![](/cdn/assets/images/search/clock.png)
We could not find any results for:
Make sure your spelling is correct or try broadening your search.
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 | |
---|---|---|---|---|---|---|---|---|---|---|
-0.40 | -0.37% | 108.60 | 108.40 | 109.00 | 108.60 | 108.60 | 108.60 | 59,131 | 08:15:40 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Trust,ex Ed,religious,charty | 49.07M | 46.79M | 0.0772 | 14.12 | 660.78M |
TIDMBSIF
RNS Number : 0356G
Bluefield Solar Income Fund Limited
27 February 2015
BLUEFIELD SOLAR INCOME FUND LIMITED
Unaudited Condensed Consolidated Interim Financial Statements for the Six Months Ended 31 December 2014
A copy of the Interim Report and Unaudited Condensed Consolidated Interim Financial Statements has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Interim Report and Unaudited Condensed Consolidated Interim Financial Statements will also shortly be available on the Company's website at www.bluefieldsif.com where further information on the Company can also be found.
Operational Highlights
-- The Company was the first of the solar focused funds to list on the Premium Segment of the London Stock Exchange on 12 July 2013;
-- The objective of the Company is to deliver long-term, stable dividends growing in-line with the Retail Price Index ("RPI");
-- Successful placement ("Placement") of new shares in November 2014 raising gross proceeds of GBP131 million to give a market capitalisation of GBP288 million at 31 December 2014;
-- As part of November 2014's Placement the Company announced 5 target acquisitions with an estimated combined energy capacity in excess of 100 Megawatts Peak ("MWp"). When completed, this will take the Company's combined energy capacity to approximately 250 MWp across 29 assets;
-- The Company funded two acquisitions, Redlands and Capelands with a combined energy capacity of 15 MWp using part of the GBP50 million revolving credit facility ("Facility") arranged with The Royal Bank of Scotland plc ("RBS"), which was repaid from proceeds of the Placement before the end of the period;
-- During the six months ended 31 December 2014, the Company made 17 acquisitions from total commitments of GBP51.5 million with an estimated combined energy capacity of 45 MWp including 3 from the target acquisitions announced by the Company as part of the Placement. A portfolio of 12 asset acquisitions were mainly funded through issue of consideration shares in the Company valued at GBP7.7 million (see Note 16);
-- Net Asset Value ("NAV") as at 31 December 2014 of GBP282 million (30 June 2014: GBP148 million);
-- NAV per share as at 31 December 2014 of 101.34 pence per share (30 June 2014: 102.96 pence per share);
-- The Company delivered an on-target dividend of 4 pence per share in the first financial year ending 30 June 2014 and has paid a further interim dividend of 3.25 pence per share and is on target to deliver a sector leading 7 pence per share for the financial year ending 30 June 2015;
-- Notwithstanding the reduction in power prices during the period, the attractively priced portfolio and strong contractual protections give the Directors confidence that the Company will achieve the target return of 7 pence per share for the full financial year, rising with RPI thereafter;
-- The Company announced a transition to a quarterly dividend schedule; and
-- Since the end of the period, the Company has announced the acquisition of a 29 MWp asset in Oxfordshire, which was one of the assets disclosed in the Placement.
Financial Highlights
Six months ended 31 December 2014 ------------------------------------------------------------------------------ ----------------- Total income GBP933,433 Total net gains on financial assets held at fair value through profit or loss GBP7,788,100 Total comprehensive income before tax GBP6,055,821 Earnings per share 3.48p Second interim dividend in respect of the year ending 30 June 2014 2.00p First interim dividend in respect of the year ending 30 June 2015 3.25p NAV per share 101.34p Total Return (based on NAV movement and dividends paid) 3.53% Total Return to shareholders (based on share price and dividends paid) 5.85% ------------------------------------------------------------------------------ -----------------
A conference call presentation with Analysts will take place at 9:30am on Friday, 27 February 2015. The presentation will be hosted by James Armstrong and Mike Rand of Bluefield Partners LLP, the Investment Adviser to the Company. A PowerPoint presentation will be provided separately in advance of the call.
To register for the call, please contact the Company's PR agent CNC, by either email to tom.karim@cnc-communications.com or by telephone on +44(0)20 3219 8820 / +44(0)7923 293 399.
Enquiries:
James Armstrong / Mike Rand / Giovanni Terranova
Bluefield Partners LLP - Company Investment Adviser
Tel: +44 (0)20 7078 0020
Tod Davis / David Benda
Numis Securities Limited - Company Broker
Tel: +44 (0)20 7260 1000
Kevin Smith
Heritage International Fund Managers Limited - Company Secretary & Administrator
Tel: +44 (0)1481716000
Tom Karim
CNC
Tel: +44(0)20 3219 8820 / +44(0)7923 293 399
Note to editors
About Bluefield Solar Income Fund Limited (BSIF)
BSIF is a Guernsey-registered investment company focusing on large scale agricultural and industrial solar assets. It raised gross proceeds of GBP130 million in July 2013 through an initial public offering of shares on the main market of the London Stock Exchange. It raised a further GBP13 million in February 2014 in an oversubscribed placement. Pursuant to a placing programme in November 2014 the Company raised an additional GBP131 million. In June 2014 it agreed a three-year revolving credit facility with Royal Bank of Scotland, for up to GBP50 million.
BSIF seeks to provide shareholders with an attractive return, principally in the form of income distributions, by investing in a diversified portfolio of solar energy assets, each located within the UK, with a focus on utility scale assets and portfolios on greenfield, industrial and/or commercial sites. To date, dividends have been paid semi-annually, but the Company has announced that in 2015 it intends to move to quarterly distributions.
About Bluefield Partners LLP (Bluefield)
Bluefield was established in 2009 and is an investment adviser to companies and funds investing in solar energy infrastructure. It has a proven record in the selection, acquisition and supervision of large scale energy and infrastructure assets in the UK and Europe. The team has been involved in over GBP600m of solar photovoltaic ("PV") funds and/or transactions in both the UK and Europe since 2008, including over GBP380m in the UK since December 2011.
Bluefield has led the acquisitions, and currently advises on over 50 UK based solar assets that are agriculturally, commercially or industrially situated. Based in its London office, Bluefield's partners are supported by a dedicated and highly experienced team of investment, legal and portfolio executives.
Bluefield was appointed Investment Adviser to the Company in June 2013.
Chairman's Statement
Introduction
The period to 31 December 2014, has seen the Company consolidate its position as the UK's leading premium listed solar investment company with the largest market capitalisation, most diversified portfolio, and on target to deliver sector leading returns.
In November 2014, we achieved a successful GBP131 million fundraise and announced an agreed investment pipeline of GBP150 million. At the same time we announced a fully covered dividend of 3.25 pence per share in November 2014, laying a solid foundation for a 7 pence per share dividend for the full financial year.
The Company's first annual report sought to deliver a clear and transparent analysis of our activities with a particular focus on the valuation methodology and underlying assumptions. I trust shareholders will find this interim report continues in the same vein. Transparency is especially pertinent today. Investors across the renewable energy sector have been seeking to understand the impact that lower power prices may have on the Company's ability to make dividend distributions and what effect this might have on the Company's valuation. I make reference to both dividends and valuation below; I would however direct you to the Power Price Sensitivity and Distributions section of the Report of the Investment Adviser where there is a full description of the Company's power price strategy and the potential impact on dividends and their sensitivity to changes in power price. Apart from being instructive, I hope it gives you as much comfort as it has given the Board in reiterating the very robust nature of the Company's revenue streams. As with the annual report, you will see a detailed valuation analysis in the Report of the Investment Adviser that highlights the Company's long-term view of power prices in relation to the NAV.
Investment Strategy
The Company's strategy of funding assets through the construction phase in an increasingly competitive market has continued to give us a key competitive advantage over other groups who have decided to acquire assets only at the operational stage. As I have highlighted before, in a primary asset market such as the UK solar market, funding through construction gives the Company access to the widest pool of assets available and enables us to acquire them in a cost effective way. The success of this is demonstrable in the scale, pricing and quality of the pipeline announced in this period. The Company made 17 acquisitions and announced a pipeline that, when completed, will take the Company's energy capacity to approximately 250 MWp.
Leverage
The Company has, currently, less than 5% long-term debt financing which is below the level the Board and Investment Adviser believe to be optimal. The Board has asked its Investment Adviser to prepare an analysis of the project finance and bond markets with the view to increase the level of structural debt in the medium term.
Portfolio performance
The operational portfolio, whilst still in its early phase, is performing ahead of expectations. As the Investment Adviser highlights in its Portfolio analysis, part of the stability of the portfolio's revenues is down to the strong contractual protections the Company has negotiated with its contractors; the analysis of Betingau is a good example of the level of protection afforded to our shareholders.
Power Price
When analysing the core assumptions that go into a valuation of a typical asset within the Company's portfolio the most volatile element post acquisition is the assumption of price for the sale of electricity through Power Purchase Agreements ("PPA"). This has always been the case but has been put under particular scrutiny with the recent reduction in power prices. The analysis delivered by the Investment Adviser when faced with a significant drop in power prices indicates how robust our investment model is proving to be. It is worth considering that, since the inception of the Company, power prices have dropped approximately 20% as at 31 December 2014, and at one point were down by 30%. Even in this environment, the Company is still confident of delivering its dividends in the medium term, which is a testament, ultimately, to the acquisition pricing discipline shown. On a positive note, should power prices track back to levels expected by the market over the next couple of years, there should be upside for our shareholders in terms of dividends.
Valuation
The unaudited valuation shows a small decrease in the NAV per share since 30 June 2014, after payment in the half year of 5.25 pence of dividends. Other than power prices the other assumptions have remained the same, however in the period under review we have had two competing forces. We have seen power prices drop and we have seen a reduction in the long term forecast, as per the view of our independent power forecaster. Countering these downward forces have been the unwinding of the discount rate (a reflection of the reduction in the timing of cash flows discounted over the life of the asset), and a modest increase in the valuation from assets that have become operational and have been valued on a Discounted Cash-Flow ("DCF") basis.
Market Growth
The final quarter of 2014 saw continued growth in the primary base of solar assets as developers and contractors pushed to get their assets grid connected before the end of the Renewable Obligation Scheme (the "RO Scheme")(1) for larger solar assets after March 2015. The UK remained the leading primary investment market for solar in Europe. It is expected that the first quarter of 2015 will see high installation levels for large scale assets. The period after March 2015, will be interesting for the solar industry as it transitions over to the new regime where the industry will start to use Contracts for Difference ("CfD") for large solar assets and growth in the commercial and industrial market is expected. Experience of other solar markets indicates that even in a changing regulatory landscape, solar markets are highly adaptable.
