively pursue new acquisitions. During the period the Investment
Manager evaluated over 700MW of solar assets from primary and secondary
vendors, demonstrating good availability of assets in the market.
Maintaining its diligent investment process and prudent stance regarding
market pricing, the Investment Manager progressed negotiations to reach
exclusivity over a pipeline of 132MW. 10MW of capactiy were acquired
during the year, with an additional 72MW added after the end of the
period and 50MW expected to reach financial close in the near term,
demonstrating that NAV accretive opportunities exist in the secondary
market and can be sourced by the Company.
Opting to increase exposure to existing well-understood assets with a
proven track record, the Company bought the remaining minority equity
positions in the Southam, Paddock Wood and Atherstone assets in November
2016. The Company also completed the acquisition of Shotwick in February
2017. Located in Flintshire, Wales, and with an installed peaking
capacity of 72MW, Shotwick is the UK's largest solar installation.
The Company maintains its strategy of favouring assets that are
accretive to NAV and continues to analyse a further pipeline of c.100MW.
The Asset Manager has continued to focus on the consolidation and
optimisation of the existing portfolio. Given the substantial scale of
the portfolio and the considerable average asset size the Asset Manager
has been able to secure significantly improved commercial terms for many
of the assets' contracts, including reduced Operation and Maintenance
costs and insurance premiums. Floating Power Purchase Agreements
("PPAs") have also been implemented, positioning the portfolio to
capture more of the benefits from the rising power prices seen in recent
months and which are expected to continue into 2017.
Evolution of the UK Solar Market
The UK solar market continued to grow throughout 2016 although at a much
reduced rate compared to previous periods. By the time the Renewables
Obligation Scheme closes on 31 March 2017, it is estimated that the UK
will have a total installed solar capacity of 12GW. During 2016, the UK
solar market was the most active in the EU with deals worth a total
GBP2.9 billion, including refinancings, greenfield projects and
acquisitions.
Activity levels in the secondary market continue to build with a
significant number of portfolios becoming available in recent months,
confirming the UK solar market consolidation opportunity.
The year 2016 offered greater regulatory stability for the sector and an
improving outlook in terms of power prices but the year was not without
its complications. While unexpected, we believe the Brexit EU referendum
result in June 2016 will have a limited impact on the Company. The
fundamentals of the UK solar sector are not underpinned by any EU
regulation or legislation. The subsequent dissolution of The Department
of Energy and Climate Change ("DECC") and transfer of its
responsibilities to the new Department of Business, Energy and
Industrial Strategy ("BEIS"), incorporating the Department of Business,
Innovation and Skills ("BIS"), could have positive implications if this
results in 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 Company.
Outlook
Now in its fourth year and with an established portfolio of utility
scale solar assets, the Company is well-placed to take advantage of the
ongoing recovery in UK wholesale power prices which will support the
continued delivery of attractive returns to Shareholders. Work by the
Asset Manager to maximise the operating performance of the assets is
ongoing. Further value-enhancing opportunities are continually being
identified.
Entering 2017, the considerable size of the UK's solar industry means
there is a wealth of opportunities in the developing market for
secondary assets and the Investment Manager is currently reviewing a
pipeline of c.100MW of potential investments. 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 team.
Selective additions to the portfolio will be made in line with the
Investment Manager's prudent approach to both asset quality and pricing.
The success of the Company's share placings during the year evidences
investor support for the stable income flows generated by the portfolio.
We expect this trend will continue, supported by the current
low-interest rate environment and, as a result, anticipate reporting
further growth in demand for yielding infrastructure assets, such as the
Foresight Solar Fund Limited.
Alexander Ohlsson
Chairman
15 February 2017
Corporate Summary and Investment Objective
Foresight Solar Fund Limited invests in a portfolio of predominantly UK
ground-based solar PV 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
The Company's Initial Public Offering on 24 October 2013 raised GBP150
million, creating the largest dedicated solar investment company listed
in the UK at the time. Gross proceeds of GBP134.9 million were raised
under a subsequent 12 month placing programme initiated in September
2014. In September 2016, GBP28.9 million was raised through the
oversubscribed reissue of Shares out of Treasury and in October 2016 a
further GBP31.9 million was raised through a tap issue, which was also
oversubscribed. To date, the Company has raised a total of GBP345.7
million through Share Placings.
The Company had a market capitalisation at the end of the period of
GBP354.9 million and owns a portfolio of 16 large scale, ground based
solar power plants across the UK with a total operational capacity of
348MW.
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
registration number 113721.
The Company has 340,950,912 Ordinary Shares in issue which are listed on
the premium segment of the Official List and traded on the London Stock
Exchange's Main Market.
The Company makes its investments through intermediate holding companies
and underlying Project Vehicles/Special Purpose Vehicles ("SPVs") which
are ultimately wholly-owned by the Company.
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 from offices located in
Italy, the US and Australia.
The Company will seek to acquire, through subsidiaries, 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 underlying 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,
Renewable Obligation Certificates ("ROCs") and Feed-in Tariffs
("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 Company's 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. 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.
Significant Shareholders
The Company's Shareholders include a substantial number of blue-chip
institutional investors.
Shareholders in the Company with more than a 5% holding as at 30
December 2016 are as follows:
Investor % Shareholding in Fund
Newton Investment Management Limited 9.9%
Blackrock Investment Management Limited 9.6%
Schroders Plc 9.5%
Legal & General Investment Mgmt Ltd 7.2%
Rathbone Investment Management Limited 6.0%
Total 42.2%
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.
The Investment Manager
The Company's Investment Manager is Foresight Group CI Limited
("Foresight Group CI"), which is responsible for the development and
management of the assets of the Company including the sourcing and
acquisition of future ground-based solar power plants predominantly
located in the UK, advising on the Group's borrowing strategy, the sale
of the electricity and the administering of green benefits. The
Investment Manager is a Guernsey registered company, incorporated under
the Guernsey Law with registered number 51471. The Investment Manager is
licensed and regulated by the Guernsey Financial Services Commission.
Foresight, defined here as Foresight Group CI and its subsidiaries, is a
privately-owned infrastructure and private equity Investment Manager,
managing assets of c. GBP2.3 billion, raised from pension funds and
other institutional investors, UK and international private and high
net-worth individuals and family offices. Founded in 1984, in total
Foresight manages 27 funds on behalf of institutional and retail
investors including four venture capital trusts which are listed on the
premium segment of the Official List and are admitted to trading on the
Main Market. Headquartered in The Shard, London, with further offices in
Guernsey, Nottingham, Manchester, Rome, San Francisco and Sydney,
Foresight has over 160 staff.
Foresight established its solar investment team in 2007 and launched its
first solar fund, Foresight European Solar Fund, in early 2008.
Foresight Solar VCT plc was launched in November 2010 and the Group has
since raised over GBP200 million for solar-focused Enterprise Investment
Schemes. In 2013, Foresight managed funds issued the largest UK solar
index linked bond at that date.
Foresight is now the second largest solar asset owner in the UK with
over 630MW of installed capacity. In total, the team manages c. GBP1.2
billion invested in over 75 operating solar plants totalling over 750MW
of existing operational capacity across the UK, Italy and the USA.
The group's dedicated multinational infrastructure team of 38
professionals comprises individuals with operational, financing, legal,
tax and structuring expertise in the renewable energy sector. The team,
which is supported by further finance, sales, marketing, investor
relations and administration functions across the Foresight group,
includes 30 investment and finance professionals, as well as a technical
team of eight focused on the optimisation of the solar plants.
The Company's Investment Management team is led by four experienced
UK-based fund managers and is responsible for new asset acquisitions,
pipeline development, value enhancement of the Company and also advises
the Board on the optimal borrowing strategy of the Company. The
management team is supported by a team of UK-based solar investment
analysts with additional resource obtained from Foresight's US, Italian
and Australian investment teams. Foresight is overseen by an Executive
Committee of which Jamie Richards and Gary Fraser are members.
Foresight's Executive Committee provides strategic investment advice to
the management team and the Board.
Jamie Richards, Partner, Head of Infrastructure
Jamie joined Foresight in 2000 and is one of its four Executive
Committee members. Since inception in 2007, he has had overall
responsibility for Foresight's infrastructure/solar business in the UK,
Italy and US and related funds including origination and structuring.
Jamie has overseen, as a member of the investment committee, more than
75 solar projects representing Foresight's approximately GBP1.2 billion
solar portfolio. Prior to 2007, he led a number of venture capital and
private equity transactions in the technology and cleantech sectors
representing Foresight's funds and was a non-executive director for
several companies. Jamie is a chartered accountant and has 20 years'
experience in fund management, banking and corporate recovery. Before
joining Foresight, Jamie worked at PwC, Citibank and MIDIS, both in
London and Sydney. Jamie holds a BSc in Economics and Accounting from
The University of Bristol.
Ricardo Pineiro, Partner, Head of UK Solar
Ricardo has led Foresight's UK solar investments since inception in
2010, including the acquisition of over 40 UK solar power plants,
totalling c.600MW and continues to oversee their commercial management.
He has also been responsible for arranging c.GBP470 million of third
party debt facilities to date, including revolving debt facilities,
listed bonds and project finance facilities. Ricardo joined Foresight
from Espirito Santo Investment, where he spent three years in the
project finance division as manager with a special focus on transport,
energy, oil and gas. Prior to this he worked as a business analyst in
the corporate finance division of a Portuguese investment bank in
Lisbon. Ricardo is primarily focused on leading new infrastructure
transactions across UK and other international markets.
Gary Fraser, Partner, Group Finance Director
Gary is a chartered accountant and Chartered Fellow of the Securities
Institute. He worked with Ernst & Young between 1993 and 1999,
predominantly in the audit and risk assurance and corporate finance
areas and joined ISIS Asset Management plc in 1999 where he was
responsible for the provision of similar services to several investment
companies. He joined Foresight in 2004 and is one of its four Executive
Committee members.
Matthew Black, Senior Investment Manager
Matt has been is responsible for the origination, financing and
structuring of UK solar transactions since joining Foresight in 2012
including leading the acquisition of over 200MW of UK solar projects. He
previously spent more than four years at Credit Suisse where he was
responsible for the product development, structuring and investment
management of retail and institutional investment products. He was also
a Research Associate at Imperial College, London where he focused on the
financing of UK renewable energy and electricity infrastructure. Matt
holds an MSc in Environmental Technology and Energy Policy from Imperial
College, an MA in International Relations and a BA in Politics both from
the University of Sheffield.
The Asset Manager
The underlying investments have appointed Foresight Group LLP, a
subsidiary of Foresight Group CI, to act as Asset Manager. The Asset
Manager is responsible for the management of the operating assets
including relationships with contractors, asset performance, portfolio
optimisation and commercial negotiations during the operating phase.
Foresight Group LLP is authorised and regulated by the Financial Conduct
Authority. It is overseen by a strong, experienced and majority
independent Board.
The Company's Asset Management team is led by a Senior Portfolio Manager,
responsible for the financial and commercial operations of the assets,
and a Technical Director with six years of European solar experience who
supervises the operational management of the Company's portfolio on a
day to day basis.
Foresight has developed a best-in-class, in-house solar 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 which provides
limited back office and administrative functions such as invoicing and
financial reporting for each solar power plant.
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, negotiating
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 of incidents quickly and work with them in
order to minimise the impact on portfolio production. Foresight also
oversees each of the O&M contractors' performance, incident control and
technical reporting in order to ensure that each solar power plant is
operated and managed so as to maximise profits and reduce operating
risks.
Tom Moore, Senior Portfolio Manager
Tom has responsibility for the financial and commercial operations of
Foresight's infrastructure assets. Tom joined Foresight in 2013 from
Jubilee Financial Products where he was a financial controller within
the asset management and investment banking space responsible for
internal finance, operations and compliance. There he was also performed
advisory work for M&A transactions and corporate restructurings. Before
this he spent four years in practice with Saffery Champness. Tom is a
Chartered Accountant and holds a BSc in Economics from The University of
York.
Arnoud Klaren, Senior Portfolio Manager and Technical Director
Arnoud joined Foresight in 2011 and is responsible for the technical
operations of Foresight's solar portfolio. Prior to joining the firm,
Arnoud worked at SolFocus, where he spent four years managing solar
projects based on concentrated photovoltaics ("CPV"), an innovative
solar technology. There, he was responsible for the construction and
start-up of pioneering CPV projects in Spain, Saudi Arabia and Greece.
Prior to SolFocus, Arnoud founded and managed ThinkSpectrally, a
spin-off company of The University of Valencia in Spain, dedicated to
quality assurance in the PV manufacturing process. Arnoud holds an MA in
Electrical Engineering from the Twente University of Technology.
Portfolio Assets
Overview
Installed
Peak Connection Acquisition Original Fair
Asset Location Status ROCs Capacity Date Date Ownership Cost(2) Value
Operational
and 2.0 32 November 2013
Wymeswold(1) Leicestershire accredited 1.4 2 March 2013 March 2015 100% GBP45.0m GBP50.1m
Operational
and
Castle Eaton Wiltshire accredited 1.6 18 March 2014 June 2014 100% GBP22.6m GBP21.9m
Operational
and
Highfields Essex accredited 1.6 12 March 2014 June 2014 100% GBP15.4m GBP15.0m
Operational
and
High Penn Wiltshire accredited 1.6 10 March 2014 June 2014 100% GBP12.7m GBP12.0m
Operational
and
Pitworthy North Devon accredited 1.4 16 March 2014 June 2014 100% GBP19.3m GBP18.3m
Operational
and
Hunters Race West Sussex accredited 1.4 11 July 2014 September 2014 100% GBP13.3m GBP13.5m
Operational
and
Spriggs Farm Essex accredited 1.6 12 March 2014 November 2014 100% GBP14.6m GBP14.8m
Operational
and September
Bournemouth Dorset accredited 1.4 37 2014 December 2014 100% GBP47.9m GBP51.3m
Operational
and December
Landmead Oxfordshire accredited 1.4 46 2014 December 2014 100% GBP52.4m GBP54.1m
Operational
and September
Kencot Oxfordshire accredited 1.4 37 2014 March 2015 100% GBP49.5m GBP49.0m
Operational
and December
Copley Lincolnshire accredited 1.3 30 2015 June 2015 100% GBP32.7m GBP38.0m
Operational
and July 2015
Atherstone Warwickshire accredited 1.4 15 March 2015 November 2016 100% GBP16.2m GBP16.6m
Operational
and July 2015
Paddock Wood Kent accredited 1.4 9 March 2015 November 2016 100% GBP10.7m GBP11.5m
Operational
and July 2015
Southam Warwickshire accredited 1.4 10 March 2015 November 2016 100% GBP11.1m GBP11.8m
Operational
and
Port Farm Wiltshire accredited 1.4 35 March 2015 August 2015 100% GBP44.5m GBP46.0m
Operational
and
Membury Berkshire accredited 1.4 16 March 2015 September 2015 100% GBP22.2m GBP21.9m
Total
Portfolio 348 GBP430.1m GBP445.8m
Post-Period end acquisition
Operational
and
Shotwick Flintshire accredited 1.3 72 March 2016 February 2017 100% GBP74.9m n/a
Total 420 GBP505.0m n/a
(1) The 1.4 ROC banding and March 2015 acquisition date refer to the
2.3MW Wymeswold extension finalised in March 2015.
(2) Original cost at time of acquisition, including transaction costs.
