Bluefield Solar Income Share Discussion Threads

[nerja] 28/1/2020 17:42

hxxps://citywire.co.uk/investment-trust-insider/news/risky-renewables-now-jefferies-questions-dividend-cover-if-power-prices-plunge/a1317805?section=investment-trust-insider&_ga=2.235307718.630262266.1580232792-291942799.1580232792

For the doubters this is off insider info from city wire

[nerja] 28/1/2020 17:38

Risky Renewables: now Jefferies questions dividend cover if power prices plunge

Renewable infrastructure investment company share prices fell again today as investors continued to respond to yesterday’s bearish note on the sector by analysts at JPMorgan Cazenove and Jefferies analyst Matthew Hose added to investor concern about the impact of falling power prices on the income funds ability to pay covered dividends.

Where Cazenove’s Chris Brown focused on the hit to valuations of the six listed renewables funds from declining long-term electricity price forecasts – predicting their net asset values (NAV) could fall by a third on average and their shares, trading at double-digit premiums over NAV, could slump by over 40% - Jefferies’ Hose highlighted the reduction in earnings and dividends this slump could cause.

Like Brown, Hose contrasted how Foresight Solar, JLEN Environmental Assets, NextEnergy Solar and Greencoat UK Wind predicted 0.4% to 1% annual real growth after inflation in power prices despite independent forecaster Bloomberg New Energy Finance positing 4% annual declines up until 2040.

In a note to investors, Hose said the weakness in power prices could burst a bubble in the shares that had been inflated by the wall of money from ESG (environmental, social, governance) investors last year.


Hose believed renewables funds shares, which closed at an average premium of 14% on Monday, could tumble to the low discounts to NAV they stood at in 2015/16 when power prices were also under pressure.

Sensitive NAVs

This is because his analysis shows a 5% reduction in power price assumptions knocks the NAVs of the different funds by between 2.9% and 5.3% making their high share price ratings even more precarious:

NextEnergy Solar (NESF), 9.8% share price premium, -5.3% hit to NAV;
Foresight Solar (FSFL), 10.8% premium, -4.4% hit;
Bluefield Solar (BSIF), 20% premium, -3.7% hit;
Greencoat UK Wind (UKW), 14.4% premium, -3.7% hit
Renewables Infrastructure Group (TRIG), 13.7% premium, -3.5% hit;
JLEN Environmental Assets (JLEN), 15% premium, -2.9% hit.
But the more pressing risk for income investors, said Hose, was the impact on near-term cash flows as revenues from selling power declined and weakened dividend cover.

‘We see the cover of certain funds as relatively thin and, in some cases, as being supported by fixing/hedging that could eventually roll off into lower realised power prices,’ the analyst said.

According to Hose, Greencoat UK Wind has the best dividend cover, with earnings 1.7 times its payouts, in contrast to the other five on multiples of just 1.1 at Bluefield, 1.2 at Foresight and JLEN and 1.3 at NextEnergy and Renewables Infrastructure.

Bluefield's dividend challenge

Bluefield Solar Income, downgraded to ‘underweight’ by Brown and rated ‘negative̵7; by Hose, was the biggest faller in the group today. Its shares fell 5p or 3.5% to 137.5p after yesterday it announced its first purchase in over three years of three UK solar parks for £13.9m.

Today it announced its first quarterly dividend of 1.95p per share for the financial year to 30 June for which it is targeting a total of 7.90p. This will be up from 7.68p last year, although the company, which is unusual in having a policy of paying out all its earnings, topped this up with a special dividend of 0.63p in 2019.

Brown questioned the sustainability of Bluefield’s dividend, which is currently linked to the retail prices (RPI) index, a higher measure of inflation than the standard consumer prices (CPI) version.

‘While we share the BSIF board's confidence in the shorter-term outlook for the dividend, if the shorter-term power price remains weak then the average fixed power price would be expected to fall while the dividend target is based on RPI, with only the regulated income [from government ROC subsidies] guaranteed to rise in line with RPI.

‘We think meeting these targets will be a challenge across the sector, but with a full payout policy, it might be felt earlier by BSIF than by some of the peers,’ said Brown.