(1) This excludes those assets that have qualified for the 'grace period'
Acquisitions, Cash Generation and Dividend
Following consultation with shareholders, the Board has now adopted a quarterly dividend schedule under which dividends will be distributed as four interim dividends, declared quarterly. The first quarterly dividend, in respect of the three months to 31 March 2015, is expected to be declared in April 2015. During the period we undertook a Related Party Transaction, which was approved by shareholders, to acquire an investment asset (see Note 18). The performance of these plants have exceeded expectations since acquisition.
Shareholders
The Board is pleased with the successful Placement of 127.5 million shares to raise GBP128.5 million, net of expenses, in November 2014 and I would like to take this opportunity to thank our shareholders for their support. As a Board, we are hugely encouraged by the continued and increasing support from our shareholders, many of whom were with us at IPO. The success of the Placement indicates a strong endorsement of the Company's strategy and the Board is pleased with diversifying our shareholder base. We are also delighted to welcome our new shareholders and we look forward, with the Investment Adviser, to working hard on our shareholders' behalf to repay the faith they have put in us.
Outlook
The prospects for the Company remain very good, as we seek to build on the strong platform we have created in our first 18 months. In the immediate term, we will look to complete all the acquisitions disclosed in the Placement. Beyond that we will work with our trusted contractors to continue to build a high quality energy investment company with sector leading returns.
John Rennocks
Chairman
26 February 2015
Report of the Investment Adviser
Introduction
Bluefield was established in 2009 and is an investment adviser to companies and funds investing in solar 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 team has been involved in over GBP600 million of solar photovoltaic ("PV") funds and/or transactions in both the UK and Europe since 2008 including over GBP380 million in the UK since December 2011.
Bluefield has led the acquisition of, and currently advises on, over 50 UK based solar assets that are agriculturally, commercially or industrially situated. 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.
Bluefield's Investment Committee has collective experience of over GBP7 billion of energy and infrastructure transactions.
Portfolio Developments
1. Portfolio Performance
The Company's operating portfolio as at 31 December 2014 is shown below:
Project Contractor Region ROC* banding/FiT** MWp --------------------- --------------- ---------------------------- -------------------- ------ Hardingham Solar Century Norfolk 1.6 ROCs 14.8 Goosewillow Ikaros Solar Oxfordshire 1.6 ROCs 16.9 North Beer Parabel UK Cornwall 2.0 ROCs 6.9 Hill Farm Solar Century Oxfordshire 1.6 ROCs 15.2 Hall Farm Ikaros Solar Norfolk 1.6 ROCs 11.5 Saxley Solar Century Hampshire 1.6 ROCs 5.9 Betingau Prosolia Glamorgan 1.6 ROCs 9.9 Sheppey Solar Century Kent 1.4 ROCs 10.6 Pentylands Conergy Wiltshire 1.6 ROCs 19.2 Durrants REC Isle of Wight FiT 4.9 Goshawk (10x Thames Water & 1x Adnams) British Gas Surrey/Oxfordshire/Suffolk FiT 1.2 Hoback Solar Century Hertfordshire 1.4 ROCs 17.5 --------------------- --------------- ---------------------------- -------------------- ------ Total 134.5 -------------------------------------------------- ------------------------------------ ------
*Renewable Obligation Certificates ("ROC")
**Feed-in Tariffs ("FiT")
As at 31 December 2014, the Company had an operational portfolio of 21 commissioned investments committing GBP155.8 million and delivering an energy capacity of 134.5 MWp(2) . Located across the south of England and Wales, the investments are geographically diverse, have been constructed by 7 experienced solar contractors and contain a diverse range of proven solar technologies and infrastructure.
Total electricity production from 1 July 2014 to 31 December 2014 was 52.2 Gigawatt Hours ("GWh") and was in line with budgeted expectations for the whole portfolio although, within this the strong performance of the majority of the plants has been offset by a limited contribution from Project Betingau.
In September 2014, Project Betingau experienced a serial defect in relation to the transformers and was shut down for safety reasons until February 2015 when new replacement transformers were installed. Due to the strength of contractual protections in place, full recovery of all lost revenues from commissioning in March 2014 to the end of the period was secured under the terms of the construction contract as well recovery of all the costs associated with the defect.
Transformers from a new manufacturer (ABB) with five years' warranty were successfully installed after the end of the reporting period. In addition to these items a variation has also been signed that grants a price reduction of 3.5% on the overall cost of the project. When the defects arose the project company was holding GBP2.7 million of retention against the contract price plus a GBP1.7 million bond and as a result the strong protections to revenue, price and costs were able to be enforced without dispute. The project company will continue to hold a significant level of (retention and/or bond) security until the project has proven performance in line with warranty over its first two years of operation.
In October 2014 the Company acquired 12 operational projects, known as Project Durrants (1 asset) and Project Goshawk (11 assets), whilst in November 2014 Project Hoback also became operational in line with expectations. While as at the financial period end it is too early to make definitive statements regarding meaningful performance indicators for these 3 projects the irradiation and portfolio performance in the short period of operation was overall ahead of expectations.
Notwithstanding the positive operational performance it is notable that falling power prices in the period to 31 December 2014 have precipitated a fall in the pricing of PPAs between 30 June 2014 and the period end. The impact of the fall in power price and the Company's exposure to the power market for revenue is discussed in detail in the section below on Power Price Sensitivity and Dividends.
2. Acquisitions
During the period the Company successfully completed the acquisition of 17 additional projects for the total consideration of GBP51.5 million as set out in the table below:
Project Contractor Region ROC banding/FiT MWp Status --------------- --------------- --------------- ----------------- ----- ------------------- Capelands Juwi Devon 1.4 ROCs 8.4 Under construction Redlands Juwi Somerset 1.4 ROCs 6.2 Under construction Durrants REC Isle of Wight FiT 4.9 Operational Goshawk (10x British Gas Surrey/ FiT 1.2 Operational Thames Water Oxfordshire/ & 1x Adnams) Suffolk Hardingham Solar Century Norfolk 1.4 ROCs 5.2 Under construction extension Ashlawn Parabel UK Somerset 1.4 ROCs 6.6 Under construction Rove Wirsol Wiltshire 1.4 ROCs 12.7 Under construction Total 45.2 ---------------------------------- ------------------------------ ----- -------------------
This expands the portfolio to 26 projects with a combined capacity of 173.6 MWp. Details of the acquisitions made, all of which are 100% owned by BSIFIL, during the period are outlined below:
Capelands & Redlands, Somerset/Devon
On 25 July 2014 terms were agreed with Juwi Renewables as Engineering, Procurement & Construction ("EPC") contractor to build two solar farms in Devon (8.4 MWp) and Somerset (6.2 MWp) respectively. The projects are currently in the final stages of construction and are expected to be accredited under the current 1.4 ROC regime. The plants will use S-Energy modules and SMA inverters and were funded initially through the Company's GBP50 million acquisition Facility and then latterly with the proceeds of the Placement completed in November 2014.
Durrants, Isle of Wight
The acquisition of the 4.9 MWp plant was agreed in October 2014 as part of the purchase of Bluefield L&P Solar Limited and included the taking over of a finance facility from Bayern LB of GBP14.5 million. The project was acquired as an operational asset (with a 2 year performance record) under the FiT regime. The plant was constructed by a German contractor, REC, and uses modules from REC and inverters from SMA and Advanced Energy. The investment was funded through the shareholder approved issue of shares pursuant to an October 2014 shareholder circular.
Goshawk, Surrey, Oxfordshire, Suffolk
The acquisition of Project Goshawk, a 1.2 MWp portfolio consisting of 11 operating projects, was agreed in October 2014 as part of the purchase of Bluefield L&P Solar Limited. The projects are all registered under the FiT regime and were constructed by British Gas. The plants use modules from Trina and Suntech with inverters from SMA. The investment was funded through the shareholder approved issue of shares pursuant to an October 2014 shareholder circular.
Hardingham Extension, Norfolk
In November 2014 terms were agreed with Solar Century as EPC contractor to build a 5.2 MWp extension to Project Hardingham in Norfolk. The project remained under construction at reporting period end and is expected to be accredited under the 1.4 ROC regime. The plant will use Hanwha modules and Power One inverters and was funded with the proceeds of the Placement completed in November 2014.
Ashlawn, Somerset
On 3 December 2014 terms were agreed with Parabel UK as EPC contractor to build a 6.6 MWp solar farm in Somerset. The project remained under construction at reporting period end and is expected to be accredited under the 1.4 ROC regime. The plant will use Q-cell modules and Huawei inverters and was funded with the proceeds of the Placement completed in November 2014.
Rove, Wiltshire
On 23 December 2014 terms were agreed with Wirsol Energy as EPC contractor to build a 12.7 MWp solar farm in Wiltshire. The project remained under construction at reporting period end and is expected to be accredited under the 1.4 ROC regime. The plant will use Astronergy modules and Advanced Energy inverters and was funded with the proceeds of the Placement completed in November 2014.
Elms, Oxfordshire
Since the period end the Company has announced terms were agreed with Wirsol Energy as EPC to build Project Elms, a 29.0 MWp solar plant in Oxfordshire. The plant is under construction and is expected to be accredited under the 1.4 ROC regime. The plant will use Astronergy modules and Advanced Energy inverters and will be funded with the proceeds of the Placement completed in November 2014.
(2) This includes Durrants and Goshawk as these were operational when acquired in October 2014.
Power Price Sensitivity and Dividends
The Company has a mix of regulated revenues and revenues derived from the sale of electricity, via PPAs.
1. Revenue Breakdown
The portfolio's revenue streams in the 2014/2015 financial year show the sale of electricity accounts for 39% of the Company's income. Regulated revenue from the sale of FiTs, ROCs and LECs accounts for 61%.
2. Tenure
During this initial period of growth where the Company is seeking to grow its asset base the Investment Adviser's strategy is to fix the price of power sale contracts for individual assets for periods of 12 to 18 months. Prices can be fixed up to 3 months in advance of the commencement of the fixing period. The target is to fix 25% of the portfolio within each quarter, in order to mitigate against seasonality and short-term events which can have an impact on the price of electricity in the UK. The fixing period seeks to enable the Company to maximise potential revenues for the Company during its current acquisition phase whilst spreading exposure to short-term power movements across the portfolio to avoid concentration of risk. The security of even longer term contracts would, we believe, invariably result in the generator sacrificing revenues for the comfort of longer term certainty, which, on balance, the Investment Adviser believes is not the optimal strategy for the Company at this stage. In addition, typical long term power off-take contracts available in the energy market provide floors but not fully fixed rates, such floors being significantly below even the recent lower power price levels.