Asset Summaries
Wymeswold, Leicestershire
Ownership 100%
MW 34
ROCs 2.0/1.4
Acquisition Date November 2013/March 2015
Solar Panels 142,000
Technology Polycrystalline Silicon
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%
MW 18
ROCs 1.6
Acquisition Date June 14
Solar Panels 60,000
Technology Polycrystalline Silicon
Panel Supplier Canadian Solar
EPC Party SunEdison
O&M Counterparty Brighter Green Engineering
Inverter Supplier Bonfiglioli
Grid Operator Southern Electric Power
Highfields, Essex
Ownership 100%
MW 12
ROCs 1.6
Acquisition Date June 14
Solar Panels 38,000
Technology Monocrystalline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty Brighter Green Engineering
Inverter Supplier Ingeteam
Grid Operator UK Power Networks
High Penn, Wiltshire
Ownership 100%
MW 10
ROCs 1.6
Acquisition Date June 14
Solar Panels 30,000
Technology Monocrystalline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty Brighter Green Engineering
Inverter Supplier Bonfiglioli
Grid Operator SSE Power Distribution
UK Power Networks
Pitworthy, North Devon
Ownership 100%
MW 16
ROCs 1.4
Acquisition Date June 14
Solar Panels 48,000
Technology Monocrystalline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty Brighter Green Engineering
Inverter Supplier Bonfiglioli
Grid Operator Western Power Distribution
Hunters Race, West Sussex
Ownership 100%
MW 11
ROCs 1.4
Acquisition Date September 14
Solar Panels 41,000
Technology Polycrystalline Silicon
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%
MW 12
ROCs 1.6
Acquisition Date November 14
Solar Panels 50,000
Technology Polycrystalline Silicon
Panel Supplier Talesun
EPC Party Bester Generation
O&M Counterparty Brighter Green Engineering
Inverter Supplier Green Power Tech
Grid Operator UK Power Networks
Bournemouth, Dorset
Ownership 100%
MW 37
ROCs 1.4
Acquisition Date December 14
Solar Panels 146,000
Technology Polycrystalline Silicon
Panel Supplier REC
EPC Party Goldbeck
O&M Counterparty Goldbeck
Inverter Supplier SMA
Grid Operator SSE Power Distribution
Landmead, Oxfordshire
Ownership 100%
MW 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%
MW 37
ROCs 1.4
Acquisition Date March 15
Solar Panels 144,000
Technology Polycrystalline Silicon
Panel Supplier Astronergy
EPC Party Conergy
O&M Counterparty Conergy
Inverter Supplier SMA
Grid Operator Southern Electric Power
Copley, Lincolnshire
Ownership 100%
MW 30
ROCs 1.3
Acquisition Date June 15
Solar Panels 115,200
Technology Polycrystalline Silicon
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 100%
MW 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 100%
MW 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 100%
MW 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%
MW 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%
MW 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
Post period end acquisition
Shotwick, Flintshire
Ownership 100%
MW 72
ROCs 1.3
Acquisition Date February 17
Solar Panels 227,728
Technology Polycrystalline Silicon
Panel Supplier Jetion
EPC Party China Triumph International Engineering Corporation
("CTIEC")
O&M Counterparty CTIEC
Inverter Supplier SMA
Grid Operator Scottish Power
Investment Manager's Report
For the year ended 31 December 2016
Key Metrics
As at 31 December 2016 As at 31 December 2015
Market Capitalisation GBP354.9 million GBP281.8 million
Share Price 104.1 pence 100.0 pence
Total Dividend per Share for
the Year 6.17 pence 6.10 pence
Gross Asset Value GBP549.0 million* GBP439.1 million
Net Asset Value GBP350.8 million GBP279.1 million
NAV per Share 102.9 pence 99.0 pence
NAV Change per Share 3.9 pence -1.9 pence
Total Return (NAV) 7.04% 5.5%
Total Shareholder Return 6.58% 4.81%
Equity Discount Rate 7.5% 7.5%
Profit after Tax GBP30.7 million GBP15.2 million
* of Company and its subsidiaries
Portfolio Summary
The 16 asset portfolio, comprising solar installations across England
and Wales with a total generating capacity of 348MW, has been carefully
constructed since IPO. Investment opportunities have been selected to
ensure diversification by geography, while aiming to maximise exposure
to regions with favourable irradiation patterns. The portfolio is also
diversified by technology and counterparties in order to minimise risk.
The individual selection of solar assets also takes into account pricing,
driven by the aim of achieving portfolio growth but not at the expense
of securing good value for investors.
In keeping with the Company's low risk strategy and in order to minimise
exposure to construction risk, 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.
Basis of Presentation
As described more fully in the financial statements, amendments to IFRS
10 effective 1 January 2016 have been implemented and have resulted in
an accounting policy change in relation to consolidation of
subsidiaries. This means that the Company has valued its holding in its
sole direct subsidiary, UK Hold Co, at fair value through profit or loss
rather than consolidating its holding in UK Hold Co as it did in prior
years. The result of this change means that the value of debt (held by a
subsidiary) and underlying investments (also held by a subsidiary) are
not separated in the Statement of Financial Position.
Acquisitions and Pipeline
In November 2016, the Company completed the acquisition (a total of
10MW) of the remaining minority equity positions in the 10MW Southam
asset, 9MW Paddock Wood asset and the 15MW Atherstone asset. The Company
originally acquired majority positions in the three sites, which are
operational and accredited under the 1.4 ROC subsidy regime, in July
2015 and was pleased to have the opportunity to increase its ownership
to 100% of the share capital in the three assets.
A total of 715MW of potential asset acquisitions were evaluated by the
Investment Manager during 2016. Of these, 480MW were considered
appropriate for the Company, of which 132MW were progressed to
exclusivity and ultimately 10MW of additional installed capacity
acquired during the period. Following period end the Company acquired
the 72MW solar site at Shotwick and continues to have the right to buy a
further 50MW asset.
This reflects the prudent investment strategy and preferred approach of
acquiring assets that will be accretive in value to Shareholders. The
Investment Manager was particularly cautious about acquiring new assets
in the first half of the year in an environment of decreasing UK
wholesale power prices, due to the disparity it believed existed between
the pricing expectations of asset vendors and buyers. However, following
the Brexit referendum result the Investment Manager felt the market
environment became more attractive. The increased uncertainty triggered
by Brexit led some potential overseas acquirers of UK solar assets to
reconsider. Set against a backdrop of improving power prices, this
prompted the Investment Manager to progress a number of the
opportunities to exclusivity.
Potential acquisitions are sourced through the Investment Manager's
extensive contacts, which as a global investor in renewables extend
beyond the UK to Italy, Spain, Australia and the US, including strong
relationships with vendors, typically contractors and developers that
build solar power plants. In acquiring additional investments, the
emphasis is on how assets can enhance the creation of distributable cash
flow within the Company's portfolio.
The Investment Manager's Investment Committee reviews prospective new
investments at various stages and ultimately recommends any acquisition
to the Board for approval. The Board considers the suitability of any
prospective acquisition in relation to the existing portfolio and its
match with the Company's investment policy. As part of the due diligence
process, the Investment Manager's analysis is complemented by the use of
other professional expertise including technical consultants,
accountants, taxation and legal advisers and insurance experts.
Foresight has built a reputation as a trusted acquirer in the sector
with strong transactional capabilities and the ability and willingness
to execute swiftly when required.
The Investment Manager seeks to maintain diversification within the
Company's portfolio by investing in a number of solar power plants with
varying characteristics which mitigates exposure to a number of
different technical (as well as geographical) risks. The grid
connections for the solar power plants in the Company's portfolio are
managed by a number of different Distribution Network Operators. The
Company also uses a number of other, different third party providers in
respect of each solar power plant such as developers, EPC contractors,
O&M contractors, panel manufacturers, landlords and offtakers.
Following Period End
In February 2017, the Company announced the acquisition of Shotwick
solar park in Flintshire, North Wales. Shotwick was connected to the
grid in March 2016 and has received Renewable Obligation Certificate
("ROC") accreditation of 1.3ROCs/MWh. With a peak capacity of 72MW and a
50MW AC export capacity, Shotwick is currently the largest operational
solar asset in the UK. Via a private wire agreement Shotwick provides
renewable electricity to the neighbouring Shotton paper mill owned by
UPM, a Finnish conglomerate with a market cap of EUR11.87 billion.
The acquisition has been funded using the remainder of both the equity
proceeds recently raised and the acquisition facility available to the
Company. The Company expects to enable repayment of the facility through
additional equity raises in 2017. It should be noted that the Company
has contractual rights to all revenue generated by Shotwick since 30
November 2016.
Regulatory and Market Changes
While the regulatory environment for UK renewables has proved more
settled in 2016 than 2015, the year has not been without its upheavals
in other regards, most notably the EU referendum result in June. While
unexpected, the result appears likely to have limited, if any, impact on
the Company. However, one indirect consequence, certainly in the
short-term, has been to accelerate the uptick in rising UK power prices,
a side-effect of a weakened pound.
The fundamentals of the UK solar sector are not underpinned by 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 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 The Department of Energy and Climate
Change ("DECC") would be dissolved and the department's 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. 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. If adhered to, it
will limit annual emissions to an average of 57% below 1990 levels. This
would require a significant reduction in carbon emissions by 2028,
considering UK emissions were only 35% below 1990 levels in 2014, with a
further fall of 3% provisionally calculated for 2015. Coming after the
EU referendum, this budget has helped allay concerns that the UK's
carbon reduction policies could be impacted by the decision to leave the
EU. In October 2016, the Committee on Climate Change noted that the vote
to leave the EU does not change the UK's legal commitments to reduce its
emissions by 57% by 2030 and at least 80% by 2050 (relative to 1990)
under the Climate Change Act. UK policy has developed over time in an EU
context. The Government has stated its intention to initially convert
existing EU laws into UK legislation when the UK leaves the EU. Many
aspects of EU level policy will need to be preserved or replicated at
the UK level in the longer term. In some areas the Government should
take opportunities to improve on EU level approaches.
Of the recent changes to the regulatory environment for UK solar, the
announcement in December 2015 of the closure of the Renewable Obligation
Scheme ("RO Scheme") to new solar PV of 5MW and below from 1 April 2016
onwards, remains the most relevant. This was driven by the significant
increase in the installed capacity of UK solar in prior 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 Scheme described above had
no impact on the existing installed capacity of the Company portfolio or
any of the projects in its immediate pipeline.
The contracts for difference ("CfD") scheme was also suspended
indefinitely in November 2015. However, in November 2016 BEIS announced
that the second auction will now open in April 2017 with a total budget
of GBP290 million across the two delivery years 2021/22 and 2022/23. As
had been anticipated, there will be no support for solar PV, which along
with onshore wind is deemed too mature for this support.
The UK's total solar capacity has continued to grow in the wake of
2015's regulatory revisions, albeit at a slower pace. The UK solar
market is expected to reach 12GW of installed capacity by the time the
ROC regime closes for new installation in March 2017, from the existing
11GW in Q3 2016. Large scale, ground mounted installations are thought
to account for over 60% of the total solar market. The rapid growth and
scale of UK installed solar capacity over the past five 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. This
allows acquisitions to be expedited in a timely manner, while securing
attractive investment returns. The Investment Manager currently expects
a significant amount of large scale ground mounted solar assets to
become available in the secondary market over the next 24 months,
supporting the expected Company growth in the short to medium term.
Power Prices
During the first half of the year UK power prices remained under
pressure primarily from low gas prices due to stockpiles of liquefied
gas. Gas, which accounts for approximately half of total UK generation
capacity, remains the main driver of power prices. A short term fall in
coal prices due to continued oversupply in the market also exerted
downwards pressure. Electricity demand continued to fall mainly due to
reduced industrial output from the iron and steel industries.
However, power prices reached an inflexion point midway through 2016,
with the downward trend seen in recent years beginning to reverse. The
nascent increases seen in Q3 were attributable primarily to an increase
in gas price forecasts, driven by an assumed weaker Sterling to Euro
ratio in the wake of Brexit.
The upward trend in forecast power prices continued in Q4 with third
party consultants attributing this to expected increases in oil and gas
prices as well as tighter capacity margins due to the retirement of
unprofitable generators, continuing delays in investment decisions for
new thermal projects and the impact of the industrial emissions
directive. Rising forecast long-term gas prices in the UK are triggered
by further diversification away from Russian gas towards higher cost
liquefied natural gas and supply from other regions. Future demand is
also expected to increase, driven by assumed GDP growth, increasing
upwards momentum.
The average power price achieved across the portfolio during the year
was GBP37.7/MW (2015:GBP42.2/MWh). The portfolio is now in a position to
benefit from rising electricity prices due to the Manager's decision not
to fix electricity prices within the portfolios PPAs with prices of over
GBP50/MWh being achieved in Q4 2016.
The Investment Manager uses forward looking power price assumptions to
assess the likely future income of the portfolio assets for valuation
purposes. The Company's assumptions are formed from a blended average of
the forecasts provided by a number of third party consultants. Between
its IPO in October 2013 and 31 December 2016, the Company revised its
power price forecasts downwards nine times. During the year to 2016
there was a downward movement of 3.6%, however, during the second half
of the year the Company made two upward revisions in forecast power
prices, resulting in an average annual increase of 2.2% over that period,
in line with the most recently published advisor reports. Following the
recent upwards revision the Investment Manager's forecast for future
power prices remains 27.5% below the level at IPO. The Company's
forecasts continue to assume an increase in power prices in real terms
over the medium to long-term of 1.7% per annum (2015: 1.8%).
During the period, 63% of the Company's operational portfolio revenue
came from the sale of ROCs and other green benefits to an off-taker.
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 37% of revenues derive from electricity
sales which are subject to wholesale electricity price movements.
Electricity prices in the UK are a component of the RPI index basket of
goods and services and as a result present a degree of correlation with
the long term RPI. This direct indexation of revenues derived from ROC
benefits and the degree of inflation linkage of the wholesale
electricity price provides a significant percentage of cash flows
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 will sell the entirety of the generated electricity and ROCs to
the designated off-taker.
The Company's PPA strategy seeks to optimise revenues from the power
generated, while keeping the flexibility to manage the portfolio
appropriately. As of 31 December 2016, 15 of the 16 assets in the
portfolio assets had in place a five year floating rate PPA, which
tracks market power prices. The remaining asset, Wymeswold, has in place
fixed price arrangements until Q4 2017. The Wymeswold asset represents
c.10% of the total portfolio installed capacity. The Investment Manager
is constantly reassessing conditions in the electricity market and
updating its view on likely future movements. The Company retains the
option to fix the PPAs of its portfolio assets at any time. As part of
the Investment Manager's ongoing efforts to maximise the commercial
performance of the portfolio, a PPA tendering process across all assets
has been undertaken. This process has seen a significant reduction in
fees charged by our off-takers.
Portfolio Optimisation
During the period the Asset Manager has run a number of concurrent
processes to maximise the free cash being generated by the portfolio. As
well as focusing on 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 by the end of 2015, the
Asset Manager believed that the portfolio was of a significant scale in
order to optimise the PPA and commercial terms of the portfolio.
Following a portfolio wide tender exercise to find the most appropriate
and competitive contracts in the market, the Company entered into new
five year PPA contracts for 15 of the 16 assets in the portfolio at the
end of Q1 2016. Wymeswold, the remaining asset which represents 10% of
the total portfolio installed capacity, had already secured an
attractive long-term contract in 2013 with fixed price arrangements
until Q4 2017.
Through the new PPAs, the Company is able to take advantage of the
wholesale market movements through the flexibility of being able to fix
power prices at any point in time. 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, 32% of the Company's
operational portfolio revenues were linked to spot power prices. This
has allowed the Company to benefit from the recent upward movement in
power prices, which are currently forecast to continue. 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% achieved by the Asset Manager through
the increased buying power of a larger portfolio. This reduction in cost
has been accomplished at the same time as improving the terms of cover
such as lowering the level of claim deductibles in March 2016. The Asset
Manager fixed the current price for a three-year period, subject to
certain loss limits not being breached.
Operation and Maintenance 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,
resulting in a decrease in annual fees. During 2016, the O&M contracts
for a further six assets within the portfolio have been transferred to
BGE.
Brighter Green Engineering
Brighter Green Engineering has ultimate Shareholders in common with
Foresight Group although they operate as separate entities and share no
common executive personnel. The tender process of O&M contracts for
Foresight's assets remains competitive and these are awarded on merit.
Further to the reduction in cost that the new O&M contracts bring, BGE
offers strong technical expertise and market leading incident response
times. BGE provides 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 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 widened contractual terms, it is anticipated that the
portfolio efficiencies achieved 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. It is the
Asset Manager's view that further portfolio efficiencies can be secured
in the future assuming a consolidation of the O&M sector and further
economies of scale arising from an increase in the number of MW owned by
the Company.
Maximising Value through the Final Acceptance Certificate ("FAC")
Process
As each solar asset in the portfolio approaches the end of the two year
EPC warranty period in preparation for the issuance of a Final
Acceptance Certificate ("FAC"), Foresight carries out a rigorous
analysis of the site. This aims to identify any possible defects and
ensure construction, planning and all equipment is in-line with
contractual obligations. In addition to a thorough site audit by
Foresight's engineers and a full evaluation of performance data for the
asset, the modules are tested by an accredited laboratory and
independent experts test the high voltage equipment including
transformers and switchgear. If deemed necessary cables are tested for
insulation faults. Through this process, the Asset Manager has become
aware of issues, minor in many cases. Subsequently, the EPC contractor
is notified of any operational underperformance relative to the levels
guaranteed at acquisition, or defects with the plant. Before the FAC is
issued, the Asset Manager negotiates with the EPC contractor for the
remedy of any faults or seeks to enforce the financial settlement agreed
in the EPC contract to fully compensate the Company for any lost
earnings likely to be incurred as a result of underperformance over the
life of the asset.
