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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.70 | 1.99% | 87.30 | 86.60 | 87.00 | 86.80 | 84.80 | 86.10 | 864,718 | 16:35:09 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 162.99M | 154.47M | 0.2610 | 3.33 | 513.63M |
From Apr 2019 to Apr 2024
TIDMFSFL
RNS Number : 9497R
Foresight Solar Fund Limited
06 March 2019
6 March 2019
Foresight Solar Fund Limited
('Foresight Solar', 'FSFL' or 'the Company')
Annual Results to 31 December 2018 and Dividend Announcement
Foresight Solar, a fund investing in a diversified portfolio of ground-based solar PV assets in the UK and internationally, is pleased to announce its Annual Results for the year ended 31 December 2018.
Highlights
Hot Features
Premium
-- NAV increased to GBP610.3m (31 Dec 2017: GBP481.3m), being 111.2p per share (31 Dec 2017:
107.0p), driven by a reduction in discount rate for UK assets, an upwards revision of UK power
price forecasts and a change in short term inflation forecasts
-- Strong operational performance of the UK portfolio, 4.9% above budget for the year, a result
of performance enhancing initiatives implemented by the asset management team and levels of
irradiation higher than expected
-- Production from the UK portfolio amounted to 5.2% of total UK solar generation in 2018, enough
clean electricity to power 223,049 homes
-- Portfolio grew to 54 ground-mounted solar assets totalling 869MW of capacity (2017: 23 solar
assets totalling 621MW). The Company is now the largest UK--listed dedicated solar energy
investment company by installed capacity
-- Total of GBP106 million raised for two accretive acquisitions through two oversubscribed fundraisings,
in July and October 2018
-- Declared dividends of 6.58 pence per share for the year ended 31 December 2018, in line with
target
-- Target dividend for 2019 increased to 6.76 pence*, in line with the UK's Retail Price Index
("RPI") for 2018
-- During 2019, the Company will continue to focus on portfolio and capital structure optimisation,
improving the performance of the Australian assets and delivering strong operational performance
across the portfolio
* Target returns are not a profit forecast. There can be no assurance that target returns will be met and it should not be seen as an indication of the Company's expected or actual results or returns.
Key Metrics
As at As at
31 December 2018 31 December 2017
Gross Asset Value ("GAV") GBP1,114.7 million GBP680.8 million
------------------- ------------------
Net Asset Value ("NAV") GBP610.3 million GBP481.3 million
------------------- ------------------
NAV per Share 111.2 pence 107.0 pence
------------------- ------------------
Profit after Tax for the Year GBP56.0 million GBP35.1 million
------------------- ------------------
Total Dividend per Share for 6.58 pence 6.32 pence
the period
------------------- ------------------
Annual Total Shareholder Return
since IPO* 6.83% 7.02%
------------------- ------------------
* Annualised from IPO on 29 October 2013.
Commenting on the Company's results, Alex Ohlsson, Chairman of Foresight Solar Fund Limited said:
"The period under review was one of significant progress for Foresight Solar Fund, with good progress against our operational objectives and the acquisition of 31 assets over the year, funded through two oversubscribed placings. Following these acquisitions, FSFL is now the largest UK--listed dedicated solar energy investment company by installed capacity. We also continued to focus on portfolio optimisation which, assisted by higher levels of irradiation, led to our UK portfolio outperforming our budget by 4.9%.
Following on from the significant portfolio growth in 2018, FSFL intends to take a more opportunistic approach towards secondary market acquisitions. We will focus on optimising our recently-acquired assets, improving the capital structure through a third-party debt refinancing and continuing to deliver strong operational performance across the portfolio. We look forward to a further year of progress."
Results presentation
Foresight Solar Fund Ltd is holding a presentation to analysts at 09:00 today at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London, EC2M 5SY. Analysts wishing to attend should contact foresightsolar@citigatedewerogerson.com to register.
Analysts unable to attend in person may listen to the presentation live by using the details below:
Conference Call Dial-In Details: 0808 109 0700
Standard International Access: +44 (0) 20 3003 2666
Password: Foresight
Dividend Declaration
Foresight Solar is also pleased to announce that the fourth Quarterly dividend of 1.65 pence per share was approved by the Directors and will be paid on 24 May 2019. The dividend timetable is as follows:
Date
Ex-dividend Date 9 May 2019
------------
Record Date 10 May 2019
------------
Payment Date 24 May 2019
------------
For further information, please contact:
Foresight Group
+44 (0)20 3763 6951
Joanna Andrews
InstitutionalIR@ForesightGroup.eu
Stifel Nicolaus Europe Limited
+44 (0)20 7710 7600
Mark Bloomfield
Neil Winward
Gaudi Le Roux
Citigate Dewe Rogerson
+44 (0)20 7638 9571
Nick Hayns
Elizabeth Kittle
Lucy Eyles
Notes to Editors
About Foresight Solar Fund Limited
Foresight Solar is a Jersey registered, closed-end investment company investing in a diversified portfolio of ground-based solar PV assets in the UK and Australia.
Since its IPO in October 2013, FSFL has more than tripled in size and raised more than GBP569 million through share placings. The Company targets an index-linked annualised dividend inflated by RPI and has paid all target dividends to date. The target dividend for 2019 is 6.76 pence per share.
FSFL is managed by Foresight Group, a leading independent Global Infrastructure & Private Equity manager, which provides FSFL with depth of experience in fund management, deal origination and execution. The Company has a fully independent Board of Directors and is chaired by Alex Ohlsson. The lead Investment Manager for the Company is Ricardo Piñeiro, Head of UK Solar at Foresight Group.
Chairman's Statement
On behalf of the Board, I am pleased to present the Audited Annual Report and Financial Statements for Foresight Solar Fund Limited (the "Company" or the "Fund") for the year ended 31 December 2018.
The period under review marked the achievement of a number of significant milestones in terms of growth and progress for the Company and was its most acquisitive year to date. There has been a material improvement in portfolio performance with the UK portfolio delivering operational performance 4.9% above budget, a clear testament to the work of the Asset Management team over recent periods.
Alongside this, the Investment Manager's ability to source NAV accretive investment opportunities, in an increasingly competitive secondary market, allowed the Company to acquire 248MW of solar assets in the UK during the course of the year. The portfolio increased to a total of 869MW of installed capacity and reinforced the Company's position as the largest UK-listed dedicated solar energy investment company by installed capacity. The acquisitions were financed through two oversubscribed fundraisings totalling GBP106 million.
In November 2018, the Company celebrated its fifth anniversary. Since listing on the London Stock Exchange in October 2013, the UK solar market has evolved rapidly and more recently entered a period of consolidation. During this period the Company has met all target dividends, grown NAV per share from 98.0 pence at IPO to 111.2 pence as at 31 December 2018 and delivered an annual total return to shareholders of 6.83%. I would like to thank my fellow Directors, the Investment Manager and the Asset Management team for their contribution to the growth of the Company over the past five years.
The Board remains confident in the operational performance of its assets under our Asset Management team, the Investment Manager's ability to identify NAV accretive opportunities and the global movement towards a higher penetration of renewable generation, all of which support continued growth for the Company.
KEY FINANCIALS
In 2018, the NAV per Ordinary Share increased by 4.2 pence to 111.2 pence (31 December 2017: 107.0 pence). This increase was primarily driven by an upward revision of the UK power price forecast in the short and medium term, changes to the short term inflation forecasts, the positive impact of the acquisitions announced during the period and a change in discount rate for UK assets. A 0.25% discount rate reduction has been applied across the UK portfolio where debt is not held at SPV level to reflect the increase in current market valuations of operating solar assets in the UK. Profit for the year was GBP56.0m (2017: GBP35.1m) and Earnings per Share rose to 11.60 pence, up from 8.80 pence in 2017.
DIVIDS AND DIVID GROWTH
The Company has declared total dividends of 6.58 pence per share for the year, in line with its target. The fourth and final 2018 interim dividend of 1.65 pence will be paid on 24 May 2019.
Dividend cover for the period on a cash basis was 1.38 times, excluding dividends paid immediately to new shares issued in the period and including cash balances acquired as part of the acquisitions completed in 2018. Excluding these acquired cash balances, the dividend cover was 1.20 times, up from 1.12 times for the prior year on a like-for-like basis and supported by strong operational performance and higher UK power prices.
The target dividend for 2019 is 6.76 pence, an increase of 2.70% when compared with 2018 and in line with the UK's Retail RPI 2018.
Since the IPO, the Company has met all target dividends and remains on track to maintain its RPI inflation-linked dividend supported by continued favourable market conditions and solid portfolio performance. As previously noted in the 30 June 2018 Interim Report, the Board reviews the dividend policy on an ongoing basis to ensure it remains reflective of the ongoing correlation between power prices and inflation levels as well as the expected evolution of the Investment Portfolio.
CAPITAL RAISING
In July and October 2018, the Company raised a total of GBP106 million in two oversubscribed placings. This equity has been fully deployed through the acquisition of UK operational solar assets in August and November 2018 and through the partial repayment of outstanding debt facilities, resulting in no cash drag to investors. The Company has raised GBP569 million of equity to date.
PORTFOLIO DEVELOPMENT
As the consolidation of the UK solar market continued, the Company remained active in the UK secondary solar market through the acquisition of 31 operational UK assets (totalling 248MW of installed capacity) over the course of 2018.
In April 2018, the Company acquired a portfolio of five solar assets with a total installed capacity of 53MW, accredited under the Renewable Obligation ("RO") scheme with the exception of a 3MW asset accredited under the Feed-in-Tariff ("FiT") scheme. A further 26 RO accredited assets were acquired in the second half of the year. Of these, 15 assets, with a total installed capacity of 114MW, were acquired in August 2018 and the remaining 11 assets, with a total installed capacity of 81MW, acquired in November 2018. All the assets acquired in 2018 were operational, accredited and made in line with the Company's focused, value accretive acquisition strategy.