3. Current Status
As at 31 December 2014, 56% of the portfolio has fixed power prices out to 30 June 2015 or beyond. The remaining 44% of the portfolio is either undergoing construction with prices to be fixed following commissioning in quarter 1 of 2015 or is operational and will be fixed in quarter 1 of 2015 in accordance with the portfolio quarterly fixing. As set out above, the projects being fixed will be negotiated for different tenures in order to spread portfolio fixing time evenly for future years.
4. Power Price Sensitivity
Analysis of the Company's portfolio and its exposure to power price variations affirms the robust nature of the revenues and the Company's ability to deliver its dividends in the coming years. This is partly due to the majority of revenues being regulated (61%) and also due to the Investment Adviser having applied a prudent power price forecast when making acquisitions.
In quantifying the impact of changes in the wholesale power price market, the Company's portfolio has been analysed based upon the base case power price the Company would need to generate the target dividend of 7 pence in the financial year ending 30 June 2015, rising with RPI thereafter, all other assumptions being unchanged. Based upon a steady state for all other assumptions the Company would expect to meet its dividend target, based upon earnings within its asset portfolio, at a power off-take rate of GBP48 per Megawatt hour ("MWh").
This level is equivalent to the low point for 12 month forward PPA pricing during the accounting period which was reached in December 2014. If this low point was maintained at a constant level in real terms until financial year ending 30 June 2016 the Company would still expect to meet its RPI linked dividend target throughout this period.
The table below sets out the sensitivity of the earnings over the period to financial year ending 30 June 2016 to changes in power prices and illustrates the favourable dividends expected even in an environment of significantly falling power prices.
Dividend Target sensitivity (based upon Investment Adviser forecasts):
FYE June 2015 2016 ----------------------------------- ----- ----- Target, pence per share* 3.75 7.18 ----------------------------------- ----- ----- 31 December 2014 price plus 20%: Power price at GBP57.60 (2015 real) 3.75 7.88 ----------------------------------- ----- ----- 31 December 2014 price plus 10%: Power price at GBP52.80 (2015 real) 3.75 7.54 ----------------------------------- ----- ----- 31 December 2014 price: Power price at GBP48.00 (2015 real) 3.75 7.19 ----------------------------------- ----- ----- 31 December 2014 price minus 10%: Power price at GBP43.20 (2015 real) 3.75 6.84 ----------------------------------- ----- ----- 31 December 2014 price minus 20%: Power price at GBP38.40 (2015 real) 3.75 6.49 ----------------------------------- ----- -----
* The 2015 dividend target is adjusted to reflect the 3.25 pence per share interim dividend that has already been paid. The 2016 dividend target reflects a 2.5% RPI uplift assumption.
The impact of power prices on NAV is set out below in the valuations section.
NAV and valuation of the Portfolio
The Investment Adviser is responsible for carrying out the fair market valuation of the Company's investments.
Valuations are carried out on a six monthly basis as at 31 December and 30 June each year and the Company has committed to procure a review of valuations by an independent expert not less than once every three years.
As the portfolio comprises only non-market traded investments, the Investment Adviser has adopted valuation guidelines based upon the International Private Equity and Venture Capital Valuation Guidelines 2012, ("IPEV Valuation Guidelines") as adopted by the European Venture Capital Association; application of which is considered consistent with the requirements of compliance with IAS 39 and IFRS 13.
In accordance with these guidelines the Investment Adviser has prepared its valuations either on the basis of cost for investments made shortly before the valuation date, or on the basis of DCF methodology, exercising its judgement in assessing the expected future cash-flows, project life, financial model and discount rate.
Following the recommendation of the Investment Adviser, the Directors' Valuation adopted for the portfolio as at 31 December 2014 was GBP187.1 million compared to GBP136.1 million as at 30 June 2014. The Company raised GBP138 million of new equity in the period and released a GBP7.8 million dividend (being 2 pence per share as second interim dividend in respect to the financial year ending 30 June 2014 and 3.25 pence per share as a first interim dividend in respect to the current reporting period). Excluding these adjustment factors the uplift in valuation during the period was GBP8.8 million or 4.9%, of which GBP6.1 million resulted from creation of working capital balances and GBP2.7 million from changes in the DCF valuation. This movement is analysed further in the section on Valuation movements below.
A breakdown in the movement of the NAV (GBP million) of the company over the period is set out in the table below.
(GBPmillion) 30 June 2014 NAV 147.7 ---------------------------------- ------ -------------- 2nd Interim Dividend (FY 13/14) -2.9 Further issue of shares 138.4 Raising costs for Placement -2.2 ---------------------------------- ------ -------------- Adjusted starting position 281.0 ---------------------------------- ------ -------------- DCF Valuation uplift 2.1 Investment income released to Group 6.6 Movement in working capital 0.1 Net Operational costs -2.8 Cash distributions in the period -4.9 ------ 31 December 2014 NAV 282.1 ---------------------------------- ------ --------------
Whilst the movements in the table above represent the impact of activity in the period with respect to the overall NAV of the Company, within this are items that contribute to the movement in the Directors' valuation of the portfolio set out below.
These items are the DCF uplift, Investment Income released to Group and the Movement in working capital.
Portfolio valuation movements
A breakdown of the movement in the Directors' valuation of the portfolio in the period is set out in the table below.
Valuation movement during the period to 31 December 2014
(GBPmillion) As % of rebased valuation 30 June 2014 Valuation 136.1 --------------------------------- ----- -------------- ----------- New Investments 48.3 Cash receipts from portfolio -6.1 Rebased Valuation 178.3 --------------------------------- ----- -------------- ----------- Working capital contribution 6.1 3.4% Unwinding of discount rate 6.2 3.5% DCF uplift from new investments 1.1 0.6% Power Price Movement -4.6 -2.6% 31 December 2014 Valuation 187.1 4.9% --------------------------------- ----- -------------- -----------
Net cash and working capital of GBP95.0 million and the Directors' valuation of the investments of GBP187.1 million equates to the total NAV value of GBP282.1 million.
After taking into account cash commitments and portfolio cash distributions in the period of GBP48.3 million and -GBP6.1 million respectively, the growth over the re-based valuation of GBP178.3 million at 30 June 2014 is 4.9%.
Each movement between the re-based valuation and the 31 December 2014 valuation is considered in turn below:
Working Capital Contribution
This increase is driven by the income built up but not distributed to the group as at 31 December 2014.
Unwinding of discount rate
An increase in the period of GBP6.2 million is due to the unwinding of the discount rate in the period from 1 July 2014 to 31 December 2014.
DCF uplift
Within the period there has been a positive contribution of GBP1.1 million from new acquisitions being valued on a DCF basis for the first time.
Power Prices
The DCF analysis has been adapted to take account of a material change in energy price forecasts between the June 2014 and December 2014 valuations. In June 2014, the Group's portfolio was valued using a 5% discount to the most recent leading forecasters' energy curve (released in April 2014). The basis for this discount was that the Investment Adviser had witnessed a fall in PPA prices achieved between the forecast date of April 2014 and the date of the financial statements in June 2014.
In December 2014 the energy forecast used by the Investment Adviser was updated (with an additional reduction). The short-term pricing within the energy price forecast was compared by the Investment Adviser to PPA prices achievable in the market for its solar assets and considered to accurately reflect the market without discount or premium.
The significant reduction in power price forecast during the period resulted in a reduction to the portfolio value equivalent to GBP4.6 million, resulting from the fall in power price curve as well as a reduced growth expectation over the 25 year asset life.
Discount rate
While investments with different proportions of regulatory income, or different capital structures, may justify differentials in discount rates to reflect different cash-flow certainty, the assets currently held by the Group were considered to be substantially similar in revenue profile and capital structure, therefore not meriting any differential in discount rate.
The discount rate has been determined based on a risk free rate of 1.80% (10 year UK gilts as at 31 December 2014) plus a market risk premium of 6.0% calculated by the Investment Adviser based upon its judgement of market pricing within the UK solar PV sector. The Investment Adviser prepared a detailed analysis of precedent transactions as well as capital asset pricing theory, which was presented to the Board as part of the valuation proposal for the portfolio.
Whilst it was noted UK gilt yields had fallen in the period, the Board concluded that with increased volatility in the energy markets potentially impacting the risk premium attached to the asset class it was appropriate at this time to maintain the discount rate at an unchanged level.
As such, after reviewing the analysis presented by the Investment Adviser, the Board confirmed and have adopted the discount rate of 7.8%, representing the same discount rate as applied in the period to 30 June 2014.
The principal factors taken into consideration in determining a discount rate of 7.8% were: (i) comparative analysis of transaction pricing for pre- and post-construction solar assets; (ii) review of published return targets of the listed renewable energy funds; (iii) review of the conclusions of independent valuations of solar assets; and (iv) the Investment Adviser's market experience in bidding for UK solar assets under tender. In accordance with the capital asset pricing model, the selected rate has been applied to discount the unleveraged project cash-flows net of taxation (exclusive of any tax shield). It is also important to note that this discount rate has been applied on the basis of the Investment Adviser's long term inflation assumption of 2.5%.
The discount rate used for valuing the projects as at 31 December 2014 and 30 June 2014 is shown below.
Period Ending Government Bond yield Risk Premium Discount Rate ------------------ ---------------------- ------------- -------------- 30 June 2014 2.8% 5.0% 7.8% ------------------ ---------------------- ------------- -------------- 31 December 2014 1.8% 6.0% 7.8% ------------------ ---------------------- ------------- --------------
Valuation Sensitivities
Discount Rate
At 31 December 2014, all of the operational investments within the portfolio have been valued with DCF methodology on the basis of a discount rate of 7.8%, whilst those that remain under construction have been valued on a cost less impairment basis.
The analysis below shows the impact on valuation of increasing or decreasing this rate by 0.5%.
Discount Rate -0.5% Base: 7.8% +0.5% ----------------------------- ---------------- ----------------- ---------------- Impact change on Directors' +GBP7.4 million GBP187.1 million -GBP6.9 million valuation ----------------------------- ---------------- ----------------- ---------------- Implied change in NAV per Ordinary Share +2.6p 101.3p -2.5p ----------------------------- ---------------- ----------------- ----------------
Inflation Rate
Consistent with the Investment Adviser's financial analysis presented to investors at IPO, the Company has assumed an RPI inflation rate of 2.5% per annum flat for the full 25 year life of the DCF.
The sensitivity table below illustrates the impact an increase and decrease of 0.25% from the assumed annual inflation rates has on the valuation of the portfolio.
Inflation Rate -0.25% Base: 2.5% +0.25% ----------------------------- ---------------- ----------------- ---------------- Impact change on Directors' -GBP3.9 million GBP187.1 million +GBP4.0 million valuation ----------------------------- ---------------- ----------------- ---------------- Implied change in NAV per Ordinary Share -1.4p 101.3p +1.4p ----------------------------- ---------------- ----------------- ----------------
Power Price
The DCF valuation is based upon a power price forecast prepared by a leading forecaster. The Investment Adviser reviewed a number of power price forecast options including valuing on the basis of zero real energy price inflation or applying forecasts provided by alternative forecast providers.