Through its extensive operating experience, the Asset Manager has
managed the FAC process with numerous EPC contractors and fully utilises
the opportunity presented to support the future value of the assets in
the Company's portfolio and safeguard their long term performance.
Potential Induced Degradation
Potential Induced Degradation ("PID") is widely acknowledged module
defect which is anticipated to affect up to 25% of the modules installed
in the UK. Manufacturing defects exacerbated by humid conditions found
in the UK have been shown to cause PV modules to degrade faster than
would usually be expected, reducing their efficiency over time. Since
PID was first identified improvements have been made in the
manufacturing process and the issue occurs less frequently in newer
modules, typically those manufactured after 2015.
Modules that are PID sensitive can see a deterioration in performance at
any point in their life. If properly tested, modules show their
susceptibility to PID from an early stage even though its effects may
not be seen for many years. The effects of PID can be stopped or
reversed (with the EPC contractor required to meet the cost if
identified at an appropriate stage) through the implementation of
site-specific technological solutions.
Based on the developing understanding of PID and its potential impact on
the UK's solar industry, the Asset Manager is utilising the knowledge
and experience of its team to take a proactive approach. The team is
currently working with industry experts and laboratories to ensure all
assets are properly and thoroughly audited, both on the field and in the
laboratory, and identify any that may be susceptible to PID. If detected,
the defect is notified to the EPC contractor and an assessment made of
the likely impact on performance over the lifetime of the asset.
Useful Economic Life of Assets
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
for the properties on which the Company's solar assets are located and
planning consent periods initially 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
-- Three of the lease agreements in place have the option to extend beyond
the initial consented period to an average of 37 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 35, 35 and 40 years
respectively from the start of operations. Applying the current discount
rate and extending current model assumptions as well as incorporating
enhanced capital expenditure to a capped life of 35 years would have an
immediate uplift on NAV of 2.5 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 8.0 pence. The table below illustrates the impact on NAV of
extended asset lives.
NAV (using
current lease Alternate NAV (recognising extended life where lease Alternate NAV (recognising extended life of all other
assumptions) and planning already available; 3 assets) assets)
102.9 105.4 113.4
The Investment Manager expects to incorporate lease extension
assumptions into the valuations once it is comfortable with the
underlying assumptions relevant to the extended periods of time.
Portfolio Performance
The total electricity production of the portfolio during the year was
319GWh. While many of the assets continued to generate electricity in
line with, or above expectations, the overall total for the Company was
5.3% below what was anticipated. While disappointing, this
underperformance can be attributed to a number of specific sites that
have experienced what are expected to be isolated and non-recurrent
problems. These sites and the issues behind their underperformance are
explored in more detail below. The Asset Manager continues to focus on
minimising incidents of underperformance and on securing compensation
from EPC contractors or pursuing insurance claims for the losses
incurred.
We do not expect any short-term fluctuations in power generation to
affect the medium to long-term outlook for the Company and the Asset
Manager remains optimistic about restoring production levels of the
portfolio in the near term.
The main driver was a grid outage at the Bournemouth site which resulted
in 12.8GWh of lost production. The impact of the Bournemouth outage
represented in a decrease in the total portfolio production for the
period of 3.8% against the expectations of the Investment Manager.
Compensation received includes insurance proceeds and Liquidated Damages
("LDs") received relating to lost production within the calendar year.
LDs relating to EPC defects or potential future loss of production are
not included for this purpose. The notional performance of the portfolio,
once compensation and the Bournemouth outage are adjusted for, was 0.2%
below expectations.
Production Reconciliation
Irradiation levels recorded for the year were in line with expectations,
with a weighted average variance of 0.2% above the forecasts produced at
the time of acquisition and validated by independent technical advisers.
Annual irradiation forecasts are subject to a 4% deviation against long
term historical averages; a range within which the irradiation recorded
at all of the assets fell.
Overview of Portfolio Performance
The expectations of the Investment Manager are based on those used at
the time of acquisition and are not adjusted.
Production
Irradiance Variance Production Variance (MW hours)
Atherstone 2.3% 3.9% 14,351
Bournemouth -1.4% -32.9% 26,560
Castle Eaton 0.8% -5.7% 15,831
Copley Farm 1.6% 5.9% 29,794
High Penn 0.7% -6.9% 8,788
Highfields Farm -0.5% -6.9% 11,143
Hunters Race -0.4% 1.7% 10,832
Kencot Hill 0.7% 0.6% 36,057
Landmead 3.8% 3.2% 44,181
Membury -2.9% -2.2% 15,952
Paddock Wood 1.5% 5.2% 9,797
Pitworthy Farm -3.9% -19.2% 12,580
Port Farms -0.7% -1.5% 33,283
Southam 0.0% 3.8% 10,110
Spriggs Farm -3.2% -17.6% 9,833
Wymeswold 0.6% -4.2% 30,317
Total -5.3% 319,409
Weighted average 0.2%
Bournemouth
Production at the Bournemouth site was affected by a planned grid outage
announced by the Distribution Network Operator ("DNO") required in order
to increase the line capacity. The original timetable for the programme
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. After re-energisation, the
Asset Manager remained in a continued dialogue with the DNO and agreed
that the further remaining works would be carried out in the winter
months. A further outage therefore occurred in the middle of December
for a total of four days. 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 insurable events.
Spriggs Farm
Following investigations undertaken in conjunction with the module
manufacturer, PID has been identified as the cause of underperformance
at Spriggs Farm. The Investment Manager is working closely with the EPC
contractor and remedial work has started on the site. The project will
be protected by the original EPC warranty bond until the Asset Manager
is satisfied that any works in relation to the EPC warranty claim have
been completed and the long term performance of the asset reverts to
initial expectations.
Spriggs Farm also suffered from a transformer outage during the year.
This event represented 6.1% of the annual expected production. Losses
were covered through insurance policies.
Wymeswold
Wymeswold was the first asset in the portfolio to begin its Final
Acceptance Certificate ("FAC") testing. As an asset approaches its FAC,
members of the asset management team make numerous visits to the site
and a technical advisor 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 year than anticipated.
A substantial amount of improvement work was carried out on site to
rectify inverters, string combiner boxes and DC strings. Although this
led to a negative impact on performance in the short-term, we believe it
will lead to improved performance of the asset over the medium to
long-term. The Asset Manager continues to work with BGE, the O&M
contractor for the site, to improve the site's performance and has
already seen an improvement in site performance during the second half
of the year.
Castle Eaton, High Penn, Highfields and Pitworthy
The Asset Manager had previously identified varying degrees of
underperformance across Castle Eaton, High Penn, Highfields and
Pitworthy - the four sites constructed by SunEdison. The projects have
had various performance issues since operational commencement, some of
which have been addressed by SunEdison following discussions with the
Asset Manager. The Asset Manager has monitored the situation closely
from an early stage and has been able to identify specific reasons for
the lower levels of production seen. LDs have been received by the
Company at the FAC stage to fully compensate for lost production within
the year but also to compensate for any longer term performance issues.
However the Asset Manager expects a meaningful improvement in
performance in the near term.
During 2015, the Intermediate Acceptance Certificate showed the projects
performed below the guaranteed performance ratio ("PR") levels. As a
result, the Asset Manager and SunEdison agreed that the guaranteed PRs
would be lowered with SunEdison paying full financial compensation for
the expected loss in performance over the lifetime of the plants.
Unfortunately, around the same time as SunEdison's US parent company
filing for Chapter 11 creditor protection in the US in April 2016, the
performance of the sites deteriorated further. During Q2 and Q3 of 2016,
Foresight's technical team tracked PRs and identified underlying
problems throughout the period, notifying SunEdison of defects under the
four EPC contracts. The Asset Manager appointed an independent technical
advisor to support them through this process. All four sites have
performed below levels guaranteed in the EPC contracts.
The Asset Manager has subsequently made claims for the cumulative value
of identified defects and for LDs resulting from poor performance. As is
normal, the LDs were calculated on a net present value basis to cover
the next 23 years of potentially lower production.
Late in the year, the Asset Manager also terminated all four O&M
contracts with SunEdison and appointed Brighter Green Engineering. The
Asset Manager has approved remedial plans for all issues identified and
have appointed contractors to perform the required remedial works.
Also at Pitworthy, an inverter station caught fire in December 2015
which temporarily halted production at the plant into 2016. As the fire
was caused by factors outside of the O&M contractor's control, an
insurance claim was made and was subsequently settled with proceeds
reflecting 5.6% of the expected annual production.
The Asset Manager is confident that financial compensation already
received fully compensates the Company for the under performance of the
SunEdison assets.
Financing
Fundraising
During the period, the Company successfully raised GBP60.8 million
additional equity capital through a placing of shares held in Treasury,
in September, and a tap issue of new shares in October, both of which
were oversubscribed. The Company may consider launching a new placing
programme in due course subject to market conditions and investor
demand.
Date Placing Price Shares Issued (million) Funds Raised
31 December 2015
(cumulative) - 281.8 GBP284.9m
13 September 2016 102.9 pence 28.2 GBP28.9m
Treasury Shares
28 October 2016 103.0 pence 31.0 GBP31.9m
New Shares
31 December 2016 - 341.0 GBP345.7m
(cumulative)
Gross Asset Value ("GAV")
The GAV of the Company, excluding subsidiaries, is GBP350.89 million.
The reconciliation below shows the GAV as it would be on a consolidated
basis when all external debt at the intermediate holding level is
included. There is no external debt at asset level.
GAV of Company GBP350.89 million
Less: Valuation of Investment (GBP273.61 million)
Add: Valuation of underlying solar portfolio GBP445.80 million
Add: other net assets of subsidiaries GBP25.90 million
GAV of Company and Subsidiaries GBP548.98 million
Long-Term Refinancing
In March 2016, the Company's subsidiaries reached Financial Close on a
GBP160 million long-term debt facility. This facility wholly refinanced
the 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. For the year ended 31
December 2016 the average cost of long-term debt was 2.5% per annum.
As at 31 December 2016, the total outstanding long-term debt was
GBP158.3 million, representing 29% of GAV. The total outstanding debt,
including short term facilities, was GBP198.3 million, representing 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 terms under which the debt has been secured do not
limit the Company's flexibility and have not caused it to compromise on
any commercial terms that would be potentially disadvantageous. The
Company is fully able to maintain its strategy of retaining exposure to
UK power prices through PPAs that do not require mechanisms such as
fixed prices or price floors.
Acquisition Facility
In conjunction with the Financial Close of the long-term facility, a
subsidiary of 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. The facility was fully drawn by 31 December 2016 in
advance of the acquisition of Shotwick.
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. Since the IPO, the Company has met
all target dividends. The Company is targeting a full year dividend for
the period ending 31 December 2017 of 6.32 pence.
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.
Dividend Timetable for the period 1 January 2016 to 31 December 2016
On 24 June 2016, the first interim dividend of 1.54 pence per share for
the period ending 31 December 2016 was paid. The second interim dividend
of 1.54 pence per share was paid on 30 September 2016 and the third on
30 December 2016. The Company remains on target to deliver a dividend of
6.17 pence for the financial year ending 31 December 2016 following the
approval of the fourth and final interim dividend, of 1.55 pence, by the
Board on 15 February 2017. This will be paid on 5 May 2017.
Dividend Amount Status Payment Date
Interim 1 1.54 pence Paid 24 June 2016
Interim 2 1.54 pence Paid 30 September 2016
Interim 3 1.54 pence Paid 30 December 2016
Interim 4 1.55 pence Approved 5 May 2017
TOTAL 6.17 pence
Dividend Timetable Date
Ex-dividend Date 6 April 2017
Record Date 7 April 2017
Payment Date 5 May 2017
Dividend Cover
Dividends of GBP18.7 million were paid in the year. Against the relevant
net cash flows of the Company and underlying investments, these
dividends were covered 1.08 times when dividends paid to newly issued
equity are excluded.
Dividends were covered 1.10 times when compensation received post year
end but in relation to the year is included.
Ongoing Charges
The ongoing charges ratio for the year to 31 December 2016 is 1.20%
(2015: 1.24%). This has been calculated using methodology as typically
recommended by the Association of Investment Companies ("AIC").
Investment Performance
The NAV per share for the Company as at 31 December 2016 increased to
102.9 pence compared to 99.0 pence as at 31 December 2015.
Movements in NAV
A breakdown in the movement of the NAV during the year to 31 December
2016 is shown in the table below.
NAV
NAV per share
As at 31 December 2015 279,106,101 99.0p
Dividend paid -18,675,316 (6.3)p
Interest earned 26,229,311 8.7p
Equity Raise 59,600,722 -
Management fee -3,053,351 (1.0)p
Finance costs -5,074,450 (1.7)p
Other costs (inc. Corporation Tax) -1,260,923 (0.4)p
Acquisitions 1,625,705 0.5p
Discounted Cash Flow
Rates 2,186,295 0.7p
Valuation date 3,258,853 1.1p
Power price -3,902,445 (1.3)p
Inflation assumption 6,146,898 2.1p
Other movements 4,582,582 1.5p
As at 31 December 2016 350,769,982 102.9p
Valuation of the Portfolio
The Investment Manager is responsible for providing fair market
valuations of the Company's underlying 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 ("IPEV")
Valuation methodology.
It is the policy of the Investment Manager to value with reference to
Discounted Cash Flows ("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.
Valuation Sensitivities
Where possible, assumptions are based on observable market and technical
data. In many cases, such as the forward power prices, independent
advisors are used to provide reliable and evidenced information allowing
the Investment Manager to adopt a prudent approach. 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.
Technical Performance
The performance ratio assumptions in the 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 quarterly basis to ensure valuation assumptions better
reflect the actual performance of the sites. The conservative movements
in assumed performance ratios are implemented at a rate that ensures
short term fluctuations do not over inflate performance potential.
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 Investment
Manager regularly reviews the discount rate to ensure it remains in line
with any changes to the risk profile of the Company. The Investment
Manager is focused on making acquisitions of assets that are accretive
to NAV with the aim of maintaining a stable discount rate.
Rates
The portfolio stands to benefit from changes in local business rates,
announced on 30 September 2016 as part of a wider revaluation. To date
rateable values on solar assets have been GBP8,000/MW regardless of the
level of subsidy. From 1 April 2017 this will change as the Valuation
Office Agency aims to reflect how operational costs and revenues of
solar assets have changed over the seven years since the last business
rates revaluation in 2010. From April, solar assets will be liable for
different levels of business rates based on a range of rateable values
reflecting the level of subsidy received and cost of construction. Older
solar sites will incur higher charges while newer sites (assets
receiving subsidies at 1.6 ROCs and below, a category into which 90% of
the Company's portfolio falls) will see a fall in the rates paid to
local authorities.
Valuation Date
This movement represents the impact of moving from one valuation date to
another. Over the life of the asset this movement will reduce the asset
valuation to nil. Short term increases arise from moving towards higher
cash yields (and therefore discounting them less).
Power Price
The Company's power price assumptions are formed from a blended average
of the forecasts provided by a number of third party consultants.
During the first half of the year the Manager made two downwards
revisions in the long term power price forecast representing an average
annual fall in prices of 5.6%. During the second half of the year the
Company made two upward revisions in forecast power prices, resulting in
an average annual increase of 2.2% over that period. The Company's
forecasts continue to assume an increase in power prices in real terms
over the medium to long-term of 1.7% per annum (2015: 1.8%).
Inflation Assumptions
The Investment Manager increased its medium/long-term inflation
assumption from 2.50% to 2.75% at the end of June 2016. This reflects
increases in market inflation expectations due to a number of factors
including the result of the EU referendum and resultant weaker Sterling.
Following the announcement in August 2016 of additional loosening of
monetary policy, including a reduction in interest rates to a record low
of 0.25%, the first change since 2009, inflation has continued to pick
up as the impact of Sterling's weakness feeds through to the wider
economy.
The Investment Manager continues to maintain a conservative 2.25% annual
rate of inflation for 2017 before assuming annual inflation of 2.75%
thereafter. Post-period end in January 2017, it was announced that the
Retail Prices Index rose to 2.5% in December 2016 compared to 2.2% in
November 2016 and 1.2% in December 2015. The Investment Manager will
continue to monitor actual outturn inflation rates and inflation
expectations going forward and adjust the assumptions used in its
valuations accordingly.
Other Movements
This includes other factors behind the valuation movement such as
revisions in underlying assumptions regarding operational efficiencies
including O&M and insurance.
Outlook
Entering 2017, the Investment Manager believes the Company and its
underlying portfolio is in a strong position. The team responsible for
the Company's investment and asset management has leveraged its
experience in the sector to implement several value-enhancing strategies
to the benefit of Shareholders and this work will continue.