FINANCING
At 31 December 2018, the total outstanding debt of the Company and its subsidiaries amounted to GBP504.4 million (31 December 2017: GBP200.3 million), with long term debt representing GBP399.4 million (December 2017: GBP152.4 million). The total gearing level increased to 45% of GAV (December 2017: 29%) as a result of the acquisitions completed in the year and the use of Australian assets' debt facilities. Long-term gearing represented 36% of GAV (2017: 22%), remaining within the 40% long-term debt target set by the Board.
As previously reported, the Investment Manager is undertaking a refinancing of the assets acquired in the second half of 2018 and other UK portfolio assets. The intention of the refinancing is to reduce the average annual cost of long-term debt and remove the refinancing risk of the existing project loans inherited as part of the recent acquisitions. The Company intends to achieve this through entering long-term debt facilities. The refinancing of these assets is anticipated to complete before the end of June 2019.
The Company's Revolving Credit Facilities ("RCFs") totalled GBP105 million at 31 December 2018, giving the Company the flexibility to adjust its gearing position in the short term. The Investment Manager will continue to actively source opportunities to enhance the Company's capital structure.
OPERATIONAL PERFORMANCE
United Kingdom
The portfolio delivered performance significantly above budget. Irradiation was 6.4% above base case assumptions, with exceptional levels of irradiation in the summer months, continuing into the second half of the year.
Operational performance was strong, with only a few instances of downtime and electricity generation for the period 4.9% above expectations after accounting for compensation events.
During the year, the Asset Manager undertook a number of optimisation initiatives. In the third quarter of 2018, a Power Purchase Agreement ("PPA") tender was undertaken for 22 UK sites which is expected to result in material improvements in pass-through rates in the medium to longer term. The new PPAs are expected to become effective by April 2019. In addition, as a result of the higher power prices experienced in 2018, the Company removed cashflow volatility in the short and medium term by increasing the percentage of electricity sales under fixed price arrangements.
In addition, a tender for Operation and Maintenance ("O&M") services was carried out across a number of assets significantly reducing the cost for O&M services.
Australia
In Australia, Longreach successfully connected to the grid in March 2018 and Bannerton reached first export in July 2018 and has been gradually increasing its export capacity since. As previously reported, on 22 November 2018, RCR Tomlinson Limited ("RCR") went into administration. RCR was under contract by the Company to provide Engineering, Procurement and Construction ("EPC") and O&M services to its Longreach and Oakey 1 assets, both located in Queensland. The Company has appointed replacement contractors to implement commissioning works. Whilst the remaining two Australian assets have experienced delays as a result of RCR going into administration, it is not expected to have a material impact on overall financial performance, or asset valuation, as the Company is contractually protected.
MARKET DEVELOPMENTS
United Kingdom
As anticipated there have been a very limited number of new large-scale solar assets constructed in the UK following the closure of the RO scheme in April 2017, with investment activity in the sector focused on secondary market acquisitions of operational assets.
Despite this limited growth in the solar market, the UK renewables market has continued to thrive. In September 2018, the capacity of renewable energy overtook that of fossil fuels in the UK for the first time with 41.9GW of generation from wind, solar, biomass and hydropower exceeding the 41.2GW of capacity from coal, gas and oil-fired power generation assets1. In the five years to 2018, renewable capacity has tripled while fossil fuel capacity has fallen by a third due to the decommissioning of fossil fuel generators(1) .
Whilst there has been a hiatus in financial support from government sources for large-scale solar, there has been a surge in support for renewable energy generation. The UK market is expected to require an additional 50GW of solar installations by 2050 if the government is to meet its climate change targets (80% reduction in greenhouse gas emissions by 2050). Given the existing UK solar installed capacity currently totals just 13GW, the level of growth required is expected to be met by a significant increase in new installations on a subsidy-free basis over the medium and longer term.
Relevant regulatory developments for the year include the consultation announced by Ofgem in November 2018 in relation to the Targeted Charging Review ("TCR"). This review includes reforms which would reduce revenues received by UK embedded generation assets. The reforms are yet to be finalised and, if agreed, are expected to be implemented as of 2021.
At the time of writing, the outcome of Brexit negotiations remains uncertain. The Company remains largely insulated in all Brexit scenarios and, as a result, the Investment Manager does not expect any material change to its business.
Australia
Australia has seen significant growth in the installation of wind and solar projects driven by rapidly falling technology costs and an abundant availability of wind and solar resources. In October 2018, Australia's Clean Energy Regulator reported 8.3GW of renewable generation was either operational or under construction, with solar generation accounting for 4.4GW, exceeding the 6.4GW required to meet the 2020 Renewable Energy Target of 33,000GWh from renewable generation.(2)
In September 2018, Prime Minister Scott Morrison announced that the National Energy Guarantee ("NEG") policy would not come into effect in its initially proposed form. This policy focused on reducing consumers' electricity prices and bringing reliability and emissions reductions to the country's National Electricity Market. Instead it has been suggested, through a number of public announcements made by the Government, that the NEG policy will be modified to focus on encouraging new investment which supports lower electricity prices and no longer be focused on the reduction of emissions. Despite the relative uncertainty as to the shape the NEG ultimately will take, the country remains committed to meeting its emissions target as outlined in the 2016 Paris Agreement and, as such, energy reliability guarantees are expected to remain in place, providing continued support to the solar sector.
SUSTAINABILITY AND ESG
Our ongoing commitment to Sustainability and Environmental, Social and Governance ("ESG") measures is reflected in the Company's investment process and asset management operations. This year alone, the Company's electricity generation represented 5.2% of the UK's solar generation and avoided the production of more than half a million tonnes of CO(2) . The implementation of various environmental initiatives at a number of sites, such as hedgerow planting and grassland management, has served to benefit the local eco-systems whilst simultaneously reducing the O&M burden, resulting in improved financial performance. Furthermore, the assets have received widespread support from local communities through community engagement and educational visits. The Company also continues to support local communities through the distribution of more than GBP100k in community benefits in 2018, which have helped to fund a number of local development projects such as upgrading sport facilities and community centres.
OUTLOOK
The fundamentals for long-term growth in UK renewables remain in place, with the majority of relevant energy policy drivers enshrined in current UK legislation. The UK government continues to be committed to its five-yearly carbon budgets and to the 2008 UK Climate Change Act targeting an 80% reduction in carbon emissions from 1990 levels by 2050.
Following on from significant UK portfolio growth in 2018, the Company will adopt an opportunistic approach to secondary market acquisitions, reflecting the current competitive landscape of the UK market as a result of the ongoing solar market consolidation.
The Company is of the view that investment opportunities in assets that benefit from government-backed subsidy mechanisms will remain available in international markets and is increasingly focusing on Western European and other international markets. The Investment Manager continues to review investment opportunities in the region and remains confident the assets have the potential to deliver attractive returns, on a risk-adjusted basis, while further diversifying the Company's portfolio.
Alongside the Western European markets, we continue to monitor developments in the unsubsidised solar market, as construction costs decrease and new PPA structures become available, both in the UK and other European markets. We will also continue to track advances made in battery technology and the potential for co-location with large scale solar assets.
Portfolio optimisation will continue to be a core objective for the Company. During 2019, the Company will continue to focus on embedding and optimising its recently acquired UK assets, improving the capital structure through a third party debt refinancing, improving the performance of the Australian assets and, importantly, continuing to deliver strong operational performance across the portfolio.
Corporate governance
We look forward to enhancing Board diversity and broadening expertise through the appointment of a new Director in the first half of 2019.
Annual General Meeting
We look forward to meeting shareholders at the Company's next Annual General Meeting ("AGM") on 25 June 2019 at 9:30am at 28 Esplanade, St. Helier, Jersey JE2 3QA.
Alexander Ohlsson
Chairman
5 March 2019
CORPORATE SUMMARY
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.
As at 31 December 2018, the Company has 548,941,550 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, inflation-linked quarterly dividend and enhanced capital value, through investment in ground-based solar assets predominantly located in the UK.
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 GBP569 million through equity issuance and reached a gross asset value of GBP1,114.7 million as at 31 December 2018. It is the largest UK-listed dedicated solar energy investment company by installed capacity.
In June and October 2018, the Company announced two placings of 44,995,209 and 53,994,250 new shares respectively, raising GBP106 million in total. Both placings were oversubscribed and in both instances the Company undertook a scaling back exercise. Following the issuance of the new shares, the Company has 548,941,550 shares in issuance representing a market capitalisation of GBP592.9 million as at 31 December 2018.
As at 31 December 2018, the Company's portfolio consisted of 54 assets with a net installed capacity of 869MW, including four Australian assets (representing 146MW), two of which remain under construction.
INVESTMENT POLICY
The Company will pursue its investment objective by acquiring ground-based, operational solar power plants predominantly located in the UK. Investments outside the UK and assets which are, when acquired, still under construction will be limited to 25 percent of the GAV 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 ("PPAs") will be entered into between each of the individual solar power plant SPVs in the portfolio and creditworthy offtakers. Under the PPAs, the SPVs will sell solar generated electricity and green benefits to the designated offtaker. The Company may retain exposure to power prices through PPAs that do not include 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 GAV post-acquisition. The GAV 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 Borrowing (including any asset level gearing) as a percentage of the Company's GAV, 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 GAV will not exceed 40 per cent at the time of drawdown.
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 2018 are as follows:
% Shareholding
in Fund
BlackRock Investment Management
Ltd 16.17
Newton Investment Management
Ltd 7.34
Baillie Gifford & Co Ltd 7.25
Legal & General Investment
Mgmt Ltd 7.24
Schroders Plc 6.81
Tredje AP Fonden 5.16
Total 49.97%
ALTERNATIVE INVESTMENT FUND MANAGEMENT DIRECTIVE ("AIFMD")
The AIFMD, which was implemented across the EU on 22 July 2013 with the transition period ending on 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 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 the following website address: www.fsfl.foresightgroup.eu.
Board of Directors
The Directors, who are Non-Executive and independent of the Investment Manager, are responsible for the determination of the investment policy of the Company, have overall responsibility for the Company 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 of 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 sits on the boards of a number of companies and is also Chairman of the listed company GCP Asset Backed Income Fund Limited. He is an Advisory Board member of Jersey Finance, Jersey's promotional body and Treasurer of the Jersey Law Society. He has recently retired as the independent Chairman of the States of Jersey's Audit Committee. 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 and was reappointed on 11 June 2018.