It is notable that the forecast builds in a 'solar capture' rate reflecting the higher proportion of solar generation in peak hours, as well as a balancing cost discount which rises over the life of the forecast. The compound annual growth rate ("CAGR") implied by the power price forecast over the 25 year assumed asset life is 1.19% in real terms. When evaluating the power forecast impact on NAV however the real annual increase in power price on a straight line basis which would give rise to an equivalent NAV impact is 2.15%. This compares to a rate of 2.68% implied in June 2014. The higher result when taking into account the present value impact results from the fact that the assumed CAGR is higher in the early years but lower in later years. Applying the June 2014 power forecast the Directors' Valuation of the portfolio would have been GBP191.7 million.
If the Directors' Valuation of the Portfolio had assumed zero real energy price inflation the resulting valuation of the Company would be GBP171.0 million.
The sensitivity below considers a flat 10% movement in power prices across the life of the projects.
Power Price -10% Base: 0% +10% ----------------------------- ---------------- ----------------- ---------------- Impact change on Directors' -GBP8.6 million GBP187.1 million +GBP8.6 million valuation ----------------------------- ---------------- ----------------- ---------------- Implied change in NAV per Ordinary Share -3.1p 101.3p +3.1p ----------------------------- ---------------- ----------------- ----------------
Energy Yield
The energy yield of a solar PV asset is derived from three factors: (i) the irradiation captured by the power plant; (ii) the ratio at which the power plant converts irradiation to energy, the so called 'Performance Ratio'; and (iii) the availability of the power plant (% days per year).
The Investment Adviser has relied upon independent technical advice provided by one of the leading solar PV technical advisers in the UK market as a basis for its assumptions, or where applicable, the Performance Ratio warranted by the contractor (against which the Contractor has penalty obligations and make good obligations if the plant does not perform).
The technical adviser determines its irradiation forecasts on the basis of a number of long term irradiation databases utilising both ground and satellite based measurements. These sources are applied on a weighted average basis according to the quality of the dataset and outliers are excluded.
In addition to analysing the base case energy yield (P50), the technical adviser provides an energy yield estimate based upon a 90% probability of exceedance, the so called "P90" (downside case), or in other words, the energy yield which there is a 10% probability of not being reached, as well as the "P10" (upside case) scenario, in which there is a 10% probability of base case being exceeded.
It is notable that solar energy yields have relatively low energy yield probability variance compared to other sectors, such as wind, due to the proportionately lower volatility of irradiation which is based on largely predictable daylight hours, rather than variable weather patterns.
The sensitivity below applies the impact of the P90/P10 scenarios on the valuation of the portfolio and movement in NAV per share.
Energy Yield P90 (10 year) Base: (P50) P10 (10 year) ----------------------------- ----------------- ------------ ----------------- Impact change on Directors' -GBP15.0 million GBP187.1 +GBP15.0 million valuation million ----------------------------- ----------------- ------------ ----------------- Implied change in NAV per Ordinary Share -5.4p 101.3p +5.4p ----------------------------- ----------------- ------------ -----------------
Operating costs at project company level
The sensitivity illustrates the effect of a 10% increase and a 10% decrease in annual operating costs for the portfolio, assuming in each case that the change occurs from 1 January 2015 and remains constant over the life of the project.
Operating Costs -10% Base +10% ----------------------------- ---------------- --------- ---------------- Impact change on Directors' +GBP3.7 million GBP187.1 -GBP3.7 million valuation million ----------------------------- ---------------- --------- ---------------- Implied change in NAV per Ordinary Share +1.3p 101.3p -1.3p ----------------------------- ---------------- --------- ----------------
Other Assumptions
A number of other assumptions, while not separately analysed here, should be taken into consideration:
- Investment cash-flows are for 25 years with a zero terminal value. Planning permission for projects is typically granted for an initial 25 years subject to re-application at the end of the period, but leases typically benefit from extension options, giving rise to the potential for a longer operational life, which has not been taken into account in the Directors' Valuation; and
- Although in June 2014 the Company secured debt financing to fund further build-out of the Group's portfolio, the Investment Adviser has not taken into account any potential valuation benefits which may be derived from financial structuring in the future of the Company.
The assumptions set out in this section will remain subject to review by the Investment Adviser and the Directors and may give rise to a revision of valuation approach in future reports.
Financing
On 11 June 2014, the Group entered into an agreement with RBS for the provision of an acquisition facility of up to GBP50 million. The Facility has a margin of 2.25% over LIBOR and is due to expire on 10 June 2017.
The Facility was drawn in the period (GBP19.5 million) but fully repaid with part of the proceeds from the Placement in November 2014 and as at the period end the Facility was undrawn.
Market Developments
The regulatory outlook for the industry remains positive, albeit the industry will transition over to the new regulatory regime for newly built projects from April 2015, which naturally creates some uncertainty. It is the view of the Investment Adviser that even with this transition, the UK solar market is viewed as highly attractive by developers, contractors and funders and that the market will see continued growth throughout 2015. The shape of the market may be slightly different with an expectation to see an increase in the number of sub-5 MWp assets due to an ongoing RO Scheme eligibility and fewer large scale (>5 MWp capacity plants) until the next CfD auction at the end of the calendar year.
Regulation
The UK solar market is unique in relation to established solar markets in that the UK government has explicitly outlined an ambitious plan for growth in the sector, through the publication of the Solar PV Strategy: Part 2 (the "Strategy"). In tandem with the Strategy, the outcome of the consultation into large scale solar was delivered in quarter 4, 2014 (the "Consultation").
The Consultation sought to achieve a market that has balanced growth across all the major investment sectors, domestic, commercial and industrial and agriculturally situated.
Under the Consultation, the RO Scheme for solar will close for installations that are greater than 5 MWp in capacity and are grid connected after 31 March 2015 (except in the case where they qualify for a 'Grace Period'). For assets that are greater than 5 MWp in capacity, they are to be replaced by the new support, the CfD, which is proposed to give fully-indexed revenues for 15 years with no exposure to wholesale energy prices. There is no change to support for projects connected prior to April 2015.
Contracts for Difference
The inaugural CfD bid process was delayed from December 2014 to February 2015. Contracts were originally expected to be awarded in January 2015, however the sealed bid window only closed on 4 February 2015.
Rooftop
In July 2014, the Department of Energy and Climate Change ("DECC") announced its ambition to see the rooftop solar market grow from the current low installed capacity to 11-12 GWp by 2020, creating a potential major new investment market. The single biggest part of this market is expected to be the industrial and commercial market, an investment area pioneered by the Investment Adviser in the early days of the UK market. In respect of unlocking this huge potential, DECC launched a consultation on 25 November 2014, seeking views on whether medium and large rooftop solar installations could be moved without the loss of FiT payments. The consultation closed on 5 January 2015, and the results are yet to be announced. DECC also announced an amendment to the definition of building-mounted solar under the FiT to require that the building must use 10% of the electricity generated. The Investment Adviser is actively supporting this initiative and engaging with DECC.
Grace Period
At the same time as the launch of the rooftop consultation, DECC released the results of a previous consultation on the introduction of a grid delay grace period for projects qualifying for the RO Scheme Obligation, with DECC deciding in favour of the introduction of a 12 month grace period for projects greater than 5 MWp which have a Distribution Network Operator ("DNO") confirmed connection date before 31 March 2016.
Bluefield Partners LLP
26 February 2015
Analysis of Financial Results
Summary Unaudited Condensed Consolidated Statement of Comprehensive Income
Six months ended 29 May 2013 to 31 December 2014 31 December 2013 Unaudited Unaudited GBP GBP ------------------------------------ ----------------------------- ----------------------------------- Operating income 8,721,533 304,033 Administrative expenses (1,770,169) (809,462) Transaction costs (471,561) (459,850) Finance costs (423,982) - ------------------------------------ ----------------------------- ----------------------------------- Total comprehensive income /(loss) for the period 6,055,821 (965,279) ------------------------------------ ----------------------------- ----------------------------------- Earnings per share: Basic and diluted (pence) 3.48 (0.74) ------------------------------------ ----------------------------- -----------------------------------
Operating income increased during the period to GBP8,721,533. This includes net gains on assets held at fair value through profit or loss of GBP2,098,359 (31 December 2013: GBPNil) reflecting the change in valuation from 30 June 2014 to 31 December 2014 as further detailed in the Investment Adviser's report, receipts from investments held at fair value through profit or loss of GBP5,689,741 (31 December 2013: GBPNil) and investment income of GBP864,341 (31 December 2013: GBPNil). Interest Income has fallen to GBP69,092 (31 December 2013: GBP304,033) reflecting the lower cash balance over the period to 31 December 2014.
Administrative expenses increased to GBP1,770,169 compared with GBP809,462 for the period to 31 December 2013 and are discussed in more detail in the Cost Analysis table below and in Note 5 of the consolidated financial statements.
Transaction costs increased to GBP471,561 (31 December 2013:GBP459,850). The costs for completed acquisitions decreased to GBP168,032 (31 December 2013: GBP335,865) and the costs for projects under review at the period end increased to GBP303,529 (31 December 2013: GBP123,985).
The finance costs for the period of GBP423,982 (31 December 2013: GBPNil) represent the expenses (including interest and fees) associated with the Company's GBP50m Facility with RBS (completed on 11 June 2014).
The tax charge for the period shown in the unaudited condensed consolidated statement of comprehensive income is GBPNil (31 December 2013: GBPNil) due to the expectation that any taxable profits within the Group (BSIFIL had taxable profits of GBP4,708,214 (31 December 2013: GBP1,238,282)) will be offset against the taxable losses of the underlying SPVs through group relief.
As a result of the activity in the period Total Comprehensive Income has risen to GBP6,055,821 (31 December 2013: GBP(965,279)) and earnings per share to 3.48p from (0.74)p in the period to 31 December 2013.
Cost Analysis
Administrative expenses Six months ended 29 May 2013 31 December 2014 to GBP 31 December 2013 GBP ------------------------------- ------------------ ------------- Investment advisory fees 872,286 575,665 Legal and professional fees 259,911 - Provision for VAT 215,840 - Administration fees 121,607 62,544 Directors' remuneration 73,096 72,699 Audit & non-audit fees 42,493 42,500 Other expenses 184,936 56,054 -------------------------------- ------------------ ------------- Total administrative expenses 1,770,169 809,462 -------------------------------- ------------------ -------------
Administrative expenses increased to GBP1,770,169 compared with GBP809,462 for the period to 31 December 2013. This increase is mainly a result of the costs associated with the successful completion of the Placement executed in November 2014 that raised a further GBP128,452,005 (after issues costs) for the Company.