The upward trend in forecast power prices seen in the second half of
2016 has been driven by an increase in gas prices, which have been
buoyed by assumptions of a weaker Sterling to Euro ratio in the wake of
Brexit. Tighter capacity margins and rising future demand, based on GDP
growth expectations, is expected to increase this upwards momentum.
Through its existing floating PPA exposure, the Company is well
positioned to benefit from rising power prices, which will result in
increased revenue generation, further underpinning returns to
Shareholders.
While the imminent closure of the ROC regime from 1 April 2017 marks the
end of an era of frenetic growth for the UK solar industry, we continue
to see new opportunities as the sector evolves. With no new subsidies
likely to be available in the near future, there is now a fixed, albeit
extensive, pool of large-scale solar generating capacity. This has the
potential to help secure the long-term value of the Company's underlying
assets, which will continue to benefit from this RPI-linked subsidised
revenue stream for 20 years. Meanwhile, corporate power purchase
agreements and private-wire deals have the potential to provide a new
impetus to market activity.
With an estimated 12GW of installed generating capacity creating an
active secondary market, the UK's evolving solar market remains
attractive. Driven by falling interest rates and an improving outlook
for power prices, the Investment Manager continues to progress an
existing pipeline of investment opportunities, with further capacity
expected to be acquired in the short term. Additionally, new deal flow
is continually being developed with c. 100MW of assets currently under
review.
Foresight Group CI Limited
Investment Manager
15 February 2017
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. The Directors consider the following as principle risks
and uncertainties and mitigants to the Company at this time.
Risks relating to the sale of electricity
Generally, the price at which a solar PV plant sells its electricity is
determined by market prices in the UK. Risks relating to the price of
electricity can broadly be separated into supply side risks, demand side
risks and regulatory risk. A decline in the market price of electricity
could materially adversely affect the price of electricity generated by
solar PV assets and thus the Company's business, financial position,
results of operations and business prospects.
Wholesale prices are also dictated by the level of electricity demand
which varies depending on the time of day, day of the week or through
seasonality. Other demand side measures such as energy efficiency and
demand response management could also result in lower wholesale
electricity prices.
A number of broader regulatory changes to the electricity market (such
as changes to integration of transmission allocation and changes to
energy trading and transmission charging) are being implemented across
the EU which could have an impact on electricity prices.
The risk of declines in the wholesale price of electricity can be
mitigated through a variety of means and trading strategies. The
portfolio currently has PPAs in place into the medium term offering a
secure route to market. As at the year end 10% of the portfolio was
subject to fixed electricity prices and all of the PPAs allow
electricity prices to be fixed at any point. The Investment Manager
regularly reviews these prices and would look to fix prices if they were
forecast to fall below the level needed to provide adequate dividend
cover.
The sale of wholesale power accounts for 37% of the revenues of the
underlying portfolio.
Risks relating to regulatory changes in the UK electricity market
From 31 March 2017, the UK Government intends to close the Renewables
Obligation Scheme to the accreditation of projects commissioned after
that date. It is uncertain what support, if any, will be put in place
after March 2017 in order to provide subsidies to new projects which may
limit the number of investment opportunities available in the primary
market and/or increase competition for existing ROC accredited assets.
The UK Government remains committed to a balanced generation mix,
whereby renewables as a share of future generation capacity will rise
significantly. This is underpinned by EU and UK binding policy targets.
The UK has revised its policies supporting the renewable energy sector
from time to time in order to reduce the benefits available to new
renewable power generation projects. The assets would likely suffer a
loss if the UK was to abandon the practice of grandfathering and apply
adverse retrospective changes to the levels of support for operating
projects There is significantly less risk of support being reduced,
withdrawn or changed for existing support-accredited projects. In order
to maintain investor confidence, the UK has ensured that the benefits
already granted to operating renewable power generation projects are
exempted from future regulatory change. This practice is referred to as
grandfathering. The UK's Renewable Obligation Certificate regime
provides a stable 20 year subsidised revenue stream that increases over
time in line with RPI.
The Company is also able to invest up to 25% in other jurisdictions
which could provide protection against UK centred legislation.
Risks relating to gearing
The Company's underlying subsidiaries currently have borrowings of
approximately GBP198 million of which GBP158 million are Term Loan
Facilities and GBP40 million are Revolving Credit Facilities. Under the
terms of the Facility Agreements, the borrower has agreed to covenants
as to its operation and financial conditions. Any failure by the
borrower to fulfil obligations under the Facility Agreements (including
repayment) may permit the lender to demand repayment of the related loan
and to realise its security which may mean the loss of a solar power
asset. In the event that such security involves the lender taking
control (whether by possession or transfer of ownership) of the
Company's underlying assets, the Company's returns may be adversely
impacted.
Furthermore, the Revolving Credit Facility has a shorter term than would
be expected under the Long Term Facilities. Although the borrower may
repay the amounts currently drawn down under the Revolving Credit
Facilities with the net proceeds of share issues, there can be no
guarantee that the as to our ability to refinance these facilities on
the same terms as current Long Term Facilities on their final repayment
dates.
Any new debt facilities are thoroughly appraised before they are entered
into to ensure they benefit the Shareholders without creating
unnecessary risk. Due to low gearing limits and sound management it is
unlikely that debt covenants would negatively impact our ability to pay
dividends, and would indeed be expected to increase dividend coverage.
Any debt terms would allow individual assets to be sold without debt
attached to them as it is envisaged debt will be drawn away from the
project vehicles.
Risks relating to the taxation of the Company
Taxation is subject to change on a regular basis. Therefore, the levels
of, and reliefs from, taxation may change during the period of
investment. Any change in the Company's tax status or in taxation
legislation in the United Kingdom, Jersey or any other tax jurisdiction
affecting Shareholders or investors, or changes in accounting practices
and standards could affect the value of the investments held by the
Company, or affect the Company's ability to achieve its investment
objective.
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. Draft legislation was
released on 26 January 2017 but failed to clarify matters sufficiently.
The Investment Manager expects further clarity will be provided in the
updated draft legislation to be published following the UK budget.
Risks relating to RPI
The revenues and expenditure of solar PV assets are frequently partly or
wholly subject to indexation, typically with reference to RPI and the
Company's target distributions are linked to RPI.
We consider the inflation risk presented by these assets to be minimised
through the explicit inflation-linked nature of both operating revenues
and costs. On the revenue side, ROC prices are formally linked to RPI
and for PPAs the electricity price forms part of the RPI basket of
goods. For costs, Operation and Maintenance ("O&M") contract prices and
land rents are both linked to inflation and as such there is a natural
inflation linkage to costs and revenues. Additionally, GBP63 million of
the Long Term Debt in place is linked to RPI.
Risks relating to operation and maintenance contracts
The Company relies on third-party professionals and independent
contractors and other companies to provide the required operator and
maintenance support services throughout the operating phases of the
solar PV assets in the Company's investment portfolio. If such
contracted parties are not able to fulfil their contractual obligations,
the Company's ability to operate the solar plants could be adversely
affected and the Company may be forced to seek recourse against such
parties, provide additional resources to complete their work, or to
engage other companies to complete their work.
In addition, if a contractor's work was not of the requisite quality,
this could have an adverse effect on projects in which the Company is
invested and might not only reduce financial returns but could adversely
affect the Company's reputation.
Operational risk is minimised by the use of experienced and financially
robust counterparties, supported by availability guarantees and damages
if these are not met. Termination provisions are contained within the
underlying contracts to replace the O&M provider if performance is
unsatisfactory. Foresight's experience in managing this asset type since
2007 and expertise in identifying strong counterparties further mitigate
this factor.
Grid outages
Solar plants are subject to disconnections from the grid from the
network operators. These outages are beyond the control of the Asset
Manager. Over the past year the loss of production across the portfolio
due to external grid disconnections has been higher than expected. Our
valuation models assume that the projects will be unavailable for a
proportion of the time and we believe this assumption to be robust over
the medium to long term. The recent spike in grid disconnections is
caused, in part, by the need to upgrade infrastructure to accommodate
the large increase in renewable generators. The Manager expects that the
impact on this infrastructure improvement will be lower going forward
due to the reduced number of new installations. The Manager continues to
actively discuss better reporting and management of works with network
operators.
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 adopted a 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.
Safety, Health, Environmental and Quality ("SHEQ") performance and
proportionate risk management are a top priority at all levels for
Foresight Group. To further improve the management of SHEQ risks,
reinforce best practise and ensure non-compliance with regulations is
avoided, the Asset Manager has appointed an independent health and
safety consultant who regularly visits the portfolio assets to ensure
they not only meet, but exceed, industry and legal standards.The
consultant has confirmed that all sites are in compliance with all
applicable regulations. Recommendations that have been implemented to
help raise standards further include improvements to the safety signage
on the fence of two plants.
Environmental
The 348MW portfolio produced 319.41GWh of clean energy during the
period. This is the equivalent of:
-- 97,000 UK homes powered for one year; or
-- 190,125 tonnes of CO2 emissions prevented; or
-- 64,888 tonnes of coal have not been burned
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 Asset 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 beehives.
As part of our EPC contracts, the plants are designed in such a way that
they allow for sheep grazing. Currently our Kencot, Copley and Wymeswold
assets have active sheep grazing.
Social
The Asset Manager has actively sought to engage with the local
communities around the Company's 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. During the
period, Hunters Race welcomed students from Chichester College while in
May students of the Institution of Engineering and Technology visited
Kencot Solar to gain a better understanding of the operations of a solar
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.
As a signatory for this voluntary framework, Foresight submits an annual
report to the UNPRI on its responsible investment activities, which is
approved by senior management. This allows the Group to demonstrate to
stakeholders and the public how we incorporate ESG issues, understand
where we sit in relation to local and global peers and to learn and
develop our practices year-on-year.
Foresight Group actively collaborates with the investment industry and
relevant governmental bodies and regulators through direct conversations
and contributing to collective consultation papers on matters affecting
the investment process, including ESG.
Corporate Governance Report
The Board has considered the principles and recommendations of the AIC
Code of Corporate Governance (AIC Code) by reference to the AIC
Corporate Governance Guide for investment Companies (AIC Guide). The AIC
Code, as explained by the AIC Guide, addresses all the principles set
out in the UK Corporate Governance Code, as well as setting out
additional principles and recommendations on issues that are of specific
relevance to the Company.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide
(which incorporates the UK Corporate Governance Code), will provide
better information to Shareholders. The Company has complied with the
recommendations of the AIC Code and the relevant provisions of the UK
Corporate Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to:
-- The role of the Chief Executive
-- Executive Directors' remuneration
-- The need for an internal audit function
For the reasons set out in the AIC Guide, and as explained in the UK
Corporate Governance Code, the Board does not consider these provisions
to be relevant to the position of the Company, being an externally
managed investment company. In particular, all of the Company's
day-to-day management and administrative functions are outsourced to
third parties. As a result, the Company has no Executive Directors,
employees or internal operations. The Company has therefore not reported
further in respect of these provisions.
The Board
The Company has a Board of three Non-Executive Directors, two of whom
are considered to be independent. Peter Dicks is considered
non-independent under the listing rules by virtue of being a Director of
other Foresight Venture Capital Trusts ("VCTs") which are also managed
by Foresight Group.
During the year Peter Dicks acted as a Director of Foresight VCT plc,
Foresight 2 VCT plc (in liquidation), Foresight 3 VCT plc and Foresight
4 VCT plc. Due to the different investment focus of the Company the
Board believes there to be no conflict between the roles Mr Dicks
performs. Where conflicts of interest do arise between the different
funds, the common Director would seek to act fairly and equitably
between different groups of Shareholders. If a conflict were to occur
then decisions would be taken by the independent Directors.
Division of Responsibilities
The Board is responsible to Shareholders for the proper management of
the Company and Board meetings are held on at least a quarterly basis
with further ad hoc meetings scheduled as required. In the period under
review 12 Board meetings were held. The Board has formally adopted a
schedule of matters for which its approval is required, thus maintaining
full and effective control over appropriate strategic, financial,
operational and compliance issues. A Management Agreement between the
Company and the Manager sets out the matters over which the Manager has
authority, including monitoring and managing the existing investment
portfolio and the limits above which Board approval must be sought. All
other matters are reserved for the approval by the Board of Directors.
Individual Directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them in the
furtherance of their duties. In view of its Non-Executive nature and the
requirements of the Articles of Association that Directors retire by
rotation at the third Annual General Meeting after the AGM at which they
were elected, the Board considers that it is not appropriate for the
Directors to be appointed for a specific term as recommended by the AIC
Code.
Full details of duties and obligations are provided at the time of
appointment and are supplemented by further details as requirements
change. There is no formal induction programme for the Directors as
recommended by the AIC Code. However, this will be implemented should
the need arise.
The Board has access to the officers of the Company Secretary who also
attend Board Meetings. Representatives of the Manager attend all formal
Board Meetings although the Directors may meet without the Manager being
present. Informal meetings with the Manager are also held between Board
Meetings as required. The Company Secretary provides full information on
the Company's assets, liabilities and other relevant information to the
Board in advance of each Board Meeting. Attendance by Directors at Board
and Committee meetings is detailed in the table below.
Board Management Engagement & Remuneration Audit
Alex Ohlsson 12/12 1/1 2/2
Peter Dicks 11/12 1/1 2/2
Chris Ambler 10/12 1/1 2/2
In the light of the responsibilities retained by the Board and its
Committees and of the responsibilities delegated to Foresight Group CI
Limited, JTC (Jersey) Limited and its legal advisors, the Company has
not appointed a Chief Executive Officer, Deputy Chairman or a Senior
Independent Non-Executive Director as recommended by the AIC Code. As
such, the provisions of the UK Corporate Governance Code which relate to
the division of responsibilities between a Chairman and a Chief
Executive Officer are not considered applicable to the Company.
Investment Manager
As an experienced multi-fund asset manager, Foresight Group has in place
established policies and procedures designed to address conflicts of
interest in allocating investments among its respective investment
funds.
Foresight Group is fully familiar with, and has extensive experience in
allocating investments, ensuring fair treatment for all investors and
managing conflicts of interest should these arise. Foresight Group is
keen to ensure such fair treatment for all investors. Under the rules
and regulations of the Guernsey Financial Services Commission ("GFSC"),
Foresight Group is also legally obliged to treat its investors fairly
and handle such conflicts in an open and transparent manner and these
processes are audited on an annual basis.
In terms of allocation, Foresight Group adheres to a formal written
policy for allocating new investments which are overseen by the Group's
Investment Committee. Each available funding opportunity is allocated
pro-rata to the net amounts raised by each Foresight Group managed fund
with a sector and asset class investment strategy matching the proposed
investment. Where the allocation would result in any Foresight Group
managed fund having insufficient liquidity or excessive portfolio
concentration, or would fail to reach a deployment deadline set by
regulation or contract, the allocation is revised accordingly.
Foresight Group's allocation policy is reviewed from time-to-time by the
independent Board of Directors of each of the Foresight Group funds and
this policy has been operated successfully for many years. All
investments are allocated on pari passu terms.
After a full evaluation of the performance of the Investment Manager,
including review of assets purchased by the Company and the results of
ongoing portfolio management, it is the opinion of the Directors that
the continuing appointment of the Investment Manager on the terms
currently agreed is in the interests of the Shareholders.
Board Committees
The Board has adopted formal terms of reference, which are available to
view by writing to the Company Secretary at the registered office, for
two standing committees which make recommendations to the Board in
specific areas.
The Audit Committee comprises Chris Ambler (Chairman), Alex Ohlsson and
Peter Dicks, all of whom are considered to have sufficient financial
experience to discharge the role. The Committee meets at least twice a
year to, amongst other things, consider the following:
-- Monitor the integrity of the financial statements of the Company and
approve the accounts;
-- Review the Company's internal control and risk management systems;
-- Make recommendations to the Board in relation to the appointment of the
external auditors;
-- Review and monitor the external Auditors' independence; and
-- Implement and review the Company's policy on the engagement of the
external Auditors to supply non-audit services.
KPMG LLP has completed the Company's external audit for the period and
has not performed any non-audit services during the year. Ernst & Young
LLP prepares all necessary tax returns following sign off of the annual
accounts.
The Management Engagement & Remuneration Committee, which has
responsibility for reviewing the remuneration of the Directors,
comprises Alex Ohlsson (Chairman), Peter Dicks and Chris Ambler and
meets at least annually to consider the levels of remuneration of the
Directors, specifically reflecting the time commitment and
responsibilities of the role. The Management Engagement & Remuneration
Committee also undertakes external comparisons and reviews to ensure
that the levels of remuneration paid are in line with industry
standards. The Management Engagement & Remuneration Committee also
reviews the appointment and terms of engagement of the Manager.
