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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Foresight Solar Fund Limited | LSE:FSFL | London | Ordinary Share | JE00BD3QJR55 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.20 | -0.24% | 83.30 | 83.00 | 83.40 | 83.40 | 82.50 | 83.40 | 1,169,387 | 16:35:21 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 162.99M | 154.47M | 0.2610 | 3.18 | 491.15M |
Hot Features
Premium
TIDMFSFL
Annual Results to 31 December 2017 and Dividend Announcement
Highlights
--During the year the Company acquired 273MW of additional
solar assets including 127MW in the UK and 146MW of Australian
solar assets across four projects, which represents the first
international acquisitions for the Company
--At 31 December 2017, the Company's portfolio comprised 23
assets with a net peak capacity of 621MW. The UK portfolio
represented 475MW of total installed capacity across 19
operating assets, with the Australian portfolio representing
146MW of net peak capacity under construction
--During 2017, the portfolio generated 426 GWh of clean energy,
sufficient to power nearly 140,000 UK homes
--The Company delivered its target dividend of 6.32 pence per
share for the year ended 31 December 2017. (2016: 6.17 pence)
--The Net Asset Value ("NAV") increased to GBP481.3 million
over the period, increasing the NAV per Ordinary Share to
107.0 pence, from 102.9 pence as at 31 December 2016
--During 2017, the equity discount rate decreased by 0.5% to
7.0% to better reflect market conditions and reducing
operational risk. The Company has also updated its Valuation
Methodology to more accurately reflect leverage in the portfolio,
incorporating a levered discount rate of 7.75% for those assets
with debt
--During the year the Company announced two Ordinary Share
issuances, raising GBP117.5 million of new equity capital
--The Investment Manager has identified a selective pipeline of
value accretive opportunities across selected markets within
stable economies and with regulatory support for renewable
energy
Dividend Timetable
Dividend Timetable Date
Ex-dividend Date 10 May 2018
Record Date 11 May 2018
Payment Date 25 May 2018
Key Metrics
As at
31 December 2017
Market Capitalisation GBP486.0 million
Share Price 108.0 pence
Total Dividend per Share for the Year 6.32 pence
Gross Asset Value* GBP680.8 million
Net Asset Value GBP481.3 million
NAV per Share 107.0 pence
Total Return (NAV) 7.48%
Total Shareholder Return since IPO 7.02%
Profit after Tax for the Year GBP35.1 million
* Including investment valuations and cash of Company and its
subsidiaries. Investments valued using 7.0% Discount Rate.
Commenting on today's results, Alex Ohlsson, Chairman of
Foresight Solar Fund Limited said:
"The Company continues to deliver its target dividends since
IPO, despite challenging energy prices. This year also marked
the beginning of the Company's international expansion with
146MW of new assets acquired in Australia."
A conference call for analysts will be held at 9:00am on
Thursday 22 February 2018.
To register, please contact Shabnam Bashir at Citigate Dewe
Rogerson by email Shabnam.Bashir@citigatedewerogerson.com or by
phone +44 (0) 20 7282 2822
A presentation will be provided separately before the call.
A copy of the Report can be found on the Fund's website:
www.fsfl.foresightgroup.eu
For further information, please contact:
Foresight Group
Romy Abrahams rabrahams@ForesightGroup.eu +44 (0)203
763 6956
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Mark Bloomfield
Neil Winward
Tunga Chigovanyika
Notes to Editors
About Foresight Solar Fund Limited ("The Company" or "FSFL")
Foresight Solar Fund Limited ("FSFL" or "the Company") is a
Jersey registered, closed-end investment company investing in a
diversified portfolio of ground-based solar PV assets in the UK
and in Australia.
The Company's objective is to provide investors with a
sustainable and inflation-linked quarterly dividend. The Company
aims to preserve and where possible enhance capital value
through the reinvestment of excess cash flows, not required for
the payment of dividends.
Including its IPO in October 2013, the Company has raised a
total of GBP463.2 million through share placings.
About Foresight Group
Foresight Group is a leading infrastructure and private equity
manager with GBP2.8bn of assets under management and c. 220
people worldwide. The group has offices in London, Rome,
Nottingham, Manchester, Guernsey, San Francisco and Sydney.
Foresight Solar Fund Limited is managed and advised by
Foresight's highly experienced team which to date has invested
GBP1.5bn in solar generation.
www.foresightgroup.eu
Foresight Solar Fund Limited: Annual Results to 31 December
2017
Financial Highlights
As at 31 December 2017
Market Capitalisation GBP486.0 million
NAV per Share 107.0 pence
Dividend per Share declared for the Year 6.32 pence
Gross Asset Value GBP680.8 million*
Net Asset Value GBP481.3 million
Share Price 108.0 pence
Total Return (NAV) 7.48%**
Total Shareholder Return 7.02%***
Profit after Tax for the Year GBP35.1 million
Number of Shares 449,952,091
* Including investment valuations and cash of Company and its
subsidiaries. Investments valued using 7.0% Discount Rate.
** Annualised from IPO on 29 October 2013 and calculated in
line with AIC methodology.
*** Annualised from IPO on 29 October 2013
-- During the year the Company acquired 273MW of
additional solar assets including 127MW in the UK and 146MW of
Australian solar assets across four projects, which represents
the first international acquisitions for the Company
-- At 31 December 2017, the Company's portfolio
comprised 23 assets with a net peak capacity of 621MW. The UK
portfolio represented 475MW of total installed capacity across
19 operating assets, with the Australian portfolio representing
146MW of net peak capacity under construction
-- During 2017, the portfolio generated 426 GWh of
clean energy, sufficient to power nearly 140,000 UK homes
-- The Company delivered its target dividend of
6.32 pence per share for the year ended 31 December 2017.
(2016: 6.17 pence)
-- The Net Asset Value ("NAV") increased to
GBP481.3 million over the period, increasing the NAV per
Ordinary Share to 107.0 pence, from 102.9 pence as at 31
December 2016
-- During 2017, the equity discount rate decreased
by 0.5% to 7.0% to better reflect market conditions and
reducing operational risk. The Company has also updated its
Valuation Methodology to more accurately reflect leverage in the
portfolio, incorporating a levered discount rate of 7.75% for
those assets with debt
-- During the year the Company announced two
Ordinary Share issuances, raising GBP117.5 million of new equity
capital
-- The Investment Manager has identified a
selective pipeline of value accretive opportunities across
multiple markets within stable economies and with regulatory
support for renewable energy
Chairman's Statement
The Company continues to deliver its target dividends since IPO,
despite challenging energy prices. This year also marked the
beginning of the Company's international expansion with 146MW of
new assets acquired in Australia."
ALEXANDER OHLSSON, CHAIRMAN
REVIEW OF THE YEAR
On behalf of the Board, I am pleased to present the Audited
Annual Report and Financial Statements for Foresight Solar Fund
Limited (the "Company") for the year ended 31 December 2017.
The year 2017 was undoubtedly a landmark year for the maturing
UK solar market. Initiated by the closure of the UK Renewable
Obligation scheme to new solar projects in March 2017, the UK
solar industry has entered a transitionary period during the
last 12 months. With new solar PV installations no longer
benefiting from a subsidy mechanism, there have been limited
opportunities to purchase primary assets and consequently
competition for operational solar projects in the secondary
market has increased.
The Company has followed a disciplined approach to UK
acquisitions, successfully adding 127MW of operational assets to
the UK portfolio including the 72MW Shotwick solar project and
the 50MW Sandridge solar project. Simultaneously, the Company
has looked further afield for investment opportunities, acquiring
146MW of assets in Australia currently under construction,
leveraging on the Investment Manager's experience and track
record in securing more value for investors.
Once these Australian assets are operational, the Company's
portfolio will represent the UK's largest dedicated solar energy
listed investment company by installed capacity, with 621MW
across 23 assets. As at 31 December 2017, the UK portfolio
represented 475MW of total installed capacity across 19 assets,
with the additional four assets located in Australia
representing 146MW of net peak capacity.
DIVID AND DIVID GROWTH
The Company has continued to achieve its dividend objectives
and paid all target dividends since IPO, having delivered the
targeted inflation-linked dividend of 6.32 pence for the year
ending 31 December 2017. (2016: 6.17 pence). Since the
Company's IPO in 2013, the Company has paid total dividends of
24.6 pence per share.
The target dividend for 2018 is 6.58 pence, in line with the
UK's Retail Price Index ("RPI") for 2017.
The Board will continue to review the Company's dividend policy
to reflect the expected evolution of the Investment Portfolio
and the ongoing relationship between power prices and inflation
levels.
KEY FINANCIALS
During the year, the Net Asset Value ("NAV") per Ordinary
Share increased by 4.1 pence from 102.9 pence as at 31
December 2016 to 107.0 pence as at 31 December 2017. This was
primarily driven by acquisitions made during the year, the
reduction in the unlevered equity discount rate and by
recognising for the first time the value of extended useful
economic lives of certain UK solar sites beyond 25 years. The
Company has also updated its NAV methodology to more accurately
reflect the leveraged discount approach of the projects financed
by third party debt by applying a levered discount rate to
assets associated with long-term debt.
The Profit after Tax for the year was GBP35.1 million
resulting in Earnings per Share of 8.80 pence.
CAPITAL RAISING AND FINANCING
During the year the Company issued 109 million new Ordinary
Shares representing GBP117.5 million of new funds raised. Of
this, GBP78.5 million was raised in March and the remaining
GBP39.0 million in October. The new Ordinary Shares were issued
under the Placing Programme, announced on 3 March 2017, for up
to 250 million new Ordinary Shares.
The net proceeds from these equity placings were used to
finance investment opportunities in the UK and Australia and
pay down existing short term revolving credit facilities
("RCF").
In February 2017, a new RCF of GBP55.0 million was agreed
with Santander Global Corporate Banking at attractive terms to
support the financing of new acquisitions.
At the year end, the total outstanding debt for the Company
and its subsidiaries, including RCFs, amounted to GBP200.3
million (GBP198.3 million at 31 December 2016). The gearing
level at 29% of Gross Asset Value ("GAV") (2016: 36%) remains
conservative and is within the debt level limits set by the
Company. The Investment Manager will continue to optimise the
Company's capital structure to enhance returns for investors.
PORTFOLIO DEVELOPMENT
With additional capital raised during 2017, the Company was
well placed to acquire solar projects in line with the
Company's growth strategy both in the UK and abroad. During
the period, the Investment Manager evaluated over 1.8GW of
solar assets from secondary vendors in the UK, demonstrating
the availability of assets in the UK secondary market during a
period of consolidation post the closure of the UK ROC regime.
The acquisitions of Sandridge and Shotwick demonstrate that,
despite the increased competition in the UK secondary solar
market, the Company is still able to identify NAV accretive
opportunities. In an increasingly competitive market, the
Investment Manager will continue to maintain its strong
discipline and only acquire assets that meet the Company's
return requirements.
In Q4 2017, the Company completed its first overseas
acquisitions, investing in four assets in Australia which will
have an installed peak capacity of 146MW, when construction is
complete. The Board believes that the Australian solar market
offers the opportunity to diversify the Company's portfolio into
an overseas market that benefits from strong regulatory support
along with high levels of irradiation, supported by the
Investment Manager's active presence in Australia since 2016.
Although the Company will continue to focus predominantly on
the UK market, in line with the Investment mandate, the Board
believes international investments represent an attractive
opportunity to increase shareholder returns.
OPERATIONAL PERFORMANCE
The portfolio generated 426 Gigawatt hours of clean energy
during 2017, enough to power nearly 140,000 homes. The
performance of the assets showed a significant and sustained
improvement over the course of the year, following a relatively
challenging first half, resulting from lower than expected
irradiation levels and scheduled rectification works. Irradiation
levels remained below expected levels during the second half of
the year resulting in overall production levels for the period
being 4.6% below expectations against an irradiation variance of
-2.2% for the year.
A small number of assets experienced specific production
problems earlier in the year, however all but one of these
are now performing above or in line with expectations. results
of these improvements can clearly be demonstrated, the works
themselves led to low site availability which impacted To
address underperformance, significant remediation works have been
undertaken on these sites at the expense of the relevant EPC
contractors. While the positive production during part of the
year. Lost production was more than compensated for by the
Liquidated Damages the Company received.
During 2017, the Asset Manager successfully secured the
necessary lease extensions and other planning rights needed to
extend the expected useful economic life of eight UK portfolio
assets beyond the 25 year period initially assumed. This has
been recognised in the NAV, reflecting a more accurate
valuation of the portfolio, resultng in an uplift of GBP11.3m
(2.8 pence per share).
The Asset Manager continues to optimise the commercial
performance of the assets with significant long term savings
achieved during the year, predominantly through a new framework
agreement with Brighter Green Engineering ("BGE") which will
immediately reduce O&M pricing by c. 20% on assets operated by
BGE.
SOLAR MARKET DEVELOPMENTS
As reported in June 2017, there is now a total of over 12GW
of solar capacity in Great Britain, with over 8GW of ground
mounted solar. Although the lack of regulatory support for new
large scale solar projects has halted the flow of primary
solar assets to market, the Company continues to see
opportunities to acquire existing operational assets currently
being held by short term investors.
While the ROC scheme was replaced by the Contract for
Difference ("CfD") subsidy regime, solar PV and onshore
technologies were both excluded from the most recent auction
round, and are highly unlikely to feature in future auction
rounds. The Investment Manager/Board expects future growth in
the UK solar energy market to be driven by falling
installation costs. In addition, the prospect of co-locating
battery facilities with solar projects should further support
this trend as capex costs for this technology reduce.
Australia, in contrast offers a rapidly growing solar sector,
with solar projects accounting for over c.900MW of total
installed capacity in 2017. Further significant growth is
anticipated, as 4.5GW of new large-scale projects are due to
be installed by 2020. Through the Paris Agreement on climate
change, the Australian Government has committed to reducing the
country's carbon emissions 26-28% below 2005 levels by 2030.
While criticism has been levelled at the lack of Federal
support for renewables, support from State governments has been
robust, with many implementing ambitious individual renewables
targets as well as holding competitive auctions for renewable
energy capacity. The Board believes being an early entrant in
this market has given the Company a distinct competitive
advantage, while also benefitting from the Investment Manager's
solar experience and track record in the UK.
Although the Australian Solar market is forecast to grow
significantly over the next few years, the power purchase
agreement ("PPA") market in Australia has become more
competitive in recent months reflecting the number of PPAs
expected to be written by the most relevant local utilities.
This is explained in more detail in the Australian market
report.
Overall, the global solar market is expected to see significant
growth over the coming years as solar project costs continue
to fall and grid parity is achieved in more geographies.
ANNUAL GENERAL MEETING
I look forward to reporting further to shareholders at the
next Annual General Meeting ("AGM"), which will be held on 11
June 2018 at 9.30am.
OUTLOOK
The Investment Manager is actively reviewing a pipeline of more
than 310MW of potential investments in the UK and other solar
markets, but will maintain a prudent approach to new
acquisitions, making its investment decisions based on the
ability of projects to increase Company NAV.
The Asset Manager will continue to focus on maximising the
operating performance of the UK portfolio from a technical
perspective while seeking to secure improved commercial terms,
as well as working closely with the EPC contractors to monitor
the progress of the Australian construction assets.
Alexander Ohlsson
Chairman
21 February 2018
Corporate Summary and Investment Objective
CORPORATE SUMMARY
Foresight Solar Fund Limited ("the Company") is a closed-ended
company with an indefinite life and was incorporated in Jersey
under the Companies (Jersey) Law 1991, as amended, on 13
August 2013, with registration number 113721.
The Company has 449,952,091 Ordinary Shares in issue which are
listed on the premium segment of the Official List and traded
on the London Stock Exchange's Main Market.
The Company makes its investments through intermediate holding
companies and underlying Project Vehicles/Special Purpose Vehicles
("SPVs").
INVESTMENT OBJECTIVE
The Company's objective is to provide investors with a
sustainable and inflation-linked quarterly dividend and to aim
to preserve and where possible enhance capital value, through
the reinvestment of excess cash flows, not required for the
payment of dividends, in a diversified portfolio of
predominantly UK ground-based solar PV assets.
THE COMPANY
The Company's Initial Public Offering on 24 October 2013 raised
GBP150 million, creating the largest dedicated solar investment
company listed in the UK at the time. To date, the Company
has raised a total of GBP463.2 million through equity issuance.
On 3 March 2017, the Company announced a Placing Programme
relating to the issue of up to 250 million new Ordinary
Shares in aggregate over 12 months. Since the start of this
Placing Programme, the Company has issued 109 million new
Ordinary Shares equivalent to GBP117.5 million of new funds
raised. Of this GBP78.5 million was raised in March and the
remaining GBP39.0 million in October.
As at 31 December 2017, the Company had a market
capitalisation of GBP486.0 million and the portfolio consisted
of 23 assets with a net peak capacity of 621MW. 19 assets
are located in the UK with a total generating capacity of
475MW and the remaining four assets are located in Australia
with 146MW of capacity currently under construction.
INVESTMENT POLICY
The Company will pursue its investment objective by acquiring
ground-based, operational solar power plants predominantly in the
UK. Investments outside the UK and assets which are still,
when acquired, under construction will be limited to 25 percent
of the Gross Asset Value of the Company and subsidiaries,
calculated at the time of investment.
The Company will seek to acquire majority or minority stakes
in individual ground-based solar assets. When investing in a
stake of less than 100 per cent in a solar power plant SPV,
the Company will secure its shareholder rights through
shareholders' agreements and other legal transaction documents.
Power purchase agreements will be entered into between each of
the individual solar power plant SPVs in its portfolio and
creditworthy offtakers in the UK. Under the PPAs, the SPVs
will sell solar generated electricity and green benefits to the
designated offtaker. The Company may retain exposure to UK
power prices through PPAs that avoid mechanisms such as fixed
prices or price floors.
Investment may be made in equity or debt or intermediate
instruments but not in any instruments traded on any investment
exchange.
The Company is permitted to invest cash held for working
capital purposes and awaiting investment in cash deposits, gilts
and money market funds.
In order to spread risk and diversify its portfolio, at the
time of investment no single asset shall exceed in value (or,
if it is an additional stake in an existing investment, the
combined value of both the existing stake and the additional
stake acquired) 30 per cent of the Company's Gross Asset Value
post-acquisition. The Gross Asset Value of the Company will be
calculated based on the last published gross investment
valuation of the Company's portfolio, including cash, plus
acquisitions made since the date of such valuation at their
cost of acquisition. The Company's portfolio will provide
diversified exposure through the inclusion of not less than
five individual solar power plants and the Company will also
seek to diversify risk by ensuring that a significant
proportion of its expected income stream is derived from
regulatory support (which will consist of for example, without
limitation, ROCs and FiTs for UK assets). Diversification will
also be achieved by the Company using a number of different
third-party providers such as developers, EPC contractors, O&M
contractors, panel manufacturers, landlords and distribution
network operators.
The Articles provide that gearing*, calculated as Group
borrowings (including any asset level gearing) as a percentage
of the Company's Gross Asset Value, will not exceed 50 percent
at the time of drawdown. It is the Board's current intention
that long-term gearing (including long-term, asset level gearing),
calculated as Group borrowings (excluding intra-group borrowings
(i.e. borrowings between members of the Group) and revolving
credit facilities) as a percentage of the Company's Gross Asset
Value will not exceed 40 per cent at the time of drawdown.
*(see Capital Raising and Financing section in Chairman's
Statement)
Any material change to the investment policy will require the
prior approval of Shareholders by way of an ordinary resolution
(for so long as the Ordinary Shares are listed on the
Official List) in accordance with the Listing Rules.
SIGNIFICANT SHAREHOLDERS
The Company's Shareholders include a substantial number of
blue-chip institutional investors.
Shareholders in the Company with more than a 5% holding as at
31 December 2017 are as follows:
Investor % Shareholding in Fund
Blackrock Investment Management Ltd 14.2%
Newton Investment Management Ltd 9.0%
Legal & General Investment Management Ltd 7.6%
Schroders Plc 7.4%
Standard Life Aberdeen 6.5%
Total 44.7%
ALTERNATIVE INVESTMENT FUND MANAGEMENT DIRECTIVE ("AIFMD")
The AIFMD, which was implemented across the EU on 22 July
2013 with the transition period ending 22 July 2014, aims to
harmonise the regulation of Alternative Investment Fund Managers
("AIFMs") and imposes obligations on managers who manage or
distribute Alternative Investment Funds ("AIFs") in the EU or
who market shares in such funds to EU investors. Under the
AIFMD, the Company is self-managed and acts as its own
Capitalised Alternative Investment Fund Manager.
Both the Company and the Investment Manager are located outside
the European Economic Area ("EEA") but the Company's marketing
activities in the UK are subject to regulation under the
AIFMD.
PACKAGED RETAIL AND INSURANCE-BASED INVESTMENT PRODUCTS REGULATION
A new EU regulation, the Packaged Retail and Insurance-based
Investment Products Regulation ("PRIIPS"), came into effect on 1
January 2018. Its aim is to ensure retail investors are
provided with transparent and consistent information across
different types of financial products. This new regulation
requires the Company to publish a Key Information Document
("KID"). The KID is available on the Company's website under
Publications and can be found at this link:
www.fsfl.foresightgroup.eu
Board of Directors
The Directors, who are Non-Executive and, other than Mr Dicks,
independent of the Investment Manager, are responsible for the
determination of the investment policy of the Company, have
overall responsibility for the Company's activities including its
investment activities and for reviewing the performance of the
Company's portfolio. The Directors are as follows:
ALEX OHLSSON (CHAIRMAN)
Mr Ohlsson is Managing Partner for the law firm Carey Olsen
in Jersey. He is recognised as a leading expert in corporate
and finance law in Jersey and is regularly instructed by
leading global law firms and financial institutions. He is the
independent chairman of the States of Jersey's Audit Committee
and an Advisory Board member of Jersey Finance, Jersey's
promotional body. He is also a member of the Financial and
Commercial Law Sub-Committee of the Jersey Law Society which
reviews as well as initiates proposals for legislative changes.
He was educated at Victoria College Jersey and at Queens'
College, Cambridge, where he obtained an MA (Hons) in Law. He
has also been an Advocate of the Royal Court of Jersey since
1995.
Mr Ohlsson was appointed as a Non-Executive Director and
Chairman on 16 August 2013.
CHRIS AMBLER
Mr Ambler has been the Chief Executive of Jersey Electricity
Plc since 1 October 2008. He has experience in a number of
senior positions in the global industrial, energy and materials
sectors working for major corporations including ICI/Zeneca, The
BOC Group and Centrica/British Gas, as well as in strategic
consulting roles. He is a Director on other boards including a
Non-Executive Director of Apax Global Alpha Limited, a listed
fund which launched on the London Stock Exchange on 15 June
2015.
Mr Ambler is a Chartered Director, a Chartered Engineer and a
Member of the Institution of Mechanical Engineers. He holds a
First Class Honours Degree from Queens' College Cambridge and
an MBA from INSEAD.
Mr Ambler was appointed as a Non-Executive Director on 16
August 2013.
PETER DICKS
Mr Dicks is currently a Director of a number of quoted and
unquoted companies. In addition, he was the Chairman of
Foresight VCT plc and Foresight 2 VCT plc from their launch
in 1997 and 2004 respectively until 2010 and since then he
has continued to serve on the Board of the now merged
Foresight VCT plc. He is also on the Board of ICG Enterprise
Trust plc, Mears Group plc, Mercia Fund 1 General Partnership
Limited and Miton UK Microcap Trust plc and Chairman of
Unicorn AIM VCT plc and SVM Emerging Fund.
Mr Dicks was appointed as a Non-Executive Director on 16
August 2013.
Investment Manager
The Company's Investment Manager is Foresight Group CI Limited
("Foresight Group"), which is responsible for the development
and management of the assets of the Company, including the
sourcing and structuring of new solar project acquisitions and
advising on the Company's borrowing strategy. The Investment
Manager is a Guernsey registered company, incorporated under the
Guernsey Law with registered number 51471. The Investment
Manager is licensed and regulated by the Guernsey Financial
Services Commission.
Founded in 1984, Foresight Group is a leading independent
infrastructure and private equity investment manager that
currently manages c. GBP2.8 billion of assets on behalf of
institutions and retail clients. The Investment Manager is
headquartered in London with offices in San Francisco, Sydney,
Rome, Guernsey and two regional UK offices in Manchester and
Nottingham. At the year end, Foresight Group's staff number was
over 220 globally, including more than 60 investment
professionals.
Foresight Group established its solar investment team in 2007
and today manages assets of c. GBP1.5 billion invested in 79
solar plants across the UK, Europe and Australia with a total
generating capacity of c.1.1GW. Foresight Group is now the
second largest solar asset manager in the UK with over 800MW
of installed capacity. In Australia, following the recent
acquisitions made on behalf of the Company, Foresight Group is
now one of the larger solar asset managers with 252MW under
management. Other solar assets include an 11MW portfolio of
unsubsidised solar assets in Portugal and Spain, where Foresight
Group set a new precedent, closing one of the first corporate
PPAs in that market.
The solar investment team, which now numbers 24 investment
professionals, forms part of Foresight Group's 38-strong
dedicated multinational energy infrastructure team, which
possesses a comprehensive suite of capabilities, from investment
origination and execution, including sourcing and structuring
transactions. In the UK, the wider infrastructure team also
manages 447MW of investments in bioenergy projects, onshore wind,
lithium-ion battery storage facilities and reserve power
generation assets.
The team is supported by an extensive back office team
comprising finance, investor relations, sales, marketing, HR and
administration.
Foresight Group established its Sydney office in early 2016,
completing its first solar transaction in Australia in February
2017 with the acquisition of the 25MW Barcaldine Remote
Community Solar Farm in Queensland. In addition, in November
2015 Foresight Group was awarded a A$100m commitment from the
Clean Energy Finance Corporation ("CEFC"), the Government-backed
green bank, to fund bioenergy projects across Australia. The
multi-disciplined team of six includes investment professionals
and portfolio managers with experience in solar and bioenergy
projects, both transactional and during the construction and
operational phases, and is supported by the solar investment
team based in London.
The Company's Investment Management team is led by three
experienced UK-based fund managers and is responsible for new
asset acquisitions, pipeline development and value enhancement of
the Company, including making recommendations for optimal
borrowing strategies. This team is supported by a group of
UK-based solar investment analysts with additional resource
obtained from Foresight Group's Italian and Australian investment
teams. Foresight Group is overseen by an Executive Committee of
which Jamie Richards and Gary Fraser are members. Foresight
Group's Executive Committee provides strategic investment advice
to the management team and the Board.
JAMIE RICHARDS, PARTNER, HEAD OF INFRASTRUCTURE
Jamie joined Foresight Group in 2000 and is an Executive
Committee member. Since inception in 2007, he has had overall
responsibility for Foresight Group's infrastructure/solar business
in the UK, Australia, Italy and US including origination and
structuring. Jamie has overseen, as a member of the Investment
Committee, more than 100 solar projects representing Foresight
Group's approximately GBP1.5 billion solar portfolio. Prior to
2007, he led a number of venture capital and private equity
transactions in the technology and cleantech sectors representing
Foresight Group's funds and was a non-executive director for
several companies. Jamie is a chartered accountant and has 20
years' experience in fund management, banking and corporate
recovery. Before joining Foresight Group, Jamie worked at PwC,
Citibank and Macquarie, both in London and Sydney.