The movement in expenses related to the placing programme are; Investment advisory fees (31 December 2014: GBP872,286; 31 December 2013: GBP575,665); legal and professional fees (31 December 2014: GBP259,911; 31 December 2013: GBPNil), administration fees (31 December 2014: GBP121,607; 31 December 2013: GBP62,544) and listing fees (31 December 2014: GBP81,801; 31 December 2013: GBP4,391).
A more detailed analysis of the Group's financial performance can be found in the unaudited condensed consolidated statement of financial position, unaudited condensed consolidated statement of comprehensive income, unaudited condensed consolidated statement of changes in equity, unaudited condensed consolidated statement of cash flows and the related explanatory notes.
Summary Unaudited Condensed Consolidated Statement of Financial Position
31 December 2014 30 June 2014 Unaudited Audited GBP GBP Portfolio value 187,132,114 136,120,317 Cash and cash equivalents 95,585,124 11,287,130 Other working capital (580,780) 268,572 Total net assets 282,136,458 147,676,019 -------------------------------------------------- ----------------- --------------- Number of Ordinary Shares in issue at period end 278,417,224 143,426,684 -------------------------------------------------- ----------------- --------------- Net Asset Value per Ordinary Share (pence) 101. 34 102.96 -------------------------------------------------- ----------------- ---------------
The portfolio value grew by GBP51,011,797 in the period to GBP187,132,114 as a result of new acquisitions (Hoback, Capelands, Redlands, Durrants, Goshawk, Ashlawn, and Rove), the extension of an existing investment (Hardingham), and the uplift in the fair value of the portfolio following the period end valuation process. Further detail on the movement in the valuation of the portfolio is given in the Valuation section of the Report of the Investment Adviser.
Net assets increased by GBP134,460,439 to GBP282,136,458 as a result of raising new equity in the period (net proceeds of GBP128,452,005 through the issue of Ordinary Shares) and earnings in the period of GBP6,055,821 (31 December 2013; GBP(965,279)). The un-invested proceeds of the Placement contributed towards the increase in cash and cash equivalents during the period of GBP84,297,994 to GBP95,585,124.
Summary Unaudited Condensed Consolidated Statement of Cash Flows
Six months ended 31 December 2014 29 May 2013 to Unaudited 31 December 2013 Unaudited GBP GBP ------------------------------------------- ------------------------------------------- ---------------------------- Operating and investment cashflows 6,623,174 304,033 Operating and finance costs (1,741,911) (668,694) ------------------------------------------- ------------------------------------------- ---------------------------- Net cash flow before acquisition and finance set up costs 4,881,263 (364,661) ------------------------------------------- ------------------------------------------- ---------------------------- Debt financing costs (74,449) - Issue of share capital (net of costs) 136,177,961 127,460,594 Purchase of new investments (including acquisition costs) (48,913,438) (56,076,759) Dividends paid (7,773,343) - Cash movement in period 84,297,994 71,019,174 ------------------------------------------- ------------------------------------------- ---------------------------- Opening cash balance 11,287,130 - ------------------------------------------- ------------------------------------------- ---------------------------- Net cash at end of period 95,585,124 71,019,174 ------------------------------------------- ------------------------------------------- ----------------------------
Cash received from the portfolio increased to GBP6,623,174 (31 December 2013: GBP304,033) as a result of income contributions from the projects of GBP6,554,082 (31 December 2013: GBPNil) and interest income of GBP69,092 (31 December 2013: GBP304,033). This overall increase reflects the fact in the period to 31 December 2013 there was only 1 operational project in the portfolio where as in the period to 31 December 2014 there were 21 fully operational projects.
It is also important to note that 5 of investments made in the six months ended 31 December 2014 were still under construction and had not begun to contribute to the cash received by the end of 31 December 2014.
The GBP7,773,343 dividends paid in the period reflect the second interim dividend for the year ending 30 June 2014 of GBP2,868,534 (2.0 pence per share) and a payment of the first interim dividend in respect of the year to 30 June 2015 of GBP4,904,809 (3.25 pence per share).
Group debt facility
On 11 June 2014, the Group entered into an agreement with RBS for the provision of an acquisition facility of up to GBP50 million. The Facility has a margin of 2.25% over LIBOR and is due to expire on 10 June 2017.
The Facility was drawn in the period (GBP19.5 million) but fully repaid with part of the proceeds from the Placement in November 2014. As at the period end the Facility was undrawn.
Statement of Principal Risks and Uncertainties for the Remaining Six Months of the year to 30 June 2015
The full list of risks and uncertainties are disclosed in the annual financial statements as at 30 June 2014. The Company assesses the following as the principal risks and uncertainties as the most likely to affect the Group for the remaining six months of the year to 30 June 2015:
Risks relating to the Group's commercial investment decisions
The Group may acquire or dispose of an investment at a price that is not in the best interest of shareholders. To mitigate this risk, the Board reviews market pricing comparisons where relevant prior to approving transactions.
The Group's Special Purpose Vehicle ("SPV") investments may be subject to underperformance versus the expectations at acquisition. To mitigate this risk, the Investment Adviser prepares a quarterly operational summary for the Board that evaluates the performance of each SPV investment against budget and highlights any issues to be addressed.
Risks relating to the valuation of SPV investments
Valuations of the SPV investments are reliant on large and detailed financial models based on discounted cash-flows. Significant inputs such as the discount rate, rate of inflation and the amount of electricity the solar assets are expected to produce are subjective and certain assumptions or methodologies applied may prove to be inaccurate. This is particularly so in periods of volatility or when there is limited transactional data for solar PV generation against which the investment valuation can be benchmarked. Other inputs such as the price at which electricity and associated benefits can be sold are subject to Government policies and support. To mitigate this risk, the discount factor applied to the cash-flows is reviewed by the Investment Adviser to ensure that it is set at the appropriate level. All papers supporting the Gross Asset Value calculation and methodology used are presented to the Audit Committee and to the Board for challenge, approval and adoption. Additionally, the Investment Adviser actively monitors the output from each project on an ongoing basis and actions are taken to mitigate any shortfalls relating to the operations.
Risks relating to unfavourable electricity market conditions
Annual income generation of the Group is sensitive to future power-market pricing, with approximately 39% of the Company's revenue being derived from the sale of electricity. A major structural shift in power demand or supply will impact the Company's ability to meet its dividend target. To mitigate this risk, the Investment Adviser regularly updates the portfolio cash-flow model to reflect future power-market forecasts and applies additional discounts to the forecasts. New projects are always assessed using the most recent power-market forecast data available.
These inherent risks associated with investments in the solar energy sector could result in a material adverse effect on the Company's performance and value of Ordinary Shares.
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 carried out a formal review of the risk matrix at the Audit Committee meeting held on 19 November 2014. The Board relies on periodic reports provided by the Investment Adviser and Administrator regarding risks that the Group faces. When required, experts will be employed to gather information, including tax advisers, legal advisers, and environmental advisers.
Directors' Statement of Responsibilities
The Directors are responsible for preparing the Interim Report and Unaudited Condensed Consolidated Interim Financial Statements in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
-- the Unaudited Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union; and
-- the Chairman's Statement, Report of the Investment Adviser and Statement of Principal Risks and Uncertainties for the Remaining Six Months of the year to 30 June 2015 meet the requirements of an interim management report, and include a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Unaudited Condensed Consolidated Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.
On behalf of the Board
Paul Le Page
Director
26 February 2015
Independent Review Report to Bluefield Solar Income Fund Limited
Introduction
We have been engaged by Bluefield Solar Income Fund Limited (the "Company") to review the condensed set of consolidated financial statements in the interim financial report for the six months ended 31 December 2014 which comprises the unaudited condensed consolidated statement of financial position, unaudited condensed consolidated statement of comprehensive income, unaudited condensed consolidated statement of changes in equity, unaudited condensed consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated financial statements.
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this 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 for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with the DTR of the UK FCA.
As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union (""EU"). The condensed set of consolidated financial statements included in this interim financial report have been prepared in accordance with IAS 34 Interim Financial Reporting, adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the interim financial report based on our review.
Scope of review
We conducted our review in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the interim financial report for the six months ended 31 December 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Neale D. Jehan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Glategny Court, Glategny Esplanade
St. Peter Port,
Guernsey, GY1 1WR
26 February 2015
Unaudited Condensed Consolidated Statement of Financial Position
As at 31 December 2014
31 December 2014 30 June 2014 Unaudited Audited Note GBP GBP ------------------------------------------------------------ ----- ---------------------------- ------------- ASSETS Non-current assets Financial assets held at fair value through profit or loss 10 187,132,114 136,120,317 Trade and other receivables 12 377,778 511,111 Total non-current assets 187,509,892 136,631,428 ------------------------------------------------------------ ----- ---------------------------- ------------- Current assets Trade and other receivables 12 967,956 608,530 Cash and cash equivalents 13 95,585,124 11,287,130 Total current assets 96,553,080 11,895,660 ------------------------------------------------------------ ----- ---------------------------- ------------- TOTAL ASSETS 284,062,972 148,527,088 ------------------------------------------------------------ ----- ---------------------------- ------------- LIABILITIES Current liabilities Other payables and accrued expenses 14 1,926,514 851,069 ------------------------------------------------------------ ----- ---------------------------- ------------- Total current liabilities 1,926,514 851,069 ------------------------------------------------------------ ----- ---------------------------- ------------- TOTAL LIABILITIES 1,926,514 851,069 ------------------------------------------------------------ ----- ---------------------------- ------------- NET ASSETS 282,136,458 147,676,019 ------------------------------------------------------------ ----- ---------------------------- ------------- EQUITY Share capital 277,015,727 140,837,766 Retained earnings 5,120,731 6,838,253 TOTAL EQUITY 16 282,136,458 147,676,019 ------------------------------------------------------------ ----- ---------------------------- ------------- Number of Ordinary Shares in issue at period end 16 278,417,224 143,426,684 ------------------------------------------------------------ ----- ---------------------------- ------------- Net Asset Value per Ordinary Share (pence) 9 101.34 102.96 ------------------------------------------------------------ ----- ---------------------------- -------------
These unaudited condensed consolidated interim financial statements were approved and authorised for issue by a committee of the Board of Directors on 26 February 2015 and signed on their behalf by:
John Rennocks Paul Le Page Director Director 26 February 2015
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.