The Board believes that, as a whole, it has an appropriate balance of
skills, experience and knowledge. The Board also believes that diversity
of experience and approach, including gender diversity, amongst Board
members is important and it is the Company's policy to give careful
consideration to issues of Board balance and diversity when making new
appointments.
Copies of the terms of reference of each of the Company's committees can
be obtained from the Company Secretary upon request.
Board Evaluation
The Board undertakes an annual evaluation of its own performance and
that of its Committees through an initial evaluation questionnaire. The
Chairman then discusses the results with the Board and its Committees
and will take appropriate action to address any issues arising from the
process.
Relations with Shareholders
The Company communicates with Shareholders and solicits their views when
it is considered appropriate to do so. Individual Shareholders are
welcomed to the Annual General Meeting where they have the opportunity
to ask questions of the Directors, including the Chairman, as well as
the Chairman of the Audit, Remuneration and the Management Engagement &
Remuneration Committee. From time to time, the Board may also seek
feedback through Shareholder questionnaires and through open invitations
for Shareholders to meet the Investment Manager.
Internal Control
The Directors of the Company have overall responsibility for the
Company's system of internal controls and the review of their
effectiveness. The internal controls system is designed to manage,
rather than eliminate, the risks of failure to achieve the Company's
business objectives. The system is designed to meet the particular needs
of the Company and the risks to which it is exposed and by its nature
can provide reasonable but not absolute assurance against misstatement
or loss.
The Board's appointment of JTC (Jersey) Limited as accountant and
administrator has delegated the financial administration of the Company.
There is an established system of financial controls in place, to ensure
that proper accounting records are maintained and that financial
information for use within the business and for reporting to
Shareholders is accurate and reliable and that the Company's assets are
safeguarded.
Directors have access to the advice and services of the Company
Secretary, who is responsible to the Board for ensuring that Board
procedures and applicable rules and regulations are complied with.
Pursuant to the terms of its appointment, Foresight Group invests the
Company's assets in infrastructure investments and have physical custody
of documents of title relating to the equity investments involved.
The Investment Manager confirms that there is a continuous process for
identifying, evaluating and managing the significant risks faced by the
Company. This has been in place for the period under review and up to
the date of approval of the Annual Report and financial statements, and
is regularly reviewed by the Board and accords with the guidance. The
process is overseen by the Investment Manager and uses a risk-based
approach to internal control whereby a test matrix is created that
identifies the key functions carried out by the Investment Manager and
other service providers, the individual activities undertaken within
those functions, the risks associated with each activity and the
controls employed to minimise those risks. A residual risk rating is
then applied. The Board is provided with reports highlighting all
material changes to the risk ratings and confirms the action that has or
is being taken. This process covers consideration of the key business,
operational, compliance and financial risks facing the Company and
includes consideration of the risks associated with the Company's
arrangements with professional advisors.
The Audit Committee has carried out a review of the effectiveness of the
system of internal control, together with a review of the operational
and compliance controls and risk management. The Audit Committee has
reported its conclusions to the Board which was satisfied with the
outcome of the review.
The Board monitors the investment performance of the Company in
comparison to its objective at each Board meeting. The Board also
reviews the Company's activities since the last Board meeting to ensure
that the Investment Manager adheres to the agreed investment policy and
approved investment guidelines and, if necessary, approves changes to
such policy and guidelines.
The Board has reviewed the need for an internal audit function. It has
decided that the systems and procedures employed by the Investment
Manager, the Audit Committee and other third party advisers provide
sufficient assurance that a sound system of internal control to
safeguard Shareholders' investment and the Company's assets, is in place
and maintained. In addition, the Company's financial statements are
audited by external Auditors and thus an internal audit function
specific to the Company is considered unnecessary.
Directors' Professional Development
Full details of duties and obligations are provided at the time of
appointment and are supplemented by further details as requirements
charge, although there is no formal induction programme for the
Directors as recommended by the AIC Code. Directors are also provided
with key information on the Company's policies, regulatory and statutory
requirements and internal controls on a regular basis. Changes affecting
Directors' responsibilities are advised to the Board as they arise.
Directors also participate in industry seminars.
Bribery Act 2010
The Company is committed to carrying out business fairly, honestly and
openly. The Investment Manager has established policies and procedures
to prevent bribery within its organisation.
Going Concern
The Company's business activities, together with the factors likely to
affect its future development, performance and position are set out in
this report. The financial position of the Company, its cash flows,
liquidity position and borrowing facilities are referred to in the
Chairman's Statement, Strategic Report and Notes to the Accounts. In
addition, the financial statements include the Company's objectives,
policies and processes for managing its capital; its financial risk
management objectives; and its exposures to credit risk and liquidity
risk.
The Company has sufficient financial resources together with investments
and income generated. As a consequence, the Directors believe that the
Company is able to manage its business risks.
The Directors have reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
Viability Statement
In accordance with the UK Corporate Governance Code, the Directors have
assessed the viability of the Company over a three year period, taking
into account the Company's current position and the potential impact of
the principal risks and uncertainties set out under Risk Management.
Based on this assessment, the Directors confirm that they have a
reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period to
December 2019.
The Directors have determined that a three year period to 31 December
2019 constitutes an appropriate period over which to provide its
viability statement. This is the period focussed on by the Board during
the strategic planning process and is considered reasonable for a
business or our size and nature. Whilst the Directors have no reason to
believe the Company will not be viable over a longer period, we believe
this presents users of the Annual Report with a reasonable degree of
confidence whilst still providing a longer-term perspective.
In making this statement, the Board carried out a robust assessment of
the principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or liquidity.
The Board also considers the ability of the Company to raise finance and
deploy capital. The results take into account the availability and
likely effectiveness of the mitigating actions that could be taken to
avoid or reduce the impact or occurrence of the underlying risks.
This review has considered the principal risks which were identified by
the Manager. The Board concentrated its effort on the major factors
which affect the economic, regulatory and political environment. The
Board also paid particular attention to the importance of its close
working relationship with the Manager, Foresight Group CI Limited.
As part of this process, the Directors have also considered the
viability of the Company should long-term debt be introduced in the near
future.
Directors' Remuneration Report
Introduction
The Board has prepared this report in line with the AIC code. An
ordinary resolution to approve this report will be put to the members at
the forthcoming Annual General Meeting on 12 June 2017.
The law requires the Company's Auditor, KPMG LLP, to audit certain of
the disclosures provided. Where disclosures have been audited, they are
indicated as such. The Auditor's opinion is included in the 'Independent
Auditor's Report.'
Annual Statement from the Chairman of the Management Engagement &
Remuneration Committee.
The Board, which is profiled below, consists solely of Non-Executive
Directors and considers at least annually the level of the Board's fees.
Consideration by the Directors of matters relating to Directors'
Remuneration
The Management Engagement & Remuneration Committee comprises three
Directors: Alex Ohlsson (Chairman), Chris Ambler and Peter Dicks. The
Committee has responsibility for reviewing the remuneration of the
Directors, specifically reflecting the time commitment and
responsibilities of the role, and meets at least annually. The Committee
also undertakes external comparisons and reviews to ensure that the
levels of remuneration paid are broadly in line with industry standards
and members have access to independent advice where they consider it
appropriate.
During the year neither the Board nor the Committee has been provided
with external advice or services by any person, but has received
industry comparison information from management in respect of the
Directors' remuneration. The remuneration policy set by the Board is
described below. Individual remuneration packages are determined by the
Remuneration Committee within the framework of this policy.
The Directors are not involved in deciding their own individual
remuneration.
Remuneration Policy
The Board's policy is that the remuneration of Non-Executive Directors
should reflect time spent and the responsibilities borne by the
Directors for the Company's affairs and should be sufficient to enable
candidates of high calibre to be recruited. The levels of Directors'
fees paid by the Company for the period ended 31 December 2016 were
agreed in 2015. It is considered appropriate that no aspect of
Directors' remuneration should be performance related in light of the
Directors' Non-Executive status.
The Company's policy is to pay the Directors quarterly in arrears, to
the Directors personally (or to a third party if requested by any
Director). Mr Ohlsson's remuneration is paid to Carey Olsen Corporate
Services Jersey Limited. None of the Directors has a service contract
but, under letters of appointment dated 16th August 2013 may resign at
any time by mutual consent. No compensation is payable to Directors
leaving office. As the Directors are not appointed for a fixed length of
time there is no unexpired term to their appointment but, as noted above,
the Directors will retire by rotation every year.
The above remuneration policy was approved by the Shareholders at the
Annual General Meeting held 25 April 2016 for the financial year to 31
December 2015 and will apply in subsequent years. Shareholders' views in
respect of Directors' remuneration are communicated at the Company's
Annual General Meeting and are taken into account in formulating the
Directors' remuneration policy.
Details of Individual Emoluments and Compensation
The emoluments in respect of qualifying services of each person who
served as a Director during the period and those forecast for the year
ahead are shown below. No Director has waived or agreed to waive any
emoluments from the Company in the period under review. No other
remuneration was paid or payable by the Company during the current
period nor were any expenses claimed by or paid to them other than for
expenses incurred wholly, necessarily and exclusively in furtherance of
their duties as Directors of the Company. The Company's Articles of
Association do not set an annual limit on the level of Directors' fees
but fees must be considered within the wider Remuneration Policy noted
above. Directors' liability insurance is held by the Company in respect
of the Directors.
Anticipated Directors' fees for the year ended Audited Directors' fees for year ended 31 December
31 December 2017 2016
Alex GBP60,000 GBP60,000
Ohlsson
(Chairman)
Chris GBP45,000 GBP45,000
Ambler
Peter GBP35,000 GBP35,000
Dicks
The Directors are not eligible for pension benefits, share options or
long-term incentive schemes.
Directors' Interests
Directors who had interests in the shares of the Company as at 31
December 2016 are shown below. There were no changes in the interests
shown as at 31 December 2015. The Directors do not have any options over
shares.
Ordinary shares of nil par value held at 31 December
2016
Alex Ohlsson (Chairman) 25,000(1)
Chris Ambler Nil
Peter Dicks 51,433
(1) Includes 25,000 shares legally and beneficially owned by a personal
pension company.
Approval of Report
The Board will propose a resolution in the forthcoming AGM that the
remuneration of the Directors will remain at the levels shown above for
the year to 31 December 2016.
Audit Committee Report
The Audit Committee is chaired by Chris Ambler and comprises the full
Board. The Committee operates within clearly defined terms of reference.
The terms of reference were reviewed during the period under review and
were deemed appropriate.
Meetings are scheduled to coincide with the reporting cycle of the
Company and the committee has met twice in the period under review. The
function of the Committee is to ensure that the Company maintains the
highest standards of integrity, financial reporting, internal and risk
management systems and corporate governance and maintains an effective
relationship with the Company's Auditors. None of the members of the
Audit Committee has any involvement in the preparation of the financial
statements of the Company.
The Audit Committee is charged with maintaining an open relationship
with the Company's Auditors. The Chairman of the Audit Committee keeps
in regular contact with the Auditors throughout the audit process and
the Auditors attend the Audit Committee meeting at which the accounts
are considered. The Committee reports directly to the Board which
retains the ultimate responsibility for the financial statements of the
Company.
Significant Issues Considered
The Audit Committee has identified and considered the following
principle key areas of risk in relation to the business activities and
financial statements of the company:
-- Valuation and existence of unquoted investments. This issue was discussed
with the Investment Manager and the Auditor at the conclusion of the
audit of the financial statements, as explained below:
Valuation and Existence of Unquoted Investments
The unquoted investment is a 100% controlling interest in Foresight
Solar (UK Hold Co) Limited ("UK Hold Co"), a non-consolidated subsidiary
company which is measured at fair value. The majority of UK Hold Co's
total assets (by value) are held in an investment where no quoted market
price is available. The unquoted investment is a 100% controlling
interest in FS Holdco Limited ("FS Holdco"), a non-consolidated
subsidiary company which is also measured at fair value, established by
using the fair value of the net assets of FS Holdco.
The majority of FS Holdco's total assets (by value) are held in
investments where no quoted market price is available. These are valued
by using discounted cash flow measurements. The valuation of these
underlying investments are seen to be areas of inherent risk and
judgement. There is an inherent risk of the Investment Manager unfairly
valuing the investment due to the Investment Manager's fee being linked
directly to the Net Asset Value of the Company.
During the valuation process the Board and Audit Committee and the
Investment Manager follow the valuation methodologies for unlisted
investments as set out in the International Private Equity and Venture
Capital Valuation guidelines and appropriate industry valuation
benchmarks. These valuation policies are set out in note 2 of the
accounts. These were then further reviewed by the Audit Committee. The
Investment Manager confirmed to the Audit Committee that the underlying
investment valuations had been calculated consistently throughout the
period and in accordance with published industry guidelines, taking
account of the latest available information about investee companies and
current market data. Furthermore, the Investment Manager held
discussions regarding the investment valuations with the Auditors.
The Investment Manager has agreed the valuation assumptions with the
Audit Committee.
Key assumptions used in the valuation forecasts are detailed in note 16
of the financial statements. The Investment Manager has provided
sensitivities around those assumptions which are also detailed in note
16.
The Investment Manager and Auditors confirmed to the Audit Committee
that they were not aware of any material misstatements. Having reviewed
the reports received from the Investment Manager and Auditors, the Audit
Committee is satisfied that the key areas of risk and judgement have
been addressed appropriately in the financial statements and that the
significant assumptions used in determining the value of assets and
liabilities have been properly appraised and are sufficiently robust.
The Audit Committee considers that KPMG LLP has carried out its duties
as Auditor in a diligent and professional manner.
During the year, the Audit Committee assessed the effectiveness of the
current external audit process by assessing and discussing specific
audit documentation presented to it in accordance with guidance issued
by the Auditing Practices Board. The audit partner is rotated every five
years ensuring that objectivity and independence is not impaired. KPMG
LLP has audited the Company since 2014. This is the second year the
Audit Director has been in place. No tender for the audit of the Company
has been undertaken since 2014. As part of its review of the continuing
appointment of the Auditors, the Audit Committee considers the need to
put the audit out to tender, its fees and independence from the
Investment Manager along with any matters raised during each audit.
The Audit Committee considered the performance of the Auditor during the
year and agreed that KPMG LLP continued to provide a high level of
service and maintained a good knowledge of the market, making sure audit
quality continued to be maintained.
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:
Alex 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 has experience in a number of senior positions in the
global industrial, energy and materials sectors working for major
corporations including ICI/Zeneca, The BOC Group and Centrica/British
Gas, as well as in strategic consulting roles. He is a Director on other
boards including a Non-Executive Director of Apax Global Alpha Limited,
a listed fund which launched on the London Stock Exchange on 15 June
2015.
Mr Ambler is a Chartered Director, 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 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, ICG Enterprise Trust plc and Mears Group plc.
and Chairman of Unicorn AIM VCT 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 31 December 2016
The Directors are responsible for preparing the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for
each financial year. Under that law they have elected to prepare the
financial statements in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union ("EU").
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these Financial Statements, the
Directors are required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether applicable IFRS Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
Financial Statements; and
-- Prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company's transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the Financial Statements
comply with the Companies (Jersey) Law 1991. They have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also responsible
for preparing a Corporate Governance Statement that complies with that
law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website
(which is delegated to Foresight Group and incorporated into their
website).
We confirm that to the best of our knowledge:
-- the Financial Statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
-- the Annual Report gives a true and fair view of the development and
performance of the business and the position of the Company together with
a description of the principal risk and uncertainties that the Company
faces; and
-- the Report and Financial Statements, taken as a whole, are fair, balanced,
and understandable and provide the necessary information for the
shareholders to assess the Company's performance, business model and
strategy.
For and behalf of the Board
Alexander Ohlsson
Chairman
15 February 2017
Independent Auditor's Report to the Members of Foresight Solar Fund
Limited only
Opinions and conclusions arising from our audit
1 Our opinion on the Financial Statements is unmodified
We have audited the financial statements of Foresight Solar Fund Limited
(the "Company") for the year ended 31 December 2016 which comprise the
Statement of Comprehensive Income, the Statement of Financial Position,
the Statement of Changes in Equity, the Statement of Cash Flows and the
related notes. In our opinion, the Financial Statements:
-- give a true and fair view, in accordance with International Financial
Reporting Standards as adopted by the European Union, of the state of the
Company's affairs as at 31 December 2016 and of its profit for the year
then ended; and
-- have been properly prepared in accordance with the Companies (Jersey) Law
1991.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the
risk of material misstatement that had the greatest effect on our audit
was as follows:
Valuation of Unquoted Investment: GBP273.6m (2015 restated: GBP249.7m)
Risk versus 2015 unchanged
Refer to the Audit Committee Report, the Summary of significant
accounting policies and the Financial Statements.