RICARDO PINEIRO, PARTNER, HEAD OF UK SOLAR
Ricardo has led Foresight Group's UK solar investments since
joining Foresight Group in 2011, including the acquisition of
over 60 UK solar power plants, totalling c.800MW and continues
to oversee their commercial management. He has also been
responsible for arranging over GBP500 million of third party
debt facilities to date, including revolving debt facilities,
listed bonds and project finance facilities. Ricardo joined
Foresight Group from Espirito Santo Investment, where he spent
four years in the project finance division as manager with a
special focus on transport, energy, oil and gas. Ricardo is
primarily focused on leading new renewable energy transactions
across UK and other international markets.
GARY FRASER, PARTNER, GROUP FINANCE DIRECTOR
Gary is a chartered accountant and Chartered Fellow of the
Securities Institute. He worked with Ernst & Young between 1993
and 1999, predominantly in the audit and risk assurance and
corporate finance areas and joined ISIS Asset Management plc in
1999 where he was responsible for the provision of similar
services to several investment companies. He joined Foresight
Group in 2004 and is an Executive Committee member.
Asset Manager
The Company's underlying investment vehicles have appointed
Foresight Group LLP, a subsidiary of Foresight Group CI, to
act as Asset Manager. The Asset Manager is responsible for all
operations, including the commercial, financial and technical
management of assets under construction acquired by the Company.
Over the last six years, Foresight Group has developed a
leading Asset Management capability through its team of 38
individuals with expertise across electrical and civil
engineering, finance and legal disciplines. The team manages
over 150 energy infrastructure projects including solar, battery
storage, reserve power, waste-to-energy and wind investments,
with 1.5GW of renewable energy capacity.
The Asset Manager adopts an active and hands-on approach in
order to maximise long-term value creation. Activities undertaken
include oversight of construction progress, detailed asset
performance monitoring, active contract management, identification
of opportunities to enhance long-term performance and improve
operational efficiency.
The Asset Manager's experience in asset optimisation has been
gained through continual emphasis on operational efficiencies
achieved through the consolidation of costs across O&M
activities and insurances, negotiating attractive offtake pricing
and ongoing equipment improvements.
As an early market entrant, the Asset Manager has a wealth of
experience in the technical and operational management of solar
assets and has been able to develop its own centralised
monitoring system so that all sites can be remotely monitored
in real time. This sophisticated asset management database forms
the basis of all performance analysis and reporting, as well
as enabling the enforcement of contractual compliance. This
powerful tool assesses the performance of the portfolio on a
continuous basis and ensures that all information is consistent,
accurate and relevant. It also allows the Asset Manager's
engineers to identify and notify contractors of incidents
expeditiously and working with them to minimise the impact on
portfolio production. The Asset Manager also oversees each of
the O&M contractors' performance, incident control and technical
reporting to ensure that each solar power plant is operated
and managed so as to maximise profits and reduce operating
risks.
TOM MOORE, DIRECTOR
Tom has responsibility for the financial and operational
performance of Foresight Group's energy infrastructure assets.
Tom joined Foresight Group in 2013, having previously worked as
Financial Controller at a hedge fund with oversight of internal
finance, operations and compliance. He also performed advisory
work for M&A transactions and corporate restructurings. Before
this he spent four years in practice with Saffery Champness.
Tom is a chartered accountant and holds a BSc in Economics
from The University of York.
ARNOUD KLAREN, SENIOR PORTFOLIO MANAGER AND TECHNICAL DIRECTOR
Arnoud joined Foresight Group in 2011 and is responsible for
the technical aspects of Foresight Group's solar portfolio.
Arnoud previously worked at SolFocus as a Project Manager where
he focused on the deployment of concentrated photovoltaic plants
in Southern Europe and the Middle-East. Prior to this, Arnoud
founded ThinkSpectrally, a spin-off company of The University of
Valencia in Spain, dedicated to quality assurance in the PV
manufacturing process. Arnoud holds a MSc degree in Electrical
Engineering from the Twente University of Technology in The
Netherlands.
JULIAN ELSWORTH, SENIOR PORTFOLIO MANAGER
Julian joined Foresight Group in 2013 and has over 14 years
of experience in the renewable energy industry. Julian is
responsible for the management of the technical and commercial
aspects of the UK solar portfolio. Prior to joining Foresight
Group, Julian worked as a Senior Consultant for a large
engineering consultancy where he focused on a variety of
renewable energy projects globally. Julian is a Chartered
Engineer and holds an MSc in Renewable Energy and the
Environment from Reading University.
TULLY ROBERTSON, TECHNICAL PORTFOLIO MANAGER
Tully joined Foresight Group in 2018, based in Sydney. He is
an electrical engineer with 13 years' experience in
project/contract management, design and commissioning of various
high voltage infrastructure projects throughout Australia,
including Foresight Group's 20MW Barcaldine solar farm in
Queensland. Tully has also performed lead Owner's Engineer
design reviews and written EPC specifications for utility scale
wind and solar farm projects in Australia. Tully is a
Chartered Professional Engineer (CPEng), Registered Professional
Engineer of Queensland (RPEQ) and Member of the Institution of
Engineers Australia (MIEAust).
Portfolio Assets
OVERVIEW
Installed
Peak
Capacity Net Connection Acquisition Current(5)
Asset Country Status (MW) Ownership MW Date Cost(1) Fair Value
Operational
and
Wymeswold(2) UK accredited 34 100% 34 March 2013 GBP45.0m GBP47.7m
Operational
and
Castle Eaton UK accredited 18 100% 18 March 2014 GBP22.6m GBP20.6m
Operational
and
Highfields UK accredited 12 100% 12 March 2014 GBP15.4m GBP13.5m
Operational
and
High Penn UK accredited 10 100% 10 March 2014 GBP12.7m GBP10.5m
Operational
and
Pitworthy UK accredited 16 100% 16 March 2014 GBP19.3m GBP16.5m
Operational
and
Hunters Race UK accredited 11 100% 11 July 2014 GBP13.3m GBP13.4m
Operational
and
Spriggs Farm UK accredited 12 100% 12 March 2014 GBP14.6m GBP13.7m
Operational
and September
Bournemouth UK accredited 37 100% 37 2014 GBP47.9m GBP49.8m
Operational
and December
Landmead UK accredited 46 100% 46 2014 GBP52.4m GBP47.9m
Operational
and September
Kencot UK accredited 37 100% 37 2014 GBP49.5m GBP44.5m
Operational
and December
Copley UK accredited 30 100% 30 2015 GBP32.7m GBP36.2m
Operational
and
Atherstone UK accredited 15 100% 15 March 2015 GBP16.2m GBP15.5m
Operational
and
Paddock Wood UK accredited 9 100% 9 March 2015 GBP10.7m GBP11.1m
Operational
and
Southam UK accredited 10 100% 10 March 2015 GBP11.1m GBP11.1m
Operational
and
Port Farm UK accredited 35 100% 35 March 2015 GBP44.5m GBP43.8m
Operational
and
Membury UK accredited 16 100% 16 March 2015 GBP22.2m GBP20.5m
Operational
and
Shotwick UK accredited 72 100% 72 March 2016 GBP75.5m GBP84.6m
Operational
and
Sandridge UK accredited 50 100% 50 March 2016 GBP57.3m GBP58.0m
Operational
and
Wally Corner UK accredited 5 100% 5 March 2016 GBP5.7m GBP5.8m
UK Subtotal 475 475 GBP568.6m GBP564.7m
July
Bannerton Australia Construction 110 48.5% 53 2018(3) GBP12.5m GBP12.5m(4)
March
Longreach Australia Construction 17 49% 8 2018(3) GBP5.3m GBP5.3m(4)
September
Oakey 1 Australia Construction 30 49% 15 2018(3) GBP7.8m GBP7.9m(4)
October
Oakey 2 Australia Construction 70 100% 70 2018(3) GBP15.9m GBP16.0m(4)
Australia Subtotal 227 146 GBP41.5m GBP41.7m
Total 702 621 GBP610.3m GBP606.4m
1 Original cost at time of acquisition, including transaction
costs
2 Includes the 2MW extension acquired in March 2015
3 Expected connection dates
4 Held at cost incurred to date. This does not represent
expected final cost and assumes AUD/GBP exchange rate of 0.58
as at 31 December 2017
5 Calculated using a discount rate of 7.75%
Investment Manager's Report
For the year ended 31 December 2017
KEY METRICS
As at As at
31 December 2017 31 December 2016
Market Capitalisation GBP486.0 million GBP354.9 million
Share Price 108.0 pence 104.10 pence
Total Dividend per Share for the Year 6.32 pence 6.17 pence
Gross Asset Value* GBP680.8 million GBP549.0 million
Net Asset Value GBP481.3 million GBP350.8 million
NAV per Share 107.0 pence 102.9 pence
Total Return (NAV) 7.48% 7.04%
Total Shareholder Return since IPO 7.02% 6.58%
Profit after Tax for the Year GBP35.1 million GBP30.7 million
* Including investment valuations and cash of Company and its
subsidiaries. Investments valued using 7.0% Discount Rate.
PORTFOLIO SUMMARY
As at 31 December 2017, the Company's portfolio consisted of
23 assets with a net peak capacity of 621MW. The Company
holds 19 operational assets located in the UK with a total
generating capacity of 475MW and four assets under construction
in Australia, representing 146MW of net installed capacity. The
portfolio's average size of 27MW per solar installation means
the Company benefits from efficiencies of scale particularly in
terms of lower asset management costs per MW and operating and
maintenance charges. At the year end, the Company owned seven
of the top 25 largest solar projects in the UK.
The Investment Manager has selected assets within the UK that
ensure diversification by geography, while aiming to maximise
exposure to regions with favourable irradiation patterns. The
Australian assets, which represent c.13% of the total equity
invested to date, further diversify the portfolio in a market
where we believe our shareholders can now obtain attractive
returns, on a risk-adjusted basis.
ACQUISITIONS
In terms of MWs acquired, 2017 was the Company's most
acquisitive year to date. Operational assets with a total
capacity of 127MW were acquired in the UK and 146MW of
construction stage projects were acquired in Australia.
UK
SHOTWICK
In February 2017, the Company acquired the 72MW Shotwick solar
project in Flintshire, North Wales. Shotwick is the largest
operational solar asset in the UK and most significant UK
acquisition made by the Company to date.
Shotwick provides electricity via a private wire agreement to
the neighbouring Shotton paper mill, which is owned by Finnish
conglomerate UPM, while retaining the flexibility to export
electricity to the National Grid.
This investment is also noteworthy due to a 25-year corporate
PPA signed with UPM, which is the first such arrangement for
the Company. This enables the papermill to potentially run on
up to 100% green energy during daylight hours and saves up to
22,500 tonnes of carbon dioxide emissions per year. This
contract allows the Company to obtain power prices materially
above traditional utility PPAs available in the market. Shotwick
was connected to the grid in March 2016 and has received ROC
accreditation of 1.3ROCs/MWh. The Company acquired the economic
benefit of all project cash flows from Shotwick since 1
December 2016.
SANDRIDGE
In February 2017, the Company acquired Sandridge solar project
located in Wiltshire. At 50MW, Sandridge is the second largest
UK asset in the portfolio acquired during the period. It was
connected to the National Grid in March 2016 and has received
ROC accreditation of 1.3ROCs/MWh. The Company acquired the
economic benefit of all project cash flows since 1 January
2017. Sandridge was acquired under a bilateral agreement from
Goldbeck, a developer with which the Investment Manager has
worked on previous assets, allowing the Company to gain access
to high quality projects at attractive valuations.
WALLY CORNER
In July 2017, the Company acquired Wally Corner, a 1.2 ROC
5MW operational project in Berinsfield, South Oxfordshire. Wally
Corner was purchased from a counterparty with which the
Investment Manager has worked before, resulting in a very
efficient transaction process for the Company.
AUSTRALIA
BANNERTON
In September 2017, the Company announced its first overseas
acquisition; a 48.5% stake in the Bannerton solar farm in
Victoria, Australia. The project will have a total peak
capacity of 110MW once fully operational and is expected to
connect to the grid in July 2018.
Bannerton benefits from a 10-year contract with the Victorian
Government for the sale of c.36% of the project's Large-scale
Generation Certificates ("LGCs"), having won a tender to supply
clean power to the Melbourne tram network. It also benefits
from a 17-year fixed-price PPA with Alinta Energy, an
Australian utility. The contract with Alinta covers 60% of the
electricity expected to be generated during the term of the
contract. The remaining electricity and LGCs generated will be
sold at prevailing market prices.
Bannerton was acquired from a joint venture between Syncline
Energy Pty Limited and Foresight Solar Australia (UK) Limited
(a solar developer which is a subsidiary of Foresight Group
Holdings Limited) for an initial consideration of A$5.5 million.
The Company's total equity investment will be c. A$40 million
including the expected construction costs. The initial
consideration was funded through the Company's existing RCF
provided by Santander Global Corporate Banking. Bannerton also
benefits from an Australian Dollar denominated debt facility of
c.A$98 million, provided by the CEFC. The project's co-investors
are KDB Infrastructure Asset Management Co. Ltd on behalf of
Global Infrastructure Fund 3 and Hanwha Energy Corporation
Singapore Pte. Ltd, a subsidiary of Hanwha Energy Corporation,
with no investor owning more than 48.5% in the project. The
co-investors were selected based on their long-term investment
objectives in the Australian market. Foresight Group will act
as asset manager for the project.
Bannerton is currently on track both in terms of budget and
construction milestones. The Investment Manager will continue to
work closely with the EPC contractor to manage the various
construction phases and ensure that all connection dates are
achieved on time. Bannerton, and the other three Australian
projects described below, will use a single axis tracking
technology which ensures that the modules track the sun across
the sky. This technology is expected to provide an increased
energy production of up to 30% versus the fixed ground mounted
solar solutions that are typically built in the UK.
LONGREACH
In October 2017, the Company entered into binding commitments with
Canadian Solar Inc, a global solar developer and panel manufacturer, to
acquire interests in three construction stage assets in Queensland,
Australia. The Company's equity investment in these assets will amount
to a total of c.A$74 million (approximately GBP43m*)([1] #_ftn1)
including expected construction costs.
(*assuming AUD/GBP exchange rate of 0.58 as at 31 December
2017)
The Company has acquired a 49% interest in Longreach Solar
Farm, which will have a total installed capacity of 17MW once
operational. Canadian Solar Inc will own the remaining 51%
interest in this project. The project has entered into a
20-year contracts-for-difference agreement with the Queensland
Government for both power and Large-scale Generation
Certificates. The Investment Manager believes this significantly
de-risks the project given the high positive credit rating of
the counterparty (Moody's Aa1).
Longreach received grant funding from the Australian Renewable
Energy Agency ("ARENA"), an independent agency of the Federal
Government established in 2012 with the objective of increasing
the supply and competitiveness of Australian renewable energy
sources. An Australian Dollar denominated debt facility of
c.A$27 million, with a five year term, has been provided by
joint senior lenders, CEFC and Bank of Tokyo-Mitsubishi UFJ
("MUFG").
Construction of Longreach is well progressed and the project is
on target to connect to the grid in March 2018.
OAKEY 1
A 49% stake in Oakey 1 Solar Farm, which will have a total
installed capacity of 30MW once operational, has also been
acquired. Canadian Solar Inc will own the remaining 51%
interest in this project. It benefits from the same Queensland
Government contracts as Longreach, as well as ARENA funding and
a c.A$38 million facility from the same lenders, on the same
terms.
Progress at Oakey 1 is currently on track, meeting construction
milestones, and the site is expected to connect to the grid
in September 2018.
OAKEY 2
The Company has acquired a 100% interest in Oakey 2 Solar
Farm. The development's 70MW installed capacity once operational
makes it the Company's largest Australian asset and the
Company's second largest asset overall. Oakey 2 will benefit
from a c.A$55 million senior debt facility from CEFC, with a
four-and-a-half-year term to align with the maturity dates of
Longreach and Oakey 1 financing terms.
The Investment Manager is currently reviewing the PPA options
for Oakey 2 and expects to enter an agreement in advance of
the target commissioning date in October 2018. Although still
at a relatively early stage, Oakey 2 is currently on track to
achieve this.
UK REGULATORY AND MARKET CHANGES
The key development of 2017 was the closure of the UK
Renewable Obligation scheme on 31 March 2017, which brought to
an end a period of significant growth for the UK's solar
market. However, with total installed capacity of over 12GW,
the UK has a large and increasingly mature solar sector that
is expected to continue to provide potential acquisition targets,
albeit on an increasingly opportunistic basis.
During the second half of the year, there was increased
discussion about the future funding of the lowest cost
renewables, onshore wind and solar. Government announcements
coinciding with the results of the Contracts for Difference
("CfD") auction in September confirmed the expectation that
solar and onshore wind will continue to be excluded from Pot
1 (established technologies) during the third auction round
expected in Spring 2019. In October, the release of the Clean
Growth Strategy (the Government's plan to grow the UK's
national income while cutting greenhouse gas emissions) also
excluded any mention of future support for onshore wind and
ground mounted solar.
There has been growing support to reconsider the use of
subsidies, including proposals for technology neutral auctions
from diverse groups including backbench Conservative MPs, the
Committee for Climate Change, Energy UK, Dieter Helm's cost of
energy review and a variety of NGOs and energy trade
associations. Meanwhile, a report from the Committee on Climate
Change in June 2017 highlighted that the UK is significantly
behind its 2030 targets to reduce carbon emissions and could
fail to meet the legally binding commitments set out in the
UK's Fifth Carbon Budget. Despite this, the Investment Manager
believes there will limited Governmental support for new ground
mounted solar projects for the foreseeable future.
In December 2017, Ofgem published a consultation which is
broadly supportive of the co-location of battery storage
facilities with ROC accredited renewable energy installations,
lifting concerns that this could invalidate existing ROC
accreditations. The Investment Manager will continue to monitor
the progress of these market developments and its potential
to accelerate the transition to a decentralised energy system.
On 20 October 2017, the Department for Business, Energy &
Industrial Strategy ("BEIS") published figures for the ROCs that
have been submitted for Compliance Period 15 (2016 - 2017).
The report showed an undersupply of ROCs presented by
electricity utility companies. This is believed to be due to a
combination of low wind speeds, biomass plant outages and a
decision to only submit ROCs into the subsequent compliance
period. Based upon the expected buy-out payments, the recycle
value will be GBP4.89/ROC, which is the highest value seen in
six years and materially higher than the preceding three years,
which have ranged from GBP0/ROC to GBP0.70/ROC. As a result,
the Company has received GBP2 million additional revenue from
the ROC recycle system this year. The Investment Manager's
continues to assume 10% ROC Recycle in their model for the
foreseeable future.
There remains political uncertainty following the UK's vote to
withdraw from the European Union and the UK snap general
election held on 8 June 2017. Although formal Brexit
negotiations started on 19 June 2017, it remains unclear to
what extent the UK power market will continue to be integrated
with the wider EU power market and therefore what the impact
on wholesale power prices will be. The most noticeable impact
of Brexit for the Company so far has been sterling's
depreciation. This has had the effect of increasing UK power
prices as the cost of natural gas and electricity that is
imported from Europe has risen. The Company will continue to
carefully monitor any potential political effects from Brexit,
however current indications suggest that the UK Government
remains committed to a carbon reduction agenda.
PIPELINE AND OUTLOOK
The closure of the Renewable Obligation scheme in March 2017
led to a significant decrease in primary market activity and
increased competition in the secondary market, resulting in an
increase in pricing for operational, ROC accredited assets.
Despite the increased level of competition, the secondary solar
market in the UK remains active with a number of transactions
disclosed to the market in the past 12 months. The Investment
Manager continues to target value accretive opportunities and is
actively reviewing a pipeline of more than 310MW of potential
investments in the UK and other jurisdictions.
As increasing interest in direct ownership of UK solar assets
from institutional investors impacts pricing, the Investment
Manager will maintain a careful approach to new acquisitions.
While the Investment Manager will continue to predominantly
focus on operational assets available in the UK secondary
market, it will also continue exploring investment opportunities
in other international markets including Western European
countries and the US. Investment opportunities outside the UK
are expected to deliver value-accretive returns on a
risk-adjusted basis while further diversify the Company's
portfolio, in line with the Company's investment policy.
CURRENT UK POWER PRICES
During the year, 63% of the Company's operational portfolio
revenue came from the sale of ROCs. These revenues are
directly and explicitly linked to inflation for 20 years from
the accreditation date under the ROC regime and subject to
Retail Price Index ("RPI") inflationary increases applied by
Ofgem in April of each year.
The remaining 37% of revenues derives from electricity sales,
which are subject to power price movements, and embedded
benefits.
Power prices during 2017 experienced periods of increased
volatility with relatively high power prices in early Q1 and
late Q4 but lower prices achieved during the summer. The
average power price in December 2017 was GBP53.24 per MWh,
compared to GBP41.05 per MWh during the summer period inclusive
of April to September. The average power price achieved across
the portfolio during 2017 was GBP41.99 per MWh. (2016: GBP37.70
per MWh)
During 2017 European power prices were driven by ongoing
concerns around the future of France's nuclear plants. Wholesale
gas prices, a key driver of UK electricity prices, climbed
higher after the UK's main gas storage supply, Centrica's Rough
facility, closed after decades of use. This followed a summer
period when UK gas prices were generally lower than prices in
Western Europe. In December 2017, gas prices across Europe
jumped after a double blow to key infrastructure following an
explosion at a natural gas hub in Baumgarten in Austria and
the closure of a pipeline in the North Sea that feeds the UK
market. This, combined with December's cold snap across the
Continent, caused major concerns around the gas supply,
therefore pushing energy prices higher.
UK POWER PRICE FORECAST
The Investment Manager uses forward looking power price
assumptions to assess the likely future income of the portfolio
assets for valuation purposes. The Company's assumptions are
formed from a blended average of the forecasts provided by
third party consultants and are updated on a quarterly basis.
During the year to 31 December 2017, there was a downward
movement of c. 9.4% in the medium to long term power price
forecast. This was mainly driven by lower anticipated oil and
gas prices.
The Investment Manager's forecast for future power prices
remains 34.3% below the level at IPO. However, the Company's
forecasts continue to assume an increase in power prices in
real terms over the medium to long-term of 1.3% per annum (31
December 2016: 1.7%).
Where the assumed asset life extends beyond 2040, the
Investment Manager has assumed no real growth in forecast power
prices.
UK POWER PURCHASE AGREEMENTS
PPAs are entered into between each individual solar power asset
and offtakers in the UK electricity supply market. Under the
PPAs, each asset will sell the entirety of the generated
electricity and ROCs to the designated offtaker. The Company's
PPA strategy seeks to optimise revenues from the power
generated, while keeping the flexibility to manage the portfolio
appropriately.
The Company has taken advantage of current attractive forward
electricity prices and increased the proportion of fixed price
arrangements from 7% (30 June 2017) to 29% of the electricity
sales of the UK portfolio as of 31 December 2017. This
arrangement is for the period from 1 December 2017 to 31
March 2019 at a weighted-average price of GBP43.26 /MWh. This
provides greater visibility over future cash flows and limits
potential price volatilities in the short term.
The Investment Manager is regularly reassessing conditions in
the electricity market and updating its view on likely future
movements. The Company retains the option to fix the PPAs of
its portfolio assets at any time, but the Investment Manager
is satisfied that the current proportion of fixed price
arrangements offers an appropriate level of price certainty.
FUNDRAISING
On 3 March 2017, the Company announced a Placing Programme
relating to the issue of up to 250 million new Ordinary
Shares over a 12-month period. Since the start of this Placing
Programme, the Company has issued 109 million new Ordinary
Shares.
Date Placing Shares Issued (million) Funds
Price Raised
31 December 2016 - 341.0 Shares GBP345.7million
(cumulative)
29 March 2017 107.8 pence 72.8 New Shares GBP78.5 million
8 November 2017 108.0 pence 36.2 New Shares GBP39.0 million
31 December 2017 - 449.9 Shares GBP463.2 million
(cumulative)
THIRD PARTY DEBT ARRANGEMENTS
The Company applies a combination of debt Instruments to
optimise the Capital Structure of Its Investments, which include
Long Term Debt facilities and short term RCFs. The Company has
the flexibility to introduce debt at SPV level and at Holdco
level. To date, all the sterling denominated third party debt
facilities have been entered at Holdco level, with the
Australian portfolio benefiting from third party debt facilities
at project level.
LONG TERM FACILITIES
The current long-term facilities at a subsidiary level are
shown in the table below. Macquarie Infrastructure Debt
Investment Solutions ("MIDIS") and Abbey National Treasury
Services ("Santander") are the providers of these loans.
Long- Term
Lender Tranche Size Maturity Dates Applicable Rate
Fixed-rate,
fully
MIDIS amortising GBP63m March 2034 3.78%
MIDIS Inflation GBP63m March 2034 RPI index +
linked, fully 1.08%
amortising
Santander Term Loan, fully GBP34m March 2024 LIBOR + 1.70%
amortising
As at 31 December 2017, GBP152.4 million of the initial total
facility amount of GBP160.0 million was outstanding.
The Term Loan tranche is priced over the London Interbank
Offered Rate ("LIBOR") and benefits from an interest rate swap
hedging 80% of the outstanding debt during the term of the
loan. At 31 December 2017, the average cost of long-term debt
was 2.54% per annum (2016: 2.5%).
The terms under which the debt has been secured do not limit
the Company's flexibility and have not caused it to compromise
on any commercial terms that might be potentially
disadvantageous. The Company is fully able to maintain its
strategy of retaining exposure to UK power prices through PPAs
that do not require mechanisms such as fixed prices or price
floors.
REVOLVING CREDIT FACILITIES
The purpose of the short term credit facilities is to provide
additional financial flexibility for future pipeline
opportunities. Historically, new equity has always been raised
against a defined pipeline of assets or to refinance amounts
drawn on the Fund's short-term Revolving Credit Facility
("RCF"). This has avoided blind pool risk and cash drag on
investor funds.
On 23 February 2017, a subsidiary of the Company entered into
a new GBP55 million, short-term revolving credit facility with
Santander at a favourable rate of LIBOR + 2.00%.
Below is a summary of the Revolving Credit Facilities to date:
Short -Term Lenders Size Maturity Dates Applicable rate
Santander GBP40m March 2019 LIBOR + 2.05%
Santander GBP55m February 2020 LIBOR + 2.00%
The applicable rate of 2.00% represents a decrease of five
basis points against the average applicable rate of the
revolving facilities refinanced in April 2016.
As of 31 December 2017, GBP47.9 million of the total RCF was
outstanding. The available balance of GBP47.1 million will be
used to fund the Company's Australian assets that are currently
under construction and other future opportunities that the
Company may identify.