Other fallers

JLEN Environmental Assets shed 2p or 1.7% to 119p as it announced plans to invest €25m in a portfolio of construction ready wind farms and solar parks in Europe.

NextEnergy Solar slipped 3.5p or 2.9% to 118p and GCP Infrastructure Investments (GCP), a generalist infrastructure fund that also invests in renewables, slid 3.8p or 2.9% to 128p.

Renewables Infrastructure Group, Greencoat UK Wind and Foresight Solar eased between 0.3% and 1.25% lower.

[nimbo1] 28/1/2020 17:12

See SQN asset finance as an example of what can happen when pricing assumptions change.

Its just a risk - it may never come to pass on the solar funds and premiums to NAV may increase....I have no idea.

[williamcooper104] 28/1/2020 15:59

They won't ignore NAV if it starts to plummet

[williamcooper104] 28/1/2020 15:58

The issue with renewables is that the senior and junior debt is usually for the life of the PPA (10 to 15 years) and that sucks up much of the cashflow meaning that the equity is repaid out of the tail of the project so is hugely dependent on power prices The DCF models used to create NAV will assume a lot of inflation - so the equity is really rather sensitive to long term power price forecasts Sub-debt in renewables was always the better risk/return 5.5 percent is good - but the satefy check is the PV of that growing at inflation for the averages PPA price - difference between that and share price is the risk

[damp seaweed] 28/1/2020 13:24

The NAV is based on discounted cash flows projected 25-30 yrs out.
But as the share price of BSIF is so disconnected from the NAV. Then maybe investors will ignore this fundamental. Though @~5.5% yield it hardly looks a bargain........IMHO

[bobdouthwaite] 28/1/2020 12:13

So the bubble could burst in the next 20-30 years? Hardly a reason to panic.

[nerja] 28/1/2020 10:31

Update) Investors in London’s expensive listed renewable energy funds are at a risk of a 43% share price fall and a 33% drop in asset values due to the slide in long-term power forecasts, JPMorgan Cazenove has warned.

Strong investor demand for their reliable dividends and environmentally friendliness has pushed shares in London’s six wind and solar power investment companies to an average 16% premium above their underlying net asset values (NAV).

But UK investment companies analyst Christopher Brown said the double-digit premiums of companies in the £9bn renewables sector were unsustainable in face of mounting evidence that growth in carbon-free energy would slash the cost of electricity in the next 20-30 years.

While that's good news for consumers and the planet, it is bad news for funds generating most of their revenues from selling electricity into the wholesale market, said Brown and fellow analyst Adam Kelly.

Using the latest figures from Bloomberg New Energy Finance, an independent forecaster owned by financial media giant Bloomberg, the analysts believed the NAVs of Bluefield Solar Income (BSIF), Foresight Solar (FSFL), Greencoat UK Wind (UKW), JLEN Environmental Assets (JLEN), NextEnergy Solar (NESF) and Renewables Infrastructure Group (TRIG) could drop by a third on average.


And because of their elevated share prices – trading at premiums of between 12% and 23% - that could translate into a 43% fall in their stocks, they said.

[campervan1] 28/1/2020 10:15

Any chance someone could cut and paste that article. Can't read it and really don't want to sign up to yet another investment service. TIA

[nimbo1] 28/1/2020 09:45

Bubble bursting here like it did with LTI. No longer holds any of these trusts for this reason. Would be delighted to buy back nearer nav - finally market realises the high income is at a price - I.e amortising capital to 0 and market foundations for power pricing not rock solid.

[nerja] 28/1/2020 08:19

hxxps://citywire.co.uk/investment-trust-insider/news/renewable-funds-could-plunge-40-on-cannibalisation-threat-say-jpm-analysts/a1317406?ref=investment-trust-insider-latest-news-list

Renewable funds could plunge 40% on ‘cannibalisation’ threat, say JPM analysts

[masurenguy] 28/1/2020 08:01

This years dividend projected to be a 2.8% increase over last year

RNS Number : 0679B
28 January 2020

The First Interim Dividend of 1.95 pence per Ordinary Share will be payable to Shareholders on the register as at 7 February 2020 with an associated ex-dividend date of 6 February 2020 and a payment date of 28 February 2020.

