Bluefield Solar Income Share Discussion Threads

[macc2] 22/9/2017 14:16

Barclays Smart Investors has still not credited me the BSIF dividend that was paid out on 8th Sept. Presumably other providers have paid?

[a0002577] 20/9/2017 08:43

Good suggestion, Tartshagger

For those interested in vanadium batteries see for an explanation

[gateside] 19/9/2017 19:00

Good report. But I hope their figures are more accurate than their dates. As they refer to 31st June! Bit of a bad mistake!

[masurenguy] 19/9/2017 16:34

Bid boom boosts 6% yielding Bluefield Solar Income

Full-year results from Bluefield Solar Income Fund (BSIF) show the UK’s highest yielding listed renewable energy fund clearly benefited from the abolition in April of the ‘ROC’ (renewable obligations certificates) incentives to power generators. The government’s move slashed the construction of new capacity and caused a spike in bidding activity as investors sought to grab the UK’s remaining solar parks, which still come with attractive, long-term, inflation-linked power supply contracts.

Data from Bloomberg New Energy Finance shows that solar market mergers and acquisitions slumped to 0.86 gigawatts (GW, thousand watts) of power in 2016 from 1.45 GW in the previous year after the government announced it was removing the ROC regime. It then bounced back with deal volumes in the first half of this year close to the level for the whole of 2015. Bluefield Partners, BISF’s investment adviser, believes that at this rate solar M&A could hit a record 2.82 GW in 2017.

The surge in deal-making was one of the main factors in BISF’s net asset value (NAV) leaping 18.5% in the 12 months to 31 June. NAV per share rose from 99.4p to 110.5p during the year, with returns from the portfolio topped up by quarterly dividends totalling 7.25p. These were fully covered by underlying earnings per share of 7.32p, up from 7.1p in 2015/16. The total return including dividends to shareholders was even higher, at 22.5%, as income investors chased up the share price now yielding 6.4%. James Armstrong of BSIF’s investment adviser, Bluefield Partners, said the four-year-old fund had reaped the reward of investing in the sector early. ‘This is a maturing market. There’s a lot of secondary market activity. We looked at third party transactions to see what our valuation should be,’ he said.

Analysts sounded a note of caution pointing out the the NAV rise was the result of a big cut in the discount rates Bluefield uses to value the portfolio. Matthew Hose of Jefferies said while valid, the reduction in the WACC (weighted average cost of capital) rate from 6.6% to 6.15% and the equity discount rate from 8.3% to 7.4% in six months ‘still results in a more aggressive portfolio valuation versus peers, in our view', rating the stock ‘underperform’. Maarten Freeriks of Stifel was ‘neutral’ on BSIF rating saying: ‘The company say they were likely too conservative at the 31/12/16 valuation. We were surprised to see such a drastic discount rate move given many of the peer group have adjusted discount rates by lower amounts.’

BSIF’s portfolio contains 81 large and small solar parks which at the end of June had over 441.5 MWp (mega watt peak) in energy capacity, enough to power 133,774 homes and save 189,845 tonnes of carbon dioxide (CO2). The downside of the M&A boom was that BSIF struggled to find new investments at a price it wanted to pay. Having raised £60.6 million from investors last October the fund spent £44.4 million on 10 new plants, a low point since its 2013 launch. ‘Competitive acquisition market conditions and reduced government incentives for investment diminishes our appetite, despite continuing intensive activity by our investment adviser in reviewing possible opportunities,’ chairman John Rennocks told investors.

Armstrong said his team was reviewing 400MW worth of possible investments, but with prices trending ever higher he was determined not to over pay or sacrifice investment returns. With growth from acquisition on the wane, Armstrong said the fund was focused on becoming more efficient. He said its Bristol-based monitoring team was experienced in holding plant operators’ feet to the fire on their service contracts. As a result, despite slightly lower than expected levels of irradiation, or sunlight, during the year and with power prices 30% below their forecast at the fund’s slaunch, the company increased underlying revenues from £20.9 million to £25.1 million in 2016/17.

As BSIF has a policy of fully distributing income to investors, this meant its dividend of 7.25p exceeded last year’s target of 7.18p. This year’s target has been raised to 7.4p in line with the rise in the retail prices index (RPI). Rennocks described the desire to grow dividends by RPI as a ‘challenge’ given 39% of BSIF’s revenues come from the sale of electricity in the unregulated wholesale market, which are not linked to inflation. Armstrong said the company was looking at other low-risk ways of generating revenue, such as the feasibility of locating storage batteries on its solar parks.

BSIF shares firmed a penny to close at 113.75p on Monday after the results, a premium of 10.8% over their current estimated NAV per share of 101.76p, according to Morningstar. This is slightly above the 10.3% average premium of the seven wind/solar energy funds in the Association of Investment Companies’ Renewables sector. Over three years to yesterday’s close BSIF has generated a total shareholder return of 32.5%, above the sector averge of 29.8%, according to Numis Securities data. It is the only listed renewable energy fund to charge a performance fee, taking 30% of any excess return over a 7p dividend, on top of an annual management charge ranging between 1% and 0.6% of net assets. The combined effect in the financial year was an ongoing charge of 1.1%.

[tartshagger] 19/9/2017 14:56

Yes a very good presentation. I noticed that James Armstrong commented on the lack of night-time generation capacity. Maybe it would be a good idea for them to buy into one of the new primary offshore wind farms, which are now being built without subsidy. Coupled with a grid scale vanadium redox energy storage capability, Bluefield could morph into something really huge...

[a0002577] 19/9/2017 10:19

As you say, Rambutan2, well worth a listen. Lots of good info there and some comparison to other Green infrastructure funds. Simple business model - make money, take a little for doing it and pay a goodly amount to shareholders. Probably deserves to be re-rated in line with UKW

[rambutan2] 18/9/2017 14:05

Well worth a listen. I really rate the management.

[a0002577] 18/9/2017 11:33

I like the fact that they use WACC to arrive at NAV - wish all Green infrastructure funds did the same.

They also appear to have announced that the dividend next year will be 7.40 pence or more and that it will be spread more evenly through the year - if there are no new fund raisings. Dividend of 1.50 pence announced and promise to pay first interim early next year.

[masurenguy] 18/9/2017 07:32

RNS Number : 9658Q
Bluefield Solar Income Fund Limited
18 September 2017

Full Year Results

Annual Report and Financial Statements for the year from 1 July 2016 to 30 June 2017

Operational Highlights

-- The Company delivered total underlying earnings(1) of GBP25.1 million (2016: 20.9 million) in the year and underlying EPS(2) of 7.32 pence (2016: 7.10 pence) and declared a fully covered dividend of 7.25 pps against a target of 7.18 pps (2016: 7.25 pps and a target of 7.07 pps);

-- Fully covered debt service including both interest and principal repayment of GBP2.7 million;

-- A successful Placement of new shares in October 2016 raised gross proceeds of GBP60.6 million and the Company's market capitalisation grew to GBP425 million at 30 June 2017;

-- During the year ended 30 June 2017, the Company announced 10 acquisitions, consisting of 10 additional plants, financed by total consideration of GBP44.4 million with an estimated combined energy capacity of 40.3 MWp;

-- As at 30 June 2017, the Company had a total of 41 large solar assets, 40 micro solar assets and 1 roof top asset, with an estimated combined energy capacity in excess of 441.5 MWp, all of which were operational;

-- NAV as at 30 June 2017 was GBP409 million (30 June 2016: GBP308 million), equivalent to a NAV per share of 110.49 pence (30 June 2016: 99.39 pence);

-- WACC used for the Directors' Valuation reduced from 6.6% at 30 June 2016 to 6.15%;

-- In September 2016, the Company announced a long term financing agreement between BSIFIL and Aviva Investors. The GBP187 million facility is fully amortising over 18 years and has two tranches: GBP121.5 million is fixed at a cost of 2.875% and GBP65.5 million has a cost of 0.70% plus RPI; and

-- The portfolio capacity as at 30 June 2017 will power the equivalent of 133,774 homes and save 189,845 tonnes of CO2 in a year.

[18bt] 18/9/2017 07:28

Good results, though the increase in NAV is largely driven by the reduction in the WACC. The company is sticking to its well thought through strategy and it doesn't sound as though there are going to be many acquisitions for the next 12 months, so possibly no share issues. This does what it says on the tin: pays an attractive dividend yield with some RPI linkage - which is a plus when inflation is higher than target.

[a0002577] 08/9/2017 11:11

Interesting release from JLEN this morning of a piece of 'independent' research on the JLEN fund. Interesting because it gives much information/background on how various green subsidies work and gives a comparison to others such as BSIF.

Can be found here

[18bt] 08/9/2017 07:43

Good Investors Chronicle podcast interviewing the manager of this fund a week or two ago. Would highly recommend listening to as background on solar etc. Find on podcast provider, then IC, then Personal Finance

[18bt] 17/5/2017 10:25

SpectoAcc: my thought is that the retail price cap won't make much difference to wholesale prices - what it may well do is hurt the smaller companies as it will reduce switching. The price cap in the prepaid meter market has led to tarrifs from all the players in that market moving to within £30 of each other. Broadly people like me who switch regularly will end up subsidising those that don't. Speaking to people atone major energy co with whom I work a lot, it will take some time for this to take effect: the 2 years reported in the papers is about right. It needs primary legislation and then OFGEM will need to consult on the level of cap/mechanism.

[tonytyke2] 17/5/2017 09:46

Yep, very happy to stay with this one for now. It was bought for diversification to achieve high yield with the hope for some minor increase in share price I think I latched onto this from John Baron's income and growth recommended portfolios in the investors chronicle.
TT

[spectoacc] 13/5/2017 10:29

Wondering what effect the next Tory govnt's retail price caps will have on wholesale energy prices - may get some unexpected consequences of a daft policy. (The energy market is indeed broken - but the way to fix it isn't through price capping).

@rambutan2 - any thoughts on the "annuity" status of BSIF? ie that the assets have a finite life?

[rambutan2] 13/5/2017 03:50

I'm keeping hold of mine for the time being. Although it is the only closed end fund I've ever held on a premium. The nav being linked to energy prices offers something different for me, the div is good, and I like the openess of the management.

[spectoacc] 12/5/2017 19:46

Or - the NAV may rise. The latest fall more due to blended valuation.

But odd thing with BSIF is that it's set up to have a limited life - so in theory is an annuity stream more than a company. I think we all expect there to be value at the end, and they're adding assets along the way too, but still - I can't justify the current premium based on that.

The main thing that would knock them is interest rates rising - and to be fair I can't see that happening remotely soon.

[a0002577] 12/5/2017 18:19

I'm also out - for the time being While yield is good, NAV has dropped.

It seems to me that all these Green Infrastructure ITs are over-priced at the moment with Foresight Solar giving best value.

A shock to the system will bring the prices down and I shall buy in again

[spectoacc] 11/5/2017 08:05

Out; they've done everything they said they'd do, and more, but I just can't stomach the premium any further. Should add that whenever I've sold something trading way above NAV, it's always gone higher. :) Good luck holders.

[nimbo1] 13/4/2017 14:03

shares still in demand at the moment : )

[masurenguy] 19/3/2017 10:15

My perspective remains that BSIF is a better value player with a superior yield.

Foresight Solar requests flexibility and offers shares on 5.9% yield

Foresight Solar Fund (FSFL) has set a share price of 107.75p for its £50 million share placing and asked shareholders for more flexibility to enable it to buy solar power parks in the secondary market. The placing price represents a 2% premium to the £367 million fund’s net asset value (NAV) per share on 23 February and is slightly above the current share price of 107.25p. The yield is around 5.9%. The share placing will close on 29 March and the results announced two days later.

Foresight raised £150 million at its flotation in October 2013. A subsequent fund raise in September 2015 resulted in a further £134.9 million, while a placing of treasury shares in September followed by a tap issue a month later collectively raised a further £60.8 million. This share pricing officially gives investors their first proper look-in for a year and a half. The new shares will be entitled to receive the interim dividend of 1.55p per share to be paid on 5 May. The share placing forms part of a broader plan to place up to 250 million new shares over the next 12 months. The board also has plans for a secondary listing and private placement in South Africa. It said the capital raised will enable the investment team to take advantage of investment opportunities in the market and diversify the shareholder register, which should make it easier to trade Foresight Solar’s shares. For example, BlackRock represents a substantial shareholder, with a stake worth close to 10%. The proceeds will also be used to partially repay the current drawn balance on its two revolving credit facilities which total £95 million. The share placing will enlarge the capital base, which should lead to a reduction in the ongoing charges ratio.

The proposed share price of 107.75p, which is more expensive than the current market price, does not represent an attractive entry point for investors, according to Nigel Moore, senior wealth manager at Pilling & Co. 'The yield of 5.8% is attractive, but the dividend cover is only just covered and the company carries relatively high leverage,' he added.Moore also points out that Foresight Solar recently reported electricity generation was below budget. This was partly due to an outage from the external grid. 'One issue to consider is that 37% of revenues are exposed to spot electricity prices which can be of significant impact, outside of management control,' Moore explained. Pilling & Co does not currently hold Foresight Solar. Monica Tepes, investment companies analyst at Cantor Fitzgerald, added: 'The issue price represents a 2% premium to NAV which broadly equates to the cost of the issue so I would say it is a “fair” price. New shareholders don’t overpay while existing shareholders are not diluted. Relative to the current market price, it is very close, so not necessarily a “steal”.'

Income focus

The board also proposes changing the trust’s investment objective, so there is more of a focus on income through inflation-linked quarterly dividends. They have requested greater flexibility when it comes to acquiring assets and access to a wider pipeline of opportunities. Since Foresight Solar launched in 2013, it has only invested in ground-based solar power plants in the primary market and the investment policy does not permit gearing at the asset level. ‘However, given the growth of UK installed solar capacity over the past five years, the investment opportunities within the secondary market are increasing and are expected to increase further,’ the company said in a statement. As these ground-based solar power plants have already been owned, typically by construction companies, it has become commonplace for vendors in the secondary market to have incurred debt at the asset level. The board is therefore proposing that gearing at an asset level should be allowed in the future. The trust grew its dividend by 1.15% in 2016 when its dividend yield was 5.9%, slightly down in comparison to the previous year's 6.1%.

Performance

The trust has experienced some volatility over the past year, moving from close to par last March to a discount to NAV of 6.3% in July. Since then, Foresight Solar has traded at a steady, healthy premium. Over the past three years, its shares have risen by 27.9%, slightly above 26.8% achieved by the average trust in the infrastructure – renewables sector. Its NAV has returned 25.5% over three years, outpacing a sector average of 19.9%. The announcement of Foresight Solar’s shareplacing plans follows that of £2.4 billion HICL Infrastructure (HICL), which is hoping to raise at least £205 million. This is its first formal fund raising in four years and equates to a 4.9% yield.

[rambutan2] 05/3/2017 19:14

I note that Foresight (FSFL) is amending its investment strategy and pretty much forgetting the capital growth bit, so coming more into line with BSIF's of paying out all excess income. However, as yet, it hasn't upped its div, so BSIF's remains the most enticing.

[nimbo1] 27/2/2017 15:56

large volume today

[18bt] 24/2/2017 08:27

This is a very clear statement and explanation of the business model, which I like greatly. This is a core inflation-protected holding for me if held in a tax free fund.

[spectoacc] 23/2/2017 08:14

@Masurenguy - thanks for going to the effort to post that.