At 31 December 2017 the all-in annualised cost of the
short-term facilities was 1.51%. The Investment Manager expects
to refinance the remaining balance either through future equity
raisings or other long-term refinancing arrangement.
TERM FACILITIES FOR AUSTRALIAN ASSETS
The Australian Assets will benefit from Australian dollar
denominated senior debt facilities at project level provided by
the CEFC and the Mitsubishi UFJ Financial Group ("MUFG"). The
facilities will be utilised to fund construction costs and will
convert to a term loan after commissioning. This facility
structure will allow the Company to minimise the equity
injection during the construction. In addition, as project level
debt is denominated in Australian dollars, this will create a
further natural hedge against foreign exchange volatility. The
commercial terms of the facilities are set out below:
Applicable
Maturity Base Rate
Project Lender Size dates (fixed) Applicable margin
c.A$98 Construction: 2.55%; Operations: 2.30% up to year
Bannerton CEFC million Jun-27 2.95% 5, 2.80% thereafter
c.A$13.5
Longreach CEFC million Mar-22 2.57% Construction: 1.55%; Operations: 1.40%
c.A$13.5
Longreach MUFG million Mar-22 3.28%* Construction: 1.55%; Operations: 1.40%
c.A$19
Oakey 1 CEFC million Mar-22 2.58% Construction: 1.55%; Operations: 1.40%
c.A$19
Oakey 1 MUFG million Mar-22 3.14%* Construction: 1.55%; Operations: 1.40%
c.A$55
Oakey 2 CEFC million Oct-22 2.48% 2.25%
* Interest rate swap for 100% of the outstanding debt
during the initial five years, 75% from years six
to ten and 50% thereafter
The Bannerton investment vehicle entered a nine-year, fixed-rate,
debt facility with the CEFC at the time of acquisition. The
facility will have no exposure to changes to the Bank Bill
Swap Bid Rate ("BBSY"), the benchmark Interest rate for
Australian denominated loans, as the BBSY was fixed at
financial close for the term of the facility.
The Longreach and Oakey 1 solar parks have separate debt
facilities at financial close from the CEFC and MUFG, in equal
tranches. The CEFC facilities have a five-year term and will
also have no exposure to BBSY. The MUFG facilities, with an
identical tenor of five years, will be linked to BBSY although
interest rate swaps, on a decreasing nominal amount, will be
in place for a notional tenor of 20 years.
Oakey 2 has entered a five-year facility with the CEFC at a
fixed margin of 2.25%. The facility was entered before the
project vehicle entered a PPA contract which resulted in higher
margins for this facility. This decision was taken to avoid
construction delays.
The Investment Manager foresees opportunities to refinance the
Australian portfolio either through individual, project-by-project
facilities or through a portfolio facility. Given the increased
interest in the Australian renewable sector from local and
international lenders, the Investment Manager expects
opportunities to refinance with longer term debt facilities in
the medium term.
Gearing levels supported by solar projects in Australia also
depend on the PPA strategy, with a maximum gearing of 85%
achievable for projects with PPAs with a 20 year tenor. The
average gearing for the Australian portfolio, once the projects
are connected to the grid, is expected to be approximately
55%. As at 31 December 2017, no third party debt has been
drawn at project level in Australia.
GEARING POSITION
As at 31 December 2017, the total outstanding long-term debt
was GBP152.4 million, representing 22% of GAV of the Company
and Subsidiaries (2016: GBP158.3 million).
As at 31 December 2017, the total outstanding debt including
RCFs was GBP200.3 million, representing 29% of GAV (2016:
GBP198.3 million or 36% of GAV.)
The gearing as a percentage of GAV does not include third
party debt facilities entered for the Australian portfolio as
no amounts were drawn as of 31 December 2017.
DIVIDS
Since the IPO, the Company has met all target dividends. The
Company is targeting a full year dividend for the year ending
31 December 2018 of 6.58 pence.
DIVID TIMETABLE FOR THE YEAR 1 JANUARY 2018 TO 31 DECEMBER
2017
Dividend Amount Status Payment Date
Interim 1 1.58 pence Paid 25 August 2017
Interim 2 1.58 pence Paid 24 November 2017
Interim 3 1.58 pence Approved 23 February 2018
Interim 4 1.58 pence Approved 25 May 2018
TOTAL 6.32 pence
The fourth quarterly dividend of 1.58 pence was approved by
the Board on 21 February 2018 and will be paid on 25 May
2018.
Dividend Timetable 2017 - Interim 4
Ex-dividend Date 10 May 2018
Record Date 11 May 2018
Payment Date 25 May 2018
DIVID COVER
Total dividends of GBP20.1 million were paid during the year
ended 31 December 2017. Against the relevant net cash flows of
the Company and underlying investments, these dividends were
covered 1.52 times. Only three dividends were paid during the
year to December 2017 due to a change in the dividend
timetable. Including the fourth dividend related to the period,
this would have equated to a dividend cover of 1.12 times.
FOREIGN EXCHANGE
As a result of its Australian acquisitions, the Company will
be exposed to foreign exchange movements in respect of these
investments. To reduce the impact of potential currency
fluctuations and to minimise the volatility of equity returns
and cash flow distributions, the Company will implement a
hedging strategy by entering forward contracts for up to two
years in an amount equivalent to c.75% of its distributable
foreign currency cash flows at project level. Due to the
predictable nature of solar irradiation in Australia, and the
known dividend payment dates, the Investment Manager believes
this hedging solution will protect the cash yields from the
Australian projects.
The cost of the equity investments will not benefit from
foreign exchange hedging, considering the long-term investment
strategy of the Company.
The Company will review the foreign exchange strategy on a
semi-annual basis with the objective of limiting the short-term
volatility in sterling distributable cash flows caused by
foreign exchange fluctuations and of optimising the costs of
the hedging instruments.
ONGOING CHARGES
The ongoing charges ratio for the year to 31 December 2017 is
1.18% (2016: 1.20%). This has been calculated using methodology
as recommended by the Association of Investment Companies
("AIC"). Foresight Group LLP charges asset management fees
directly to the assets and these are not included within the
ongoing charge ratio.
INVESTMENT PERFORMANCE
The NAV per share for the Company as at 31 December 2017
increased to 107.0 pence compared to 102.9 pence as at 31
December 2016.
GROSS ASSET VALUE ("GAV")
The GAV of the Company is GBP482.7 million as at 31 December
2017. The reconciliation below shows the GAV as it would be
on a consolidated basis when all third party debt at the
intermediate holding level is included. There is no external
debt at asset level for the UK assets.
GAV of Company GBP482.7m
Less: Valuation of Investment (GBP408.5m)
Add: Valuation of underlying solar portfolio GBP606.4m
Less: Other net assets of subsidiaries GBP0.2m
GAV of Company and Subsidiaries GBP680.8m
The GAV does not include third party debt facilities entered
for the Australian portfolio as no amounts were drawn as of
31 December 2017.
MOVEMENTS IN NAV
A breakdown in the movement of the NAV of the Group during
the year to 31 December 2017 is shown in the table below.
NAV NAV per share
NAV as at 31 Dec-16 350,690,671 102.9p
Dividend paid (20,061,231) (4.9)p
Equity raised 115,287,272 0.2p
Interest earned 32,898,879* 8.1p
Management fee (4,467,273)* (1.1)p
Finance costs (6,650,260)* (1.6)p
Other cost (incl. Corporation Tax) (4,687,140)* (1.2)p
Methodology change 7,960,918** 2.0p
Tax (1,114,195)** (0.3)p
Inflation (998,142)** (0.2)p
Acquisitions 10,717,322** 2.6p
Discount rate 23,841,610** 5.9p
Valuation date (842,468)** (0.2)p
Performance ratio (561,960)** (0.1)p
Power curve (31,649,022)** (7.8)p
Lease extensions 11,267,650** 2.8p
Other movements (283,884)** (0.1)p
NAV as at 31 Dec-17 481,348,747** 107.0p
* Of Company and its subsidiaries
** Movement in the valuation of underlying solar assets
VALUATION OF THE PORTFOLIO
The Investment Manager is responsible for providing fair market
valuations of the Company's underlying assets to the Board of
Directors. The Directors review and approve these valuations
following appropriate challenge and examination. Valuations are
undertaken quarterly. A broad range of assumptions are used in
the valuation models. These assumptions are based on long-term
forecasts and are not affected by short-term fluctuations, be
it economic or technical.
It is the policy of the Investment Manager to value with
reference to Discounted Cash Flows ("DCF") at the later of
commissioning or completion. This is partly due to the long
periods between agreeing an acquisition price and financial
completion of the acquisition. Quite often this delay reflects
construction. Revenues accrued do not form part of the DCF
calculation when making a fair and proper valuation.
The current portfolio consists of non-market traded investments
and valuations are based on a DCF methodology, or held at
cost where the assets have not yet reached commissioning. This
methodology adheres to both IAS 39 and IFRS 13 accounting
standards as well as the International Private Equity and
Venture Capital ("IPEV") Valuation Guidelines.
The Company's Directors review the operating and financial
assumptions, including the discount rates, used in the valuation
of the Company's portfolio and approve them based on the
recommendation of the Investment Manager.
DIVID PAID
The Company paid dividends of GBP20.1 million during the year.
EQUITY RAISED
Two Share Placings took place, raising net proceeds of GBP115.3
million from new and existing investors.
INTEREST EARNED
The Company and its subsidiaries accrued GBP32.9 million of
investment income during the reporting period. This income
represents the majority of distributions from the underlying
assets.
COSTS
Total costs of GBP15.8 million, which include corporation tax,
management fees, finance and other costs, were incurred by the
Company and its subsidiaries on a consolidated basis during the
year.
METHODOLOGY CHANGE
Since IPO, the Company has used an equity discount rate
approach in its valuation methodology. This was implemented to
reflect the initial capital structure, comprising equity and
RCFs at fund level. Under this methodology, the NAV was
calculated by discounting unlevered project level cash flows
with an equity discount rate, deducting outstanding external
debt at holding level at face value, and making balance sheet
adjustments (dividends paid in the period, finance and
management fee deductions) as necessary.
The Company is now adopting a levered equity discount rate for
those assets which utilise long term debt facilities and
deducting the outstanding long term external debt at holding
level at fair value (determined by discounting the debt cash
flows with the levered discount rate), with no changes to the
balance sheet adjustments. For those assets that are funded by
equity or RCF proceeds, the Company will continue to adopt the
unlevered equity discount rate.
In the opinion of the Investment Manager this change in
methodology provides a more precise valuation of the Company's
portfolio as it takes into consideration the gearing position
of the portfolio and the respective tax shield created by the
introduction of long term debt into the capital structure,
unaccounted for in the previous methodology.
A discount rate premium of 0.75% against the equivalent
unlevered equity discount rate has been applied, based on the
relatively conservative long-term gearing target of the Company
and the cross-collateralisation benefits of the assets included
in the existing long-term debt facilities provided by MIDIS and
Santander.
This new methodology applies to the first 16 acquisitions owned
by FS Holdco 1, the borrower of the long-term debt facilities
provided by MIDIS and Santander, which represent c.73% of the
UK portfolio.
A levered equity discount rate methodology will be used
whenever long-term debt is in place, including the Australian
assets currently under construction.
TAX
The impact of Base Erosion and Profit Shifting ("BEPS") has
been incorporated into the 31 December 2017 NAV. The position
was not significantly different to the World-Wide Debt Cap
(that BEPS replaced) and the impact on the NAV has been
GBP1.1 million. The impact of the new BEPS legislation is, to
a certain extent, reduced by the Company's new methodology
making more efficient use of group losses across the portfolio.
INFLATION
At 30 June 2016 the Investment Manager increased its
medium/long-term inflation assumption from 2.50% to 2.75%. This
remains unchanged as at 31 December 2017. This small movement
in NAV is a result of rebasing the Investment Manager's near
term assumptions.
ACQUISITIONS
During the period the Company made three acquisitions of assets
located in the UK, resulting in a NAV uplift of GBP10.7
million which represents the difference between the acquisition
prices paid and the current valuations. The Australian
acquisitions are valued at cost and will continue to be held
at cost until connection but were updated to reflect the
exchange rate at the year end.
DISCOUNT RATE
The Company has reduced its unlevered equity discount rate to
7.00%.
During the year the Company revised its equity discount rate
starting from 7.50% at 31 December 2016 to 7.25% as at 30
June 2017 and to 7.00% as at 31 December 2017. This reduction
reflects the increase in the market value of the assets. This
reduction to 7% is further supported by the terms of the
increasing number of secondary market transactions announced in
the UK during the course of 2017 by new entrants to the
market, predominantly institutional investors, with more
competitive costs of capital.
The Investment Manager regularly reviews the discount rate to
ensure it remains in line with any changes to the risk
profile of the Company.
VALUATION DATE
This movement represents the impact of moving from one
valuation date to another. Over the life of an asset this
movement will reduce the valuation to nil. Short term increases
arise from moving towards higher cash yields (and therefore
discounting them less).
PERFORMANCE RATIO ("PR")
The performance ratio assumptions in the valuation models are
initially linked to contractually guaranteed performance and the
initial technical due diligence findings at the time of
acquisition. The long-term assumptions are adjusted on an
ongoing basis as more data becomes available, recognising the
actual performance ratios experienced across the portfolio on an
asset by asset basis. This approach is applied on a quarterly
basis to ensure valuation assumptions better reflect the actual
performance of the sites. The movements in assumed performance
ratios are implemented conservatively at a rate that ensures
short term fluctuations do not inflate performance potential.
Assumed performance ratios can move up as well as down.
POWER CURVE
The Investment Manager uses forward looking power price
assumptions to assess the likely future income of the portfolio
assets for valuation purposes. The Company's assumptions are
formed from a blended average of the forecasts provided by
third party consultants and are updated on a quarterly basis.
During the year from 1 January 2017 to 31 December 2017 there
was a downward movement of c. 9.4% in the medium to long
term power price forecast. The Company's forecasts continue to
assume an increase in power prices in real terms over the
medium to long-term of 1.3% per annum (31 December 2016:
1.7%).
LEASE EXTENSIONS
The previous DCF methodology used to value the assets assumed
a 25-year asset life, with no residual value at the end of
this period. This assumption was based on the market standard
lease terms for the properties on which the Company's solar
assets are located and planning consent periods initially
granted by local planning offices.
The Asset Manager has secured lease and planning rights to
extend the useful economic life of eight assets in the
portfolio by up to an extra ten years beyond this 25-year
period. These extensions have now been included in the DCF
model.
The cash flows from operations that fall after the initial
25-year period have been discounted at 9.0%, reflecting the
merchant risk of the expected cash flows beyond the initial
25-year period.
The average extension to useful economic life across the eight
assets is 8.2 years with additional costs incorporated into the
extended lives. The weighted life of the UK portfolio is 28.7
years.
For illustration purposes, in addition to incorporating the
extensions mentioned above, if the remaining UK assets were to
be valued on a 35-year basis from connection, the Company's
NAV would increase by a further 2.8 pence. The table below
illustrates the impact on NAV of extended asset lives.
NAV (recognising extended life where lease and planning Alternate NAV (recognising extended life of all other
already available; 8 assets) assets)
107.0 pence 109.8 pence
OTHER MOVEMENTS
This includes other factors behind the valuation movement such
as revisions in underlying assumptions regarding operational
efficiencies, such as insurance.
VALUATION SENSITIVITIES
Where possible, assumptions are based on observable market and
technical data. In many cases, such as the forward power
prices, independent advisors are used to provide reliable and
evidenced information enabling the Investment Manager to adopt a
prudent approach. We set out the inputs we have ascertained
would have a material effect upon the NAV in note 16 of the
financial statements. All sensitivities are calculated
independently of each other.
Australian Solar Market
AUSTRALIAN MARKET OVERVIEW
Renewable energy output in Australia has grown substantially in
the last decade, increasing from only 7% of the national power
mix to 19% by July 2017, compared to over 30% in the UK. In
particular, momentum has been growing in the solar sector
recently, with a record 3.5GW of new large-scale capacity
reaching financial close in 2017. The country has historically
relied on its coal and gas resources for power and still uses
more electricity from fossil fuel than any other source.
However, with a high irradiation profile (average levels are
approximately twice that of the UK and production seasonality
is much lower), regulatory support and falling technology prices,
significant further growth is anticipated in the coming years
with over 4GW of additional solar plants expected to be
installed by 2020.
RENEWABLE ENERGY POLICY
Since 2001, regulatory support for solar projects in Australia
has been available under the Federal Government's Renewable
Energy Target ("RET"). The aim of the RET is to source 33,000
GWh of electricity from renewable sources by 2020, representing
nearly a quarter of the country's power requirements. There are
two main components:
-- the Small-scale Renewable Energy Scheme ("SRES"), which
encourages the installation of small-scale renewable energy
systems such as rooftop solar
https://www.cleanenergycouncil.org.au/technologies/solar-pv.html ,
solar water heaters
https://www.cleanenergycouncil.org.au/technologies/solar-water-heating.html
, heat pumps
https://www.cleanenergycouncil.org.au/technologies/solar-water-heating.html
and small-scale wind and hydro systems, and
-- the Large-scale Renewable Energy Target ("LRET"), which creates
a financial incentive for larger renewable energy power stations.
Since 2012, two Government-backed entities, the Australian
Renewable Energy Agency ("ARENA") and the Clean Energy Finance
Corporation
http://www.inspiratia.com/datalive/companies/Clean-Energy-Finance-Corporation/
("CEFC") have supported Australia's transition to a low-emissions
economy, providing debt and equity financing for projects.
Australia is over halfway to its 2020 target, with sufficient
projects in the pipeline to meet the target provided Financial
Close is achieved in all cases over the next 12-18 months.
The State governments of Queensland, Victoria, South Australia
and Australian Capital Territory have set ambitious renewable
energy targets and established reverse auction tenders that are
expected to underpin greenfield development of energy sources
such as solar, wind, battery storage, pumped hydro and energy
from waste. The Victorian Government has renewable energy
production targets of 25% by 2020 and 40% by 2025. It has
also recently established a reverse auction mechanism to build
650MW worth of new projects, as well launching battery storage
projects. Under this scheme Bannerton, the Company's first
significant Australian acquisition, benefits from a 10-year fixed
price contract with the Victorian Government for the sale of
LGCs, having won a tender against considerable competition to
supply clean power to the Melbourne tram network.
In tandem with increasing renewable generation capacity, energy
storage is also likely to play a key role in the future of
the Australian power market. In November 2017, battery pioneer
Tesla completed the construction of the world's largest
lithium-ion storage facility, in South Australia, connected to
the 309MW Hornsdale wind farm. Queensland and Victoria are
launching similar initiatives which will enhance network
reliability and smooth the integration of renewables into the
grid.
LARGE-SCALE GENERATION CERTIFICATES
Under the LRET, renewable generators receive a Large-Scale
Generation Certificate ("LGC") for every 1 MWh of power
generated from renewable sources, which is matched by an
obligation imposed on energy retailers and large electricity
users to source a minimum number of renewable energy
certificates. Under current legislation, this scheme will expire
in 2030, independently of the date projects connect to the
grid.
These certificates can be sold and transferred at a negotiated
price, usually to liable entities such as electricity retailers,
which are required to surrender a set number of certificates
to the Government's Clean Energy Regulator each year. The
revenue earned by generators from the sale of LGCs is
additional to that received from the sale of electricity.
LGC pricing is subject to fluctuations, determined by supply
and demand. Unlike ROCs, the price of which is revised
annually by Ofgem, LGCs do not have any inflation linkage.
There is a price cap set at A$93, but no floor. However,
prices can be fixed through long term contracts. Often this is
done on a bundled PPA basis, specifically electricity plus
certificates are delivered at an agreed combined price for a
fixed period. Each of Bannerton, Longreach and Oakey 1 have
fixed price contracts in place for varying proportions of the
proportions of their production with a mix of power only, LGC
only and bundled contracts.
LGC revenues are expected to represent 23% of the Company's
Australian revenues, until 2030, with the remaining 77% arising
from the sale of the electricity generated. This compares to a
60/40 split of ROCs and electricity in the UK.
The spot price of LGCs has recently increased, rising to
c.A$85 by the end of 2017. The shortage of sizeable greenfield
renewable energy projects being commissioned (and therefore
delivering LGCs to the market) is expected to result in
increased LGC spot prices into 2018. However, the increasing
pipeline of utility-scale solar projects is expected to result
in reduced prices from 2019, and especially from 2020, by when
the Company's third-party forecasters are predicting a 25%
decrease as these projects complete.
Against a backdrop of rising power prices and shortages of
base load electricity, in early October 2017, the Australian
Government made an announcement regarding the future of
Australia's energy policy, stating its decision to implement a
two-part National Energy Guarantee ("NEG"). The NEG requires
energy retailers and large consumers to deliver reliable,
affordable, lower emissions energy. It covers:
-- A reliability guarantee set to deliver the appropriate level of
energy to meet the needs of each state; and
-- An emissions guarantee set at a level determined by the
Australian Government and enforced by the Australian Energy
Regulator.
The NEG will be implemented by the independent Energy Security
Board, however it will require the approval of all states
operating in the Australia's National Electricity Market ("NEM");
the wholesale electricity market covering eastern and southern
Australia, namely Queensland, New South Wales, Victoria, South
Australia and Tasmania.) As most states are currently controlled
by the opposition Labour Party there may be push-back on
aspects of the proposal.
The NEG does not include any proposed changes to the RET,
therefore the current projects will continue to be able to
create large-scale generation certificates ("LGCs") until the end
of 2030. However, little detailed information has been provided
on the proposed guarantees, and it is currently difficult to
fully understand or quantify the impact of the NEG.
The Investment Manager's view is that the increased uncertainty
triggered by the NEG, and the limited information available,
will cause a delay in constructing new energy generation.
ELECTRICITY MARKET
Australia's electricity market is generally considered to be
competitive and prices are mostly unregulated, with gas and
coal costs being the key drivers. Wholesale power prices vary
between States and certain parts of Australia have experienced
volatility during 2017, linked to severe weather events and the
retirement of coal-powered plants. Power prices are typically
higher in the summer months of October to March, in part due
to the use of air conditioning systems.
Currently prices in the NEM are determined every five minutes
and averaged over each half hour period to get a spot price.
Generators bid how much electricity they are willing to provide,
and at what price, for each five minute interval. Renewable
energy generators usually bid in at zero cost to ensure they
are able to export at all times that they are generating, and
are therefore price takers rather than having an active bidding
strategy. The Australian Electricity Market Operator ("AEMO")
accepts the bids starting from the lowest price, until
sufficient supply has been secured to equal demand in that
interval. On 28 November 2017, a rule change was confirmed
reducing the settlement period for electricity spot prices from
30 minutes to five minutes, starting in 2021. This aims to
enable the power system to operate in a more dynamic way.
Wholesale electricity spot and futures prices have continued to
rise, now averaging A$81/MWh by the end of 2017 across all
the Australian states. Elevated electricity prices have changed
the investment proposition for renewables, particularly solar
which has the lowest construction costs, and many projects are
now viable based on electricity revenues alone, without
subsidies. Strong average prices are expected to continue in
the medium term, primarily driven by the progressive withdrawal
of coal-fired power generation capacity, strong wholesale gas
prices, extreme weather trends and growing aggregate demand.
Once operational, the Company will update its power price
forecasts for each asset in Australia on a quarterly basis
using forecasts prepared by independent advisers.
The Company's Australian assets will generate a higher
proportion of their revenues from electricity sales than those
in the UK; 77% of forecast total revenues during the initial
20-year period, compared to c.40% in the UK, with the
subsidies comprising the balance in each case. However, the
Australian portfolio will benefit from a higher proportion of
predictable cash flows as long term, fixed-price Power Purchase
Agreements ("PPAs") are available for up to 20 years. This
compares favourably to the UK where PPAs are generally only
agreed on a three or four-year basis. Three of the Company's
assets have already entered into fixed price contracts for up
to 20 years and it is the Investment Manager's objective to
secure fixed-price offtake contracts for 50% of the Australian
portfolio's electricity generation either through long-term
contracts or short-medium term contracts with frequent renewal,
subject to prevailing market conditions.
Although the Company will continue to focus predominantly in
the UK market, we believe the international investments
represent an attractive opportunity to increase shareholders'
returns with a limited equity exposure to foreign exchange.
The Australian investments which represent c.13% of the total
equity invested to date, offer an opportunity to further
diversify the portfolio in a market where shareholders may
obtain higher returns on a risk-adjusted basis compared to the
UK market. The returns are expected to range between 8.5% and
10% depending on the PPA structure in place.
Asset Manager's Report
PORTFOLIO PERFORMANCE
The Asset Manager is pleased with the significant and sustained
improvement of the portfolio's performance over the course of
the year.
The performance ratio ("PR") of 12 of the 18 sites,
representing 300MW of installed capacity, performed at or above
base case during the year. PR is a function of production
against actual irradiation levels and is the most accurate way
to measure the performance of the Asset Manager.
Significant levels of remedial work and interventions occurred
on the remaining sites with all but one asset meeting the
expectations of the Asset Manager by the end of the year.
Greater detail regarding the sites with specific performance
issues can be found below.
Pitworthy (representing 15.6MW) is now the only asset that is
not meeting the technical performance expectations of the Asset
Manager and work on this solar farm will continue into the
spring of 2018.
Although the underperformance in the first half of the year
was disappointing, the portfolio has shown a notable improvement
in the second half of 2017. The weighted average PR of the
portfolio during the second half of the year was 4.1% higher
than the first half.
The Liquidated Damages ("LD") received to date are substantially
more than the revenue lost over the last 18 months due to
ongoing works and underperformance. LD payments are calculated
with reference to a 25 year asset life and are received after
the end of the two year EPC guarantee period. To date the
Company has received financial compensation from EPCs of c.
GBP13 million of which GBP5.9 million represents LDs. LDs have
been accrued across seven sites and GBP1.3 million has been
released from the SPVs to the Company during 2017 and is
included in the NAV calculation. The remaining funds will be
released once the Asset Manager is confident there is no long
term impact on performance. In all cases other than Pitworthy,
where further work is necessary before a view can be taken on
future production, the Asset Manager is confident that ongoing
production levels will be robust, and at least in line with
the investment case of the assets. Amounts received in addition
to LDs have been spent rectifying EPC defects identified as
part of ongoing operations. No additional costs other than
amounts received from EPC protections have been spent in
rectifying any defects.
SHOTWICK (72MW)
As disclosed in the 30 June 2017 Interim Report, a transformer
failed at Shotwick on 16 March 2017 preventing the site from
generating power for a 28 day period. In line with the Asset
Manager's strategy of ensuring essential replacements are readily
available, the requirement for a spare transformer had been
identified prior to acquisition and the equipment was already
on order at the time of the failure. Over the last six
months no further issues have occurred at Shotwick. Further
spare transformers have been procured and are available for use
if any such incident occurs again in the future. The Company
received c. GBP0.7 million in compensation following the outage,
which covers the losses.