The risk: 78% of the Company's total assets (by value) are held in an
investment where no quoted market price is available. The unquoted
investment is a 100% controlling interest in Foresight Solar (UK Hold
Co) Limited ("UK Hold Co"), a non-consolidated subsidiary company which
is measured at fair value. Fair value is established in accordance with
the International Private Equity and Venture Capital Valuation
Guidelines by using the fair value of the net assets of UK Hold Co.
87% of UK Hold Co's total assets (by value) are held in an investment
where no quoted market price is available. The unquoted investment is a
100% controlling interest in FS Holdco Limited ("FS Holdco"), a
non-consolidated subsidiary company which is also measured at fair value,
established by using the fair value of the net assets of FS Holdco.
96% of FS Holdco's total assets (by value) are held in investments where
no quoted market price is available. These are valued by using
discounted cash flow measurements. There is a significant risk over the
valuation of these investments [directly held by FS Holdco] and this is
the key judgemental area that our audit focused on.
Our response: Our procedures included:
-- documenting and assessing the design and implementation of the investment
valuation processes and controls in place.
-- challenging the Investment Manager on key judgements affecting the
investee company valuations in the context of observed industry best
practice and the provisions of the International Private Equity and
Venture Capital Valuation Guidelines.
-- In particular, in relation to the investments valued using discounted
cash flow measurements, we challenged the appropriateness of the
valuation basis selected as well as underlying assumptions, such as
energy yield, power price, costs and inflation rates which produce the
cash flow projections; and the appropriateness of the discount factor
applied to those cash flow projections.
-- Comparing key underlying financial data inputs and energy yield inputs to
external sources and management information as applicable.
-- Challenging the assumptions around the sustainability of earnings based
on the plans of the investee companies and whether these are achievable,
and we obtained an understanding of existing and prospective investee
company cash flows to understand whether borrowings can be serviced or
refinancing may be required. Our work included consideration of events
which incurred subsequent to the year end up until the date of this audit
report.
-- attending the year end Audit Committee meeting where we assessed the
effectiveness of the Audit Committee's challenge and approval of unquoted
investment valuations; and
-- considering the appropriateness, in accordance with relevant accounting
standards, of the disclosures in respect of unquoted investments and the
effect of changing one or more inputs to reasonably possible alternative
valuation assumptions.
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at GBP3.50m
(2015: GBP4.39m), determined with reference to a benchmark of Total
Assets, of which it represents 1% (2015: 1%).
In addition, we applied materiality of GBP0.30m (2015: GBP0.23m) to
income from investments for which we believe misstatements of lesser
amounts than materiality for the financial statements as a whole could
reasonably be expected to influence the company's members' assessment of
the financial performance of the company.
We reported to the Audit Committee any corrected and uncorrected
identified misstatements exceeding GBP175,000 (2015: GBP219,000), in
addition to other identified misstatements that warranted reporting on
qualitative grounds.
Our audit of the Company and its underlying investments was undertaken
to the materiality noted above and was performed at the Manager's London
office.
4 We have nothing to report on the disclosures of principal
risks
Based on the knowledge we acquired during our audit, we have nothing
material to add or draw attention to in relation to:
-- the Directors' Viability Statement, concerning the principal risks, their
management, and, based on that, the Directors' assessment and
expectations of the company's continuing in operation over the three
years to 31 December 2019; or
-- the disclosures in note 2 of the financial statements concerning the use
of the going concern basis of accounting
5 We have nothing to report in respect of the matters on which
we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based
on the knowledge we acquired during our audit, we have identified other
information in the annual report that contains a material inconsistency
with either that knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
-- we have identified material inconsistencies between the knowledge we
acquired during our audit and the Directors' statement that they consider
that the annual report and financial statements taken as a whole is fair,
balanced and understandable and provides the information necessary for
Shareholders to assess the company's position and performance, business
model and strategy; or
-- the Audit Committee Report does not appropriately address matters
communicated by us to the Audit Committee.
Under the Companies (Jersey) Law 1991 we are required to report to you
if, in our opinion:
-- proper accounting records have not been kept by the Company, or
-- proper returns adequate for our audit have not been received from
branches not visited by us; or
-- the Company's accounts are not in agreement with the accounting records
and returns; or
-- we have not received all the information and explanations we require for
our audit.
Under the Listing Rules we are required to review the part of the
Corporate Governance Report relating to the Company's compliance with
the eleven provisions of the 2014 UK Corporate Governance Code specified
for our review.
We have nothing to report in respect of the above responsibilities.
Respective responsibilities of Directors and auditor
As explained more fully in the Statement of Directors' Responsibilities,
the Directors are responsible for the preparation of company's financial
statements which give a true and fair view. Our responsibility is to
audit, and express an opinion on, the Company financial statements in
accordance with applicable law and international Standards of Auditing
(UK and Ireland). Those standards require us to comply with the UK
Ethical Standards for Auditors.
Scope of an audit of financial statements performed in accordance with
ISAs (UK and Ireland)
A description of the scope of an audit of financial statements is
provided on our website at www.kpmg.com/uk/auditscopeother2014. This
report is made subject to important explanations regarding our
responsibilities, as published on that website, which are incorporated
into this report as if set out in full and should be read to provide an
understanding of the purpose of this report, the work we have undertaken
and the basis of our opinions.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body, in
accordance with Article 113A of the Companies (Jersey) Law 1991. Our
audit work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company and the Company's members, as a body, for our audit work, for
this report, or for the opinions we have formed.
Philip Merchant
For and on behalf of KPMG LLP
Chartered Accountants and Recognised Auditor
15 Canada Square
London E14 5GL
15 February 2017
Statement of Comprehensive Income
For the year ended 31 December 2016
31 December
2016 31 December 2015 (Restated)
Notes GBP'000 GBP'000
Revenue
Interest income 4 29,462 25,119
Gain / (Loss) on investments at fair value through
profit or loss 14 4,775 (6,619)
34,237 18,500
Expenditure
Management fees 5 (3,054) (2,551)
Administration and accountancy expenses 6 (228) (123)
Directors' fees 7 (140) (170)
Other expenses 8 (76) (442)
Total expenditure (3,498) (3,286)
Profit before tax for the year 30,739 15,214
Taxation - -
Profit and total comprehensive income for the year 30,739 15,214
Earnings per Ordinary Share (pence per Share)
9 10.38 5.91
All items above arise from continuing operations, there have been no
discontinued operations during the year.
The accompanying notes form an integral part of these Financial
Statements.
Statement of Financial Position
As at 31 December 2016
31 December 2016 31 December 2015 (Restated)
Notes GBP'000 GBP'000
Assets
Non-current assets
Investments held at
fair value through
profit or loss 14 273,614 249,660
Total non-current
assets 273,614 249,660
Current assets
Interest receivable 10 33,044 4,646
Trade and other
receivables 11 4,847 12,152
Cash and cash
equivalents 12 39,381 12,924
Total current assets 77,272 29,722
Total assets 350,886 279,382
Equity
Retained earnings 11,767 (297)
Stated capital 17 339,003 279,403
Total equity 350,770 279,106
Liabilities
Current liabilities
Trade and other
payables 13 116 276
Total current
liabilities 116 276
Total liabilities 116 276
Total equity and
liabilities 350,886 279,382
Net Asset Value per
Ordinary Share 18 102.88 99.04
The Financial Statements were approved by the Board of Directors and
signed on its behalf on 15 February 2017 by:
Alex Ohlsson
Chairman
The accompanying notes form an integral part of these Financial
Statements.
Statement of Changes in Equity
For the year ended 31 December 2016
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 year:
Profit for the year - 30,739 30,739
Transactions with
owners, recognised
directly in equity:
Dividends paid in the
period 21 - (18,675) (18,675)
Issue of Ordinary Shares 17 60,781 - 60,781
Capitalised issue costs 17 (1,181) - (1,181)
Balance as at 31
December 2016 339,003 11,767 350,770
For the period 1 January 2015 to 31 December 2015 (Restated):
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 year:
Profit for the year - 15,214 15,214
Transactions with
owners, recognised
directly in equity:
Dividends paid in the
year 21 - (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
The accompanying notes form an integral part of these Financial
Statements.
Statement of Cash Flows
For the year ended 31 December 2016
31 December
2016 31 December 2015 (Restated)
GBP'000 GBP'000
Profit for the year before tax from continuing
operations 30,739 15,214
Adjustments for:
Unrealised (gain)/loss on investments (4,775) 6,619
Investment income (29,462) (25,119)
Operating cash flows (3,498) (3,286)
Decrease/(increase) in trade and other receivables 7,305 (7,671)
Decrease in trade and other payables (160) (1,504)
Net cash inflow/(outflow) from operating
activities 3,647 (12,461)
Investing activities
Increase in loan notes to subsidiary (34,000) (71,000)
Decrease in Shareholder loan to subsidiary 14,821 9,844
Investment income received 1,064 29,879
Net cash outflow from investing activities (18,115) (31,277)
Financing activities
Dividends paid (18,675) (19,118)
Issue costs paid (1,181) (1,607)
Proceeds from issue of shares 60,781 74,784
Net cash inflow from financing activities 40,925 54,059
Net increase in cash and cash equivalents 26,457 10,321
Cash and cash equivalents at the beginning of the
year 12,924 2,603
Cash and cash equivalents at the end of the year 39,381 12,924
The accompanying notes form an integral part of these Financial
Statements.
Notes to the Financial Statements
For the year ended 31 December 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"). Up to 31 March 2016, UK Hold Co invested in further
holding companies (the "SPVs") which then invested in the underlying
investments. 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 the
SPVs 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 2 Limited
("FS Holdco 2") was incorporated on 1 December 2016. FS Debtco Limited
("FS Debtco") was incorporated on 2 December 2016. As at 31 December
2016, there had been no activities in either FS Holdco 2 or FS Debtco.
The principal activity of the Company, UK Hold Co, FS Holdco, FS Holdco
2 and FS Debtco (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 Financial Statements for the year ended 31 December 2016 (the
"Financial Statements") have been prepared in accordance with
International Financial Reporting Standards as adopted by the European
Union ("IFRS") which comprise standards and interpretations issued by
the International Accounting Standards Board ("IASB"), and International
Accounting Standards and Standing Interpretations approved by the
International Financial Reporting Interpretation Committee that remain
in effect and to the extent they have been adopted by the European
Union. The Financial Statements have been prepared on the historical
cost convention as modified for the measurement of certain financial
instruments at fair value through profit or loss and in accordance with
the provisions of the Companies (Jersey) Law 1991.
The preparation of Financial Statements in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the
Company's accounting policies. The estimates and associated assumptions
are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which
form the basis of making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates and underlying assumptions are
reviewed on an ongoing basis. Judgements made by management in the
application of IFRS that have a significant effect on the Financial
Statements and estimates with a significant risk of material adjustment
in the next year are disclosed in note 3.
For the year ended 31 December 2015 the Company consolidated its holding
in the UK Hold Co (including UK Hold Co's investments in the SPVs).
Further amendments to IFRS 10 effective 1 January 2016 have been
implemented and have resulted in an accounting policy change in relation
to consolidation of subsidiaries. These changes are explained in note
2.3 Changes in Accounting Policy and note 2.4 Consolidation.
2.2 Going concern
The Directors have considered the Company's cash flow projections for a
period of no less than twelve months from the date of approval of these
consolidated Financial Statements together with the Company's borrowing
facilities. These projections show that the Company will be able to meet
its liabilities as they fall due.
The Directors have therefore prepared the 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")
The following standards which are applicable to the Company became
effective for accounting periods commencing on or after 1 January 2016
and have been applied in these financial statements:
-- Amendments to IFRS 10, 'Consolidated Financial Statements' and
IAS 28, 'Investments in Associates', or 'Investment entities'.
The amendments to IFRS 10 confirm that an investment entity should
consolidate a subsidiary which is not an investment entity and whose
main purpose and activity is to provide services in support of the
investment entity's investment activities. However, the amendments
clarify that if the subsidiary is itself an investment entity, the
investment entity parent should measure its investment in the subsidiary
at fair value through profit or loss. This approach is required
regardless of whether the subsidiary provides investment-related
services to the parent or to third parties. This means that the Company
has to value its holding in UK Hold Co at fair value through profit or
loss rather than consolidating its holding in UK Hold Co.
The Company has therefore restated its comparative figures for the year
ended 31 December 2015 to no longer consolidate its holding in UK Hold
Co, but rather value its holding at fair value through profit or loss.
These changes have affected the Statement of Comprehensive Income, the
Statement of Financial Position, the Statement of Changes in Equity,
Statement of Cash Flows and the accompanying notes.
-- IFRS 12 Disclosure of Interests in Other Entities by
Investment Entities: Applying the Consolidation Exception (Amendments to
IFRS 10, IFRS 12 and IAS 28) effective 1 January 2016.
An investment entity that prepares financial statements in which all of
its subsidiaries are measured at fair value through profit or loss
presents the disclosures relating to investment entities required by
IFRS 12.
The additional disclosures required by IFRS 12 are included in note 15
and note 16 Investments in Unconsolidated Entities.
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 and which are applicable to the Company, were
in issue but not yet effective:
-- IFRS 15, 'Revenue from Contracts with Customers'. Effective
for accounting periods commencing on or after 1 January 2018.
-- 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.
-- IFRS 16, 'Leases'. Effective for accounting periods commencing
on or after 1 January 2019.
These standards and interpretations will be adopted when they become
effective. The Directors do not expect that the adoption of the
Standards listed above will have a material impact on the financial
statements in future periods, except that IFRS 9 may impact both the
measurement and disclosures of financial instruments and IFRS 15 may
have an impact on revenue recognition and related disclosures. Beyond
the information above, it is not practicable to provide a reasonable
estimate of the effects of IFRS 9 and IFRS 15 until a detailed review
has been completed.
2.4 Consolidation
Subsidiaries
All subsidiaries are entities over which the Company has control. The
Company controls an entity when the Company is exposed to, or has the
rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity.
As discussed in note 1, the Company has one direct subsidiary, a 100%
controlling interest in UK Hold Co. Up to 31 March 2016, UK Hold Co
itself invested in the SPVs which then invested in the underlying
investments. Therefore, the SPVs are indirect subsidiaries. On 11
January 2016, UK Hold Co incorporated a new subsidiary, FS Hold Co,
which is also an indirect subsidiary of the Company. On 31 March 2016,
UK Hold Co transferred the SPVs to FS Hold Co in return for shares in FS
Hold Co and a loan receivable on a pari passu basis. Under IFRS 10
"Consolidated Financial Statements", qualifying entities that meet the
definition of an investment entity are not required to produce a
consolidated set of Financial Statements and instead account for
subsidiaries at fair value through profit or loss. The Directors deem
that the Company is an investment entity and therefore the Company does
not consolidate any of its subsidiaries but carries them at fair value
through profit or loss.
The defined criteria of an 'investment entity' are as follows:
-- It holds more than one investment;
-- It has more than one investor;
-- It has investors that are not related parties to the entity;
and
-- It has ownership interests in the form of equity or similar
interests.
However, the absence of one or more of these characteristics does not
prevent the entity from qualifying as an 'investment entity', provided
all other characteristics are met and the entity otherwise meets the
definition of an 'investment entity':
-- It obtains funds from one or more investors for the purpose of
providing those investor(s) with professional investment management
services;
-- It commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation, investment
income or both; and
-- It measures and evaluates the performance of substantially
all of its investments on a fair value basis.
The Company does not meet all the defined criteria of an 'investment
entity' as the Company only has one investment. However, the Directors
deem that the Company is nevertheless an 'investment entity' as the
remaining requirements has been met and, through UK Hold Co and FS Hold
Co, there is a diverse investment portfolio which will fill the criteria
of having more than one investment. The Company consolidated its holding
in UK Hold Co for the year ended 31 December 2015 as UK Hold Co provides
investment related services to the Company and was viewed as being
simply an extension of the investment entity's investing activities.
However as a result of the amendments to IFRS 10 effective 1 January
2016, intermediate investment entities are not permitted to be
consolidated and must be held at fair value through profit or loss. The
Company therefore restated its comparative figures for the year ended 31
December 2015 to no longer consolidate its holding in the UK Hold Co,
but rather value its holding at fair value through profit or loss. These
changes have affected the Statement of Comprehensive Income, the
Statement of Financial Position, the Statement of Changes in Equity,
Statement of Cash Flows and its accompanying notes.