Unaudited Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2014
Six months ended 29 May 2013 to 31 December 2014 31 December 2013 Unaudited Unaudited Note GBP GBP ------------------------------------------ ----- ------------------------------------ ----------------------------- Income Income from investments 4 864,341 - Interest income from cash and cash equivalents 69,092 304,033 ------------------------------------------ ----- ------------------------------------ ----------------------------- 933,433 304,033 Net gains on financial assets held at fair value through profit or loss 10 7,788,100 - ------------------------------------------ ----- ------------------------------------ ----------------------------- Operating income 8,721,533 304,033 ------------------------------------------ ----- ------------------------------------ ----------------------------- Expenses Administrative expenses 5 1,770,169 809,462 Transaction costs 6 471,561 459,850 Operating expenses 2,241,730 1,269,312 ------------------------------------------ ----- ------------------------------------ ----------------------------- Operating profit/(loss) 6,479,803 (965,279) ------------------------------------------ ----- ------------------------------------ ----------------------------- Finance costs 7 423,982 - ------------------------------------------ ----- ------------------------------------ ----------------------------- Total comprehensive income/(loss) before tax 6,055,821 (965,279) Taxation 8 - - Total comprehensive income/(loss) for the period 6,055,821 (965,279) ------------------------------------------ ----- ------------------------------------ ----------------------------- Attributable to: Owners of the Company 6,055,821 (965,279) Earnings per share: Basic and diluted (pence) 15 3.48 (0.74) ------------------------------------------ ----- ------------------------------------ -----------------------------
All items within the above statement have been derived from continuing activities.
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.
Unaudited Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2014 (unaudited)
Number of Note Ordinary Shares Share capital Retained earnings Total equity GBP GBP GBP -------------------------------------- ------ ----------------- -------------- ------------------ ------------- Shareholders' equity at 1 July 2014 143,426,684 140,837,766 6,838,253 147,676,019 -------------------------------------- ------ ----------------- -------------- ------------------ ------------- Shares issued during the period: 120,000,000 Ordinary Shares issued via placing 16 120,000,000 123,000,000 - 123,000,000 7,500,000 Ordinary Shares issued via placing 16 7,500,000 7,687,500 - 7,687,500 Share issue costs 16 - (2,235,495) - (2,235,495) Shares issued as consideration for SPV investment 16,18 7,490,540 7,725,956 - 7,725,956 Dividends paid 16,17 - - (7,773,343) (7,773,343) Total comprehensive income for the period - - 6,055,821 6,055,821 Shareholders' equity at 31 December 2014 278,417,224 277,015,727 5,120,731 282,136,458 -------------------------------------- ------ ----------------- -------------- ------------------ -------------
For the period from incorporation on 29 May 2013 to 31 December 2013 (unaudited)
Number of Ordinary Shares Share capital Retained earnings Total equity GBP GBP GBP Shareholders' equity at 29 May 2013 - - - - -------------------------------------------- ---------------- -------------- ------------------ ------------- Shares issued during the period: 130,000,000 Ordinary Shares issued at IPO 130,000,000 130,000,000 - 130,000,000 290,000 Ordinary Shares issued at IPO in lieu of Directors' fees 290,000 290,000 - 290,000 Share issue costs - (2,539,406) - (2,539,406) Total comprehensive loss for the period - - (965,279) (965,279) Shareholders' equity at 31 December 2013 130,290,000 127,750,594 (965,279) 126,785,315 --------------------------------------------- ---------------- -------------- ------------------ -------------
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.
Unaudited Condensed Consolidated Statement of Cash Flows
For the six months ended 31 December 2014
Six months ended 29 May 2013 to 31 December 2014 31 December 2013 Unaudited Unaudited Note GBP GBP -------------------------------------------------- ------ --------------------------- ----------------------------- Cash flows from operating activities Total comprehensive income/(loss) for the period 6,055,821 (965,279) Adjustments: Increase in trade and other receivables (226,093) (81,724) Increase in other payables and accrued expenses 1,075,445 682,342 Net gains on financial assets held as fair value through profit or loss 10 (7,788,100) - Finance expense on revolving loan facility 7 74,449 - Net cash used in operating activities (808,478) (364,661) -------------------------------------------------- ------ --------------------------- ----------------------------- Cash flows from investing activities Purchase of financial assets held at fair value through profit or loss 10 (48,913,438) (56,076,759) Receipts from SPV investments held at fair value through profit or loss 10 5,689,741 - Net cash used in investing activities (43,223,697) (56,076,759) -------------------------------------------------- ------ --------------------------- ----------------------------- Cash flow from financing activities Proceeds from issue of Ordinary Shares 16 138,413,456 130,000,000 Issue costs paid 16 (2,235,495) (2,539,406) Dividends paid 16,17 (7,773,343) - Drawdown on revolving loan facility 7 19,500,000 - Repayment of revolving loan facility 7 (19,574,449) - Net cash generated from financing activities 128,330,169 127,460,594 -------------------------------------------------- ------ --------------------------- ----------------------------- Net increase in cash and cash equivalents 84,297,994 71,019,174 Cash and cash equivalents at the start of the period 11,287,130 - Cash and cash equivalents at the end of the period 13 95,585,124 71,019,174 -------------------------------------------------- ------ --------------------------- -----------------------------
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended 31 December 2014
1. General information
Bluefield Solar Income Fund Limited (the "Company") is a non-cellular company limited by shares and was incorporated in Guernsey under the Companies (Guernsey) Law, 2008 (the "Law") on 29 May 2013 with registered number 56708 as a closed-ended investment company. It is regulated by the Guernsey Financial Services Commission.
The unaudited condensed consolidated interim financial statements (the "financial statements") for the six months ended 31 December 2014 comprise the financial statements of the Company and its wholly owned subsidiary, Bluefield SIF Investments Limited ("BSIFIL"), (together the "Group") as at 31 December 2014.
The investment objective of the Group is to provide shareholders with an attractive return, principally in the form of dividends, by investing via Special Purpose Vehicles ("SPV") in a portfolio of large scale United Kingdom ("UK") based solar energy infrastructure assets. The Board adopted quarterly dividends with effect from the first quarter of 2015.
The Group has appointed Bluefield Partners LLP as its Investment Adviser ("Investment Adviser").
2. Accounting policies
a) Basis of preparation
The financial statements, included in this interim report, have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU and the Disclosure and Transparency Rules of the Financial Conduct Authority. The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the preparation of the Group's consolidated financial statements for the period from 29 May 2013 to 30 June 2014.
These financial statements have been prepared under the historical cost convention with the exception of financial assets held at fair value through profit or loss and in accordance with the provisions of the Law.
These financial statements do not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Group's consolidated financial statements for the period from 29 May 2013 to 30 June 2014.
Functional and presentation currency
These financial statements are presented in pounds sterling ("Sterling"), which is the functional currency of the Group as well as the presentation currency. The Group's funding, investments and transactions are all denominated in Sterling.
Seasonal and cyclical variations
The Group's results do not vary significantly during reporting periods as a result of seasonal activity.
b) Going concern
The Directors in their consideration of going concern, have reviewed comprehensive cash-flow forecasts prepared by the Investment Adviser, future projects in the pipeline and the performances of the current solar plants in operation and, at the time of approving these financial statements, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Group. The Directors have concluded that it is appropriate to adopt the going concern basis of accounting in preparing these financial statements.
c) Segmental reporting
International Financial Reporting Standards ("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, as a whole, has been determined as constituting the chief operating decision maker of the Group. The key measure of performance used by the Board to assess the Group's performance and to allocate resources is the total return on the Group'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.
For management purposes, the Group is engaged in a single segment of business, being investment mainly in UK solar energy infrastructure assets via SPVs, and mainly in one geographical area, the UK.
d) Acquisitions settled through share consideration
Where an acquisition of an investment asset by BSIFIL is settled by consideration of shares in the Company, the number of shares issued is determined using the fair value of each share at the time of the acquisition (see Note 16).
3. Critical accounting judgements, estimates and assumptions in applying the Group'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 or complexity or area where assumptions and estimates are significant to the financial statements has been identified as the risk of misstatement of the valuation of the SPV investments (see Note 10).
The estimates and underlying assumptions are reviewed on an on-going 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.
Accounting for subsidiaries
As noted in the Group's consolidated financial statements for the period from 29 May 2013 to 30 June 2014, the Group had early adopted IFRS 10 'Consolidated Financial Statements' including the Investment Entities Amendments to IFRS 10, IFRS 12 and IAS 27 (the "Amendments") and the Company consolidates its results with BSIFIL. This treatment is based on an exception to the requirement for mandatory non-consolidation under IFRS 10 for Investment Entities. As the Company is an investment entity and BSIFIL is a subsidiary providing investment services to the Company, consolidation is required.
On 18 December 2014, the International Accounting Standards Board issued further amendments to IFRS 10 (Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) (the "Consolidation Exception Amendments") which may have a material impact on the preparation and presentation of the Group accounts as they have clarified the scope of the exceptions to mandatory non-consolidation. The Consolidation Exception Amendments are mandatory for annual periods beginning on or after 1 January 2016. The Board is currently assessing the full impact of these and the Company continues to consolidate its results with BSIFIL in these financial statements.
4. Income from investments
Six months ended 29 May 2013 to 31 December 2014 31 December 2013 GBP GBP Consultancy services fee income 864,341 - 864,341 - ================= =================
BSIFIL has entered into consultancy agreements with each SPV for the provision of on-going ad-hoc advisory services in the management, administration and operation of each SPV. The consultancy services fee income is charged according to hourly rates and agreed from time to time between BSIFIL and each SPV.
5. Administrative expenses
Six months ended 29 May 2013 to 31 December 2014 31 December 2013 GBP GBP Investment advisory fees (including technical services fee) (see Note 18) 872,286 575,665 Legal and professional fees 259,911 - Provision for VAT (see Note 12) 215,840 - Administration fees (see Note 18) 121,607 62,544 Directors' remuneration (see Note 18) 73,096 72,699 Audit fees 21,643 17,500 Non-audit fees 20,850 25,000 Broker fees 25,745 23,378 Regulatory Fees 13,048 6,235 Registrar fees 15,302 6,023 Insurance 20,581 4,503 Listing fees 81,801 4,391 Other expenses 28,459 11,524 1,770,169 809,462 ================= =================
6. Transaction costs
Six months ended 29 May 2013 to 31 December 2014 31 December 2013 GBP GBP Completed investment acquisitions 168,032 335,865 Other investment acquisitions 303,529 123,985 471,561 459,850 ================= =================
7. Finance costs
Six months ended 29 May 2013 to 31 December 2014 31 December 2013 GBP GBP Arrangement fees 133,333 - Loan facility fees 216,200 - Loan interest 74,449 - 423,982 - ================= =================
On 11 June 2014, the Group entered into a three-year revolving acquisition facility for up to GBP50m with The Royal Bank of Scotland plc, which expires on 10 June 2017. During the first six months of the financial year, the Group had drawn down amounts of GBP19.5 million from this facility. The facility is subject to an interest rate of margin over LIBOR of 2.25% and arrangement fee of 1.6% over total commitment, secured against the Group's assets. The arrangement fee is to be amortised over the three year term of the loan facility. Interest charged for the six months ended 31 December 2014 amounted to GBP74,449 (31 December 2013: GBPNil). The drawn down amount plus interest was repaid in November 2014. The balance of the loan at 31 December 2014 was GBPNil (30 June 2014: GBPNil).