Bluefield Solar and its Board of Directors set annual dividend targets which are intended to grow in line with the Retail Price Index ('RPI'), using the 2014/15 financial year dividend of 7 pence per share as a base. The total dividend for the financial year ending 30 June 2019 was 8.31 pence per Ordinary Share, which consisted of the 7.68 pence per share target divided and an additional dividend of 0.63 pence per share. The target dividend for the financial year ending 30 June 2020 remains at 7.90 pence per Ordinary Share, as published in the Company's latest annual report for the financial year ending 30 June 2019.

[nimbo1] 27/1/2020 17:10

hxxps://citywire.co.uk/investment-trust-insider/news/renewable-funds-could-plunge-40-on-cannibalisation-threat-say-jpm-analysts/a1317406?re=71527&ea=1174519&utm_source=BulkEmail_Investment+Trust+Insider+Daily&;utm_medium=BulkEmail_Investment+Trust+Insider+Daily&utm_campaign=BulkEmail_Investment+Trust+Insider+Daily

[panshanger1] 17/1/2020 13:52

New all time high I wonder if we'll see some consolation In this sector ?

[masurenguy] 24/12/2019 15:05

Consistent annual growth in the shareprice over the past 3 years.
2017 - 2018: 7.9%
2018 - 2019: 11.8%
2019 - 2020: 10.5% (as at 24/12/19)
That is an actual increase of 36p, which averages 1p per month over those 3 years. Over the same period the share has also yielded 22.5p in dividends.

[tartshagger] 18/12/2019 09:26

If it looks like a duck, quacks like a duck and swims like a duck it prolly is a duck! Looks like a clean breakout to me, the measured move would be to 147p

[masurenguy] 17/12/2019 17:27

Another ATH close @140p. :o)

[masurenguy] 07/12/2019 16:55

BSIF finally closed at an ATH of 138.75p yesterday.

[masurenguy] 06/12/2019 10:37

Just hit an ATH intraday price with a £40K Buyer of 28,930 shares @138.24p.

[nimbo1] 22/11/2019 08:36

I've let a whole load of these go this am at 137... price may kick on but premium too large for me and JLEN results talks of weak power prices achieved hence looking at battery storage...

[tartshagger] 19/11/2019 11:48

BSIF share price has resistance at ~137p and support at ~127p. It's been moving sideways in a rectangle since March. Eventually it will break one way or the other, assuming it's not a triple top and it breaks upwards the target would be about 147p. If it breaks downwards and reaches 117p ish, that would be a strong buy.

[masurenguy] 15/11/2019 15:12

The BSIF shareprice is proving to be a solid performer both in terms of capital appreciation and yield. The shareprice is up 12% over the past year and over the past three and a half years it is up by 37% - an average increase of 0.9% per month over that timeframe. Furthermore, it has also delivered 23.4p in dividends over that period and it remains on track for a further 5% yield increase in the current year. A very solid buy and hold investment.

[masurenguy] 04/10/2019 18:58

Bluefield: solar farms are expensive, we’ll build our own
Michelle McGagh, Citywire, 04 Oct, 2019

High-yielding Bluefield Solar Income (BSIF) is going back to its roots with investment in solar farm construction as acquisitions in the secondary market become too expensive. Increased competition in the solar market at a time when there is a lack of new projects helped the 6%-yielding investment company lift net asset value by 4.1% in the 12 months to 30 June and declare an extra dividend. NAV rose to 117.28p from 113.28p in June last year and from 114.41p at the end of December to 117, boosted also by forecast-beating sunlight and electricity generation. Although a reduction in long-term power price predictions dented NAV, this was offset by several local authorities extending the leases on some of Bluefield’s solar parks by 15 years, raising the average life of the portfolio from 21.4 years to 24.2 years.

Winterflood analysts said while there was scope for more positive asset-life extensions it cautioned that the charging review of the energy regulator Ofgem could, according to the company, knock 2.8p per share from NAV. Nevertheless, these were strong results with total dividends (four quarterly and one special) of 8.31p per share, ahead of its retail prices index (RPI) inflation-linked target of 7.68p and covered by earnings with revenue reserves doubled to 0.6p. The target dividend for 2020 was raised by 2.88%, in line with inflation, to 7.9p, offering a prospective yield of 6.1%, according to analysts at Winterflood Securities. With dividends included the NAV grew 10.8% but shareholders enjoyed a total return of 19.1% as the share price rose to a double-digit premium, currently 13.5%.