UK Hold Co does not meet all the defined criteria of an "investment
entity" as it is 100% owned by the Company and, from 31 March 2016, it
only has one investment. However, the Directors deem that UK Hold Co is
nevertheless an intermediate investment entity as through FS Hold Co,
there is a diverse investment portfolio which will fill the criteria of
having more than one investment and, the Company that holds 100% of
share capital has a number of investors.
FS Hold Co and FS Hold Co 2 do not meet all the defined criteria of an
'investment entity' as they are 100% owned by UK Hold Co. However, the
Directors deem that the companies are nevertheless 'investment entities'
as the remaining requirements have been met and the Company that holds
100% of the share capital of UK Hold Co has a number of investors.
Therefore, the Company meets the requirements of an 'investment entity'.
The Company accounts for its subsidiary at fair value through profit or
loss in accordance with IAS 39 "Financial Statements: Recognition and
Measurement". The financial asset at fair value through profit or loss
carried in the Statement of Financial Position represents the Company's
investments in UK Hold Co. See notes 14 and 16 for more detail on the
investments held at fair value through profit or loss.
As the UK Hold Co is no longer consolidated, its investements (plus
their underlying investments) are no longer separately presented at fair
value through profit or loss in the Company's accounts. However
accounting standards require that if an investment entity is the parent
of another investment entity, the parent shall also provide the
additional disclosures required by IFRS 12 interest in unconsolidated
subsidiaries. These disclosures are set out in notes 15 and 16.
2.5 Income
Income comprises interest income (bank interest and loan interest).
Interest income is recognised when it is probable that the economic
benefits will flow to the Company and the amount of revenue can be
measured reliably. Loan interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective interest
rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to
that asset's net carrying amount on initial recognition.
2.6 Expenses
Operating expenses are the Company's costs incurred in connection with
the on-going management of the Company's investments and administrative
costs. Operating expenses are accounted for on an accruals basis.
The Company's management and administration fees, finance costs and all
other expenses are charged through the Statement of Comprehensive
Income.
Acquisition costs of assets are capitalised on purchase of assets. Costs
directly relating to the issue of Ordinary Shares are charged to the
Group's stated capital reserve.
2.7 Taxation
The Company is currently registered in Jersey. The Company is taxed at
0% which is the general rate of Corporation tax in Jersey.
2.8 Functional and presentational currency
The Directors consider the Company's functional currency to be Pounds
Sterling ("GBP") as this is the currency in which the majority of the
Company's assets and liabilities and significant transactions are
denominated. The Directors have selected GBP as the Company's
presentation currency.
2.9 Financial Assets and Liabilities
2.9.1 Classification
The Company classifies its financial assets and liabilities in the
following categories: at fair value through profit or loss; and
financial assets and liabilities at amortised cost. The classification
depends on the nature and purpose for which the financial assets and is
determined at the time of initial recognition by management.
(a) Financial asset at fair value through profit or loss
The financial asset at fair value through profit or loss consists of one
investment in UK Hold Co. The asset in this category is classified as
non-current.
(b) Financial assets and liabilities at amortised cost
These assets and liabilities are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market.
They comprise trade and other receivables, interest receivable, cash and
cash equivalents and trade and other payables.
Trade receivables are rights to receive compensation for goods or
services that have been provided in the ordinary course of business to
customers. Accounts receivable are classified as current assets if
receipt is due within one year or less (or in the normal operating cycle
of the business if longer). If not, they are presented as non-current
assets.
Cash and cash equivalents comprise cash on hand and demand deposits and
other short-term highly liquid investments with an original maturity of
three months or less that are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.
Trade payables are obligations to pay for goods or services that have
been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due
within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current
liabilities.
2.9.2 Recognition and measurement
Purchases and sales of financial assets are recognised on the trade-date
(the date on which the Company commits to purchase or sell the asset).
Investments are initially recognised at fair value, being the
consideration given. It is the policy of the Investment Manager to value
with reference to discounted cash flows immediately following
acquisition. Investments treated as 'financial assets at fair value
through profit or loss' are subsequently measured at fair value.
Financial assets at amortised cost are initially recognised at fair
value plus transaction costs that are directly attributable to the
acquisition, and subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment. The
effect of discounting on these financial assets is not considered to be
material.
Fair value is defined as the amount for which an asset could be
exchanged between knowledgeable willing parties in an arm's length
transaction. 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 the investment and its underlying
direct and indirect investments is determined in accordance with IAS 39
and IFRS 13. The fair value of UK Hold Co is made up of its equity and
loans. The unconsolidated subsidiaries of FS Holdco is determined in
accordance with IAS 39 and IFRS 13, using unlevered Discounted Cash Flow
principles (unless a more appropriate methodology is applied).
Gains or losses arising from changes in the fair value of the 'financial
assets at fair value through profit or loss' category are presented in
the Consolidated Statement of Comprehensive Income within
'gains/(losses) on investments at fair value through profit or loss' in
the period in which they arise.
Financial liabilities at amortised cost consist of trade and other
payables. Trade and other payables are initially recognised at fair
value net of transaction costs incurred and classified as current. All
purchases of financial liabilities are recorded on trade date, being the
date on which the Company becomes party to the contractual requirements
of the financial liability. Unless otherwise indicated the carrying
amounts of the Company's financial liabilities approximate to their fair
values.
2.9.3 Derecognition of financial assets and liabilities
Financial assets (in whole or in part) are derecognised either:
-- when the Company has transferred substantially all the risks
and rewards of ownership; or
-- when it has neither transferred nor retained substantially
all the risks and rewards and when it no longer has control over the
assets or a portion of the asset; or
-- when the contractual right to receive cash flow has expired.
A financial liability (in whole or in part) is derecognised when the
Company has extinguished its contractual obligations, it expires or is
cancelled. Any gain or loss on derecognition is taken to the Statement
of Comprehensive Income.
2.10 Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new ordinary shares are shown in equity as
a deduction, net of tax, from the proceeds. Ordinary shares have a nil
par value.
2.11 Dividend distribution
Dividend distribution to the Company's Shareholders is recognised as a
liability in the Company's Financial Statements in the period in which
the dividends are approved by the Company's Shareholders.
3. Critical accounting estimates and judgements
Disclosure is required of judgements and estimates made by management in
applying the accounting policies that have a significant effect on the
financial statements. The Company makes estimates and judgements
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 judgements 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 underlying investments
The fair value of the underlying investments held by the Company's
subsidiaries, which impact the value of the company's subsidiaries, are
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 ("IPEV") Valuation Guidelines, using
unlevered Discounted Cash Flow principles (unless a more appropriate
methodology is applied). As described more fully in note 16, valuations
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 IPEV valuation methodology used in deriving a fair value is in
accordance with the fair value requirements of IAS 39.
The fair value of UK Hold Co is made up of the fair value of its net
assets. In the Director's opinion, this value represents the fair value
of the investments at the valuation date as all available information is
used in the valuation process. UK Hold Co has one direct subsidiary FS
Hold Co and this Investment is fair valued using the FS Hold Co's net
asset value as reported at year end.
The fair value of the underlying investments held by FS Hold Co's
subsidiaries are determined by using valuation techniques. The Directors
base the fair value of the investments based on information received
from the Investment Manager.
3.2 Determination of investment entities
The Directors of the Company have determined that it meets the
definition of an Investment Entity as per IFRS 10. Details of this
judgement is disclosed in note 2.4 Consolidation.
4. Interest income
31 December 2016 31 December 2015 (Restated)
GBP'000 GBP'000
Bank interest income 13 34
Loan interest income 29,449 25,085
29,462 25,119
Loan interest comprises interest on loan notes and interest on
Shareholder loans.
Loan notes were issued by UK Hold Co to the Company for the purchase of
investments. Interest is payable at 9% per annum in arrears on each
Interest Payment Date (28 / 29 February and 31 August each year). Where
interest is not paid on payment date, it will compound and future
interest shall accrue at 11% per annum from the due date up to the date
of actual payment compounding on each Interest Payment Date. Total
interest of GBP27,314,252 was accrued during the year (2015 restated:
GBP21,578,249), GBP27,314,252 was receivable at year end (2015 restated:
GBP1,050,940). The loan notes balance at year end on which interest is
charged is GBP250,000,000 (2015 restated: GBP216,000,000). These loans
form part of the fair value of the investments as per note 14.
A Shareholder loan is created when the total amount paid by the Company
on behalf of UK Hold Co for the cost of Investments is more than the
total loan notes issued by UK Hold Co to the Company. Interest is
receivable at 9% per annum and is repayable in full on demand. Total
interest of GBP2,135,009 was accrued during the year (2015 restated:
GBP3,497,668). GBP5,730,000 was receivable at year end (2015 restated:
GBP3,594,816). The Shareholder loan balance at year end is GBP23,910,000
(2015 restated: GBP38,729,995). These loans form part of the fair value
of the investments as per note 14.
5. Management fees
The Investment Manager of the Company, Foresight Group CI Limited,
receives an annual fee of 1% of the Net Asset Value ("NAV") of the
Company. This is payable quarterly in arrears and is calculated based on
the published quarterly NAV. For the year ended 31 December 2016, the
Investment Manager was entitled to a management fee of GBP3,053,551
(2015 restated: GBP2,551,085) of which GBP17,066 was outstanding as at
31 December 2016 (2015 restated: GBP5,535).
6. 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 year ended 31
December 2016, total administration and accountancy fees were GBP227,452
(2015 restated: GBP122,763) of which GBP50,002 was outstanding as at 31
December 2016 (2015 restated: GBP4,200).
7. Directors' fees
Remuneration of the Directors of the Company is currently paid at a
total rate of GBP140,000 (2015 restated: GBP170,000). All of the
Directors are Non-Executive Directors. Remuneration paid for the year
ended 31 December 2016 is detailed below:
31 December 31 December
2016 2015 (Restated)
GBP'000 GBP'000
Peter Dicks 35 45
Alex Ohlsson 60 70
Christopher Ambler 45 55
140 170
8. Other Expenses
31 December 2016 31 December 2015 (Restated)
GBP'000 GBP'000
Annual fees 32 127
Audit fees 17 36
Legal and professional fees 27 279
76 442
The total audit fee pertaining to the group is GBP54,900 for the year
ended 31 December 2016 (2015 restated: GBP46,000).
9. Earnings per Ordinary share - basic and diluted
The basic and diluted profits per Ordinary Share for the Company are
based on the profit for the period of GBP30,738,374 (2015 restated:
GBP15,214,912) and on 296,123,500 (2015 restated: 257,246,283) Ordinary
Shares, being the weighted average number of shares in issue during the
period.
10. Interest receivable
31 December 2016 31 December 2015 (Restated)
GBP'000 GBP'000
Interest receivable on loan
notes 27,314 1,051
Interest receivable on
Shareholder loan 5,730 3,595
33,044 4,646
11. Trade and other receivables
31 December 2016 31 December 2015 (Restated)
GBP'000 GBP'000
Prepaid expenses - 11
Amounts due from subsidiaries 4,694 12,087
Other receivables 153 54
4,847 12,152
12. Cash and cash equivalents
31 December 2016 31 December 2015 (Restated)
GBP'000 GBP'000
Cash at bank 39,381 12,924
39,381 12,924
13. Trade and other payables
31 December 2016 31 December 2015 (Restated)
GBP'000 GBP'000
Accrued expenses 116 276
116 276
14. Investments at fair value through profit or loss
The following table presents the Company's investments at fair value
through profit or loss:
31 December
31 December 2015
2016 (Restated)
GBP'000 GBP'000
Investment in UK Hold Co Equity - -
Loans 273,614 249,660
273,614 249,660
Book cost as at 1 January 254,730 193,574
Opening Investment Holding (losses)/ gains (5,070) 1,549
Valuation as at 1 January 249,660 195,123
Movements during the year
Purchase at cost 34,000 71,000
Disposal proceeds (14,821) (9,844)
Investment Holding gains/(losses) 4,775 (6,619)
Valuation as at 31 December 273,614 249,660
Book cost as at 31 December 273,909 254,730
Closing investment holding gains (295) (5,070)
273,614 249,660
The Company has one investment in Foresight Solar (UK Hold Co) Limited
("UK Hold Co"). This investment consists of both debt and equity and is
not quoted in an active market. Accordingly, the investment in UK Hold
Co has been valued using its net assets.
In turn, UK Hold Co has one investment in FS Holdco Limited ("FS
Holdco"). This investment also consists of both debt and equity and is
not quoted in an active market. Accordingly, the investment in FS Holdco
has been valued using its net assets.
In turn, FS Holdco's investment portfolio consists of unquoted
investments in solar projects, the valuations of which are based on a
discounted cash flow methodology (as set out in note 16).
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:
(a) Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities;
(b) Level 2 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable; and
(c) 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.
As UK Hold Co's net asset value is not considered observable market data
the investment in UK Hold Co has been classified as level 3. There were
no movements between levels during the year.
As at 31 December 2016:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investment - - 273,614 273,614
- - 273,614 273,614
As at 31 December 2015:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investment - - 249,660 249,660
- - 249,660 249,660
Sensitivity Analysis
Due to the nature of the Group structure and the underlying valuation
basis of UK Hold Co, FS Holdco and the underlying solar project
investments, the valuation of the Company's investment at fair value
through profit or loss is directly linked to the valuation of the
underlying solar investments. Therefore, the unobservable inputs driving
the valuation of the Company's investments in UK Hold Co are directly
attributable to the valuation of the unquoted investments in FS Holdco
which is discussed further in note 16.
15. Investments in unconsolidated entities
Details of the undertakings which the unconsolidated subsidiaries held
as at 31 December 2016 are listed below:
Direct or Proportion
indirect Country of Principal of shares and voting rights
Name holding incorporation activity held
Foresight Solar
(UK Hold Co)
Limited ("UK Hold Holding
Co") Direct UK Company 100%
FS Holdco Limited
("FS Holdco") Indirect UK Subsidiary 100%
FS Holdco 2
Limited ("FS
Holdco 2") Indirect UK Subsidiary 100%
FS Debtco Limited
("FS Debtco") Indirect UK Subsidiary 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 100%
Southam Hold Co
Limited Indirect UK SPV 100%
Paddock Wood Hold
Co Limited Indirect UK SPV 100%
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%
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 100%
Southam Solar Farm
Ltd ("Southam") Indirect UK Investment 100%
Paddock Wood Solar
Farm Ltd
("Paddock Wood") Indirect UK Investment 100%
Year ended 31 December 2016
The following table represents the fair values of the investments held
by FS Holdco Limited as required by IFRS12.
Unrealised Unrealised
Cost as at gain/(loss) Movement gain/(loss) Fair value as
31 as at on as at at
Cost as at Additions / December 1 January unrealised 31 December 31 December
1 January 2016 (Disposals) 2016 2016 gain/(loss) 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Wymeswold 44,247 (500) 43,747 4,817 1,536 6,353 50,100
Castle Eaton 22,508 - 22,508 (756) 148 (608) 21,900
Pitworthy 19,272 - 19,272 (734) (238) (972) 18,300
Highfields 15,403 - 15,403 (785) 382 (403) 15,000
High Penn 12,623 - 12,623 (1,105) 482 (623) 12,000
Hunter's
Race 12,239 - 12,239 900 361 1,261 13,500
Spriggs 14,437 - 14,437 271 92 363 14,800
Bournemouth 47,911 - 47,911 1,682 1,707 3,389 51,300
Landmead 52,416 - 52,416 (65) 1,749 1,684 54,100
Kencot 48,442 - 48,442 (563) 1,121 558 49,000
Copley 32,680 - 32,680 2,956 2,364 5,320 38,000
Paddock Wood 6,335 4,431 10,766 108 626 734 11,500
Atherstone 12,595 3,484 16,079 156 365 521 16,600
Southam 7,702 3,365 11,067 (154) 887 733 11,800
Port Farms 44,502 (505) 43,997 267 1,736 2,003 46,000
Membury 21,671 - 21,671 (351) 580 229 21,900
414,983 10,275 425,258 6,644 13,898 20,542 445,800
Year ended 31 December 2015
The following table represents the fair values of the investments held
by FS Holdco Limited (2015: Foresight Solar (UK Hold Co) Limited) as
required by IFRS12.