As at 31 December 2014, GBP112.3 million (30 June 2014: GBP111.8 million) of the Group's assets have been pledged as security against the Group's revolving loan facility.
8. Taxation
The Company has obtained exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 for which it pays an annual fee of GBP600 (included within regulatory fees). With effect from 1 January 2015, this annual fee will increase to GBP1,200. 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 to 31 December 2014 is 21%.
At the period end, BSIFIL had taxable profits of GBP4,708,214 (31 December 2013: GBP1,238,282) which are expected to be offset against the taxable losses of the underlying SPVs through group relief. As a result, the tax charge for the period shown in the unaudited condensed consolidated statement of comprehensive income is GBPNil (31 December 2013: GBPNil).
9. Net Asset Value per Ordinary Share
The calculation of NAV per Ordinary Share is arrived at by dividing the total net assets of the Group as at the unaudited condensed consolidated statement of financial position date by the number of Ordinary Shares of the Group at that date.
10. Financial assets held at fair value through profit or loss
31 December 2014 30 June 2014 Total Total GBP GBP Opening balance (Level 3) 136,120,317 - Additions* 48,913,438 127,313,722 Change in fair value of financial assets held at fair value through profit or loss 2,098,359 8,806,595 Closing balance (Level 3) 187,132,114 136,120,317 ============================== ======================= Analysis of net gains on financial assets held at fair value through profit or loss (per unaudited condensed consolidated statement of comprehensive income) Six months ended 29 May 2013 to 31 December 2014 31 December 2013 GBP GBP Change in fair value of financial assets held at fair value through profit or loss 2,098,359 - Receipt from SPV investments held at fair value through profit or loss 5,689,741 - --------------------------- ----------------- 7,788,100 - =========================== =================
*As at 31 December 2014, additions include equity in SPV investments of GBP3,285,862 (30 June 2014: GBP1,317,617).
Fair value measurements
Financial assets and financial liabilities are classified in their entirety into only one of the following three 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);
-- 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 Group. The Group 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 instruments carried at fair value are the investments held by the Group, through the SPVs, which are fair valued at each reporting date. The Group's investments have been classified within Level 3 as the SPV investments are not traded and contain unobservable inputs.
Transfers during the period
There have been no transfers between levels during the six months ended 31 December 2014. Due to the nature of the investments, these will be classified as Level 3.
Valuation methodology and process
The same valuation methodology and process is followed in these financial statements as was applied in the preparation of the Group's consolidated financial statements for the period from 29 May 2013 to 30 June 2014.
The Directors base the fair value of the investments in the SPVs held by the Group on information received from the Investment Adviser. Fair value is calculated on an unleveraged, 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.
The Directors have satisfied themselves as to the Group's valuation policy, valuation methodology, discount rates and key assumptions applied.
The key inputs to the valuation are the discount rate, power price forecasts, inflation rate, irradiation forecasts and taxation. Original discount rates applied when the solar assets were first purchased could change due to factors such as a material change in long term inflation expectations or risk-free rates; a change in risk perception of solar assets or the regulation supporting solar assets; or a change in the nature of capital available within the industry (for example, large scale institutional investors with a low cost of capital may drive the reduction in the cost of capital for solar assets). As a result, the discount rates are subjective and an alternative assumption may result in a different rate. Judgement is used by the Investment Adviser in arriving at the appropriate discount rate used by the Group, which has been determined at 7.8% (30 June 2014: 7.8%). This is based on the Investment Adviser's knowledge of the market, taking into account pricing levels applied on recent bidding activity on operational assets and third party valuations of the Investment Adviser's other unlisted funds.
Long term power price forecasts are obtained from a leading power forecaster, which are reviewed and adjusted, where appropriate, by the Investment Adviser by applying an adjustment on the leading forecaster's price power curve in order to align these with the fixed power prices which would currently be achieved on the power purchasing agreements that the SPVs have entered into. No adjustment was applied in respect of this valuation as the forecasting power curve was the most up to date datapoint at 31 December 2014 (30 June 2014: 5% discount). The compound annual growth rate ("CAGR") implied by the power price forecast over the 25 year assumed asset life is 1.19% in real terms. When evaluating the power forecast impact on NAV however, the real annual increase in power price on a straight line basis which would give rise to an equivalent NAV impact is 2.15%. This compares to a rate of 2.68% implied in June 2014. The higher result when taking into account the present value impact results from the fact that the assumed CAGR is higher in the early years but lower in later years.
Related revenue (for associated Feed-in Tariffs ("FiT") and Renewable Obligation Certificates ("ROC") benefits) and costs (for the construction and maintenance of the solar assets) may not stay constant in real terms over the life of the solar assets due to inflation rates. The Group assumes an inflation rate of 2.5% (30 June 2014: 2.5%).
Long term irradiation forecasts based on a number of long term irradiation databases utilising both ground and satellite based measurements have been provided by a leading solar photovoltaic ("PV") technical adviser in the UK market. The Investment Adviser has relied on this data and where applicable, the performance ratio warranted by the contractors. Base energy yield assumptions are P50 (50% probability of exceedence) (30 June 2014: P50).
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 Group's SPV investments.
Sensitivity analysis
The table below analyses the sensitivity of the fair value of investments to an individual input, while all other variables remain constant. The Board considers the changes in inputs to be within a reasonable expected 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.
Change in fair value Change in NAV of investments per share Input Change in input GBP (pence) ------------------- ---------------- --------------------------------------- ------------------------------------- Discount rate +0.5% (6,899,682) (2.48) -0.5% 7,360,605 2.64 ------------------- ---------------- --------------------------------------- ------------------------------------- Power prices +10% 8,610,916 3.09 -10% (8,616,609) (3.09) ------------------- ---------------- --------------------------------------- ------------------------------------- Inflation rate + 0.25% 4,011,353 1.44 - 0.25% (3,888,796) (1.40) ------------------- ---------------- --------------------------------------- ------------------------------------- Energy yield 10 year P90 (14,964,581) (5.37) 10 year P10 14,940,597 5.37 ------------------- ---------------- --------------------------------------- ------------------------------------- Operational costs +10% (3,700,521) (1.33) -10% 3,698,638 1.33 ------------------- ---------------- --------------------------------------- -------------------------------------
11. Financial support to unconsolidated SPV investments
The following table shows the SPV investments of the Group. As the Group is considered to be an investment entity under IFRS 10, these SPV investments have not been consolidated in the preparation of these financial statements:
Ownership Project SPV investment Date of investment Site location Interest Hill Farm HF Solar Limited 21 October 2013 Oxfordshire 100% Hardingham Hardingham Solar Limited 30 August 2013 Norfolk 100% Betingau Betingau Solar Limited 23 December 2013 Glamorgan 100% Goosewillow ISP (UK) 1 Limited 5 August 2013 Oxfordshire 100% Hall Farm Hall Solar Limited 24 December 2013 Norfolk 100% North Beer North Beer Solar Limited 10 October 2013 Cornwall 100% Saxley Saxley Solar Limited 19 December 2013 Hampshire 100% Sheppey Sheppey Solar Limited 18 February 2014 Kent 100% Pentylands Solar Power Surge Limited 4 March 2014 Wiltshire 100% Hoback Hoback Solar Limited 17 June 2014 Hertfordshire 100% L&P Solar (see Notes 16 and 18) Bluefield L&P Solar Limited* 9 October 2014 Various 100% Capelands Capelands Solar Farm Limited 25 July 2014 Devon 100% Redlands Redlands Solar Farm Limited 25 July 2014 Somerset 100% Ashlawn Ashlawn Farm Limited 3 December 2014 Somerset 100% Rove Wel Solar Farm Limited 23 December 2014 Wiltshire 100%
*Bluefield L&P Solar Limited includes underlying SPVs; KS SPV5 Limited and Bluefield Goshawk Limited.
The Group has advanced the following shareholder loans to the SPVs, the loans are subject to an interest rate of 7% per annum, are unsecured and repayable no later than 25 years from the date the respective loan agreements were entered into:
Total Drawn down Outstanding loan by SPVs at loan commitment Project SPV investment commitment 31 December 2014 31 December 2014 GBP GBP GBP HF Solar Hill Farm Limited 17,249,999 17,259,434 - Hardingham Hardingham Solar Limited 22,649,999 17,794,057 4,855,942 Betingau Solar Betingau Limited 11,154,999 11,154,727 272 ISP (UK) 1 Goosewillow Limited 18,909,990 18,883,577 26,413 Hall Solar Hall Farm Limited 12,003,479 11,997,592 5,887 North Beer North Beer Solar Limited 9,299,000 9,292,586 6,414 Saxley Solar Saxley Limited 6,949,999 6,967,792 - Sheppey Solar Sheppey Limited 11,949,999 11,967,345 - Solar Power Pentylands Surge Limited 21,349,990 21,349,857 133 Hoback Solar Hoback Limited 18,949,999 14,048,311 4,901,688 L&P Solar (see Notes 16 Bluefield L&P and 18) Solar Limited 7,725,957 7,725,957 - Capelands Solar Farm Capelands Limited 8,569,900 5,845,684 2,724,216 Redlands Solar Redlands Farm Limited 6,319,900 4,650,501 1,669,399 Ashlawn Farm Ashlawn Limited 7,549,999 3,522,349 4,027,650 Wel Solar Farm Rove Limited 13,949,999 10,481,529 3,468,470 As at 31 December 2014 194,583,208 172,941,298 21,686,484 ================= ============================== =================================
The Group's SPVs are committed to pay amounts equal to the loan commitment and equity to meet working capital requirements and payments for the turnkey EPC contracts entered into with the contractors for the design and construction of the solar plants.
12. Trade and other receivables
31 December 2014 30 June 2014 GBP GBP Non-current assets Prepayments: - Arrangement fees (Note 7) 377,778 511,111 377,778 511,111 ================= ============= Current assets Income receivable from consultancy services fee (see Note 4) 477,756 148,243 VAT receivable 215,840 16,728 Provision for VAT (215,840) - Interest receivable 50,701 5,274 Other receivables 2,681 23,887 Prepayments: - Arrangement fees (Note 7) 266,667 266,667 - Directors' remuneration (Note 18) 65,918 139,014 - Insurance 77,669 286 - Other 26,564 8,431 967,956 608,530 ================= =============
BSIFIL is currently engaged with HM Revenue and Customs regarding the recovery of VAT. Pending resolution of this matter, the VAT receivable balance has been provided for in full. There are no other material past due or impaired receivable balances outstanding at the period end.