CASTLE EATON (18MW), HIGH PENN (10MW), HIGHFIELDS (12MW) AND
PITWORTHY(16MW)
All four sites acquired from SunEdison are expected to return
to full availability and performance very early in 2018 as a
result of the extensive remedial works carried out by the O&M
contractor Brighter Green Engineering ("BGE").
An extensive programme of work, detailed below, is materially
complete across three of the four sites where the Asset
Manager is pleased to report that key performance indicators
have improved significantly, with these three sites now
performing in line with expectations. Pitworthy has sustained
more material problems with availability but the Asset Manager
is optimistic that these levels will return to normal in Q1
2018 after the remaining works to upgrade inverter modules and
combiner boxes have been completed.
Although the works have resulted in a significant improvement
in technical performance during the year, in carrying these
repairs out, short-term availability and production levels have
been reduced. Overall, the performance of the sites was
significantly improved during the second half of the year.
During 2017 the following process has been followed at each of
the four sites:
-- In-depth investigations of the sites were carried out in close
collaboration with technical advisors, equipment manufacturers and
BGE to identify defects. These resulted in an extensive list
of defects that BGE has been working through over the last
year. Issues that were identified cover potential health &
safety risks, site security and performance-related problems.
-- Combiner boxes, which bring together the output of several
solar strings, were identified as being unlikely to last the
full lifetime of the projects and as susceptible to damage
from extreme events such as lightning strikes. A solution was
developed with the technical advisor to improve maintenance
activities that will ensure the longevity of the combiner boxes
and see the installation of additional surge protection devices,
which will provide enhanced protection.
-- New commercial agreements with the inverter manufacturer and the
inverter maintenance provider have helped to improve performance
in recent months, allowing faults to be resolved more
efficiently.
After deducting the cost of defect rectification, the Liquidated
Damages relating to these projects are in excess of GBP3.5
million. Revenue lost to date due to poor performance and
additional works on site amounts to GBP0.95 million with no
material loss expected in the long term.
SPRIGGS FARM (12MW)
Following the intervention of the Asset Manager, the site's
performance ratio has significantly improved by 27% following
completion of the works and the site is now performing
consistently above base case.
As reported in the 30 June 2017 Interim Accounts, Spriggs
Farm's performance has been negatively impacted by Potential
Induced Degradation ("PID") as well as transformer failures,
caused by a manufacturing defect, both of which were resolved
earlier in the year. A claim has been made against the EPC
for both issues, and the proceeds from the Warranty Bond
received. This has covered the cost of remedying the defects,
as well as legal and technical costs incurred.
The remedial measures to reverse the effect of PID included
installing a retrofit solution across the site using anti-PID
boxes and negative grounding of each inverter, taking care to
comply with all relevant codes in relation to correct signage,
site monitoring and alarm notification. Once it has been
confirmed that the affected modules have been fully restored,
the anti-PID boxes will be removed while the negative grounding
will remain in place to ensure that PID is prevented from
reoccurring.
PORT FARM (35MW)
The site's performance ratio fell below the level guaranteed
under the EPC contract, leading to liquidated damages of GBP1.2
million being received. The primary reason for the
underperformance was slow response times when dealing with minor
failures such as DC fuses and inverters. The site is now
under the care of BGE and as such the Asset Manager expects
performance to increase significantly.
PRODUCTION
OVERVIEW OF PORTFOLIO PERFORMANCE
When irradiation levels are normalised production was 2.4% below
expectations for the year. Despite the strong technical
performance, production levels were 4.6% below expectations
during the year, primarily driven by lower than expected
irradiation, which was 2.2% below expectations across the year
and 3.0% below expectations in the second half of the year.
Annual irradiation forecasts are subject to an approximate 4%
standard deviation against long term historical averages across
a 12 month period. This means that annual variation of
irradiation is typically less than 4%, but occasionally can be
more. This can be seen in the table below.
Production
Site (MW hours) Production Variance Irradiation Variance
Atherstone 13,612,540 -1.0% -1.3%
Bournemouth 38,200,595 -3.1% -5.4%
Castle Eaton 14,838,113 -7.6% -2.3%
Copley 28,061,345 0.2% -1.2%
High Penn 7,349,504 -19.1% -0.7%
Highfields 9,698,482 -14.0% -4.6%
Hunters Race 10,462,928 -1.3% -1.8%
Kencot 34,848,893 -2.3% -3.0%
Landmead 42,777,788 0.4% 1.8%
Membury 15,547,056 -1.5% -4.0%
Paddock Wood 9,648,177 4.1% 0.9%
Pitworthy 9,180,749 -35.8% -7.7%
Port Farm 31,502,228 -4.5% -2.4%
Sandridge 45,885,400 -3.7% -2.1%
Shotwick 62,011,539 -4.8%(1) -0.4%
Southam 9,334,974 -3.7% -3.8%
Spriggs Farm 10,445,092 -12.0% -4.5%
Wally Corner 1,622,319 -0.6% -4.1%
Wymeswold 30,741,267 -2.3% -3.5%
Total 425,768,989 -4.6%
Weighted Total -2.2%
1 Adjusted for insurance receipts.
EPC CONTRACTS
Engineering, Procurement & Construction ("EPC") contracts
typically guarantee that the solar projects will meet certain
performance ratios during the first two years of operation. If
they do not meet the agreed performance ratio, the EPC
Contractor will be obliged to pay liquidated damages to cover
the performance ratio shortfalls over the two year contract
term as well as assumed future shortfalls over a 25 year term
on a discounted cash flow basis. Security against such payment
obligations usually take the form of either cash retentions or
on-demand performance bonds. In addition, the EPC contractor
will also be responsible for any component defect that occurs
on site during the initial two-year period.
As assets in the portfolio approach the end of the two year
EPC warranty period, in preparation for the issuance of a
Final Acceptance Certificate ("FAC"), the Asset Manager carries
out a rigorous technical audit of the site. During 2017 the
Asset Manager continued its established FAC process on all
sites that were approaching the end of the EPC Warranty Period
and by the end of 2017, all but four assets in the current
UK portfolio had reached their FAC date. The technical audit
is carried out to identify any defects and ensure construction,
planning and all installed equipment are in-line with
contractual obligations. The performance data for each site is
also assessed in detail as well as specific tests of key
pieces of equipment (modules, transformers, cables) to ensure
compliance.
The EPC contractor is then notified of any site
underperformance and any defects that need to be rectified. The
SPVs security (warranty bond/cash retention) is maintained for
the period of time from the end of the EPC Warranty period
until such a time the defects are all rectified to the Asset
Manager's satisfaction. Where Defects are not corrected
accordingly or an agreement cannot be reached, the securities
in place can be called upon so that the SPVs can rectify the
defects themselves or a settlement agreement can be entered
into releasing the EPC of their liability.
O&M CONTRACTS
The SPVs have also entered into Operation and Maintenance
("O&M") contracts for the provision of preventative and
corrective maintenance services. Under the terms of the O&M
Contracts, an annual test is carried out on each of the solar
power plants which analyses the respective solar power project's
availability to generate power over the previous 12 month
period. If the respective solar power project's availability
were to be less than that guaranteed under the O&M Contract,
typically 99 per cent., the O&M Contractor will be liable to
pay liquidated damages, usually capped per annum to the level
of the annual fees paid to the O&M Contractor.
O&M CONTRACTS WITH BRIGHTER GREEN ENGINEERING
Due to the extensive scope of services offered and competitive
pricing, Brighter Green Engineering ("BGE") continues to be the
Company's preferred O&M contractor, taking over sites as
inherited O&M contracts expire. As at the date of this report,
BGE is the appointed O&M contractor for eleven out of 18
assets in the UK portfolio, which represent 238MW of total
installed capacity.
Over the last six months the Company has undertaken a
benchmarking exercise. This ensures continued best practice is
followed and that the works better reflect the needs of the
portfolio. As part of this process new contracts have been
agreed with BGE, along with new pricing that will represent a
saving of 20% on a like for like basis. The Directors
approved the new contracts on 21 February 2018. The revised
pricing was incorporated into the valuation as at 31 December
2017.
Each SPV is entering into a separate contract for O&M services,
with a minimum term of five years. Total consideration payable
by the nine SPVs to BGE under the new contracts will
initially be GBP1.6 million per year. Pricing is linked to the
RPI index. Further contracts may be added in the future as
EPC contractors typically only provide O&M services for the
first two years of a site's operations.
BGE has ultimate Shareholders in common with Foresight Group
although they operate as separate entities and share no common
executive personnel. BGE is deemed to be a related party of
the Company under LR 15.5.4R as it is a member of the
Investment Manager's group. The Transaction is classed as a
smaller related party transaction under Listing Rule 11.1.10R.
GRID LIAISON WORK
Both scheduled and unscheduled grid disconnections impact the
portfolio and are considered as an 'exclusion event', meaning
that the EPC/O&M is not liable for any production loss that
is suffered as a consequence. While there is little control
over unscheduled grid disconnections due to issues such as
storms and equipment failures, the Asset Manager has taken a
much more active role in working with the Distribution Network
Operators ("DNOs") to minimise the impact caused by scheduled
grid outages.
Scheduled grid outages are those that occur when a DNO carries
out work on its network (e.g. upgrades/servicing of equipment).
Typically, the DNO will send a notice to the SPV detailing
the planned outage, including its expected duration. Once this
is received the Asset Manager contacts the DNO to understand
the outage and establish whether the works can be carried out
earlier or later in the year with the aim of always avoiding
higher irradiation months in the summer. During 2016 and 2017,
there have been a number of cases where outages have been
successfully re-scheduled using this approach, thus reducing or
avoiding a potentially negative impact on revenue.
In addition to this, each DNO hosts an owner/operator forum on
a quarterly basis with the aim of understanding the
requirements of owners and operators, while also updating them
on the processes they have put in place to manage outages.
The Asset Manager has been attending these forums for a number
of years now, providing the opportunity to discuss outages in
more detail and contribute to work on this topic. This also
allows the Asset Manager to meet and establish relationships
with key contacts within the DNOs. This approach with the DNOs
will continue for the foreseeable future to ensure that the
impact of grid outages is minimised across the portfolio.
AUSTRALIAN CONSTRUCTION ASSETS
The Asset Manager believes that by investing in Greenfield
opportunities in Australia and taking on the construction of
these projects, it has been able to source higher quality
assets. This also enables the Asset Manager to more effectively
manage and monitor the construction process from early on, by
negotiating the EPC and O&M agreements and ensure that all
construction and budget milestones are being achieved.
The Asset Manager is confident that the Australian assets,
currently under construction, will be ready as per the agreed
contract terms and construction timetable, however if there are
any construction delays the Company has financial protections in
place with the EPC contractor via Liquidated Damages to cover
any losses caused by delays. Once the sites are operational,
the EPC contractors have obligations to rectify any defects
that become apparent within the first two years.
As part of the construction management plan, Foresight Group
has hired two additional team members in Sydney with technical
and project management experience to specifically manage these
sites and minimise the risk of delay. Two of the sites will
also have technical engineers living on site, monitoring
developments and remaining there full time once operational.
ASSET MANAGEMENT CONTRACTS
Foresight Group LLP provides Asset Management Services to the
underlying SPVs under direct and individual contracts. Foresight
Group LLP is authorised and regulated by the Financial Conduct
Authority. The Company is overseen by an experienced and
majority independent Board. The Asset Management Services
provided ensure the day to day operation of the sites is
robust with commercial and strategic decisions dictated to the
O&M counterparties. The services also include:
-- Oversight of O&M counterparties
-- Contractual compliance of all contracts, including enforcement of
penalties and damages
-- Portfolio optimisation including negotiation of project contracts
(insurance, O&M, PPA, import power, security, warranties) ,
spare part and replacement strategy and technology improvements
-- Reporting to debt providers and other debt compliance services
-- Accounting, bookkeeping, tax compliance and statutory reporting
of all SPVs
-- Corporate governance activities including health and safety
compliance
On 21 February 2018, the Board approved an updated agreement
that better reflects the needs of the SPVs and increases the
price charged for those services. The contracts, entered into
by each of the SPVs, includes a minimum term of five years
and an aggregated initial fee of GBP0.94 million per year.
These increased prices were incorporated into the valuation as
at 31 December 2017. Pricing is linked to the RPI index.
Further contracts may be added in the future as new
acquisitions are made.
Foresight Group LLP is deemed to be a related party of the
Company under LR 15.5.4R as it is a member of the Investment
Manager's group. The Transaction is classed as a smaller
related party transaction under Listing Rule 11.1.10R.
Environmental, Social and Governance Considerations
LAND MANAGEMENT AND ENVIRONMENTAL ENHANCEMENTS
The 475MW operational UK portfolio produced 426GWh of clean
energy during the period. This is the equivalent of:
The Company believes Environmental, Social and Governance ('ESG")
considerations play an important part in delivering responsible
and sustainable growth for the long term. These factors have
been integrated into all stages of the investment process, and
are actively supported by all involved, regardless of seniority.
With that in mind, the Company has adopted a Responsible
Investment Framework to provide a suitable operational framework
in matters related to the investment process, such that ESG
has become part of the normal day-to-day operations.
SIGNATORY OF UNPRI
Foresight Group is a signatory to the United Nations Principles
for Responsible Investment ("UNPRI").
The UNPRI, established in 2006, is a global collaborative
network of investors working together to put the six Principles
for Responsible Investment into practice. As institutional
investors, we have a duty to act in the best long-term
interests of our beneficiaries. In this fiduciary role, we
believe that ESG issues can affect the performance of
investment portfolios (to varying degrees across companies,
sectors, regions, asset classes and through time). We also
recognise that applying these Principles may better align
investors with broader objectives of society. Therefore, where
consistent with our fiduciary responsibilities, we commit to the
following:
1. We will incorporate ESG issues into investment analysis and
decision-making processes.
2. We will be active owners and incorporate ESG issues into
our ownership policies and practices.
3. We will seek appropriate disclosure on ESG issues by the
entities in which we invest.
4. We will promote acceptance and implementation of the
Principles within the investment industry.
5. We will work together to enhance our effectiveness in
implementing the Principles.
6. We will report on our activities and progress towards
implementing the Principles.
As a signatory for this voluntary framework, Foresight Group
submits an annual report to the UNPRI on its responsible
investment activities, which is approved by senior management.
This allows Foresight Group to demonstrate to stakeholders and
the public how we incorporate ESG issues, understand where we
sit in relation to local and global peers and to learn and
develop our practices year-on-year.
Foresight Group actively collaborates with the investment
industry and relevant governmental bodies and regulators through
direct conversations and contributing to collective consultation
papers on matters affecting the investment process, including
ESG.
The Company has been awarded a five star rating by 3D
Investing.
Five star funds are the real pioneers in the industry. They
are required to demonstrate at least a fair financial
performance, excellent transparency, a high social impact and a
lack of exposure to ethically controversial companies.
3D Investing provides research and communication services to
help investment managers and advisers to deliver a high quality
and distinctive service for the socially motivated investor.
For further details please refer to the website
www.3dinvesting.com
Further to the environmental advantages of large scale renewable
energy, each investment is closely scrutinised for localised
environmental impact. Where improvements can be made, the
Company will work with residents, landowners and local
authorities to minimise visual and auditory impact of sites.
The Asset Manager is a working partner of the Solar Trade
Association's Large Scale Asset Management Working Group and a
signatory to the Solar Farm Land Management Charter. It ensures
that solar farms are managed in a manner that maximizes the
agricultural, landscaping, biodiversity and wildlife potential,
which can also contribute to lowering maintenance costs and
enhancing security. As such, the Asset Manager has worked with
Kent Wildlife Trust to identify site specific biodiversity
enhancements for a number of sites to secure long-term gains
for wildlife and ensure that the land and environment are
maintained to a high standard. Biodiversity and wildlife
enhancements undertaken by the Company include:
-- Management of grassland areas within the security fencing to
promote wildflower meadows and sustainable sheep grazing;
-- Planting and management of hedgerows and associated hedge banks;
-- Management of field boundaries between security fencing and
hedgerows;
-- Sustainable land drainage and pond restoration;
-- Installation of insect hotels and reptile hibernacula;
-- Installation of boxes for bats, owls and kestrels; and
-- Installation of beehives by local beekeepers.
Some solar plants are designed to enable sheep grazing through
the installation of protection barriers around electrical
equipment, and other plants are investigated for upgrading to
ensure that the farmland the solar assets are located on can
remain in agricultural production, which is a frequent desire
of local communities. Currently our Copley, High Penn, Pitworthy,
Bournemouth and Wymeswold solar assets have active sheep grazing
by the landowner's livestock, in an effective working
partnership with the Company.
SOCIAL AND COMMUNITY ENGAGEMENT
The Asset Manager has actively sought to engage with the local
communities around the Company's solar assets and regularly
attends parish meetings to encourage community engagement and
promote the benefits of the solar assets.
Educational visits have also taken place across the portfolio,
including hosting local members of the Institute of Engineering
and Technology and students from Loughborough University at the
Wymeswold solar plant and hosting students of Warwickshire
College at the Southam solar plant.
COMMUNITY BENEFITS
The Company supports community benefit schemes that assist
parish councils in developing and maintaining community assets.
In 2017, GBP99k worth of grants were provided to local
communities. Projects funded include upgrading recreational
facilities and playgrounds and the provision of bus shelters in
these rural communities.
GOVERNANCE
The Asset Manager actively reviews the consents of all solar
assets to ensure that all solar plants are compliant with the
consents and the conditions attached to them and actively
engages with local government organisations to ensure ongoing
compliance. In addition to ensuring the company is protected
from prosecution this also promotes trust with local
communities.
HEALTH AND SAFETY
There were no reportable health and safety incidents reported
during the year.
Safety, Health, Environmental and Quality ('SHEQ") performance
and proportionate risk management are a top priority at all
levels for Foresight Group. To further improve the management
of SHEQ risks, reinforce best practice and ensure non-compliance
with regulations is avoided, the Asset Manager has appointed an
independent professionally accredited health and safety consultant
who regularly visits the portfolio assets to ensure they not
only meet, but exceed, industry and legal standards. The
consultant has confirmed that all sites are in compliance with
all applicable regulations. Recommendations that have been
implemented to help raise standards further including
improvements to wiring and safety signage/labelling.
When Foresight Group representatives visit the sites, they
ensure that induction procedures are properly undertaken,
appropriate clothing is worn and that the site office is
properly equipped. They will also provide feedback on site
conditions to ensure that assets remain safe and secured. A
similar regime is employed for the assets under construction in
Australia, where compliance with health and safety standards and
regulations are a contractual obligation of those constructing
the facilities. Additionally, professionally accredited independent
health and safety consultants are employed to review on site
construction activity to ensure that staff understand and are
complying with health and safety requirements, that staff remain
alert to risks and do not sustain accidents or injuries and
that non-compliance with regulations is avoided.
ESG IMPACT IN AUSTRALIA
Our selected development and construction partners have been
active in including local communities in the progress of the
development of the Australian projects and ensuring that the
projects are not disruptive to residents or the environment
during construction and operation.
The Oakey developments will also be beneficial to local
communities in Queensland. The projects will provide local
landowners with the opportunity to improve the resilience of
their farming operations due to the fact long-term land leasing
to solar energy generators supplements their income. In addition,
the farm will create 120 construction jobs.
POWERING THE MELBOURNE TRAM NETWORK
The Company's first Australian solar project, Bannerton, has won
a tender from the Victorian Government to supply clean power
to the Melbourne tram network. Not only is this good from a
clean energy perspective as it lowers carbon emissions, it will
also be beneficial from a social perspective as it provides
low cost travel and will help reduce the number of petrol
powered cars on the road.
Principal Risks
Reliance is placed on the internal systems and controls of the
Investment Manager and external service providers such as the
Administrator to effectively manage risk across the portfolio.
Foresight Group has a comprehensive Risk Management Framework in
place which is reviewed on a regular basis by the Directors.
A full list of relevant risks can be found in the Company's
latest Prospectus issued on 3 March 2017. The Directors
consider the following as the principal risks and uncertainties
to the Company at this time, and their mitigants.
Major Risk Summary of Risk Mitigants
Risks A decline in the wholesale price of electricity could Volatility in the wholesale electricity price can
relating to materially adversely affect the price of electricity be mitigated by entering hedging agreements against
the sale of generated by solar PV assets and thus the Company's future price movements. This can be achieved through
electricity business, financial position, results of operations a variety of trading strategies including forward
and business prospects. sale contracts of electricity and fixed price PPAs.
The portfolio currently has PPAs in place into the
medium term offering a secure route to market. At
31 December 2017, 29% of the UK portfolio was subject
to fixed electricity prices, with the remaining PPAs
allowing for electricity prices to be fixed at any
point. The Investment Manager regularly reviews wholesale
electricity price forecasts and would consider increasing
the percentage of fixed whole sale revenues if future
movements prices affect the minimum dividend cover
targets., The percentage of fixed electricity sales
are expected to increase to 36% once the Australian
portfolio becomes operational (assuming full 12 months
of operations).
Risks The introduction of subsidy scheme changes, either Despite recent changes to the UK RO scheme, the grandfathering
relating to of a retrospective nature or not, could have a material principle states that existing operational accredited
regulatory adverse effect on the Company financial position and projects will continue to be supported for the duration
changes to valuation of the existing portfolio. of their RO eligibility period (20 years from the
subsidy date of accreditation). Furthermore, while the UK's
schemes renewable energy policy has, over the last few years,
experienced much development and change the Government
has avoided making changes with retrospective character.
In addition, the UK Government remains committed to
ambitious targets in terms of renewable generation
and carbon emission reductions under the Climate Change
Act.
Australia has set its federal policy to meet its Renewable
Energy Target ("RET") for 33,000 GWh by 2020, but
it will remain in place until 2030. The Large-scale
RET includes legislated annual targets which will
require significant investment in new renewable energy
generation capacity in coming years.
The Investment Manager will continue to monitor any
regulatory changes that can potentially affect the
renewable market in the UK and Australia.
Risks The Company's underlying subsidiaries currently have Any new debt facilities are thoroughly appraised before
relating to borrowings of approximately GBP200.3. million. Under they are entered into to ensure they benefit the Shareholders
gearing the terms of the Facility Agreements, the borrower without creating unnecessary risk. Due to conservative
has agreed to covenants as to its operation and financial gearing targets and sound management it is unlikely
conditions. Any failure by the borrower to fulfil that debt covenants would negatively impact our ability
obligations under the Facility Agreements (including to pay dividends, and would indeed be expected to
repayment) may permit the lender to demand repayment increase dividend coverage. Gearing, calculated as
of the related loan and to realise its security which Group borrowings (including any asset level gearing)
may mean the loss of a solar power asset. as a percentage of the Company's Gross Asset Value
will not exceed 50 per cent. at the time of drawdown.
It is the Board's current intention that long-term
gearing (including any long-term, asset level gearing),
calculated as Group borrowings (excluding intra-group
borrowings and any revolving credit facilities) as
a percentage of the Company's Gross Asset Value will
not exceed 40 per cent. at the time of drawdown.
Risks The revenues and expenditure of solar PV assets are The Investment Manager considers the inflation risk
relating to frequently partly or wholly subject to indexation, presented by these assets to be minimised through
RPI typically with reference to RPI. Additionally, GBP63.0 the explicit inflation-linked nature of both operating
million of the Long-Term Debt in place is linked to revenues and costs. On the revenue side, ROC prices
RPI. are formally linked to RPI and for PPAs the electricity
price forms part of the RPI basket of goods. For costs,
Operation and Maintenance ("O&M") contract prices
and land rents are both linked to inflation and as
such there is a natural inflation linkage to costs
and revenues.
Risks The Company's investment policy permits the Company Currency hedging will be implemented for investments
relating to to invest up to 25 per cent. of the Gross Asset Value outside of the UK. In order to reduce the risk of
movements in of the Company (calculated at the time of investment) currency fluctuations and to minimise the volatility
currency in investments outside the UK. Movements in exchange of equity returns the Company will implement a hedging
rates may affect the sterling value of any assets strategy of entering forward contracts for up to two
favourably or unfavourably that are denominated in years in length to hedge the majority of its distributable
currencies other than sterling. At the year end, the foreign currency cash flows at project level. The
Company had acquired 146MW of assets under construction equity invested will not benefit from foreign exchange
in Australia. hedging. In addition, the assets will benefit from
Australian dollar denominated senior debt facilities
at project level (c.60 per cent. gearing on average)
which will limit the equity exposure to foreign exchange
movements.
Risks The Company relies on third-party professionals and The SPVs have entered into Operation and Maintenance
relating to independent contractors and other companies to provide ("O&M") contracts with contractors pursuant to which
operation the required operator and maintenance support services the contractor provides both preventative and corrective
and throughout the operating phases of the solar PV assets maintenance. Under the terms of the O&M contracts
maintenance in the Company's investment portfolio. If such contracted the contractor is typically required to keep the site
contracts parties are not able to fulfil their contractual obligations, available 99% of the time during the hours of daylight.
the Company's ability to operate the solar plants Liquidated Damages are due to the SPV should availability
could be adversely affected and the Company may be fall below the guaranteed level. The Liquidated Damages
forced to seek recourse against such parties, provide compensate for all lost revenue but are usually capped
additional resources to complete their work, or to at the annual O&M fee. Foresight Group's experience
engage other companies to complete their work. in managing this asset type since 2007 and expertise
in identifying strong counterparties further mitigates
this risk.
Risk of grid Solar plants are subject to disconnections from the Whilst there is little control over unscheduled grid
outages grid from the network operators. These outages are disconnections due to issues such as storms and equipment
beyond the control of the Asset Manager. The Company's failure, the Asset Manager has taken a much more active
valuation models assume that the projects will be role in working with the Distribution Network Operator
unavailable for a proportion of the time and believe ("DNO") to minimise the impact caused by scheduled
this assumption to be robust over the medium to long grid outages.
term. If there is a grid disconnection for any reason
the SPV is unable to recover the cost of the production
loss.
Risks The Company can invest up to 25 per cent. of its GAV The Investment Manager ensures that risks are mitigated
relating to in assets under construction. Delays in project construction through the performance bonds and through the use
the may result in a reduction in returns caused by a delay of milestone payments, with funds only being transferred
construction in the project generating revenue. Failure in the once certain conditions are met. In addition, the
of solar PV construction of a plant, for example, faulty components construction progress is overseen by the in-house
assets or insufficient structural quality may not be evident Asset Management team with support from independent
at the time of acquisition or during any period during technical advisers to ensure the construction milestones
which a warranty claim may be brought against the are achieved on schedule and in line with the specifications
contractor and may result in loss of value without set up in the construction contract.
full or any recourse to insurance or construction
warranties.
Corporate Governance Report
The Board has considered the principles and recommendations of
the AIC Code of Corporate Governance (AIC Code) by reference
to the AIC Corporate Governance Guide for investment companies
(AIC Guide). The AIC Code, as explained by the AIC Guide,
addresses all the principles set out in the UK Corporate
Governance Code, as well as setting out additional principles
and recommendations on issues that are of specific relevance to
the Company.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC
Guide (which incorporates the UK Corporate Governance Code),
will provide better information to Shareholders. The Company has
complied with the recommendations of the AIC Code and the
relevant provisions of the UK Corporate Governance Code, except
as set out below.