Unrealised Unrealised
gain/(loss) Movement gain/(loss) Fair value as
as at on as at at
Cost as at Additions / Cost as at 1 January unrealised 31 December 31 December
1 January 2015 (Disposals) 31 December 2015 2015 gain/(loss) 2015 2015
Wymeswold 45,046 (799) 44,247 3,684 1,133 4,817 49,064
Castle Eaton 22,508 - 22,508 192 (948) (756) 21,752
Pitworthy 19,272 - 19,272 243 (977) (734) 18,538
Highfields 15,403 - 15,403 247 (1,032) (785) 14,618
High Penn 12,623 - 12,623 (123) (982) (1,105) 11,518
Hunter's
Race 13,036 (797) 12,239 (26) 926 900 13,139
Spriggs 14,621 (184) 14,437 699 (428) 271 14,708
Bournemouth 47,911 - 47,911 249 1,433 1,682 49,593
Landmead 52,416 - 52,416 1,189 (1,254) (65) 52,351
Kencot - 48,442 48,442 - (563) (563) 47,879
Copley - 32,680 32,680 - 2,956 2,956 35,636
Paddock Wood - 6,335 6,335 - 108 108 6,443
Atherstone - 12,595 12,595 - 156 156 12,751
Southam - 7,702 7,702 - (154) (154) 7,548
Port Farms - 44,502 44,502 - 267 267 44,769
Membury - 21,671 21,671 - (351) (351) 21,320
242,836 172,147 414,983 6,354 290 6,644 421,627
16. Fair value of the investments in unconsolidated entities
Valuation process
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 ("IPEV") Valuation Guidelines, using
unlevered Discounted Cash Flow principles. It is in the opinion of the
Investment Manager and Directors that the IPEV Valuation Guideline
methodology used in deriving a fair value is in accordance with the fair
value requirements of IFRS 13.
Sensitivity analysis of significant changes in unobservable inputs
within Level hierarchy of underlying Investments
The Company's 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 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) 464.4 455.0 445.8 436.9 428.2
NAV per share (pence) 108.4 105.6 102.9 100.3 97.7
Change vs Base Case (%) 4.19 2.06 0.00 (2.00) (3.93)
Production
Base case production is a function of a number of separate assumptions
including irradiation levels, availability of the sites and technical
performance of the equipment. A sensitivity of +/- 10% is considered
reasonable given stable levels of irradiation, contractual availability
guarantees and understanding of future performance levels of the
equipment.
+10% Base -10%
Directors' valuation (GBP) 491.9 445.8 396.4
NAV per share (pence) 116.4 102.9 88.4
Change vs Base Case (%) 10.35 0.00 (11.08)
Power Price
DCF models assume power prices that are consistent with the Power
Purchase Agreements ("PPA") currently in place. 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 (GBP) 397.8 422.3 445.8 468.7 490.9
NAV per share (pence) 88.8 96.0 102.9 109.6 116.1
Change vs Base Case (%) (10.76) (5.26) 0.00 5.14 10.12
Inflation
A variable of 1.5% is considered reasonable given historic fluctuations.
An inflation rate of 2.25% was used for 2017 and 2.75% for future years.
-1.50% -0.75% Base +0.75% 1.50%
Directors' valuation (GBP) 395.9 420.3 445.8 472.9 501.6
NAV per share (pence) 88.3 95.4 102.9 110.8 119.3
Change vs Base Case (%) (11.18) (5.71) 0.00 6.09 12.53
Operating costs (investment level)
Operating costs include operating and maintenance ("O&M"), insurance and
lease costs. Other costs are fixed and are therefore not considered to
be sensitive to changes in unobservable inputs. 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.
-10.00% -5.00% Base +5.00% +10.00%
Directors' valuation (GBPm) 451.8 448.8 445.8 442.7 439.6
NAV per share (pence) 104.7 103.8 102.9 102.0 101.1
Change vs Base Case (%) 1.36 0.68 0.00 (0.69) (1.38)
17. Stated Capital
The stated capital of the Company consists solely of Ordinary Shares of
nil par value and therefore the value of the stated capital relates only
to share premium. 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
31 December
31 December 2015
2016 (Restated)
Shares Shares
Opening balance 281,803,232 208,000,000
Issued during the period 59,147,680 101,955,375
Repurchased and held in Treasury - (28,152,143)
Closing balance 340,950,912 281,803,232
31 December
31 December 2015
2016 (Restated)
GBP'000 GBP'000
Opening balance 279,403 206,226
Proceeds from share issue 60,781 74,784
Less: issue costs capitalised (1,181) (1,607)
Closing balance 339,003 279,403
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
GBP350,769,981 (2015 restated: GBP279,106,101) and on 340,950,912 (2015
restated: 281,803,232) redeemable Ordinary Shares, being the number of
Ordinary Shares in issue at the end of the period.
19. Financial instruments and risk profile
The Company holds cash and liquid resources as well as having
receivables and payables that arise directly from its operations. The
underlying investments of the Company's investment activities indirectly
expose it to various types of riks associated with solar power. The main
risks arising from the Company's financial instruments are market risk,
liquidity risk, credit risk and interest rate risk. The Directors
regulatory review and agree policies for managing each of these risks
and these are summarised below:
19.1 Market risk
(a) Foreign exchange risk
Foreign currency risk, as defined in IFRS 7, arises as the values of
recognised monetary assets and monetary liabilities denominated in other
currencies fluctuate due to changes in foreign exchange rates. As the
Company operates only within the United Kingdom and Jersey, the
Directors have concluded that the Company is not exposed to foreign
exchange risk.
(b) Price risk
The Company's investments are susceptible to market price risk arising
from uncertainties about future values of the instruments. The Company's
Investment Manager provides the Company with investment recommendations.
The Company's Investment Manager's recommendations are reviewed and
approved by the Investment Manager before the investment decisions are
implemented. To manage the market price risk, the Company's Investment
Manager reviews the performance of the investments on a regular basis
and is in regular contact with the management of the non current
investments for business and operational matters.
Price risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices. At 31
December 2016, the Company's only investment was valued at net assets
excluding the outstanding loans issued by the Company. Were this value
to increase by 10%, the increase in net assets attributable to
Shareholders for the year would have been GBP27,361,400. The impact of
changes in unobservable inputs to the underlying investments is
considered in note 16.
19.2 Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due as a result of the maturity of
assets and liabilities not matching. An unmatched position potentially
enhances profitability, but can also increase the risk of losses.
Liquidity could be impaired by an inability to access secured and/or
unsecured sources of financing to meet financial commitments. The Board
monitors the Company's liquidity requirements to ensure there is
sufficient cash to meet the Company's operating needs.
31 December 2016
Carrying Contractual Less than 6 to 12 Greater than
amount Total 6 months Months 12 months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
Assets
Investments 273,614 273,614 - - 273,614
Trade and
other
Receivables 4,847 4,847 4,847 - -
Interest
receivable 33,044 33,044 33,044 - -
Cash and
cash
equivalents 39,381 39,381 39,381 - -
Total
Financial
assets 350,886 350,886 77,272 - 273,614
Trade and
other
payables (116) (116) (116) - -
Total
financial
liabilities (116) (116) (116) - -
Net position 350,770 350,770 77,156 - 273,614
31 December 2015 (Restated)
Carrying Contractual Less than 6 to 12 Greater than
amount Total 6 months Months 12 months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
Assets
Investments 249,660 249,660 - - 249,660
Trade and
other
Receivables 12,141 12,141 12,141 - -
Interest
receivable 4,646 4,646 4,646 - -
Cash and
cash
equivalents 12,924 12,924 12,924 - -
Total
Financial
assets 279,371 279,371 29,711 - 249,660
Financial Liabilities
Trade and
other
payables (276) (276) (276) - -
Total
financial
liabilities (276) (276) (276) - -
Net position 279,095 279,095 29,435 - 249,660
19.3 Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company.
The Company places cash with authorised deposit takers and is therefore
potentially at risk from the failure of such institutions.
In respect of credit risk arising from other financial assets and
liabilities, which mainly comprise of cash and cash equivalents,
exposure to credit risk arises from default of the counterparty with a
maximum exposure equal to the carrying amounts of these instruments. In
order to mitigate such risks, cash is maintained with major
international financial institutions. During the year and at the
reporting date, the Company maintained relationships with the following
financial institutions:
31 December
Moody's Credit 2016
Rating GBP'000
Cash in hand:
Royal Bank of Scotland International Limited P2 327
Lloyds Bank International Limited P1 18,684
Santander UK plc P1 20,370
Total Group cash and cash equivalents and total cash
in hand 39,381
Total Group cash balances held by banks 39,381
Moody's
Credit 31 December 2015 (Restated)
Rating GBP'000
Cash in hand:
Royal Bank of Scotland International Limited P2 12,923
Lloyds Bank International Limited P1 1
Total Group cash and cash equivalents and total cash
in hand 12,924
Total Group cash balances held by banks 12,924
19.4 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in market
interest rates. The Company's exposure to the risk of changes in market
interest rates relates primarily to the Company's long-term borrowing to
its subsidiary. At year end the Company had no long term borrowings with
third parties (2015 restated: Nil).
Weighted average time for which rate
Total portfolio Weighted average interest rate is fixed
31 December 2016 31 December 2016 31 December 2016
GBP'000 % Days
Loan notes 250,000 10.93% 780
Shareholder
loans 23,910 9.00% 1,287
Cash 39,381 - -
313,291
Weighted average time for which rate
is fixed
Total portfolio Weighted average interest rate 31 December 2016
31 December 2015 (Restated) 31 December 2016 (Restated) (Restated)
GBP'000 % Days
Loan notes 216,000 9.99% 678
Shareholder
loans 38,730 9.00% 921
Cash 12,924
267,654
19.5 Other risks
Political and economic risk
The value of Ordinary Shares may be affected by uncertainties such as
political or diplomatic developments, social and religious instability,
changes in government policies, taxation or interest rates, currency
repatriation and other political and economic developments in law or
regulations and, in particular, the risk of expropriation,
nationalisation, and confiscation of assets and changes in legislation
relating to the level of foreign ownership.
Governmental authorities at all levels are actively involved in the
promulgation and enforcement of regulations relating to taxation, land
use and zoning and planning restrictions, environmental protection,
safety and other matters. The introduction and enforcement of such
regulations could have the effect of increasing the expense and lowering
the income or rate of return from, as well as adversely affecting the
value of, the Company's assets.
20. Capital Management
The Company'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 Company 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.
21. Dividends
Dividends paid during the year comprise an interim dividend in respect
of the prior year from 1 October 2015 to 31 December 2015 of
GBP4,311,589 (1.53 pence per Ordinary Share) and interim dividends in
respect of quarter 1 (1 January 2016 to 31 March 2016) of GBP4,339,770
(1.54 pence per Ordinary Share), quarter 2 (1 April 2016 to 30 June
2016) of GBP4,773,313 (1.54 pence per Ordinary Share) and quarter 3 (1
July 2016 to 30 September 2016) of GBP5,250,644 (1.54 pence per Ordinary
Share) respectively.
22. Related party disclosures
For the purposes of these Financial Statements, a related party is an
entity or entities who are able to exercise significant influence
directly or indirectly on the Company's operations.
As noted in Note 2, the Company does not consolidate its subsidiary.
However, the Company and its subsidiaries (direct and indirect) are a
Group and therefore, are considered to be related parties.
During the year the Company acquired an additional GBP34,000,000 in Loan
Notes from UK Hold Co (2015: GBP71,000,000), bringing the total issued
by UK Hold Co up to GBP250,000,000 (2015: GBP216,000,000), on which
interest of GBP27,314,252 was receivable for the year (2015:
GBP21,578,249). As at the reporting date interest of GBP27,314,252 was
receivable (2015: GBP1,050,940).
As at the reporting date, the Company has a Shareholders loan receivable
from UK Hold Co totalling GBP23,910,000 (2015: GBP38,729,995). Total
interest of GBP 2,135,009 was receivable for the year (2015:
GBP3,497,668) all of which was outstanding at reporting date (2015:
GBP3,594,816).
On 31 March 2016, UK Hold Co transferred all Shareholder loans which
formed part of the investment in its subsidiaries , being
GBP343,730,873, to FS Holdco in return for a loan payable by FS Holdco
to UK Hold Co of GBP343,730,873, On 14 April 2016, UK Hold Co's
oustanding loan balance with The Royal Bank of Scotland Plc (the "RBS")
of GBP149,503,500 was paid by FS Holdco on behalf of UK Hold Co. On 23
December 2016, FS Holdco increased its loan to UK Hold Co by
GBP34,000,000. The total interest payable for the year was GBP20,511,723
(2015: Nil).
Up to 31 March 2016, UK Hold Co was entitled to loan interest on the
Shareholder loans from the SPVs, totalling GBP6,837,036, of which nil
was outstanding at the reporting date (2015: GBP2,018,173). Following
the transfer on 31 March 2016 to the year end, FS Holdco was entitled to
loan interest on the Shareholder loans, from the SPVs, totalling
GBP19,371,585, of which GBP10,385,755 was outstanding as at the
reporting date. During the year, FS Holdco received repayments of
Shareholder loans from the SPVs totalling GBP1,005,000.
All of the SPVs are cash generating solar farms. On occasion revenues
may be received or expenses paid on their behalf by UK Hold Co (up to 31
March 2016) and FS Holdco (from 31 March 2016). All of these
transactions are related parties. At year end, the following SPVs had
amounts payable and receivable to FS Holdco:
31 December 31 December
2016 2015
GBP'000 GBP'000
Receivable
Copley 116 -
Payable
Atherstone - 329
Copley - 2,000
Kencot 293 -
Membury 758
Paddock Wood - 212
Southam - 122
Total payable to SPVs 935 2,663
During the year under review, UK Hold Co made use of a tax credit of
GBP1,003,322 (2015: GBPNil) availed by its subsidiary, FS Holdco, to
reduce the tax liability of the Group at the reporting date.
The manager is considered a related party as it provides key management
services to the Group. Refer to note 23 for transactions with the
manager.
23. Transactions with the manager
Foresight Group CI Limited, acting as investment manager to the Group in
respect of its investments, earned fees of GBP3,053,551 during the year
(2015 restated: GBP2,551,085), of which GBP17,066 was outstanding as at
31 December 2016 (2015 restated: GBP5,535).
Foresight Group CI Limited charged fees to FS Hold Co of GBP680,000 (31
December 2015: GBPNil) during the year in relation to the arrangement
and transaction advice of the long term refinancing of the Group, of
which GBPNil (31 December 2015: GBPNil) was outstanding as at year end.
Foresight Group LLP, a related party of Foresight Group CI, charged
asset management fees to the underlying projects of GBP512,000 during
the period (31 December 2015: GBP368,350).
Brighter Green Engineering, a related party of Foresight Group LLP,
charged fees to the underlying projects under both the O&M contracts and
EPC defect remedial work of GBP853,203 during the period (31 December
2015: GBP19,944)
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 (31 December 2015: GBP29,671).
24. Commitments and contingent liabilities
As at the year end a SPV ultimately owned by the Company had agreed to
fund the acquisition of Sandridge Solar Power Limited ("Sandridge") for
the value of at least GBP56.8m. Sandridge is a 49.63 MW capacity solar
plant located in Wiltshire. Completion of the acquisition is subject to
various conditions being satisfied by the vendor.
The Company had no 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 Company with a view to gaining economic benefits from its direction.
26. Post balance sheet events
On 18 January 2017 the Company acquired an additional GBP35,200,000,
funded using equity proceeds raised during the year, of Loan Notes in UK
Hold Co, bringing the total issued by UK Hold Co up to GBP285,200,000.
This GBP35,200,000 was utilised in the acquisition of Atem Solar Limited
(Shotwick Solar) on 2 February 2017 by FS Holdco 2, a direct subsidiary
of UK Hold Co.
Advisors
ADMINISTRATOR & COMPANY SECRETARY
JTC (Jersey) Limited
Elizabeth House
9 Castle Street
St. Helier Jersey
JE4 2QP
REGISTRAR
Computershare Investor Services (Jersey)
Queensway House
Hilgrove Street
St. Helier Jersey
JE1 1ES
JOINT CORPORATE BROKERS
Stifel Nicolaus Europe Limited (formerly Oriel Securities)
150 Cheapside
London
EC2V 6ET
J. P. Morgan Cazenove
25 Bank Street,
Canary Wharf
London E14 5JP
INVESTMENT MANAGER
Foresight Group CI Limited
PO Box 156
Dorey Court
St. Peter Port
Guernsey
GY1 4EU
LEGAL ADVISORS TO THE COMPANY AS TO ENGLISH LAW
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London
EC2A 2EW
LEGAL ADVISORS TO THE COMPANY AS TO JERSEY LAW
Ogier
Ogier House
The Esplanade
St. Helier
Jersey
JE4 9WG
LEGAL ADVISORS TO THE COMPANY AS TO THE ACQUISITION OF SOLAR ASSETS
Osborne Clarke
One London Wall
London
EC2Y 5EB
INDEPENDENT AUDITORS
KPMG LLP
15 Canada Square
London
E14 5GL
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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
(END) Dow Jones Newswires
February 16, 2017 02:01 ET (07:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
1 Year Foresight Solar Chart |
1 Month Foresight Solar Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