Neil Wood, Bluefield group finance director, said the valuation reflected increased competition for solar assets since 2017 when the government removed solar subsidies for new projects. ‘We have been watching the valuation of assets increase as new players seek assets that have become scarce because of the lack of new projects,’ he said. While BSIF was busy buying assets in the first few years after launch in 2013, he said prices had risen ‘dramatically’ in recent years and ‘we started to feel pricing was a little overheated’. As the company is ‘not about asset gathering’ it stepped back from acquisitions and instead of moving overseas for opportunities like some peers it focused on ‘nurturing’ the existing assets in the portfolio to make them more efficient. ‘There are not any material projects being built,’ said Wood. ‘And anything that is being built is under the new non-subsidised regime. The secondary market remains very competitive and there is a significant amount of capital on the sidelines and the return hurdle [for many buyers] has decreased, which has been a material driver in the valuation of assets going up over a number of years.’ While Wood said BSIF benefited from asset price rises it was ‘hard watching assets that you are familiar with and would like to acquire passing by’ because of cost.

Rather than watch more expensive assets pass by while new projects remain thin on the ground, the company was taking a proactive approach, and returning to investing in the construction of solar farms. Wood said Bluefield was one of the first investors to fund assets through construction while listed peers would only buy solar farms that were built and operational. Although the landscape of subsidies was different then, he was confident non-subsidised solar farms were cheap enough to build so that the returns would ‘earnings efficient’. ‘We were happy to fund through construction and the non-subsidised market offers us a great opportunity to reinstate the success we had a few years ago in this market,’ he said. A reduction in solar powerm, a government target to eradicate carbon emissions by 2050 and public alarm at climate change provided a good backdrop for prospects, Wood said. ‘Six years ago there was a limited number of green investors and now the landscape has transformed and that needed to happen to meet the ambitious targets [on emissions] that have been set,’ he said.

[zero the hero] 20/9/2019 17:48

Even if the share price is showing a small but steady increase (roughly 12% for me) these dividends are a great reason to be invested. I have called this a boring share before (and it is) but this steady accumulation without fireworks is rather nice.

[masurenguy] 19/9/2019 16:11

"there is no guarantee that it won't drop off a cliff in a few years time."

Well there is no guarantee that the world won't succumb to a nuclear holocaust, global viral disease catastrophe or climate change extinction in a few years time either ! :0). However, the technological trend even 5 years ago suggests that PV panels can productively last for a lot longer than 25 years in moderate climates like ours.

"For monocrystalline silicon, the most commonly used panel for commercial and residential PV, the degradation rate is less than 0.5% for panels made before 2000, and less than 0.4% for panels made after 2000. That means that a panel manufactured today should produce 92% of its original power after 20 years, quite a bit higher than the 80% estimated by the 1% rule. Panels in more moderate climates such as the northern United States had degradation rates as low as 0.2% per year. Those panels could retain 96% of their production capabilities after 20 years." Engineering.com 2014

What will happen to my solar panels after 25 years?

"The truth is we don`t really know – there`s not really a lot of data to look at since photovoltaics is a relatively new technology (the vast majority of all solar panels are less than 10 years old). However, from what we are seeing so far, we have reason to be excited. Here are a couple of interesting reports:
A 33W solar panel (Arco Solar 16-2000) actually outperformed it’s original factory specifications 30 years after it was manufactured.
World`s first modern solar panel still works after 60 years.
Kyocera has reported several solar power installations that continue to operate reliably and generate electricity even though they are nearly 30 years old.

The technology has improved, the solar panels on today`s market are more robust and durable. This is where it gets really interesting. What does all of this actually mean? The lifespan of a modern solar panel is far longer than the 20 years that we use to calculate costs and earnings. This basically translates into more money in your pocket. I would bet that a solar panel installed today would be up and running (and still generating a good amount of electricity) 30 – 40 years down the line."