The UK Corporate Governance Code includes provisions relating
to:
-- The role of the Chief Executive
-- Executive Directors' remuneration
-- The need for an internal audit function
For the reasons set out in the AIC Guide, and as explained
in the UK Corporate Governance Code, the Board does not
consider these provisions to be relevant to the position of
the Company, being an externally managed investment company. In
particular, all of the Company's day-to-day management and
administrative functions are outsourced to third parties. As a
result, the Company has no Executive Directors, employees or
internal operations. The Company has therefore not reported
further in respect of these provisions.
THE BOARD
The Company has a Board of three Non-Executive Directors, two
of whom are considered to be independent. Peter Dicks is
considered non-independent under the listing rules by virtue of
being a Director of other Foresight Venture Capital Trusts
("VCTs") which are also managed by Foresight Group.
During the year, Peter Dicks acted as a Director of Foresight
VCT plc, Foresight 2 VCT plc (dissolved on 27 June 2017,
following its merger with Foresight VCT plc), Foresight 3 VCT
plc (in members voluntary liquidation, following its merger with
Foresight 4 VCT plc) and Foresight 4 VCT plc. Mr Dicks
resigned as a Director from the Board of Foresight 4 VCT plc
on 22 June 2017. These VCTs invest in high growth, small
unquoted UK companies.
Due to the different investment focus of the Company compared
to the VCTs, the Board believes there to be no conflict
between the roles Mr Dicks performs. Where conflicts of
interest do arise between the different funds, the common
Director would seek to act fairly and equitably between
different groups of Shareholders. If a conflict were to occur
then decisions would be taken by the independent Directors.
DIVISION OF RESPONSIBILITIES
The Board is responsible to Shareholders for the proper
management of the Company and Board meetings are held on at
least a quarterly basis with further ad hoc meetings scheduled
as required. In the year under review 16 Board meetings were
held. The Board has formally adopted a schedule of matters for
which its approval is required, thus maintaining full and
effective control over appropriate strategic, financial,
operational and compliance issues. A Management Agreement between
the Company and the Investment Manager sets out the matters
over which the Investment Manager has authority, including
monitoring and managing the existing investment portfolio and
the limits above which Board approval must be sought. All
other matters are reserved for approval by the Board of
Directors.
Individual Directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them
in the furtherance of their duties. In terms of the
requirements of the Articles of Association the Directors retire
periodically at every third Annual General Meeting after the
AGM at which they were elected.
Full details of duties and obligations are provided at the
time of appointment and are supplemented by further details as
requirements change. There is no formal induction programme for
the Directors as recommended by the AIC Code. However, this
will be implemented should the need arise.
The Board has access to the officers of the Company Secretary
who also attend Board Meetings. Representatives of the
Investment Manager attend all formal Board Meetings although the
Directors may meet without the Investment Manager being present.
Informal meetings with the Investment Manager are also held
between Board Meetings as required. The Company Secretary
provides full information on the Company's assets, liabilities
and other relevant information to the Board in advance of each
Board Meeting. Attendance by Directors at Board and Committee
meetings is detailed in the table below.
Board Management Engagement & Remuneration Audit
Alex Ohlsson 16/16 1/1 3/3
Peter Dicks 16/16 1/1 3/3
Chris Ambler 14/16 1/1 3/3
In the light of the responsibilities retained by the Board and
its Committees and of the responsibilities delegated to
Foresight Group CI Limited, JTC (Jersey) Limited and its legal
advisors, the Company has not appointed a Chief Executive
Officer, Deputy Chairman or a Senior Independent Non-Executive
Director as recommended by the AIC Code. As such, the
provisions of the UK Corporate Governance Code which relate to
the division of responsibilities between a Chairman and a Chief
Executive Officer are not considered applicable to the Company.
INVESTMENT MANAGER
As an experienced multi-fund asset manager, Foresight Group has
in place established policies and procedures designed to address
conflicts of interest in allocating investments among its
respective investment funds.
Foresight Group is fully familiar with, and has extensive
experience in allocating investments, ensuring fair treatment for
all investors and managing conflicts of interest should these
arise. Foresight Group is keen to ensure such fair treatment
for all investors. Under the rules and regulations of the
Guernsey Financial Services Commission ("GFSC"), Foresight Group
is also legally obliged to treat its investors fairly and
handle such conflicts in an open and transparent manner and
these processes are audited on an annual basis.
In terms of allocation, Foresight Group adheres to a formal
written policy for allocating new investment opportunities which
are overseen by Foresight Group's Investment Committee. Each
opportunity is allocated with reference to the net capital
available within each Foresight Group managed fund with a
sector and asset class investment strategy matching the proposed
investment. Where the allocation would result in any Foresight
Group managed fund having insufficient liquidity or excessive
portfolio concentration the allocation is revised accordingly.
Foresight Group's allocation policy is reviewed from time-to-time
by the independent Board of Directors of each of the Foresight
Group funds and this policy has been operated successfully for
many years. Investments are allocated on pari passu terms.
After a full evaluation of the performance of the Investment
Manager, including review of assets purchased by the Company
and the results of ongoing portfolio management, it is the
opinion of the Directors that the continuing appointment of the
Investment Manager on the terms currently agreed is in the
interests of the Shareholders.
BOARD COMMITTEES
The Board has adopted formal terms of reference, which are
available to view by writing to the Company Secretary at the
registered office, for two standing committees which make
recommendations to the Board in specific areas.
The Audit Committee comprises Chris Ambler (Chairman), Alex
Ohlsson and Peter Dicks, all of whom are considered to have
sufficient financial experience to discharge the role. The
Committee meets at least twice a year to, amongst other things,
consider the following:
-- Monitor the integrity of the financial statements of the
Company and approve the accounts;
-- Review the Company's internal control and risk management
systems;
-- Make recommendations to the Board in relation to the
appointment of the external auditors;
-- Review and monitor the external Auditors' independence; and
-- Implement and review the Company's policy on the engagement of
the external Auditors to supply non-audit services.
KPMG LLP has completed the Company's external audit for the
period and has not performed any non-audit services during the
year. Ernst & Young LLP prepares all necessary tax returns
following sign off of the annual accounts.
The Management Engagement & Remuneration Committee, which has
responsibility for reviewing the remuneration of the Directors,
comprises Alex Ohlsson (Chairman), Peter Dicks and Chris Ambler
and meets at least annually to consider the levels of
remuneration of the Directors, specifically reflecting the time
commitment and responsibilities of the role. The Management
Engagement & Remuneration Committee also undertakes external
comparisons and reviews to ensure that the levels of
remuneration paid are in line with industry standards. The
Management Engagement & Remuneration Committee also reviews the
appointment and terms of engagement of the Investment Manager.
The Board believes that, as a whole, it has an appropriate
balance of skills, experience and knowledge. The Board also
believes that diversity of experience and approach, including
gender diversity, amongst Board members is important and it is
the Company's policy to give careful consideration to issues of
Board balance and diversity when making new appointments.
Copies of the terms of reference of each of the Company's
committees can be obtained from the Company Secretary upon
request.
BOARD EVALUATION
The Board undertakes an annual evaluation of its own
performance and that of its Committees through an initial
evaluation questionnaire. The Chairman then discusses the results
with the Board and its Committees and will take appropriate
action to address any issues arising from the process.
RELATIONS WITH SHAREHOLDERS
The Company communicates with Shareholders and solicits their
views when it is considered appropriate to do so. Individual
Shareholders are welcomed to the Annual General Meeting where
they have the opportunity to ask questions of the Directors,
including the Chairman, as well as the Chairman of the Audit,
Remuneration and the Management Engagement & Remuneration
Committee. From time to time, the Board may also seek feedback
through Shareholder questionnaires and through open invitations
for Shareholders to meet the Investment Manager.
INTERNAL CONTROL
The Directors of the Company have overall responsibility for
the Company's system of internal controls and the review of
their effectiveness. The internal controls system is designed to
manage, rather than eliminate, the risks of failure to achieve the Company's business objectives. The system is designed to meet the particular needs of the Company and the risks to which it is exposed and by its nature can provide reasonable but not absolute assurance against misstatement or loss. The Board's appointment of JTC (Jersey) Limited as accountant and administrator has delegated the financial administration of the Company. There is an established system of financial controls in place, to ensure that proper accounting records are maintained and that financial information for use within the business and for reporting to Shareholders is accurate and reliable and that the Company's assets are safeguarded. Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures and applicable rules and regulations are complied with. Pursuant to the terms of its appointment, Foresight Group invests the Company's assets in infrastructure investments and has physical custody of documents of title relating to the equity investments involved. The Investment Manager confirms that there is a continuous process for identifying, evaluating and managing the significant risks faced by the Company. This has been in place for the year under review and up to the date of approval of the Annual Report and financial statements, and is regularly reviewed by the Board. The process is overseen by the Investment Manager and uses a risk-based approach to internal control whereby a test matrix is created that identifies the key functions carried out by the Investment Manager and other service providers, the individual activities undertaken within those functions, the risks associated with each activity and the controls employed to minimise those risks. A residual risk rating is then applied. The Board is provided with reports highlighting all material changes to the risk ratings and confirming the action that has or is being taken. This process covers consideration of the key business, operational, compliance and financial risks facing the Company and includes consideration of the risks associated with the Company's arrangements with professional advisors. The Audit Committee has carried out a review of the effectiveness of the system of internal control, together with a review of the operational and compliance controls and risk management. The Audit Committee has reported its conclusions to the Board which was satisfied with the outcome of the review. The Board monitors the investment performance of the Company in comparison to its objectives at each Board meeting. The Board also reviews the Company's activities since the last Board meeting to ensure that the Investment Manager adheres to the agreed investment policy and approved investment guidelines and, if necessary, approves changes to such policy and guidelines. The Board has reviewed the need for an internal audit function. It has decided that the systems and procedures employed by the Investment Manager, the Audit Committee and other third party advisers provide sufficient assurance that a sound system of internal control to safeguard Shareholders' investment and the Company's assets, is in place and maintained. In addition, the Company's financial statements are audited by external Auditors and thus an internal audit function specific to the Company is considered unnecessary. DIRECTORS' PROFESSIONAL DEVELOPMENT Full details of duties and obligations are provided at the time of appointment and are supplemented by further details as requirements change, although there is no formal induction programme for the Directors as recommended by the AIC Code. Directors are also provided with key information on the Company's policies, regulatory and statutory requirements and internal controls on a regular basis. Changes affecting Directors' responsibilities are advised to the Board as they arise. Directors also participate in industry seminars. BRIBERY ACT 2010 The Company is committed to carrying out business fairly, honestly and openly. The Investment Manager has established policies and procedures to prevent bribery within its organisation. CRIMINAL FINANCES ACT 2017 The Company has committed to a policy to conduct all of its business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country. The Company is committed to acting professionally, fairly and with integrity in all of its business dealings and relationships wherever it operates and implementing and enforcing effective systems to counter tax evasion facilitation. The Company will uphold all laws relevant to countering tax evasion in all the jurisdictions in which the Company operates, including the Criminal Finances Act 2017. GOING CONCERN The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in this report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are referred to in the Chairman's Statement, Investment Manager's Report and Notes to the Accounts. In addition, the financial statements include the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to credit risk and liquidity risk. The Company has sufficient financial resources together with investments and income generated. As a consequence, the Directors believe that the Company is able to manage its business risks. The Directors have reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. VIABILITY STATEMENT In accordance with the UK Corporate Governance Code, the Directors have assessed the viability of the Company over a three year period to December 2020, taking into account the Company's current position and the potential impact of the principal risks and uncertainties set out under Risk Management. Based on this assessment, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to December 2020. The Directors have determined that a three year period to 31 December 2020 constitutes an appropriate period over which to provide its viability statement. This is the period focussed on by the Board during the strategic planning process and is considered reasonable for a business of its size and nature. Whilst the Directors have no reason to believe the Company will not be viable over a longer period, it believes this presents users of the Annual Report with a reasonable degree of confidence whilst still providing a longer-term perspective. In making this statement, the Board carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Board also considers the ability of the Company to raise finance and deploy capital. The results take into account the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks. This review has considered the principal risks which were identified by the Investment Manager. The Board concentrated its effort on the major factors which affect the economic, regulatory and political environment. The Board also paid particular attention to the importance of its close working relationship with the Investment Manager. As part of this process, the Directors have also considered the viability of the Company should long-term debt be introduced in the near future. Directors' Remuneration Report INTRODUCTION The Board has prepared this report in line with the AIC code. An ordinary resolution to approve this report will be put to the members at the forthcoming Annual General Meeting on 11 June 2018. The law requires the Company's Auditor, KPMG LLP, to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such. The Auditor's opinion is included in the 'Independent Auditor's Report.' (Henry Todd, Lead Audit Engagement Partner). ANNUAL STATEMENT FROM THE CHAIRMAN OF THE MANAGEMENT ENGAGEMENT AND REMUNERATION COMMITTEE The Board, which is profiled below, consists solely of Non-Executive Directors and considers at least annually the
level of the Board's fees.
CONSIDERATION BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS'
REMUNERATION
The Management Engagement & Remuneration Committee comprises
three Directors: Alex Ohlsson (Chairman), Chris Ambler and Peter
Dicks. The Committee has responsibility for reviewing the
remuneration of the Directors, specifically reflecting the time
commitment and responsibilities of the role, and meets at least
annually. The Committee also undertakes external comparisons and
reviews to ensure that the levels of remuneration paid are
broadly in line with industry standards and members have access
to independent advice where they consider it appropriate.
During the year neither the Board nor the Committee has been
provided with external advice or services by any person, but
has received industry comparison information from management in
respect of the Directors' remuneration. The remuneration policy
set by the Board is described below. Individual remuneration
packages are determined by the Remuneration Committee within the
framework of this policy.
The Directors are not involved in deciding their own individual
remuneration.
REMUNERATION POLICY
The Board's policy is that the remuneration of Non-Executive
Directors should reflect time spent and the responsibilities
borne by the Directors for the Company's affairs and should be
sufficient to enable candidates of high calibre to be
recruited. The levels of Directors' fees paid by the Company
for the year ended 31 December 2017 were agreed in 2016. It
is considered appropriate that no aspect of Directors'
remuneration should be performance related in light of the
Directors' Non-Executive status.
The Company's policy is to pay the Directors quarterly in
arrears, to the Directors personally (or to a third party if
requested by any Director). Mr Ohlsson's remuneration is paid
to Carey Olsen Corporate Services Jersey Limited. None of the
Directors has a service contract but, under letters of
appointment dated 16 August 2013 may resign at any time by
mutual consent. No compensation is payable to Directors leaving
office. As the Directors are not appointed for a fixed length
of time there is no unexpired term to their appointment but,
as noted above, the Directors will retire by rotation every
year.
The above remuneration policy was approved by the Shareholders
at the Annual General Meeting held on 11 June 2017 for the
financial year to 31 December 2017 and will apply in
subsequent years. Shareholders' views in respect of Directors'
remuneration are communicated at the Company's Annual General
Meeting and are taken into account in formulating the
Directors' remuneration policy.
DETAILS OF INDIVIDUAL EMOLUMENTS AND COMPENSATION
The emoluments in respect of qualifying services of each person
who served as a Director during the year and those forecast
for the year ahead are shown below. No Director has waived or
agreed to waive any emoluments from the Company in the year
under review. No other remuneration was paid or payable by the
Company during the current year nor were any expenses claimed
by or paid to them other than for expenses incurred wholly,
necessarily and exclusively in furtherance of their duties as
Directors of the Company. The Company's Articles of Association
do not set an annual limit on the level of Directors' fees
but fees must be considered within the wider Remuneration
Policy noted above. Directors' liability insurance is held by
the Company in respect of the Directors.
Anticipated Directors' fees for the year ending Audited Directors' fees for year ended
31 December 2018 31 December 2017
Alex GBP70,000 GBP65,000
Ohlsson
(Chairman)
Chris GBP55,000 GBP50,000
Ambler
Peter GBP45,000 GBP40,000
Dicks
The Directors are not eligible for pension benefits, share
options or long-term incentive schemes.
DIRECTORS' INTERESTS
Directors who had interests in the shares of the Company as
at 31 December 2017 are shown below. There were no changes in
the interests shown as at 31 December 2016. The Directors do
not have any options over shares.
Ordinary shares of nil par value held on 31 December
2017
Alex Ohlsson (Chairman) 25,000(1)
Chris Ambler 9,280
Peter Dicks 51,433
(1) Shares legally and beneficially owned by a personal
pension company.
APPROVAL OF REPORT
The Board will propose a resolution at the forthcoming AGM
that the remuneration of the Directors will be at the levels
shown above for the year to 31 December 2018.
Audit Committee Report
AUDIT COMMITTEE REPORT
The Audit Committee is chaired by Chris Ambler and comprises
the full Board. The Committee operates within clearly defined
terms of reference. The terms of reference were reviewed during
the year under review and were updated as deemed appropriate.
Meetings are scheduled to coincide with the reporting cycle of
the Company and the Committee has met three times in the year
under review. The function of the Committee is to ensure that
the Company maintains the highest standards of integrity,
financial reporting, internal and risk management systems and
corporate governance and maintains an effective relationship with
the Company's Auditors. None of the members of the Audit
Committee has any involvement in the preparation of the
financial statements of the Company.
The Audit Committee is charged with maintaining an open
relationship with the Company's Auditors. The Chairman of the
Audit Committee keeps in regular contact with the Auditors
throughout the audit process and the Auditors attend the Audit
Committee meeting at which the accounts are considered. The
Committee reports directly to the Board which retains the
ultimate responsibility for the financial statements of the
Company.
SIGNIFICANT ISSUES CONSIDERED
The Audit Committee has identified and considered the following
principal key areas of risk in relation to the business
activities and financial statements of the company:
-- Valuation of unquoted investments. This issue was discussed with
the Investment Manager and the Auditor at the conclusion of
the audit of the financial statements, as explained below:
VALUATION OF UNQUOTED INVESTMENTS
The unquoted investment is a 100% controlling interest in
Foresight Solar (UK Hold Co) Limited ("UK Hold Co"), a
non-consolidated subsidiary company which is measured at fair
value. The majority of UK Hold Co's total assets (by value)
are in companies where no quoted market price is available.
100% controlling interests are held in these companies, being
FS Holdco Limited ("FS Holdco"), FS Holdco 2 Limited ("FS
Holdco 2"), FS Holdco 3 Limited ("FS Holdco 3") and FS Holdco
4 Limited ("FS Holdco 4"). FS Holdco 2 also has a 100%
controlling interest investment in FS Debtco Limited ("FS
Debtco"). These are all non-consolidated subsidiary companies
which are also measured at fair value, established by using
the fair value of the net assets of FS Holdco, FS Holdco 2,
FS Holdco 3, FS Holdco 4 and FS Debtco.
The majority of FS Holdco's, FS Debtco's and FS Holdco 4's
total assets (by value) are held in investments where no
quoted market price is available. FS Holdco's and FS Debtco's
assets are valued by using discounted cash flow measurements.
FS Holdco 4's assets were held at cost at 31 December 2017.
These valuations of underlying investments are seen to be areas
of inherent risk and judgement. There is an inherent risk of
the Investment Manager unfairly valuing the investment due to
the Investment Manager's fee being linked directly to the Net
Asset Value of the Company.
During the valuation process the Board and Audit Committee and
the Investment Manager follow the valuation methodologies for
unlisted investments as set out in the International Private
Equity and Venture Capital Valuation guidelines and appropriate
industry valuation benchmarks. These valuation policies are set
out in note 2 of the accounts. These were then further
reviewed by the Audit Committee. The Investment Manager
confirmed to the Audit Committee that the underlying investment
valuations had been calculated consistently throughout the year
and in accordance with published industry guidelines, taking
account of the latest available information about investee
companies and current market data. Furthermore, the Investment
Manager held discussions regarding the investment valuations with
the Auditors.
The Investment Manager has agreed the valuation assumptions with
the Audit Committee.
Key assumptions used in the valuation forecasts are detailed in
note 17 of the financial statements. The Investment Manager has
provided sensitivities around those assumptions which are also
detailed in note 17.
The Investment Manager confirmed to the Audit Committee that
they were not aware of any material misstatements. Having
reviewed the reports received from the Investment Manager and
Auditors, the Audit Committee is satisfied that the key areas
of risk and judgement have been addressed appropriately in the
financial statements and that the significant assumptions used
in determining the value of assets and liabilities have been
properly appraised and are sufficiently robust. The Audit
Committee considers that KPMG LLP has carried out its duties
as Auditor in a diligent and professional manner.
During the year, the Audit Committee assessed the effectiveness
of the current external audit process by assessing and
discussing specific audit documentation presented to it in
accordance with guidance issued by the Auditing Practices Board.
The audit partner is rotated every five years ensuring that
objectivity and independence is not impaired. KPMG LLP has
audited the Company since 2014. A new Audit Director was
appointed in November 2017, and the 2017 financials will be
first year that the Audit Director has been in place. No
tender for the audit of the Company has been undertaken since
2014. As part of its review of the continuing appointment of
the Auditors, the Audit Committee considers the need to put
the audit out to tender, their fees and independence from the
Investment Manager along with any matters raised during each
audit.
The Audit Committee considered the performance of the Auditor
during the year and agreed that KPMG LLP continued to provide
a high level of service and maintained a good knowledge of
the market, making sure audit quality continued to be
maintained.
Statement of Directors' Responsibilities
For the year 1 January 2017 to 31 December 2017
The Directors are responsible for preparing the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRS") as adopted
by the European Union ("EU").
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period. In preparing
these Financial Statements, the Directors are required to:
-- Select suitable accounting policies and then apply them
consistently;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether applicable IFRS Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements; and
-- Prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to
ensure that the Financial Statements comply with the Companies
(Jersey) Law 1991. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the
assets of the Company and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Corporate Governance Statement that
complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website (which is delegated to Foresight Group and
incorporated into their website).
We confirm that to the best of our knowledge:
-- the Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Company;
-- the Annual Report gives a true and fair view of the
development and performance of the business and the position of
the Company together with a description of the principal risks
and uncertainties that the Company faces; and
-- the Report and Financial Statements, taken as a whole, are fair,
balanced, and understandable and provide the necessary
information for the shareholders to assess the Company's
performance, business model and strategy.
For and behalf of the Board
Alexander Ohlsson
Chairman
21 February 2018
UK Asset Summaries
Wymeswold, Leicestershire
Ownership 100%
ROCs 2.0/1.4
Acquisition Date
November '13 / March '15
Solar Panels 142,000
Technology Polycrystalline Silicon
Panel Supplier
Trina Solar; Suntech Power
EPC Party Lark Energy
O&M Counterparty
Brighter Green Engineering
Inverter Supplier LTi REEnery
Grid Operator
Western Power Distribution
Castle Eaton, Wiltshire
Ownership 100%
ROCs 1.6
Acquisition Date June '14
Solar Panels 60,000
Technology Polycrystalline Silicon
Panel Supplier Canadian Solar
EPC Party SunEdison
O&M Counterparty
Brighter Green Engineering
Inverter Supplier Bonfiglioli
Grid Operator
Southern Electric Power
Highfields, Essex
Ownership 100%
ROCs 1.6
Acquisition Date June '14
Solar Panels 38,000
Technology Monocrystalline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty
Brighter Green Engineering
Inverter Supplier Ingeteam
Grid Operator
UK Power Networks
High Penn, Wiltshire
Ownership 100%
ROCs 1.6
Acquisition Date June '14
Solar Panels 30,000
Technology Monocrystalline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty
Brighter Green Engineering
Inverter Supplier Bonfiglioli
Grid Operator
SSE Power Distribution
UK Power Networks
Pitworthy, North Devon
Ownership 100%
ROCs 1.4
Acquisition Date June '14
Solar Panels 48,000
Technology Monocrystalline
Panel Supplier SunEdison
EPC Party SunEdison
O&M Counterparty
Brighter Green Engineering
Inverter Supplier Bonfiglioli
Grid Operator
Western Power Distribution
Hunters Race, West Sussex
Ownership 100%
ROCs 1.4
Acquisition Date September '14
Solar Panels 41,000
Technology Polycrystalline Silicon
Panel Supplier Hareon Solar
EPC Party Hareon Solar
O&M Counterparty
Brighter Green Engineering
Inverter Supplier Power One
Grid Operator
SSE Power Distribution
Spriggs Farm, Essex
Ownership 100%
ROCs 1.6
Acquisition Date November '14
Solar Panels 50,000
Technology Polycrystalline Silicon
Panel Supplier Talesun
EPC Party Bester Generation
O&M Counterparty
Brighter Green Engineering
Inverter Supplier Green Power Tech
Grid Operator
UK Power Networks
Bournemouth, Dorset
Ownership 100%
ROCs 1.4
Acquisition Date December '14
Solar Panels 146,000
Technology Polycrystalline Silicon
Panel Supplier REC
EPC Party Goldbeck
O&M Counterparty
Brighter Green Engineering
Inverter Supplier SMA
Grid Operator
SSE Power Distribution
Landmead, Oxfordshire
Ownership 100%
ROCs 1.4
Acquisition Date December '14
Solar Panels 483,000
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier
GE Power Conversion
Grid Operator
SSE Power Distribution
Kencot, Oxfordshire
Ownership 100%
ROCs 1.4
Acquisition Date March '15
Solar Panels 144,000
Technology Polycrystalline Silicon
Panel Supplier Astronergy
EPC Party Conergy
O&M Counterparty
Brighter Green Engineering
Inverter Supplier SMA
Grid Operator
Southern Electric Power
Copley, Lincolnshire
Ownership 100%
ROCs 1.3
Acquisition Date June '15
Solar Panels 115,000
Technology Polycrystalline Silicon
Panel Supplier Renesola
EPC Party Cofely Fabricom N.V./S.A
O&M Counterparty
Cofely Fabricom N.V./S.A
Inverter Supplier SMA
Grid Operator
Western Power Distribution
Atherstone, Warwickshire
Ownership 100%
ROCs 1.4
Acquisition Date July '15
Solar Panels 154,000
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier SMA
Grid Operator
Western Power Distribution
Paddock Wood, Kent
Ownership 100%
ROCs 1.4
Acquisition Date July '15
Solar Panels 97,000
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier SMA
Grid Operator
UK Power Networks
Southam, Warwickshire
Ownership 100%
ROCs 1.4
Acquisition Date July '15
Solar Panels 103,000
Technology Thin film
Panel Supplier First Solar
EPC Party Belectric
O&M Counterparty Belectric
Inverter Supplier SMA
Grid Operator
Western Power Distribution
Port Farm, Wiltshire
Ownership 100%
ROCs 1.4
Acquisition Date August '15
Solar Panels 136,000
Technology Polycrystalline Silicon
Panel Supplier ReneSola
EPC Party Renesola UK Limited
O&M Counterparty
Renesola UK Limited
Inverter Supplier Schneider Electric
Grid Operator
SSE
Membury, Berkshire
Ownership 100%
ROCs 1.4
Acquisition Date September '15
Solar Panels 63,000
Technology Polycrystalline Silicon
Panel Supplier ReneSola
EPC Party Renesola UK Limited
O&M Counterparty
Renesola UK Limited
Inverter Supplier ABB
Grid Operator
SSE
Shotwick, Flintshire
Ownership 100%
ROCs 1.3
Acquisition Date February '17
Solar Panels 228,000
Technology Polycrystalline Silicon
Panel Supplier Jetion
EPC Party China Triumph International Engineering
Corporation ("CTIEC")
O&M Counterparty CTIEC
Inverter Supplier SMA
Grid Operator
Scottish Power
Sandridge, Wiltshire
Ownership 100%
ROCs 1.3
Acquisition Date February '17
Solar Panels 192,000
Technology Polycrystalline Silicon
Panel Supplier
Canadian Solar Inc: S-Energy
EPC Party Goldbeck
O&M Counterparty Goldbeck
Inverter Supplier Schneider Electric
Grid Operator
SSE
Wally Corner,
South
Oxfordshire
Ownership 100%
ROCs 1.2
Acquisition Date July '17
Solar Panels 18,000
Technology Polycrystalline Silicon
Panel Supplier Hanwa Q Cells
EPC Party Ethical Power
O&M Counterparty Ethical Power
Inverter Supplier SMA
Grid Operator
Southern Electric Power
Distribution (SSE)
Australia Asset Summaries
Bannerton, Victoria
Ownership 48.5%
Subsidy mechanism LGC
Aquisition Date September '17
Solar Panels 319,000
Technology
Monocrystalline Silicon panels
Panel Supplier
Hanwha Q-Cells
EPC contractor UGL Engineering
O&M contractor
UGL Engineering
Inverter Supplier SMA
Grid Operator
Powercor
Longreach, Queensland
Ownership 49.0%
Subsidy mechanism LGC
Aquisition Date October '17
Solar Panels 51,000
Technology
Monocrystalline Silicon panels
Panel Supplier
Canadian Solar
EPC contractor RCR
O&M contractor
RCR
Inverter Supplier SMA
Grid Operator
Ergon Energy
Oakey 1, Queensland
Ownership 49.0%
Subsidy mechanism LGC
Aquisition Date October '17
Solar Panels 88,200
Technology
Monocrystalline Silicon panels
Panel Supplier
Canadian Solar
EPC contractor RCR
O&M contractor
RCR
Inverter Supplier SMA
Grid Operator
Ergon Energy
Oakey 2, Queensland
Ownership 100%
Subsidy mechanism LGC
Aquisition Date October '17
Solar Panels 206,000
Technology
Monocrystalline Silicon panels
Panel Supplier
Canadian Solar
EPC contractor Canadian Solar
O&M contractor
Canadian Solar
Inverter Supplier SMA
Grid Operator
Ergon Energy
Independent Auditor's Report
to the members of Foresight Solar Fund Limited
1. OUR OPINION IS UNMODIFIED
We have audited the financial statements of Foresight Solar
Fund Limited ("the Company") for the year ended 31 December
2017 which comprise the Statement of Comprehensive Income, the
Statement of Financial Position, the Statement of Changes in
Equity, the Statement of Cash Flows and the related notes,
including the accounting policies in note 2.