The Directors' remuneration prepayment totalling GBP65,918 (30 June 2014: GBP139,014) relates to the cost of 290,000 Ordinary Shares that were issued to the Directors on 12 July 2013 in lieu of a cash payment for Directors' fees for the first two years (see Note 18).
The Directors consider that the carrying amount of all receivables approximates to their fair value.
13. Cash and cash equivalents
Cash and cash equivalents comprises cash held by the Group and short-term bank deposits held with maturities of up to three months. The carrying amounts of these assets approximate their fair value.
31 December 2014 30 June 2014 Cash and cash equivalent: GBP GBP - Committed 21,686,484 5,035,375 - Uncommitted 73,898,640 6,251,755 95,585,124 11,287,130 ============================== =============
Committed cash and cash equivalents consist of amounts expected to be utilised to meet the Group's commitments.
14. Other payables and accrued expenses
31 December 2014 30 June 2014 GBP GBP Loan from SPV investment 780,000 - Investment advisory fees 537,267 322,758 Transaction costs 302,235 - Legal and professional fees 25,380 313,164 Administration fees 38,621 33,688 Audit fees 18,500 35,000 Non-audit fees 10,500 - Other payables 214,011 146,459 1,926,514 851,069 ================= =============
The Group has financial risk management policies in place to ensure that all payables are paid within the agreed credit period. The Board of Directors considers that the carrying amount of all payables approximates to their fair value.
15. Earnings per share
Six months ended 29 May 2013 31 December 2014 31 December 2013 Profit/(loss) attributable to shareholders of the Company GBP6,055,821 GBP(965,279) Weighted average number of Ordinary shares in issue 174,243,151 130,290,000 Basic and diluted earnings from continuing operations and profit/(loss) for the period (pence) 3.48 (0.74) ================= =================
There was no income earned or shares issued between 29 May 2013 and 11 July 2013, therefore this period has not been included for the purpose of calculating the weighted average number of shares above.
There are no potentially dilutive shares in issue.
16. 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 denominated in such currencies as they may determine.
Six months ended 29 May 2013 to 31 December 2014 30 June 2014 Number of Number of Ordinary Shares Ordinary Shares Opening balance 143,426,684 - Shares issued as consideration for SPV investment (Note 18) 7,490,540 - Shares issued for cash 127,500,000 143,028,999 Shares issued in lieu of Directors' fees - 290,000 Shares issued as a scrip dividend alternative - 107,685 Closing balance 278,417,224 143,426,684 ================== ================= Six months ended 29 May 2013 to Shareholders equity 31 December 2014 30 June 2014 GBP GBP Opening balance 147,676,019 - Shares issued as consideration for SPV investment (Note 18) 7,725,956 - Shares issued for cash 130,687,500 143,159,289 Shares issued in lieu of Directors' fees - 290,000 Share issued as a scrip dividend alternative - 109,812 Share issue costs (2,235,495) (2,721,335) Dividends paid (7,773,343) (2,605,792) Retained earnings 6,055,821 9,444,045 Closing balance 282,136,458 147,676,019 ================== ===============
Dividends declared and paid in the period are disclosed in Note 17.
Amendment to the Articles of Incorporation (the "Articles")
At an Extraordinary General Meeting ("EGM") of the Company on 1 October 2014, the Directors of the Company were approved to issue new Ordinary Shares and/as redeemable convertible shares of no par value in the Company ("C Shares") to related parties of the Company, pursuant to the placing programme.
As described in the circular to shareholders dated 9 September 2014, the Board believe that it is in the interests of shareholders that the Board has greater discretion, with regard to the date on which the conversion ratio should be calculated, with a view to ensuring that the conversion of C Shares into new Ordinary Shares is not earnings dilutive as far as the existing Ordinary Shares are concerned. Giving the Board this discretion required an amendment to the Articles.
Accordingly, at the EGM of the Company on 1 October 2014, it was proposed and passed, that the definition of Calculation Time as set out in the Articles ("Calculation Time") be amended to remove the requirement that at least 80% (or such other percentage) of the assets attributable to the relevant C Shares must have been invested in accordance with the investment policy and instead that the Board be given absolute discretion to determine the Calculation Time with a view to achieving the objective that the conversion of the C Shares should not be earnings dilutive as far as the existing Ordinary Shares is concerned, provided however that the Calculation Time cannot fall later than a longstop date falling six months after admission of the relevant class of C Shares.
During the period and as at 31 December 2014, no C shares were in issue.
Shares issued during the period
On 9 October 2014, the Company issued 7,490,540 new Ordinary Shares as partial consideration for the acquisition of Bluefield L&P Solar Limited. These shares were issued at a price of GBP1.03143 per Ordinary Share, raising total gross proceeds of GBP7,725,956 (see Notes 11 and 18). The issue price for each consideration share equalled the average mid-market price of the Ordinary Shares during the seven dealing days up to and including the third dealing day prior to completion of the acquisition agreement. The issuance of the consideration shares is reflected as an increase in equity and a corresponding increase in financial assets held at fair value through profit or loss. This transaction had no impact on the unaudited condensed consolidated statement of comprehensive income.
On 14 November 2014, the Company issued 120,000,000 new Ordinary Shares following a placing subsequent to the authority granted by the shareholders at the EGM held on 1 October 2014. These shares were issued at a price of GBP1.025 per Ordinary Share, raising gross proceeds of GBP123,000,000.
On 25 November 2014, the Company issued 7,500,000 new Ordinary Shares following a placing subsequent to the authority granted by the shareholders at the EGM held on 1 October 2014. These shares were issued at a price of GBP1.025 per Ordinary Share, raising gross proceeds of GBP7,687,500.
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 Shares also have the right to receive all income attributable to those shares and participate in dividends 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.
Retained reserves
Retained reserves comprise of retained earnings as detailed in the consolidated statement of changes in equity.
17. Dividends
On 8 September 2014, the Board declared a second interim dividend of GBP2,868,534, in respect of the year ending 30 June 2014, equating to 2 pence per Ordinary Share, which was paid on 31 October 2014 to shareholders on the register on 19 September 2014.
In conjunction with the placings, as disclosed in Note 16, the Board had considered the timing of the Company's dividends with the objective of ensuring that any issue of new shares would not be dilutive to the dividend attributable to existing ordinary shareholders. As such, the Board decided to bring forward the declaration and payment dates of the first interim dividend in respect of the year to 30 June 2015. As a result, on 3 November 2014 the Board declared the first interim dividend of GBP4,904,809, equating to 3.25 pence per Ordinary Share (first interim dividend in respect of the year ending 30 June 2014: 2.0 pence per Ordinary Share), which was paid on 5 December 2014 to shareholders on the register on 14 November 2014.
18. Related Party Transactions and Directors' Remuneration
In the opinion of the Directors, the Company has no immediate or ultimate controlling party.
Laurence McNairn, Director of the Company, is also a Director of the Company's Administrator, Heritage International Fund Managers Limited. From the total administration fees incurred during the period, GBP71,736 (31 December 2013: GBP56,918) relates to the fees of the Administrator, of which GBP38,621 (30 June 2014: GBP33,688) was outstanding at the period end.
The total Directors' fees expense for the period amounted to GBP73,096 (31 December 2013: GBP72,699); therefore, at 31 December 2014, the prepaid element of the shares issued is GBP65,918 (30 June 2014: GBP139,014). Of this, Laurence McNairn received a Director's fee of GBP15,123 (31 December 2013: GBP15,041) with GBP14,877 (30 June 2014: GBP30,000) prepaid at the period end.
As at 31 December 2014, the number of Ordinary Shares held by each Director is as follows:
31 December 2014 30 June 2014 John Rennocks 255,805 155,000 Paul Le Page 70,000 70,000 Laurence McNairn 241,764 91,764 John Scott 251,176 201,176 -------------------------------- 818,745 517,940 ================================ ==============================
John Scott and John Rennocks are Directors of BSIFIL. Mike Rand and James Armstrong, who are partners of the Investment Adviser, are also Directors of BSIFIL. None of these Directors receives any fees for their services as Directors of this subsidiary.
The Group's investment advisory fees (including technical services fee) for the period amounted to GBP872,286 (31 December 2013: GBP575,665) of which GBP537,267 (30 June 2014: GBP322,758) was outstanding at the period end.
The Group's consultancy services fee income for the period amounted to GBP864,341 (31 December 2013: GBPNil) of which GBP477,756 (30 June 2014: GBP148,243) was outstanding at the period end.
On 9 October 2014, BSIFIL acquired Bluefield L&P Solar Limited. As three members of the Investment Adviser, are also Directors of BSIFIL or its subsidiaries, are indirectly key management personnel of the Company and owned B shares in Bluefield L&P Solar Limited, they are considered related parties, and the transaction a related party transaction, under UK FCA Listing Rule 11 'Related Party Transactions' and IAS 24 'Related Party Disclosures'. The three members of the Investment Adviser received GBP1,548 cash consideration for their B shares. As holders of B shares, they were also entitled to receive 20% of the profit generated by the sale of Bluefield L&P Solar Limited. Their share of this amounted to GBP353,965. In reviewing the purchase price paid by the Company for the acquisition of Bluefield L&P Solar Limited, the Board obtained a valuation report from BDO LLP to confirm that the purchase price was determined on a fair and reasonable basis.
19. Guarantees and other commitments
As at 31 December 2014, the Group had provided guarantees amounting to GBP184.63 million (30 June 2014: GBP125.04 million) to the SPVs in relation to the funding of EPC contracts entered into by the SPVs, of which GBP36.8 million (30 June 2014: GBP100.83 million) was paid during the period and GBP47.01 million (30 June 2014: GBP24.21 million) held by the SPVs in escrow.
As at 31 December 2014, the Company had provided guarantees amounting to GBP112.3 million (30 June 2014: GBP111.8 million) to BSIFIL in relation to the revolving loan facility entered into the by Group (see Note 10).
At the reporting date, the Group had loan commitments of GBP21,686,484 (30 June 2014: GBP18,985,375) relating to the shareholder loans extended to its SPVs (see Note 11).
20. Subsequent events
Since 31 December 2014, further amounts totalling GBP3.99 million were transferred from the Group to the SPVs on the existing loan commitments at period end.
On 13 February 2015, the Company entered into a conditional contract for a total commitment of GBP32.8 million to acquire a 29 MWp solar plant in Oxfordshire. Since 13 February 2015, GBP22.46 million has been transferred from the Group to the SPV.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUMGPUPAUUM
1 Year Bluefield Solar Income Chart |
1 Month Bluefield Solar Income Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions