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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bluefield Solar Income Fund Limited | LSE:BSIF | London | Ordinary Share | GG00BB0RDB98 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.20 | -0.18% | 109.00 | 108.80 | 109.00 | 109.40 | 108.60 | 109.40 | 535,800 | 16:35:07 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | 49.07M | 46.79M | 0.0772 | 14.09 | 662M |
From Jul 2022 to Jul 2024
TIDMBSIF
RNS Number : 2607B
Bluefield Solar Income Fund Limited
30 September 2022
30 September 2022
Bluefield Solar Income Fund Limited
('Bluefield Solar' or the 'Company')
Annual Report and Financial Statements for the Year Ended 30 June 2022
Bluefield Solar (LON:BSIF), the sterling income fund focused on acquiring and managing UK-based renewable energy assets, is pleased to announce its Annual Results for the Year Ended 30 June 2022.
Highlights
As at 30 June 2022 / 30 June 2021
Hot Features
Premium
Net Asset Value (NAV) Dividend Target per Share
GBP858.4m GBP471.4m 8.16pps 8.00pps
NAV per share Actual Dividend Declared
140.39p 115.83p 8.20pps 8.00pps
Underlying Earnings(1) Total Shareholder Return in
(pre amortisation of debt) year(2)
GBP66.8m GBP48.6m 14.55% (3.79)%
Underlying Earnings per share(1) Total Return in year(3)
(pre amortisation of debt) 28.16% 5.83%
12.04p 11.34p
Total return to Shareholders
since IPO
92.45% 74.79%
Underlying Earnings per share(1) 57% of revenues are indexed
(post amortisation of debt) linked over life of the subsidies
9.54p 9.16p
Environmental, Social and Governance (ESG)
ESG KPIs
Ø Over 624,000,000 kWh of renewable energy generated
Ø Over 120,000 tonnes of CO2e savings achieved
Ø Equivalent of 215,000 homes powered with renewable energy
Ø Over GBP154,000 paid to community benefit schemes
ESG Highlights
Ø Developed a robust ESG strategy, including an ESG vision,
commitments & KPIs
Ø Published the Company's first TCFD disclosure
Ø Aligning with Article 8 of the Sustainable Finance Disclosure
Regulation (SFDR)
Forward Focus
Further investment into the Company's solar and battery development
pipeline has increased it to a combined total of C.900MW;
In July 2021, the Company completed its maiden wind investment,
acquiring 109 small scale UK onshore wind turbines with the
potential for future re-powering with larger turbines for an
initial consideration of GBP63m.
1. Underlying earnings is an alternative performance measure employed by the Company to provide insight to the Shareholders by linking the underlying financial performance of the operational projects to the dividends declared and paid by the Company. Further detail is provided below.
2. Total Shareholder Return is based on share price movement and dividends paid in the year. It is defined in the Alternative Performance Measure appendix.
3. Total Return is based on the NAV movement and dividends paid in the year. It is defined in the Alternative Performance Measure appendix.
Results Summary:
For the year For the year
ended ended
30 June 2022 30 June 2021
Total operating income GBP176,141,970 GBP25,921,639
Total comprehensive income before GBP174,572,832 GBP24,517,576
tax
Total underlying earnings (pre GBP66,750,110 GBP48,663,667
amortization of debt) (1)
Earnings per share (per below) 34.91p 6.25p
Underlying EPS available for distribution(2) 11.92p 11.09p
Total declared dividends per share
for year 8.20p 8.00p
Earnings per share carried forward
(See below) 3.39p 2.67p
NAV per share 140.39p 115.83p
Share price at 30 June 131.00p 121.40p
Total return(3) 28.16% 5.83%
Total Shareholder Return(4) 14.55% (3.79)%
Total Shareholder Return since
inception(5) 92.45% 74.79%
Dividends per share paid since
inception 61.45p 53.39p
1 . Underlying earnings is an alternative performance measure employed by the Company to provide insight to the Shareholders by linking the underlying financial performance of the operational projects to the dividends declared and paid by the Company. Further detail is provided below.
2. Underlying EPS is calculated using underlying earnings available for distribution divided by the average number of shares.
3. Total return is based on NAV per share movement and dividends paid in the year.
4. Total Shareholder Return is based on share price movement and dividends paid in the year .
5. Total Shareholder Return since inception is based on share price movement and dividends paid since the IPO.
John Rennocks, Chairman of Bluefield Solar, said:
"It is highly pleasing to report another set of excellent results for Bluefield Solar. With maiden investments into onshore wind and storage, as well as further acquisitions of solar, supported by two successful capital raises, the financial standing of the Company has never been stronger as it enters the FTSE 250. Furthermore, the growth of the Company's development pipeline to over 1.1GW, provides Bluefield Solar with a wonderful opportunity to play an increasing role in the transformation of the UK's energy map."
Analyst presentation
A remote call for analysts will be hosted by James Armstrong and Neil Wood of Bluefield Partners LLP at 09:30am today, 30 September 2022. For details, please contact Buchanan on BSIF@buchanan.uk.com.
A copy of the presentation is available via the Company's website and an audio webcast of the presentation will also be made available after 12pm today.
https://bluefieldsif.com/
For further information:
Bluefield Partners LLP (Company Investment Tel: +44 (0) 20 7078 0020 Adviser) www.bluefieldllp.com James Armstrong / Neil Wood / Giovanni Terranova Numis Securities Limited (Company Broker) Tel: +44 (0) 20 7260 1000 Tod Davis / David Benda / Vicki Paine www.numis.com Ocorian Administration (Guernsey) Limited Tel: +44 (0) 1481 742 742 (Company Secretary & Administrator) www.ocorian.com Patrick Ogier Media enquiries: Tel: +44 (0) 20 7466 5000 Buchanan (PR Adviser) www.buchanan.uk.com Henry Harrison-Topham / Henry Wilson BSIF@buchanan.uk.com
Notes to Editors
About Bluefield Solar
Bluefield Solar is a sterling income fund focused on acquiring and managing renewable energy and storage projects in the UK, to provide long term, growing dividends for its shareholders whilst furthering the decarbonisation of the energy system. Not less than 75% of the Company's gross assets will be invested into UK solar assets. The Company can also invest up to 25% of its gross assets into other technologies, such as wind and storage. The majority of the Company's revenue streams are regulated and non-correlated to short term UK energy market fluctuations. Bluefield Solar owns and operates one of the UK's largest, diversified portfolios of solar assets with a combined installed power capacity in excess of 766 MWp.
Bluefield Solar is listed on the Main Market of the London Stock Exchange and is a member of the FTSE 250, classified within the Closed End Investments subsector.
Further information can be viewed at www.bluefieldsif.com
About Bluefield Partners
Bluefield Partners LLP was established in 2009 and is an investment adviser to companies and funds investing in renewable energy infrastructure. It has a proven record in the selection, acquisition and supervision of large-scale energy assets in the UK and Europe. The team has been involved in over GBP4 billion renewable funds and/or transactions in both the UK and Europe, including over GBP1 billion in the UK since December 2011.
Bluefield Partners LLP has led the acquisitions of, and currently advises on, over 100 UK based solar PV assets that are agriculturally, commercially or industrially situated. Based in its London office, it is supported by a dedicated and experienced team of investment, legal and portfolio executives. Bluefield Partners LLP was appointed Investment Adviser to Bluefield Solar in June 2013.
Corporate Summary
Investment objective
The investment objective of the Company is to provide Shareholders with an attractive return, principally in the form of regular income distributions, by being invested primarily in solar energy assets located in the UK. The Company also invests a minority of its capital into other renewables assets including wind and energy storage.
Structure
The Company is a non-cellular company limited by shares incorporated in Guernsey under the Law on 29 May 2013. The Company's registration number is 56708, and it is regulated by the GFSC as a registered closed-ended collective investment scheme and as a Green Fund after successful application under the Guernsey Green Fund Rules to the GFSC on 16 April 2019 . The Company's Ordinary Shares were admitted to the Premium Segment of the Official List and to trading on the Main Market of the LSE following its IPO on 12 July 2013. The issued capital during the year comprises the Company's Ordinary Shares denominated in Sterling.
The Company has the ability to use long term and short term debt at the holding company level, as well as having long term, non-recourse debt at the SPV level.
Investment Adviser
The Investment Adviser to the Company during the period was Bluefield Partners LLP which is authorised and regulated by the UK FCA under the number 507508. In May 2015 Bluefield Services Limited (BSL), a company with the same ownership as the Investment Adviser, commenced providing asset management services to the investment SPVs held by the UK limited company parent, which changed from Bluefield SIF Investments Limited (BSIFIL) to Bluefield Renewables 1 Limited (BR1) in May 2022 to facilitate arrangement of the new RCF. In August 2017 Bluefield Operations Limited (BOL), a company with the same ownership as the Investment Adviser, commenced providing operation and maintenance services to the Company and provides services to 64 sites (555MW) of the investment portfolio held by BR1 as at year end.
In December 2020 Bluefield Renewable Developments Limited (BRD), a company with the same ownership as the Investment Adviser, commenced providing the Company with new build development opportunities in addition to arrangements in place with the Company's other development partners.
Chair's Statement
Introduction
As the Company ends its ninth year of operation, it gives the Board and I great pleasure once again to be reflecting on a year of considerable success for the Company.
As the world emerged from the Covid pandemic and the global economy rebounded, the Company's Investment Adviser succeeded in growing the generating capacity of the Company's portfolio by over 25% in the period to June 2022. When combined with the increase seen in the previous financial year, your Company's portfolio of operating renewable assets has grown by over 60% since June 2020. In the light of recent increases in inflation and (particularly) the price of electricity, our acquisition programme looks well timed and provides shareholders with excellent value.
The Company's ability to maximise the value of energy sales through its strategy of typically fixing prices 18 months ahead, and thanks to its high levels of inflation- linked revenues, it continues to deliver a sector leading, covered dividend. With its proprietary pipeline of business, the Company intends to continue to grow its high quality asset base.
The principal activities of the Company, as well as main features of the period under review, are:
-- The Company completed the purchase of three portfolios of subsidised onshore wind and solar assets, with a combined enterprise value of approximately GBP300m;
-- To complement this level of investment, the Company raised c.GBP255m through equity issuance, in August 2021 and June 2022;
-- Ensuring a focus on increasing future renewable generation and supporting the UK's transition to Net Zero, 45MW of new build solar and over 125MW of ready to build storage assets were purchased for a combined total of GBP11m;
-- Momentum on the Company's development pipeline continued apace, with planning consents being secured on c.100MW of solar projects whilst the wider total pipeline grew to c.900MW of solar and c.429MW of battery storage;
-- The Net Asset Value per share rose to 140.39pps (30 June 2021: 115.83pps), reflecting both the dramatically higher electricity prices which have been seen since Russia's invasion of Ukraine and the spike in inflation;
-- Total declared dividends for the year have been increased to 8.20pps, ahead of our original target of 8.12pps;
-- Post period end the Company signed contracts for the construction of Yelvertoft, a CfD backed 50MW solar plant; and
-- The Company was recently promoted to the FTSE 250 index.
At the time of writing, the Group's total outstanding debt has increased to c.GBP460 million and its leverage level stands at c.35% of GAV, which is at the lower end of our preferred range of 35%-45%.
Acquisitions
Over the reporting period the Company completed 153.3MW of ROC and FiT accredited acquisitions, consisting of solar (95MW) and onshore wind (58.3MW) projects, increasing the Company's generating portfolio to 766MW as at 30 June 2022 (June 2021: 613MW); this resulted in a generating mix for the portfolio of 92.4% solar and 7.6% onshore wind, the latter being our first foray into this sector. The Company's mandate allows for diversification up to 25% of its GAV into non solar renewables.
In addition to successfully completing acquisitions of subsidised assets, good progress has been made on the Company's strategy of investing in the future build out of the UK's renewable mix through receipt of planning consent on two ready to build PV plants totalling 80MW and investments into ready to build co-located solar and storage (45MW and 25MW, respectively), as well as standalone battery storage of over 100MW.
These ready to build assets provide the Company with the opportunity to invest up to GBP34m over the next year and are in addition to the investment of up to GBP34m to complete construction of Yelvertoft. More details of acquisitions during the period are outlined below within the Investment Adviser's report.
Underlying Earnings and Dividend Income
The Underlying Earnings for the period, pre amortisation of long-term finance, were GBP66.8m, or 12.04pps, and underlying earnings for distribution, post debt repayments of GBP13.8m (2.50pps), were GBP52.9m (9.54pps).
The strong operational performance of the Company's portfolio over the six months to 31 December 2021, combined with the benefit of brought forward revenue reserves of 2.39pps (adjusted 204,452,595 new shares issued during the period) means the Board has earned comfortably in excess of its dividend target of 8.16pps for the year to 30 June 2022. By declaring a fourth interim dividend of 2.09pps, the total dividend for the year is 8.20pps and the Company thereby remains the sector's highest dividend distributor (on a pence per share basis).
Further details of Underlying Earnings are set out in the Investment Adviser's Report below.
Valuation and Discount Rate
Demand for renewable projects, at all stages of their lifecycle, remains strong ; as both power prices and inflation have surged, valuations of assets have risen in tandem.
The Investment Adviser is now observing that pricing for solar portfolios, on GBPm/MW basis, has moved to c.GBP1.40m/MW, with the upper range on deals closer to GBP1.50m/MW. Transactions in previous years have been in the GBP1.25m/MW - GBP1.40m/MW range.
Higher interest rates and the inclusion of onshore wind within the portfolio have caused the Board to increase the discount rate for the 30 June valuation to 6.75% (June 2021: 6%).
By valuing the Company's operational portfolio at an enterprise value of GBP1,181m (c.GBP1.39m/MW for the solar assets (vs. GBP1.26m/MW in June 2021), the Directors' Valuation as at 30 June 2022 is in line with recent market transactions and consistent with the Company's valuation methodology of 'willing buyer/willing seller'.
Please see below in the Investment Adviser's report for further details on the Directors' Valuation.
Inflation
Over the past year inflation has surged, reflecting higher commodity and energy prices following a recovery in demand from pandemic lows. Since March 2022, Russia's invasion of Ukraine and the continuing conflict there have helped push inflation to levels not seen since the 1980s. The result is current UK inflation, on an RPI basis, close to 12% (CPI 9.4%).
Prevailing opinion among economic forecasters remains that inflation will abate during 2023, but it is possible that price pressures will endure. Since our income grows with inflation, resulting from the indexation provisions in our regulated revenues, increases in RPI boost both our earnings and the valuation of our assets.
Reflecting the latest economic forecasts, as well as the transition from RPI to CPIH post 2030, inflation assumptions supporting the valuation are 10.9% in 2022 (an increase from 6.4% as per the December 21 Interim statements), 3.4% in 2023 and thereafter 3.0% until 2029, before dropping to 2.25%.
Power Prices
Increasing electricity demand, as the world emerged from the Covid 19 pandemic, had seen power prices rising steadily but Russia's invasion of Ukraine sent shockwaves through European energy markets, with concerns around the supply of Russian gas to Europe driving a 45.5% [1] increase in gas prices and sending UK day-ahead power prices surging from c.GBP78/MWh to highs of c.GBP593/MWh in August 2022.
Navigating such turbulent times requires care, and the Company's PPA strategy of fixing power for between one and three years has allowed it to fix power contracts throughout the period of rising prices. This not only insulates the portfolio from market volatility, as successfully demonstrated during the Covid pandemic, but also enables it to create pricing certainty at increasing levels for up to three years ahead. Evidence of this is seen in the average fixed price achieved for fixed contracts from January 2022 onwards. As at June 2022 the average weighted price for these contracts were GBP190.1/MWh, GBP303/MWh for January 2023 and GBP230/MWh for June 2023. This provides the expectation of over 2 x dividend cover (post and ex-carried forward earnings) in the financial years ending June 2023 and June 2024.
Please see below in the Investment Adviser's report for a graph illustrating the blended power curves used by the Company in the Directors' Valuation.
Environmental, Social and Governance ("ESG")
It gives me great pleasure to present the Company's first ESG strategy within this report and I take pride in the unwavering commitment the Board and Investment Adviser have in ensuring the Company strives to implement best practice policies in this hugely important area.
This year has seen the first retirement from the Board of Directors since the Company was established in 2013, so I would like to extend a warm welcome to Libby Burne who joined us as a Non-Executive Director in October 2021 following a distinguished career at PwC; and to thank Laurence McNairn, who has retired from the Board, for his wise counsel and dedication since the very early days of the Company.
After nine years as Chair it is now my intention to stand down at the forthcoming AGM, and the Board has agreed that John Scott will move from his role as Senior Independent Director to succeed me as Chair of the Company. I believe this is important for continuity as we rotate other Board members who have served since the IPO. John intends to serve not more than three additional years, during which time the newer members of the Board will be more established, and we will look for a longer term replacement as Chair. We are also at an advanced stage in appointing a new non-executive director who will succeed John as Senior Independent Director at the AGM.
The Energy Crisis and Reform
The energy crisis has resulted in power prices reaching unsustainably high levels, putting pressure on every section of the economy. The government is engaging with renewable energy generators to see how our industry can be part of the solution, recognising that the renewable energy sector is well placed to play a major role in creating a long term solution to this crisis. Solar and wind are today the lowest cost generators in the market, their technologies are relatively quick to deploy and they provide indigenous, clean and secure supplies of energy. The Company welcomes the opportunity to discuss an equitable reform of the electricity market that will result in consumers seeing the benefit of the lower generating costs of existing portfolios. In the event that both government and generators find a fair solution that will not impair the future attractiveness of the market and which does not constrain our ability to raise the new capital required to support the investment needed to continue the process of decarbonising the economy, there is an opportunity for a good outcome for all.
Conclusion
With high levels of index-linked revenues, a conservative debt and power sales strategy and no currency risk, we have demonstrated after close to a decade of operation that your Company remains a safe haven for investors looking for robust sterling income, with sector leading earnings and dividends.
I am delighted that the Company has been promoted to membership of the FTSE 250 index, and it does so on the strongest of financial footings and with a wonderful opportunity to play an increasing role in the transformation of the UK's energy map.
John Rennocks
Chair
29 September 2022
The Company's Investment Portfolio
[chart]
Analysis of the Company's Investment Portfolio
[chart]
Strategic Report
1. Company's Objectives and Strategy
The Company seeks to provide Shareholders with an attractive, sustainable return, principally in the form of quarterly income distributions, by investing in a portfolio of large-scale UK based renewable energy infrastructure assets. Subject to maintaining a prudent level of reserves, the Company aims to achieve this through optimisation of asset performance, acquisitions and the use of gearing. The Company's original dividend target for the financial year ended 30 June 2022 was 8.12pps and this was subsequently raised to a target of not less than 8.16pps. Having now declared four interim dividends totalling 8.20pps, the Company is pleased to have exceeded this target.
The Operational and Financial Review section below provides further information relating to performance during the year.
2. Company's Operating Model
Structure
The Company holds and manages its investments through a UK limited company, in which it is the sole shareholder. On 6 May 2022 the UK limited company parent changed from BSIFIL to Bluefield Renewables 1 Limited (BR1) to facilitate arrangement of the new RCF.
[chart]
Management
Board and Committees
The independent Board is responsible to Shareholders for the overall management of the Company. The Board has adopted a Schedule of Matters Reserved for the Board which sets out the particular duties of the Board. Such reserved powers include decisions relating to the determination of investment policy, approval of new investments, oversight of the Investment Adviser, approval of changes in strategy, risk assessment, Board composition, capital structure, statutory obligations and public disclosure, financial reporting and entering into any material contracts by the Company.
Through the Committees and the use of external independent advisers, the Board manages risk and governance of the Company. The Board is fully made up of independent non-executive Directors, three of whom are Guernsey residents. See the Corporate Governance Report for further details.
Investment Adviser
The Investment Adviser's key responsibilities include identifying and recommending suitable investments for the Company and negotiating the terms on which such investments will be made.
Through a Technical Services Agreement with BR1 the Investment Adviser is also responsible for all issues relating to the supervision and monitoring of existing investments (included within the fee cap under the Investment Advisory Agreement). The Company has appointed BSL, a company with the same ownership as the Investment Adviser, to provide asset management services for the Company's portfolio. Bluefield Operations Limited and Bluefield Renewable Developments Limited also have the same ownership as the Investment Adviser and provide operational management for the majority of the Company's investments and a pipeline of development projects for the Company respectively.
During the year the Investment Adviser has been paid a fee equivalent to 0.6% of NAV at 30 June 2022 (0.8% at 30 June 2021) reflecting the increase in the Company's asset size. A summary of the fees paid to the Investment Adviser is given in Note 16 of the financial statements. The fees paid to BSL, BRD and BOL, the Solar Asset Management and Operations and Maintenance businesses under common ownership with the Investment Adviser are also detailed in Note 16.
Administrator
The Board has delegated administration and company secretarial services to the Administrator. Further details on the responsibilities assigned to the Investment Adviser and the Administrator can be found in the Corporate Governance Report.
Employees and Officers of the Company
The Company does not have any employees and therefore policies for employees are not required. The Directors of the Company are listed below.
Investment Process
Through its record of investment in the UK renewable energy market, the Investment Adviser has developed a rigorous approach to investment selection, appraisal and commitment.
Repeat transaction experience with specialist advisers
The Investment Adviser has worked with a range of specialist advisers from multiple disciplines in each of the transactions it has executed in the UK and European market and is able to source relevant expertise to address project issues both during and following a transaction.
Application of standardised terms developed from direct experience
The Investment Adviser has developed standardised terms which have been specifically tested by reference to real transaction and project operational experience. Whilst contract terms are specifically negotiated and tailored for each individual project, the Investment Adviser always includes contractual protection regarding recovery of revenue losses for underperformance and obligations for correction of defects.
Rigorous internal approval process
All investment recommendations issued to the Company, are made following the formalised review process described below:
(1) Investment origination and review by Managing Partners
Before incurring costs in relation to the preparation of a transaction, a project is concept reviewed by the Investment Adviser's Managing Partners, following which, a letter of interest or memorandum of understanding is issued, and project exclusivity is secured.
(2) Director Concept Approval
In the event that material costs are to be incurred in pursuing a transaction, a concept paper is issued by the Investment Adviser for review by the Board. This concept review fixes a project evaluation budget as well as confirming the project proposal is in line with the Company's investment policy and strategy and aligned to ESG principles.
(3) Due diligence
In addition to applying its direct commercial experience in executing renewable energy acquisitions and managing operational projects, the Investment Adviser engages legal, technical and, where required, insurance and accounting advisers from its extensive network to undertake independent due diligence.
(4) Bluefield Partners LLP Investment Committee
Investment recommendations issued by the Investment Adviser are made following the submission of a detailed investment paper to the Investment Committee. The Investment Committee operates on the basis of unanimous consent and has a record of making detailed evaluation of project risks. The investment paper submitted to the Investment Committee discloses all interests which the Investment Adviser and any of its affiliates may have in the proposed transaction.
(5) Board approval
Following approval by the Investment Adviser Investment Committee, investment recommendations are issued by the Investment Adviser for review by the boards of the Company and BR1. The boards undertake detailed review meetings with the Investment Adviser to assess the recommended projects. If the boards of both the Company and BR1 approve the relevant transaction, the Investment Adviser is authorised to execute it in accordance with the Investment Adviser's recommendation and any condition stipulated in the boards' approvals. The boards are regularly updated on the pipeline of potential new investments to help provide context for capital allocation decisions.
(6) Closing memorandum
Prior to executing the transaction, the Investment Adviser completes a closing memorandum confirming that the final transaction is in accordance with the terms presented in the investment paper to the Investment Committee; detailing any material variations and outlining how any conditions to the approval of the Investment Committee and/or Board approval have been addressed. This closing memorandum is countersigned by an appointed member of the Investment Committee prior to completing the transaction.
Managing conflicts of interest
The Investment Adviser is regulated by the FCA and is bound by conduct of business rules relating to management of conflicts of interest. The Board has noted that the Investment Adviser has other clients and has satisfied itself that the Investment Adviser has procedures in place to address potential conflicts of interest which, together with any mitigation measures, are disclosed in the investment recommendation for each investment.
3. Investment Policy
The Company invests in a diversified portfolio of renewable energy assets, all located within the UK, with a focus on utility scale assets and portfolios on greenfield, industrial and/or commercial sites. With a focus on solar, the Company has the ability to invest up to 25% of the Company's GAV into complementary renewable technologies, principally wind and storage. The Company's responsible investment approach is discussed in section 4 of the Strategic Report.
Individual assets or portfolios of assets are held within SPVs into which the Company invests through equity and/or debt instruments. The Company typically seeks legal and operational control through direct or indirect stakes of normally 100% in such SPVs, but may participate in joint ventures or minority interests to gain exposure to assets which the Company would not be able to acquire on a wholly-owned basis.
The Company may, at holding company level, make use of both short term debt finance and long term structural debt, but such holding company level debt (when taken together with the SPV finance noted above) will not exceed 50% of the GAV. It may also make use of non-recourse finance at the SPV level to provide leverage for specific renewable energy infrastructure assets or new portfolios provided that at the time of entering into (or acquiring) any new financing, total non-recourse financing within the portfolio will not exceed 50% of GAV.
While it is not the Company's policy to be a long term holder of non-UK assets, the Company can invest up to 10% of GAV into assets outside the UK to enable it to acquire portfolios with a mix of UK and non-UK assets. Furthermore, up to 5% of the GAV may be invested into pre-construction UK solar development opportunities. The aggregate exposure to other renewable energy assets, energy storage technologies, UK solar development opportunities and non-UK assets will be limited to 30% of the Company's GAV.
No single asset (excluding any third-party funding or debt financing in such asset) will represent, on acquisition, more than 25% of the NAV.
The Company derives its revenues from the sale of ROCs, FiTs and CfDs (or any such regulatory regimes that may replace them from time to time) alongside the sale of electricity under power purchase agreements with counterparties such as co-located industrial energy consumers and wholesale energy purchasers.
The Company may invest up to 5% of GAV into further UK solar development opportunities and purchase assets pre- or post- construction in order to:
1. Maximise quality and scale of deal flow; 2. Optimise the efficiency of the acquisitions; 3. Minimise risk via appropriate contractual agreements ; and 4. Acquire assets using prudent assumptions.
Listing Rule Investment Restrictions
The Company currently complies with the investment restrictions set out below and will continue to do so for so long as they remain requirements of the FCA:
-- neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in the context of the Group as a whole;
-- the Company must, at all times, invest and manage its assets in a way which is consistent with its objective of spreading investment risk and in accordance with the published investment policy; and
-- not more than 10% of the GAV at the time of investment is made will be invested in other closed-ended investment funds which are listed on the Official List.
As required by the Listing Rules , any material change to the investment policy of the Company will be made only with the prior approval of the FCA and Shareholders.
4. Responsible Investment
In line with its purpose of 'Renewable Energy, Delivered Responsibly', the Company is committed to delivering shareholder value whilst at the same time promoting positive environmental and social impact. As part of its responsible investment approach, the Company must consider both the positive and adverse impacts of its investment decisions on sustainability factors, seeking to mitigate the negative where possible.
ESG consideration within the investment process has been enhanced this year, with the creation of a standalone ESG due diligence questionnaire. Developed in line with SASB standards, the questionnaire includes an exclusionary list, high-level climate screening and SFDR considerations, in addition to focused environmental, social and governance questions. As part of a recent potential acquisition, the Company outsourced ESG due diligence to an external consultant.
Further information on the Company's approach to Responsible Investment and its ESG strategy is contained within the ESG Report below.
5. Operational & Financial Review for the period
Key Performance Indicators
As at 30 June As at 30 June
2022 2021
----------------------------------------------- ------------- -------------
Market Capitalisation (GBP'000s) 801,002 494,098
Total dividends per share declared
in relation to the year 8.20p 8.00p
NAV (GBP'000s) 858,391 471,426
NAV per share 140.39p 115.83p
Total Shareholder Return 14.55% (3.79)%
----------------------------------------------- ------------- -------------
Market Capitalisation (1)
The Directors regard the Company's market capitalisation as an important secondary indicator of the trading liquidity in its shares. The Company's market capitalisation grew from GBP494m to GBP801m, due to an increased share price as a result of two successful capital raises and during the year.
Total Dividends Per Share Declared (1)
BSIF generates returns primarily in the form of distributions and the Company has a progressive dividend target, so it is important that the dividend increases each year. During the year the dividend grew by 2.5% from 8pps to 8.20pps.
NAV
The Company's average NAV is a determinant of BSIF's total expense ratio as forms the denominator of the calculation. The finite life of renewable asset leases will ultimately lead to the attrition the Company's NAV. The Directors recognise this as a significant feature and have expanded the mandate of the Company in part to mitigate this effect. The Company's NAV grew during the year as a result of capital raising activity and valuation uplifts.
(1) please see Alternative Performance Measures below for further details.
NAV Per Share(1)
Whilst the Company's principal goal is to produce income, the NAV per share movement informs our shareholders and the Board whether this income has been produced at the expense of capital growth. The NAV per share grew during the year and produced a positive return to capital, largely as result of valuation uplifts deriving from strong demand for electricity and renewable generation assets.
Total Shareholder Return(1)
This is a measure of the combined return to Shareholders from dividend income and share price movements and whilst this should be positive in the long-term, short term fluctuations in shareholder and market sentiment can cause this number to be positive or negative. The positive return of 14.55% for 2022 compared to the negative return of -3.79% in 2021 reflects an improvement in market sentiment for the Company and the renewables sector.
Acquisitions
See the Investment Adviser's Report in Section 2.
Portfolio Performance
See the Investment Adviser's Report under Sections 2 and 4.
The Company's PPA strategy is to enter into short term contracts with contracting periods spread quarterly across the portfolio in order to minimise the portfolio's sensitivity to short term price volatility.
Summary Statement of Comprehensive Income
Year ended Year ended
30 June 2022 30 June 2021
GBP million GBP million
-------------------------------------------------------------- ------------------------- -------------------------
Total Income (Note 4 of the financial statements) 0.8 0.7
Change in fair value of assets (Note 8
of the financial statements) 175.4 25.2
Administrative expenses (Note 5 of the
financial statements) (1.6) (1.4)
Total comprehensive income 174.6 24.5
-------------------------------------------------------------- ------------------------- -------------------------
Earnings per share 34.91p 6.25p
Income for the period includes interest income and monitoring fees paid by BSIFIL and BR1 to BSIF.
The total comprehensive income before tax of GBP174.6 million reflects the performance of the Company when valuation movements and operating costs are included. Further detail on valuation movements of BR1's portfolio is given in the Report of the Investment Adviser.
The Company's ongoing charges ratio is 1.02% (2021: 1.14%), calculated in accordance with the AIC recommended methodology, which excludes non-recurring costs and uses the average NAV in its calculation. See below for a tabular calculation of the Company's ongoing charges ratio.
6. Directors' Valuation* of Company's portfolio
The Investment Adviser, or an independent external valuer, is responsible for preparing the fair market valuation recommendations for the Company's investments for review and approval by the Board.
Valuations are carried out semi-annually, as at 31 December and 30 June, with an external review as and when the Board deems appropriate.
This fair market value adopted for the portfolio was GBP939.9m (note 8 of the financial statements) and is confirmed by an alternative approach using a combination of discounted cash flows of income generated from the portfolio of investments.
The Board reviews the recommendations of the Investment Adviser to form an opinion of the fair value of the Company's investments. A detailed analysis of the Directors' Valuation is presented in the Report of the Investment Adviser.
7. Principal and Emerging Risks
Under the FCA's Disclosure Guidance and Transparency Rules, the Board is required to identify those material risks to which the Company is exposed and take appropriate steps to mitigate those risks.
These inherent risks associated with investments in the renewable energy sector could result in a material adverse effect on the Company's performance and value of Ordinary Shares.
The Company's risk register covers five main areas of risk:
-- Portfolio Management; -- Fund Operations; -- Regulation and Compliance; -- External; -- Emerging.
Each of these areas, together with the principal risks associated with that category, is summarised in the table below and includes commentary on the mitigating factors. The list is a subset of a much larger set of risks which the Board reviews on a regular basis. Emerging risks are identified in the course of board discussions and meetings and are recorded in a separate area of the risk register.
* Directors' Valuation is an alternative performance measure to show the gross value of the SPV investments held by BR1, including their holding companies. A reconciliation of the Directors' Valuation to Financial assets at fair value through profit and loss is shown in Note 8 of the financial statements.
PORTFOLIO MANAGEMENT
Risk Potential Impact Mitigation
1. Portfolio Acquisition Poor investment decisions The Board reviews the
Risk or missed investment Company's investment
opportunities. pipeline with the
Investment
Adviser, who have
substantial
experience in the sector,
on a regular basis.
To fund acquisitions,
the Company has access
to debt financing under
terms of its revolving
credit facility, as
well as the option to
complete equity issuances.
--------------------------------------- ---------------------------------------
2. Portfolio Operational Underperformance of wind, BSL as asset manager
Risk solar or storage plant prepares a quarterly
versus expectations at operational summary
acquisition. for the Board that
evaluates
the performance of each
plant against budget
and highlights any issues
to be addressed. The
Board has agreed KPIs
for BSL with Bluefield
LLP and is in the process
of agreeing KPIs for
Bluefield Operations
Ltd (BOL), to monitor
contractor performance
as more projects are
transitioned to BOL.
--------------------------------------- ---------------------------------------
OPERATIONAL
Risk Potential impact Mitigation
3. Valuation error Valuations of the SPV Valuations presented
investments by the Investment Adviser
maybe over or understated. are underpinned by comparisons
with other market transactions
and confirmed by long
term DCF model. The
valuations are reviewed
and challenged by the
Board at a minimum on
a semi-annual basis.
The Investment Adviser
is currently working
to simplify the Company's
models to reduce the
risk of errors and minimise
data storage requirements.
To minimise the risk
of forecast error and
to mitigate the impact
of power price volatility
on the Company's portfolio
valuation, blended power
price curves from three
leading forecasters
are used in the portfolio
cash flow model.
------------------------------------------ ------------------------------------------
OPERATIONAL
Risk Potential impact Mitigation
4. Depreciation The portfolio NAV will The Investment Adviser
of NAV depreciate through the has been requested to
Company's life subject model how the portfolio
to other market fluctuations NAV will move with time,
and the addition of new producing long term
assets. scenario planning for
the Board's review.
The Board has authorised
the Investment Adviser
to negotiate lease extensions
on all active plants,
as each successful extension
increases the life of
the Company and reduces
the depreciation of
the NAV. The Company
has secured development
permission for its first
unsubsidised solar plant
and has added new technologies
such as battery storage
to its portfolio to
mitigate the impact
of the expiry of the
FiT and ROC regimes.
----------------------------------------- -------------------------------------------
EXTERNAL
Risk Potential impact Mitigation
5. Physical and Global climate change has A number of mitigation
Transitional Climate-related the potential to disrupt measures are already
Risks the operation of the company in place for physical
both directly via solar and transitional climate-related
irradiation and wind speed risks, as described
and indirectly via the in the TCFD disclosure
risk of damage to portfolio below. We will also
assets, power transmission undertake scenario analysis
infrastructure or the demand for material physical
for the electricity that and transitional climate-related
we produce. risks and opportunities
within the next 12 months,
to better understand
the potential impacts
on the Company. In 2022,
the Company undertook
a climate materiality
assessment to identify
material physical and
transitional risks.
Please refer to the
TCFD disclosure below
for more information.
------------------------------ ----------------------------------
Risk Potential impact Mitigation
6. Changing Electricity Annual income generation The Investment Adviser
Market Conditions of the Company is sensitive regularly updates the
to future power market portfolio cash flow
pricing. A major structural model to reflect future
shift in power demand or power market forecasts
supply will impact the and where appropriate
Company's ability to meet applies discounts to
its dividend target. the forecasts. New projects
Excessive movement in power are always assessed
prices could destabilise using the most recent
the energy markets. power market forecast
data available. A rolling
programme of PPA contract
expiries has been implemented
to minimise risk. Protection
against a sustained
period of low energy
prices can only be achieved
by maximising exposure
to regulatory revenues
through acquisition
of more legacy FiT and
ROC plants. Some recent
acquisitions have included
fixed power contracts
for a longer period,
reducing exposure to
short term volatility.
Long term power prices
are however beyond the
control of the Company.
A third party review
of the power strategy
adopted by the Investment
Adviser has also given
a strong independent
verification of the
strategy. The Investment
Adviser is periodically
reviewing possibilities
for the private sale
of electricity to stabilise
long term revenues.
The Company commissioned
and received a report
on the benefits of integrating
storage technologies
within its portfolio
and is currently developing
its first battery storage
site. This will give
the added benefit of
being able to profit
from power price volatility.
----------------------------- --------------------------------
Risk Potential impact Mitigation
7. Changes in tax There may be unfavourable An independent taxation
regime tax related changes including review of the Company
restrictions on renewables, was carried out as part
or no relief on debt structuring. of the long-term debt
Measures to protect UK financing procurement
consumers from power price process. The Company
increases have been implemented makes regular debt repayments
and it is not yet clear to reduce operating
whether these measures leverage and with the
will be funded through intention of ensuring
taxation. that debt is repaid
before regulatory revenues
expire. The Board continues
to monitor the situation
and take advice from
the Group's Tax Advisers
as necessary.
----------------------------------- -------------------------------
8. Changes to Government Decisions affecting the The Investment Adviser
Plans wholesale supply of electricity provides regular updates
through either i) a flooded in this regard within
market or ii) other available the quarterly Board
forms of energy sources. papers.
The UK government is currently The Investment Adviser
consulting with industry has begun to increase
on plans to reform the its level of political
UK Electricity Market which engagement to help with
may involve controls on the formation of a new
sales prices for renewable energy policy and to
generators. ensure that investment
in renewables is maintained.
----------------------------------- -------------------------------
9. Cyber risk Key stakeholders could BSL engaged a third-party
exchange corrupt or virus consultant to implement
infected emails with key a security case study
BSIF counterparties. Malicious at one of the Company's
firmware may cause damage plants. The results
to hardware resulting in of this are being used
a loss of generation or to assess and mitigate
damage to the grid. the risks facing the
entire portfolio.
A group head of IT has
been appointed by our
Investment Adviser with
specific responsibility
for cyber security.
----------------------------------- -------------------------------
10. Adverse publicity Adverse publicity within Market responses have
the Renewable Energy sector been considered and
could damage the Company's agreed at all levels.
ability to raise additional The Board and the Investment
finance and/or acquire Adviser ensure the Company's
new capacity. activities are fairly
and accurately presented
including through Broker,
Stock Exchange announcements,
press releases and web
site maintenance. All
incidences of adverse
publicity monitored
via the Company's PR
Adviser.
----------------------------------- -------------------------------
Risk Potential impact Mitigation
11. Inadequate Inadequate ESG reporting The Company has completed
ESG Reporting could lead to shareholder an ESG materiality review
dissatisfaction and lack and has set the priorities
of demand for the Company's for its ESG programme.
shares.
----------------------------- ---------------------------------
12. Inflation Excessive inflation is Whilst the Company is
likely to increase the a net beneficiary of
Company's cost of capital inflation it is not
and cost of operations. clear whether the government's
actions will reduce
inflation and could
lead to a weaker currency
and a higher cost of
capital. The Company
has maintained its interest
rate hedge in case inflation
does not subside leading
to more aggressive action
by the Bank of England.
----------------------------- ---------------------------------
13. Supply Chain Projects in the Company's BSL the Company's O&M
Risks development pipeline are contractor has made
becoming more costly to strategic purchases
develop and may be subject of long-lead time critical
to delays due to supply components such as transformers
chain risks. We will map our supply
Our supply chain has a chains, with priority
high dependency on Chinese given to Tier 1 and
components which could Tier 2 suppliers. We
impact availability of will insist that our
components and could have Tier 1 suppliers have
potential reputational some sort of grievance
risk. mechanisms in place
(Whistleblowing hotline,
Grievance procedures,
worker representation
etc) by June 2023. We
are developing a sustainable
procurement policy with
accompanying supplier
sustainability checklist
(to be used both in
relation to the repair
and maintenance of operational
assets and also the
construction of new
infrastructure projects).
----------------------------- ---------------------------------
Longer term viability statement
Assessing the prospects of the Company
The corporate planning process is underpinned by scenarios that encompass a wide spectrum of potential outcomes. These scenarios are designed to explore the resilience of the Company to the potential impact of significant risks set out below.
The scenarios are designed to be severe but plausible and take full account of the likely effectiveness of the actions to be taken to avoid or reduce the impact of the underlying risks and which would be open to management. In considering the likely effectiveness of such actions, the conclusions of the Board's regular monitoring and review of risk and internal control systems, as discussed above, is taken into account.
The Board reviewed the impact of stress testing the quantifiable risks to the Company's cash flows above as detailed in risk factors 1-9 and concluded that the Company, assuming current and envisaged leverage levels, would be able to continue to produce distributable income in the event of the following scenarios:
Strategic
Report Risk
Factor
2. Plant performance degradation
of 1.0% per annum versus 0.4%
per annum
-------------------------------
2. Plant availability reduced to
95%
-------------------------------
5. P90 irradiation
-------------------------------
6. Power price set to zero
-------------------------------
The Board considers that this stress testing based assessment of the Company's prospects is reasonable in the circumstances of the inherent uncertainty involved. In accordance with the Articles, every five years the Board is required to propose an ordinary resolution that the Company should cease to continue as presently constituted. The first such discontinuation vote was held at the 2018 AGM and resulted in a 99.46% vote in favour of continuation. The next discontinuation vote is due to be held at the 2023 AGM and the Directors have no reason to believe that shareholders will vote for discontinuation. For the purposes of modelling the Company's viability, the discontinuation vote would have limited impact as a restructuring or sale of the Company's portfolio would be likely to require more than the five year viability modelling period to execute and the Company's portfolio would continue to be cash-flow generative irrespective of the outcome of the vote.
The period over which we confirm longer term viability
Within the context of the corporate planning framework discussed above, the Board has assessed the prospects of the Company over a five year period ending 30 June 2027. The Directors have increased the viability period from three to five years, reflecting the maturity of the Company and the industry, and have determined that the five year period to June 2027 is an appropriate period to provide this viability statement as this period accords with the Group's planning purposes.
This period is used for our mid-term business plans and has been selected because it presents the Board and therefore readers of the annual report with a reasonable degree of confidence whilst still providing an appropriate longer term outlook.
Confirmation of longer term viability
The Board confirms that its assessment of the principal and emerging risks facing the Company was robust.
Based upon the robust assessment of the principal and emerging risks facing the Company and its stress testing based assessment of the Company's prospects, the Board confirms that it has 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 June 2027.
These inherent risks associated with investments in the renewable energy sector could result in a material adverse effect on the Company's performance and value of Ordinary Shares.
The Company's risks are mitigated and managed by the Board through continual review, policy setting and half yearly review of the Company's risk matrix by the Audit Committee to ensure that procedures are in place with the intention of minimising the impact of the above mentioned risks. The Board last carried out a review of the risk matrix at the Audit Committee meeting held on 26 September 2022. The Board relies on periodic reports provided by the Investment Adviser and Administrator regarding risks that the Company faces. When required, experts will be employed to gather information, including tax advisers, legal advisers and ESG advisers.
Directors' Responsibilities Pursuant to Section 172 of the Companies Act 2006
Section 172 of the Companies Act 2006 applies directly to UK domiciled companies. Nonetheless the AIC Code requires that the matters set out in section 172 are reported on by all companies, irrespective of domicile, provided this does not conflict with local company law.
Section 172 recognises that directors are responsible for acting in a way that they consider, in good faith, is the most likely to promote the success of the Company for the benefit of its Shareholders as a whole. In doing so, they are also required to consider the broader implications of their decisions and operations on other key stakeholders and their impact on the wider community and the environment. Key decisions are those that are either material to the Company or are significant to any of the Company's key stakeholders. The Company's engagement with key stakeholders and the key decisions that were made or approved by the Directors during the year are described below.
Stakeholder group Methods of engagement Benefits of engagements
Shareholders
The major investors The Company engages Shareholder engagement
in the Company's shares with its Shareholders was rewarded by support
are set out below. through the issue for the Company's
of regular portfolio growth and diversification
Continued access to updates in the form strategy.
capital is vital to of RNS announcements
the Company's longer and quarterly factsheets.
term growth objectives,
and therefore, in The Company provides
line with its objectives, in-depth commentary
the Company seeks on the investment
to maintain shareholder portfolio, corporate
satisfaction through: governance and corporate
* Positive risk-adjusted returns outlook in its semi-annual
financial statements.
* Payment of Quarterly dividends In addition, the Company,
through its brokers
and Investment Adviser
undertake regular
roadshows to meet
with existing and
prospective investors
to solicit their feedback,
understand any areas
of concern, and share
forward looking investment
commentary.
The Board receives
quarterly feedback
from its brokers in
respect of their investor
engagement and investor
sentiment.
----------------------------- ------------------------------
Service providers
The Company does not The Company has identified The Feedback given
have any direct employees; its key service providers by the service providers
however, it works and on an annual basis is used to review
closely with a number undertakes a review the Company's policies
of service providers of performance based and procedures to
(the Investment Adviser, on a questionnaire ensure open lines
Administrators, secretaries, through which it also of communication,
auditor, brokers and seeks feedback. and operational efficiency.
other professional
advisers). Furthermore, the Board The Company is able
The independence, and its sub-committees to identify and resolve
quality and timeliness engage regularly with problems with service
of their service provision its service providers provider relationships
is critical to the on a formal and informal via this process.
success of the Company. basis.
The Company will also
regularly review all
material contracts
for service quality
and value.
----------------------------- ------------------------------
Portfolio Companies
The Company held an The Board reviews cash-flow The Feedback given
operational portfolio projections for each by the service providers
of 127 solar PV plants investment that the is used to review the
(consisting of 85 large company makes and for Company's policies
scale sites, 39 micro the entire portfolio and procedures to ensure
sites and 3 roof top on a regular basis. open lines of communication,
sites), 6 wind farms and operational efficiency
and 109 single stick The Investment Adviser regarding its Portfolio
turbines, with a total ensures that when the Companies.
capacity of 766.2MW. agreements are initially
The portfolio displays put in place, the end
strong geographical dates of the investments
diversity. are staggered in order
to ensure a constant
flow of revenue. PPA
counterparties are
selected on a competitive
basis but with a clear
focus on achieving
diversification of
counterparty risk.
A quarterly update
on the contracts is
provided in the Investment
Adviser's Report within
the Board Packs.
Community & Environment
The Company has worked This is an area of
with external consultants high importance to
to develop robust ESG all our stakeholders,
policies and procedures. therefore is a high
priority in our decision
making and is described
in detail in the ESG
Report.
------------------------------ -------------------------------
Paul Le Page Elizabeth Burne
Director Director
29 September 2022 29 September 2022
Report of the Investment Adviser
Introduction from the Investment Adviser
The period under review straddles the end of prolonged low inflation with relatively stable power prices and the start of rapidly increasing inflation and significantly higher power prices. This shift is likely to see changes in public policy. The UK government has commenced a consultation on the energy markets (Review of Energy Market Arrangements under the acronym REMA) which is looking to see whether changes can be effected to make the energy system more efficient. More urgently, the government is also opening up fast track discussions with the renewable industry to see whether there is a way for the merchant power element of the Renewable Obligation Scheme's revenues to be converted into a Contract for Difference. It could be a good solution, as long as the outcome is fair to the Company's shareholders and to consumers, and we will be engaging with government on these potential solutions.
A time of crisis can often propel positive change and I believe that this crisis is the opportunity for the renewable energy industry to become even more central and vital to the government's core energy objectives. Solar and wind are now the lowest cost energy sources in the market today. They are both relatively quick to deploy and will add to the country's energy security. They also, particularly solar, have high levels of public support.
James Armstrong
Managing Partner, Bluefield Partners LLP
1. About Bluefield Partners LLP ('Bluefield')
Bluefield was established in 2009 and is an investment adviser to companies and funds investing in renewable energy infrastructure. Our team has a proven record in the selection, acquisition and supervision of large scale energy and infrastructure assets in the UK and Europe. The Bluefield team has been involved in over GBP6 billion renewable funds and/or transactions in both the UK and Europe, including over GBP1 billion in the UK since December 2011.
Bluefield was appointed Investment Adviser to the Company in June 2013. Based in its London office, Bluefield's partners are supported by a dedicated and highly experienced team of investment, legal and portfolio executives. As Investment Adviser, Bluefield takes responsibility for selection, origination and execution of investment opportunities for the Company, having executed over 100 individual SPV acquisitions on behalf of BSIF and other European vehicles.
2. Portfolio: Acquisitions, Performance and Value Enhancement
a. Acquisitions in the period
Status Technology Transaction details Total Value Date
Operational Solar UK-based solar and onshore c. GBP187m May 2022
and Wind wind portfolio - Equity
c. GBP112
93.2MW ROC and FiT backed million,
operational portfolio of solar net Debt
(64.9MW) and wind (28.3MW), (third party)
located across England, Wales, c.GBP75.
Northern Ireland and Scotland. million
------------- ------------------------------------- ---------------- --------------
Solar UK-based solar and onshore cGBP62.5m January
and Wind wind portfolio - Equity 2022
cGBP22.5
47.5MW ROC backed operational million,
portfolio - solar (30.1MW) Debt (third
and wind (17.4MW) - located party) GBP40
largely in the South West. million.
------------- ------------------------------------- ---------------- --------------
Small scale onshore wind cGBP63 million August
Wind portfolio - All equity 2021
(potential
12.6MW FiT and NI ROC backed re-powering
operational portfolio of 109 investment
small scale onshore wind turbines of additional
- located across England (62), GBP35 million)
Northern Ireland (29), Scotland
(11) and Wales (7). Includes
the opportunity to increase
investment through the re-powering
of 17 turbines in Northern
Ireland.
------------- ------------------------------------- ---------------- --------------
Development Storage 100MW of consented storage c.GBP6 million January
projects - All equity 22 and
May 2022
Development rights, grid connection
and associated land to build
two 40MW battery storage sites
in Derbyshire and Worcestershire
and one 20MW storage project
in Liverpool.
Commercial operations scheduled
to start in 2023/24.
------------- ------------------------------------- ---------------- --------------
Solar Mauxhall Farm c.GBP5 million August
and Storage - All equity 2021
Development rights and associated
land to build a 45MW solar
asset and co-located 25MW
battery storage site in northeast
Lincolnshire for c. GBP5mn.
Commercial operations scheduled
to start in 2023.
------------- ------------------------------------- ---------------- --------------
Total Value c.GBP323.5m Equity
c.GBP208.5m,
Debt (3(rd)
party)
cGBP115m
------------- ------------------------------------- ---------------- --------------
Following these acquisitions, the portfolio's total outstanding debt has increased to GBP460 million, and the total installed capacity of its operational portfolio has grown to 766MW (made up of solar 708MW and wind 58MW). The Company's leverage as at 30 June 2022 is c.35% of Gross Asset Value ('GAV') (c.44% as at 30 June 2021).
Post period end - Construction Programme
In July 2022, the Investment Adviser successfully secured CfDs on 62.4MW of ready to build PV plants (Yelvertoft 49.9MW, Romsey 6.5MW and Oulton 6.0MW). By securing a CfD contract, the plants will benefit from index linked revenues (to CPI) over a 15 year duration at the AR4 solar PV strike price of GBP45.99/MWh (in 2012 equivalent prices), or GBP57.48/MWh in 2022. The contracts commence from 31 March 2025, at which point the strike price referenced above will include inflation from 2023 and 2024.
The first development to enter the mobilisation phase is the Yelvertoft Solar PV project, which signed an EPC contract with Bouygues in September 2022 and is targeting initiation of construction in Q4 2022 and operation in Q3 2023.
As the EPC agreements require contractors to provide full procurement activity and to supply all materials, the Investment Adviser completes a full assessment of each contractor's procurement and supply chain management processes, to ensure compliance with the Company's ESG policies and standards. For further information relating to the Company's wider ESG activity, please refer to the ESG section below.
a. Portfolio Performance and Optimisation
As of 30 June 2022, the Company held an operational portfolio of 766.2MW, comprising both solar PV (707.9MW, representing 92.4%) and onshore wind (58.3MW, representing 7.6%) assets, located across the UK (June 21: 613MW, +25.0% increase). For completeness, due to the timing of an acquisition in late May 2022, 12 utility-scale plants and 3 micro sites plants (aggregated capacity of 64.9MW) and 4 wind farms (aggregated capacity of 28.3MW), are not included in the performance section of the report. These will be included in full for the FY 22/23.
The combined solar and wind portfolio generated an aggregated total of 687.5GWh during the reporting year, with a Generation Yield of 1,027MWh/MW.
Chart D.1: Summary of Installed Capacity by Technology and Total Generation by Technology
[chart]
(1) Solar PV
As of 30 June 2022, the capacity of the solar PV portfolio was 708MW comprising 124 PV plants (83 large-scale plants, 39 micro sites and 2 roof top arrays). Following acquisitions outlined in the table above, this is an increase of 95MW from 30 Jun 2021. However, as outlined above, due to the timing of the acquisition of 64MW in May 2022, these assets are excluded from the performance summaries below.
The solar plants are located across the UK, predominantly in the South West and South East of England:
Chart D.2: Solar PV Capacity (MW) by Location
[chart]
As shown in the table below, irradiation levels during the period were 2.6% higher than the Company's forecast and 4.7% higher than FY 2021/22. As chart D.3 illustrates above, this reflects an offsetting of irradiation between the first six months of the period to December 2021 (-2.9% below expectations) and the second six month period to June 2022 (+7.3% above expectations).
In the 12 months to 3o June 2022, the solar portfolio achieved a Net PR of 79.4% (FY 2020/21: 80.3%) against a forecast of 81.4% and generated 624.58GWh of power, marginally above expectations. The generation yield was 971MWh for each MW of installed capacity, 3.5% higher than recorded in the previous year.
Availability (the total time the plant was operating, as a percentage of the maximum possible) for the year was in line with expectations at 98%.
Table D. 1. Summary of Solar Fleet Performance for 2021/22:
Delta 21/22
FY FY Delta to FY to
2021/22 2021/22 Forecast 2020/21 20/21 Actual
Actual Forecast (% change) Actual (% change)
==================== ========== ========== ============ ========== ==============
Portfolio Total
Installed
Capacity (MW)(1) 642.9 N/A N/A 612.8 +4.9%
==================== ========== ========== ============ ========== ==============
Weighted Average
Irradiation (Hrs)
(2) 1,222.7 1,191.9 +2.6% 1,168.0 +4.7%
==================== ========== ========== ============ ========== ==============
Total Generation
(MWh) (3) 624,651 621,740 +0.5% 575,358 +8.6%
==================== ========== ========== ============ ========== ==============
Generation Yield
(MWh/MW) (2) 971.6 967.1 +0.5% 938.9 +3.5%
==================== ========== ========== ============ ========== ==============
Average Total
Unit Price
(GBP/MWh) (4) GBP132.71 GBP128.47 +3.3% GBP125.70 +5.6%
-------------------- ========== ========== ============ ========== ==============
Notes to Table D.1.
1. Excludes 12 solar plants acquired in late May 2022 (aggregated capacity of 64.9MW)
2. Periods of irradiation where irradiance exceeds the minimum level required for generation to occur (50W/M(2) )
3. Excluding grid outages and significant periods of constraint or curtailment that were outside the Company's control (for example, DNO-led outages and curtailments)
4. The Total Unit Price includes all income associated with the sale of power, subsidy payments, Liquidated Damages and insurance claims amounts but excludes assumptions around ROC Recycle amounts (which may contribute a further 5-7% of revenue)
Chart D.3: Irradiation & Generation (Actual & Forecast) by month, FY 2021/22
[chart]
Total Revenue for the period was GBP82.89m, equivalent to GBP128.93k/MW, 4.53% higher than forecasts and 21% higher than the previous FY (2020/21: GBP118/MWh), due to the more favourable fixed PPA agreements which commenced during the period.
Operational Costs for the period were c.GBP18.4m, including the cost associated with the optimisation & enhancement projects (see below).
Optimisation & Enhancement Activity
A core focus of the Investment Adviser's activities is protecting, optimising, and enhancing the value of the Company's operational portfolio. Examples of key activities for the solar portfolio include:
-- Asset Life Extension: Over 400MW (31 December 21: 371.4MW) of the PV portfolio now has leases that allow for terms beyond 30 years, representing 62.8% of the solar PV portfolio as at 30 June 2022, with 332.2MW benefitting from planning term extensions up to 40 years (100% of applications successful). The Investment Adviser continues to negotiate further lease extensions.
-- Transfer of O&M Services to Bluefield Operations Limited ('BOL'): BOL now provides O&M contractor services to 64 of the Company's assets, totalling 555MW of installed capacity, representing 86.4% of the solar portfolio (FY 2020/21: 486MW). This transition has brought enhanced service levels and operational savings of GBP454.3k/annum compared to the original fees paid to external service providers. Further contracts will continue to transfer to BOL in the 2022/23 FY.
-- Capital Works Projects: We completed optimisation/enhancement projects across 10 plants, with a total investment of c.GBP1.46m. Further projects include the replacement of existing transformers, a phased repowering of string inverters, strengthening mounting structures and improving site drainage. The Investment Adviser intends to undertake similar works over the winter 22/23 period.
OFGEM Audits
As part of the industry-wide audits of RO-accredited generating assets, the Investment Adviser and Asset Manager have been working closely with the regulator on those assets (randomly) selected for audit. All of the Company's assets to have completed OFGEM audits have been classified as 'satisfactory'.
Table D.2. BSIF Solar PV Generation by Asset, FY 2021/22:
Solar PV Asset Total Investment Commitment Installed Capacity (MW) Generation to 30 June 2022
(GBP) (Actual, MWh)
Bradenstoke 89.0 70.0 64,397
----------------------------- ----------------------- ----------------------------
West Raynham 55.9 50.0 50,122
----------------------------- ----------------------- ------------------------------
Southwick 61.0 47.9 46,783
----------------------------- ----------------------- ----------------------------
Elms 32.8 28.9 28,128
----------------------------- ----------------------- ----------------------------
Hardingham 22.7 20.1 19,017
----------------------------- ----------------------- ----------------------------
Pentylands 21.4 19.2 17,530
----------------------------- ----------------------- ----------------------------
Molehill 23.1 18.0 19,288
----------------------------- ----------------------- ----------------------------
Hoback 19.0 17.5 17,330
----------------------------- ----------------------- ----------------------------
Littlebourne 22.0 17.0 17,164
----------------------------- ----------------------- ----------------------------
Goosewillow 19.0 16.9 14,890
----------------------------- ----------------------- ----------------------------
Hill Farm 17.3 15.2 14,971
----------------------------- ----------------------- ----------------------------
Roves 14.0 12.7 11,106
----------------------------- ----------------------- ----------------------------
Pashley 15.4 11.5 12,455
----------------------------- ----------------------- ----------------------------
Hall Farm 13.4 11.4 11,553
----------------------------- ----------------------- ----------------------------
Sheppey 12.0 10.6 11,369
----------------------------- ----------------------- ----------------------------
Betingau 11.2 10.0 7,593
----------------------------- ----------------------- ----------------------------
Capelands 8.6 8.4 8,318
----------------------------- ----------------------- ----------------------------
North Beer 9.3 6.9 6,578
----------------------------- ----------------------- ----------------------------
Ashlawn 7.6 6.6 6,289
----------------------------- ----------------------- ----------------------------
Redlands 6.4 6.2 6,474
----------------------------- ----------------------- ----------------------------
Bidwell 8.1 6.1 5,748
----------------------------- ----------------------- ----------------------------
Nottington 11.8 6.0 7,126
----------------------------- ----------------------- ----------------------------
Lower Marsh 8.6 5.9 5,627
----------------------------- ----------------------- ----------------------------
Saxley 7.0 5.9 5,537
----------------------------- ----------------------- ----------------------------
Cobbs Cross 9.1 5.7 5,518
----------------------------- ----------------------- ----------------------------
Stow Longa 8.8 5.3 5,054
----------------------------- ----------------------- ----------------------------
Foxcombe 7.5 5.3 4,441
----------------------------- ----------------------- ----------------------------
Beaford 8.3 5.2 3,779
----------------------------- ----------------------- ----------------------------
Eastcott 10.1 5.0 4,529
----------------------------- ----------------------- ----------------------------
Hamptworth 8.8 5.0 5,107
----------------------------- ----------------------- ----------------------------
Holly Farm 7.2 5.0 5,121
----------------------------- ----------------------- ----------------------------
East Farm 7.2 5.0 4,861
----------------------------- ----------------------- ----------------------------
Great Houndbeare (Little Bear) 6.8 5.0 5,529
----------------------------- ----------------------- ----------------------------
Durrants 6.4 5.0 5,124
----------------------------- ----------------------- ----------------------------
Clapton 6.3 5.0 5,243
----------------------------- ----------------------- ----------------------------
Romsey 5.8 5.0 5,382
----------------------------- ----------------------- ----------------------------
Old Stone 5.7 5.0 5,100
----------------------------- ----------------------- ----------------------------
Salhouse 5.6 5.0 4,964
----------------------------- ----------------------- ----------------------------
Frogs Loke 5.6 5.0 4,999
----------------------------- ----------------------- ----------------------------
Place Barton 5.5 5.0 4,993
----------------------------- ----------------------- ----------------------------
Court Farm 5.5 5.0 5,212
----------------------------- ----------------------- ----------------------------
The Grange 5.4 5.0 5,149
----------------------------- ----------------------- ----------------------------
Bunns Hill 5.3 5.0 4,910
----------------------------- ----------------------- ------------------------------
Oulton 5.3 5.0 4,713
----------------------------- ----------------------- ------------------------------
Rookery 5.2 5.0 5,254
----------------------------- ----------------------- ------------------------------
Wormit 5.1 5.0 4,587
----------------------------- ----------------------- ------------------------------
Kellingley 5.0 5.0 4,902
----------------------------- ----------------------- ------------------------------
Kislingbury 5.0 5.0 4,503
----------------------------- ----------------------- ------------------------------
Willows 4.6 5.0 4,578
----------------------------- ----------------------- ------------------------------
Gretton 5.1 4.9 4,630
----------------------------- ----------------------- ------------------------------
Trethosa 5.8 4.8 4,723
----------------------------- ----------------------- ------------------------------
Folly Lane 5.3 4.8 4,922
----------------------------- ----------------------- ------------------------------
Gypsum 4.4 4.5 4,314
----------------------------- ----------------------- ------------------------------
Tollgate Farm 4.6 4.3 4,137
----------------------------- ----------------------- ------------------------------
Burnaston 14.4 4.1 3,778
----------------------------- ----------------------- ------------------------------
Galton Manor 5.5 3.8 3,979
----------------------------- ----------------------- ------------------------------
Thornton Lane 3.7 3.6 3,204
----------------------------- ----------------------- ------------------------------
Blackbush 6.6 3.4 2,942
----------------------------- ----------------------- ------------------------------
Barvills 3.3 3.2 3,338
----------------------------- ----------------------- ------------------------------
Hazel* 4.3 2.8 2,707
----------------------------- ----------------------- ------------------------------
Norton Hall 4.1 2.8 2,773
----------------------------- ----------------------- ------------------------------
Lount 3.3 2.5 1,974
----------------------------- ----------------------- ------------------------------
Langlands 3.1 2.1 2,110
----------------------------- ----------------------- ------------------------------
Stantway 2.7 1.8 1,714
----------------------------- ----------------------- ------------------------------
Aberporth 2.0 1.4 1,333
----------------------------- ----------------------- ------------------------------
Goshawk (10 micro sites) 2.0 1.1 1,071
----------------------------- ----------------------- ------------------------------
Butteriss (20 micro sites) 2.3 0.8 653
----------------------------- ----------------------- ------------------------------
Corby 2.3 0.5 383
----------------------------- ----------------------- ------------------------------
Promothames (9 micro sites) 1.3 0.4 316
----------------------------- ----------------------- ------------------------------
SUB-TOTAL 763.8 613.0 593,946
----------------------------- ----------------------- ------------------------------
Assets acquired during the Period
----------------------------------------------------------------------------------------------------------------------
Carloggas* 8.3 8,020
----------------------------- ----------------------- ------------------------------
Crossroads* 5.0 5,289
----------------------------- ----------------------- ------------------------------
Lower End* 5.0 5,241
----------------------------- ----------------------- ------------------------------
Woolbridge* 5.0 5,495
----------------------------- ----------------------- ------------------------------
Rookwood* 5.0 4,904
----------------------------- ----------------------- ------------------------------
Creathorne* 1.8 1,682
----------------------------- ----------------------- ------------------------------
SUB-TOTAL 30.1 30,631
----------------------------- ----------------------- ------------------------------
*Although assets were acquired in January 2022, generation data is for the full FY
(2) Onshore Wind
During the reporting period the Investment Adviser managed a wind portfolio of 117 onshore turbines, comprising of 109 small scale turbines (55-250KW) with 8 turbines of 2.0-2.3MW, and an aggregated capacity 30.0MW.
Chart D.4 BSIF Wind Portfolio, and Turbine Type/Installed Capacity by Location/Installed Capacity.
[chart]
In late May 2022, the Company acquired an additional 18 large onshore wind turbines, with a total installed capacity of 28.5MW. These turbines have performed better than expected, but are excluded from this report, as having less than 2 months of operations in the reporting period.
Over the reporting year, the wind speed across the asset locations averaged 6.1m/s (-4.2% to forecasts); UK averages during 2021 were at the lowest level recorded in the previous 10 years
Total generation from onshore wind during the reporting period was 62.9MWh, 17% below forecasts, largely due to low availability of 2 turbines at Delabole Wind Farm, which experienced several key component failures during the second half of the reporting year. Liquidated Damages ('LDs') have been received from the OEM for the 2021 calendar year, with losses during 2022 due to calculated in January 2023. Availability for the remainder of the fleet (Hampole and the small-scale turbines) was largely as forecast at 95.9%.
Table D.3: Aggregated Wind Portfolio Performance, Annual 2021/22
Actual Forecast
Total Total Delta to
Aggregate Number Power Power Forecast Actual Forecast Delta
Capacity of Price Price Power Price Generation Generation to Forecast
(MW) Turbines (GBP/MWh) (GBP/MWh) (% change) (MWh) (MWh) (% change)
Small
scale
turbines 12.6 109 316.7 282.2 12% 27,339 29,522 -7%
=========== ========== =========== =========== =========== ============ ============ ============ ============
Delabole 9.2 4 155.2 113.7 36% 15,615 25,227 -38%
=========== ========== =========== =========== =========== ============ ============ ============ ============
Hampole 8.2 4 116.4 119.8 -3% 19,955 20,999 -5%
=========== ========== =========== =========== =========== ============ ============ ============ ============
Aggregate
Fleet 30.0 117 213.1 181.1 18% 62,909 75,748 -17%
=========== ========== =========== =========== =========== ============ ============ ============ ============
The Investment Adviser was able to negotiate improved fixed PPA terms on many assets; thus, despite low generation, the wind portfolio's total revenue was as forecast, at GBP13.4m.
During the reporting period the wind assets recorded lower than forecast wind speeds. This was largely due to the UK experiencing the lowest average wind speeds in 10 years, during 2021.
Chart D.5 Average Windspeed & Generation (Actual Vs Forecast) by month, 2021/22
[chart]
Optimisation Activities
In the Northern Ireland fleet, 17 out of 29 small-scale turbines have been identified for repowering with replacement EWT 250KW turbines. These assets can repower to a higher capacity, whilst maintaining their respective RO accreditation statuses.
As at 30(th) June 2022, 4 turbines have been repowered and are operational, and a further 7 have received full planning approval for a new 25-year term. Prior to end December 2022 an additional turbine will be decommissioned and repowered with the EWT model, and a further 3 are scheduled for early 2023. The remaining 6 turbines have seen planning applications submitted to the relevant LPAs.