In our opinion the financial statements:
-- give a true and fair view of the state of Company's affairs
as at 31 December 2017 and of its profit for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union;
and
-- have been properly prepared in accordance with the Companies
(Jersey) Law 1991.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) ("ISAs (UK&I)") and
applicable law. Our responsibilities are described below. We
believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion. Our audit
opinion is consistent with our report to the audit committee.
We were appointed as auditor by the directors on 11 February
2015. The period of total uninterrupted engagement is for the
4 financial years ended 31 December 2017. We have fulfilled
our ethical responsibilities under, and we remain independent of
the Company in accordance with UK ethical requirements including
the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard were
provided.
Overview
Materiality: GBP4.6m (2016: GBP3.5m)
financial statements as a whole 0.9% (2016: 1%) of Total Assets
Interest income GBP0.4m (2016: GBP0.3m)
Risks of material misstatement vs 2016
Recurring risks Valuation of Unquoted Investments < >
2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL
MISSTATEMENT
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the
financial statements and include the most significant assessed
risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team.
We summarise on the next page the key audit matter unchanged
from 2016, in arriving at our above audit opinion, together
with our key audit procedures to address those matters and, as
required for public interest entities, our results from those
procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely
for the purpose of, our audit of the financial statements as
a whole, and in forming our opinion thereon, and consequently
are incidental to that opinion, and we do not provide a
separate opinion on these matters.
The risk Our response
Investments Valuation of Unlisted Investments Our procedures included:
GBP408.5 million; (2016: GBP273.6m) 85% (2016: 78%) of the company's total assets (by Control design: Documenting and assessing the design
Refer to page 50 (Audit Committee Report), page 77-78 value) is held in investments where no quoted market and implementation of the investment valuation processes
(accounting policy) and page 82-90 (financial disclosures). price is available. and controls;
The unquoted investment is a 100% controlling interest Control observation: Attending the year end Audit
in Foresight Solar (UK Hold Co) Limited ("UK Hold Committee meeting where we assessed the effectiveness
Co"), a non-consolidated subsidiary company which of the Audit Committee's challenge and approval of
is measured at fair value, being the net assets of unlisted investment valuations;
UK Hold Co. Methodology choice: In the context of observed industry
85% (2016: 87%) of UK Hold Co's total assets (by value) best practice and the provisions of the International
are held in investments where no quoted market price Private Equity and Venture Capital Valuation Guidelines,
is available. The unquoted investments are 100% controlling we challenged the appropriateness of the valuation
interests in FS Holdco Limited ("FS Holdco"), FS Holdco basis selected;
2 Limited ("FS Holdco 2"), FS Holdco 3 Limited ("FS Our valuations experience: With the assistance of
Holdco 3") and FS Holdco 4 Limited ("FS Holdco 4"). our own valuation specialists, challenging the Investment
These are measured at fair value, being the fair value Manager on key judgements affecting investee company
of the net assets of FS Holdco, FS Holdco 2, FS Holdco valuations, such as discount factors and the useful
3 and FS Holdco 4. economic life of the assets. We compared key underlying
65% of FS Holdco 2's total assets (by value) is held financial data inputs to external sources, investee
in an investment where no quoted market price is available. company audited accounts and management information
The unquoted investment is a 100% controlling interest as applicable. We challenged the assumptions around
in FS Debtco Limited ("FS Debtco"). This is measured the sustainability of earnings based on the plans
at fair value, being the net assets of FS Debtco. of the investee companies and whether these are achievable,
70% of FS Holdco's, 100% of FS Holdco 4's and 74% and we obtained an understanding of existing and prospective
of FS Debtco's total assets (by value) are held in investee company cash flows to understand whether
investments where no quoted market price is available. borrowings can be serviced or refinancing may be required.
These are measured at fair value using discounted Our work included consideration of events which occurred
cash flow measurements or the price of a recent transaction. subsequent to the year end up until the date of this
Fair value is established in accordance with the International audit report;
Private Equity and Venture Capital Valuation Guidelines. Comparing valuations: Where a recent transaction has
There is a significant risk over the valuation of been used to value any holding, we obtained an understanding
the underlying investments [directly held by FS Holdco, of the circumstances surrounding those transactions
FS Holdco 4 and FS Debtco] and that is the key judgemental and whether it was considered to be on an arms-length
area that our audit focused on. basis and suitable as an input into a valuation; and
Assessing transparency: Consideration of the appropriateness,
in accordance with relevant accounting standards,
of the disclosures in respect of unquoted investments
and the effect of changing one or more inputs to reasonable
possible alternative valuation assumptions.
Our results
We found the Company's valuation of unquoted investments
to be acceptable.
3. OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE
OF OUR AUDIT
Materiality for the financial statements as a whole was set at
GBP4.6m (2016: GBP3.50m), determined with reference to a
benchmark of Total Assets, of which it represents 0.9% (2016:
1%).
In addition, we applied materiality of GBP0.40m (2016: GBP0.30m)
to interest income from investments for which we believe
misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to
influence the Company's members' assessment of the financial
performance of the Company.
We agreed to report to the Audit Committee any uncorrected
identified misstatements exceeding GBP230,000 (2016: GBP175,000),
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Our audit of the company was undertaken to the materiality
level specified above and was performed at the office of the
Manager in London.
4. WE HAVE NOTHING TO REPORT ON GOING CONCERN
We are required to report to you if:
-- we have anything material to add or draw attention to in
relation to the directors' statement in note 2 to the
financial statements on the use of the going concern basis of
accounting with no material uncertainties that may cast
significant doubt over the Company's use of that basis for a
period of at least twelve months from the date of approval of
the financial statements; or
-- the related statement under the Listing Rules set out on page
48 of the annual report is materially inconsistent with our
audit knowledge
We have nothing to report in these respects.
5. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE
ANNUAL REPORT
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
-- the Directors' confirmation within the viability statement on
page 48 of the annual report that they have carried out a
robust assessment of the principal risks facing the Company,
including those that would threaten its business model, future
performance, solvency and liquidity;
-- the Principal Risks and Uncertainties disclosures describing
these risks and explaining how they are being managed and
mitigated; and
-- the directors' explanation in the name of viability statement
of how they have assessed the prospects of the Company, over
what period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Under the Listing Rules we are required to review the
viability statement. We have nothing to report in this respect.
Corporate governance disclosures
We are required to report to you if:
-- we have identified material inconsistencies between the knowledge
we acquired during our financial statements audit and the
directors' statement that they consider that the annual report
and financial statements taken as a whole are fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy; or
-- the section of the annual report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
-- a corporate governance report has not been prepared by the
company.
We are required to report to you if the Corporate Governance
Report does not properly disclose a departure from the eleven
provisions of the UK Corporate Governance Code specified by the
Listing Rules for our review.
We have nothing to report in these respects.
Based solely on our work on the other information described
above:
-- with respect to the Corporate Governance Report disclosures
about internal control and risk management systems in relation
to financial reporting processes and about share capital
structures:
-- we have not identified material misstatements therein; and
-- the information therein is consistent with the financial
statements; and
-- in our opinion, the Corporate Governance Report has been
prepared in accordance with relevant rules of the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority.
6. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON WHICH
WE ARE REQUIRED TO REPORT BY EXCEPTION
Under the Companies (Jersey) Law 1991 we are required to
report to you if, in our opinion:
-- proper accounting records have not been kept by the Company, or
-- proper returns adequate for our audit have not been received
from branches not visited by us; or
-- the Company's accounts are not in agreement with the accounting
records and returns; or
-- we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
7. RESPECTIVE RESPONSIBILITIES
Directors' responsibilities
As explained more fully in their statement set out on page 51
of the annual report, the directors are responsible for: the
preparation of the financial statements including being satisfied
that they give a true and fair view; such internal control as
they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error; assessing the Company's ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern
basis of accounting unless they either intend to liquidate the
Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see
below), or error, and to issue our opinion in an auditor's
report. Reasonable assurance is a high level of assurance, but
does not guarantee that an audit conducted in accordance with
ISAs (UK&I) will always detect a material misstatement when it
exists. Misstatements can arise from fraud, other irregularities
or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the
financial statements.
A fuller description of the scope of an audit of financial
statements is provided on our website at
www.kpmg.com/uk/auditscopeother2014.
8. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR
RESPONSIBILITIES
This report is made solely to the Company's members, as a
body in accordance with Article 113A of the Companies (Jersey)
Law 1991. Our audit work has been undertaken so that we might
state to the Company's members those matters we are required
to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the
Company and the Company's members, as a body, for our audit
work, for this report, or for the opinions we have formed.
Henry Todd
Senior Statutory Auditor
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
21 February 2018
Statement of Comprehensive Income
For the year ended 31 December 2017
31 December 31 December
2017 2016
Notes GBP'000 GBP'000
Revenue
Interest income 4 35,421 29,462
Gain on investments at fair value through profit or
loss 14 4,650 4,775
40,071 34,237
Expenditure
Management fees 5 (4,277) (3,054)
Administration and accountancy expenses 6 (212) (228)
Directors' fees 7 (155) (140)
Other expenses 8 (340) (76)
Total expenditure (4,984) (3,498)
Profit before tax for the year 35,087 30,739
Taxation - -
Profit and total comprehensive income for the year 35,087 30,739
Earnings per Ordinary Share (pence per Share) 9 8.80 10.38
All items above arise from continuing operations, there have
been no discontinued operations during the year.
Statement of Financial Position
As at 31 December 2017
31 December 31 December
2017 2016
Notes GBP'000 GBP'000
Assets
Non-current assets
Investments held at fair value through
profit or loss 14 408,464 273,614
Total non-current assets 408,464 273,614
Current assets
Interest receivable 10 57,626 33,044
Trade and other receivables 11 1,933 4,847
Cash and cash equivalents 12 14,669 39,381
Total current assets 74,228 77,272
Total assets 482,692 350,886
Equity
Retained earnings 26,793 11,767
Stated capital 18 454,515 339,003
Total equity 481,308 350,770
Liabilities
Current liabilities
Trade and other payables 13 1,384 116
Total current liabilities 1,384 116
Total liabilities 1,384 116
Total equity and liabilities 482,692 350,886
Net Asset Value per Ordinary Share 19 107.0 102.9
The Financial Statements were approved by the Board of
Directors and signed on its behalf on 21 February 2018 by:
Alexander Ohlsson
Chairman
The accompanying notes form an integral part of these Financial
Statements.
Statement of Changes in Equity
For the year ended 31 December 2017
Stated Capital Retained Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January
2017 339,003 11,767 350,770
Total comprehensive income
for the year:
Profit for the year - 35,087 35,087
Transactions with owners,
recognised directly in
equity:
Dividends paid in the
period 22 - (20,061) (20,061)
Issue of Ordinary Shares 18 117,539 - 117,539
Capitalised issue costs 18 (2,027) - (2,027)
Balance as at 31 December
2017 454,515 26,793 481,308
For the period 1 January 2016 to 31 December 2016:
Stated Capital Retained Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January
2016: 279,403 (297) 279,106
Total comprehensive income
for the year:
Profit for the year - 30,739 30,739
Transactions with owners,
recognised directly in
equity:
Dividends paid in the year 22 - (18,675) (18,675)
Issue of Ordinary Shares 18 60,781 - 60,781
Capitalised issue costs 18 (1,181) - (1,181)
Balance as at 31 December
2016 339,003 11,767 350,770
The accompanying notes form an integral part of these Financial
Statements.
Statement of Cash Flows
For the year ended 31 December 2017
31 December 31 December
2017 2016
GBP'000 GBP'000
Profit for the year before tax from continuing
operations 35,087 30,739
Adjustments for:
Unrealised gain on investments (4,650) (4,775)
Operating cash flows 30,437 25,964
Increase in interest receivable (24,582) (28,398)
Decrease in trade and other receivables 2,914 7,305
Increase/(decrease) in trade and other payables 1,268 (160)
Net cash inflow from operating activities 10,037 4,711
Investing activities
Increase in loan notes to subsidiary - (34,000)
(Increase)/decrease in shareholder loan to
subsidiary (130,200) 14,821
Net cash outflow from investing activities (130,200) (19,179)
Financing activities
Dividends paid (20,061) (18,675)
Issue costs paid (2,027) (1,181)
Proceeds from issue of shares 117,539 60,781
Net cash inflow from financing activities 95,451 40,925
Net (decrease)/increase in cash and cash equivalents (24,712) 26,457
Cash and cash equivalents at the beginning of the
year 39,381 12,924
Cash and cash equivalents at the end of the year 14,669 39,381
The accompanying notes form an integral part of these Financial
Statements.
Notes to the Financial Statements
FOR THE YEARED 31 DECEMBER 2017
1. Company information
Foresight Solar Fund Limited (the "Company") is a closed-ended
company with an indefinite life and was incorporated in Jersey
under the Companies Law (Jersey) 1991, as amended, on 13
August 2013, with registered number 113721. The address of the
registered office is: 28 Esplanade, St Helier, Jersey, JE4 2QP.
The Company has one investment, Foresight Solar (UK Hold Co)
Limited ("UK Hold Co"). Up to 31 March 2016, UK Hold Co
invested in further holding companies (the "SPVs") which then
invested in the underlying solar investments. On 11 January
2016, UK Hold Co incorporated a subsidiary, FS Holdco Limited
("FS Holdco"). On 31 March 2016, UK Hold Co transferred all
equity investments and related shareholder loans in the SPVs to
FS Holdco in return for 16 ordinary shares issued by FS
Holdco Limited and a loan receivable on a pari passu basis.
On 1 December 2016, UK Hold Co incorporated a further
subsidiary, FS Holdco 2 Limited ("FS Holdco 2"), which in turn
incorporated a subsidiary, FS Debtco Limited ("FS Debtco"), on
2 December 2016. FS Debtco invested in SPVs which then
invested in the underlying solar investments.
During the year ended 31 December 2017, UK Hold Co
incorporated two additional subsidiaries, FS Holdco 3 Limited
("FS Holdco 3"), on 31 August 2017 and FS Holdco 4 Limited
("FS Holdco 4"), on 1 September 2017. As at 31 December 2017,
there had been no activities in FS Holdco 3. FS Holdco 4
invested in SPVs which then invested in the underlying solar
investments.
The principal activity of the Company, UK Hold Co, FS Holdco,
FS Holdco 2, FS Debtco, FS Holdco 3, FS Holdco 4 and the
SPVs (together "the Group") is investing in operational UK
ground based solar power plants.
2. Summary of significant accounting policies
2.1 Basis of presentation
The Financial Statements for the year ended 31 December 2017
(the "Financial Statements") have been prepared in accordance
with International Financial Reporting Standards as adopted by
the European Union ("IFRS") which comprise standards and
interpretations issued by the International Accounting Standards
Board ("IASB"), and International Accounting Standards and
Standing Interpretations approved by the International Financial
Reporting Interpretation Committee that remain in effect and to
the extent they have been adopted by the European Union. The
Financial Statements have been prepared on the historical cost
convention as modified for the measurement of certain financial
instruments at fair value through profit or loss and in
accordance with the provisions of the Companies (Jersey) Law
1991.
2.2 Going concern
The Directors have considered the Company's cash flow
projections for a period of no less than twelve months from
the date of approval of these Financial Statements together
with the Company's borrowing facilities. These projections show
that the Company will be able to meet its liabilities as they
fall due.
The Directors have therefore prepared the Financial Statements
on a going concern basis.
2.3 Changes in accounting policies and disclosures
New standards, interpretations and amendments adopted by the
Company
No standards, interpretations or amendments newly applicable for
financial periods beginning 1 January 2017 were considered to
have a material impact on the Company.
New and revised IFRSs in issue but not yet effective
The Company has not early adopted any standard, interpretation
or amendment that has been issued but is not yet effective.
At the date of authorisation of these Financial Statements, the
following standards were in issue but not yet effective, and
will be applicable to the Company.
-- IFRS 15, 'Revenue from Contracts with Customers'.
IFRS 15 was endorsed on 22 September 2016 and effective for
accounting periods beginning on or after 1 January 2018. The
objective of IFRS 15 is to establish the principles that an
entity shall apply to report useful information to users of
financial statements about the nature, amount, timing, and
uncertainty of revenue and cash flows arising from a contract
with a customer. A five-step model framework is adopted to
recognise revenue based on the amount of consideration to which
the entity expects to be entitled to in exchange for goods or
services promised to customers.
Scope:
IFRS 15 applies to all contracts with customers except those
within the scope of IAS 17 Leases, IFRS 9 Financial
Instruments, IFRS 10 Consolidated Financial Statements, IFRS 11
Joint Arrangements, IAS 27 Separate Financial Statements, IAS 28
Investments in Associates and Joint Ventures, IFRS 4 Insurance
Contracts and non-monetary exchanges between entities in the
same line of business to facilitate sales to customers.
Application to the Company:
The adoption of IFRS 15 is not expected to have a material
impact on the Company's two revenue streams:
- Interest revenue earned from loans that have been issued
to underlying Companies within the Group; and
- Gains on its investments at fair value through profit
and loss.
IAS 18 currently specifies that interest revenue is recognised
using the effective interest method. The measurement principles
for interest revenue have been included in IFRS 9 which
similarly will require that interest revenue be recognised using
the effective interest method.
Revenue arising from changes in the fair value of financial
assets and financial liabilities or their disposal is
specifically excluded from the scope of IAS 18. Revenue from
financial instruments and other contractual rights or obligations
within the scope of IFRS 9 are specifically excluded from the
scope of IFRS 15.
As both revenue streams falls within the scope of IFRS 9 and
thus specifically excluded from the scope of IFRS 15, the
adoption of IFRS 15 is not expected to have a material impact
on the Company.
-- IFRS 9, 'Financial Instruments - Classification and
Measurement'.
IFRS 9 was issued in July 2014 and is effective for annual
periods beginning on or after 1 January 2018 with early
adoption permitted but not elected by the Company. IFRS 9 was
issued to replace IAS 39 Financial Instruments: Recognition and
Measurement. It includes requirements for recognition and
measurement, impairment, derecognition and general hedge
accounting.
Initial measurement of financial instruments.
IFRS 9 contains a new classification and measurement approach
for financial assets that reflects the business model in which
assets are managed and their cash flow characteristics. IFRS 9
contains three principal classification categories for financial
assets: amortised cost, fair value through profit or loss and
fair value through other comprehensive income. The standard
replaces the existing IAS 39 categories of held to maturity,
loans and receivables , fair value through profit or loss,
amortised cost and available for sale.
Application to the Company:
The adoption of IFRS 9 is not expected to have a material
impact on the Company's financial instruments:
Investments held at fair value through profit or loss
The Company's investment in UK Holdco (which comprises both
debt and equity) is presently held at fair value through
profit or loss under IAS 39. In terms of IFRS 9, the
investment in its entirety will continue to be held at fair
value through profit or loss as the equity portion of the
investment is not held for trading nor will the fair value
through other comprehensive income option be elected and the
debt portion of the investment meets the following conditions;
- the fair value through profit or loss classification
eliminates an accounting mismatch; and
- the debt investment forms part of a group of assets
that are managed and performance evaluated on a fair value
basis.
No change is therefore expected in the recognition or
measurement of investments held at fair value through profit or
loss.
Interest receivable, trade and other receivables, cash and cash
equivalents
Interest receivable, trade and other receivables and cash and
cash equivalents are presently measured at amortised cost under
IAS 39. Under IFRS 9 assets can be classified under amortised
cost under the following conditions;
- The assets must be held in a business model whose
objective is to collect the contractual cash flows i.e. "held
to collect"; and
- the contractual cash flows must represent repayment of
the principal and interest on the principal amount outstanding
These assets by their nature meet the above conditions and
will therefore continue to be held at amortised cost under
IFRS 9.
Trade and other payables
Under IAS 39, trade and other payables are measured at
amortised cost. This is not expected to change with the
application of IFRS 9.
Conclusion:
Taking the above into account, the adoption of IFRS 9 is not
expected to have a material impact on the Company's results.
Upon adoption, additional disclsures may be required within the
Accounting Policies note in the Annual Report.
2.4 Consolidation
Associates
Associates are entities over which the Company has significant
influence, being the power to participate in the financial and
operating policy decisions of the investee (but not control or
joint control).
Subsidiaries
Subsidiaries are entities over which the Company has control.
The Company controls an entity when the Company is exposed to,
or has the rights to, variable returns from its involvement
with the entity and has the ability to affect those returns
through its power over the entity.
Investment Entity
Qualifying entities that meet the definition of an investment
entity are not required to produce a consolidated set of
Financial Statements and instead account for subsidiaries at
fair value through profit or loss.
The defined criteria of an 'investment entity' are as follows:
-- It holds more than one investment;
-- It has more than one investor;
-- It has investors that are not related parties to the
entity; and
-- It has ownership interests in the form of equity or
similar interests.
However, the absence of one or more of these characteristics
does not prevent the entity from qualifying as an 'investment
entity', provided all other characteristics are met and the
entity otherwise meets the definition of an 'investment entity':
-- It obtains funds from one or more investors for the
purpose of providing those investor(s) with professional
investment management services;
-- It commits to its investor(s) that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both; and
-- It measures and evaluates the performance of
substantially all of its investments on a fair value basis.
As discussed in note 1, the Company has one direct subsidiary,
a 100% controlling interest in UK Hold Co and a number of
indirect subsidiaries.
Under IFRS 10 "Consolidated Financial Statements", the directors
deem that the Company is an investment entity and therefore
the Company does not consolidate its subsidiary but carries it
at fair value through profit or loss. The Company does not
meet all the defined criteria of an 'investment entity' as the
Company only has one investment. However, the Directors deem
that the Company is nevertheless an 'investment entity' as the
remaining requirements have been met and, through the Group,
there is a diverse investment portfolio which will fill the
criteria of having more than one investment. Therefore, the
Company qualifies as an 'investment entity'.
As UK Hold Co is not consolidated, its subsidiaries (plus
their underlying investments) are not separately presented at
fair value through profit or loss in the Company's accounts.
However accounting standards require that if an investment
entity is the parent of another investment entity, the parent
shall also provide the additional disclosures required by IFRS
12 Interest in unconsolidated subsidiaries. These disclosures are
set out in notes 16 and 17.
2.5 Income
Income comprises interest income (bank interest and loan
interest). Interest income is recognised when it is probable
that the economic benefits will flow to the Company and the
amount of revenue can be measured reliably. Loan interest
income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount on initial
recognition.
2.6 Expenses
Operating expenses are the Company's costs incurred in
connection with the on-going management of the Company's
investments and administrative costs. Operating expenses are
accounted for on an accruals basis.
The Company's management and administration fees, finance costs
and all other expenses are charged through the Statement of
Comprehensive Income.
Acquisition costs of assets are capitalised on purchase of
assets. Costs directly relating to the issue of Ordinary Shares
are charged to the Group's stated capital reserve.
2.7 Taxation
The Company is currently registered in Jersey. The Company is
taxed at 0% which is the general rate of Corporation tax in
Jersey.
2.8 Functional and presentational currency
The Directors consider the Company's functional currency to be
Pounds Sterling ("GBP") as this is the currency in which the
majority of the Company's assets and liabilities and significant
transactions are denominated. The Directors have selected GBP as
the Company's presentation currency.
Indirect subsidiaries of the Company may have assets and
liabilities of foreign operations which will impact the
investment value on the Company's balance sheet. The assets and
liabilities of these foreign operations, including fair value
adjustments arising on acquisition, are translated into GBP at
the exchange rates at the reporting date. The income and
expenses of foreign operations are translated into GBP at the
exchange rates at the dates of the transactions.
2.9 Financial Assets and Liabilities
2.9.1 Financial asset at fair value through profit or loss
The financial asset at fair value through profit or loss
consists of one investment in UK Hold Co. The asset in this
category is classified as non-current.
(a) Recognition and measurement
Purchases and sales of financial assets at fair value through
profit or loss are recognised on the trade-date (the date on
which the Company commits to purchase or sell the asset).
Investments are initially and subsequently recognised at fair
value.
Fair value is defined as the amount for which an asset could
be exchanged between knowledgeable willing parties in an arm's
length transaction.
The fair value of UK Hold Co is made up of the fair value
of its net assets. UK Hold Co has four direct subsidiaries -
FS Holdco, FS Holdco 2, FS Holdco 3 and FS Holdco 4, and FS
Holdco 2 has one direct subsidiary - FS Debtco Limited. FS
Holdco is fair valued using its net asset value as reported
at period end, with adjustments to its long term external debt
to reflect the fact that the carrying value at amortised cost
is not considered to be the best approximation of its fair
value. FS Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4
are fair valued using their net asset value as reported at
period end.
The fair value of the underlying investments held by the
Company's subsidiaries, which impact the value of the Company's
subsidiaries, are determined by using valuation techniques. The
Directors calculate the fair value of the investments based on
information received from the Investment Manager. The Investment
Manager's assessment of fair value of investments is determined
in accordance with the International Private Equity and Venture
Capital ("IPEVC") Valuation Guidelines, using a Discounted Cash
Flow valuation methodology. As described in more detail in note
17, valuations such as these rely on inputs relating to the
output of the asset (including assumptions such as solar
irradiation and technological performance of the asset), power
prices, operating costs, discount and inflation rates applied to the cash flows, and the duration of the useful economic life of the asset. The Board and the Investment Manager consider that the discounted cash flow valuation methodology used in deriving a fair value is in accordance with the fair value requirements of IAS 39. The investments held by FS Holdco 4 were valued at cost as at 31 December 2017 as these projects are not yet operational. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the Statement of Comprehensive Income within 'gains/(losses) on investments at fair value through profit or loss' in the period in which they arise. (b) Change in valuation methodology A change in a valuation technique or its application is appropriate if the change results in a measurement that is equally or more representative of fair value in the circumstances. Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate in accordance with IAS 8. However, the disclosures in IAS 8 for a change in accounting estimate are not required for revisions resulting from a change in a valuation technique or its application. Due to the legacy capital structure of the group, the subsidiaries have historically adopted an equity discount rate that discounted expected future cash flows of the underlying investments before the cost of debt was considered. Under this technique the valuation of the investments were calculated by discounting unlevered project level cash flows with an equity discount rate. The Board considers that applying a leveraged WACC discount rate to both the underlying assets linked to long term debt and the long term debt better reflects the current and anticipated capital structure of the Company and provides greater accuracy when valuing assets with long term debt. Therefore, the new valuation methodology uses a levered WACC discount rate for assets with long term debt and an unchanged equity discount rate for assets funded through short term debt facilities and/or equity. The above change in valuation technique resulted in a GBP22,726,769 decrease in the fair value of FS Holdco's investments which, when combined with the fair value adjustment to FS Holdco's long term debt, resulted in a GBP11,087,422 net increase in the fair value of UK Hold Co's incestment in FS Holdco which directly impacts the value of the Company's investment at fair value through profit or loss. (b) Derecognition Financial assets at fair value through profit or loss (in whole or in part) are derecognised either: -- when the Company has transferred substantially all the risks and rewards of ownership; or -- when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or -- when the contractual right to receive cash flow has expired. Any gain or loss on derecognition is taken to the Statement of Comprehensive Income. 2.9.2 Financial assets and liabilities at amortised cost The financial assets and liabilities at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They comprise trade and other receivables, interest receivable, cash and cash equivalents and trade and other payables. Trade and other receivables are rights to receive compensation for goods or services that have been provided in the ordinary course of business to customers. Accounts receivable are classified as current assets if receipt is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets. Interest receivable is the right to receive payments at fixed or variable interest rates on loans issued by the Company. Interest receivable is classified as current if the receipt is due within one year or less. If not, it is presented as a non-current asset. Cash and cash equivalents comprise cash in hand. Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. (a) Recognition and measurement Trade and other receivables are initially recognised at cost plus transaction costs that are directly attributable to the acquisition, and subsequently carried at amortised cost, less provision for impairment. Cash is initially and subsequently recognised at cost. Trade and other payables are initially and subsequently recognised at amortised cost. (b) Derecognition Trade and other receivables/payables are derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the Statement of Comprehensive Income. 2.10 Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares have a nil par value. 2.11 Dividend distribution Dividend distributions to the Company's shareholders are recognised as a liability in the Company's Financial Statements in the period in which the dividends are approved by the Company's shareholders. 3. Critical accounting estimates and judgements The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The Board considers that the only areas where management make critical estimates and judgements that may have a significant effect on the financial statements are in relation to the valuation of financial assets at fair value through profit and loss, which is discussed in detail in note 2.9.1 and the determination that the Company meets the definition of an investment entity, which is discussed in detail in note 2.4. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and underlying assumptions are reviewed on an ongoing basis. The Board considers that the determination that the Company meets the definition of an investment entity involves significant judgements because the entity does not possess all the typical characteristics of an investment entity. While the absence of one or more of the typical characteristics of an investment entity described in IFRS 10 Consolidated Financial Statements does not immediately disqualify an entity from being classified as an investment entity. The entity is required to disclose its reasons for concluding that it is nevertheless an investment entity if one or more of these characteristics are not met. In order to reach that conclusion of whether the Company meets the definition of an investment entity the Board had to make significant judgements. The Board considers that the fair value of Investments not quoted in an active market involves critical accounting estimates and judgement because it is determined by the Directors using their own models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. Models use observable data, to the extent practicable. However, they also rely on significant unobservable inputs about the output of the asset (including assumptions such as solar irradiation and technological performance of the asset), power prices, operating costs, discount and inflation rates applied to the cash flows, and the duration of the useful economic life of the asset. Furthermore, changes in these inputs and assumptions could affect the reported fair value of financial instruments. The determination of what constitutes 'observable' requires significant judgement by the Fund. The Fund 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.
4. Interest income
31 December 2017 31 December 2016
GBP'000 GBP'000
Bank interest income 25 13
Interest on loan notes 32,246 27,314
Interest on shareholder loan 3,150 2,135
35,421 29,462
Loan notes were issued by the company to UK Hold Co for the
purchase of investments. Interest accrues at 9% per annum in
arrears on each Interest Payment Date (28 / 29 February and
31 August each year). Where interest is not paid on payment
date, it will compound and future interest shall accrue at 11%
per annum from the due date up to the date of actual payment
compounding on each Interest Payment Date. The loan notes
balance at year end on which interest is charged is
GBP250,000,000 (2016: GBP250,000,000). These loans form part of
the fair value of the investments as per note 14.
A Shareholder loan is created when the total amount paid by
the Company on behalf of UK Hold Co to acquire the underlying
investments is more than the total loan notes issued by the
Company to UK Hold Co. Interest was previously accrued at 9%
per annum, decreasing to 2% per annum with effect from 1
April 2017, and is repayable in full on demand. The
shareholder loan balance at year end is GBP154,110,000 (2016:
GBP23,910,000). These loans form part of the fair value of the
investments as per note 14.
5. Management fees
The Investment Manager of the Company, Foresight Group CI
Limited, receives an annual fee of 1% of the Net Asset Value
("NAV") of the Company. This is payable quarterly in arrears
and is calculated based on the published quarterly NAV. For
the year ended 31 December 2017, the Investment Manager was
entitled to a management fee of GBP4,276,808 (2016:
GBP3,053,551) of which GBP1,257,741 was outstanding as at 31
December 2017 (2016: GBP17,066).
6. Administration and Accountancy fees
Under an Administration Agreement, the Administrator of the
Company, JTC (Jersey) Limited, is entitled to receive minimum
annual administration and accountancy fees of GBP156,000 payable
quarterly in arrears. For the year ended 31 December 2017,
total administration and accountancy fees were GBP211,534 (2016:
GBP227,452) of which GBP39,000 was outstanding as at 31
December 2017 (2016: GBP50,002).
7. Directors' fees
31 December 2017 31 December 2016
GBP'000 GBP'000
Peter Dicks 40 35
Alexander Ohlsson 65 60
Christopher Ambler 50 45
155 140
8. Other Expenses
31 December 2017 31 December 2016
GBP'000 GBP'000
Legal and professional fees 271 27
Other expenses 69 49
340 76
Included within legal and professional fees is GBP20,500 (2016:
GBP24,400) relating to the audit of these financial statements.
The total audit fee pertaining to the group is GBP88,938 for
the year ended 31 December 2017 (2016: GBP65,900).
There were no other fees paid to the auditors for non-audit
services (2016: Nil).
9. Earnings per Ordinary share - basic and diluted
The basic and diluted profits per Ordinary Share for the
Company are based on the profit for the period of
GBP35,086,596 (2016: GBP30,738,374) and on 398,908,689 (2016:
296,123,500) Ordinary Shares, being the weighted average number
of shares in issue during the period.
10. Interest receivable
31 December 2017 31 December 2016
GBP'000 GBP'000
Interest receivable on loan notes 48,746 27,314
Interest receivable on shareholder loan 8,880 5,730
57,626 33,044
11. Trade and other receivables
31 December 2017 31 December 2016
GBP'000 GBP'000
Prepaid expenses 16 -
Amounts due from subsidiaries* 1,146 4,694
Other receivables 771 153
1,933 4,847
*Amounts due from subsidiaries are unsecured, interest free and
repayable on demand.
12. Cash and cash equivalents
31 December 2017 31 December 2016
GBP'000 GBP'000
Cash at bank 14,669 39,381
14,669 39,381
13. Trade and other payables
31 December 2017 31 December 2016
GBP'000 GBP'000
Accrued expenses 1,384 116
1,384 116
14. Investments at fair value through profit or loss
The following table presents the Company's investments at fair
value through profit or loss:
31 December 2017 31 December 2016
GBP'000 GBP'000
Investment in UK Hold Co Equity - -
Loans 408,464 273,614
408,464 273,614
Book cost as at 1 January 273,909 254,730
Opening Investment Holding losses (295) (5,070)
Valuation as at 1 January 273,614 249,660
Movements during the year
Purchase at cost (loans drawn down) 130,200 34,000
Disposal proceeds - (14,821)
Investment holding gains 4,650 4,775
Valuation as at 31 December 408,464 273,614
Book cost as at 31 December 404,109 273,909
Closing investment holding gains/(losses) 4,355 (295)
408,464 273,614
The Company has one investment in Foresight Solar (UK Hold Co)
Limited ("UK Hold Co"). This investment consists of both debt
and equity and is not quoted in an active market. Accordingly,
the investment in UK Hold Co has been valued using its net
assets.
In turn, UK Hold Co has four investments in FS Holdco Limited
("FS Holdco"), FS Holdco 2 Limited ("FS Holdco 2"), FS Holdco
3 Limited ("FS Holdco 3") and FS Holdco 4 Limited ("FS Holdco
4"), and FS Holdco 2 has one investment in FS Debtco Limited
("FS Debtco"). These investments also consist of both debt and
equity and are not quoted in an active market. FS Holdco is
fair valued using its net asset value as reported at period
end, with adjustments to its long term external debt to
reflect the fact that the carrying value at amortised cost is
not considered to be the best approximation of its fair value.
FS Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4 are
fair valued using their net asset value as reported at period
end.
In turn, FS Holdco, FS Debtco and FS Holdco 4's investment
portfolios consist of unquoted investments in solar projects,
the valuations of which are based on a discounted cash flow
methodology (as set out in note 16).
Fair value hierarchy
IFRS 13 "Fair Value Measurement" requires disclosures relating
to fair value measurements using a three-level fair value
hierarchy. The level within which the fair value measurement is
categorised in its entirety is determined on the basis of the
lowest level input that is significant to the fair value
measurement. Assessing the significance of a particular input
requires judgement, considering factors specific to the asset or
liability. The following table shows investments recognised at
fair value, categorised between those whose fair value is based
on:
(a) Level 1 - Quoted (unadjusted) market prices in active
markets for identical assets or liabilities;
(b) Level 2 - Valuation techniques for which the lowest
level input that is significant to the fair value measurement
is directly or indirectly observable; and
(c) Level 3 - Valuation techniques for which the lowest
level input that is significant to the fair value measurement
is unobservable.
All investments held at fair value through profit or loss are
classified as level 3 within the fair value hierarchy.
As UK Hold Co's net asset value is not considered observable
market data the investment in UK Hold Co has been classified
as level 3. There were no movements between levels during the
year.
As at 31 December 2017:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investment - - 408,464 408,464
- - 408,464 408,464
As at 31 December 2016:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investment - - 273,614 273,614
- - 273,614 273,614
Sensitivity Analysis
Due to the nature of the Group structure and the underlying
valuation basis of UK Hold Co, FS Holdco, FS Holdco 2, FS
Debtco, FS Holdco 3, FS Holdco 4 and the underlying solar
project investments, the valuation of the Company's investment
at fair value through profit or loss is directly linked to
the valuation of the underlying solar investments. Therefore,
the unobservable inputs driving the valuation of the Company's
investments in UK Hold Co are directly attributable to the
valuation of the unquoted investments in FS Holdco, FS Debtco
and FS Holdco 4 which is discussed further in note 16.
15. Subsidiaries and associates
Direct or
indirect Country of Principal Proportion
Name holding incorporation activity of shares and voting rights held
Foresight Solar
(UK Hold Co)
Limited ("UK Holding
Hold Co") Direct UK Company 100%
FS Holdco Limited Holding
("FS Holdco") Indirect UK Company 100%
FS Holdco 2
Limited ("FS Holding
Holdco 2") Indirect UK Company 100%
FS Debtco Limited Holding
("FS Debtco") Indirect UK Company 100%
FS Holdco 3
Limited ("FS Holding
Holdco 3") Indirect UK Company 100%
FS Holdco 4
Limited ("FS Holding
Holdco 4") Indirect UK Company 100%
FS Wymeswold SPV Holding
Limited Indirect UK Company 100%
FS Castle Eaton SPV Holding
Limited Indirect UK Company 100%
FS Pitworthy SPV Holding
Limited Indirect UK Company 100%
FS Highfields SPV Holding
Limited Indirect UK Company 100%
FS High Penn SPV Holding
Limited Indirect UK Company 100%
FS Hunter's Race SPV Holding
Limited Indirect UK Company 100%
FS Spriggs SPV Holding
Limited Indirect UK Company 100%
FS Bournemouth SPV Holding
Limited Indirect UK Company 100%
FS Landmead SPV Holding
Limited Indirect UK Company 100%
SPV Holding
FS Kencot Limited Indirect UK Company 100%
SPV Holding
FS Copley Limited Indirect UK Company 100%
FS Port Farms SPV Holding
Solar Limited Indirect UK Company 100%
FS Membury SPV Holding
Limited Indirect UK Company 100%
FS Southam Solar SPV Holding
Limited Indirect UK Company 100%
FS Atherstone SPV Holding
Solar Limited Indirect UK Company 100%
FS Paddock Wood
Solar Farm SPV Holding
Limited Indirect UK Company 100%
Atherstone Hold SPV Holding
Co Limited Indirect UK Company 100%
Southam Hold Co SPV Holding
Limited Indirect UK Company 100%
Paddock Wood Hold SPV Holding
Co Limited Indirect UK Company 100%
Shotwick Solar SPV Holding
Limited Indirect UK Company 100%
Sandridge Solar SPV Holding
Power Limited Indirect UK Company 100%
Acquisition Co 1 SPV Holding
Limited Indirect UK Company 100%
Acquisition Co 2 SPV Holding
Limited Indirect UK Company 100%
Acquisition Co 2 SPV Holding
Limited Indirect UK Company 100%
Foresight
Bannerton Pty SPV Holding
Limited Indirect UK Company 48.50%
Wymeswold Solar
Farm Limited
("Wymeswold") Indirect UK Investment 100%
Castle Eaton
Solar Farm
Limited ("Castle
Eaton") Indirect UK Investment 100%
Pitworthy Solar
Farm Limited
("Pitworthy") Indirect UK Investment 100%
Highfields Solar
Farm Limited
("Highfields") Indirect UK Investment 100%
High Penn Solar
Farm Limited
("High Penn") Indirect UK Investment 100%
Direct or
indirect Country of Principal Proportion
Name holding incorporation activity of shares and voting rights held
Hunter's Race Solar
Farm Limited
("Hunter's Race") Indirect UK Investment 100%
Spriggs Solar Farm
Limited
("Spriggs") Indirect UK Investment 100%
Bournemouth Solar
Farm Limited
("Bournemouth") Indirect UK Investment 100%
Landmead Solar Farm
Limited
("Landmead") Indirect UK Investment 100%
Kencot Hill Solar
Farm Limited
("Kencot") Indirect UK Investment 100%
Copley Solar
Limited
("Copley") Indirect UK Investment 100%
Port Farms Solar
Limited (Port
Farm") Indirect UK Investment 100%
Membury Solar
Limited
("Membury") Indirect UK Investment 100%
Atherstone Solar
Farm Ltd
("Atherstone") Indirect UK Investment 100%
Southam Solar Farm
Ltd ("Southam") Indirect UK Investment 100%
Paddock Wood Solar
Farm Ltd ("Paddock
Wood") Indirect UK Investment 100%
Shotwick Solar
Limited ("Shotwick
Solar") Indirect UK Investment 100%
Sandridge Solar
Power Limited
("Sandridge") Indirect UK Investment 100%
SSR Wally Corner
Limited ("SSR
Wally") Indirect UK Investment 100%
Foresight Solar
Australia Pty
Limited Indirect Australia Investment 100%
Longreach Asset
Company Pty
Limited Indirect Australia Investment 49%
Oakey 1 Asset
Company Pty
Limited Indirect Australia Investment 49%
RE Oakey Pty
Limited Indirect Australia Investment 100%
16. Interests in unconsolidated structured entities
Year ended 31 December 2017
The following table represents the fair values of the
investments held by FS Holdco Limited as required by IFRS12.
Cost at 1 January 2017 Additions / (Disposals) Cost as at 31 December 2017 Unrealised gain/(loss) as at 1 January 2017 Movement on unrealised gain/(loss) Unrealised gain/(loss) as at 31 December 2017 Fair value as at 31 December 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Wymeswold 48,590 - 48,590 1,510 (1,782) (272) 48,318
Castle Eaton 21,630 - 21,630 270 (1,105) (835) 20,795
Pitworthy 18,210 - 18,210 90 (1,672) (1,582) 16,628
Highfields 14,300 - 14,300 700 (1,426) (726) 13,574
High Penn 11,310 - 11,310 690 (1,494) (804) 10,506
Hunter's
Race 13,160 - 13,160 340 49 389 13,549
Spriggs 14,580 - 14,580 220 (919) (699) 13,881
Bournemouth 50,060 - 50,060 1,240 (876) 364 50,424
Landmead 51,580 - 51,580 2,520 (5,616) (3,096) 48,484
Kencot 47,210 - 47,210 1,790 (3,941) (2,151) 45,059
Copley 35,670 - 35,670 2,330 (940) 1,390 37,060
Paddock Wood 10,621 - 10,621 879 (326) 553 11,174
Atherstone 16,004 - 16,004 596 (917) (321) 15,683
Southam 11,145 - 11,145 655 (540) 115 11,260
Port Farms 44,215 - 44,215 1,785 (1,693) 92 44,307
Membury 21,160 - 21,160 740 (1,200) (460) 20,700
429,445 - 429,445 16,355 (24,398) (8,043) 421,402
The above individual project valuations do not include a
(GBP5,010,200) adjustment (2016: Nil) relating to future tax
payments which will be settled at the Fund level.
Comparatives for the year ended 31 December 2016 are shown on
page 87 of the annual report.
Year ended 31 December 2017
The following table represents the fair values of the
investments held by FS Debtco Limited as required by IFRS12.
Cost at Cost
1 January 2017 Additions / (Disposals) as at 31 December 2017 Unrealised gain/(loss) as at 1 January 2017 Movement on unrealised gain/(loss) Unrealised gain/(loss) as at 31 December 2017 Fair value as at 31 December 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Shotwick
Solar - 74,894 74,894 - 9,696 9,696 84,590
Sandridge
Solar
Power - 57,046 57,046 - 959 959 58,005
SSR Wally
Corner - 5,718 5,718 - 41 41 5,759
- 137,658 137,658 - 10,696 10,696 148,354
FS Holdco 2 commenced trading during the period and therefore
no comparatives are shown.
As at 31 December 2017, there had been no activities in FS
Holdco 3.
Year ended 31 December 2017
The following table represents the fair values of the
investments held by FS Holdco 4 Limited as required by IFRS12.
Cost
Cost at 1 January 2017 Additions / (Disposals) as at 31 December 2017 Unrealised gain/(loss) as at 1 January 2017 Movement on unrealised gain/(loss) Unrealised gain/(loss) as at 31 December 2017 Fair value as at 31 December 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Bannerton
Solar
Farm - 12,482 12,482 - - - 12,482
Longreach - 5,218 5,218 - - - 5,218
Oakey 1 7,842 7,842 - 80* 80* 7,922
Oakey 2 - 15,910 15,910 - 120* 120* 16,030
- 41,452 41,452 - 200 200 41,652
*This relates to FX gain on translation from AUD to GBP at
31 December 2017.
FS Holdco 4 commenced trading during the period and therefore
no comparatives are shown.
Year ended 31 December 2016
The following table represents the fair values of the
investments held by FS Holdco Limited as required by IFRS12.
Cost at Additions/ Cost
1 January 2016 (Disposals) as at 31 December 2016 Unrealised gain/(loss) as at 1 January 2016 Movement on unrealised gain/(loss) Unrealised gain/(loss) as at 31 December 2016 Fair value as at 31 December 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Wymeswold 49,090 (500) 48,590 - 1,510 1,510 50,100
Castle Eaton 21,630 - 21,630 - 270 270 21,900
Pitworthy 18,210 - 18,210 - 90 90 18,300
Highfields 14,300 - 14,300 - 700 700 15,000
High Penn 11,310 - 11,310 - 690 690 12,000
Hunter's
Race 13,160 - 13,160 - 340 340 13,500
Spriggs 14,580 - 14,580 - 220 220 14,800
Bournemouth 50,060 - 50,060 - 1,240 1,240 51,300
Landmead 51,580 - 51,580 - 2,520 2,520 54,100
Kencot 47,210 - 47,210 - 1,790 1,790 49,000
Copley 35,670 - 35,670 - 2,330 2,330 38,000
Paddock Wood 6,190 4,431 10,621 - 879 879 11,500
Atherstone 12,520 3,484 16,004 - 596 596 16,600
Southam 7,780 3,365 11,145 - 655 655 11,800
Port Farms 44,720 (505) 44,215 - 1,785 1,785 46,000
Membury 21,160 - 21,160 - 740 740 21,900
419,170 10,275 429,445 - 16,355 16,355 445,800
17. Fair value of the investments in unconsolidated
entities
Valuation process
Valuations are the responsibility of the Board of Directors.
The Investment Manager is responsible for submitting fair market
valuations of Group assets to the Directors. The Directors
review and approve these valuations following appropriate
challenge and examination. Valuations are carried out quarterly.
The current portfolio consists of non-market traded investments
and valuations are based on a discounted cash flow methodology.
The Investment Manager's assessment of fair value of investments
is determined in accordance with the International Private
Equity and Venture Capital Valuation Guidelines ("IPEVC"), using
levered and unlevered Discounted Cash Flow principles. The
Investment Manager and Directors consider that the discounted
cash flow methodology used in deriving a fair value is in
accordance with the fair value requirements of IFRS 13. The
investments held by FS Holdco 4 were valued at cost as at 31
December 2017 as these projects were not yet operational and
therefore are not included in the sensitivity analysis on the
following pages.
Sensitivity analysis of significant changes in unobservable
inputs within Level hierarchy of underlying Investments
The Company's investments (indirectly held through its
unconsolidated subsidiaries FS Holdco and FS Holdco 2) are
valued with reference to the discounted value of future cash
flows. The Directors consider the valuation methodology used,
including the key assumptions and discount rate applied, to be
appropriate. The Board review, at least annually, the valuation
inputs and where possible, make use of observable market data
to ensure valuations reflect the fair value of the investments.
A broad range of assumptions are used in the valuation models.
These assumptions are based on long-term forecasts and are not
affected by short term fluctuations in inputs, be it economic
or technical.
The Directors consider the following assumptions to be
significant inputs to the DCF calculation. The valuation of the
Company's investments is determined based on the discounted
value of future cash flows of those investments over their
useful economic lives ("UELs").
The UEL of individual assets is determined by reference to a
fixed contractual lease term, and therefore, the Board and
Manager do not consider that the UEL is an unobservable input
or assumption that can have a significant impact on the
valuation of the investments.
However, the Boards notes that if extended contractual lease
terms were negotiated for individual assets, this would increase
the value of those assets. Similarly, if the assets did not
operate for the duration of the fixed contractual period, this
would reduce the value of those assets.
Discount rate
The weighted average discount rate used is 7.58%. The Directors
do not expect to see a significant change in the discount
rates applied within the Solar Infrastructure sector. Therefore
a variance of +/- 0.5% is considered reasonable.
-0.50% -0.25% Base +0.25% +0.50%
Directors' valuation (GBPm) 593.8 581.6 569.8 558.3 547.3
NAV per share (pence) 112.3 109.6 107.0 104.5 102.0
Change vs Base Case (%) 4.2 2.1 0.0 (2.0) (3.9)
Production
Base case production is a function of a number of separate
assumptions including irradiation levels, availability of the
sites and technical performance of the equipment. A sensitivity
of +/- 10% is considered reasonable given stable levels of
irradiation, contractual availability guarantees and understanding
of future performance levels of the equipment.
-10% Base +10%
Directors' valuation (GBPm) 501.4 569.8 637.4
NAV per share (pence) 91.8 107.0 122.0
Change vs Base Case (%) (12.0) 0.0 11.9
Power Price
DCF models assume power prices that are consistent with the
Power Purchase Agreements ("PPA") currently in place. At the
PPA end date, the model reverts to the power price forecast.
During the year, c.60% of the Company's operational performance
came from the sale of ROCS. These revenues are directly and
explicitly linked to inflation for 20 years from the
accreditation date under the ROC regime and therefore are not
considered for sensitivity analysis. The remaining c.40% of
revenue derived from electricity sales which are subject to
power price movements.
The power price forecasts are updated quarterly and based on
power price forecasts from leading independent sources. The
Investment Manager adjusts where more conservative assumptions
are considered appropriate and applies expected PPA sales
discounts. The forecast assumes an average annual increase in
power prices in real terms of approximately 1.3%.
-20.0% -10.0% Base +10.0% +20.0%
Directors' valuation (GBPm) 503.7 536.9 569.7 602.4 634.9
NAV per share (pence) 92.3 99.7 107.0 114.3 121.5
Change vs Base Case (%) (11.6) (5.8) 0.0 5.7 11.4
Inflation
A variable of 1.5% is considered reasonable given historic
fluctuations. A long term inflation rate of 2.75% has been
used.