The Investment Adviser has continued to implement and manage a range of operational enhancement measures across the small-scale turbines, both to improve performance and to protect against failure.
Power Purchase Agreements
The Company maintained its strategy of fixing power price contracts for periods between 12 and 36 months with the majority of contracts continuing to be struck for a minimum of 18 months (the average required duration under the LTF agreement with Aviva).
As shown in the charts below, 100% of BSIF assets hold subsidy accreditation, the vast majority with RO accreditations, with RO and FiT subsidy revenue accounting for 59.2% of the total revenue (45.6% ROC, 13.6% FiT). Income from fixed purchase power agreements constituted 37.5% the total revenue for the year, with the remaining 3.3% of revenues coming from existing index-linked power agreements on newly acquired assets.
Chart D.6 Subsidy accreditation by % of Portfolio Capacity (left) and Revenue Source by % of Portfolio Capacity (right)
[chart]
The Company has continued to implement the approach of fixing power prices evenly throughout the year for between 18-36 months, with the average current portfolio PPA term as at 30 June 2022 standing at 25.2 months.
The purpose of this strategy is to mitigate the Company's exposure to seasonal fluctuations and short-term events which have the potential to increase volatility in price, whilst allowing flexibility to capitalise on periods of higher power prices, and simultaneously enabling the Company to avoid fixing prices during periods of significant weakness.
The Investment Adviser continues to believe this is the best strategy for the Shareholders, who are looking for stable revenues and forecastable, sustainable dividends. In March 2020, the Company went into the pandemic with over 90% of its revenues fixed and had the best twelve months' performance since IPO, at a time when unhedged strategies were generating less than 50% of their expected revenues. The current market is offering the opportunity to restrike contracts at far higher prices out to 2025, something we are actively doing (see chart below for the average of all fixes and 270MW, fixed in 2022). A fixed contract strategy will always lag a sudden upturn in prices, but we have very high visibility of revenues over the next few years where other strategies do not and it is a strategy that has almost a decade of delivering the highest covered dividend (covered by in year earnings and post debt amortisation).
New PPA prices are agreed up to 3 months in advance of the commencement of the fixing period and PPA counterparties are selected on a competitive basis, but with a clear focus on achieving value and diversification of counterparty risk.
The graph below shows that, as at 30 June 2022, the Company has a price confidence level of 96% to December 2022 and c.87% to June 2023 over the pricing of its power and subsidy revenue streams.
Chart D.7. % of BSIF revenues fixed as at 30 June 2022 (solar PV and onshore wind, combined)
[chart]
Note: There is c.95MW of capacity which benefits from long term offtake agreements, with 9 years remaining. These agreements have built in floor prices, which are automatically applied in the absence of direct short-term power price fixes. Graph also includes all fixed wind assets but excludes 5.33MW of the small-scale wind portfolio which hold 'floating' PPAs, linked to the NI SEM.
Over the past 12 months, global energy demand grew rapidly in the second half of 2021, propelled by rapid economic recovery as Covid-19 lockdowns eased, leading to increasing gas prices. The UK is particularly exposed to high gas prices due to a reliance on residential gas supplies and a significant portion of UK electricity being generated in gas-fired power stations. Increased demand, coupled with historically low gas storage levels, led to LNG and LPG prices rising significantly, pushing up wholesale electricity markets. This trend was further compounded by Russia's invasion of Ukraine, enforcing uncertainty around the security of European gas supply and price volatility on the gas markets, in turn leading to record prices and high volatility in the UK power markets.
The price of coal also rose sharply towards the latter end of the Period driven by high demand in Europe, a ban on imported Russian coal and limited supply from Asia. As a result, UK-ETS carbon prices held largely above the GBP70/tonne of CO2 equivalent mark throughout the second half of the Period, having closed below the GBP60/tonne of CO2 equivalent on most days between July 2021- mid-November 2021. The demand for carbon certificates is likely to remain supported in the coming winter after several coal plants were requested to stay online to safeguard GB system security and reduce its reliance on gas imports.
The impact of sharp commodity price increases was a three-fold year-on-year increase in the UK day-ahead base load power price for the 12 months to 30 June 2022, of GBP171.25 per MWh from c. GBP55.25 per MWh, for the 12 months to 30 June 2021.
Day-ahead base load power prices settled at GBP384.85/MWh on average in March 2022, which was almost 80% above market expectations, whilst UK seasonal forward power prices also rose sharply over the year, with Winter 2022-23 base load reaching highs of GBP345/MWh in June 2022, almost five times the level seen in July 2021.
As a further illustration of the points mentioned above, the below charts compare the wholesale electricity prices versus gas and carbon from December 2019 to June 2022.
[chart]
Source data from Bloomberg. Carbon price EU ETS from Bloomberg, effective GB price based on IA calculations
The upward movement of the wholesale power market is reflected in the BSIF average seasonal weighted power price. The average seasonal weighted power price for the 12-month period ending 30 June 2022 has increased by 18.47% from the previous 12-month period ending 30 June 2021, from GBP47.86 per MWh to GBP56.70 per MWh.
The impact of power prices on NAV is set out in the valuations section.
3. Analysis of underlying earnings
The total generation and revenue earned in 2021/22 by the Company's portfolio, split by subsidy regime, is outlined below:
Subsidy Regime Generation (MWh) PPA Revenue (GBPm) Regulated Revenue (GBPm)
FiT 55,303 3.6 9.8
----------------- ------------------- -------------------------
4.0 ROC 12,782 1.7 3.2
----------------- ------------------- -------------------------
2.0 ROC 26,868 1.7 3.0
----------------- ------------------- -------------------------
1.6 ROC 112,726 6.0 10.2
----------------- ------------------- -------------------------
1.4 ROC 266,350 14.7 20.8
----------------- ------------------- -------------------------
1.3 ROC 65,181 4.3 4.8
----------------- ------------------- -------------------------
1.2 ROC 133,993 8.0 9.7
----------------- ------------------- -------------------------
1.0 ROC 17,288 1.4 0.9
----------------- ------------------- -------------------------
0.9 ROC 41,282 5.5 2.1
----------------- ------------------- -------------------------
Total 731,773 46.9 64.5
----------------- ------------------- -------------------------
The Company includes ROC recycle assumptions within its long term forecasts and applies a market based approach on recognition within any current financial period, including prudent estimates within its accounts where there is clear evidence that participants are attaching value to ROC recycle for the current accounting period.
In October 2021, Ofgem announced that value for ROC recycle for the period April 2020 to March 2021 (CP19) was GBP3.87/ROC (equivalent to 7.7% of CP19 ROC buyout prices). This was in line with the ROC Recycle estimate the Company had recognised in its 30 June 2021 Financial Statements; a further 'late payment' amount of GBP0.55/ROC was announced in December 2021, equating to a further GBP455k. This amount has been included within the 'Other revenue' line within the table below.
The key drivers behind the changes in Underlying Earnings between FY 2021/22 and FY 2020/21 are the combined effects of higher generation and PPA pricing in solar (8.6% and 9.2% respectively), lower generation in wind assets (-17%) and an increase in earnings from the acquisitions completed during the year.
The table below demonstrates that the portfolio generated underlying earnings, pre debt amortisation, of GBP66.8m (12.04pps) and underlying earnings for distribution, post debt repayments of GBP13.8m (2.50pps), of GBP53.0m (9.54pps).
As a result, after declaring four interim dividends totalling 8.20pps, the Company has carry forward earnings available for future dividends of 3.39pps.
Underlying Portfolio Earnings
Full year Full year Full year Full year
to to to to
30 June 30 June 30 June 30 June
22 21 20 19
(GBPm) (GBPm) (GBPm) (GBPm)
Portfolio Revenue 111.4 73.1 65.9 63.6
---------- ---------- ---------- ----------
Liquidated damages
and Other Revenue* 1.6 2.0 3.8 0.8
---------- ---------- ---------- ----------
Net Earnings from Acquisitions
in the period 0.0 5.1 0.0 0.0
---------- ---------- ---------- ----------
Portfolio Income 113.0 80.2 69.7 64.4
---------- ---------- ---------- ----------
Portfolio Costs -27.8 -17.6 -14.1 -13.1
---------- ---------- ---------- ----------
Project Finance Interest
Costs -4.7 -1.8 -0.6 -0.6
---------- ---------- ---------- ----------
Total Portfolio Income
Earned 80.5 60.8 55.0 50.7
---------- ---------- ---------- ----------
Group Operating Costs(#)
** -8.3 -7.5 -5.8 -5.4
---------- ---------- ---------- ----------
Group Debt Costs -5.4 -4.7 -4.6 -4.6
---------- ---------- ---------- ----------
Underlying Earnings 66.8 48.6 44.6 40.7
---------- ---------- ---------- ----------
Group Debt Repayments -13.8 -9.3 -9.2 -8.8
---------- ---------- ---------- ----------
Underlying Earnings
available for distribution 53.0 39.3 35.3 31.9
---------- ---------- ---------- ----------
Full year Full year Full year Full year
to to to to
30 June 30 June 30 June 30 June
22 21 20 19
(GBPm) (GBPm) (GBPm) (GBPm)
---------- ---------- ---------- ----------
Brought forward reserves 13.4 8.4 2.3 1.1
---------- ---------- ---------- ----------
Total funds available
for distribution -1 66.4 47.7 37.6 33.0
-------------------------------- ---------- ---------- ---------- ----------
Target distribution*** 45.2 34.3 29.3 28.4
-------------------------------- ---------- ---------- ---------- ----------
Actual Distribution
-2 45.5 34.3 29.3 30.7
---------- ---------- ---------- ----------
Underlying Earnings
carried forward
(1-2) 20.9 13.4 8.4 2.3
---------- ---------- ---------- ----------
Full year Full year Full year Full year
to to to to
30 June 30 June 30 June 30 June
22 21 20 19
(GBPm) (GBPm) (GBPm) (GBPm)
---------- ---------- ---------- ----------
Excess Distribution
Paid 0 0 0 2.3
---------- ---------- ---------- ----------
* Other Revenue includes ROC mutualisation, ROC recycle late payment CP19, insurance proceeds, O&M settlement agreements and rebates received.
#Includes the Company, BSIFIL and BR1 (included within BSIFIL is a group tax charge of GBP1.4m vs GBP2.3m June 2021).
**Excludes one-off transaction costs and the release of up-front fees related to the Company's debt facilities
***Target distribution is based on funds required for total target dividend for each financial period.
The table below presents the underlying earnings on a 'per share' basis.
Full year Full year Full year Full year
to to to to
30 June 22 30 June 21 30 June 30 June
20 19
(GBPm) (GBPm) (GBPm) (GBPm)
Target Distribution 45.2 34.3 29.3 28.4
------------ ------------------ ------------ ------------
Total funds available
for distribution
(including reserves) 66.4 47.7 37.6 33.0
------------ ------------------ ------------ ------------
Average Number of
shares in year* 554,042,715 429,266,617 370,499,622 369,883,530
------------ ------------------ ------------ ------------
Target Dividend
(pps) 8.16 8.00 7.90 7.68
------------ ------------------ ------------ ------------
Total funds available
for distribution
(pps) 12.22 11.19 10.13 8.91
------------ ------------------ ------------ ------------
Total Dividend Declared
& Paid (pps) ** 8.20 8.00 7.90 8.31
------------ ------------------ ------------ ------------
Reserves carried
forward
(pps) *** 3.39 2.67 2.23 0.60
------------ ------------------ ------------ ------------
* Average number of shares is calculated based on shares in issue at the time each dividend was declared.
** An additional dividend of 0.63pps was paid for the year ended 30 June 2019.
*** Reserves carried forward are based on the shares in issue at the point of Annual Accounts publication (being c.611m shares, 2021: c.496m).
4. NAV and Valuation of the Portfolio
The Investment Adviser is responsible for advising the Board in determining the Directors' Valuation and, when required, carrying out the fair market valuation of the Company's investments.
Valuations are carried out on a six-monthly basis at 31 December and 30 June each year, with the Company committed to conducting independent reviews as and when the Board believes it benefits Shareholders.
As the portfolio comprises only non-market traded investments, the Investment Adviser has adopted valuation guidelines based upon the IPEV Valuation Guidelines published by the BVCA (the British Venture Capital Association). The application of these guidelines is considered consistent with the requirements of compliance with IFRS 9 and IFRS 13.
Following consultation with the Investment Adviser, the Directors' Valuation adopted for the portfolio as at 30 June 2022 was GBP939.9m (30 June 2021, GBP694.5m).
The table below shows a breakdown of the Directors' valuations over the last three financial years:
Valuation Component (GBPm) June 2022 June 2021 June 2020
Enterprise Portfolio DCF value (EV) 1,180.6 770.1 602.7
---------- ---------- ----------
Consented Solar and Battery Storage Development rights 13.8 1.8 0.0
---------- ---------- ----------
Deduction of Project Co debt -390.3 -119.8 -10.8
---------- ---------- ----------
Project Net Current Assets 135.8 42.4 32.4
---------- ---------- ----------
Directors' Valuation 939.9 694.5 624.3
---------- ---------- ----------
Portfolio Size (MW) 766.2 613.0 478.8
---------- ---------- ----------
Discounting Methodology
The Board continues to adopt the approach under the 'willing buyer/willing seller' methodology, that the valuation of the Company's portfolio be appropriately benchmarked on GBP/MW basis against comparable portfolio transactions.
The Directors' Valuation is based on the discounting of post-tax, projected cash flows of each investment, based on the Company's current capital structure, with the result then benchmarked against comparable market multiples. The discount rate applied on the post-tax levered project cash flows is the weighted average discount rate.
Key factors behind the valuation
During the reporting period there have been a number of key factors that have been considered in the Investment Adviser's recommendation to the Directors' Valuation:
(i) Competition for operational assets continues to remain high. This has resulted in average pricing for subsidised projects moving towards the higher band of the pricing range witnessed by the Investment Adviser of c.GBP1.25m/MW and c.GBP1.45m/MW for comparable portfolios to the Company's. The step up in average pricing is also related to significant increases in near-term power price forecasts, see details below, and the rate of inflation (see below);
(ii) Inflation has risen sharply since the Company's Interim financial statements in December 2021, with RPI rising to over 11% on a year on year basis as at 30 June 2022. To align the Directors Valuation with the latest public data and Bloomberg's basket of independent forecasters, a revision to the assumption for 2022 from 6.4% (in December 2021) to 10.9% has been made. With high levels of uncertainty over the potential level of inflation in 2023 and beyond, the Directors have elected to remain at 3.4% in 2023 and 3.0% until 2029. Thereafter, an assumption of 2.25% from 2030 has been applied to reflect the transition from RPI to CPIH;
(iii) In tandem with rising inflation, interest rates have also seen significant increases over the period as the Bank of England raised base rates from the historic lows of 0.1% (in place until as recently as November 2021) to 1.25% as at 30 June 2022. Post year end, as at 22 September 2022, the Bank of England raised base rate to 2.25% with further increases expected. With long term debt yields increasing by a comparable amount, the Directors have determined it is appropriate that a proportional adjustment is made to the Company's equity discount rate. As such, the Levered equity discount rate has been increased to 6.75% (6.00% in December 2021 and June 2021). The discount rate for asset lives in excess of 30 years has also been increased to 8.00% (7.50% in in December 2021 and June 2021);
(iv) Acquisitions made in the period, being a 109 wind turbine portfolio with 12.5MW capacity and two mixed solar and wind portfolios of 47.5MW and 93MW, have been valued on a discounted cash flow basis as at 30 June 2022 with inherited 3(rd) party financings (GBP113.5m in total) associated with these acquisitions included alongside the impact of GBP255m of equity raised during the period.
By reflecting the core factors above within the Directors' Valuation for 30 June 2022, the EV of the portfolio is GBP1,180.6m (June 2021: GBP770.1m) with the effective price for the solar component of GBP1.38m/MW (June 2021: GBP1.26m/MW). These metrics sit squarely within the pricing range of precedent market transactions and the 'willing buyer-willing seller' methodology upon which the Directors' Valuation is based.
Valuation Assumptions - Further detail
Debt
The debt assumptions within the Directors' Valuation reflect all third-party loans within the Company's capital structure as at the valuation date. Interest rates and repayment profiles are matched to the terms of each loan. In the case of any short-term financing, conservative assumptions are applied with respect to interest rates and repayment profiles post maturity.
As at 30 June 2022, the Group's short term debt consisted of GBP70m drawn under its RCF, along with a GBP110m term loan from NatWest, maturing in September 2023 with the conversion assumption within the Directors' Valuation aligned to the percentage of the loan that has been hedged (being 75% with 18-year interest rate swaps at a rate of 0.31% until 2038).
The interest rate applied to the converted balance of the RCF is 4% and on the NatWest term loan it is 3% (with a cumulative balance of GBP131.5m).
Power Price
The blended forecast of three leading consultants used within the latest Directors' Valuation, as shown in the graph below, is based on forecasts released in the quarter to June 2022. For illustration purposes, the graph below also includes the blended curves used in the Company's December 2021 Interim accounts and June 2021 Annual accounts.
The curves used in the 30 June 2022 Directors' Valuation reflect the following key updates:
1. Short-term European fuels - gas and coal - prices have risen significantly following the invasion of the Ukraine, driving material increases in near-term wholesale power prices;
2. Increased renewable deployment in the UK (notably in the early 2030s following the launch of the REPowerEU package in May 2022 which highlights the EU's plans to accelerate the clean energy transition and rapidly reduce the region's dependence on Russian gas imports)
3. Annual GB electricity demand, driven principally by electrification of heat and transport, is expected to rise from 305TWh in 2022 to 497TWh by 2050;
[chart]
NAV Movement
[chart]
Directors' Valuation movement
(GBPmillion) As %
of valuation
--------------------------------------- ------- ------------- --------------
30 June 2021 Valuation 694.5
----------------------------------- --- ------- ------------- --------------
New investments acquired 299.3
----------------------------------- --- ------- ------------- --------------
Restructure adjustment -
LT debt at project level (106.6)
----------------------------------- ------------ ------------- --------------
Rebased Valuation 887.2
----------------------------------- ------------ ------------- --------------
(7.2)
Cash receipts from portfolio (63.7) %
Date change, degradation, O&M (3.7)
updates (33.0) %
Power curve updates (incl. PPAs) 99.9 11.3 %
Inflation updates 60.3 6.8 %
Discount rate change (38.4) (4.3)%
Balance of portfolio return 27.6 3.1%
30 June 2022 Valuation 939.9 6.0% ---------------------------------------- ------- ------------- --------------
Each movement from the 30 June 2022 valuation is considered in turn below:
New investments acquired (12.6MW wind portfolio, 47.5MW solar and wind portfolio, 93.2MWsolar and wind portfolio)
These movements reflect the base investment cost of GBP63.6m of the 12.6MW, 109 single stick wind portfolio the Company acquired in August 2021, 47.5MW ROC backed operational portfolio of solar and wind, located largely in the South West, acquired in January 2022, and 93.2MW ROC and FiT backed operational portfolio of solar and wind, located across England, Wales, Northern Ireland and Scotland, acquired in May 2022. New acquisitions were bought into the valuation model on a discounted cash flow basis together with the associated financing.
Cash receipts from the Portfolio
This movement reflects the cash payments made from the underlying project companies up to BSIFIL, BR1 and the Company to enable the companies to settle operating costs and distribution commitments as they fall due within the period.
Power curve updates (incl. PPAs)
The Company's three independent power price forecasters released updated forecasts in April 2022 and June 2022, and these have been applied to the Directors' Valuation. The impact of consistently applying an even blend of three independent forecasters as well as the latest power price fixes, against power price expectations applied in the 30 June 2022 valuation, results in a valuation increase of GBP99.9m from June 2021.
The discounted cash flow for each project applies the contractually fixed power price applicable to each generation asset until the end of the fixed period, and thereafter an even blend of three independent forecasters' prices.
Inflation
The Company's inflation assumptions within the June 2022 valuation have been adjusted to reflect higher short-term inflation expectations with levels now projected at 10.9% in 2022, 3.4% in 2023, 3.0% to 2029 and 2.25% from 2030 onwards (June 2021: 2020 and 2025 of 3.00%, and from 2025 onwards of 2.75%);
Balance of Portfolio Return
The balance of portfolio return is the Company's change in capital structure following the equity issuance of c.GBP255m from equity raises in August 2021 and June 2022, as well as minor operational and financial assumption changes.
Other assumptions
Consistent with previous Directors' Valuations, the valuation assumes a terminal value of zero for all projects within the portfolio c.25 years after their commencement of operation, or up to 40 years for those with asset life extensions.
There have been no material changes to assumptions regarding the future performance or cost optimisation of the portfolio when compared to the Directors' Valuation of 30 June 2022.
On the basis of these key assumptions, the Board believes there remains further potential for NAV enhancement from the potential extensions of asset life for further projects in the portfolio, as well as cost optimisation on long term O&M fees.
The assumptions set out in this section will remain subject to continuous review by the Investment Adviser and the Board.
Reconciliation of Directors' Valuation to Balance sheet
Balance at Year End
Category 30 June 2022 30 June 2021 30 June 2020
(GBPm) (GBPm) (GBPm)
---------------------------- ---------------------------- ----------------------------
Directors'
Valuation 939.9 694.5 624.3
---------------------------- ---------------------------- ----------------------------
Portfolio
Holding Company
Working Capital (13.6) 26.4 20.9
---------------------------- ---------------------------- ----------------------------
Portfolio
Holding Company
Debt (70.0) (250.6) (212.8)
---------------------------- ---------------------------- ----------------------------
Financial Assets
at Fair Value
per Balance
sheet 856.3 470.3 432.4
---------------------------- ---------------------------- ----------------------------
Gross Asset
Value 1,316.7 840.7 653.3
---------------------------- ---------------------------- ----------------------------
Gearing (% GAV*) 35% 44% 33%
---------------------------- ---------------------------- ----------------------------
* GAV is the Financial Assets, as at 30 June 2022, at Fair Value of GBP856.3m plus RCF of GBP70m and 3(rd) party portfolio debt of GBP390.7m (giving total debt of GBP460.7m).
Directors' Valuation sensitivities
Valuation sensitivities are set out in tabular form in Note 8 of the financial statements. The following diagram reviews the sensitivity of the EV of the portfolio to the key underlying assumptions within the discounted cash flow valuation.
[chart]
5. Financing
Revolving Credit Facility
On 11 May 2022, the Company agreed a new and enlarged GBP100 million revolving credit facility ("RCF"), provided equally by RBSI and Santander UK which, as well as being extended to May 2024 (with an option to extend to May 2025), also contained a new accordion tranche of up to a further GBP100.0 million which matured on 8 August 2022. The accordion facilitated the acquisition of the 93.2MW operational portfolio acquired in May 2022 and was repaid in full following the GBP150 million equity raise in June 2022. The margin, over SONIA, on the facility has also been lowered from 2.0% to 1.9%.
As at 30 June 2022 the Company's subsidiary had drawn GBP70m from its RCF.
External Debt
Excluding the Company's RCF, total outstanding loans to 3(rd) party lenders stands at GBP390.6m with each loan secured against a portfolio of assets and fully amortising within the life of the respective asset's subsidies.
The table below outlines core details of all debt facilities within the Company, excluding the RCF, which is detailed above.
Lender Outstanding Amount (June Maturity Secured against
2022)
Aviva - 18yr amortising GBP93.9m fixed, GBP64.1m Sep 2034 401.2MW solar portfolio
loan index linked
---------------------------- ---------------------------- ----------------------------
Natwest - 3 year Term Loan GBP110m Sep 2023 (75% hedged at 141.7MW solar portfolio
0.31% until 2038)
---------------------------- ---------------------------- ----------------------------
Gravis - 15yr amortising GBP38.3m Jun 2035 47.5MW solar and wind
loan portfolio
---------------------------- ---------------------------- ----------------------------
BayernLB, Clydesdale, KfW - GBP57.0m (BayernLB), Dec 2033 to Jun 2034 93.2MW solar and wind
15 yr amortising loans GBP10.6m (KfW), GBP8.1m portfolio
(Clydesdale)
---------------------------- ---------------------------- ----------------------------
Project finance loan with GBP8.7m Sep 2029 5MW solar asset
BayernLB
---------------------------- ---------------------------- ----------------------------
Total GBP390.7m
---------------------------- ---------------------------- ----------------------------
GAV Leverage
The Group's total outstanding debt, as at 30 June 2022, is c.GBP460 million and its leverage stands at c.35% of GAV (44% as at 30 June 21) at the lower end of the 35% - 45% range the Directors have previously outlined as desirable for the Company.
6. Market Developments
UK solar photovoltaic capacity and deployment
According to BEIS, the UK's total installed solar photovoltaic capacity as at June 2022 (the latest statistics available) was 13.99GWp, across just over 1.2 million installations. This compares to 13.66GWp in June 2021. Expansion over the period, of 330MW, has been driven exclusively by the deployment of c. 90,000 small unaccredited installations with capacities below 50kWp. The chart below illustrates how the deployment of new generating capacity has diminished significantly since the closure of the RO scheme in 2017.
[chart]
*Source; BEIS, Solar photovoltaics deployment June 2022
Capacity accredited nationally under the RO Scheme is 7.3GWp, according to the latest data from BEIS released in March 2022, representing c. 52% of the total solar capacity in the UK, but it constitutes only 2% of the number of installations.
Capacity accredited under the FiT scheme was c. 5.1GWp. This equates to about 36% of total solar capacity and c. 75% of all installations. Subsidy-free capacity stands at 1.5GWp and 23% of installations, although many of these are micro installations.
Secondary market transactions and subsidy-free activity
Transactional activity in the UK secondary solar PV market continued its momentum during July 2021-June 2022 with investor appetite for subsidised assets remaining very high. According to the most recent figures from Bloomberg New Energy Finance (BNEF) and Bluefield internal data, 272MW of subsidised projects changed hands during January-June 2022. For reference, some 732MW of solar PV project deals were reported in 2021.
Activity in the UK subsidy-free market has also continued at pace. Significant development activity is being carried out within the UK, which is being driven by factors such as ambitious decarbonisation targets, increasing preferences by customers for clean energy, demand for ESG investments and the inclusion of solar PV in the recent CfD auction round.
Estimates from Solar Power Media indicate that there are over 41GWp of large-scale solar projects in the development/ready-to-build phase (June 2021: 17GWp) and c. 7.2GWp awaiting or under construction as at the end of May 2022.
Over the past 18 months there have been a small number of larger-scale unsubsidised projects constructed in the UK. Throughout the 2021 financial year, however, there have been indications that solar deployment rates have stagnated somewhat due to increased construction costs and supply chain challenges. The elevated pricing is being driven by a significant increase in solar module prices, together with increases in commodity prices and disruption in global supply chains.
With 708MW of operational solar capacity, the Company maintains a strong position within the UK solar market, owning about 7.4% of the country's utility-scale solar PV capacity.
As an established and experienced market participant, this predominantly regulated revenue base provides a strong foundation for continued growth of the Company through both primary and secondary acquisitions in solar, storage and wind.
7. Regulatory Environment
The regulatory environment is under the spotlight for the first time in a number of years as the government looks to manage soaring energy costs and increase energy security. A consultation has been launched to look at whether there needs to be reform of the energy markets. More immediately, the government is looking to see whether the renewable industry and the government can agree a mutually favourable change to the merchant part of the Renewable Obligation Scheme.
Update on Contracts for Differences (CfD)
The CfD scheme, which currently provides a tariff for 100% of an asset's generation over a 15 year period, is now the UK Government's main mechanism for supporting low-carbon electricity generation and operates via an auction process. The latest CfD allocation round (AR4) opened in December 2021 and closed in July 2022. It was the first auction round since AR1 (2015) that allowed solar PV projects to participate.
A total of ninety-three new renewable energy projects won contracts in AR4 across GB, which is more than the number of projects awarded in the previous three auctions combined. A total of 10.8GW renewable projects received CfDs in AR4 (up by 87% from the previous auction in 2019) with the majority going to offshore wind at 7GW and 2.2GW to solar PV projects. These numbers reflect the success the scheme is having with respect to accelerating the deployment of renewable energy in the UK.
In February 2022, the UK government confirmed that it will hold annual CfD auctions from 2023, having previously been scheduled once every two years. The next CfD auction (AR5) is planned for March 2023.
A CfD consultation outcome published in May 2022 announced changes to Supply Chain Plan requirements and a strengthened non-delivery disincentive. The 2020-21 government call for evidence on 'Enabling a high renewable, net zero electricity system' also highlighted several areas in which CfDs could be reformed.
The UK Energy Security Strategy
In April 2022, the UK government published its British Energy Security Supply paper following widespread calls to lower the UK's reliance on Russian gas and reduce the impact of significant wholesale power price rises on UK retail energy consumers. The latest targets largely added to the goals set in the Government Energy White Paper, published in late 2020, with a particular focus on greater nuclear and offshore wind capacity targets.
The Government now plans to reach 50GW offshore wind capacity by 2030 - an increase from the 40GW target in its net zero strategy released in October 2021 - of which floating offshore wind should make up 5GW, up from 1GW previously. No target was set for onshore wind growth targets with former Prime Minister Boris Johnson having been reluctant to ease planning rules to enable more onshore wind developments. A nuclear target of 24GW by 2050 was set, with small modular reactors expected to form a key part of the nuclear project pipeline. The Government estimated a five-fold increase in solar deployment levels by 2035, as well as its intention to consult on amending planning rules for ground-mounted solar to strengthen policy in favour of development on non-protected land.
Future of the UK ETS
A joint consultation of the UK, Scottish, Welsh and North Irish governments on developing the UK Emissions Trading Scheme (UK ETS) was launched in March 2022 and closed in mid-June. The governments sought feedback on a net zero consistent UK ETS cap following advice from the Climate Change Committee's (CCC), with any changes to the policy to align the cap with a net zero trajectory to be implemented by no later than January 2024. The wide-ranging consultation also sought comments on other topics such as the role of Free Allocation policy as a carbon leakage mitigation tool and the incorporation of greenhouse gas removal into the UK ETS, all of which ultimately aim to improve the ambition and operational effectiveness of the scheme.
Balancing Services Use of System (BSUoS) Charges
The UK energy regulator Ofgem approved a measure to move balancing charges away from generators and onto final demand users from 1 April 2023, following several years of consultation processes on the proposal. Successful applicants in the AR4 will have their CfD strike prices adjusted downwards to reflect this regulatory change.
BSUoS charges are how the ESO recovers costs associated with balancing the electricity transmission system, including the costs of constraints, frequency response services, provision of reserve, the costs of actions taken in the Balancing Mechanism and the ESO's internal costs. BSUoS charges are currently recovered from demand customers and generators based on the amount of energy import from or exported into the network in each half-hour period.
Review of Electricity Market Arrangements
The UK Government published its Review of Electricity Market Arrangements (REMA) consultation in mid-July which potentially opens the GB power market to one of the biggest overhauls for a generation. REMA aims to deliver fundamental reform to non-retail electricity market arrangements to facilitate the decarbonisation of the electricity system by 2035, while ensuring security of supply. Topics covered include the revision of the wholesale market structure (potentially decoupling power from gas prices), balancing mechanism, network charging, operability services and related policies such as CfD and capacity market schemes. The consultation closes on 10 October 2022 and a delivery roadmap is expected to be released in 2024.
Bluefield Partners LLP 29 September 2022
Environmental, Social and Governance Report
1. Introduction
An introduction from the Chair
I am pleased to present the Company's first environmental, social and governance (ESG) strategy within this report, encompassing the Company's purpose of 'Renewable Energy, Delivered Responsibly'. The Company has refreshed its materiality assessment, engaged stakeholders to identify priority ESG topics, established its key pillars and articulated its ESG ambition. To enable our shareholders to feel confident that ESG issues are being well managed, and opportunities grasped, ESG performance will be reported annually against a set of commitments and KPIs.
Climate action is at the forefront of the sustainability agenda. The journey to Net Zero continues to be a challenging one, with the global pandemic, conflict between Ukraine and Russia and the cost-of-living crisis evidencing the dynamic relationship between social and environmental factors. Our societies cannot be separated from the natural environment they inhabit, and global emission reduction goals cannot be achieved in isolation from social challenges.
The renewables industry plays an important role in climate change mitigation through decarbonisation of the energy markets. As the demand for renewables continues to rise, the industry must address social risks, such as those presented within its supply chain. Indeed, we have witnessed the renewables sector come together over such matters in recent years, recognising that the greatest impact will be achieved through industry collaboration.
The Company was founded on the belief that investment in renewable technology created the opportunity for attractive and sustainable returns whilst delivering clean, renewable energy. As a pioneer in the market, BSIF has always had a clearly articulated environmental focus. The Company recognises the opportunities and value that ESG considerations present, and the positive impact which can be delivered by its portfolio in addition to financial returns.
Over the coming year, the Company will work towards its ESG vision, embedding policies and processes to ensure best practice ESG governance. A key focus will be alignment with the EU Sustainable Finance Disclosure Regulation (SFDR) and EU taxonomy, in preparation for the Company's first full disclosure next year. The Company will also enhance its understanding of potential climate related impacts, helping it to better adapt, mitigate and manage climate related risks and leverage opportunities.
This year has been a significant one in the Company's ESG journey. The Board looks forward to continuing this momentum, progressing towards the Company's ESG vision, and delivering positive impact across the communities and environments it operates within.
John Rennocks,
Chair
An introduction from the Investment Adviser
As the Company's Investment Adviser, Bluefield Partners LLP has worked closely with the Board over the last 12 months to develop its first ESG strategy, which will enable the Company to manage its ESG risks and opportunities, deliver meaningful impact and meet its regulatory requirements.
The strategy will be delivered through the activities of the Bluefield companies which service the portfolio. Their structure, with four separate but complementary businesses, facilitates the integration of ESG into different parts of the investment and operational cycle. Input from Bluefield employees, including investment and development teams through to field service engineers who maintain the portfolio on a daily basis, was instrumental to the development of the Company's ESG strategy and their passion and dedication towards sustainability will drive its success.
Though it has been a year of considerable achievement for the Bluefield companies, we are aware of the social context in which we operate, in particular the cost-of-living crisis in the UK and the contribution of rising energy prices towards this. It has always been our belief that renewable energy assets offer shareholders attractive returns, but they are also the most cost-effective energy solution globally and have a low carbon impact once operational. Large-scale deployment of renewable infrastructure throughout the UK will both support net zero ambitions and help secure domestic energy supply stabilising energy pricing. Echoing the Chair's message above, social and environmental factors cannot be considered in isolation, and we must make simultaneous progress towards energy stability, affordability, and sustainability.
James Armstrong,
Managing Partner of Bluefield Partners LLP
2. 2022 ESG Highlights
Covering the 12-month period ending 30 June 2022:
Note: CO(2) e savings have reduced from 2021 due to the decreasing contribution of fossil fuels to the UK grid mix, resulting in reduced displacement of fossil fuel generated energy and therefore reduced CO(2) e savings. This is discussed in more detail below.
3. ESG Context
ESG Landscape
Urgent action is needed to tackle the climate crisis and extensive financial investment will be needed to decarbonise global economies and mobilise the green transition. The Company presents an investment solution which delivers attractive returns to shareholders whilst mitigating the effects of climate change through the production of clean energy. Through its UK focused portfolio, the Company is also contributing to domestic energy security.
Whilst ESG considerations increasingly dominate the executive agenda, historically these have not received equal attention, with more focus placed on environmental issues. Recently, it has been recognised that social and environmental factors cannot be viewed separately. This has been exacerbated by the global pandemic, and the war between Russia and Ukraine. Sustainable development requires simultaneous environmental and social progress. In combination with good governance, consideration of these factors is integral to the long-term success of any investment fund.
ESG Regulation
Rising demand for environmentally sustainable investments has caused a global surge in mandatory ESG reporting, driving funds to transparently disclose how they consider sustainability aspects. A suite of regulation is emerging, with the SFDR in Europe and the highly anticipated Sustainable Disclosure Regulation (SDR) in the UK. These regulations have a shared purpose to drive more consistent sustainability reporting and prevent greenwashing.
SFDR
SFDR Level 1 disclosure requirements came into effect in March 2021. The Board reviewed the Company's ESG strategy and characteristics with the Investment Adviser and elected to adopt an Article 8 classification. Given the nature of the Company's investments, Article 9 classification has been considered. However, there is currently insufficient detail on the level of regulatory scrutiny Article 9 funds will be subject to compared to Article 8. The Company has decided to remain classified as an Article 8 product for the interim and is preparing to make its first full disclosure under the SFDR Level 2 requirements, coming into effect in January 2023. As the requirements and expectations of the SFDR become clearer, the Company will review whether Article 8 classification remains appropriate.
For the purposes of Article 8, the environmental characteristics promoted by the Company are to reduce reliance on fossil fuels and facilitate the UK transition to renewable and sustainable methods of energy generation. Please see the 'Climate Change Mitigation' section of this report to see how the Company has met its environmental characteristics over the reporting period.
EU Taxonomy
The EU Taxonomy, complementary to the SFDR, specifies an additional set of disclosure requirements which establish whether an economic activity is environmentally sustainable ([2]) . To align with the EU Taxonomy, the Company's investments must satisfy the following criteria:
The Company considers that its investments substantially contribute to the environmental objective of Climate Change Mitigation . During the reporting period, the Company aimed to achieve this objective through its production of clean, renewable energy, and by investing in new renewable energy infrastructure and energy storage facilities. Please see the 'Climate Change Mitigation' section of this report to see how the Company's investments have contributed to this environmental objective during the reporting period.
The Company acknowledges that its investments in renewable energy infrastructure have the potential to harm the other environmental objectives of the Taxonomy Regulation. The Company takes the following actions to help mitigate such risks:
-- Protection and restoration of biodiversity and ecosystems. On-site measures are in place to preserve the natural environment and prevent adverse impacts on biodiversity-sensitive areas. This includes ensuring each asset remains compliant with its Landscape & Ecological Management Plan (LEMP). During the reporting period, a Biodiversity Policy has also been created for the portfolio. Please refer to the 'Pioneering Positive Local Impact' section of this report for further detail.
-- Transition to a circular economy. The Company remains committed to a best practice approach in respect of asset decommissioning and recycling, acknowledging that recycling practices at the point of decommissioning remain difficult to define, given the long lifespan of renewable infrastructure. Further information on the Company's approach to decommissioning can be found within the 'Generating Energy Responsibly' section of this report.
Human and labour rights are key priorities for the Company, particularly in relation to materials sourcing and supply chain management. During the reporting period, the Investment Adviser carried out appropriate due diligence and compliance checks on key contractors and other counterparties to help mitigate risks, including in relation to human and labour rights, anti-money laundering, anti-bribery, and anti-corruption. The Company has also committed to ensuring that its assets are covered by a Human Rights Policy, aligned with the principles of the United Nations Global Compact ([3]) (UNGC) and OECD Guidelines ([4]) . Please refer to the 'Generating Energy Responsibly' section of this report for further detail.
Given that the Company only invests in renewable energy infrastructure and supporting technologies such as energy storage, its high-level assessments indicate that all of its investments contribute to the environmental objective of climate change mitigation. Therefore 100% of the portfolio may be taxonomy-aligned, including approximately 12.5% in enabling activities (based on operational and controlled pipeline capacity). However, the Company acknowledges that further work is needed to ensure compliance with the other requirements of the Taxonomy Regulation, and this will be addressed as part of the ESG activities being undertaken over the coming year, which are detailed throughout this report.
The "do no significant harm" principle applies only to those investments underlying the financial product that take into account the EU criteria for environmentally sustainable economic activities. The investments underlying the remaining portion of this financial product do not take into account the EU criteria for environmentally sustainable economic activities.
Other Regulation
In its 2021 Annual Report, the Company committed to aligning with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and is pleased to present its first voluntary disclosure on below. Emerging regulation, including the Taskforce on Nature-related Financial Disclosures (TNFD) and the UK climate transition plan standard ([5]) , are being monitored by the Investment Adviser.
4. The Company's ESG Strategy
Introduction
As a pioneer in the renewable market, the Company has always considered ESG issues. The Company is proud to have developed its approach and embraced a critically self-reflective practice to discover, define and articulate an ESG strategy that reflects stakeholder expectations, and which will deliver a positive impact across its portfolio of investments.
Company Purpose & ESG Vision
The Company's ESG vision acts as a guide for the strategy and aligns with the Company's wider purpose and ambition to deliver value through its investments .
Our purpose:
RENEWABLE ENERGY, DELIVERED RESPONSIBLY
Driving shareholder value whilst promoting positive environmental and social impact through our work as a pioneering and responsible renewables fund. As well as supporting the UK's Net Zero carbon ambition, we aim to enhance biodiversity across our sites, to support the UK in mitigating both the climate and ecological crisis.
Our ESG vision:
BSIF is helping to mitigate climate change through decarbonisation of the energy sector, whilst delivering long-term dividends to our shareholders. We match our best-in-class shareholder returns with a best-in-class approach to environmental, social and governance aspects. We recognise that being a renewables fund does not mean that we can remove ourselves from wider environmental, social, and governance topics, and are conscious of the potentially harmful impacts that come with being part of the renewables industry. We have committed to further developing our robust due diligence processes and requirements of our suppliers and contractors and we believe that the assets within our fund have a part to play at the local level as much as at the national level. We aim to enhance biodiversity at our sites and integrate this in our efforts in the communities in which we operate, recognising the interconnection between ecological and climate impact.
ESG Strategy
The Company's ambitions will be achieved through delivery of its ESG strategy, which is centred around three key pillars. ESG topics are arranged under the three pillars and reflect:
-- Priority focus areas, as identified by stakeholders
-- Regulatory requirements, e.g., EU SFDR, EU Taxonomy and TCFD
-- ESG reporting frameworks, e.g., SASB
These underpin what will become the Company's biggest value and impact drivers.
[chart]
Figure 1 - the Company's ESG strategy, including key pillars and priority ESG topics
Sustainable Development Goals ([6])
The United Nations Sustainable Development Goals (UN SDGs) ([7]) were a key consideration during strategy development. Following the alignment protocol, the most relevant SDGs have been mapped against each of the Company's ESG pillars (Figure 1). In total, eight goals have been identified where the Company believes it can have the greatest positive impact.
The Company's largest impact will be in relation to Goal 7, 'Affordable and Clean Energy' and Goal 13, 'Climate Action'. Through its portfolio of renewable energy assets, the Company is producing hundreds of thousands of MWh of renewable energy each year and supporting decarbonisation of the UK economy.
Commitments & KPIs
Commitments and KPIs have been developed to enable the Company to monitor and evidence its ESG performance. These were adopted by the Board in August 2022 and will be reviewed by the Board annually, to ensure they remain aligned to the evolving ESG landscape. Data will be collected over the coming year to enable the Company to first report against its KPIs in 2023.
Key commitments are highlighted in Table 1 and a full breakdown of the Company's commitments and KPIs is presented within Appendix 1.
Pillar Key Commitments
Climate Change * We will report our renewable energy generation
Mitigation annually
* We will implement renewable energy import tariffs
across our portfolio
* We will invest up to GBP50,000 in industry
collaborations annually to support the energy
transition
* We will undertake scenario analysis for material
physical and transitional climate-related risks and
opportunities within the next twelve months
-------------------------------------------------------------
Pioneering Positive * We will evaluate Biodiversity Net Gain (BNG) across
Local Impact the operational portfolio and achieve at least 20%
BNG on new solar developments.
* We will conduct independent biodiversity assessments
across at least 10% of our sites annually (relating
to assets over 1MW in capacity).
* We will continue to promote positive action within
the communities we operate within.
-------------------------------------------------------------
Generating Energy * We will ensure 100% of our assets are covered by a
Responsibly Human Rights policy by June 2023
* We will ensure 100% of our assets are covered by
policies covering UNGC principles and OECD Guidelines
by June 2023
* We will adopt a Supplier Code of Conduct and require
its adoption by Tier 1 suppliers by the end of June
2023.
-------------------------------------------------------------
Table 1 - key ESG commitments for the 22/23 financial year
5. How ESG is Embedded
ESG Oversight
ESG is considered by the Board as part of Board meetings and investment decisions, with Meriel Lenfestey named as the Director having overall responsibility and oversight of ESG risks and opportunities, including in relation to climate. Figure 2 presents the Company's ESG and climate governance structure.
The Board monitors ESG and climate activity through regular communication with the Investment Adviser, including as part of investment committee papers, Board meetings, ad hoc calls, and written updates. Key activities, such as development of the Company's ESG strategy, must be approved by the Board. Where additional ESG expertise is required, the Company engages external consultants, including ESG specialists, biodiversity consultants and law firms. The Company's ESG policy, which communicates its ESG ambition and strategy, is available on its website: bluefieldsif.com/investors/publications/ .
[chart]
Figure 2 - the Company's ESG and Climate Governance Structure
Day-to-day management of ESG and climate is the responsibility of the Investment Adviser. The Group ESG Manager works closely with the Investment and Commercial teams to drive ESG and climate activities across the portfolio. ESG is included as a standing agenda item as part of the Investment Adviser's quarterly Board meetings and the Group ESG Manager regularly reports progress to the Managing Partner and Group General Counsel.
The Group ESG Manager is also responsible for communicating, embedding, and monitoring ESG initiatives across the other Bluefield companies which service the portfolio. Key individuals from each team, including Commercial Analysts, Investment Managers, Asset Managers and O&M Portfolio Managers, regularly interact with the Group ESG Manager to integrate ESG considerations into each stage of the asset lifecycle. The performance of the Group ESG Manager is assessed via progress against agreed ESG objectives, which are reviewed and updated annually.
Responsible Investment
On behalf of the Company, the Investment Adviser undertakes detailed due diligence on each investment opportunity. ESG consideration within the investment process has been enhanced recently, with the creation of a standalone ESG due diligence questionnaire. Developed in line with SASB standards, the questionnaire includes an exclusionary list, high-level climate screening and SFDR considerations, in addition to focused environmental, social and governance questions. As part of a recent potential acquisition, the Company piloted outsourcing ESG due diligence to an external consultant, trialling the questionnaire and refining it for future use.
The following diagram details how sustainability risks are integrated into the Company's investment process:
-- negative screening - checks made against the Company's investment policy and exclusionary list (which forms part of its ESG due diligence questionnaire).
-- investment screening - the Company primarily invests in solar energy infrastructure, alongside a minority exposure to other renewable energy assets, including energy storage;
-- due diligence - in 2022, a comprehensive due diligence questionnaire was created to identify material ESG risks and opportunities and identify data gaps associated with the asset which the Company may need to fill in order to comply with its ESG reporting requirements. In addition to an exclusionary list, the questionnaire includes questions relating to material ESG risks and opportunities, developed in line with SASB standards. Requirements of the EU SFDR, including in relation to Principal Adverse Indicators (PAIs) and climate risk screening, and the EU Taxonomy's Do No Significant Harm (DNSH) criteria, are also captured. Where required, the Company may outsource ESG due diligence to a competent third party;
-- vetting and monitoring -legal checks are undertaken on key counterparties to ensure that they are reputable, particularly as regards anti-money laundering, anti-bribery and anti-corruption, and sanctions breaches. Diligence is undertaken on O&M contractors associated with target assets, including in relation to labour practices and Health & Safety. Integration of ESG into vetting and monitoring of third-party service providers is ongoing, including use of an ESG due diligence process in association with engineering, procurement and construction ("EPC") site contractors;
-- investment approval - approval of acquisition of renewable energy assets by the Board, with a dedicated ESG section within the submitted investment committee papers;
-- management and reporting - active management of sustainability issues over the operational lifetime of the assets, including implementation of the Company's ESG strategy and reporting against ESG commitments and KPI's;
-- end of investment life - best practice will be followed in the recycling of assets in line with industry standards at the time of decommissioning, recognising their long lifespan.
The focus over the coming months will be to integrate the Company's ESG strategy into portfolio related activities. Collaboration between the Bluefield companies, including between development, investment, asset management and O&M teams, will aid this process. Robust data will be needed to evidence ESG performance, and the Company is working with the Investment Adviser to implement systems to facilitate the collection, analysis, and monitoring of ESG data across the portfolio.
Stakeholder Engagement
Stakeholder engagement was key in defining the Company's ESG focus. To identify priority ESG topics, interviews were conducted with a range of internal and external stakeholders, capturing different perspectives and interests, and building upon the findings of the materiality assessment undertaken in 2021. The interviews were conducted by Anthesis Group ("Anthesis"), a global sustainability consultancy engaged to support the Company with development of its ESG strategy. Stakeholders were asked to identify topics that they felt were most likely to influence the Company's future performance as a sustainable business, and what areas should be focused on as a priority.
Though different ESG challenges and opportunities presented for different stakeholder groups, three topics were routinely identified:
Ø Renewable Energy Production
Ø Ecological Impacts
Ø Material Sourcing and Lifecycle Assessment
Other topics such as supplier and contractor relations, community impact and Greenhouse Gas (GHG) emissions were also identified as important areas for the Company to address. With no employees, health, safety, and wellbeing were linked to the Company in relation to its duty of care to those who service its portfolio, and therefore areas for which the Company should retain oversight.
The Company will look to implement formal processes to facilitate engagement with its stakeholders on ESG topics. The Company will continue to engage with local communities, as detailed within the 'Pioneering Positive Local Impact' section of this report.
Materiality Assessment
In addition to stakeholder interviews, a landscape review of the Company was undertaken. This helped evaluate the ESG context that the Company sits within and included a review of regulatory drivers and industry reporting standards. Information gathered from the interviews and landscape review was used to update the Company's materiality assessment. The materiality assessment is presented in a matrix (Figure 3), that compares internal and external stakeholder priorities, with the highest priorities appearing in the top right corner.
[chart]
Figure 3 - the Company's updated materiality assessment, highlighting priority ESG topics
Identified material topics form the basis from which the Company's ESG strategy was built and are represented within each of its three key pillars. By focusing on these prioritised topics, the Company aims to anticipate and meet the needs of its stakeholders as much as possible.
6. Climate Change Mitigation
Introduction
Critical and ambitious action is needed to address climate change. To remain in line with the Paris Agreement, global emissions need to reduce by at least 45% by 2030 ([8]) . Despite this, fossil fuels still account for 64% of global greenhouse gas emissions ([9]) .
The UK has set one of the world's most ambitious climate change targets, aiming to reduce emissions by 78% by 2035 ([10]) . Renewable energy infrastructure will be critical for decarbonisation and to reduce reliance upon volatile and polluting fossil fuel markets ([11]) .
In addition to supporting the UK's transition to net zero, the Company is contributing to sustainable development by helping secure domestic energy supply. Through its ESG strategy, the Company will evidence a responsible and ethical approach to investment, driving shareholder value whilst also promoting positive environmental and social impact.
Advocating Renewable Energy
The Company substantially contributes to climate change mitigation through its generation of renewable energy. During the 12-month period ending 30 June 2022, the Company produced:
Ø Over 624,000,000 kWh of renewable energy
Ø Powered the equivalent of over 215,000 UK homes with renewable electricity for a year [12]
Ø Achieved over 120,000 tonnes of CO2e savings [13]
Since IPO in 2013, the Company has saved over 1 million tonnes of CO2e from being released into the atmosphere. Though CO2e savings are a commonly used metric in the renewables industry, the reducing contribution of fossil fuels to the UK grid mix means that relative CO2e savings will decrease over time, even if renewable energy generation increases. This is because the CO2e savings metric is derived from the displacement of fossil fuel generated electricity, therefore as fewer fossil fuels supply the grid, there will be less carbon to be displaced. For this reason, the Company reports against additional environmental metrics to evidence the portfolio's positive environmental impact.
The Company will achieve its greatest impact in the fight against the climate crisis by working side by side with other industry players. The Company recognises the potential harmful impacts that come with being part of the renewables industry, and as the sector continues to grow, it will need to address emerging social and environmental risks. Where immediate solutions do not present, the industry will need to work collaboratively to manage these risks and ensure an ethical approach to investment is upheld. Such has been recently demonstrated in regard to concerns of forced labour in the polysilicon supply chain.
Over the coming year, the Company will invest up to GBP50,000 in industry initiatives, including universities and research institutions, to support the energy transition. Renewable asset end-of-life considerations, an increasingly important topic for the industry to address, will be considered as part of this. The Company's approach to end-of-life considerations is discussed in more detail in the 'Generating Energy Responsibly' section of this report.
Carbon Emissions
Though the Company generates renewable energy, it also takes accountability for its own carbon contribution and is committed to reporting against its carbon emissions annually. To date, the Company has primarily invested in secondary assets, meaning they were operational when acquired. Once operational, a renewable asset will generate more energy than it will consume, making its carbon impact net positive. However, as the Company plans to construct new solar and battery assets from 2022, it is taking steps to better understand the carbon intensity of its operations.
The Company has calculated its first GHG inventory for the period 1 July 2021 - 30 June 2022, in line with the GHG Protocol. Emission factor sources included DEFRA 2021, DEFRA EEIO 2022, and IEA 2021. Table 2 highlights emission results per category ([14]) .
Emissions Emissions
Location-Based % Market-Based %
(tCO(2) e) (tCO(2) e)
Scope 1 58 2 58 2
---------------- ---- -------------- ----
Scope 2 1,081 30 1,249 34
---------------- ---- -------------- ----
Scope 3 2,453 68 2,353 64
---------------- ---- -------------- ----
Total 3,592 100 3,660 100
---------------- ---- -------------- ----
Table 2 - the Company's GHG emission inventory for the period 1(st) July 2021 - 30(th) June 2022
Emissions are reported as tonnes of carbon dioxide equivalent (tCO(2) e) and include all relevant greenhouse gases. No emissions that fall within the reporting boundary have been excluded from the GHG inventory.
The Company defines its organisational boundaries using the Operational Control approach as per the World Resource Institute (WRI) and World Business Council for Sustainable Development (WBCSD) GHG Protocol. Under this approach, the Company will account for 100% of the GHG emissions from operations over which it has operational control. Scope 1 emissions are those arising directly from the Company's operations; Scope 2 are those which arise indirectly in relation to the purchase of electricity; and Scope 3 relates to indirect emissions associated with the Company's wider supply chain. Scope 3 emission categories included: Purchased Goods and Services; Fuel-and-Energy-Related Activities; and Waste.
As this was the Company's first GHG inventory, certain areas of data collection proved challenging and therefore some data were estimated. The Company will improve the accuracy of its inventory over time as it embeds the required data collection processes into its regular GHG reporting routine.
As expected, the Company's Scope 3 emissions represent the bulk of its carbon footprint. It is expected that Scope 3 emissions will increase over coming years as the Company begins its construction programme. The Investment Adviser is working collaboratively with Engineering, Procurement & Construction (EPC) contractors to understand how energy use can be reduced during the construction process.
As a measure to reduce its direct emissions, the Company will transfer its assets onto renewable energy import tariffs, where these are not already in place. As standard, renewable energy import tariffs will be elected for all new assets being developed. The Company will continue to review what additional measures could be taken to reduce its operational footprint over time.
The Investment Adviser and other Bluefield companies calculate their carbon footprint annually and offset this through investment in Plan Vivo verified carbon offset projects. Bluefield Operations Limited is also continuing to investigate how electric vehicles can be incorporated effectively into its fleet.
Climate-related Risks and Opportunities
The Task Force on Climate-related Financial Disclosures (TCFD) is the first international initiative to examine climate change in a financial context. Recognising the potential impact of climate risks and opportunities on investments, the FCA introduced mandatory TCFD reporting for asset managers and asset owners, supporting the UK's ambition to create a net zero aligned financial centre [15] . Although the Company does not currently fall within the scope of the FCA's mandatory reporting requirement, it has chosen to undertake TCFD reporting on a voluntary basis. The Company's first TCFD disclosure can be found below.
7. Pioneering Positive Local Impact
Introduction
The Company believes that the assets within its portfolio can drive positive local impact, as well as having a role at the national level. Recognising that ecological improvements such as enhanced biodiversity can bring about community gain, for example through visual accessibility to nature, education and conservation, the Company wishes to maximise its impact by strengthening its approach to these areas simultaneously.
The Company is also mindful of the potential adverse impacts that its operations may have at a local level. This includes the activities of delivery partners, such as suppliers and contractors, who service the portfolio on the Company's behalf. Supply chain engagement will therefore be key to ensuring the Company's ESG expectations are communicated and met across portfolio related activities.
Biodiversity
Climate change and ecological impact are intrinsically linked, and both require urgent action. The Company aims to create positive impact in both of these areas simultaneously, focusing upon Biodiversity Net Gain (BNG) across the portfolio as an additional way to mitigate climate change beyond its contribution to the net zero transition. Given the alarming rate of biodiversity decline in the UK ([16]) , and the thousands of acres of land under management, the Company has the opportunity to go beyond its mandatory requirements to deliver a notable ecological impact.
The Company has developed a biodiversity policy which reflects its aspiration to become an industry leader in biodiversity management. The policy is available on the Company's website: bluefieldsif.com/investors/publications/ .
The policy was developed with support from Wychwood Biodiversity, a leading ecological consultant working closely with the UK solar industry to enhance ecological monitoring standards. Delivery of the policy will help the Company benefit from nature related opportunities which may arise in the future and also evidence to shareholders how nature related risks are being considered as part of ensuring long term sustainability.
To achieve the Company's biodiversity aspirations, a 12-month implementation plan has been created and will be delivered by the Bluefield companies which service the portfolio. Due to the close working nature of the Bluefield companies, the Company has an enhanced ability to implement, manage and monitor biodiversity initiatives across its portfolio, integrating them into the planning process of new developments and fostering them throughout the operational lifecycle. Focus will be given to quantifying BNG across the existing portfolio, as well as ensuring at least 20% BNG is achieved for all new solar developments, going beyond the 10% requirement of the Environment Act.
In line with the EU Taxonomy's requirement to do no significant harm to biodiversity, the Company carefully manages its ecological impacts across the operational cycle of its assets. Bluefield Operations Limited is responsible for ensuring each asset remains compliant with its Landscape and Ecological Management Plan (LEMP). The LEMP is often created during the planning phase of a new project, to help ensure the asset has no net negative impact on the surrounding environment. The LEMP specifies enhancement measures which must be implemented to support (and potentially increase) the biodiversity present, including wildflower seeding, bat and bird box installation, mammal gates and hibernacula.
Once operational, land management activities are scheduled to minimise impact on surrounding fauna and flora. Grass cuts avoid ground bird nesting season and sections of a site may be left uncut to provide refuge and boost biodiversity. Many of the sites also support sheep grazing, helping manage grassland whilst supporting farming activities.
Community Impact and Initiatives
A key focus for the Company is how it can maximise its positive impact towards the communities surrounding its portfolio. Community perception of renewable technology is important as it feeds into local decision making, policy development and ultimately planning requirements. Engagement undertaken as part of the planning process helps develop positive relationships with local stakeholders and obtain community support.
Though a certain level of public consultation must be undertaken as standard, Bluefield Development, currently developing a solar and battery pipeline for the Company, prides itself on going beyond minimum requirements to actively engage community representatives, such as Parish Councils, as early in the planning process as possible. Information obtained during early consultation helps refine project plans and can feed into the creation of community benefit funds.
Minimising community impact during the construction process is a priority for the Company. Though the Company has yet to start its new construction programme, as part of the tender process, EPC contractors are asked how they engage with the local community. Adherence of subcontractors to construction and traffic management plans, which help minimise disturbance to the local community, will be monitored by EPC contractors and reported as required to the Investment Adviser.
Once assets are operational, community engagement is maintained through long-term relationships with landowners and the administration of community benefit funds. To better understand the positive impact of its community benefit payments, the Company has engaged an independent grant specialist to oversee community benefit fund management across the portfolio. As well as offering administrative support to Parishes, the engagement will provide greater insight into how funds are being used, enabling the Company to enhance its reporting in this area.
The Company has paid over GBP154,000 to Community Benefit Funds during the financial year ending 30(th) June 2022.
Over the coming year, the Company will identify and support partnerships and initiatives which benefit the local communities surrounding its assets. The Investment Adviser will also explore how to better quantify community engagement and value, which is currently challenging. One area could relate to local job creation - for example, during the last financial year Bluefield Operations Limited created an additional ten Field Service Engineer (FSE) positions to support growth of the Company's portfolio.
Delivery Partnerships
On-site activities, including construction and maintenance, grass cutting, panel cleaning and ecological management, all require the services of external parties. To communicate its ESG expectations and to support delivery of its ESG strategy, the Company will adopt a suite of policies at SPV level, including a Sustainable Procurement Policy, a Waste Management Policy, and a Supplier Code of Conduct. Commitments within these policies will be enacted through the activities of the Company's delivery partners, including suppliers and contractors, helping drive ethical practices across the Company's operations and supply chain.
Health & Safety is of the highest importance to both the Company and the Bluefield companies which service its portfolio. Every asset owning SPV holds Health & Safety policies, standards, and process requirements, with which all contractors must comply. Main contractors (including Bluefield companies) undergo annual Health & Safety audits by the SPVs, to ensure ongoing compliance. Each SPV conducts a routine review of its Health & Safety records and policies, to ensure compliance with the latest Health & Safety guidance and industry best-practise.
During the reporting year, Bluefield Operations Limited had one major Health & Safety incident, which resulted in no injuries to personnel. Bluefield Operations Limited investigate every incident report raised and any learnings or significant trends are followed up and communicated to the wider team.
8. Generating Energy Responsibly
Introduction
To ensure that ESG issues are well managed, the Company is currently embedding policies, processes, and procedures to drive best practice and reduce its exposure to industry risks, both social and environmental. As part of its responsible investment approach, the Company will consider both the positive and adverse impacts of its investment decisions on sustainability factors, seeking to mitigate the negative where possible.
By integrating ESG considerations into its underlying corporate governance, the Company hopes to not only produce a sustainable product but achieve sustainability throughout its operations.
Human & Labour Rights
The renewables industry has a responsibility to ensure social safeguards are upheld during the transition to a low carbon economy. Human and labour rights are a key consideration for the Company, particularly in relation to materials sourcing and supply chain management.
The Company has zero tolerance for any form of human rights abuse, reflected in the Company's Modern Slavery Statement: bluefieldsif.com/modern-slavery-statement/ . To mitigate these risks as far as possible, and help ensure it is benefitting from ethical supply chains, the Company is committed to building robust management and due diligence practices, aligned with global frameworks. Over the coming months, the Company will ensure its assets are covered by a Human Rights Policy, which will be aligned with the principles of the United Nations Global Compact (UNGC) and OECD Guidelines. The Company will also begin mapping its supply chains to identify upstream social and environmental risk and improvement opportunities.
Whilst the Company is taking steps to strengthen its own approach to human rights due diligence, it is also supporting industry initiatives in this area. In 2021, concerns arose relating to the use of forced labour in the supply chain of polysilicon, which is the base material used to manufacture solar cells. This prompted an industry response, led by Solar Energy UK and Solar Power Europe, to develop systems and processes to improve transparency and sustainability within the PV supply chain. Representatives of the Investment Adviser are part of the Solar Energy UK Supply Chain Taskforce, which is driving progress of this initiative, and financial support has also been committed - the Investment Adviser is one of only a few UK solar power organisations to do so. The UK solar industry's supply chain statement, to which the Investment Adviser is a signatory, can be viewed here: https://solarenergyuk.org/uk-industry-supply-chain-statement/ .
Responsible and Sustainable Procurement
To meet future energy demand through renewable sources, extensive deployment of renewable infrastructure will be needed. As a result, demand for the raw materials needed to manufacture these products will increase substantially. Consideration of risks relating to materials sourcing will be an important element of the Company's responsible investment approach, including in relation to human rights.
In addition to a Sustainable Procurement Policy, during the next financial year the Company will adopt a Supplier Code of Conduct, which will set out the Company's expectations in regard to responsible and ethical supplier practices, including materials sourcing. The Company will require adoption of the Supplier Code of Conduct by its Tier 1 suppliers in the first instance.
Through its Code of Conduct, the Company will encourage its contractors to take a responsible approach to waste management, in line with Waste Hierarchy principles ([17]) . A Waste Management Policy will also be adopted by each SPV. To better understand the waste generated by its portfolio, and to reduce this over time, the Company will implement mechanisms to calculate its hazardous waste ratio.
As with operational considerations, the Company also seeks to take a responsible approach to asset end of life. End of life considerations refers to the processes undertaken once assets are withdrawn from operation, including how the materials are repaired, recycled, reused, or disposed of. These processes are difficult to define given the long lifespan of renewable technology, which is often 25+ years, and the uncertainty around what recycling practices will look like in several decades time, or how technology may develop to facilitate this.
Despite end-of-life considerations being largely unknown, as part of the lease and planning conditions for each project, budget is set aside to support with the dismantling and recycling of equipment once it is no longer operational. Equipment on-site is maintained to ensure it lasts as long as possible, with Bluefield Operations Limited implementing a detailed Planned Preventative Maintenance (PPM) programme to reduce equipment failures. Wherever possible, equipment is repaired as opposed to being replaced.
Over the coming year the Company will invest in industry collaborations to support the energy transition, which may include initiatives relating to end-of-life considerations. The Investment Adviser will also track end-of-life developments through engagement with key suppliers and industry trade bodies.
Good Governance and Business Ethics
The reputation and success of the Company could not have been achieved without its foundation of sound corporate governance, into which ESG is being increasingly considered. It is the framework from which the Company undertakes decision making, reporting, management, risk analysis and compliance.
The Company's approach to responsible investment, which was further enhanced this year, facilitates the identification of ESG risks and opportunities, which are considered as part of investment decisions. Integration of ESG into policies, procedures, and processes is ongoing, and the Company will develop a range of related policies over the coming year to support its responsible approach. These will increase the Company's requirements for its suppliers and contractors and enhance due diligence processes.
As an FCA regulated entity, the Company's Investment Adviser evidences the highest standards of professional conduct. Key policies, including in relation to anti-bribery, anti-corruption and anti-money laundering, conflicts of interest and compliance are in place, and third-party compliance advisers are used to ensure regulatory obligations are met through quarterly reviews and reports on business activities. For the other Bluefield companies which service the portfolio, governance is evidenced through a suite of policies, including in relation to anti-bribery, anti-corruption, GDPR, conflicts of interest and whistleblowing.
The Company has always taken a comprehensive and transparent approach to financial reporting. Through its ESG strategy, commitments and KPIs, the Company will take a similarly transparent approach to its ESG disclosures, with more quantitative reporting over time. By continually improving its ESG performance, the Company will deliver positive environmental and social impact whilst continuing to decarbonise energy markets.
The Company recognises the value of diversity and has previously committed to making progress in this area. In October 2021 the Board was pleased to announce the appointment of Ms. Libby Burne as an independent non-executive Director, bringing the current representation of women on the Board to 40%, being two of five current Directors. The Company will continue to diversify its Board as part of its commitment to fostering an inclusive culture.
Diversity, Equity, Inclusion and Belonging (DEIB) is a key focus of the Investment Adviser and other Bluefield companies. DEIB is embedded through an equal opportunities policy in the UK and a new DEIB committee, which will contribute to the creation of a DEIB strategy from 2023. Inclusive Leadership training has also been provided to managers. Discussions with universities are in progress to identify opportunities to engage on diversity and inclusion issues, such as through mentoring and seminars, supporting students wanting to enter less diverse industry sectors. Bluefield has also pledged to create two paid internship placements in 2023 through the 10,000 Black Interns initiative ([18]) , a programme that is designed to change the horizons of young black people in the UK, with the aim of creating a more diverse workforce.
9. Looking Forward
To the Company, ESG provides a framework through which the Company can deliver environmental and social gain whilst also taking accountability for its own adverse impacts. It provides opportunities to drive shareholder value, recognising the Company's role in mitigating the climate crisis, but also further opportunities relating to biodiversity, community benefit and industry collaboration.
Through the Company's new ESG strategy, it has made a number of commitments, from becoming a leader in biodiversity management to the development of Human Rights and Sustainable Procurement policies. Working with its Investment Adviser and the Bluefield companies which service its portfolio, the Company will deliver its ESG strategy and satisfy regulatory reporting requirements, implementing processes and procedures to collect and report quantitative ESG data, which will form the basis from which the Company will measure its ESG performance moving forward.
The Company is proud of the progress it has made towards ESG this year. To achieve its ESG ambition and truly deliver renewable energy responsibly, the Company will continue to embed ESG into its corporate governance, approaching ESG with transparency and integrity on a journey of constant evaluation and improvement.
Appendix 1
A full breakdown of the Company's ESG commitments and KPIs for the financial year 1 July 2022 - 30 June 2023.
Pillar Commitment Supporting KPI/s
Climate We will report our renewable energy -- Renewable energy generated (kWh)
Change generation annually. -- CO(2) e savings achieved (tCO(2)
Mitigation e)
-- Equivalent houses powered (#)
---------------------------------------------- ------------------------------------------------------
We will invest up to GBP50,000 in -- Revenue targeting industry collaboration
industry collaborations annually to (GBP)
support the energy transition.
---------------------------------------------- ------------------------------------------------------
We will report against our carbon -- Measurement of Scope 1 GHG Emissions
emissions annually. (tCO(2) e)
-- Measurement of Scope 2 GHG Emissions
(tCO(2) e)
-- Measurement of Scope 3 GHG Emissions
(tCO(2) e)
-- Total GHG Emissions (tCO(2) e)
-- GHG intensity of the Fund (tCO(2)
e / EUR Rev)
---------------------------------------------- ------------------------------------------------------
We will implement renewable energy -- Relative percentage of renewable
import tariffs across our portfolio. and non-renewable energy consumed
by BSIF (%)
-- Share of non-renewable energy
consumption and non-renewable energy
production of investee companies
from non-renewable energy sources
compared to renewable energy sources
(%)
-- AUM with renewable energy import
tariffs (%)
---------------------------------------------- ------------------------------------------------------
We will undertake scenario analysis -- Scenario analysis undertaken
for material physical and transitional (Y/N)
climate-related risks and opportunities
within the next twelve months
---------------------------------------------- ------------------------------------------------------
We will incorporate ESG-related matters -- ESG-related matters in risk register
into BSIF"s risk register. (#)
---------------------------------------------- ------------------------------------------------------
We will undertake a climate change -- Climate change risk and vulnerability
risk and vulnerability assessment assessment undertaken (Y/N)
(CRVA) in line with the TCFD recommendations
---------------------------------------------- ------------------------------------------------------
Pioneering We will evaluate BNG across the operational -- New developments that have had
Positive portfolio and achieve at least 20% BNG assessment (%)
Local BNG on new solar developments. -- New solar developments with at
Impact least 20% BNG achieved (%)
-- Existing sites with evidenced
BNG (%)
---------------------------------------------- ------------------------------------------------------
We will conduct independent biodiversity -- AUM independently assessed (relating
assessments across at least 10% of to assets over 1MW in capacity)
our sites annually (relating to assets (%)
over 1MW in capacity). -- AUM without a biodiversity protection
policy covering operational sites
owned, leased, managed in, or adjacent
to, a protected area or an area
of high biodiversity value outside
protected areas (%)
-- Notable species identified (e.g.,
red and amber listed species) (#)
---------------------------------------------- ------------------------------------------------------
We will minimise potential risks posed -- AUM which are deemed to have
to threatened species by our assets operations that affect threatened
and will apply industry best practice species (%)
to new sites under development. -- AUM that are located in or near
to biodiversity-sensitive areas
(%)
-- AUM that negatively affect biodiversity-sensitive
areas (%)
---------------------------------------------- ------------------------------------------------------
We will continue to promote positive -- Revenue given to partnerships
action within the communities we operate benefiting the local community (GBP)
within. -- Revenue paid to community benefit
schemes (GBP)
---------------------------------------------- ------------------------------------------------------
We will insist that our Tier 1 suppliers -- Lost time incident rate (per
that directly service the portfolio 100,000 employees)
report H&S performance on a quarterly -- Number of reportable accidents
basis. (RIDDOR) (#)
-- Number of near misses (#)
-- Employees who have received
H&S training (where possible) (%)
---------------------------------------------- ------------------------------------------------------
Generating We will map our supply chains, with -- Tier 1 supply chains mapped (%)
Energy priority given to Tier 1 and 2 suppliers. if available
Responsibly
---------------------------------------------- ------------------------------------------------------
We will ensure 100% of our assets -- AUM with Human Rights Policy
are covered by a Human Rights Policy (%)
by June 2023. -- AUM with a due diligence process
to identify, prevent, mitigate,
and address adverse human rights
impacts (%)
---------------------------------------------- ------------------------------------------------------
We will ensure 100% of our assets -- Share of investments in assets
are covered by policies covering UNGC without policies to monitor compliance
principles and OECD Guidelines by with the UNGC principles or OECD
June 2023. Guidelines for Multinational Enterprises
or grievance /complaints handling
mechanisms to address violations
of the UNGC principles or OECD Guidelines
for Multinational Enterprises (%)
---------------------------------------------- ------------------------------------------------------
We will implement mechanisms to measure -- Tonnes of hazardous waste and
our hazardous waste ratio by 2023 radioactive waste generated by assets
per million EUR invested, expressed
as a weighted average
---------------------------------------------- ------------------------------------------------------
We will clearly communicate our ESG -- Clear governance structures in
governance structure. ESG report (Y/N)
---------------------------------------------- ------------------------------------------------------
We will further diversify our Board. -- Average ratio of female to male
board members expressed as a percentage
of all board members (%)
-- Number of senior board positions
held by a woman (#)
-- Number of board members from
a non-white ethnic minority background
(#)
---------------------------------------------- ------------------------------------------------------
We will ensure 100% of our assets -- AUM with Sustainable Procurement
are covered by a Sustainable Procurement Policy (%)
Policy by June 2023
---------------------------------------------- ------------------------------------------------------
We will adopt a Supplier Code of Conduct -- Tier 1 suppliers signed Supplier
and require its adoption by Tier 1 Code of Conduct (%)
suppliers by the end of June 2023.
---------------------------------------------- ------------------------------------------------------
We will encourage our contractors -- AUM with a Waste Management Policy
to use the waste hierarchy principles. (%)
---------------------------------------------- ------------------------------------------------------
Task Force for Climate-related Financial Disclosures (TCFD)
1. Introduction
Climate change is one of the largest environmental challenges facing the planet, with urgent action needed to reduce global Greenhouse Gas (GHG) emissions. The Company supports the UK's Net Zero carbon ambition by helping to mitigate climate change through decarbonisation of the energy sector, whilst delivering long-term, attractive dividends to its shareholders.
As a renewable energy fund, climate-related opportunities are the basis on which the Company was founded. However, climate change poses both opportunities and risks, and the Company will need to ensure it is considering both of these in order to increase the resilience of its strategy over time. Climate-related considerations form a key element of the Company's ESG strategy, helping ensure that climate is considered across the investment lifecycle, including pre-investment due diligence, asset management and reporting.
The following present the Company's first voluntary TCFD disclosure. This will develop over time as climate-related considerations are further embedded into the activities of the fund.
2. Governance
a. Describe the Board's oversight of climate-related risks and opportunities
Given the nature of the Company, climate opportunities are fundamental to every investment decision. The Board, who meet formally at least once a quarter, have ultimate oversight of climate-related risks and opportunities.
[chart]
These are considered by the Board as part of every investment decision and, to date, on an ad hoc basis as part of Board meetings. Recently, 'Climate-related risks and opportunities' has been added as a standalone Board agenda item. Though the Board has overall responsibility for managing all forms of risk, Meriel Lenfestey, non-executive Director, has been named as having oversight and responsibility of material climate-related risks and opportunities. The Company's ESG and climate governance structure is presented below.
Figure 1 - the Company's ESG and Climate Governance Structure
To help ensure that climate issues are suitably considered as part of strategic decision making, and to strengthen understanding of climate-related risks and opportunities, in September 2022 the Board undertook climate risk training, which will be repeated on an annual basis.
b. Describe management's role in assessing and managing climate-related risks and opportunities
The Board monitor climate-related matters through regular communication with the Investment Adviser, including as part of Board meetings, investment committee papers, ad hoc calls, and written updates. The Bluefield Group ESG Manager engages with the Board directly on material topics, to discuss risks and opportunities and obtain approval on climate-related activities. The Company's Audit & Risk Committee, comprised of all Board members, meets at least three times a year to monitor the Company's risk matrix and assess material risks, including in relation to climate.
Day-to-day management of ESG and climate matters is the responsibility of the Investment Adviser and other Bluefield companies which service the portfolio. Working with the Investment team, the Group ESG Manager oversees the integration of climate considerations into the risk management and strategic thinking of both existing assets and new acquisitions. Implementation of ESG initiatives across the Bluefield companies is overseen by the Partners of the Investment Adviser and CEO of Bluefield Services Limited, Bluefield Operations Limited and Bluefield Development.
To strengthen the identification and assessment of climate-related risks and opportunities, the Investment Adviser has enhanced consideration of climate change within the investment due diligence process. As a result, assessment and management of climate-related factors are now embedded into business-as-usual activities. Climate change considerations will be integrated into wider portfolio activities through the Company's ESG strategy, which includes a Climate Change Mitigation pillar, ESG objectives and key performance indicators (KPIs). As part of this, the Bluefield companies which service the portfolio will play an important role in providing the Company with climate specific data.
3. Strategy
a. Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term
The Company is well positioned to benefit from climate-related opportunities over the short, medium, and long term. In 2022, the Company undertook a climate materiality assessment to identify areas of potential greatest impact and vulnerability. This included consideration of the activities of the Bluefield companies which service the portfolio, to ensure the Company's upstream risks and opportunities were captured. Identified risks are described within the 'Risk Management' section of this disclosure.
Given its investment strategy, it was identified that the Company is already leveraging climate-related opportunities from the transitional perspective of market shifts, policy shifts and the transition to low carbon technologies (with the speed of the transition impacting upon the scale of opportunities available). Whilst these opportunities exist in the short-term, they will also play a critical role in the Company's business model over the medium and long term.
The materiality assessment also identified potential climate-related risks, primarily related to the physical impacts of climate change and how these may impact the Company's assets, operations, and productivity of service providers over the short, medium, and long term. The 2022 heatwave highlighted the risk of extreme heat, including the potential negative impacts of rising temperatures upon the efficiency of solar PV and the productivity of on-site service providers. This is expected to impact the Company in the long-term, however, efforts are being made to reduce the impact of this risk across the medium to long-term time horizons.
The increased frequency and intensity of storm events, such as Storm Eunice earlier in 2022, has been identified as a potential short-term risk, which could result in damaged assets or equipment being offline for prolonged periods. The impact that extreme weather events, such as precipitation and flooding, could have upon the Company's service providers was also identified as a potential material risk in the medium to long-term.
b. Describe the impact of climate-related risks and opportunities on the organisations businesses, strategy, and financial planning
The Company's investment objective is to provide shareholders with an attractive return through investment in renewable energy assets. The Company recognises the importance of managing climate-related risks and opportunities as part of preserving shareholder value, and it is for this reason that the Company has embedded climate considerations so prominently within its ESG strategy, including a 'Climate Change Mitigation' pillar.
As a renewable energy fund which is supporting the transition to a net zero economy, the Company has desirable investment attributes, which are only further enhanced by its robust ESG strategy and focused lens upon climate change adaptation and mitigation. The Company is well positioned to benefit from climate-related opportunities and in 2020 widened its investment mandate to allow minority investment into a more diversified range of renewable technologies. Since 2019, the Company has also invested a small proportion of its gross asset value into development stage opportunities. The build out of these projects will enable the Company to contribute to renewable infrastructure deployment targets whilst increasing its market share.
However, the Company is conscious of the risks posed by climate change. The Company's portfolio will likely be exposed to more frequent and intensive weather events, resulting in an increased risk of damage to on-site infrastructure and off-site transmission and distribution systems. Long-term changes to weather patterns will likely result in material increases and decreases in asset yield and performance. The Company's service providers will also be exposed to additional health and safety risks, transportation disruption, and wider operational disturbance.
To better understand the potential impact of climate change on its portfolio, the Company has committed to undertaking scenario analysis for material physical and transitional risks and opportunities. The analysis is likely to be undertaken later in 2022 and will include a climate risk and vulnerability assessment to determine the greatest impacts of climate risks and opportunities on the Company's strategy and financial planning.
c. Describe the resilience of the organisation's strategy, taking into consideration different future climate scenarios, including a 2degC or lower scenario
As described above, the Company has not yet undertaken scenario analysis, but is planning to do so shortly. This will include the analysis of a material physical risk across three-time horizons (e.g., short, medium, and long-term) and will be modelled against three temperature scenarios. For the physical scenario model, this will be aligned to CMIP6 global and regional climate model data. Scenario pathways will also be developed for transitional risk, enabling the Company to understand the potential positive and negative impacts of transition risks on the portfolio, as well as the opportunities for the Company to further embed climate resilience into the overarching strategy.
4. Risk Management
a. Describe the organisation's processes for identifying and assessing climate-related risk.
Climate-related risks and opportunities are identified, assessed, and discussed by the Audit and Risk Committee and included as part of the Company's risk matrix. The Board currently uses a 1-3 rating to assess the potential likelihood and potential impact of any particular risk occurring. The risks are assessed in a pre- and post- mitigated setting, to map risks into a compositive score ranging from 1-9. Principal and emerging risks are disclosed annually as part of a risk matrix within the Company's Financial Accounts. Historically, 'Unfavourable Weather and Climate Conditions' has been considered a principal risk and has sat within mainstream risk management processes. Following the climate-related materiality assessment undertaken in 2022, the Company has enhanced its consideration of climate change within its risk matrix, which is presented above.
Climate risks and opportunities are also identified by the Investment Adviser and Bluefield companies which service the portfolio. These are communicated to the Board as part of quarterly Board meetings, investment committee papers and ad-hoc communications. The Investment Adviser actively monitors electricity markets and government policy/regulatory developments. This is especially the case in relation to national planning policy frameworks and local authority development plans, to identify transitional risks and opportunities for the Company. Independent market advisers are also engaged to help track potential regulatory changes in electricity markets and related areas, so that the Company is prepared for any risks to its business model.
Working with Bluefield's technical advisers, the Investment Adviser closely follows developments in renewable energy technology, to ensure the Company is well positioned to benefit from any advances made in the future. In 2022, the Investment Adviser commissioned a Lifecycle Assessment (LCA) relating to a new build solar farm, identifying which areas of the asset lifecycle have the greatest environmental impact, including in relation to carbon emissions. The results of the assessment can be used by the Company to further enhance its climate resilience.
Climate-related risks, particularly physical risks, are also considered as part of asset management service provisions, including monitoring and reporting. As an example, the impact of weather events, including elevated generation from high irradiation or downtime caused by storm damage, is captured within portfolio reporting. For new developments, consideration is given to wind speed and different flooding scenarios, helping inform site design and increase resilience to adverse weather. When acquiring operational assets, due diligence is undertaken in relation to any flood risk assessments which have been previously carried out or damage that has previously occurred due to adverse weather. This year, high-level climate screening was incorporated into a new ESG due diligence questionnaire as part of the investment process, to help ensure material climate-related risks are identified and that sufficient management systems and processes are in place to manage these risks.
b. Describe the organisation's processes for managing climate-related risks
The Investment Adviser, working with the Bluefield companies, is responsible for managing climate-related risks on behalf of the Company. Identified climate-related risks are presented in the table below:
Potential Risk Descriptor Current Management Measures
Risk
------------------------------ --------------------------------------
Flooding Flooding is likely Mitigation measures to reduce
to affect the portfolio water ingress can be considered
and may require significant during the design stage of
preventative investment. new developments and flood
If service providers risk assessments are reviewed
are unable to service as part of the project development
equipment as a result, and investment processes. Foundation
there is possibility slabs have previously been
of compound risks. elevated at specific sites
to help alleviate flood risk.
Flood events are captured in
incident reports.
------------------------------ --------------------------------------
Extreme Heat Solar panel yield Transformers protect themselves
can reduce above by shutting down if they reach
24degC and in extreme a temperature outside of their
cases, intense heat operational range. Bluefield
can cause fires. Operations Limited have implemented
Equipment such as on-site solutions to help some
inverters, transformers, assets maintain generation
and PV panels are during high temperatures, as
most likely to be described below.
affected. However,
there is potential
for the lifespan
of all electrical
equipment to be reduced,
including in relation
to batteries.
------------------------------ --------------------------------------
Storms Storms are more unpredictable Turbine control systems are
compared to other designed to switch off at around
physical risks, making 25 metres per second, to avoid
them more difficult significant damage or detachment.
to adapt to. Turbines As part of the site design
can stop generating process for new solar assets,
at high wind speeds static and dynamic load calculations
and there is potential are performed to help ensure
for damage to both that panels and their mounting
wind and solar assets. structures can withstand predicted
maximum wind speeds. Routine
framework checks are performed
on mounting structures.
------------------------------ --------------------------------------
Snow / Blizzards Snow can cover solar Snow mitigation measures can
panels and therefore be costly. However, PV panels
impact upon generation. have a coating that, together
Removal of snow requires with the angle that the panels
operational resources. are installed at, help the
Snow is not expected panels 'self-clean'. Additionally,
to be as material the dark colours of PV panels
as other physical (typically blue or black) facilitate
risks. the capture of thermal energy,
therefore speeding up the melting
process.
------------------------------ --------------------------------------
Electricity The renewables market The Investment Adviser regularly
Market Conditions is anticipated to updates the portfolio cash-flow
grow and therefore model to reflect future power
market conditions market forecasts and where
are seen as an opportunity appropriate applies discounts
rather than a risk. to the forecasts. The Investment
However, the success Adviser fixes PPA's quarterly
of the Company is and a rolling programme of
sensitive to future PPA contract expiries has been
power market pricing, implemented to minimise risk.
and a major shift Protection against a sustained
in power demand or period of low energy prices
supply will impact can only be achieved by maximising
the Company's ability exposure to regulatory revenues
to meet its dividend through acquisition of more
target. The UK Government legacy FIT and ROC plants.
is also consulting Some recent acquisitions have
on proposals to reform included fixed power contracts
electricity markets for a longer period, reducing
which may result exposure to short term volatility.
in split pricing Storage technology, which can
for renewable and profit from power price volatility,
baseload generation is also being acquired into
and the possibility the portfolio. The Company
of a regional pricing has begun a programme to improve
framework for generation its links with Westminster
and other adverse to ensure that all members
consequences for of Parliament are aware of
the Company. the need to maintain sufficient
incentives for renewable investment.
For a full overview of how
market condition risks are
being mitigated, please refer
to the Company's risk matrix
above.
------------------------------ ---------------------------------------
Technology Solar assets have The Investment Adviser periodically
a lifespan of up evaluates and reviews the cost
to 40 years, during of replacement parts for the
which the technology assets within the portfolio.
could become outdated. Availability of old parts may
There is a shorter-term present an issue and, long-term,
risk associated with PV panels may need to be re-designed
the technology chosen for warmer temperatures and
at the point of planning wind turbines designed to withstand
and whether this a wider range of windspeeds.
is still optimal Heat losses are also built
at the point of construction into generation models.
(which can be 4/5
years later). Also In regard to short-term risks,
includes consideration once a project has achieved
in relation to spare planning, the technical specification
or replacement parts. of the site is reviewed and
can be amended to ensure appropriate
equipment is installed.
------------------------------ ---------------------------------------
Policy Whilst climate-related Bluefield Development, who
policy changes may are developing a solar and
present some challenges battery pipeline for the Company,
in relation to the engages local authorities at
planning process all stages of the development
for new assets, overall, process to ensure climate change
policy shifts present is specifically addressed in
prominent opportunities the determination of planning
for the Company to applications.
leverage.
------------------------------ ---------------------------------------
Reputation The renewables sector The Company's continued transparency
has a positive reputation regarding the climate actions
due to its role in it is taking will improve reputational
climate change mitigation risks. As part of the development
and the energy transition. process, Bluefield Development
A potential source engages with local stakeholders
of reputational damage to communicate the benefits
could come from health of renewable energy projects
& safety incidents and obtain local support. As
or supply chain issues. part of its ESG strategy, the
Company will look to address
the potential negative impacts
associated with being part
of the renewables industry,
such as those relating to supply
chain.
Climate-related risks and opportunities associated with the acquisition of new assets is managed by the Investment Adviser's Investment team. If a material climate risk is identified, the appropriate adaption and mitigation measures would be discussed amongst the Investment Adviser and with the Investment Committee, the latter ultimately approving whether the acquisition goes ahead or not.
The Company invests in a range of renewable technology types, which are geographically diverse across the UK, helping to provide resilience against unpredictable weather patterns. In particular, the use of solar photovoltaic technology means generation is not dependent only on direct irradiation but also on predictable daylight hours, limiting short-term volatility when compared to other forms of weather dependent electricity generation.
The assets have suitable insurance in place, including both public liability and business interruption, to help mitigate the impact of operational disruption, which can occur through weather related events. As part of its ESG strategy, the Company has committed to implementing renewable energy import tariffs across its portfolio (if not already in place) over the coming year.
c. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisations overall risk management
Climate change risks, both transitional and physical, are considered by the Board, the Investment Adviser and Bluefield companies and are included within the Company's risk matrix. Ultimately, the Board of the Company has oversight for what controls and mitigation measures are deemed sufficient to manage climate-related risks, with delegation given to the Investment Adviser when further action is deemed necessary.
The Bluefield companies are well-equipped to identify, assess, and manage climate-related risks from an operational perspective. For example, generation irregularities are identified in real time by monitoring teams who, following an initial investigation into the cause of the issue, can classify the risk and communicate it to asset management and O&M teams, helping ensure a quick resolution. Following climate events such as extreme storms, Bluefield Operations Limited are able to adapt work schedules and respond quickly to affected sites, securing them from a Health & Safety perspective and identifying follow up works to restore generation.
Climate-related events that impact a site (e.g., heat stress), are recorded by O&M teams and provided as an incident report to the asset manager. This helps the Company to perform trend analysis on asset performance to track the behaviour of installed equipment, produce forecasts and analyse how performance can be optimised. This insight into the impact of climate-related incidents on generation will support the Company in evaluating the potential impact of climate risk on its portfolio and as a result, help inform decisions to future-proof its assets.
5. Metrics and Targets
a. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management processes.
Climate-related opportunities are tracked through the following metrics, described in more detail within the Company's ESG report:
Ø Renewable energy generated (kWh)
Ø CO2(e) savings achieved (tCO2e)
Ø Equivalent number of houses powered with renewable energy (#)
Power price volatility is monitored through wholesale energy prices and the % of revenues with fixed power prices. Various climate-related metrics are collected through incident reports and monitoring data, which include: climate-related events; temperature thresholds of equipment/components; heat losses; and windspeed thresholds. Given that the Company will start to construct new battery and solar assets shortly, metrics are being identified to enable the carbon intensity of these operations to be measured.
It is anticipated that the results of the scenario analysis will help inform and expand the Company's list of climate metrics. The Company will continue to review metrics which will enhance the assessment of climate-related risks and opportunities in line with its strategy and risk management processes, helping monitor climate-related trends impacting the Company and its service providers.
b. Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas emissions, and the related risks.
As found below, the Company has calculated its GHG emission inventory for the period 1st July 2021 - 30th June 2022. Emissions have been calculated in accordance with the GHG Protocol Corporate Accounting and Reporting Standard, therefore covering the Company's direct and indirect emissions across its value chain. Figure 2 highlights emission results per category ([19]) .
Emissions Emissions
Location-Based % Market-Based %
(tCO(2) e) (tCO(2) e)
Scope 1 58 2 58 2
---------------- ---- -------------- ----
Scope 2 1,081 30 1,249 34
---------------- ---- -------------- ----
Scope 3 2,453 68 2,353 64
---------------- ---- -------------- ----
Total 3,592 100 3,660 100
---------------- ---- -------------- ------
Figure 2 - the Company's GHG emission inventory for the period 1 July 2021 - 30 June 2022
As expected, the Company's Scope 3 emissions represent the vast majority of its carbon footprint. It is envisaged that Scope 3 emissions will increase over coming years as the Company begins its new construction programme. The Investment Adviser is working collaboratively with Engineering, Procurement & Construction (EPC) contractors to understand how energy usage can be reduced during the construction process.
As a measure to reduce its direct emissions, the Company will transfer its assets onto renewable energy import tariffs, where these are not already in place. As standard, renewable energy import tariffs will be elected for all new assets being developed. The Company will continue to review what additional measures could be taken to reduce its operational footprint over time.
c. Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.
The Company's performance, which is intrinsically linked to climate-related opportunities, is monitored through its financial objectives, which are described within the Strategic section of this report.
However, the Company also wishes to manage its climate-related risks and consider sustainability alongside financial performance. As part of the Company's ESG strategy, the following targets are in place:
Ø The Company will implement renewable energy import tariffs across its portfolio (including for construction assets once they become operational).
Ø The Company will invest up to GBP50,000 in industry collaborations annually to support the energy transition.
Ø The Company will undertake scenario analysis for material physical and transitional climate-related risks and opportunities within the next 12 months.
Ø The above will help the Company further embed climate considerations into strategic decision making and financial planning.
Work will continue to identify suitable targets and metrics to support the Company in managing its climate-related risks and opportunities.
Report of the Directors
The Directors hereby submit the annual report and financial statements of the Company for the year ended 30 June 2022.
General Information
The Company is a non-cellular company limited by shares incorporated in Guernsey under the Law on 29 May 2013. The Company's registration number is 56708, and it has been registered and is regulated by the GFSC as a registered closed-ended collective investment scheme and as a Green Fund after successful application under the Guernsey Green Fund Rules to the GFSC on 16 April 2020. The Company's Ordinary Shares were admitted to the Premium Segment of the Official List and to trading on the Main Market of the London Stock Exchange following its IPO which completed on 12 July 2013.
Principal Activities
The principal activity of the Company is to invest in a portfolio of large scale UK based solar, wind and renewable energy infrastructure assets.
The Company has a progressive dividend target. The dividend target for the financial year ended 30 June 2022 was 8.16pps.
Business Review
A review of the Company's business and its likely future development is provided in the Chair's Statement, Strategic Report and in the Report of the Investment Adviser above.
Listing Requirements
The Company has complied with the applicable Listing Rules throughout the year.
Results and Dividends
The results for the year are set out in the financial statements below.
The dividends for the year are set out in the financial statements in Note 14 below.
Share Capital
The Company has one class of Ordinary Shares. The issued nominal value of the Ordinary Shares represents 100% of the total issued nominal value of all share capital. Under the Company's Articles, on a show of hands, each shareholder present in person or by proxy has the right to one vote at general meetings. On a poll, each shareholder is entitled to one vote for every share held.
Shareholders are entitled to all dividends paid by the Company and, on a winding up, providing the Company has satisfied all of its liabilities, the Shareholders are entitled to all of the surplus assets of the Company. The Ordinary Shares have no right to fixed income.
Shareholdings of the Directors
The Directors of the Company and their beneficial interests in the shares of the Company as at 30 June 2022 are detailed below:
Director Ordinary Ordinary
Shares of Shares of
GBP1 each % holding GBP1 each % holding
held 30 June at held 30 June at
2022 30 June 2021 30 June
2022 2021
------------------ -------------- ------------ -------------- ------------
John Rennocks* 290,388 0.05 316,011 0.08
John Scott* 543,312 0.09 512,436 0.13
Paul Le Page 35,000 0.01 35,000 0.01
Laurence McNairn N/A N/A 441,764 0.11
Meriel Lenfestey 7,693 0.00 - -
Elizabeth Burne 15,000 0.00 N/A N/A
------------------ -------------- ------------ -------------- ------------
*Including shares held by PCAs
Directors' Authority to Buy Back Shares
The Board believes that the most effective means of minimising any discount to NAV which may arise on the Company's share price is to deliver strong, consistent performance from the Company's investment portfolio in both absolute and relative terms. However, the Board recognises that wider market conditions and other considerations will affect the rating of the Ordinary Shares in the short term and the Board may seek to limit the level and volatility of any discount to NAV at which the Ordinary Shares may trade. The means by which this might be done could include the Company repurchasing its Ordinary Shares. Therefore, subject to the requirements of the Listing Rules, the Law, the Articles and other applicable legislation, the Company may purchase Ordinary Shares in the market in order to address any imbalance between the supply of and demand for Ordinary Shares or to enhance the NAV of Ordinary Shares.
In deciding whether to make any such purchases the Board will have regard to what it believes to be in the best interests of Shareholders and to the applicable Guernsey legal requirements which require the Board to be satisfied on reasonable grounds that the Company will, immediately after any such repurchase, satisfy a solvency test prescribed by the Law and any other requirements in its Articles. The making and timing of any buybacks will be at the absolute discretion of the Board and not at the option of the Shareholders. Any such repurchases would only be made through the market for cash at a discount to NAV.
On incorporation, the Company passed a written resolution granting the Board general authority to purchase in the market up to 14.99% of the Ordinary Shares in issue immediately following Admission. A resolution to renew such authority was passed by Shareholders at the AGM held on 3 December 2021. Therefore, authority was granted to the Board to purchase in the market up to 14.99% of the Ordinary Shares in issue immediately following the AGM held on 3 December 2021 at a price not exceeding the higher of (i) 5% above the average mid-market values of Ordinary Shares for the five Business Days before the purchase is made or (ii) the higher of the last independent trade or the highest current independent bid for Ordinary Shares. The Board intends to seek renewal of this authority from the Shareholders at the next AGM scheduled to be held on 29 November 2022.
Pursuant to this authority, and subject to the Law and the discretion of the Board, the Company may purchase Ordinary Shares in the market on an ongoing basis with a view to addressing any imbalance between the supply of and demand for Ordinary Shares.
Ordinary Shares purchased by the Company may be cancelled or held as treasury shares. The Company may borrow and/or realise investments in order to finance such Ordinary Share purchases.
The Company did not purchase any Ordinary Shares for treasury or cancellation during the period.
Directors' and Officers' Liability Insurance
The Company maintains insurance in respect of directors' and officers' liability in relation to their acts on behalf of the Company. Insurance is in place, having been renewed on 12 July 2022.
Substantial Shareholdings
As at 30 June 2022, the Company had been notified, in accordance with chapter 5 of the Disclosure and Transparency Rules, of the following substantial voting rights over 3% as Shareholders of the Company.
Shareholder Shareholding % Holding ---------------------------------------- ------------- ---------- BlackRock 89,238,358 14.59 Newton Investment Management 42,220,250 6.90 Gravis Capital Management 38,053,279 6.22 abrdn Capital 31,003,900 5.07 Hargreaves Lansdown, stockbrokers (EO) 30,285,508 4.95 Legal & General Investment Management 25,628,211 4.19 Total Shares in Issue 256,429,506
The Directors confirm that there are no securities in issue that carry special rights with regards to the control of the Company. The Company also provides the same information as at 6 September 2022, being the most current information available.
Shareholder Shareholding % Holding --------------------------------------- ------------- ---------- BlackRock 89,379,090 14.62 Newton Investment Management 42,322,112 6.92 Gravis Capital Management 38,053,279 6.22 Hargreaves Lansdown, stockbrokers (EO) 30,957,636 5.06 abrdn Capital 30,718,189 5.02 Legal & General Investment Management 24,951,206 4.08 Brooks Macdonald 20,016,831 3.27 Interactive Investor (EO) 19,122,974 3.13 Total Shares in Issue 295,521,317
Independent Auditor
KPMG has been the Company's external Auditor since the Company's incorporation. A resolution will be proposed at the forthcoming AGM to reappoint them as Auditor and authorise the Directors to determine the Auditor's remuneration for the ensuing year.
The Audit Committee will periodically review the appointment of KPMG and the Board recommends their reappointment at the forthcoming AGM. Further information on the work of the Auditor is set out in the Report of the Audit Committee below.
Articles of Incorporation
The Company's Articles may be amended only by special resolution of the Shareholders.
Going Concern
At 30 June 2022, the Company had invested in 127 solar plants, six wind farms and 109 single stick wind turbines, committing GBP962.2 million to SPV investments. The Company, through its direct subsidiary, BR1, has access to an RCF which, together with the net income generated by the acquired projects, is expected to allow the Company to meet its liquidity needs for the payment of operational expenses, dividends and acquisition of new renewable energy infrastructure assets. The Company, through BR1, expects to comply with the covenants of its long term loans and RCF.
The Board, in its consideration of going concern, has reviewed comprehensive cash flow forecasts prepared by the Investment Adviser, taking into account capital raises to 30 June 2022, as well as the performance of the solar and wind plants currently in operation. The conflict in Ukraine continues to have a significant impact on the macro-economic environment in which the Company operates. The Board and Investment Adviser have been closely monitoring this and it has been considered as part of the going concern assessment.
The Board has also considered the likelihood of the Company being asked to discontinue operations in its mandatory five year discontinuation vote that is due at the 2023 AGM and regards this as very unlikely, given the strong performance of the Company and the support which it has received from its major shareholders. In assessing the going concern status of the Company, the Board has also considered the re-financing of the Natwest term loan, maturing in August 2023, and the interest rate swaps for 75% of the balance (being GBP82.5m) in place until 2037, and has concluded that there is no reason to believe that these will not be refinanced or repaid as they fall due.
In the light of these enquiries, at the time of approving these accounts the Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the 12 months from the date of signing the financial statements and does not consider there to be any material threat to the viability of the Company. The Board has therefore concluded that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements.
Internal controls review
Taking into account the information on Principal and Emerging Risks provided above of the strategic report and the ongoing work of the Audit Committee in monitoring the risk management and internal control systems on behalf of the Board, the Directors
-- are satisfied that they have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity; and
-- have reviewed the effectiveness of the risk management and internal control systems and no significant failings or weaknesses were identified.
Fair, Balanced and Understandable
The Board has considered whether the Annual Report taken as a whole is fair, balanced and understandable, taking into account the commentary and tone and whether it includes the requisite information needed for Shareholders to assess the Company's business model, performance and strategy. In addition, the Board also questioned the Investment Adviser on information included and excluded from the Annual Report, and considered whether the narrative at the front of the report is consistent with the financial statements. As a result of this work, each of the Board members considers that the Annual Report is fair, balanced and understandable and includes the requisite information needed for Shareholders to assess the Company's business model, performance and strategy.
Financial Risks Management Policies and Procedures
Financial Risks Management Policies and Procedures are disclosed in Note 15.
Principal and Emerging Risks
Principal and Emerging Risks are discussed in the Strategic Report above.
Annual General Meeting
The AGM of the Company will be held on 29 November 2022 at Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey. Details of the resolutions to be proposed at the AGM, together with explanations, will appear in the Notice of Meeting to be distributed to Shareholders together with this Annual Report.
Members of the Board will be in attendance at the AGM and will be available to answer shareholder questions.
By order of the Board
Paul Le Page Elizabeth Burne Director Director 29 September 2022 29 September 2022
Board of Directors
John Rennocks (Chair)
John Rennocks was appointed as non-executive Chair on 12 June 2013 and is Chair of Utilico Emerging Markets, an investor in infrastructure and related assets in emerging markets. He has broad experience in emerging energy sources, support services and manufacturing. Mr Rennocks previously served as a non-executive director of Greenko Group plc, a developer and operator of hydro and wind power plants in India, non-executive deputy chair of Inmarsat plc, a non-executive director of Foreign & Colonial Investment Trust plc, Chair of Diploma plc, as well as several other public and private companies, and as Executive Director-Finance for Smith & Nephew plc, Powergen plc and British Steel plc/Corus Group plc. Mr Rennocks is a Fellow of the Institute of Chartered Accountants of England and Wales.
John Scott (Senior Independent Director)
John Scott was appointed as a non-executive director of the Company on 12 June 2013 and is a former investment banker who spent 20 years with Lazard and is currently a director of several investment trusts. Mr Scott has been Chair of Impax Environmental Markets plc since May 2014 and Chair of Alpha Insurance Analysts since April 2013. In 2019, he was appointed Chair of JP Morgan Global Core Real Assets. In June 2017, he retired as Chair of Scottish Mortgage Investment Trust PLC. He has an MA in Economics from Cambridge University and an MBA from INSEAD. He is also a Fellow of the Chartered Insurance Institute.
Paul Le Page (Chair of the Audit Committee)
Paul Le Page was appointed as a non-executive director of the Company on 12 June 2013 and is a former executive Director and Senior Portfolio Manager of FRM Investment Management Limited, a subsidiary of Man Group, and holds non-executive directorships of a number of investment funds. Mr. Le Page is Audit Committee Chair of RTW Venture Fund Limited and was previously Audit Committee Chair of UK Mortgages Limited, Thames River Multi Hedge PCC Limited and Cazenove Absolute Equity Limited. Mr. Le Page has 18 years' Audit Committee experience within the closed end investment fund sector and has a broad-based knowledge of the global investment industry, fund governance, reporting and product structures. Mr Le Page graduated from University College London in Electrical and Electronic Engineering and qualified as a Chartered Electrical Engineer whilst leading the development of robotic immunoassay equipment. He obtained an MBA from Heriot Watt University in 1999 which he used to switch from industrial R&D to investment research.
Meriel Lenfestey
Meriel Lenfestey was appointed as a non-executive director of the Company in April 2019. Ms Lenfestey founded Flow Interactive in 1997, a London based Customer Experience Consultancy assisting clients across many sectors embracing digital transformation. Since exiting the business in 2016 she has held a portfolio of non-executive director and advisory roles across Energy, Telecoms, Transport, Infrastructure, Technology, E-gaming and local charities. She is a non-executive director at International Public Partnerships (FTSE 250), Boku (FTSE AIM), and Ikigai Ventures (FTSE All share). She also holds non-executive director roles at several private companies including Gemserv, Jersey Telecom and Aurigny as well as Art for Guernsey a local charity. She has an MA in Computer Related Design from the Royal College of Art, a Financial Times Non-Executive Director Diploma and is a Fellow of the RSA.
Elizabeth Burne
Elizabeth Burne was appointed as a non-executive director of the Company in October 2021, is a Fellow of the Association of Chartered Certified Accountants with a First Class Honours degree in Applied Accounting and over twenty years' experience within the financial services sector across the Channel Islands and Australia. Prior to becoming a non-executive director Ms Burne was an audit director at PwC, working in alternative asset management and insurance, assisting clients with strategic, financial, risk and corporate governance matters. Ms Burne holds a portfolio of non-executive directorships including HarbourVest Global Private Equity Limited (a constituent of the FTSE 250 Index), as well as a number of private companies in the venture capital, real estate and insurance sectors.
Directors' Statement of Responsibilities
The Directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations.
The Law requires the Directors to prepare financial statements for each financial year. Under the Law, the Directors have elected to prepare the financial statements in accordance with IFRS as adopted by the EU and applicable law. The financial statements are required by Law to give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgments and estimates that are reasonable, and prudent;
-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
-- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
-- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping proper accounting records that 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 Law. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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.
So far as each Director is aware, there is no relevant audit information of which the Company's Auditor is unaware, and each Director has taken all the steps that they ought to have taken as a Director in order to make themself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 249 of the Law.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, and for the preparation and dissemination of Financial Statements. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
By order of the Board
Paul Le Page Elizabeth Burne Director Director 29 September 2022 29 September 2022
Responsibility Statement of the Directors in Respect of the Annual Report
Each of the Directors, whose names are set out below in the Board of Directors section of the annual report, confirms that to the best of their knowledge that:
-- the financial statements, prepared in accordance with IFRS, as adopted by the EU give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
-- the Management Report (comprising Chair's Statement, Strategic Report, Report of the Directors and Report of the Investment Adviser) includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal and emerging risks above; and
Having taken advice from the Audit Committee, the Directors consider the annual report and financial statements, taken as a whole, is fair, balanced and understandable and that it provides the information necessary for Shareholders to assess the Company's position, performance, business model and strategy.
By order of the Board
Paul Le Page Elizabeth Burne Director Director 29 September 2022 29 September 2022
Corporate Governance Report
The Board recognises the importance of sound corporate governance, particularly the requirements of the AIC Code. The Company is currently complying with the latest AIC code effective 1 January 2019.
The Company has been a member of the AIC since 15 July 2013. The Board has considered the principles and provisions of the AIC Code. The AIC Code provides a 'comply or explain' code of corporate governance and addresses all the principles set out in the UK Code as well as setting out additional principles and recommendations on issues that are of specific relevance to investment companies such as the Company. The Board considers that reporting against the principles and recommendations of the AIC Code provides better information to Shareholders.
The GFSC issued a Guernsey Code which came into effect on 1 January 2012. The introduction to the Guernsey Code states that "Companies which report against the UK Code or the AIC Code of Corporate Governance are also deemed to meet this Code". Therefore, AIC members which are Guernsey-domiciled and which report against the AIC Code are not required to report separately against the Guernsey Code.
The AIC Code is available on the AIC's website (www.theaic.co.uk). The UK Code is available from the FRC's website ( www.frc.org.uk ). The Guernsey code is available from the GFSC's website (www.gfsc.gg).
Throughout the year ended 30 June 2022, the Company has complied with the provisions of the AIC Code and the provisions of the UK Code, except to the extent highlighted below.
Provision A.2.1 of the UK Code requires a chief executive to be appointed; as an investment company, however, the Company has no employees and therefore has no requirement for a chief executive. As all the Directors, including the Chair, are non-executive and independent of the Investment Adviser, the Company has not established a remuneration committee which is not in accordance with provisions B.2.1 and D.2.1 of the UK Code, and Principle 7 of the AIC Code respectively. The Board is satisfied that as a whole, any relevant issues can be properly considered by the Board. The absence of an internal audit function is discussed in the Report of the Audit Committee below.
The Board monitors developments in corporate governance to ensure the Board remains aligned with best practice, especially with respect to the increased focus on diversity. The Board acknowledges the importance of diversity, including gender (as stated in Principle 7 of the AIC Code), for the effective functioning of the Board and commits to supporting diversity in the boardroom. It is the Board's ongoing aspiration to have well-diversified representation and it continues to value directors with diverse skill sets, capabilities and experience gained from different geographical and professional backgrounds that enhance the Board by bringing a wide range of perspectives to the Company. The Board is satisfied with the current composition and functioning of its members and notes that we have 40% female representation, exceeding the Hampton-Alexander Review target.
The Board
The Directors' biographies are provided below which set out the range of investment, financial and business skills and experience represented.
John Rennocks, John Scott and Paul Le Page were appointed on 12 June 2013, Meriel Lenfestey was appointed on 1 April 2019 and Elizabeth Burne was appointed on 7 October 2021. Laurence McNairn was appointed 1 July 2013 and retired on 17 February 2022. The Board appointed John Scott as Senior Independent Director effective from 10 December 2013 to fulfil any function that is deemed inappropriate for the Chair to perform.
The Directors shall retire and submit themselves for re-election at each AGM of the Company; the next AGM is due to take place on 29 November 2022.
Any Director who is elected or re-elected at that meeting is treated as continuing in office throughout. If they are not elected or re-elected, they shall retain office until the end of the meeting or (if earlier) when a resolution is passed to appoint someone in their place or when a resolution to elect or re-elect the Director is put to the meeting and lost.
The Board is of the opinion that members should be re-elected because they believe that they have the right skills and experience to continue to serve the Company. As recommended in Principle 7 of the AIC Code, the Board has considered the need for a policy regarding tenure of service. As at 30 June 2022, each of the directors had been on the Board for approximately nine years, with the exceptions of Ms Lenfestey and Ms Burne who were appointed to the Board in 2019 and 2021 respectively. The Board is cognisant of the AIC guidance around Board member tenure and has taken positive action to address this by implementing a carefully thought through succession plan that manages the transition of corporate knowledge, recognises the benefits of bringing new perspectives and diversity, all whilst ensuring independence.
The Board meets at least four times a year in Guernsey, with unscheduled meetings held where required to consider investment related or other issues. In addition, there is regular contact between the Board, the Investment Adviser and the Administrator. Furthermore, the Board requires to be supplied in a timely manner with information by the Investment Adviser, the Company Secretary and other advisers in a form and of a quality appropriate to enable it to discharge its duties.
The Company has adopted a share dealing code which applies to the Board and any persons discharging managerial responsibilities. This is to ensure compliance by the Board, and relevant personnel of the Investment Adviser, with the requirements of the UK Market Abuse Regulations.
Directors' Remuneration
The Chair was entitled to an annual remuneration of GBP62,500 (2021: GBP62,500). The other Directors were entitled to an annual remuneration of GBP39,000 (2021: GBP39,000). Paul Le Page received an additional annual fee of GBP8,000 (2021: GBP8,000) for acting as Chair of the Audit Committee. The Board reviewed the Directors' remuneration and following this review from 1 January 2022 the Chair is entitled to an annual remuneration of GBP65,625. The other Directors are entitled to an annual remuneration of GBP41,000 and Paul Le Page receives an extra GBP8,350 as Chair of the Audit Committee. Post year end the Board established a Management Engagement Committee and ESG Committee, the Chair of each is entitled to an extra GBP3,000.
The remuneration earned by each Director in the past two financial years was as follows:
Director 2022 2021
GBP GBP
-------------------------------------------- ------- -------
John Rennocks 64,063 62,500
John Scott 40,000 39,000
Paul Le Page 48,175 47,000
Laurence McNairn (retired 17 February
2022) 24,892 39,000
Meriel Lenfestey 40,000 39,000
Elizabeth Burne (appointed 7 October 2021) 29,689 N/A
-------------------------------------------- ------- -------
The total Directors' fees expense for the year amounted to GBP240,818 (2021: GBP226,500). As disclosed in Note 16, John Rennocks and John Scott are directors of BSIFIL, and have received remuneration in respect of BSIFIL.
All of the Directors are non-executive and each is considered independent for the purposes of Chapter 15 of the Listing Rules.
In accordance with Article 22 of AIFMD, the Company shall disclose the total amount of remuneration for the financial year, split into fixed and variable remuneration, paid by the AIFM to its staff, and number of beneficiaries, and, where relevant, carried interest paid by the AIF. As the Company is categorised as an internally managed Non-EU AIFM for the purposes of AIFMD, Directors' remuneration reflects this amount.
Duties and Responsibilities
The Board has overall responsibility for optimising the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring the protection of investors. A summary of the Board's responsibilities is as follows:
-- statutory obligations and public disclosure; -- strategic matters and financial reporting; -- investment strategy and management; -- risk assessment and management including reporting, compliance, governance, monitoring and control; and -- other matters having a material effect on the Company.
The Directors have access to the advice and services of the Administrator, who is responsible to the Board for ensuring that Board procedures are followed and that it complies with the Law and applicable rules and regulations of the GFSC and the LSE. Where necessary, in carrying out their duties, the Directors may seek independent professional advice and services at the expense of the Company.
The Company maintains appropriate directors' and officers' liability insurance in respect of legal action against its Directors on an ongoing basis.
The Board's responsibilities for the annual report are set out in the Directors' Responsibilities Statement above. The Board is also responsible for issuing appropriate half-yearly financial reports and other price-sensitive public reports.
The attendance record of the Directors for the year to 30 June 2022 is set out below:
Scheduled Ad-hoc Audit Committee
Board Meetings Board Meetings Meetings
Director (max 4) (max 11) (max 6)
-------------------- ---------------- ---------------- ----------------
John Rennocks 4 10 5
John Scott 4 10 6
Paul Le Page 4 10 6
Laurence McNairn
(retired 17
February 2022)(1) 3 6 5
Meriel Lenfestey 4 8 6
Elizabeth Burne
(appointed 7
October 2021)(2) 3 7 4
-------------------- ---------------- ---------------- ----------------
11 ad-hoc Board Meetings were held during the period to formally review and authorise each investment made by the Company, to discuss the placing of Ordinary Shares and to consider interim dividends, amongst other items.
The Board believes that, as a whole, it comprises an appropriate balance of skills, experience, age, knowledge and length of service. The Board also believes that diversity of experience and approach, including gender diversity, amongst Board members is of great importance and it is the Company's policy to give careful consideration to issues of Board balance when making new appointments. Any new Director appointed to the Board will be provided with a bespoke induction programme tailored to the individual needs of the Director.
(1) Prior to retirement Mr McNairn had attended all scheduled and ad-hoc Board Meetings.
(2) Since appointment Ms Burne has attended all scheduled and ad-hoc Board Meetings.
Performance Evaluation
In accordance with Principle 7 of the AIC Code, the Board is required to undertake a formal and rigorous evaluation of its performance on an annual basis . A formal evaluation of the performance of the Board as a whole, and the Chair, is scheduled for completion by the end of this calendar year. The evaluation is undertaken utilising self-appraisal questionnaires and is followed by a detailed discussion of the outcomes which includes an assessment of the Directors' continued independence.
Committees of the Board
Audit Committee
The Board established an Audit Committee in 2013. It is chaired by Paul Le Page and at the date of this report comprised all of the Directors set out above. The report of the role and activities of this committee and its relationship with the Auditor is contained in the Report of the Audit Committee below. The Committee operates within clearly defined terms of reference which are available on the Company's website ( www.bluefieldsif.com ).
Nomination Committee
Post year end the Board established a Nomination Committee. It is chaired by John Rennocks and at the date of this report comprised all of the Directors set out above. The principal functions of the Committee are to assist the Board in filling vacancies on the Board and its committees and to review and make recommendations regarding Board structure, size and composition. The Committee has yet to meet since establishment, but shall meet at least once a year.
Management Engagement Committee
Post year end the Board established a Management Engagement Committee. It is chaired by Elizabeth Burne and at the date of this report comprised all of the Directors set out above. The principal function of the Committee is to annually review and, if thought fit, approve the terms of the Investment Advisory Agreement between the Company and the Investment Adviser. Additionally, the Committee shall review annually the performance and terms of engagement of any other key service providers to the Company as considered appropriate. The Committee has yet to meet since establishment, but shall meet at least once a year.
ESG Committee
Post year end the Board established an ESG Committee. It is chaired by Meriel Lenfestey and at the date of this report comprised all of the Directors set out above. The principal function of the Committee is to provide a forum for mutual discussion, support and challenge the Investment Adviser with respect to ESG including, with respect to the policies adopted by the Company, in respect to investment and divestment and by the Investment Adviser with respect to asset management activities and their reporting on ESG matters to the Committee and Board. The Committee will also assist on such other matters related to ESG as may be referred to it by the Board. The Committee has yet to meet since establishment, but shall meet at least once a year.
Internal Control and Financial Reporting
The Board acknowledges that it is responsible for establishing and maintaining the Company's system of internal control and reviewing its effectiveness. Internal control systems are designed to manage rather than eliminate the failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatements or loss. The Audit Committee reviews all controls including operations, compliance and risk management. The key procedures which have been established to provide internal control are:
-- the Board has delegated the day-to-day operations of the Company to the Administrator and Investment Adviser; however, it remains accountable for all of the functions it delegates;
-- the Board clearly defines the duties and responsibilities of the Company's agents and advisers and appointments are made by the Board after due and careful consideration. The Board monitors the ongoing performance of such agents and advisers;
-- the Board monitors the actions of the Investment Adviser at regular Board meetings and is also given frequent updates on developments arising from the operations and strategic direction of the underlying investee companies; and
-- the Administrator provides administration and company secretarial services to the Company.
The Administrator maintains a system of internal control on which it reports to the Board.
The Board has reviewed the need for an internal audit function and has decided that the systems and procedures employed by the Administrator and Investment Adviser, including their own internal controls and procedures, provide sufficient assurance that a sound system of risk management and internal control, which safeguards shareholders' investment and the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.
The systems of control referred to above are designed to ensure effectiveness and efficient operation, internal control and compliance with laws and regulations. In establishing the systems of internal control, regard is paid to the materiality of relevant risks, the likelihood of costs being incurred and costs of control. It follows therefore that the systems of internal control can only provide reasonable but not absolute assurance against the risk of material misstatement or loss.
The Company has delegated the provision of all services to external service providers whose work is overseen by the Board at its quarterly meetings. Each year a detailed review of performance pursuant to their terms of engagement has been completed by the Audit Committee and will in future be undertaken by the Management Engagement Committee and recommendations made to the Board.
Investment Advisory Agreement
In accordance with Listing Rule 15.6.2(2)R, the Directors formally appraise the performance and resources of the Investment Adviser.
The Investment Adviser is led by its managing partners, James Armstrong and Giovanni Terranova, who founded the Bluefield business in 2009 following their prior work together in European solar energy. Neil Wood, who joined in 2013 was appointed partner in 2020 and runs the Investment Adviser alongside the two founders. The Investment Adviser's team has a combined record, prior to and including Bluefield Partners LLP, of investing more than GBP1 billion in solar PV projects. The Management team have been involved in over GBP1.5 billion of solar PV transactions in the UK and Europe since 2008. The Investment Adviser's non-executive team includes Mike Rand, Bluefield Partners founder and former Managing Partner, William Doughty, the founding CEO of Semperian; Dr. Anthony Williams, the former chair of the Risk Committee for the Fixed Income, Currencies & Commodities Division, and Partner at Goldman Sachs & Co; and Jon Moulton, former managing partner and founder of Alchemy Partners.
In view of the substantial resources of the Investment Adviser and the Company's strong investment and operational performance for the period, in the opinion of the Directors the continuing appointment of the Investment Adviser is in the interests of the shareholders as a whole.
Dealings with Shareholders
The Board welcomes Shareholders' views and places great importance on communication with its shareholders. The Company's AGM will provide a forum for shareholders to meet and discuss issues with the Directors of the Company. Members of the Board will also be available to meet with shareholders at other times, if required. In addition, the Company maintains a website which contains comprehensive information, including regulatory announcements, share price information, financial reports, investment objectives and strategy and information on the Board.
Principal and Emerging Risks
Each Director is aware of the risks inherent in the Company's business and understands the importance of identifying, evaluating and monitoring these risks. The Board has adopted procedures and controls that enable it to manage these risks within acceptable limits and to meet all of its legal and regulatory obligations.
The Board considers the process for identifying, evaluating and managing any significant risks faced by the Company on an ongoing basis and these risks are reported and discussed at Board meetings. It ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld.
The Company's Principal and Emerging Risks are discussed in detail above of the Strategic Report. The Company's financial instrument risks are discussed in Note 15 to the financial statements.
Changes in Regulation
The Board monitors and responds to changes in regulation as they affect the Company and its policies.
AIFMD
AIFMD was introduced on 22 July 2014 in order to harmonise the regulation of AIFMs and imposes obligations on managers who manage or distribute AIFs in the EU or who market shares in such funds to EU investors. After seeking professional regulatory and legal advice, the Company was established in Guernsey as a self-managed Non-EU AIF. Additionally, the Company has taken advice on and implemented sufficient and appropriate policies and procedures that enable the Board to fulfil its role in relation to portfolio management and the management of risk. The Company is therefore categorised as an internally managed Non-EU AIFM for the purposes of AIFMD and as such neither it nor the Investment Adviser is required to seek authorisation under AIFMD.
The marketing of shares in AIFs that are established outside the EU (such as the Company) to investors in an EU member state is prohibited unless certain conditions are met. Certain of these conditions are outside the Company's control as they are dependent on the regulators of the relevant third country (in this case Guernsey) and the relevant EU member state entering into regulatory co-operation agreements with one another.
Currently, the NPPR provides a mechanism to market Non-EU AIFs that are not allowed to be marketed under AIFMD domestic marketing regimes. The Board is utilising NPPR in order to market the Company, specifically in the UK pursuant to Regulations 57, 58 and 59 of the UK Alternative Investment Fund Managers Regulations 2013 . The Board is working with the Company's advisers to ensure the necessary conditions are met, and all required notices and disclosures are made under NPPR. Eligible AIFMs will be able to continue to use NPPR for the time being.
Any regulatory changes arising from implementation of AIFMD (or otherwise) that limit the Company's ability to market future issues of its shares may materially adversely affect the Company's ability to carry out its investment policy successfully and to achieve its investment objectives, which in turn may adversely affect the Company's business, financial condition, results of operations, NAV and/or the market price of the Ordinary Shares.
The Board, in conjunction with the Company's advisers, will continue to monitor the development of AIFMD and its impact on the Company.
FATCA and CRS
The Company is registered under FATCA and continues to comply with FATCA and the Common Reporting Standard's requirements to the extent relevant to the Company.
PRIIPs
The Company is in compliance with the requirements under PRIIPs to publish a KID. The KID is available on the Company's website.
NMPI
On 1 January 2014 FCA rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes came into effect.
The Board has been advised that the Company would qualify as an investment trust if it was resident in the UK, and therefore the Board believes that the retail distribution of its shares should be unaffected by the changes. It is the Board's intention that the Company will make all reasonable efforts to conduct its affairs in such a manner that its shares can be recommended by independent financial advisers to UK retail investors in accordance with the FCA's rules relating to non-mainstream investment products.
Guernsey Green Fund Status
The Guernsey Green Fund aims to provide a platform for investments into various green initiatives and gives investors a trusted and transparent product that contributes to the internationally agreed objectives of mitigating environmental damage and climate change. The Company successfully obtained Guernsey Green Fund Status on 16 April 2019.
Following an application to the GFSC, the Company was deemed to have met the following investment criteria outlined in the Guernsey Green Fund Rules, 2018 ('The Rules'):
-- The Property of a Guernsey Green Fund shall be invested with the aim of spreading risk and with the ultimate objective of mitigating environmental damage resulting in a net positive outcome for the environment;
-- A Guernsey Green Fund shall comprise 75% assets by value that meet the Guernsey Green Fund Rules criteria. The remaining 25% must not lessen or reduce the Guernsey Green Fund's overall objective of mitigating environmental damage nor comprise an investment of a type specified within schedule 3 of the Guernsey Green Fund Rules, 2018;
-- A Guernsey Green Fund shall only comprise assets permitted to be held under its principal documents or prospectus and of a nature described in its prospectus; and
-- A Guernsey Green Fund shall not be invested in contravention of limits or restrictions imposed under its principal documents or prospectus.
The Company fulfils the above investment criteria by investing in a diversified portfolio of renewable energy assets, each located within the UK, with a focus on utility scale assets and portfolios on greenfield sites. The Group targets long life renewable energy infrastructure, expected to generate energy output over asset lives of at least 25 years. The Company incorporates Environmental Social & Governance policies into its investment processes and is actively monitoring and working to improve its environmental and social impact. The production of renewable energy equates to a significant amount of CO2 emissions saved, representing a sustainable and ethical investment.
By order of the Board
Paul Le Page Elizabeth Burne Director Director 29 September 2022 29 September 2022
Report of the Audit Committee
The Audit Committee, chaired by Paul Le Page and comprising all of the Directors set out above, operates within clearly defined terms of reference (which are available from the Company's website, www.bluefieldsif.com) and includes all matters indicated by Rule 7.1 of the UK FCA's DTRs and the AIC Code.. It is also the formal forum through which the Auditor will report to the Board of Directors.
The Audit Committee meets no less than three times a year, and at such other times as the Audit Committee shall require, and meets the Auditor at least twice a year. Any member of the Audit Committee may request that a meeting be convened by the company secretary. The Auditor may request that a meeting be convened if they deem it necessary. Any Director who is not a member of the Audit Committee, the Administrator and representatives of the Investment Adviser shall be invited to attend the meetings as the Directors deem appropriate.
The Board has taken note of the requirement that at least one member of the Committee should have recent and relevant financial experience and is satisfied that the Committee is properly constituted in that respect, with two of its members who are qualified accountants and three members with an investment background.
Responsibilities
The main duties of the Audit Committee are:
-- monitoring the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance and reviewing significant financial reporting judgements contained in them;
-- reporting to the Board on the appropriateness of the Board's accounting policies and practices including critical judgement areas;
-- reviewing the valuation of the Company's investments prepared by the Investment Adviser, and making a recommendation to the Board on the valuation of the Company's investments;
-- meeting regularly with the Auditor to review their proposed audit plan and the subsequent audit report and assess the effectiveness of the audit process and the levels of fees paid in respect of both audit and non-audit work;
-- making recommendations to the Board in relation to the appointment, reappointment or removal of the Auditor and approving their remuneration and the terms of their engagement;
-- monitoring and reviewing annually the Auditor's independence, objectivity, expertise, resources, qualification and non-audit work;
-- considering annually whether there is a need for the Company to have its own internal audit function;
-- keeping under review the effectiveness of the accounting and internal control systems of the Company;
-- reviewing and considering the UK Code, the AIC Code, the FRC Guidance on Audit Committees and the Company's institutional investors' commitment to the UK Stewardship code; and
-- reviewing the risks facing the Company and monitoring the risk matrix.
The Audit Committee is required to report formally to the Board on its findings after each meeting on all matters within its duties and responsibilities.
The Auditor is invited to attend the Audit Committee meetings as the Board deems appropriate and at which they have the opportunity to meet with the Committee without representatives of the Investment Adviser or the Administrator being present at least once per year.
Financial Reporting
The primary role of the Audit Committee in relation to the financial reporting is to review with the Administrator, Investment Adviser and the Auditor the appropriateness of the interim and annual financial statements, concentrating on, amongst other matters:
-- the quality and acceptability of accounting policies and practices;
-- the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements;
-- material areas in which significant judgements have been applied or there has been discussion with the Auditor;
-- whether 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 performance, business model and strategy; and -- any correspondence from regulators in relation to the Company's financial reporting.
To aid its review, the Audit Committee considers reports from the Administrator and Investment Adviser and also reports from the Auditor on the outcomes of their half year review and annual audit. Like the Auditor, the Audit Committee seeks to display the necessary professional scepticism their role requires.
Meetings
The Committee has met formally on 6 occasions in the year covered by this report. The matters discussed and challenged at those meetings were:
-- consideration and agreement of the terms of reference of the Audit Committee for approval by the Board;
-- review of the Company's risk matrix; -- review of the accounting policies and format of the financial statements;
-- review and approval of the audit plan of the Auditor and timetable for the interim and annual financial statements;
-- review of the valuation policy and methodology of the Company's investments applied in the interim and annual financial statements;
-- detailed review of the interim and annual report and financial statements; -- assessment of the effectiveness of the external audit process as described below; -- a review of the process used to determine the viability of the Company; and -- a review of the performance of the Company's Investment Adviser and key service providers
The Audit Committee chair or other members of the Audit Committee appointed for the purpose, shall attend each AGM of the Company, prepared to respond to any shareholder questions on the Audit Committee's activities.
Primary Area of Judgement
The Audit Committee determined that the key risk of misstatement of the Company's financial statements is the fair value of the investments held by the Company in the context of the high degree of judgement involved in the assumptions and estimates underlying the discounted cash flow calculations.
As outlined in Note 8 of the financial statements, the fair value of the BR1's investments (Directors' Valuation) as at 30 June 2022 was GBP939,947,842 (2021: GBP694,542,588). Market quotations are not available for these investments so their valuation is undertaken using a discounted cash flow methodology. The Directors have also considered transactions in similar assets and used these to infer the discount rate. Significant inputs such as the discount rate, rate of inflation, power price forecast and the amount of electricity the renewable energy infrastructure assets are expected to produce are subjective and include certain assumptions. As a result, this requires a series of judgements to be made as explained in Note 8 in the financial statements.
The valuation of the BR1's portfolio of renewable energy infrastructure assets (Directors' Valuation) as at 30 June 2022 has been determined by the Board based on information provided by the Investment Adviser.
The Audit Committee also reviewed and suggested factors that could impact BR1's portfolio valuation and its related sensitivities to the carrying value of the investments as required in accordance with IPEV Valuation Guidelines.
Risk Management
The Company's risk assessment process and the way in which significant business risks are managed is a key area of focus for the Committee. The work of the Audit Committee is driven primarily by the Company's assessment of its Principal and Emerging Risks as set out above of the Strategic Report, and it receives reports from the Investment Adviser and Administrator on the Company's risk evaluation process and reviews changes to significant risks identified.
Internal Audit
The Audit Committee considers at least once a year whether there is a need for an internal audit function. Currently it does not consider there to be a need for an internal audit function, given that there are no employees in the Company and all outsourced functions are with parties who have their own internal controls and procedures.
External Audit
KPMG has been the Company's external Auditor since the Company's inception.
The Auditor is required to rotate the audit partner every five years. The current Audit Director is in his first year of tenure. There are no contractual obligations restricting the choice of external auditor and the Company will consider putting the audit services contract out to tender at least every ten years. In line with the FRC's recommendations on audit tendering, this will be considered further when the audit partner rotates every five years. Under the Companies Law, the reappointment of the external Auditor is subject to shareholder approval at the AGM.
The objectivity of the Auditor is reviewed by the Audit Committee which also reviews the terms under which the external Auditor may be appointed to perform non-audit services. The Audit Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the Auditor, with particular regard to any non-audit work that the Auditor may undertake. In order to safeguard Auditor independence and objectivity, the Audit Committee ensures that any other advisory and/or consulting services provided by the external Auditor do not conflict with its statutory audit responsibilities. Advisory and/or consulting services will generally only cover reviews of interim financial statements and capital raising work. Any non-audit services conducted by the Auditor outside of these areas will require the consent of the Audit Committee before being initiated.
The external Auditor may not undertake any work for the Company in respect of the following matters: preparation of the financial statements; provision of investment advice; taking management decisions; advocacy work in adversarial situations; provision of tax and tax compliance services; promotion of, dealing in, or underwriting the Company's shares; provision of payroll services; design or implementation of internal control or risk management or financial information technology systems, provision of valuation services, provision of services related to internal audit; and provision of certain human resources functions.
The Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the Auditor, with particular regard to the level of non-audit fees. During the year, KPMG was also engaged to provide a review of the Company's interim information and to provide reporting accountant services in relation to the Company's share placings. Total fees paid for the Company and its subsidiaries amounted to GBP611,400 (2021: GBP105,250), fees for the Company itself amounted to GBP230,608 for the year ended 30 June 2022 (30 June 2021: GBP105,250) of which GBP97,975 related to audit and audit related services to the Company (30 June 2021: GBP74,200) and GBP132,633 in respect of non-audit services (30 June 2021: GBP31,050).
Notwithstanding such services, which have arisen in connection with review of the interim financial statements and reporting accountant services, the Audit Committee considers KPMG to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the audit as appropriate safeguards are in place.
To fulfil its responsibility regarding the independence of the Auditor, the Audit Committee has considered:
-- discussions with or reports from the Auditor describing its arrangements to identify, report and manage any conflicts of interest; and
-- the extent of non-audit services provided by the Auditor and arrangements for ensuring the independence and objectivity and robustness and perceptiveness of the Auditor and their handling of key accounting and audit judgements.
To assess the effectiveness of the Auditor, the Committee has reviewed and challenged:
-- the Auditor's fulfilment of the agreed audit plan and variations from it;
-- discussions or reports highlighting the major issues that arose during the course of the audit;
-- feedback from other service providers evaluating the performance of the audit team; -- arrangements for ensuring independence and objectivity; and -- robustness of the Auditor in handling key accounting and audit judgements.
The Audit Committee is satisfied with KPMG's effectiveness and independence as Auditor, having considered the degree of diligence and professional scepticism demonstrated by them. Having carried out the review described above and having satisfied itself that the Auditor remains independent and effective, the Audit Committee has recommended to the Board that KPMG be reappointed as Auditor for the year ending 30 June 2023.
To further enhance the audit efficiency of the Company and its subsidiaries the Audit Committee has recommended to the Board that KPMG should undertake the audit of the Company's subsidiary SPVs and a phased two-year programme is currently in process to implement this.
The Company is subject to mandatory audit director rotation and Mr Barry Ryan was appointed as the signing audit director for the current financial year following the rotation of Mr Rachid Frihmat. The Audit Committee met with Mr Ryan to assess his background and independence at the start of the Company's financial year.
During the course of the year as part of the board refreshment programme the Audit Committee initiated a review of the Company's articles of association and its regulatory and taxation substance requirements.
The Chair of the Audit Committee will be available at the AGM to answer any questions about the work of the Committee.
On behalf of the Audit Committee
Paul Le Page
Chair of the Audit Committee
29 September 2022
Independent Auditor's Report
I ndependent Auditor's Report to the Members of Bluefield Solar Income Fund Limited
Our opinion is unmodified
We have audited the financial statements of Bluefield Solar Income Fund Limited (the "Company"), which comprise the statement of financial position as at 30 June 2022, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
-- give a true and fair view of the financial position of the Company as at 30 June 2022, and of the Company's financial performance and cash flows for the year then ended;
-- are prepared in accordance with International Financial Reporting Standards as adopted by the EU; and
-- comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies' Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2021):
Valuation of financial The risk Our response
assets held at fair
value through profit
or loss
=========================== =========================== ============================================================
Basis : Our audit procedures
GBP856,380,000; (2021: The Company's investment included, but were not
GBP470,282,000) in its immediate limited to:
Refer to the Report subsidiary is carried Control evaluation:
of the Audit Committee at fair value through We assessed the design
abve, note 2 (j) profit or loss and and implementation of
accounting represents a significant the control over the
policy and note 8 proportion of the Valuation of financial
disclosures. Company's net assets assets held at fair value
(2022: 99.8%; 2021: through profit or loss.
99.8%). The fair Valuation model integrity
value of the immediate and model inputs:
subsidiary, which * We tested the valuation model for mathematical
reflects its net accuracy including, but not limited to, material
asset value, predominantly formulae errors;
comprises of the
fair value
(GBP939,948,000) * We verified key inputs into the valuation model, such
of underlying special as power price forecasts, contracted revenue and
purpose vehicle renewable operating costs to supporting documentation;
project investments
("SPVs") and the
immediate subsidiary * We agreed a value driven sample of balances within
level debt (see note the residual net asset amounts at subsidiary level to
8). supporting documentation, such as independent bank
The fair value of confirmations and other source documentation; and
the SPVs has been
determined using
the income approach, * In order to assess the reliability of management's
discounting the future forecasts, for a risk based selection, we assessed
cash flows of underlying the historical accuracy of the cash flow forecasts
renewable projects against actual results.
(the "Valuations"),
for which there is
no liquid market. Benchmarking the valuation
The Valuations incorporate assumptions:
certain assumptions With support from our
including discount KPMG valuation specialist,
rate, electricity we challenged the appropriateness
price forecasts, of the Company's valuation
useful economic life methodology and key assumptions
and other macro-economic including discount rate,
assumptions. power price forecasts,
In determining the inflation, and other
discount rate used macro-economic assumptions
in the Valuations, applied, by:
the relevant long * assessing the appropriateness of the valuation
term government bond methodology applied by the Investment Adviser;
yields, cost of debt,
specific asset risk
and evidence of recent * benchmarking against independent market data and
market transactions relevant peer group companies; and
are considered.
The Valuations are
adjusted for other * using our KPMG valuation specialist's experience in
specific assets and valuing similar investments.
liabilities of the
SPVs.
Risk : Assessing transparency:
The Valuations represent We considered the appropriateness
both a risk of fraud of the Company's investment
and error associated valuation policies and
with estimating the the adequacy of the Company's
timing and amounts disclosures in relation
of long term forecast to the use of estimates
cash flows alongside and judgements in arriving
the selection and at fair value (see note
application of appropriate 3).
assumptions. Changes We assessed whether the
to long term forecast disclosures around the
cash flows and/or sensitivities to changes
the selection and in key assumptions reflect
application of different the risks inherent in
assumptions may result the valuation of the
in a materially different underlying investment
valuation of financial portfolio (see note 8).
assets held at fair
value through profit
or loss.
=========================== =========================== ============================================================
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at GBP17,167,000 determined with reference to a benchmark of net assets of GBP858,391,000 of which it represents approximately 2% (2021: 2%).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to GBP12,875,000. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding GBP858,000, in addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above.
Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered the inherent risks to the Company's business model and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to affect the Company's financial resources or ability to continue operations over this period were:
-- Availability of capital to meet operating costs and other financial commitments; and
-- Ability of the Company's subsidiaries to refinance or repay debt and to comply with debt covenants.
We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Company's financial forecasts.
We considered whether the going concern disclosure in note 2(b) to the financial statements gives a full and accurate description of the directors' assessment of going concern.
Our conclusions based on this work:
-- we consider that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate;
-- we have not identified, and concur with the directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period; and
-- we have nothing material to add or draw attention to in relation to the directors' statement in the notes to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company's use of that basis for the going concern period, and that statement is materially consistent with the financial statements and our audit knowledge.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation.
Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
-- enquiring of management as to the Company's policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;
-- reading minutes of meetings of those charged with governance; and -- using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates such as valuation of unquoted investments. On this audit we do not believe there is a fraud risk related to revenue recognition because the Company's revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks.
We performed procedures including:
-- identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation;
-- incorporating an element of unpredictability in our audit procedures; and -- assessing significant accounting estimates for bias
Further detail in respect of valuation of unquoted investments is set out in the key audit matter section of in this report.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company's regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company's ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Company's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks and longer term viability
We are required to perform procedures to identify whether there is a material inconsistency between the directors' disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. we have nothing material to add or draw attention to in relation to:
-- the directors' confirmation within the viability statement (above) that they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;
-- the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated;
-- the directors' explanation in the viability statement (above) as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether 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 of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the viability statement, set out above under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the directors' corporate governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge:
-- 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;
-- the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit committee considered in relation to the financial statements, and how these issues were addressed; and
-- the section of the annual report that describes the review of the effectiveness of the Company's risk management and internal control systems.
We are required to review the part of Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect.
We have nothing to report on other matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
-- the Company has not kept proper accounting records; or -- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out above, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities .
The purpose of this report and restrictions on its use by persons other than the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. 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.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors, Guernsey
29 September 2022
Statement of Financial Position
As at 30 June 2022
30 June 2022 30 June 2021
Note GBP'000 GBP'000
------------------------------------------------------------ ----- ------------- -------------
ASSETS
Non-current assets
Financial assets held at fair value through profit or loss 8 856,380 470,282
Total non-current assets 856,380 470,282
------------------------------------------------------------ ----- ------------- -------------
Current assets
Trade and other receivables 9 882 773
Cash and cash equivalents 10 1,619 775
Total current assets 2,501 1,548
------------------------------------------------------------ ----- ------------- -------------
TOTAL ASSETS 858,881 471,830
------------------------------------------------------------ ----- ------------- -------------
LIABILITIES
Current liabilities
Other payables and accrued expenses 11 490 405
Total current liabilities 490 405
------------------------------------------------------------ ----- ------------- -------------
TOTAL LIABILITIES 490 405
------------------------------------------------------------ ----- ------------- -------------
NET ASSETS 858,391 471,425
------------------------------------------------------------ ----- ------------- -------------
EQUITY
Share capital 663,809 413,215
Retained earnings 194,582 58,210
----- ------------- -------------
TOTAL EQUITY 13 858,391 471,425
------------------------------------------------------------ ----- ------------- -------------
Ordinary Shares in issue at year end 13 611,452,217 406,999,622
------------------------------------------------------------ ----- ------------- -------------
Net asset value per Ordinary Share (pence) 7 140.39 115.83
------------------------------------------------------------ ----- ------------- -------------
These financial statements were approved and authorised for issue by the Board of Directors on 29 September 2022 and signed on their behalf by:
Paul Le Page Elizabeth Burne Director Director 29 September 2022 29 September 2022
The accompanying notes form an integral part of these financial statements.
Statement of Comprehensive Income
For the year ended 30 June 2022
Year ended Year ended
30 June 2022 30 June 2021
Note GBP'000 GBP'000
------------------------------------------------------------------------- ----- ------------- -------------
Income
Income from investments 4 834 740
------------------------------------------------------------------------- ----- ------------- -------------
834 740
Net gains on financial assets held at fair value through profit or loss 8 175,308 25,181
Operating income 176,142 25,921
------------------------------------------------------------------------- ----- ------------- -------------
Expenses
Administrative expenses 5 1,569 1,404
------------- -------------
Operating expenses 1,569 1,404
------------------------------------------------------------------------- ----- ------------- -------------
Operating profit 174,573 24,517
------------------------------------------------------------------------- ----- ------------- -------------
Profit and total comprehensive income for the year 174,573 24,517
------------------------------------------------------------------------- ----- ------------- -------------
Earnings per share:
Basic and diluted (pence) 12 34.91 6.25
------------------------------------------------------------------------- ----- ------------- -------------
All items within the above statement have been derived from continuing activities.
The accompanying notes form an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 30 June 2022
Note Number of Share capital Retained earnings Total equity
Ordinary Shares
GBP'000 GBP'000 GBP'000
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shareholders' equity at
1 July 2021 406,999,622 413,215 58,210 471,425
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shares issued during the period:
Ordinary Shares issued via placing 13 204,452,595 255,100 - 255,100
Share issue costs - (4,506) - (4,506)
Dividends paid 13,14 - - (38,201) (38,201)
Total comprehensive income for the
period - - 174,573 174,573
Shareholders' equity at
30 June 2022 611,452,217 663,809 194,582 858,391
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
For the year ended 30 June 2021
Note Number of Share capital Retained earnings Total equity
Ordinary Shares
GBP'000 GBP'000 GBP'000
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shareholders' equity at
1 July 2020 370,499,622 368,712 64,793 433,505
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shares issued during the period:
Ordinary Shares issued via placing 13 36,500,000 45,260 - 45,260
Share issue costs - (757) - (757)
Dividends paid 13,14 - - (31,100) (31,100)
Total comprehensive income for the
period - - 24,517 24,517
Shareholders' equity at
30 June 2021 406,999,622 413,215 58,210 471,425
---------------------------------------- ------ ----------------- -------------- ------------------ -------------
The accompanying notes form an integral part of these financial statements.
Statement of Cash Flows
For the year ended 30 June 2022
Year Year ended
ended
30 June 2022 30 June 2021
Note GBP'000 GBP'000
------------------------------------------------------------------------- ----- ------------- ------------------
Cash flows from operating activities
Total comprehensive income for the year 174,573 24,517
Adjustments:
Increase in trade and other receivables (109) (5)
Increase/(Decrease) in other payables and accrued expenses 85 (31)
Net gains on financial assets held at fair value through profit or loss 8 (175,308) (25,181)
Net cash used in operating activities* (759) (700)
------------------------------------------------------------------------- ----- ------------- ------------------
Cash flows from investing activities
Purchase of investments held at fair value through
profit or loss 8 (250,282) (44,625)
Receipts from investments held at fair value through
profit or loss 8 39,492 31,950
Net cash used in investing activities (210,790) (12,675)
------------------------------------------------------------------------- ----- ------------- ------------------
Cash flow from financing activities
Proceeds from issue of Ordinary Shares 251,410 45,260
Issue costs paid (816) (757)
Dividends paid 14 (38,201) (31,100)
Net cash generated from financing activities 212,393 13,403
------------------------------------------------------------------------- ----- ------------- ------------------
Net increase in cash and cash equivalents 844 28
Cash and cash equivalents at the start of the year 775 747
Cash and cash equivalents at the end of the year 10 1,619 775
------------------------------------------------------------------------- ----- ------------- ------------------
The accompanying notes form an integral part of these financial statements.
*Net cash used in operating activities includes GBP833,887 (2021: GBP739,966) of investment income.
**Receipts from investments held at fair value through profit or loss includes GBP14.1 million (2021: GBP5.4 million) of interest.
Notes to the Financial Statements for the year ended 30 June 2022
1. General information
The Company is a non-cellular company limited by shares and was incorporated in Guernsey under the Law on 29 May 2013 with registered number 56708 as a closed-ended investment company. It is regulated by the GFSC.
The financial statements for the year ended 30 June 2022 comprise the financial statements of the Company only (see Note 2 (c)).
The investment objective of the Company is to provide Shareholders with an attractive return, principally in the form of quarterly income distributions, by being invested primarily in solar energy assets located in the UK. It also has the ability to invest a minority of its capital into wind, hydro and energy storage assets.
The Company has appointed Bluefield Partners LLP as its Investment Adviser.
2. Accounting policies
a) Basis of preparation
The financial statements included in this annual report have been presented on a true and fair basis and prepared in accordance with IFRS as adopted by the EU and the DTRs of the UK FCA.
These financial statements have been prepared under the historical cost convention with the exception of financial assets measured at fair value through profit or loss, and in compliance with the provisions of the Law.
Standards, interpretations and amendments to published standards adopted in the period
The Company has not adopted any new standards, amendments or interpretations to existing standards in the accounting period.
New and Revised Standards
The Company has not adopted any new standards, amendments or interpretations to existing standards because none applicable to the Company have been published in the accounting period.
The Company has not adopted early any standards, amendments or interpretations to existing standards
that have been published and will be mandatory for the Company's accounting periods beginning after
1 July 2022 or later periods.
At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective and have not been adopted early by the Company.
The Board expects that all relevant pronouncements will be adopted in the Company's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments are not expected to have a material impact on the Company's financial statements.
b) Going concern
At 30 June 2022, the Company had invested in 127 solar plants, six wind farms and 109 single stick wind turbines, committing GBP962.2 million to SPV investments. The Company, through its direct subsidiary, BR1, has access to an RCF which, together with the net income generated by the acquired projects, is expected to allow the Company to meet its liquidity needs for the payment of operational expenses, dividends and acquisition of new renewable energy infrastructure assets. The Company, through BR1, expects to comply with the covenants of its long term loans and RCF.
The Board, in its consideration of going concern, has reviewed comprehensive cash flow forecasts prepared by the Investment Adviser, taking into account capital raises to 30 June 2022, as well as the performance of the solar and wind plants currently in operation. The conflict in Ukraine continues to have a significant impact on the macro-economic environment in which the Company operates. The Board and Investment Adviser have been closely monitoring this and it has been considered as part of the going concern assessment.
The Board has also considered the likelihood of the Company being asked to discontinue operations in its mandatory five year discontinuation vote that is due at the 2023 AGM and regards this as very unlikely, given the strong performance of the Company and the support which it has received from its major shareholders. In assessing the going concern status of the Company, the Board has also considered the re-financing of the Natwest term loan, maturing in August 2023, and the interest rate swaps for 75% of the balance (being GBP82.5m) in place until 2037, and has concluded that there is no reason to believe that these will not be refinanced or repaid as they fall due.
In the light of these enquiries, at the time of approving these accounts the Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the 12 months from the date of signing the financial statements and does not consider there to be any material threat to the viability of the Company. The Board has therefore concluded that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements.
c) Accounting for subsidiaries
The Company makes its investments in the SPVs through its wholly owned subsidiary, BR1 (previously BSIFIL).
In light of the December 2014 amendments to IFRS 10 (the Consolidation Exception Amendments), which clarified the scope of the exceptions to mandatory non-consolidation amendments, the Board considered the investment entity status of BR1 and concluded that it is, like the Company, an investment entity. As such the Company is not permitted to consolidate BR1 in the preparation of its financial statements and all subsidiaries are recognised at fair value through profit or loss.
d) Functional and presentation currency
These financial statements are presented in Sterling, which is the functional currency of the Company as well as the presentation currency. All amounts are stated to the nearest thousand unless otherwise stated. The Company's funding, investments and transactions are all denominated in Sterling.
e) I ncome
Monitoring fee income is recognised on an accruals basis.
Interest income on cash and cash equivalents is recognised on an accruals basis using the effective interest rate method.
f) Expenses
Operating expenses are the Company's costs incurred in connection with the ongoing administrative costs and management of the Company's investments. Operating expenses are accounted for on an accruals basis.
g) Finance costs
Finance costs are recognised in the Statement of Comprehensive Income in the period to which they relate on an accruals basis using the effective interest rate method. Arrangement fees for finance facilities are amortised over the expected life of the facility.
h) Dividends
Dividends declared and approved are charged against equity. A corresponding liability is recognised for any unpaid dividends prior to year end. Dividends approved but not declared will be disclosed in the notes to the financial statements.
i) Segmental reporting
IFRS 8 'Operating Segments' requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes.
The Board has considered the requirements of IFRS 8 'Operating Segments', and is of the view that the Company is engaged in a single segment of business, being investment in UK renewable energy infrastructure assets via its holding company and SPVs, and therefore the Company has only a single operating segment.
The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's NAV, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these financial statements.
The Board has overall management and control of the Company and will always act in accordance with the investment policy and investment restrictions set out in the Company's latest Prospectus, which cannot be radically changed without the approval of Shareholders. The Board has delegated the day-to-day implementation of the investment strategy to its Investment Adviser but retains responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions. Although the Board obtains advice from the Investment Adviser, it remains responsible for making final decisions in line with the Company's policies and the Board's legal responsibilities.
j) Financial instruments
Classification and measurement of financial assets and financial liabilities
Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument.
i) Financial assets held at fair value through profit or loss
Classification
The Company's investment in BR1 is accounted for as a financial asset rather than consolidated as the Company qualifies as an investment entity under IFRS 10, therefore the Company's investment is held at fair value through profit or loss in accordance with the requirements of IFRS 9.
Recognition and de-recognition
Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment. A financial asset is de-recognised either when the Company has transferred all the risks and rewards of ownership; or 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 the contractual right to receive cash flow has expired.
Measurement
Subsequent to initial recognition, investment in BR1 is measured at each subsequent reporting date at fair value. The Company holds all of the shares in the subsidiary, BR1, which is a holding vehicle used to hold the Company's SPV investments. The Directors believe it is appropriate to value this entity based on the fair value of its portfolio of SPV investment assets held plus its other assets and liabilities. The SPV investment assets held by the subsidiary are valued semi-annually as described in Note 8 on a discounted cash flow basis which is benchmarked against market transactions.
Gains or losses, through profit or loss, are made up of BR1's profit or loss, which comprises mainly cash receipts from its SPVs, the fair value movement of BR1's SPV portfolio and cash received in respect of Eurobond instrument interest. Furthermore, cash receipts made to the Company by BR1 are accounted for as a repayment of loans and not reflected in the Company's income, apart from monitoring fees (see Note 4).
ii) Cash and cash equivalents and trade and other receivables
Cash and cash equivalents comprise cash on hand and short term deposits 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. Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These financial assets are included in current assets, except for maturities greater than twelve months after the reporting date, which are classified as non-current assets. They 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.
iii) Financial liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.
All financial liabilities are initially recognised at fair value net of transaction costs incurred. All purchases of financial liabilities are recorded on the trade date, being the date on which the Company becomes party to the contractual requirements of the financial liability.
The Company's financial liabilities consist of only financial liabilities measured at amortised cost.
Financial liabilities measured at amortised cost
These include trade payables and other short term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.
Derecognition of financial liabilities
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 profit and loss.
k) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised as the proceeds received, net of direct issue costs. Direct issue costs include those incurred in connection with the placing and admission which include fees payable under the Placing Agreement, legal costs and any other applicable expenses.
3. Critical accounting judgements, estimates and assumptions in applying the Company's accounting policies
The preparation of these financial statements under IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The area involving a high degree of judgement and/or complexity and/or area where assumptions and estimates are significant to the financial statements has been identified as the valuation of the Company's investment in BR1 which is estimated predominantly on the valuation of the portfolio of investments held by BR1 (see Note 8).
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future period if the revision affects both current and future periods.
As disclosed in Note 8, the Board believes it is appropriate for the Company's portfolio to be benchmarked on a GBPm/MW basis against comparable portfolio transactions and on this basis a weighted average discount rate of 6.75% (6.00% as at 30 June 2021) has been utilised.
Use of a blended power forecast is unchanged, but the inflation assumption has been increased to 10.9% in 2022 and 3.4% in 2023 to reflect market forecasts, after this a medium-term rate at 3% (June 2021: 3%) has been extended to June 2029 before reverting to a reduced long term assumption of 2.25% (June 2021: 2.75%) thereafter.
The Directors' Valuation as at 30 June 2022 is based on a weighted average life of the portfolio of 25 years (vs. 30.2 years in June 2021), reflecting both new acquisitions and asset life extensions.
4. Income from investments
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Monitoring fee in relation to loans supplied (Note 16) 834 740
------------- -------------
834 740
============= =============
The Company provides monitoring and loan administration services to BR1 and BSIFIL for which an annual fee is charged, payable in arrears.
5. Administrative expenses
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
---------------------------------------------- ------------- -------------
Investment advisory base fee * (see Note 16) 491 363
Legal and professional fees 166 186
Administration fees 395 319
Directors' remuneration 241 227
Audit fees 98 74
Non-audit fees 40 30
Broker fees 52 50
Regulatory Fees 50 48
Registrar fees 35 51
Insurance 11 11
Listing fees 37 21
Other expenses (47) 24
1,569 1,404
============= =============
*The Investment advisory base fee is paid by both the Company (10%) and BR1 (90%). The amount shown above reflects the amount paid by the Company only. Note 16 shows the full fee paid to the Investment Adviser.
Investment Advisory Agreement
The Company, BR1 and the Investment Adviser have entered into an Investment Advisory Agreement, pursuant to which the Investment Adviser has been given overall responsibility for the non-discretionary management of the Company's (and any of BR1's SPVs) assets (including uninvested cash) in accordance with the Company's investment policies, restrictions and guidelines. Under the terms of the Investment Advisory Agreement, the Investment Adviser is entitled to a base fee. The base fee is payable quarterly in arrears in cash, at a rate equivalent to 0.80% per annum of the NAV up to and including GBP750,000,000, 0.75% per annum of the NAV above GBP750,000,000 and up to and including GBP1,000,000,000 and 0.65% per annum of the NAV above GBP1,000,000,000. The base fee will be calculated on the NAV reported in the most recent quarterly NAV calculation as at the date of payment.
On 11 June 2014, BSIFIL entered into a Technical Services Agreement with the Investment Adviser, with a retrospective effective date of 25 June 2013, in order to delegate the provision of the consultancy services to the Investment Adviser in its capacity as technical adviser to the SPVs. On the same date, 11 June 2014, the Group entered into a base fee offset arrangement agreement, whereby the aggregate technical services fee and base fee payable (under the Investment Advisory Agreement) shall not exceed the base fee that would otherwise have been payable to the Investment Adviser in accordance with the Investment Advisory Agreement had no fees been payable under the Technical Services Agreement.
The fees incurred for the period and the amount outstanding at the period end have been disclosed in Note 16.
Administration Agreement
The Administrator has been appointed to provide day-to-day administration and company secretarial services to the Company, as set out in the Administration Agreement dated 24 June 2013.
Under the terms of the Administration Agreement, the Administrator is entitled to an annual fee, at a rate equivalent to 10 basis points of NAV up to and including GBP100,000,000, 7.5 basis points of NAV above GBP100,000,000 and up to and including GBP200,000,000 and 5 basis points of the NAV above GBP200,000,000, subject to a minimum fee of GBP100,000 per annum. The fees are for the administration, accounting, corporate secretarial services, corporate governance, regulatory compliance and stock exchange continuing obligations provided to the Company. In addition, the Administrator will receive an annual fee of GBP7,500 and GBP3,000 for the provision of a compliance officer and money laundering reporting officer, respectively.
The Administrator is entitled to an investment related transaction fee charged on a time spent basis, which is capped at a total of GBP5,000 per investment related transaction. All reasonable costs and expenses incurred by the Administrator in accordance with this agreement are reimbursed to the Administrator quarterly in arrears.
The Administrator also receives a fee of GBP5,000 per annum in relation to the administration of the Company's Guernsey Green Fund Status.
For the year ended 30 June 2022, the Company incurred fees to the administrator of GBP395,329 (2021: GBP319,331) of which GBP204,162 (2021: GBP89,438) was outstanding at year-end.
6. Taxation
The Company has obtained exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 for which it paid an annual fee of GBP1,200 (2021: GBP1,200) (included within regulatory fees).
The income from the Company's investments is not subject to any further tax in Guernsey although the subsidiary and underlying SPVs, as UK based entities, are subject to the current prevailing UK corporation tax rate. The standard rate of UK corporation tax is 19% (2021: 19%).
7. Net asset value per Ordinary Share
The calculation of NAV per Ordinary Share is based on NAV of GBP858,390,982 (2021: GBP471,424,833 ) and the number of shares in issue at 30 June 2022 of 611,452,217 (2021: 406,999,622) Ordinary Shares.
8. Financial assets held at fair value through profit or loss
The Company's accounting policy on the measurement of these financial assets is discussed in Note 2(j)(i) and below.
30 June 2022 30 June 2021
Total Total
GBP'000 GBP'000
------------------------------------------------------------------------------------ ------------- ----------------
Opening balance (Level 3) 470,282 432,426
Additions - funds passed to BR1/BSIFIL 250,282 44,625
Change in fair value of financial assets held at fair value through profit or loss 135,816 (6,769)
------------- ----------------
Closing balance (Level 3) 856,380 470,282
============= ================
Analysis of net gains on financial assets held at fair value through profit or loss (per
statement of comprehensive income)
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Unrealised change in fair value of financial assets held at fair value through
profit or loss 135,816 (6,769)
Cash receipts from non-consolidated subsidiary* 39,492 31,950
Net gains on financial assets held at fair value through profit or loss 175,308 25,181
============= =============
* Comprising of repayment of Loans and Eurobond interest
Investments at fair value through profit or loss comprise the fair value of the SPV investment portfolio held by BR1, the Company's single direct subsidiary, which changed from BSIFIL to BR1 in May 2022 to facilitate arrangement of the new RCF. This is valued semi-annually by the Directors, and the fair value of BR1's cash, working capital and debt balances. A reconciliation of the SPV investment portfolio value to financial assets at fair value through profit or loss shown on the Statement of Financial Position is also shown above.
30 June 2022 30 June 2021
Total Total
GBP'000 GBP'000
SPV investment portfolio, Directors' Valuation 939,948 694,543
Immediate Holding Company
Cash 13,102 22,542
Working capital (26,670) 3,754
Debt (70,000) (250,557)
------------- -------------
(83,568) (224,261)
Financial assets at fair value through profit or loss 856,380 470,282
============= =============
Fair value measurements
IFRS 13 'Fair Value Measurement' requires disclosure of fair value measurement by level. The level of fair value hierarchy within the financial assets or financial liabilities is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the three levels.
The fair value hierarchy has the following levels:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within Level 1 that are observable for the assets or
liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
-- Level 3 - inputs for assets or liabilities that are not based on observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The only financial instrument carried at fair value is the investment held by the Company, BR1, which is fair valued at each reporting date. The Company's investment has been classified within Level 3 as BR1's investments are not traded and contain unobservable inputs.
Transfers during the period
There have been no transfers between levels during the year ended 30 June 2022. Any transfers between the levels will be accounted for on the last day of each financial period. Due to the nature of the investments, these are always expected to be classified as Level 3.
Directors' Valuation methodology and process
The same valuation methodology and process for operational assets is followed in these financial statements as was applied in the preparation of the Company's financial statements for the year ended 30 June 2021. Assets under construction and not yet operational are valued at cost (deemed to approximate fair value) and exclude acquisition costs which are expensed in the period in which they are incurred, whilst investments that are operational are valued under the 'willing buyer-willing seller' methodology, on a DCF basis over the life of the asset (typically more than 25 years) and, prudently benchmarked on a GBP/MW basis against comparable transactions for large scale portfolios.
Each investment is subject to full UK corporate taxation at the prevailing rate with the tax shield being limited to the applicable capital allowances from the Company's SPV investments.
The Investment Adviser recommends the fair value on a semi-annual basis, subject to the Board's approval. The key inputs, as listed below, are derived from various internal and external sources. The key inputs to a DCF based approach are: the equity discount rate, the cost of debt (influenced by interest rate, gearing level and length of debt), power price forecasts, long term inflation rates, asset life, irradiation forecasts, average wind speeds, operational costs and taxation. Given discount rates are a product of not only the factors listed previously but also regulatory support, perceived sector risk and competitive tensions, it is not unusual for discount rates to change over time. Evidence of this is shown by way of the revisions to the original discount rates applied between the first renewable acquisitions and those witnessed in the past twelve months.
Given discount rates are subjective, there is sensitivity within these to the interpretation of factors outlined above.
Judgement is used by the Board in increasing the weighted average discount rate to 6.75% as at 30 June 2022 (2021: 6.00%) with three key factors that have impacted the adoption of this rate outlined below:
a. Transaction values have risen to c.GBP1.25-1.45/MW for large scale solar portfolios and which the Board have used to determine that an effective price of GBP1.38m/MW is an appropriate basis for the valuation of the BSIF portfolio as at 30 June 2022;
b. Inclusion of the latest long term power forecasts from the Company's three providers;
c. Inclusion of an uplift with respect to asset extensions of 15 years on a subset (530MW) of the portfolio.
In order to smooth the sensitivity of the valuation to forecast timing or opinion taken by a single forecast, the Board continues to adopt the application of a blended power curve from leading forecasters.
The fair values of operational SPVs are calculated on a discounted cash flow basis in accordance with the IPEV Valuation Guidelines. The Investment Adviser produces fair value calculations on a semi-annual basis as at 30 June and 31 December each year.
Sensitivity analysis
The table below analyses the sensitivity of the fair value of the Directors' Valuation to an individual input, while all other variables remain constant.
The Directors consider the changes in inputs to be within a reasonable range based on their understanding of market transactions. This is not intended to imply that the likelihood of change or that possible changes in value would be restricted to this range.
30 June 2022 30 June 2021
-------------------------------------- ---------------------------------------
Change in fair value Change in fair value
of Directors' Change in NAV of Directors' Change in NAV
Valuation per share Valuation per share
Input Change in input GBPm (pence) GBPm (pence)
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Discount rate + 0.5% (21.8) (3.57) (16.0) (3.93)
-------------------
- 0.5% 23.1 3.77 17.1 4.20
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Power prices +10% 62.2 10.17 41.4 10.17
-------------------
-10% (63.8) (10.43) (43.5) (10.69)
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Inflation rate* + 0.5% 25.0 4.09 14.2 3.49
-------------------
- 0.5% (26.1) (4.28) (13.9) (3.42)
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Energy yield 10 year P90 (100.2) (16.39) (66.6) (16.36)
-------------------
10 year P10 100.5 16.43 65.9 16.19
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
Operational costs +10% (10.5) (1.72) (8.3) (2.04)
-------------------
-10% 10.5 1.72 8.3 2.04
------------------- ---------------- ---------------------- -------------- ----------------------- --------------
* PY change in input was +0.25%/-0.25%
Subsidiaries and Associates
The Company holds investments through subsidiary companies which have not been consolidated as a result of the adoption of IFRS 10: Investment entities exemption to consolidation. Below is the legal entity name and ownership percentage for the SPVs which are all incorporated in the UK except for Bluefield Durrants GmBH which is incorporated in Germany .
Name Ownership percentage Name Ownership percentage
Bluefield Renewables 1 Limited 100 Bradenstoke Solar Park Limited 100
Bluefield Renewables 2 Limited 100 GPP Langstone LLP 100
Bluefield SIF Investments Limited 100 Galton Manor Solar Park Limited 100
Bunns Hill Solar Limited 100 Gypsum Solar Farm Limited 100
HF Solar Limited 100 Holly Farm Solar Park Limited 100
Hoback Solar Limited 100 Kellingley Solar Farm Limited 100
Littlebourne Solar Farm Limited 100 Little Bear Solar Limited 100
Place Barton Farm Solar Park
Molehill PV Farm Limited 100 Limited 100
Pashley Solar Farm Limited 100 Willows Farm Solar Limited 100
ISP (UK) 1 Limited 100 Southwick Solar Limited 100
Solar Power Surge Limited 100 Butteriss Down Solar Farm Limited 100
West Raynham Solar Limited 100 Goshawk Solar Limited 100
Sheppey Solar Limited 100 Kite Solar Limited 100
Capelands Solar Farm Limited 100 Peregrine Solar Limited 100
North Beer Solar Limited 100 Promothames 1 LTD 100
WEL Solar Park 2 Limited 100 Rookery Solar Limited 100
Hardingham Solar Limited 100 Mikado Solar Projects (2) Limited 100
Redlands Solar Farm Limited 100 Mikado Solar Projects (1) Limited 100
WEL Solar Park 1 Limited 100 KS SPV 5 Limited 100
Saxley Solar Limited 100 Eagle Solar Limited 100
Frogs Lake Solar Limited 100 Kislingbury Solar Limited 100
Old Stone Farm Solar Park Limited 100 Thornton Lane Solar Farm Limited 100
Bradenstoke Solar Park Limited 100 Gretton Solar Farm Limited 100
GPP Langstone LLP 100 Wormit Solar Farm Limited 100
Ashlawn Solar Limited 100 Langlands Solar Limited 100
Betingau Solar Limited 100 Bluefield Merlin LTD 100
Grange Solar Limited 100 Harrier Solar Limited 100
Hall Farm Solar Limited 100 Rhydy Pandy Solar Limited 100
Oulton Solar Limited 100 New Energy Business Solar Ltd 100
Romsey Solar Limited 100 Corby Solar Limited 100
Salhouse Solar Limited 100 Falcon Solar Farm Limited 100
Tollgate Solar Limited 100 Folly Lane Solar Limited 100
Trethosa Solar Limited 100 New Road Solar Limited 100
Welbourne LLP 100 Blossom 1 Solar Limited 100
Barvills Solar Limited 100 Blossom 2 Solar Limited 100
Clapton Farm Solar Park Limited 100 New Road 2 Solar Limited 100
Court Farm Solar Limited 100 GPP Eastcott LLP 100
East Farm Solar Park Limited 100 GPP Blackbush LLP 100
Old Stone Farm Solar Park Limited 100 GPP Big Field LLP 100
Good Energy Creathorne Farm Solar
Park (003) Limited 100 Wind Energy Holdings Limited 100
Good Energy Lower End Farm Solar 100 Wind Energy Scotland (Fourteen 100
Park (026) Arce Fields) Limited
Good Energy Woolbridge Solar Park 100 Wind Energy Scotland (Birkwood 100
(010) Limited Mains) Limited
Good Energy Rook Wood Solar Park Wind Energy Scotland (Holmhead)
(057) Limited 100 Limited 100
Good Energy Carloggas Solar Park
(009) Limited 100 Arena Capital MP Limited 100
Good Energy Cross Road Plantation
Solar Park (028) Limited 100 Moscliff Power 5 Limited 100
Good Energy Delabole Windfarm
Limited 100 Mosscliff Power 10 Limited 100
Good Energy Hampole Windfarm
Limited 100 Mosscliff Power 2 Limited 100
Good Energy Generating Assets No.1
Limited 100 Mosscliff Power 3 Limited 100
Good Energy Holding Company No.1
Limited 100 Mosscliff Power 4 Limited 100
Aisling Renewables LTD 100 Mosscliff Power 6 Limited 100
Arena Wind Beragh Limited 100 Mosscliff Power 7 Limited 100
Arena Wind Camlough Limited 100 Mosscliff Power Limited 100
Arena Wind Cullybackey Limited 100 E2 Energy PLC 100
Arena Wind Dungorman Limited 100 Wind Energy One Limited 100
Arena Wind Holdings Limited 100 Wind Energy Two Limited 100
Arena Wind Killeenan Limited 100 New Road Wind Limited 100
Arena Wind Mowhan Limited 100 Yelvertoft Solar Farm Limited 100
Arena Wind Mullanmore Limited 100 Peradon Solar Farm Limited 60
Arena Wind (NI) Limited 100 Lower Tean Leys Solar Farm Limited 60
Ash Renewables No 3 Limited 100 Lower Mays Solar Farm Limited 60
Ash Renewables No 4 Limited 100 Leeming Solar Farm Limited 60
Ash Renewables No 5 Limited 100 Whinfield High Grange Solar Farm 60
Ash Renewables No 6 Limited 100 Wallace Wood Solar Farm Limited 60
Carmoney Energy Limited 100 Sweet Briar Solar Farm Limited 60
Errigal Energy Limited 100 BF31 WHF Solar Limited 100
Galley Energy Limited 100 BF27 BF Solar Limited 100
Oak Renewables 2 Limited 100 BF13A TF Solar Limited 100
Oak Renewables Limited 100 HW Solar Farm Limited 100
S&E Wind Energy Limited 100 AR108 Bolt Solar Farm Limited 100
Arena Capital Partners Limited 100 BF33C LHF Solar Limited 100
Boston RE Ltd 100 AR006 GF Solar Limited 100
DC21 Earth SPV Limited 100 Mauxhall Farm Energy Park Limited 100
E5 Energy Limited 100 BF16D BHF Solar Limited 100
E6 Energy Limited 100 BF33E BHF Solar Limited 100
E7 Energy Limited 100 Twineham Energy Limited 60
Hallmark Powergen 3 Limited 100 Sheepwash Lane Energy Barn Limited 100
Whitehouse Farm Energy Barn
Warren Wind Limited 100 Limited 100
Wind Energy Three Limited 100 Bluefield Durrants GmBH 100
Lightning 1 Energy Park Limited 100
Abbots Ann Farm Solar Park Limited 100
Canada Farm Solar Park Limited 100
Crockbaravally Wind Holdco Limited 100
Crockbaravally Wind Farm Limited 100
Dayfields Solar Limited 100
Farm Power Apollo Limited 100
Freathy Solar Park Limited 100
IREEL FIT TopCo Limited 100
IREEL FIT HoldCo Limited 100
IREEL Wind TopCo Limited 100
IREEL Solar HoldCo Limited 100
IREL Solar HoldCo Limited 100
Ladyhole Solar Limited 100
Morton Wood Solar Limited 100
Nanteague Solar Limited 100
Newton Down Wind HoldCo Limited 100
Newton Down Windfarm Limited 100
Padley Wood Solar Limited 100
Peel Wind Farm (Sheerness) 100
Port of Sheerness Wind Farm
Limited 100
Sandys Moor Solar Limited 100
St Johns Hill Wind Holdco Limited 100
St Johns Hill Wind Limited 100
Trickey Warren Solar Limited 100
Whitton Solar Limited 100
9. Trade and other receivables
30 June 2022 30 June 2021
GBP'000 GBP'000
Current assets
Income from investments 834 740
Other receivables 43 13
Prepayments 5 20
882 773
============= =============
There are no material past due or impaired receivable balances outstanding at the period end.
The Directors consider that the carrying amount of all receivables approximates to their fair value.
10. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Company and short term bank deposits held with maturities of up to three months. The carrying amount of these assets as at 30 June 2022 was GBP1,619,313 (2021: GBP775,016) and approximated their fair value. Cash held by BR1, the Company's immediate wholly owned subsidiary, as at 30 June 2022 is shown in Note 8.
11. Other payables and accrued expenses
30 June 2022 30 June 2021
GBP'000 GBP'000
Current liabilities
Investment advisory fees 121 89
Administration fees 204 89
Audit fees 95 85
Directors' fees 60 60
Other payables 10 82
490 405
==== =============
The Company has financial risk management policies in place to ensure that all payables are paid within the agreed credit period. The Directors consider that the carrying amounts of all payables approximate to their fair value.
12. Earnings per share
Year ended Year ended
30 June 2022 30 June 2021
------------------------------------------------------------------------------------- --------------- --------------
Profit attributable to Shareholders of the Company GBP174,572,832 GBP24,517,576
Weighted average number of Ordinary shares 500,110,688 392,299,622
Basic and diluted earnings from continuing operations and profit for the year (pence
per
share) 34.91 6.25
=============== ==============
13. Share capital
The authorised share capital of the Company is represented by an unlimited number of Ordinary Shares of no par value which, upon issue, the Directors may designate into such classes and denominate in such currencies as they may determine.
Year ended Year ended
Number of Ordinary Shares 30 June 2022 30 June 2021
Number Number
--------------------------- -------------- --------------
Opening balance 406,999,622 370,499,622
Shares issued for cash 204,452,595 36,500,000
Closing balance 611,452,217 406,999,622
============== ==============
Year ended Year ended
Shareholders' Equity 30 June 2022 30 June 2021
GBP'000 GBP'000
--------------------------------- -------------- --------------
Opening balance 471,425 433,505
Ordinary Shares issued for cash 255,100 45,260
Share issue costs (4,506) (757)
Dividends paid (38,201) (31,100)
Retained earnings 174,573 24,517
Closing balance 858,391 471,425
============== ==============
On 21 July 2021, the Company announced the issue of 89,067,980 new Ordinary Shares, at a price of GBP1.18 per ordinary share, raising gross proceeds of approximately GBP105.1 million. Following the issue, the number of ordinary shares that the Company had in issue was 496,067,602.
On 1 June 2022, the Company announced the issue of 115,384,615 new Ordinary Shares at a price of GBP1.30 per ordinary share, raising gross proceeds of approximately GBP150 million. Following the issue, the number of ordinary shares that the Company has in issue is 611,452,217.
Rights attaching to shares
The Company has a single class of Ordinary Shares, which are entitled to dividends declared by the Company. At any general meeting of the Company, each ordinary Shareholder is entitled to have one vote for each share held. The Ordinary Shareholders also have the right to receive all income attributable to those shares and participate in distributions made and such income shall be divided pari passu among the holders of Ordinary Shares in proportion to the number of Ordinary Shares held by them.
14. Dividends
On 7 July 2021, the Board declared a third interim dividend of GBP8,139,992, in respect of the year ended 30 June 2021 , equating to 2.00pps (third interim dividend in respect of the year ended 30 June 2020: 1.95pps), which was paid on 4 August 2021 to Shareholders on the register on 16 July 2021.
On 5 October 2021, the Board declared a fourth interim dividend of GBP9,921,352 in respect of the year ended 30 June 2021, equating to 2.00pps (fourth interim dividend in respect of the year ended 30 June 2020: 2.05pps), which was paid on 8 November 2021 to Shareholders on the register on 15 October 2021.
On 31 January 2022, the Board declared its first interim dividend of GBP10,070,172, in respect of the year ended 30 June 2022, equating to 2.03pps (first interim dividend in respect of the year ended 30 June 2021: 2.00pps), which was paid on 10 March 2022 to Shareholders on the register on 11 February 2022.
On 4 May 2022, the Board declared a second interim dividend of GBP10,070,172, in respect of the year ended 30 June 2022, equating to 2.03pps (second interim dividend in respect of the year ended 30 June 2021: 2.00pps), which was paid on 13 June 2022 to Shareholders on the register as at 13 May 2022.
Post year end, on 2 August 2022, the Board declared a third interim dividend of GBP12,534,770, in respect of the year ended 30 June 2022 , equating to 2.05pps (third interim dividend in respect of the year ended 30 June 2021: 2.00pps), which was paid on 31 August 2022 to Shareholders on the register on 12 August 2022.
Post year end, on 29 September 2022, the Board approved a fourth interim dividend of GBP12,779,351 in respect of the year ended 30 June 2022, equating to 2.09pps (fourth interim dividend in respect of the year ended 30 June 2021: 2.00pps), which will be declared on 30 September 2022 and paid on or around 4 November 2022 to Shareholders on the register on 14 October 2022.
15. Risk management policies and procedures
The Company is exposed to a variety of financial risks, including market risk (including price risk, currency risk and interest rate risk), credit risk, liquidity risk and portfolio operational risk. The Investment Adviser and the Administrator report to the Board on a quarterly basis and provide information to the Company which allows it to monitor and manage financial risks relating to its operations.
The Company's overall risk management programme focuses on the unpredictability of financial markets and government energy policy and seeks to minimise potential adverse effects on the Company's financial performance, as referenced in the Principal and Emerging Risks section in the Strategic Report.
The Board is ultimately responsible for the overall risk management approach within the Company. The Board has established procedures for monitoring and controlling risk. The Company has investment guidelines that set out its overall business strategies, its tolerance for risk and its general risk management philosophy.
In addition, the Investment Adviser monitors and measures the overall risk bearing capacity in relation to the aggregate risk exposure across all risk types and activities. Further details regarding these policies are set out below:
Market price risk
Market price risk is defined as the risk that the fair value of future cash flows of a financial instrument held by the Company, in particular through the Company's subsidiary, BR1, will fluctuate because of changes in market prices.
Market price risk will arise from changes in electricity prices whenever PPAs expire and are renewed. The timing of these is staggered to minimise risk .
BR1's future SPV investments are subject to fluctuations in the price of secondary assets which could have a material adverse effect on the BR1's ability to source projects that meet its investment criteria and consequently its business, financial position, results of operations and business prospects.
The Company's overall market position is monitored by the Investment Adviser and is reviewed by the Board of Directors on an ongoing basis.
Currency risk
The Company does not have any direct currency risk exposure as all its investments and transactions are in Sterling. The Company is however indirectly exposed to currency risk on future equipment purchases, made through BR1's SPVs, where equipment is imported.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments and related income from the cash and cash equivalents will fluctuate due to changes in market interest rates.
The Company is also exposed, through BR1, to interest rate risk on drawings under its RCF. Please see above in the Investment Adviser's report for details of the third party debt within the Company's subsidiaries.
The Company's interest bearing financial assets consist of cash and cash equivalents. The interest rates on the short term bank deposits are fixed and do not fluctuate significantly with changes in market interest rates.
The following table shows the portfolio profile of the financial assets at year end:
Total as at
30 June 2022
Interest rate GBP'000
--------------- -------------- --------------
Floating rate
RBSI 0.00 % 1,508
Fixed rate
Lloyds 0.00 % 111
1,619
==============
Total as at
30 June 2021
Interest rate GBP'000
--------------- -------------- --------------
Floating rate
RBSI 0.00 % 272
Fixed rate
Lloyds 0.00 % 503
775
==============
The valuation of BR1's SPV investments is subject to variation in the discount rate, which are themselves subject to changes in interest rate risk due to the discount rates applied to the discounted cash flow technique when valuing the investments. The Investment Adviser reviews the discount rates semi-annually and takes into consideration market activity to ensure appropriate discount rates are recommended to the Board. The Group is exposed to interest rate risk on the Directors' Valuation of GBP939.9m (2021: GBP694.5m).
Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. At the reporting date BR1's SPVs (2021: BSIFIL's SPVs) held performance bonds totalling GBP1,830,000 (2021: GBP1,411,977) with banks that have a credit rating which is of investment grade.
The underlying SPVs are only contracted with investment grade counter parties, mitigating PPA counterparty risk. The Directors do not have any concerns around the continuing purchasing of power through its current PPAs.
The Company's credit risk exposure is due to a portion of the Company's assets being held as cash and cash equivalents and accrued interest. The Company maintains its cash and cash equivalents and borrowings across two different banking groups to diversify credit risk. The total exposure to credit risk arises from default of the counterparty and the carrying amounts of financial assets best represent the maximum credit risk exposure at the period end date. As at 30 June 2022, the maximum credit risk exposure in relation to cash and cash equivalents held by the Company was GBP1,619,313 (2021: GBP775,016). If the cash and cash equivalents held by BR1 (2021: BSIFIL) are included, this increases to GBP14,721,105 (2021: GBP23,316,642). All cash and cash equivalents held by the Company and BR1 is with banks that have a credit rating which is of investment grade.
Total as at
Cash Fixed deposit 30 June 2022
GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------------
RBSI 1,508 - 1,508
Lloyds - 111 111
-------- -------- -------------- --------------
1,508 111 1,619
======== ============== ==============
Total as at
Cash Fixed deposit 30 June 2021
GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------------
RBSI 272 - 272
Lloyds - 503 503
-------- -------- -------------- --------------
272 503 775
======== ============== ==============
The carrying amount of these assets approximates their fair value.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its liabilities as they fall due. The Investment Adviser and the Board continuously monitor forecasted and actual cash flows from operating, financing and investing activities.
As the Company's investments, through BR1, are in the SPVs, which are private companies that are not publicly listed, the return from these investments is dependent on the income generated or the disposal of renewable energy infrastructure assets by the SPVs and will take time to realise.
The Company, through BR1, expects to comply with the covenants of its revolving credit facility.
The following table details the Company's expected maturity for its financial assets and liabilities. These are undiscounted contractual cash flows:
Total as at
Less than one year Between one and five years After five years 30 June 2022
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------------- --------------------------- ----------------- --------------
Assets
Financial assets held at fair
value through profit or loss* - - 484,322 484,322
Trade and other receivables** 877 - - 877
Cash and cash equivalents 1,619 - - 1,619
Liabilities
Other payables and accrued
expenses (490) - - (490)
2,006 - 484,322 486,328
=================== =========================== ================= ==============
* the Company passes debt to BR1 under loan agreements; as at the year end there is an additional amount of non-contractual cash which is not reflected above in addition to the interest income
**excluding prepayments
As part of the financing terms provided by all third party leaders to companies within the Group, lenders have security packages which include charges over the shares of the borrower entity and any wholly owned subsidiaries.
Total as at
Less than one year Between one and five years After five years 30 June 2021
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------------- --------------------------- ----------------- --------------
Assets
Financial assets held at fair
value through profit or loss* - - 259,438 259,438
Trade and other receivables** 753 - - 753
Cash and cash equivalents 775 - - 775
Liabilities
Other payables and accrued
expenses (405) - - (405)
1,123 - 259,438 260,561
=================== =========================== ================= ==============
* the Company passes debt to BR1 under loan agreements; as at the year end there is an additional amount of non-contractual cash which is not reflected above
**excluding prepayments
Portfolio operational risk
Portfolio operational risk is defined as the risk that renewable energy infrastructure assets perform below expectation after acquisition and revenue received from the sale of electricity is reduced. This risk is mitigated by BSL ensuring that operation and maintenance contractors are compliant with their contractual obligations including reaction times, maintenance plans and service levels.
Concentrations of risk
Concentrations of risk arise from financial instruments that have similar characteristics and are affected similarly by changes in economic or other conditions. The concentrations of the Company's assets by geography, construction contractor and revenue type are shown above. This analysis forms an integral part of the financial statements.
Capital management policies and procedures
The Company's capital management objectives are to ensure that the Company will be able to continue as a going concern while maximising the capital return to equity Shareholders.
In accordance with the Company's investment policy, the Company's principal use of cash (including the proceeds of any share issuance and loan facilities) is to fund BR1's projects, as well as expenses related to fundraising, the share issues, ongoing operational expenses and payment of dividends and other distributions to Shareholders in accordance with the Company's dividend policy.
The Board, with the assistance of the Investment Adviser, monitors and reviews the broad structure of the Company's capital on an ongoing basis.
The Company has no imposed capital requirements.
The capital structure of the Company consists of issued share capital and retained earnings.
16. Related party transactions and Directors' remuneration
In the opinion of the Directors, the Company has no immediate or ultimate controlling party.
The Chair was entitled to an annual remuneration of GBP62,500 (2021: GBP62,500). The other Directors were entitled to an annual remuneration of GBP39,000 (2021: GBP39,000). Paul Le Page received an additional annual fee of GBP8,000 (2021: GBP8,000) for acting as Chair of the Audit Committee. The Board reviewed the Directors' remuneration and following this review from 1 January 2022 the Chair is entitled to an annual remuneration of GBP65,625. The other Directors are entitled to an annual remuneration of GBP41,000 and Paul Le Page receives an extra GBP8,350 as Chair of the Audit Committee. Post year end the Board established a Management Engagement Committee and ESG Committee, the Chair of each is entitled to an extra GBP3,000.
The total Directors' fees expense for the period amounted to GBP240,818 (2021: GBP226,500) of which GBP59,750 was outstanding at 30 June 2022 (2021: GBP59,750) .
At 30 June 2022, the number of Ordinary Shares held by each Director is as follows:
2022 2021
Number of Number of
Ordinary Shares Ordinary Shares
John Rennocks* 290,388 316,011
John Scott* 543,312 512,436
Paul Le Page 35,000 35,000
Laurence McNairn N/A 441,764
Meriel Lenfestey 7,693 -
Elizabeth Burne 15,000 N/A
891,393 1,305,211
================= =================
*Including shares held by PCAs
John Scott and John Rennocks are Directors of BSIFIL. They received an annual fee of GBP6,250 (2021: GBP6,250) each for their services to this company, from 1 January 2022 the annual fee was increased to GBP6,565. Neil Wood and James Armstrong, who are partners of the Investment Adviser, are also Directors of BSIFIL and BR1.
The Company, BSIFIL's and BR1's investment advisory fees for the year amounted to GBP5,131,527 (2021: GBP3,764,777) of which GBP494,485 (2021: GBP299,763) was outstanding at the year end. James Armstrong, Giovanni Terranova and Neil Wood, who are partners of the Investment Adviser, hold a 0.03%, 0.06% and 0.01% interest in the Company as at 30 June 2022, respectively.
Fees paid during the period by SPVs to BSL, a company which has the same ownership as that of the Investment Adviser totalled GBP3,199,594 (2021: GBP2,914,444). BSL provides asset management and other services relating to the operation of daily management activities of the renewable energy project companies.
Fees paid during the period by SPVs to BOL, a company which has the same ownership as that of the Investment Adviser totalled GBP5,788,585 (2021: GBP3,471,624). BOL provides O&M and other services relating to the operation of daily management activities of the renewable energy project companies.
Fees paid during the period by SPVs to BRD, a company which has the same ownership as that of the Investment Adviser, totalled GBP691,280 (2021: GBP85,500). BRD locates and manages a pipeline of development projects for the Company.
The Company's monitoring fee income received from BSIFIL and BR1 amounted to GBP833,887 (2021: GBP739,966) of which GBP833,887 was outstanding at the year end (2021: GBP739,966).
17. Subsequent events
The following events happened after the end of the Company's reporting period on 30(th) June
Post year end, on 2 August 2022, the Board declared a third interim dividend of GBP12,534,770, in respect of the year ended 30 June 2022 , equating to 2.05pps (third interim dividend in respect of the year ended 30 June 2021: 2.00pps), which was paid on 31 August 2022 to Shareholders on the register on 12 August 2022.
Post year end, on 29 September 2022, the Board approved a fourth interim dividend of GBP12,779,351 in respect of the year ended 30 June 2022, equating to 2.09pps (fourth interim dividend in respect of the year ended 30 June 2021: 2.00pps), which will be declared on 30 September 2022 and paid on or around 4 November 2022 to Shareholders on the register on 14 October 2022.
On 16 September 2022 the Company was admitted to the FTSE 250 and on 15 August 2022 announced it had successfully qualified 65MW of new build PV projects to receive CfDs under the recent AR 4 auction.
Glossary of Defined Terms
Administrator means Ocorian Administration (Guernsey) Limited
AGM means the Annual General Meeting
AIC means the Association of Investment Companies
AIC Code means the Association of Investment Companies Code of Corporate Governance
AIF means Alternative Investment Fund
AIFM means Alternative Investment Fund Management
AIFMD means the Alternative Investment Fund Management Directive
Articles means the Memorandum of 29 May 2013 as amended and Articles of Incorporation as adopted by special resolution on 7 November 2016
Auditor means KPMG Channel Islands Limited (see KPMG)
Aviva Investors means Aviva Investors Limited
BEIS means The Department for Business, Energy and Industrial Strategy
BEPS means Base erosion and profit shifting
Bluefield means Bluefield Partners LLP
Bluefield Group means Bluefield Partners LLP and Bluefield Companies
BOL means Bluefield Operations Limited
Board means the Directors of the Company
BR1 means Bluefield Renewables 1 Ltd being the only direct subsidiary of the Company
BRD means Bluefield Renewable Developments Ltd
Brexit means departure of the UK from the EU
BSIF means Bluefield Solar Income Fund Limited
BSIFIL means Bluefield SIF Investments Limited
BSL means Bluefield Asset Management Services Limited
BSUoS means Balancing Services Use of System charges: costs set to ensure that network companies can recover their allowed revenue under Ofgem price controls
Business days means every official working day of the week, generally Monday to Friday excluding public holidays
CAGR means compound annual growth rate
Calculation Time means The Calculation Time as set out in the Articles of Incorporation
CCC means Committee on Climate Change
CfD means Contract for Difference
Company means Bluefield Solar Income Fund Limited
Companies Law means the Companies (Guernsey) Law 2008, as amended (see Law)
Consolidation Exception Amendments means the 18 December 2014 further amendments to IFRS 10 Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)
Cost of debt means the blended cost of debt reflecting fixed and index-linked elements
CO2e means Carbon Dioxide emissions
CRS means Common Reporting Standard
C shares means Ordinary Shares approved for issue at no par value in the Company
CSR means Corporate Social Responsibility
DCF means Discounted Cash Flow
DECC means the Department of Energy and Climate Change
Defect Risk means that there is an over-reliance on limited equipment manufacturers which could lead to large proportions of the portfolio suffering similar defects
Directors' Valuation means gross value of the SPV investments held by BR1, including their holding companies.
DNO means Distribution Network Operator
DSCR means debt service cover ratio
DTR means the Disclosure Guidance and Transparency Rules of the UK's FCA
EBITDA means Earnings before interest, tax, depreciation and amortisation
EGM means Extraordinary General Meeting
EIS means Enterprise Investment Scheme
EPC means Engineering, Procurement & Construction
EPS means Earning per share
ESG means Environmental, Social & Governance
EU means the European Union
EV means enterprise valuation
FAC means Final Acceptance Certificate
FATCA means the Foreign Account Tax Compliance Act
Financial Statements means the audited annual financial statements
FiT means Feed-in Tariff
GAV means Gross Asset Value
GFSC means the Guernsey Financial Services Commission
GHG means greenhouse gas
GHG Protocol supplies the world's most widely used greenhouse gas accounting standards
Group means Bluefield Solar Income Fund Limited and Bluefield SIF Investments Limited
Guernsey Code means the Guernsey Financial Services Commission Finance Sector Code of Corporate Governance
GWh means Gigawatt hour
GWp means Gigawatt peak
IAS means International Accounting Standard
IASB means the International Accounting Standards Board
IFRS means International Financial Reporting Standards as adopted by the EU
Investment Adviser means Bluefield Partners LLP
IPEV Valuation Guidelines means the International Private Equity and Venture Capital Valuation Guidelines
IPO means initial public offering
IRR means Internal Rate of Return
IVSC The International Valuation Standards Council
KID means Key Information Document
KPI means Key Performance Indicators
KPMG means KPMG Channel Islands Limited (see Auditor)
kWh means Kilowatt hour
kWp means Kilowatt peak
Law means Companies (Guernsey) Law, 2008 as amended (see Companies Law)
LD means liquidated damages
LIBOR means London Interbank Offered Rate
Listing Rules means the set of FCA rules which must be followed by all companies listed in the UK
Lloyds means Lloyds Bank Group plc
LSE means London Stock Exchange plc
LTF means long term facility provided by Aviva Investors Limited
Main Market means the main securities market of the LSE
MW means Megawatt (a unit of power equal to one million watts)
MWh means Megawatt hour
NatWest means NatWest International plc
NAV means Net Asset Value as defined in the prospectus
NMPI means Non-mainstream Pooled Investments and Special Purpose Vehicles and the rules around their financial promotion
NPPR means the AIFMD National Private Placement Regime
O&M means Operation and Maintenance
OECD means The Organisation for Economic Cooperation and Development
Official List means the Premium Segment of the UK Listing Authority's Official List
Ofgem means Office of Gas and Electricity Markets
Ordinary Shares means the issued ordinary share capital of the Company, of which there is only one class
Outage Risk means that a higher proportion of large capacity assets hold increased exposure to material losses due to curtailments and periods of outage
P10 means Irradiation estimate exceeded with 10% probability
P90 means Irradiation estimate exceeded with 90% probability
PCA means Persons Closely Associated
PPA means Power Purchase Agreement
pps means pence per share
PR means Performance Ratio (the ratio of the actual and theoretically possible energy outputs)
PRIIPS means Packaged Retail and Insurance-Based Investment Products
PV means Photovoltaic
RBSI means Royal Bank of Scotland International Limited
RCF means Revolving Credit Facility
RO Scheme means the Renewable Obligation Scheme which is the financial mechanism by which the UK Government incentivises the deployment of large-scale renewable electricity generation by placing a mandatory requirement on licensed UK electricity suppliers to source a specified and annually increasing proportion of the electricity they supply to customers from eligible renewable sources, or pay a penalty
ROC means Renewable Obligation Certificates
ROC recycle means the payment received by generators from the redistribution of the buy-out fund. Payments are made into the buy-out fund when suppliers do not have sufficient ROCs to cover their obligation.
RPI means the Retail Price Index
Santander UK means Santander UK plc
SASB means Sustainability Accounting Standards Board
SDG means the United Nations Sustainable Development Goals
SFDR means the Sustainable Finance Disclosure Regulation
SONIA means Sterling Overnight Index Average
SPA means Share Purchase Agreement
SPVs means the Special Purpose Vehicles which hold the Company's investment portfolio of underlying operating assets
Sterling means the Great British pound currency
TCFD means Task Force for Climate-related Financial Disclosures
TISE means The International Stock Exchange (formerly CISE, Channel Islands Securities Exchange)
UK means the United Kingdom of Great Britain and Northern Ireland
UK Code means the United Kingdom Corporate Governance Code
UK FCA means the UK Financial Conduct Authority
UNGC means the United Nations Global Compact
United Nations Principles for Responsible Investment means an approach to investing that aims to incorporate environmental, social and governance factors into investment decisions, to better manage risk and generate sustainable, long-term returns
Alternative Performance Measures (Unaudited)
APM Definition Purpose Calculation
Total return The percentage A key measure The change in NAV
increase/(decrease) of the success for the period plus
in NAV, inclusive of the Investment any dividends paid
of dividends paid, Adviser's investment divided by the initial
in the reporting strategy. NAV.
period. (140.39-115.83+2.0+2.0+2.03+2.03)/115.83=28.16%
--------------------- --------------------- ------------------------------------------------
Total Shareholder The percentage A measure of the The change in share
Return increase/(decrease) return that could price for the period
in share price, have been obtained plus any dividends
inclusive of by holding a share paid divided by
dividends over the reporting the initial share
paid, in the period. price.
reporting (131.00-121.40+2.0+2.0+2.03+2.03)/121.40=14.55%
period. The measure excludes
transaction costs.
--------------------- --------------------- ------------------------------------------------
Total Dividends This is the sum A measure of the The linear sum of
Declared of the dividends income that the each dividend declared
in Period that the Board company has paid in the reporting
has declared to shareholders period
relating that can be compared
to the reporting to the Company's
period. target dividend.
--------------------- --------------------- ------------------------------------------------
Underlying Total net income A measure to link Total income of
Earnings of the Company's the underlying the Company's portfolio
investment financial minus Group operating
portfolio. performance costs minus Group
of the operational debt costs.
projects to the
dividends declared
and paid by the
Company.
--------------------- --------------------- ------------------------------------------------
Market Capitalisation The total value This is a key The price per share
of the Company's indicator of the multiplied by the
issued share Company's liquidity. number of shares
capital. in issue.
--------------------- --------------------- ------------------------------------------------
NAV per The Company's A measure of the The net assets attributable
Ordinary closing NAV per value of one to Ordinary Shares
Share share at the period Ordinary on the statement
end. Share. of financial position
(GBP858.4m) divided
by the number of
ordinary shares
in issue (611,452,217)
as at the calculation
date.
--------------------- --------------------- ------------------------------------------------
Sale of The total proportion A measure to The amount of revenue
Electricity of revenue generated understand attributable to
by the Company's the proportion electricity sales
portfolio that of revenue divided by the total
is attributable attributable revenue generated
to electricity to sales of by the Company's
sales. electricity. portfolio, expressed
as a percentage.
--------------------- --------------------- ------------------------------------------------
Total Revenue Total net income A measure to outline Total income of
of the Company's the Total revenue the Company's portfolio
investment of the portfolio owned for a full
portfolio. on per MW basis. 12 months.
--------------------- --------------------- ------------------------------------------------
PPA Revenue Revenue generated A measure to outline Total revenue from
through PPAs. the revenue earned all power price
by the portfolio sales during the
from power sales. period from the
Company's portfolio.
--------------------- --------------------- ------------------------------------------------
Regulated Revenue generated A measure to outline Total revenue from
Revenue from the sale the revenue earned all subsidy income
of FiTs and ROCs. by the portfolio earned during the
from government period from the Company's
subsidies. portfolio.
Ongoing The recurring A measure of the Calculated in accordance
charges costs that the minimum gross with the AIC methodology
ratio Company and its profit that the detailed in the table
Immediate Holding Company needs below.
Company has incurred to produce to
during the period make a positive
excluding performance return for Shareholders.
fees and one off
legal and professional
fees expressed
as a percentage
of the Company's
average NAV for
the period.
------------------------ -------------------------- ------------------------------
Weighted A relative indicator A measure of the Total Regulated Revenue
Average of the regulatory Company's portfolio received by the portfolio
ROC revenues within earnings as a divided by the product
a renewable portfolio. proportion of of the current market
its assets. value of a ROC and
the annual generation
capacity of the portfolio.
------------------------ -------------------------- ------------------------------
Weighted The average operational A measure of the The sum of the product
Average life of the Company's Company's progress of each plant's operational
Life portfolio. in extending the capacity in MW and
life of its portfolio the plant's expected
beyond the end life divided by the
of the subsidy total portfolio capacity
regime in 2036. in MW.
------------------------ -------------------------- ------------------------------
Directors' The gross value An estimate of A reconciliation of
Valuation of the SPV Investments the sum that would the Directors' Valuation
held by BR1, including be realised if to Financial assets
their holding the Company's at fair value through
companies minus portfolio was profit and loss is
Project level sold on a willing shown in Note 8 of
debt. buyer, willing the financial statements.
seller basis.
------------------------ -------------------------- ------------------------------
Gross Asset The Market Value A measure of the The total assets attributable
Value of all Assets total value of to Ordinary Shares
within the Company. the Company's on the Statement of
Assets. Financial Position.
------------------------ -------------------------- ------------------------------
Total Outstanding The total outstanding A measure that The sum of the Sterling
Debt balances of all is used to establish equivalent values
debt held within the Company's of all loans held
the Company and level of gearing. within the Company.
its subsidiaries.
------------------------ -------------------------- ------------------------------
Ongoing Charges Year to 30 June 2022
Immediate Holding
The Company Company Total
GBP'000s GBP'000s GBP'000s
------------------------- ------------ ------------------ ------------
Fees to Investment
Adviser 491 4,640 5,131
Legal and professional
fees 159 165 324
Administration fees 395 - 395
Directors' remuneration 240 13 253
Audit fees 98 181 279
Other ongoing expenses 60 - 60
Total ongoing expenses 1,521 4,921 6,442
------------ ------------------ ------------
Average NAV 630,257,213
Ongoing Charges (using AIC methodology) 1.02%
------------
[1] Source: Natural gas - 2022 Data - 1990-2021 Historical - 2023 Forecast - Price - Quote - Chart (tradingeconomics.com)
[2] https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
[3] https://www.unglobalcompact.org/
[4] https://www.oecd.org/
[5] https://www.gov.uk/government/publications/fact-sheet-net-zero-aligned-financial-centre/fact-sheet-net-zero-aligned-financial-centre
[6] Disclaimer: The content of this publication has not been approved by the United Nations and does not reflect the views of the United Nations or its officials or Member States
[7] https://sdgs.un.org/goals
[8] https://bit.ly/3vBw6rH
[9] https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_SPM.pdf
[10] https://www.gov.uk/government/news/uk-enshrines-new-target-in-law-to-slash-emissions-by-78-by-2035
[11] https://www.gov.uk/government/publications/british-energy-security-strategy/british-energy-security-strategy
[12] Based on Ofgem's Typical Domestic Consumption Values
[13] Based on generation data aligned with the appropriate Government CO(2) e conversion factor
[14] The carbon footprint relating to FY 21/22 has not been externally verified
[15] https://www.gov.uk/government/news/chancellor-uk-will-be-the-worlds-first-net-zero-financial-centre
[16] https://earth.org/uk-biodiversity-loss/
[17] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/69403/pb13530-waste-hierarchy-guidance.pdf
[18] https://www.10000blackinterns.com
[19] The carbon footprint relating to the 21-22 financial year has not been externally verified
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