-1.50% -0.75% Base +0.75% +1.50%
Directors' valuation (GBPm) 501.4 534.4 569.8 608.4 650.7
NAV per share (pence) 91.8 99.1 107.0 115.6 124.9
Change vs Base Case (%) (12.0) (6.2) 0.0 6.8 14.2
Operating costs (investment level)
Operating costs include operating and maintenance ("O&M") and
insurance costs. Other costs are fixed and are therefore not
considered to be sensitive to changes in unobservable inputs.
Base case costs are based on current projected commercial
agreements. We would not expect these costs to fluctuate widely
over the life of the assets and are comfortable that the base
case is prudent. A variance of +/- 5.0% is considered
reasonable, a variable of 10.0% is shown for information
purposes.
-10.0% -5.0% Base +5.0% +10.0%
Directors' valuation (GBPm) 579.20 574.48 569.76 565.05 560.34
NAV per share (pence) 109.10 108.05 107.00 105.96 104.91
Change vs Base Case (%) 1.7 0.8 0. 0 (0.8) (1.7)
18. Stated Capital
The stated capital of the Company consists solely of Ordinary
Shares of nil par value and therefore the value of the stated
capital relates only to share premium. At any General Meeting
of the Company each Shareholder will have, on a show of hands,
one vote and on a poll one vote in respect of each Ordinary
Share held. Stated capital is the net proceeds received from
the issue of Ordinary Shares (net of issue costs capitalised).
Ordinary Shares
31 December 31 December
2017 2016
Shares Shares
Opening balance 340,950,912 281,803,232
Issued during the period 109,001,179 59,147,680
Repurchased and held in Treasury - -
Closing balance 449,952,091 340,950,912
31 December 31 December
2017 2016
GBP'000 GBP'000
Opening balance 339,003 279,403
Proceeds from share issue 117,539 60,781
Less: issue costs capitalised (2,027) (1,181)
Closing balance 454,515 339,003
19. NAV per Ordinary Share
The Net Asset Value ("NAV") per redeemable Ordinary Share for
the Company is based on the Net Asset Value at the reporting
date of GBP481,307,486 (2016: GBP350,769,981) and on 449,952,091
(2016: 340,950,912) redeemable Ordinary Shares, being the number
of Ordinary Shares in issue at the end of the period.
20. Financial instruments and risk profile
The Company holds cash and liquid resources as well as having
receivables and payables that arise directly from its
operations. The underlying investments of the Company's
investment activities indirectly expose it to various types of
risks associated with solar power. The main risks arising from
the Company's financial instruments are market risk, liquidity
risk and credit risk. The Directors regulatory review and agree
policies for managing each of these risks and these are
summarised below:
20.1 Market risk
(a) Foreign currency risk
Foreign currency risk, as defined in IFRS 7, arises as the
values of recognised monetary assets and monetary liabilities
denominated in other currencies fluctuate due to changes in
foreign exchange rates. Transactions in foreign currency are
translated at the foreign exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are translated to
pounds sterling at the foreign exchange rate ruling at that
date. Foreign exchange differences arising on translation are
recognised in income.
The Company has no direct exposure to foreign currency risk,
however through its underlying investment in Australian assets
via FS Holdco 4 it has indirect exposure. FS Holdco 4 is
directly exposed to fluctuations in foreign currency due to its
investments in Australian dollar denominated assets. The group
mitigates its exposure to fluctuations in foreign currency
through the use of forward exchange contracts.
The carrying amount of FS Holdco 4's foreign currency exposure
at the reporting date is as follows:
31 December 2017 31 December 2016
GBP'000 GBP'000
AUD 41,652 -
The FX rate applied at 31 December 2017 was 0.5782 (2016:
n/a). A 10% weakening or strengthening of the FX rate would
have a GBP4,165,000 impact on the valuation of assets
denominated in AUD.
(b) Price risk
The Company's investments are susceptible to market price risk
arising from uncertainties about future values of the
instruments. The Company's Investment Manager provides the
Company with investment recommendations. The Company's Investment
Manager's recommendations are reviewed and approved by the Board
before the investment decisions are implemented. To manage the
market price risk, the Company's Investment Manager reviews the
performance of the investments on a regular basis and is in
regular contact with the management of the non current
investments for business and operational matters.
Price risk is the risk that the fair value or cash flows of
a financial instrument will fluctuate due to changes in market
prices. At 31 December 2017, the Company's only investment was
valued at net assets excluding the outstanding loans issued by
the Company. Were this value to increase by 10%, the increase
in net assets attributable to shareholders for the year would
have been GBP40,846,400 (2016: GBP27,361,400). The impact of
changes in unobservable inputs to the underlying investments is
considered in note 17.
(c) Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company's exposure to the
risk of changes in market interest rates relates primarily to
the Company's long-term borrowing to its subsidiary. At year
end the Company had no long term borrowings with third parties
(2016: Nil).
Weighted average Weighted average time for which rate
Total portfolio interest rate is fixed
31 December 2017 31 December 2017 31 December 2017
GBP'000 % Days
Loan notes 250,000 11.00% 1,145
Shareholder
loans 154,110 4.25% 1,652
Cash 14,669 0.05% -
418,779
Weighted average Weighted average time for which rate
Total portfolio interest rate is fixed
31 December 2016 31 December 2016 31 December 2016
GBP'000 % Days
Loan notes 250,000 10.93% 780
Shareholder
loans 23,910 9% 1,287
Cash 39,381 0.05% -
313,291
The Company is also indirectly exposed to interest rate risk
through its cash and loans held by its subsidiaries. Details
of the indirect interest rate risk exposure is as follows:
Total
UK Hold Co Weighted average Weighted average time for which
portfolio interest rate rate is fixed
2017 2017 2017
Loans - FS Holdco 343,730,873 8.00 640
Loans - FS Holdco 2 & FS Holdco 4 116,345,404 5.00 275
Cash - UK Holdco, FS Holdco, FS Holdco 2 and FS Holdco
4 539,488 - -
Total indirect exposure interest rate risk 460,615,765
20.2 Liquidity risk
Liquidity risk is the risk that the Company will not be able
to meet its financial obligations as they fall due as a
result of the maturity of assets and liabilities not matching.
An unmatched position potentially enhances profitability, but can
also increase the risk of losses. Liquidity could be impaired
by an inability to access secured and/or unsecured sources of
financing to meet financial commitments. The Board monitors the
Company's liquidity requirements to ensure there is sufficient
cash to meet the Company's operating needs.
31 December 2017
Less than 6 to 12
Carrying amount Contractual Total 6 months Months Greater than 12 months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
Assets
Investments 408,464 408,464 - - 408,464
Trade and
other
Receivables 1,933 1,933 1,933 - -
Interest
receivable 57,626 57,626 57,626 - -
Cash and
cash
equivalents 14,669 14,669 14,669 - -
Total
Financial
assets 482,692 482,692 74,228 - 408,464
Trade and
other
payables (1,384) (1,384) (1,384) - -
Total
financial
liabilities (1,384) (1,384) (1,384) - -
Net position 481,308 481,308 72,844 - 408,464
31 December 2016
Less than 6 to 12 Greater than
Carrying amount Contractual Total 6 months Months 12 months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
Assets
Investments 273,614 273,614 - - 273,614
Trade and
other
Receivables 4,847 4,847 4,847 - -
Interest
receivable 33,044 33,044 33,044 - -
Cash and
cash
equivalents 39,381 39,381 39,381 - -
Total
Financial
assets 350,886 350,886 77,272 - 273,614
Financial
Liabilities
Trade and
other
payables (116) (116) (116) - -
Total
financial
liabilities (116) (116) (116) - -
Net position 350,770 350,770 77,156 - 273,614
20.3 Credit risk
Credit risk refers to the risk that a counterparty will
default on its contractual obligations resulting in financial
loss to the Company.
The Company and its subsidiaries place cash with authorised
deposit takers and is therefore potentially at risk from the
failure of such institutions.
In respect of credit risk arising from other financial assets
and liabilities, which mainly comprise of cash and cash
equivalents, exposure to credit risk arises from default of the
counterparty with a maximum exposure equal to the carrying
amounts of these instruments. In order to mitigate such risks,
cash is maintained with major international financial
institutions. During the year and at the reporting date, the
Company maintained relationships with the following financial
institutions:
31 December 2017
Moody's Credit Rating GBP'000
Cash in hand:
Royal Bank of Scotland
International Limited P2 14,659
Lloyds Bank International Limited P1 10
Total cash and cash equivalents 14,669
31 December 2016
Moody's Credit Rating GBP'000
Cash in hand:
Royal Bank of Scotland
International Limited P2 327
Lloyds Bank International Limited P1 18,684
Santander UK plc P1 20,370
Total cash and cash equivalents 39,381
The Company is also indirectly exposed to credit risk through
the cash held by its subsidiaries, and through the interest
receivable from the underlying solar investments. The Board of
UK Hold Co has determined that the maximum exposure to credit
risk in relation to investments is GBP535,515,409, being the
portion of UK Hold Co investments that are made up of loans
as at 31 December 2017 (2016: GBP343,730,873).
20.4 Other risks
Political and economic risk
The value of Ordinary Shares may be affected by uncertainties
such as political or diplomatic developments, social and
religious instability, changes in government policies, taxation
or interest rates, currency repatriation and other political and
economic developments in law or regulations and, in particular,
the risk of expropriation, nationalisation, and confiscation of
assets and changes in legislation relating to the level of
foreign ownership.
Governmental authorities at all levels are actively involved in
the promulgation and enforcement of regulations relating to
taxation, land use and zoning and planning restrictions,
environmental protection, safety and other matters. The
introduction and enforcement of such regulations could have the
effect of increasing the expense and lowering the income or
rate of return from, as well as adversely affecting the value
of, the Company's assets.
21. Capital Management
The Company's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order
to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares (up to its
authorised number of shares) or sell assets to reduce debt.
22. Dividends
Dividends paid during the year comprise an interim dividend in
respect of quarter 1 (1 January 2017 to 31 March 2017) of
GBP6,413,924 (1.58 pence per Ordinary Share) (2016: GBP4,339,770,
1.54 pence per Ordinary Share), quarter 2 (1 April 2017 to 30
June 2017) of GBP6,538,064 (1.58 pence per Ordinary Share)
(2016: GBP4,773,313, 1.54 pence per Ordinary Share) and quarter
3 (1 July 2017 to 30 September 2017) of GBP7,109,243 (1.58
pence per Ordinary Share) (2016: GBP5,250,644, 1.54 pence per
Ordinary Share). The proposed year end dividend will be
GBP7,109,243 (1.58 pence per Ordinary Share) (31 December 2016:
1.55 pence per ordinary share).
23. Related party disclosures
For the purposes of these Financial Statements, a related party
is an entity or entities who are able to exercise significant
influence directly or indirectly on the Company's operations.
As noted in Note 2, the Company does not consolidate its
subsidiary. However, the Company and its subsidiaries (direct
and indirect) are a Group and therefore, are considered to be
related parties.
Transactions with UK Hold Co
During the year the Company issued no additional Loan Notes to
UK Hold Co (2016: GBP34,000,000), thus the total issued to UK
Hold Co remained at GBP250,000,000 (2016: GBP250,000,000), on
which interest of GBP32,245,925 accrued during the year (2016:
GBP27,314,252). As at the reporting date interest of
GBP48,745,653 was receivable (2016: GBP27,314,940).
On 18 January 2017 the Company issued an additional
GBP35,200,000 shareholders loans to UK Hold Co, funded using
equity proceeds raised during the prior year. Additionally, cash
proceeds from two placings during the year, GBP67,500,000 in
March and GBP27,500,000 in November, were transferred to UK
Hold Co in the form of shareholders loans. As at the
reporting date, the Company had increased its Shareholders loan
receivable from UK Hold Co by GBP130,200,000 to GBP154,109,725
(2016: GBP23,910,000). Total interest of GBP3,150,225 accrued for
the year (2016: GBP2,135,009). As at reporting date interest of
GBP8,880,064 was receivable (2016: GBP5,729,824).
Transactions between UK Hold Co and FS Holdco
As at the reporting date, FS Holdco had a non-interest bearing
loan receivable from UK Holdco totalling GBP143,503,500 (2016:
GBP183,503,500) and an interest bearing loan payable to UK Hold
Co of GBP343,730,873 (2016: GBP343,730,873). Total interest of
GBP27,121,719 (2016: GBP20,736,506) accrued to UK Hold Co during
the year of which GBP37,711,361 (2016: GBP20,511,723) remained
payable by FS Holdco at year end.
Transactions between UK Hold Co and FS Holdco 2
As at the reporting date, UK Hold Co had an interest bearing
loan receivable from FS Holdco 2 totalling GBP74,893,885 (2016:
GBPnil), on which interest of GBP3,221,463 accrued during the
year. As at the reporting date total interest of GBP88,302
(2016: GBPnil) was receivable.
As at the reporting date, UK Hold Co also had non-interest
bearing loans receivable from FS Holdco 2 totalling GBP3,734,017
(2016: GBPnil).
As at the reporting date UK Hold Co had an interest bearing
loan payable to FS Holdco 2 totalling GBP28,970,000 (2016:
GBPnil), on which interest of GBPnil (2016: GBPnil) accrued
during the year.
As at the reporting date UK Hold Co also had an interest
bearing loan payable to FS Holdco 2 totalling GBP13,000,000
(2016: GBPnil), on which interest of GBP169,178 (2016: GBPnil)
was accrued during the year, all of which was outstanding at
year end (2016: GBPnil).
Transactions between UK Hold Co and FS Holdco 4
As at the reporting date UK Hold Co had an interest bearing
loan receivable from FS Holdco 4 totalling GBP28,970,000 (2016:
GBPnil), on which interest of GBPnil (2016: GBPnil) was accrued
during the year.
As at the reporting date UK Hold Co also had non interest
bearing loans receivable from FS Holdco 4 totalling
GBP12,481,519 (2016: GBPnil), on which interest of GBP162,430
(2016: GBPnil) was accrued during the year, all of which was
outstanding at year end (2016: GBPnil).
Transactions between UK Hold Co and FS Debtco
As at the reporting date UK Hold Co had an interest bearing
loan receivable from FS Debtco totalling GBP55,000,000 (2016:
GBPnil) on which interest of GBP2,019,178 (2016: GBPnil) accrued
during the year, all of which was outstanding at year end
(2016: GBPnil).
Transactions between FS Holdco, FS Debtco 2, FS Holdco 4 and
their SPVs
All of the SPVs are cash generating solar farms. On occasion
revenues received and expenses are paid on their behalf by FS
Holdco, FS Debtco and FS Holdco 4. All of these transactions
are related party transactions. FS Holdco made the following
net transactions on behalf of SPVs during the year and had
the following net amounts payable or receivable at year end
(none payable and receivable to FS Debtco or FS Holdco 4):
Net amount
Opening Balance Amounts paid Amounts received (payable)/ receivable
receivable/ (payable) on behalf of from as at
1 January SPV SPV 31 December
2017 2017 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
Atherstone - 1,323 (1,323) -
Bournemouth - 3,699 (3,699) -
Castle Eaton - 1,572 (3,772) (2,200)
Copley 116 3,214 (3,330) -
High Penn - 741 (1,927) (1,186)
Highfields - 1,031 (2,582) (1,551)
Hunters Race - 931 (931) -
Kencot (293) 2,412 (3,686) (1,567)
Landmead - 4,032 (4,174) (142)
Membury (758) 1,564 (1,416) (610)
Paddock Wood - 854 (854) -
Pitworthy - 989 (2,863) (1,874)
Port Farms - 2,843 (2,843) -
Southam - 890 (890) -
Spriggs - 1,052 (1,870) (818)
Wymeswold - 3,736 (5,225) (1,489)
(935) 30,883 (41,385) (11,437)
Opening Balance Net amount
receivable Amounts paid Amounts received receivable/
(payable) on behalf of from (payable) as at
1 January SPV SPV 31 December
2016 2016 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
Atherstone - 764 (764) -
Bournemouth - 1,866 (1,866) -
Castle Eaton - 872 (872) -
Copley - 2,383 (2,267) 116
High Penn - 540 (540) -
Highfields - 483 (483) -
Kencot - 2,108 (2,401) (293)
Landmead - 2,640 (2,640) -
Membury - 1,398 (2,156) (758)
Paddock Wood - 487 (487) -
Pitworthy - 796 (796) -
Port Farms - 857 (857) -
Southam - 546 (546) -
Spriggs - 69 (69) -
Wymeswold - 1,370 (1,370) -
- 17,179 (18,114) 935
Other
During the year under review, UK Hold Co made use of a tax
credit of GBP1,646,395 (2016: GBP1,003,322) availed by its
subsidiary, FS Holdco, to reduce the tax liability of the
Group at the reporting date.
24. Transactions with the manager
Foresight Group CI Limited, acting as investment manager to the
Group in respect of its investments, earned fees of
GBP4,276,808 during the year (2016: GBP3,053,551), of which
GBP1,257,741 was outstanding as at 31 December 2017 (2016:
GBP17,066).
Foresight Group CI Limited charged fees to FS Hold Co, FS
Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4 of GBPNil
(2016: GBP680,000) during the year in relation to the
arrangement and transaction advice of the long term refinancing
of the Group, of which GBPNil (2016: GBPNil) was outstanding
as at year end.
Foresight Group LLP, a related party of Foresight Group CI,
charged asset management fees to the underlying projects of
GBP587,333 during the period (2016: GBP512,000), of which
GBP65,850 was payable at year end.
Brighter Green Engineering, a related party of Foresight Group
LLP, charged fees to the underlying projects under both the
O&M contracts and EPC defect remedial work of GBP4,015,368
during the period (2016: GBP853,203), of which GBPNil was
payable at year end.
Pursuant to the terms of the Prospectus, the total launch
costs to be borne by the Shareholders of the Company were
capped at 2% of the launch proceeds of GBP150,000,000 (i.e.
GBP3,000,000) with any excess launch costs being reimbursed to
the Company from Foresight Group CI Limited. Launch costs to
be reimbursed from Foresight Group CI Limited to the Company
amounted to GBP771,254 (2016: GBP213,644).
25. Commitments and contingent liabilities
There are no commitments or contingent liabilities (2016:
GBPNil).
26. Controlling party
In the opinion of the Directors, there is no controlling party
as no one party has the ability to direct the financial and
operating policies of the Company with a view to gaining
economic benefits from its direction.
27. Post balance sheet events
There were no post balance sheet events requiring disclosure.
AIFMD Disclosures (unaudited)
ALTERNATIVE INVESTMENTS FUND MANAGER DIRECTIVE REPORT
In accordance with the Alternative Investments Fund Manager
Directive Report (the "Directive"), the Company is required in
its capacity as the Alternative Investment Fund Manager ("AIFM")
and the Alternative Investment Fund ("AIF") to disclose specific
information in relation to the following aspects of the
Company's management:
OVERVIEW OF INVESTMENT ACTIVITIES
The Company's investment activities during the year is disclosed
in full in the Investment Manager's Report on page 20 of the
Annual Report.
The Company's portfolio's performance during the year is
disclosed in full in the Asset Manager's Report on page 36 of
the Annual Report.
A list of the Company's portfolio holdings is included on page
16 of the Annual Report.
LEVERAGE AND BORROWING
Leverage is defined as any method by which the Company
increases its exposure through debt, borrowed capital or the
use of derivatives.
The Company and its subsidiaries' leverage position and third
party debt arrangements are disclosed in full in the Investment
Manager's Report on page 20 of the Annual Report.
'Exposure' is defined in two ways - 'Gross method' and
'Commitment method' - and the Company must not exceed maximum
exposures under both methods.
The Directors are required to calculate and monitor the level
of leverage of the Company, expressed as a ratio between the
exposure of the Company and its Net Asset Value (Exposure/NAV),
under both the Gross method and the Commitment method.
'Gross method' exposure is calculated as the sum of all
positions of the Company (both positive and negative), that is,
all eligible assets, liabilities and derivatives, including
derivatives held for risk reduction purposes.
'Commitment method' exposure is also calculated as the sum of
all positions of the Company (both positive and negative), but
after netting off derivative and security positions as specified
by the Directive.
For the "Gross method", the following has been excluded:
- the value of any cash and cash equivalents which are
highly liquid investments held in the local currency of the
Company that are readily convertible to a known amount of cash,
subject to an insignificant risk of changes in value and which
provide a return no greater than the rate of the 3-month high
quality government bond;
- cash borrowings that remain in cash or cash
equivalents as defined above and where the amounts of that
payable are known.
The total amount of leverage calculated as at 31 December 2017
is as follows:
Gross method: 22%
Commitment method: 32%
LIQUIDITY
Liquidity risk is the risk that the Company will not be able
to meet its financial obligations as they fall due as a
result of the maturity of assets and liabilities not matching.
An unmatched position potentially enhances profitability, but can
also increase the risk of losses. Liquidity could be impaired
by an inability to access secured and/or unsecured sources of
financing to meet financial commitments. The Board monitors the
Company's liquidity requirements to ensure there is sufficient
cash to meet the Company's operating needs.
The financial position of the Company, its cash flows,
liquidity position and borrowing facilities are referred to in
the Chairman's Statement, Strategic Report and Notes to the
Accounts. In addition, the financial statements include the
Company's objectives, policies and processes for managing its
capital; its financial risk management objectives; and its
exposures to credit risk and liquidity risk.
The Company has sufficient financial resources together with
investments and income generated. As a consequence, the
Directors believe that the Company is able to manage its
business risks.
RISK MANAGEMENT POLICY NOTE
Please refer to Principal Risks report on page 43 of the
Annual Report.
REMUNERATION
As AIFM, the Company is subject to a remuneration code which
is consistent with the requirements of the FCA which apply to
the AIFM. The remuneration policy is designed to ensure that
any relevant conflicts of interest can be managed appropriately
at all times and that the remuneration of the Directors and
senior management is in line with the risk policies and
objectives of the funds managed by the AIFM.
The Company does not directly employ any staff members. The
services in this regard are provided by staff members of
Foresight Group LLP.
In accordance with the AIFMD, information in relation to the
remuneration of the Company's AIFM is required to be made
available to investors. In accordance with the Directive, the
AIFM's remuneration policy and the numerical remuneration
disclosures in respect of the AIFM's relevant reporting period
(year ending December 2017) are available from the AIFM on
request.
Advisors
ADMINISTRATOR & COMPANY SECRETARY
JTC (Jersey) Limited
JTC House
28 Esplanade
St. Helier Jersey
JE4 2QP
REGISTRAR
Computershare Investor Services (Jersey)
Queensway House
Hilgrove Street
St. Helier Jersey
JE1 1ES
CORPORATE BROKER
Stifel Nicolaus Europe Limited (formerly Oriel Securities)
150 Cheapside
London
EC2V 6ET
INVESTMENT MANAGER
Foresight Group CI Limited
PO Box 156
Dorey Court
St. Peter Port
Guernsey
GY1 4EU
LEGAL ADVISORS TO THE COMPANY AS TO ENGLISH LAW
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London
EC2A 2EW
LEGAL ADVISORS TO THE COMPANY AS TO JERSEY LAW
Ogier
Ogier House
The Esplanade
St. Helier
Jersey
JE4 9WG
LEGAL ADVISORS TO THE COMPANY AS TO THE ACQUISITION OF SOLAR
ASSETS
Osborne Clarke
One London Wall
London
EC2Y 5EB
INDEPENT AUDITOR
KPMG LLP
15 Canada Square
London
E14 5GL
Glossary of Terms
AEMO Australian Electricity Market Operator
AIC The Association of Investment Companies
AIC Code The Association of Investment Companies Code of Corporate
Governance
AIC Guide The Association of Investment Companies Corporate
Governance Guide for Investment Companies
AIFMD The Alternative Investment Fund Management Directive
ARENA The Australian Renewable Energy Agency (ARENA) is
an independent agency of the Australian federal government,
established in 2012 to manage Australia's renewable
energy programs, with the objective of increasing
supply and competitiveness of Australian renewable
energy sources
Asset Manager The Company's underlying investments have appointed
Foresight Group LLP, a subsidiary of Foresight Group
CI, to act as Asset Manager
BEIS The Department for Business, Energy & Industrial Strategy
BEPS Base Erosion and Profit Shifting
Brexit Departure of the UK from the EU
CfD Contract for Difference
Company Foresight Solar Fund Limited
CEFC The Clean Energy Finance Corporation (CEFC) is an
Australian Government-owned Green Bank that was established
to facilitate increased flows of finance into the
clean energy sector
DCF Discounted Cash Flow
DECC The Department of Energy and Climate Change
DNO Distribution Network Operator
EPC Engineering, Procurement & Construction
EU The European Union
FAC Final Acceptance Certificate
FiT Feed-in Tariff
GAV Gross Asset Value on Investment Basis including debt
held at SPV level
Group Borrowing Group Borrowing refers to all third-party debt by
the Company and its subsidiaries.
GWh Gigawatt hour
IAS International Accounting Standard
IFRS International Financial Reporting Standards as adopted
by the EU
Investment Foresight Group CI Limited
Manager
IPO Initial Public Offering
KID Key Information Document
KPMG LLP KPMG is the Company's Auditor
LCF Levy Control Framework
LD Liquidated Damages awarded to renewable energy projects
in relation to their clean energy production which
were typically monetised under PPA contracts to offset
levies due under the Climate Change Levy to energy
suppliers.
LGC Large-Scale Generation Certificate
LIBOR London Interbank Offered Rate
Listing Rules The set of FCA rules which must be followed by all
companies listed in the UK
Main Market The main securities market of the London Stock Exchange
MIDIS Macquarie Infrastructure Debt Investment Solutions
MWh Megawatt hour
MWp Megawatt peak
NAV Net Asset Value
NEG National Energy Guarantee
NEM National Electricity Market
Official List The Premium Segment of the UK Listing Authority's
Official List
O&M Operation and Maintenance contractors
PID Potential Induced Degradation. PID is a widely acknowledged
module defect that, if not resolved, causes the PV
modules to degrade faster than would usually be expected,
reducing their efficiency over time. The effects of
PID can be stopped or reversed through the implementation
of site-specific technical solutions.
PPA Power Purchase Agreements
PR Performance Ratio
PRIIPS Packaged Retail and Insurance-Based Investment Products
PV Photovoltaic
RET Renewable Energy Target
RO Scheme Energy suppliers meet their obligations by presenting
Renewable Obligation Certificates (ROCs) to Ofgem.
Where suppliers do not have sufficient ROCs to cover
their obligation, a payment is made into the buy-out
fund.
ROC Renewable Obligation Certificates
RPI The Retail Price Index
SPV The Special Purpose Vehicles which hold the Company's
investment portfolio of underlying operating assets
UK The United Kingdom of Great Britain and Northern Ireland
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Foresight Solar Fund Limited via Globenewswire
(END) Dow Jones Newswires
February 22, 2018 02:00 ET (07:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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