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 and was reappointed on 11 June 2018.
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 served on the Board of Foresight VCT plc until May 2018. He is also on the Board of Mercia Fund 1 General Partnership Limited and Miton UK Microcap Trust plc and Chairman of Unicorn AIM VCT plc and SVM Emerging Fund plc.
Mr Dicks was appointed as a Non-Executive Director on 16 August 2013 and was reappointed on 11 June 2018.
Investment Manager
The Company's Investment Manager, Foresight Group CI Limited, is responsible for the acquisition and management of the Company's assets, including the sourcing and structuring of new acquisitions and advising on the Company's borrowing strategy. The Investment Manager is a Guernsey registered company, incorporated under Guernsey Law with registered number 51471. The Investment Manager is licensed and regulated by the Guernsey Financial Services Commission.
The Manager and its adviser, Foresight Group LLP (together, "Foresight Group"), was founded in 1984, and is now a leading independent infrastructure and private equity investment company that currently manages over GBP2.8 billion of assets on behalf of institutions and retail clients with offices in Australia, Italy, South Korea, Spain and the UK. Foresight Group's global infrastructure investments total GBP2.3 billion, with a cumulative generating capacity of 1.6GW. The solar investment team was established in 2007 and today manages assets representing GBP1.6 billion, invested in 91 solar power assets across the UK, Europe and Australia with a total generating capacity of 1.2GW. In 2018, Foresight Group's UK solar portfolio under management generated c.5.8% of total UK solar generation. In the UK, the wider infrastructure team also manages 435MW of investments in bioenergy projects, onshore wind, lithium ion battery storage facilities and reserve power generation assets.
Foresight Group's 84 strong infrastructure team, includes 25 solar investment professionals, with an average of 10 years industry experience.
Foresight Group's Investment Management team is led by three experienced UK-based managers, supported by a further team of solar investment managers located in the UK and internationally. The Investment Management team based in Australia includes seven people comprising three investment professionals, three technical professionals and one support staff. This team has been instrumental in the management of the Company's four Australian assets.
Foresight Group is overseen by an Executive Committee of which Gary Fraser is a member. Foresight Group's Executive Committee provides strategic investment advice to the management team and the Board. Early in the year Jamie Richards retired from Foresight Group. Matt Hammond replaced Jamie on the Company's Investment Management team. Matt is a Partner at Foresight Group and has over 20 years' experience in the infrastructure and renewable energy sector.
RICARDO PINEIRO, PARTNER, HEAD OF UK SOLAR
Ricardo has led Foresight Group's UK solar investments team since 2011 and has been part of the Fund's advisory team since its IPO. He has overseen more than 70 acquisitions representing over 800MW and remains primarily focused on leading new renewable energy transactions across the UK and international markets. Prior to joining Foresight, Ricardo worked at Espirito Santo Investment where he focused on lending and advisory for the energy infrastructure and transportation sectors.
Gary Fraser, Partner, Chief Financial Officer
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 a member of its Executive Committee.
MATT HAMMOND, Partner
Matt is a Partner in the Foresight's infrastructure team having joined Foresight in 2015. Prior to joining Foresight Matt was a Managing Director at Macquarie where he worked in various roles for fifteen years. There he focused on infrastructure and renewable energy advisory, principal investing and lending. He has also worked at Henderson, BT Alex Brown and the WHEB Group where he raised and invested two renewable energy funds investing across Europe.
Asset Manager
Foresight Group has a leading Asset Management capability 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, bio-energy and onshore wind investments, with 1.6GW of renewable energy capacity.
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:
-- Portfolio optimisation including negotiation of project
contracts (insurance, O&M, PPA, import power, security,
warranties), spare part and replacement strategy and technology
improvements
-- Oversight of O&M counterparties
-- Contractual compliance of all contracts
-- 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.
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.
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 and is based in Sydney. He is an electrical engineer with 13 years' experience in project/contract management and design and commissioning of various high voltage infrastructure projects throughout Australia. Tully has also performed 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).
Current Portfolio
Asset Installed Connection Date Acquisition Current Fair
Peak Capacity Cost (GBPm)(1) Value (GBPm)(2)
(MW)
UNITED KINGDOM
1 Wymeswold 34 March 2013 45.0 49.8
------------------ --------------- --------------- --------------- ----------------
2 Castle Eaton 18 March 2014 22.6 21.5
------------------ --------------- --------------- --------------- ----------------
3 Highfields 12 March 2014 15.4 13.8
------------------ --------------- --------------- --------------- ----------------
4 High Penn 10 March 2014 12.7 10.6
------------------ --------------- --------------- --------------- ----------------
5 Pitworthy 16 March 2014 19.3 17.1
------------------ --------------- --------------- --------------- ----------------
6 Hunters Race 10 July 2014 13.3 14.3
------------------ --------------- --------------- --------------- ----------------
7 Spriggs Farm 12 March 2014 14.6 14.7
------------------ --------------- --------------- --------------- ----------------
8 Bournemouth 37 September 2014 47.9 52.4
------------------ --------------- --------------- --------------- ----------------
9 Landmead 46 December 2014 52.4 50.6
------------------ --------------- --------------- --------------- ----------------
10 Kencot 37 September 2014 49.5 45.9
------------------ --------------- --------------- --------------- ----------------
11 Copley 30 December 2015 32.7 38.3
------------------ --------------- --------------- --------------- ----------------
12 Atherstone 15 March 2015 16.2 15.6
------------------ --------------- --------------- --------------- ----------------
13 Paddock Wood 9 March 2015 10.7 11.0
------------------ --------------- --------------- --------------- ----------------
14 Southam 10 March 2015 11.1 11.2
------------------ --------------- --------------- --------------- ----------------
15 Port Farm 35 March 2015 44.5 45.7
------------------ --------------- --------------- --------------- ----------------
16 Membury 16 March 2015 22.2 21.3
------------------ --------------- --------------- --------------- ----------------
17 Shotwick 72 March 2016 75.5 86.8
------------------ --------------- --------------- --------------- ----------------
18 Sandridge 50 March 2016 57.3 59.4
------------------ --------------- --------------- --------------- ----------------
19 Wally Corner 5 March 2017 5.7 6.0
------------------ --------------- --------------- --------------- ----------------
20 Coombeshead 10 December 2014 36.6 40.8
------------------ --------------- --------------- --------------- ----------------
21 Park Farm 13 March 2015
------------------ --------------- --------------- --------------- ----------------
22 Sawmills 7 March 2015
------------------ --------------- ---------------
23 Verwood 21 February 2015
------------------ --------------- ---------------
24 Yardwall 3 June 2015
------------------ --------------- --------------- --------------- ----------------
25 Abergelli 8 March 2015 3.7 4.4
------------------ --------------- --------------- --------------- ----------------
26 Crow Trees 5 February 2016 1.8 1.9
------------------ --------------- --------------- --------------- ----------------
27 Cuckoo Grove 6 March 2015 2.5 2.7
------------------ --------------- --------------- --------------- ----------------
28 Field House 6 March 2015 3.1 3.2
------------------ --------------- --------------- --------------- ----------------
29 Fields Farm 5 March 2016 1.7 2.3
------------------ --------------- --------------- --------------- ----------------
30 Gedling 6 March 2015 1.9 2.5
------------------ --------------- --------------- --------------- ----------------
31 Homeland 13 March 2014 5.2 6.9
------------------ --------------- --------------- --------------- ----------------
32 Marsh Farm 9 March 2015 4.0 4.2
------------------ --------------- --------------- --------------- ----------------
33 Sheepbridge 5 December 2015 1.9 2.4
------------------ --------------- --------------- --------------- ----------------
34 Steventon 10 June 2014 4.2 4.8
------------------ --------------- --------------- --------------- ----------------
35 Tengore 4 February 2015 1.3 1.6
------------------ --------------- --------------- --------------- ----------------
36 Trehawke 11 March 2014 4.7 5.7
------------------ --------------- --------------- --------------- ----------------
37 Upper Huntingford 8 October 2015 3.1 3.5
------------------ --------------- --------------- --------------- ----------------
38 Welbeck 11 July 2014 4.4 4.9
------------------ --------------- --------------- --------------- ----------------
39 Yarburgh 8 November 2015 3.4 4.0
------------------ --------------- --------------- --------------- ----------------
40 Abbey Fields 5 March 2016 1.5 2.3
------------------ --------------- --------------- --------------- ----------------
41 SV Ash 8 March 2015 3.4 3.7
------------------ --------------- --------------- --------------- ----------------
42 Bilsthorpe 6 November 2014 1.9 2.3
------------------ --------------- --------------- --------------- ----------------
43 Bulls Head 6 September 2014 2.2 2.6
------------------ --------------- --------------- --------------- ----------------
44 Lindridge 5 January 2016 1.7 2.3
------------------ --------------- --------------- --------------- ----------------
45 Misson 5 March 2016 2.0 2.6
------------------ --------------- --------------- --------------- ----------------
46 Nowhere 8 March 2015 3.7 3.9
------------------ --------------- --------------- --------------- ----------------
47 Pen Y Cae 7 March 2015 2.9 3.5
------------------ --------------- --------------- --------------- ----------------
48 Playters 9 October 2015 4.0 4.4
------------------ --------------- --------------- --------------- ----------------
49 Manor Farm 14 October 2015 6.1 6.7
------------------ --------------- --------------- --------------- ----------------
50 Roskrow 9 March 2015 3.7 4.4
------------------ --------------- --------------- --------------- ----------------
UK Subtotal 723 685.1 720.6
------------------ --------------- --------------- --------------- ----------------
AUSTRALIA
1 Bannerton 53(3) July 2018 22.9 22.4(5)
------------------ --------------- --------------- --------------- ----------------
2 Longreach 8(3) March 2018 2.7 3.1
------------------ --------------- --------------- --------------- ----------------
3 Oakey 1 15(3) Q2 2019(4) 4.4 4.3(5)
------------------ --------------- --------------- --------------- ----------------
4 Oakey 2 70 Q2 2019(4) 34.0 33.3(5)
------------------ --------------- --------------- --------------- ----------------
Australia Subtotal 146 63.9 63.1
------------------ --------------- --------------- --------------- ----------------
TOTAL 869 749.0 783.7
------------------ --------------- --------------- --------------- ----------------
1 Original cost at time of acquisition, including transaction costs.
2 UK investments valued using an unlevered discount rate of 6.75% or a levered discount rate between 7.50% and 7.75% depending on debt structure. Australian operational assets use a levered discount rate of 8.5%.
3 Accounts for the 48.5% stake the Company holds of Bannerton (110MW), the 49% stake held of Longreach (17MW) and the 49% stake held of Oakey 1 (30MW).
4 Expected connection dates. 5 Held at cost incurred to date using a AUD/GBP exchange rate of 0.55 as at 31 December 2018.
KEY INVESTMENT METRICS
31 December 2018 31 December 2017
Market Capitalisation GBP592.9 million GBP486.0 million
------------------ -----------------
Share Price 108.0 pence 108.0 pence
------------------ -----------------
Dividend Declared per Share for the 6.58 pence 6.32 pence
period
------------------ -----------------
GAV GBP1,114.7 million GBP680.8 million*
------------------ -----------------
NAV GBP610.3 million GBP481.3 million
------------------ -----------------
NAV per Share 111.2 pence 107.0 pence
------------------ -----------------
Annual Total Return (NAV) since IPO 7.36% 7.48%
------------------ -----------------
Annual Total Shareholder Return since
IPO 6.83% 7.02%
------------------ -----------------
Profit after Tax for the Year GBP56.0 million GBP35.1 million
------------------ -----------------
*Methodology to calculate GAV has since been updated
PORTFOLIO SUMMARY
As at 31 December 2018, the Company's portfolio comprised of 54 assets with a total net peak capacity of 869MW. In the UK, the Company has a portfolio of 50 assets representing a total installed capacity of 723MW. The Company owns a further four assets in Australia which account for 146MW of installed capacity.
All of the Company's assets benefit from government backed subsidies. The Company's UK assets are accredited under the RO scheme, with the exception of Yardwall which is a FiT accredited asset (representing less than 1% of the UK portfolio). The Australian assets benefit from subsidies in the form of Large-Scale Generation Certificates ("LGC").
During the full year period, approximately 57% of revenues were derived from subsidies, with the remaining 43% from the sale of electricity.
The ROC buy-out price for the annual compliance period commencing in April 2018 increased to GBP47.22 (2017-18 compliance period: GBP45.58), reflecting the average monthly percentage change in RPI during 2017. On average, the Company received 1.42 ROC/MWh across the UK portfolio.
The charts on pages 16-17 show a detailed analysis of the portfolio as at 31 December 2018. The portfolio continues to be well diversified by inverter and panel manufacturers and by O&M counterparties. Through the acquisition of a further 31 UK assets in the year the Company has enhanced portfolio diversification and increased efficiencies of scale in terms of reducing ongoing operational costs.
ACQUISITIONS
2018 was the Company's most acquisitive year to date, with 31 assets acquired in total, adding a further 248MW of total installed capacity to the Company's UK portfolio across the separate transactions.
In April 2018, the Company acquired a 100% interest in a 53.3MW portfolio of five operational solar parks located in the UK. The portfolio was acquired for GBP36.6 million, including transaction costs and approximately GBP4.2 million of cash balances. The acquisition agreement included the economic benefit of all project cash flows from 1 January 2018. The portfolio included a 0.5MW, FiT accredited, onshore wind asset. This asset is expected to be sold in 2019 and is an immaterial part of the investment portfolio, representing less than 1% of the Company's NAV.
In August 2018, a 114MW portfolio was acquired for an equity consideration of GBP47 million, including the economic benefit of all cashflows from 1 April 2018. All of the 15 assets are operational and accredited under the RO scheme, receiving a weighted average of 1.41 ROCs/MWh.
Finally, in November 2018, the Company completed the acquisition of a 100% interest in a portfolio of 11 operational solar assets in the UK with a total installed capacity of 80.9MW. The portfolio was acquired for an equity consideration of GBP33.1 million, including the economic benefit of all cashflows from 1 April 2018. All of the assets are RO accredited, receiving an average of 1.35ROCs/MWh.
Both aforementioned August and November 2018 acquisitions were purchased from retail funds managed by Foresight Group LLP and supported by an independent valuation from a third party valuation expert. Previous Foresight Group ownership was beneficial in allowing for a more cost-efficient and lower risk acquisition process. Additionally, all assets had been in operation for a minimum period of two years and managed by Foresight Group's Asset Management team, thereby ensuring the quality of the assets as well as securing a clear advantage in continuing to manage these assets going forwards.
MARKET DEVELOPMENTS
UNITED KINGDOM
In December 2018, total installed capacity in the UK reached 13.09GW across approximately 976,200 installations, an increase of 2.1% (268MW) since December 2017(3) . This modest growth was predominantly supported by new domestic roof-top installations and some ground mounted assets in Northern Ireland. This growth reflected a significant decrease from the 940MW installed in 2017 (7.9% increase against 2016) and 2.18GW in 2016 (22.5% increase against 2015), a result of the closure of the Renewables Obligation ("RO") scheme for new installations in April 2017.
In 2018, the UK solar market continued to experience a period of consolidation with a significant number of secondary transactions taking place, including the acquisitions completed by the Company. The level of activity in the secondary market, associated with the absence of new construction of large-scale solar assets, resulted in increased competition for the acquisition of operational assets.
In November 2018, Ofgem released a consultation to the Targeted Charging Review ("TCR"), which was launched initially in August 2017 as part of a review into residual network charging arrangements. The update included a number of proposed reforms, which would likely result in a reduction in revenues received by UK embedded generation assets which currently benefit from embedded benefits and could also result in an increase in network charges. Whilst the exact nature of the proposed changes is still to be confirmed, if taken forward in their present form they would be phased in from 2021. It should be noted, embedded benefits revenue represents less than 2% of lifetime revenues for the portfolio.
Brexit
At the time of going to print, the outcome of Brexit remains unclear. The Investment Manager does not consider the Company to be particularly sensitive to the various possible scenarios that the UK Government could take. The energy market in the UK is closely aligned with European markets and this is not expected to change over the long term. As an example, the draft political declaration made in November 2018 sets out a desire to "consider cooperation on carbon pricing by linking a United Kingdom national greenhouse gas emissions trading system with the EUs Emissions Trading System".
An exit from the EU would likely cause volatility in the energy markets, that volatility in itself could lead to higher electricity prices in the short term. Longer term impacts such as weaker economic demand and the availability of unskilled labor aren't deemed material to the future operations of the Company.
AUSTRALIA
The Australian renewable market continues to experience a period of growth with 8.3GW of renewable generation either operational or under construction, with solar generation accounting for 4.4GW(4) . On the assumption that those assets currently under construction become operational by 2020 the renewable installed capacity will exceed the 2020, total Renewable Energy Target of 33,000GWh from renewable generation.
The expected NEG policy saw significant amendments in 2018 with the Government changing its focus on encouraging new energy investments that delivers lower electricity prices only, with less focus on the reduction of emissions.
Grid connection and commissioning requirements by the Australian Energy Market Operator ("AEMO") have been identified as a general cause for commissioning delays, with new generator performance standards introduced in 2018. This has impacted the average commissioning period per project however the sector has continued to expand.
On 22 November 2018, RCR Tomlinson ("RCR"), an engineering company listed in the Australian Securities Exchange, went into administration, following a A$100 million equity raise and a write down of A$57 million in August 2018 caused by cost overruns on two solar projects under construction. RCR was involved in the construction of various solar projects since 2017. Two of the Company's assets experienced construction delays as a result of RCR going into administration however, as noted earlier, it will not have a material impact on overall financial performance as the Company is contractually protected. For more information please refer to the Asset Management section of the report.
A federal Government election is due to be held in Australia in May 2019. In November 2018, Australian opposition leader, Bill Shorten, announced the Labor Party's proposed energy plan including re-introduction of the Renewable Energy Guarantee, Contracts for Difference ("CfD") auctions, grid infrastructure investment and energy efficiency schemes with a headline goal of 50% of power from renewables by 2030. This would represent a significant increase in the existing target of c.23.5% power from renewables by 2020 under the Renewable Energy Target. The incumbent Liberal/National party coalition is yet to formally disclose its energy plan. The Investment Manager will continue actively to monitor relevant political and policy developments.
UNITED KINGDOM
The average power price achieved across the UK portfolio during the year, including fixed price arrangements was GBP49.54/MWh, versus GBP44.19/MWh in 2017, an increase of 12.1%.
Wholesale power prices generally remained in the mid GBP50's throughout the first half of the year driven by a sharp increase in March as very low temperatures and adverse weather caused higher gas prices in Europe, which consequently drove an increase in power prices. The European Emission Allowances ("EUA") carbon price also rose significantly during the first half of the year which further supported increased prices. The average power price achieved at portfolio level in the first half of the year was GBP46.54/MWh.
Throughout the second half of the year, spot prices initially increased reaching a peak of approximately GBP67/MWh in September due to increasing commodity prices, principally gas and carbon prices. The increase in commodity prices was driven mainly by the impending start of the operation of the Market Stability Reserve, which would address the current surplus of allowances. Prices remained stable from September to the end of the year. The average power price achieved at portfolio level during the second half of the year, when taking into consideration the fixed price arrangements in place for the period, was GBP51.53/MWh.
Throughout the course of the year, the Company took advantage of attractive forward electricity prices by entering fixed price arrangements for the sale of electricity. As at 31 December 2018, fixed price arrangements were in place across 53% of the UK portfolio at a weighted-average price of GBP53.38/MWh. This compares to 29% as at 31 December 2017, at a weighted average price of GBP43.26/MWh. The fixed price arrangements have different tenors, with the contract with the longest tenure expiring in March 2021. The percentage of fixed price arrangements will gradually decrease to 30% by October 2019 and 7.5% by October 2020. These arrangements provide greater visibility over future cash flows and limit potential price volatility in the short and medium term.
The Investment Manager regularly reassesses conditions in the electricity market and updates 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.
PPA tenders
In Q3 2018, a tender was performed for the supply of PPAs to 22 UK sites representing more than 200MW of the UK portfolio. The size of the portfolio tendered, and the Company's relationships with industry leading offtakers, is expected to help secure the best possible terms. The contracts to be implemented as part of the tender are expected to become effective by April 2019.
AUSTRALIA
In 2018, average wholesale power prices in Australia decreased c.18% versus 2017 in all states except for Victoria which marginally increased by c.2%. Price drops in Queensland were largely due to power price spikes in early 2017. Average prices in 2018 were above pre-2017 prices and follow the general upward trend of the past five years, which has been driven by increasing gas prices. In the first half of the year the weighted average spot price in Queensland was A$72/MWh, this rose to A$82.5/MWh in the second half of the year. The 2018 average was A$77.25/MWh. Prices in Victoria were marginally higher across both halves of the year, A$103/MWh in H1 2018 and A$92/MWh in H2 2018, averaging A$97.5/MWh across the year.
The Investment Manager continues to review the PPA options for Oakey 2 and expects to enter an agreement in advance of the target commissioning date during the second quarter of 2019. For more information please refer to the Asset Management section.
POWER PRICE FORECASTS
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 for each relevant market.
UNITED KINGDOM
During the full year period, power price forecasts increased by 0.4% mainly due to movements in the short to medium term.
In the first half of the year, forecasts dropped due to the expected higher penetration of installed renewable generation capacity in the medium and long term and forecasted decline in commodity prices.
Forecasts recovered during the second half of the year mainly due to an increase in gas prices as a result of increased oil prices and lower storage levels across Europe following the cold weather in Q1 and Q2 2018.
The Company's forecasts assume an increase in power prices in real terms over the medium to long-term of 0.6% per annum (31 December 2017: 1.3%).
Where the assumed asset life extends beyond 2050, the Investment Manager has assumed no real growth in forecast power prices.
Australia
Wholesale power prices in Australia are projected to decline between 2019 and 2021 based on the Australian Securities Exchange forward prices. During the 2020s, power prices are expected to stabilise across all regions as gas price increases are offset by additional built renewable capacity. In the early 2030s, prices are forecast to rise again due to a large amount of coal generation coming offline.
THIRD PARTY DEBT ARRANGEMENTS AND GEARING POSITION
As at 31 December 2018, total outstanding long-term debt was GBP399.4 million, representing 36% of the GAV (calculated as NAV plus outstanding debt) of the Company and its Subsidiaries (31 December 2017: GBP152.4 million or 22% of GAV). The increase in long-term debt is a result of the acquisitions completed in 2018 as the portfolios were acquired with third party debt in place.
As at 31 December 2018, the total outstanding debt including RCFs was GBP504.4 million, representing 45% of GAV (31 December 2017: GBP200.3 million or 29% of GAV.)
Long-Term Facilities
As at 31 December 2018, GBP399.4 million of long-term debt facilities were outstanding (includes GBP7.4m of nominal revaluation of the inflation-linked facilities). This figure includes GBP31.8 million of debt facilities included in the 53.3MW portfolio acquired in April 2018 and debt facilities representing GBP161.6 million relating to assets acquired in August and November 2018.
Inflation linked debt facilities represent GBP90.2 million of the total long-term debt outstanding as of 31 December 2018.
At 31 December 2018, the average cost of long-term debt, was 2.8% per annum (2017: 2.5%), including the cost of the inflation linked facilities of 1.28% per annum. The cost of the inflation linked facility is expected to increase over time assuming the Company's long-term annual RPI forecast of 2.75%, to an equivalent average annual cost of c.3.1% over the term of the facilities.
Revolving Credit Facilities
As part of the acquisition of five new assets in April 2018, the Company agreed a GBP10 million facility extension of the RCF entered into in February 2017 at the prevailing rate of LIBOR + 2%. As at 31 December 2018, RCFs of GBP105 million were fully drawn.
The current RCF facility in place for FS Holdco 1, for which Santander is the provider, is due to expire in March 2019. The Investment Manager is in the process of extending the facility for an additional three year period.
The RCFs were fully drawn during the period as a result of asset acquisitions. At 31 December 2018, the all-in annualised cost of the revolving credit facilities was 2.3% (2017: 1.51%). The Investment Manager expects to refinance the remaining balance either through future equity raisings or other long-term refinancing arrangements.
DEBT STRUCTURE
Note: Simplified for illustrative purposes
Debt Facilities
The following table summarises the debt position of the Fund as at 31 December 2018.
Borrower Holding Provider Facility Amount Outstanding Maturity Applicable Rate
Vehicle Type (m)
FS Holdco Fixed rate,
FS Holdco 1 MIDIS fully-amortising GBP62.4 Mar-24 3.78%
---------- ---------- ------------------ ------------------- --------- -----------------------
MIDIS Inflation GBP63.2 Mar-34 RPI Index(1)
linked, + 1.08%
fully-amortising
---------- ---------- ------------------ ------------------- --------- -----------------------
Santander Term loan GBP25.6 Mar-34 LIBOR + 1.70%
, fully-amortising
---------- ---------- ------------------ ------------------- --------- -----------------------
Project FS Holdco RBS Term loan GBP161.6 Sep-19 LIBOR + 3.00%
SPVs (25 2
vehicles)
---------- ---------- ------------------ ------------------- --------- -----------------------
Second
Generation
Portfolio FS Holdco Fixed rate,
1 3 MIDIS fully-amortising GBP4.3 Aug-34 4.40%
---------- ---------- ------------------ ------------------- --------- -----------------------
Inflation GBP27.0 Aug-34 RPI Index(1)
linked, + 1.70%
fully-amortising
------------------ ------------------- ------------------------------------------------- -----------------------
Foresight FS Holdco CEFC Term loan A$60.2 Jun-27 Base rate (2.95%)
Solar Australia 4(2) + margin (2.55%
Pty Ltd to 2.80%)
---------- ---------- ------------------ ------------------- --------- -----------------------
Longreach CEFC Term loan A$12.2 Mar-22 Base + margin
Finco Pty rate (constr
Ltd (2.57%) - 1.55%;
Base operation
rate - 1.40%)
(3.28%)(3)
Base
rate
(2.58%)
Base
rate
(3.14%)(3)
---------- ------------------ ------------------- -------- ----------- ----------
Longreach MUFG Term loan A$12.2 Mar-22
Finco Pty
Ltd
---------- ------------------ ------------------- -------- ----------- ----------
Oakey 1 CEFC Term loan A$16.1 Mar-22
Finco Pty
Ltd
---------- ------------------ ------------------- --------
Oakey 1 MUFG Term loan A$16.1 Mar-22
Finco Pty
Ltd
---------- ------------------ ------------------- -------- ----------- ----------
Oakey 2 CEFC Term loan A$41.4 Oct-22 Base rate (2.48%)
Finco Pty + 2.25%
Ltd
---------- ------------------ ------------------- -------- -----------------------
TOTAL LONG GBP431.6
TERM DEBT
------------------------------ -----------------------
FS Holdco FS Holdco Santander Revolving GBP40.0 Mar-19 LIBOR + 2.05%
1 credit
---------- ---------- ------------------ ------------------- --------- -----------------------
FS Debtco FS Holdco Santander Revolving GBP65.0 Feb-20 LIBOR + 2.00%
2 credit
---------- ---------- ------------------ ------------------- --------- -----------------------
TOTAL REVOLVING GBP105.0
DEBT
------------------------------ -----------------------
TOTAL DEBT GBP536.6
------------------------------ -----------------------
1 RPI Linked Facilities are assumed to have a long term inflation assumption of 2.75%
2 Australian debt presented in full and not prorated for Foresight ownership proportion
3 Interest rate swap for 100% of the outstanding debt during the initial 5 years, 75% from years six to ten and 50% thereafter
During the period the Company has repaid a total of GBP23.5 million of debt, including c.GBP15.5 million of project level debt associated to the UK operational portfolios acquired in the second half of 2018. This includes the full repayment of the GBP9.1 million Manor Farm debt facility as the facility expired in December 2018. This asset will be included in the ongoing portfolio refinancing process.
The Company continues to have limited exposure to benchmark rate movements in the UK and Australia as a result of the long term interest rate swaps in place to protect the Company from underlying interest rate movements. Sterling denominated debt facilities priced over LIBOR benefit from interest rate swaps hedging 80% of the outstanding debt during the term of the loans. In Australia, debt facilities entered with the CEFC have no exposure to the Bank Bill Swap Bid Rate ("BBSY") as the rate was fixed at financial close. Debt facilities provided by MUFG have in place interest rate swaps on a decreasing nominal amount for a notional tenor of 20 years.
Refinancing
The Investment Manager is in the process of refinancing the assets acquired in August and November 2018 and other UK portfolio assets acquired in 2017. The Company intends to enter long-term, fully amortising debt facilities on a cross-collateralised basis, reducing the average annual cost of long-term debt materially below that of the existing project loans inherited as part of the acquisitions. The assets will continue to benefit from long-term interest rate swaps. The refinancing of these assets is expected to complete before the end of June 2019.
DIVIDS
The Company has met all target dividends since IPO. The Company will deliver a full year dividend for the year ended 31 December 2018 of 6.58 pence. The Company is targeting a full year dividend for the year ending 31 December 2019 of 6.76 pence, representing a 2.70% increase against the dividend declared for the 2018 financial year.
DIVID TIMETABLE FOR FY2018
Dividend Amount Status Payment Date
Interim 24 August
1 1.64 pence Paid 2018
---------- -------- ------------
Interim 23 November
2 1.64 pence Paid 2018
---------- -------- ------------
Interim 22 February
3 1.65 pence Paid 2019
---------- -------- ------------
Interim 1.65 pence Approved 24 May 2019
4
---------- -------- ------------
TOTAL 6.58 pence
---------- -------- ------------
On 5 March 2019 the Board approved the fourth interim dividend relating to FY2018 of 1.65 pence per share which will be paid on 24 May 2019.
Dividend Timetable -
Interim 4
Ex-dividend Date 9 May 2019
-----------
Record Date 10 May 2019
-----------
Payment Date 24 May 2019
-----------
DIVID COVER
Total dividends of GBP31.3 million were paid during the year to 31 December 2018. Compared with the relevant net cash flows of the Company and underlying investments, these dividends were covered 1.38 times when dividends paid immediately to new equity are excluded. When adjusting for cash acquired alongside new assets, dividend cover was 1.20 times.
FOREIGN EXCHANGE
The Company is exposed to foreign exchange movements in respect of its investments in Australia. As such, the Company continues to implement a hedging strategy in order to reduce the possible impact of currency fluctuations and to minimise the volatility of equity returns and cash flow distributions. The Company has entered into forward contracts for up to two years in an amount equivalent to c.75% of its expected 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 strategy will protect the cash yields from the Australian assets.
The cost of the equity investments will not benefit from foreign exchange hedging, considering the long-term investment strategy of the Company.
The Company reviews its foreign exchange strategy on a regular 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 2018 was 1.18% (31 December 2017: 1.18%). 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 2018 increased to 111.2 pence compared to 107.0 pence as at 31 December 2017.
MOVEMENTS IN NAV
A breakdown in the movement of the Group NAV during the reporting period is shown in the table below.
NAV NAV per share
NAV as at December 2017 GBP481.3m 107.0p
----------- -------------
Dividend paid GBP(31.3)m (5.7)p
----------- -------------
Equity raised GBP104.8m -
----------- -------------
Interest earned GBP36.5m 6.6p
----------- -------------
Management fee GBP(5.1)m (0.9)p
----------- -------------
RCF finance costs GBP(1.7)m (0.3)p
----------- -------------
Other costs (incl. Corporation Tax) GBP(0.1)m (0.0)p
----------- -------------
Acquisitions* GBP2.2m 0.4p
----------- -------------
Inflation* GBP11.5m 2.1p
----------- -------------
Valuation date* GBP0.8m 0.1p
----------- -------------
PR* GBP(0.4)m (0.2)p
----------- -------------
Power curve* GBP7.9m 1.4p
----------- -------------
Discount Rate GBP11.0m 2.0p
----------- -------------
Operational inputs GBP(2.8)m (0.5)p
----------- -------------
Other* GBP(4.3)m (0.8)p
----------- -------------
NAV as at December 2018 GBP610.3m 111.2p
----------- -------------
* 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 is 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 transaction 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 in making a fair 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 and query 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.
METHODOLOGY
The discount rates applied to the valuation of the portfolio have been reduced during the year to reflect the increase in current market valuations of operating solar assets in the UK. The unlevered discount rate has been reduced from 7.00% to 6.75%. These include assets that have been acquired using RCF facilities, being Shotwick, Sandridge and Wally Corner.
Assets that have debt in place at portfolio level continue to be valued using a premium to the unlevered rate of 0.75%, at a discount rate of 7.50%. Assets that have debt at SPV level, and therefore not cross-collateralised, are considered to carry a higher premium of 1.00% and as such are valued using a discount rate of 7.75%.
The discount rate used for UK asset cashflows which have received lease extensions beyond the initial investment period of 25 years is 8.75% for years subsequent.
Longreach, the only asset within the Australian portfolio not held at cost, is valued using a 8.50% discount rate. The remaining Australian acquisitions are valued at cost and will continue to be held at cost until the assets are connected to the grid and fully operational. These asset valuations are updated quarterly to reflect movements related to exchange rate.
The weighted average discount rate across the portfolio is 7.30% compared to 7.58% as at 31 December 2017.
Asset life
The weighted life of the UK portfolio as at 31 December 2018 is 28.4 years (31 December 2017: 28.7 years).
The average useful economic life across 37 of the 50 UK assets goes beyond 25 years, averaging 30.5 years. Additional conservative operational costs are incorporated into the extended lives and the cash flows from operations that fall after the initial 25-year period have been discounted 8.75%, reflecting the merchant risk of the expected cash flows beyond the initial 25-year period. The change in discount rate from 9.0% in previous periods to 8.75% is in line with the aforementioned methodology change.
Assets located in Australia assume a useful economic life of 25 years.
MOVEMENTS IN NAV (GBPM AND PENCE PER SHARE)
DIVIDS PAID
The Company paid dividends of GBP31.3m during the year or 6.58p per share.
EQUITY RAISED
Two oversubscribed share placings were completed, raising net proceeds of GBP104.8 million (gross proceeds of GBP106 million) from new and existing investors.
INTEREST EARNED
The Company and its subsidiaries accrued GBP36.5 million of investment income during the year. This is the interest accrued on shareholder loans.
COSTS
Total costs of GBP6.9 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.
ACQUISITIONS
During the year the Company acquired 31 assets, resulting in a NAV uplift of GBP2.2 million which represents the difference between the acquisition internal rate of return and Fund discount rate at the time of acquisition.
In Australia, Longreach connected in March 2018 and as such has been revalued using a discounted cash flow methodology, in line with the rest of the portfolio. This resulted in a NAV uplift of GBP0.4 million.
INFLATION
The Investment Manager continues to use 2.75% as its medium/long-term inflation assumption. As at 31 December 2018, the models reflect Office for Budget Responsibility ("OBR") forecasts for the period 2018 to 2020 of: 3.46%, 3.14% and 3.05% respectively.
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
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.
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 there was an upward movement of 0.4% 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 0.6% per annum (31 December 2017: 1.3%).
DISCOUNT RATE
The Company's discount rates reported above have been reduced by 0.25% where debt is not held at SPV level.
The Investment Manager regularly reviews the discount rate to ensure it remains in line with any changes to the market and risk profile of the Company.
OPERATIONAL INPUTS
This predominately includes insurance costs. Over the year the insurance market has rationalised industry wide concerns, especially around increasing loss ratios, which has led to an increase in premiums in the market. Insurance costs, if underlying terms such as deductibles remain the same, will increase into the long term regardless of the underwriting risk associated with an individual portfolio.
OTHER MOVEMENTS
This includes other factors behind the valuation movements, including long term PPA and insurance cost assumptions.
VALUATION SENSITIVITIES
Where possible, assumptions are based on observable market and technical data. In many cases, such as forward power prices, independent advisors are used to provide reliable and evidenced information enabling the Investment Manager to adopt a prudent approach. The Investment Manager has set out the inputs which it has ascertained would have a material effect upon the NAV in note 17 of the Financial Statements. All sensitivities are calculated independently of each other.
OUTLOOK
The ongoing consolidation of the UK solar market is increasing asset valuations in the secondary market, reducing the number of NAV-accretive opportunities available. As a result of the increasingly competitive landscape the Company is expected to adopt an opportunistic approach to new UK subsidised investments.
We continue to actively monitor and explore markets which demonstrate growth potential:
-- Western Europe and other international markets: Solar markets
characterised by subsidised assets and experienced contractors.
The Investment Manager has developed strong relationships
in the region with key market participants, including developers
and owners of secondary assets, and will continue to actively
engage with these parties in assessing acquisition opportunities.
-- Unsubsidised Solar: Reductions in equipment and construction
costs, alongside a high wholesale power price environment,
have made subsidy-free assets increasingly viable. Depending
on the PPA structure these assets are expected to offer
a similar risk profile from a contracted revenue profile
perspective.
The UK subsidy free market is still at an early stage given
irradiation profiles compared to other European regions
and the relative immaturity of the long-term corporate
PPA market. The potential in this market area, however,
is rapidly developing and the Investment Manager will continue
to closely track developments. Markets in Southern Europe,
like Spain and Portugal, present a more developed PPA market.
The Investment Manager has significant experience in these
markets having invested to date in 12 subsidy-free solar
projects (totalling 53MW) in Iberia, either currently in
construction or operational. The Investment Manager will
continue to actively explore this market.
-- Battery Storage co-location: Another notable market development
in 2018 which continues to be actively monitored is the
advances made in battery technology. Again, the Investment
Manager is able to leverage Foresight Group's experience
in this sector. Foresight Group was an early investor into
the UK battery storage market investing in 45MW of battery
storage facilities in 2018. These Foresight Group investments
provide the Investment Manager with further operating experience
and insight into the potential value creation that battery
storage co-location could provide to the Company's existing
solar assets in both the UK and Australia.
Foresight Group's experience in the aforementioned markets provides the Investment Manager with a solid understanding of the value accretive potential of these investment opportunities.
UK Portfolio Performance
The portfolio has generated significantly more electricity than our base cases predicted during the year. Strong operational performance throughout the year has been underpinned by high irradiation levels throughout the summer months. Although above average levels of irradiation and high temperatures were seen throughout the summer, there is not a direct linear relationship between irradiation and production. Higher temperatures reduce the efficiency of the solar modules resulting in a lower percentage of irradiation (over and above our base case) converted into electricity.
Electricity produced was 4.9% above expectations, when adjusted for compensation received, with irradiation levels being 6.4% above investment cases.
Through active management of a maturing portfolio, the Asset Manager has successfully remedied a number of historical operational issues. The optimisation of assets has been carried out with the long-term performance of the sites in mind with some short-term availability losses being a necessary consequence to enhance long term performance.
Where material incidents occurred during the year, the Company has been substantially compensated through insurance and contractual liquidated damages. The incidents were isolated events and will not affect the long-term performance of the assets.
SHOTWICK (72MW)
As disclosed in the 30 June 2018 Interim Report, on 25 June 2018, the cable connecting the solar power plant and the substation failed, forcing the site offline until 27 July 2018. Compensation is to be received through a combination of insurance and contractual protections representing a high proportion of the revenue losses. Financial losses not covered by insurance or contractual protection amounted to GBP0.32m.
CASTLE EATON (18MW), HIGH PENN (10MW), HIGHFIELDS (12MW) AND PITWORTHY(16MW)
The four sites have seen a significant improvement in performance in 2018, with relative performance being 10% better over the year. In the first half of the year minor incidents occurred at High Penn, Highfields and Pitworthy, which reduced site availability. Pitworthy continues to be impacted by reduced availability at inverter level and experienced a transformer failure in November to December. The Asset Manager continues to work with the O&M Contractor and the inverter manufacturer to resolve the situation.
WYMESWOLD (34MW)
Over the course of 2018 there were three separate grid disconnections lasting for one day each. In addition, a number of string insulation failures were identified over the period causing inverter downtime on a regular basis, for which the Company will be compensated. Repair works have been substantially completed.
VERWOOD (20.7MW)
Performance has been affected by a number of events over the course of the year including inverter capping, inverter failures and an unscheduled outage event.
TREHAWKE (11MW)
Overall performance has been affected by minor technical issues in the summer months. The high irradiation levels experienced caused inverter clipping to reduce performance ratios.
PEN Y CAE (7MW)
Site under performance was due to scheduled grid outages in April 2018 as well as a transformer failure at one of the stations in May 2018. A spare transformer was installed and the site brought back online within nine days.
PRODUCTION
The production figures below have been adjusted, where relevant, for events where compensation has been, or will be, received.
Site MW Irradiation Production Production
Variance (kWh) Variance
Abbey Fields 4.9 8.1% 4,715,053 11.2%
----- ----------- ----------- ----------
Abergelli 7.7 3.1% 6,148,330 0.5%
----- ----------- ----------- ----------
Atherstone 14.8 8.8% 14,635,043 7.0%
----- ----------- ----------- ----------
Bilsthorpe 5.7 9.6% 4,874,835 9.4%
----- ----------- ----------- ----------
Bournemouth 37.3 1.8% 40,884,013 4.3%
----- ----------- ----------- ----------
Bulls Head 5.5 13.8% 4,745,874 10.9%
----- ----------- ----------- ----------
Castle Eaton 17.8 9.5% 17,486,409 9.5%
----- ----------- ----------- ----------
Coombeshead 9.8 3.0% 9,918,949 -2.2%
----- ----------- ----------- ----------
Copley 30.0 7.9% 30,644,929 10.0%
----- ----------- ----------- ----------
Crow Trees 4.7 10.1% 3,962,039 9.5%
----- ----------- ----------- ----------
Cuckoo Grove 6.1 -3.6% 5,447,913 -4.6%
----- ----------- ----------- ----------
Field House 6.4 4.8% 5,586,251 4.1%
----- ----------- ----------- ----------
Fields Farm 5.0 10.8% 4,457,582 12.4%
----- ----------- ----------- ----------
Gedling 5.7 13.9% 4,907,926 12.8%
----- ----------- ----------- ----------
High Penn 9.6 5.0% 9,348,103 3.4%
----- ----------- ----------- ----------
Highfields 12.2 4.8% 10,962,502 -2.3%
----- ----------- ----------- ----------
Homeland 13.2 1.5% 11,583,787 1.3%
----- ----------- ----------- ----------
Hunters Race 10.3 2.9% 11,010,957 4.4%
----- ----------- ----------- ----------
Kencot Hill 37.2 7.2% 38,349,164 7.9%
----- ----------- ----------- ----------
Landmead 45.9 11.2% 46,089,806 8.7%
----- ----------- ----------- ----------
Lindridge 4.9 7.8% 4,248,189 8.9%
----- ----------- ----------- ----------
Manor Farm 14.2 10.9% 11,715,908 11.0%
----- ----------- ----------- ----------
Marsh Farm 9.1 5.2% 7,853,383 1.1%
----- ----------- ----------- ----------
Membury 16.5 4.8% 16,602,340 5.7%
----- ----------- ----------- ----------
Misson 5.0 8.2% 4,397,964 12.3%
----- ----------- ----------- ----------
Nowhere 8.1 12.3% 7,212,327 7.4%
----- ----------- ----------- ----------
Paddock Wood 9.2 4.6% 9,968,687 8.1%
----- ----------- ----------- ----------
Park Farm 13.2 6.6% 12,603,145 6.5%
----- ----------- ----------- ----------
Pen Y Cae 6.8 7.0% 5,301,149 -0.6%
----- ----------- ----------- ----------
Pitworthy 15.6 1.5% 12,862,896 -9.6%
----- ----------- ----------- ----------
Playters 8.6 10.0% 7,720,085 6.6%
----- ----------- ----------- ----------
Port Farm 34.7 7.3% 34,613,920 5.4%
----- ----------- ----------- ----------
Roskrow 8.9 -0.7% 7,438,959 3.9%
----- ----------- ----------- ----------
Sandridge 49.6 4.0% 49,560,373 4.4%
----- ----------- ----------- ----------
Sawmills 6.6 0.4% 6,430,390 -3.6%
----- ----------- ----------- ----------
Sheepbridge 5.0 16.8% 4,648,657 17.2%
----- ----------- ----------- ----------
Shotwick 72.2 6.7% 66,413,130 2.4%
----- ----------- ----------- ----------
Southam 10.3 5.9% 10,496,546 8.9%
----- ----------- ----------- ----------
Spriggs 12.0 2.8% 12,535,777 7.8%
----- ----------- ----------- ----------
Steventon 10.0 11.5% 9,063,848 9.4%
----- ----------- ----------- ----------
SV Ash 8.4 10.1% 7,175,180 11.3%
----- ----------- ----------- ----------
Tengore 3.6 2.3% 3,162,727 3.3%
----- ----------- ----------- ----------
Trehawke 10.6 0.2% 8,533,014 -5.2%
----- ----------- ----------- ----------
Upper Huntingford 7.7 6.4% 6,564,212 6.1%
----- ----------- ----------- ----------
Verwood 20.7 7.2% 21,033,022 0.3%
----- ----------- ----------- ----------
Wally Corner 5.0 7.8% 5,423,545 10.4%
----- ----------- ----------- ----------
Welbeck 11.3 12.5% 9,638,725 8.4%
----- ----------- ----------- ----------
Wymeswold 34.5 7.9% 32,304,111 3.2%
----- ----------- ----------- ----------
Yarburgh 8.1 9.5% 7,035,544 6.6%
----- ----------- ----------- ----------
Yardwall 3.0 3.3% 3,136,092 -1.0%
----- ----------- ----------- ----------
Total 723.1 691,453,309 4.9%
----- ----------- ----------- ----------
Weighted Total 6.4%
----- ----------- ----------- ----------
AUSTRALIAN ASSETS
Two of the Australian assets became operational in 2018 with the remaining two assets due to be commissioned during the second quarter of 2019.
New commissioning requirements introduced by the AEMO in 2018 have caused delays to Longreach and Bannerton achieving full export capacity. Such delays are not expected to have a material impact on overall financial performance as the Company is contractually and financially protected.
Longreach
Construction of Longreach is complete and the site is operational. The site reached first export in March 2018, reaching full export capacity in the following months. RCR acted as EPC and O&M contractor. The Company is in the process of appointing a replacement O&M contractor. Contingency plans are in place to guarantee O&M services until the new contractor is appointed.
The project has been experiencing limited levels of grid curtailment in recent months caused by export constraints in one of the local substations. The Asset Manager is working with the network operator to address this.
Bannerton
Construction is complete however the project experienced grid commissioning delays. The project started exporting in July 2018 and is due to reach full export capacity in March 2019. The Asset Manager expects the financial losses resulting from grid connection delays to have minimal financial impact as the Company is contractually protected.
Oakey 1
Construction of Oakey 1 is mechanically complete however full commissioning has experienced delays as a result of RCR entering into administration. The project has appointed a service provider to conduct the commissioning process. The AEMO registration process is underway and the project is expected to start exporting in March 2019. Full commissioning is expected during the second quarter of 2019. As with the other Australian assets, the Company is contractually protected against commissioning delays despite RCR going into administration.
Oakey 2
Oakey 2 experienced damage whilst in construction as a result of adverse weather in October 2018 which damaged 20% of the equipment installed on site. A remedial plan has been agreed with the EPC contractor and new equipment ordered. The damage and subsequent delay is an insurable event with the project expecting to begin export in the second quarter of 2019. The works on Oakey 2 have not been affected by RCR going into administration as RCR was not involved in this project.
Sustainability and ESG
Sustainability and Environmental, Social and Governance ("ESG") considerations are at the core of the Company's strategy, helping to inform its investment process and asset management operations. Best practice across the portfolio is demonstrated through environmental stewardship, social engagement and good governance. The following reviews the recent activities taken by the Company.
ENVIRONMENTAL
Each asset is closely monitored for its localised environmental impact. The Asset Manager is a working partner of the Solar Trade Association's Large-Scale Asset Management Working Group and is a signatory to the Solar Farm Land Management Charter. The Asset Manager ensures that solar power plants are managed in a manner that maximises the agricultural, landscape, biodiversity and wildlife potential, which can also contribute to lowering maintenance costs and enhancing security.
Throughout the year, the Asset Manager's Environment and Sustainability Manager, James Jenkison, pursued a number of initiatives to ensure the solar power plants are being effectively managed for biodiversity. Such schemes include:
-- Hedgerow and tree planting - To date, more than 32km of
hedgerow have been planted across the portfolio. Planting
helps to promote biodiversity, absorbs carbon, improves
drainage and soil quality and reduces site exposure to
extreme weather conditions.
-- Building of animal refuges - Ponds, swales and hibernacula
are built at a number of sites to provide natural shelter
for flora and fauna as well as help improve natural drainage.
-- Bat and bird boxes - The Asset Manager regularly installs
bird and bat boxes to attract local species to the sites.
-- Sheep grazing - Numerous sites have been either built,
or adapted through the installation of barriers and the
protection of cabling, to ensure their suitability for
continued sheep grazing.
-- Beehive installation - The Asset Manager has worked with
local bee keepers to install hives to help restore the
native bee population and support crop pollination and
honey production. The Asset Manager encourages the productivity
of these hives through the planting of nectar rich wildflower
species.
-- Climate change risk - Flood risk assessments have been
carried out for all sites. Panels are installed above the
'worst-case scenario' water level; any array identified
as breaching this level and is declared defective and action
is taken to remedy the problem.
-- Grassland management - Grass cutting is limited to access
points and the areas directly around the solar panel arrays
in order to promote the growth of wildflowers and encourage
biodiversity.
SOCIAL
During the acquisition process, and throughout an asset's lifecycle, the Company engages with contractors, local residents, community organisations, landowners and local authorities to promote public support for the project, maximise the local benefit and minimise any actual or perceived negative effects. This has been achieved through a number of initiatives:
-- Community engagement - The Asset Manager regularly attends
parish council and local community meetings, conducts
visits with O&M providers, landowners and construction
companies to encourage community engagement and ensure
that local stakeholders are engaged. During 2018, the
Environment and Sustainability Manager conducted over
50 site visits.
-- Community investment - The Company supports community
benefit schemes that assist local authorities in developing
and maintaining community assets and organisations. In
2018, over GBP100k worth of grants were provided to local
communities throughout the UK. At Sandridge solar farm
the Parish Council used the funds to install emergency
defibrillators around the Parish. Copley solar farm used
the grants to repair and refurbish the local village hall
and at Upper Huntingford the grants were used to fund
refurbishments to the village hall, local cricket club
and educational activities at the local library. In March
2018, the Company also launched the Bannerton solar park
grant scheme, providing grants of up to AUS$5,000 to local
community groups. The groups which were awarded grants
were: Rotary Club of Robinvale - Euston; St Vincent de
Paul Society - Robinvale; Murray Valley Aboriginal Co-operative
- Robinvale College; Mallee Almond Blossom Festival -
Englefield; V8 Car Trek team - Robinvale; Storm Rugby
Club - Robinvale; Euston Netball Club and Robinvale Rowing
Club and Youth Association.
-- Educational initiatives - A large part of generating public
support comes as a result of educational initiatives,
generating interest in and understanding of solar power's
benefits. At one of the Company's Australian sites, Bannerton,
located in Victoria, students from Robinvale College visited
the site and learnt about solar power. in the UK, for
the second year running, the Company invited the Institution
of Engineering and Technology to visit Wymeswold solar
power plant in Leicestershire. The group toured the 78-hectare
site to witness first-hand the operational aspects of
a solar farm. Meanwhile, the site's O&M contractor, Brighter
Green Engineering, explained details of the plant's day-to-day
management and the steps taken to maximise operational
efficiency and environmental stewardship.
-- Health and well-being - The Health and Safety (H&S) of
everyone working on or visiting the site and of local
residents is of paramount importance. The management and
monitoring of H&S onsite is a top priority for the O&M
contractor, who is responsible for recording and reporting
all H&S related incidents to the Asset Manager on an ongoing
basis. In addition to this, to improve the management
of SHEQ (Safety, Health, Environmental and Quality), reinforce
best practice and ensure regulatory compliance, the Asset
Manager appoints an independent professionally accredited
H&S consultant who ensures that contractors are appointed
on the basis of their health and safety competence and
regularly visits the sites to ensure they are meeting
industry and legal standards.
-- Public benefit - The Company's first Australian solar
project, Bannerton, will provide clean power to Melbourne's
tram network. Not only will this contribute significantly
to the decarbonisation of the public transport network
in Melbourne, it will also reduce noise and air pollution
at the point of use, increasing both the health and the
well-being of the local population.
GOVERNANCE
The Asset Manager actively reviews the consents of all solar assets to ensure that all solar plants are compliant with the permissions and conditions attached to them and actively engages with local government organisations to ensure ongoing compliance. In addition to ensuring the Company is protected from potential legal action, this also promotes trust with local communities.
-- GRESB (Global Real Estate Sustainability Benchmark) GRESB's
Infrastructure Asset Assessment uses high-quality ESG
data and advanced analytical tools to benchmark ESG performance
of assets against its peers, identify areas for improvement
and aid engagement with investors. The Company submitted
the Southam Solar Farm to the GRESB Infrastructure ESG
Assessment in 2018. Overall, the asset received an above
peer average score.
-- UNPRI (United Nations Principles for Responsible Investment)
The Investment Manager has been a signatory to the UNPRI
since 2013. The UNPRI is a globally recognised voluntary
framework concerned with the incorporation of ESG considerations
into the investment decision making process and provides
a basis for potential and existing investors to judge
the quality of a company's ESG processes and positioning
within an industry sector. The Investment Manager achieved
an A level rating across both the 'Strategy and Governance'
and 'Infrastructure' modules in its 2018 submission.
SUSTAINABILITY
In 2018, the Company's 723MW operational UK portfolio produced over 691GWh of clean energy. The below table shows each asset's contribution to CO2 reduction in 2018 by comparing its lifecycle CO2 emissions to that of an equivalent amount of coal-generated electricity. Furthermore, using Ofgem's assessment that the average UK household consumes 3.1 MWh per year, it can be assumed that the Company's portfolio generated enough clean electricity to power 223,049 homes in 2018.
Site MW Production CO2 Production Homes Powered TOE (Tonnes Hedgerows Sheep Grazing Beehives
(MWh) Avoided per Year** of Oil Planted Installed
(t)* Equivalent) (m)
Saved
Abbey Fields 5 4,715 3,640 1,521 405 700
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Abergelli 8 6,148 4,747 1,983 529 500
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Atherstone 15 14,635 11,298 4,721 1,258 60
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Bilsthorpe 6 4,875 3,763 1,573 419 1,265
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Bournemouth 37 40,884 31,562 13,188 3,515 2,360
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Bulls Head 6 4,746 3,664 1,531 408 370
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Castle Eaton 18 17,486 13,500 5,641 1,504
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Coombeshead 10 9,919 7,657 3,200 853
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Copley 30 30,645 23,658 9,885 2,635 1,200
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Crow Trees 5 3,962 3,059 1,278 341 165
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Cuckoo Grove 6 5,448 4,206 1,757 468 780
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Field House 6 5,586 4,313 1,802 480 250
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Fields Farm 5 4,458 3,441 1,438 383 250
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Gedling 6 4,908 3,789 1,583 422
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
High Penn 10 9,348 7,217 3,016 804 600
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Highfields 12 10,963 8,463 3,536 943 650
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Homeland 13 11,584 8,943 3,737 996 130
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Hunters
Race 10 11,011 8,500 3,552 947 500
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Kencot Hill 37 38,349 29,606 12,371 3,297 2,225
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Landmead 46 46,090 35,581 14,868 3,963 2,800
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Lindridge 5 4,248 3,280 1,370 365 60
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Manor Farm 14 11,716 9,045 3,779 1,007 1,970
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Marsh Farm 9 7,853 6,063 2,533 675 755
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Membury 16 16,602 12,817 5,356 1,428 2,630
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Misson 5 4,398 3,395 1,419 378 460
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Nowhere 8 7,212 5,568 2,327 620 1,200
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Paddock
Wood 9 9,969 7,696 3,216 857 440
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Park Farm 13 12,603 9,730 4,066 1,084
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Pen Y Cae 7 5,301 4,092 1,710 456
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Pitworthy 16 12,863 9,930 4,149 1,106 1,525
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Playters 9 7,720 5,960 2,490 664 454
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Port Farm 35 34,614 26,722 11,166 2,976 430
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Roskrow 9 7,439 5,743 2,400 640 830
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Sandridge 50 49,560 38,261 15,987 4,261 280
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Sawmills 7 6,430 4,964 2,074 553
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Sheepbridge 5 4,649 3,589 1,500 400 1,450
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Shotwick 72 66,413 51,271 21,424 5,711 1,930
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Southam 10 10,497 8,103 3,386 903 330
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Spriggs 12 12,536 9,678 4,044 1,078
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Steventon 10 9,064 6,997 2,924 779 660
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
SV Ash 8 7,175 5,539 2,315 617 1,200
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Tengore 4 3,163 2,442 1,020 272 65
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Trehawke 11 8,533 6,587 2,753 734
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Upper Huntingford 8 6,564 5,068 2,117 564
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Verwood 21 21,033 16,237 6,785 1,809
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Wally Corner 5 5,424 4,187 1,750 466
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Welbeck 11 9,639 7,441 3,109 829
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Wymeswold 34 32,304 24,939 10,421 2,778 257
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Yarburgh 8 7,036 5,431 2,270 605 640
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Yardwall 3 3,136 2,421 1,012 270
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
Total 723 691,453 533,802 223,049 59,454 32,371 12 7
--- ---------- -------------- ------------- ------------ --------- ------------- ----------
* Compared to coal emissions
** Using the OFGEM figure of 3.1 MWh / annum / household
SUSTAINABLE INVESTING IN INFRASTRUCTURE
Over the course of 2018 Foresight Group's Infrastructure team has been seeking to refine its sustainability tracking and reporting to further improve its investment processes, enhance the sustainability performance of existing assets and demonstrate more comprehensively the environmental benefits and social contribution of the Company's activities. As such, in future the Investment Manager will be implementing Foresight Group's Sustainable Investing in Infrastructure Strategy. This strategy focuses on ensuring all assets are evaluated prior to acquisition and throughout their ownership, in accordance with Foresight Group's Sustainability Evaluation Criteria. There are five central themes to the Criteria, which cover the key areas of sustainability and ESG performance. The five criteria are:
1. Sustainable Development Contribution: The development
of affordable and clean energy and improved resource and
energy efficiency.
2. Environmental Footprint: Assessing potential environmental
impact such as emissions to air, land and water, effects
on biodiversity and noise and light pollution.
3. Social Engagement: Engagement and consultation with local
stakeholders. Ensuring a positive local economic and social
impact, community engagement and the health and wellbeing
of stakeholders.
4. Governance: Compliance with relevant laws and regulations
and ensuring best practice is followed.
5. Third Party Interactions: Third party due diligence is
conducted on key counterparties to ensure adherence to
the aforementioned criteria where relevant.
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.
The Directors consider the following as the principal risks and uncertainties to the Company at this time, and their mitigants.
Major Summary of Risk Mitigants
Risk
Risks A decline in the wholesale Volatility in the wholesale electricity
relating price of electricity could price can be mitigated by entering
to the materially adversely affect hedging agreements against future
sale of the price of electricity price movements. This can be achieved
electricity generated by solar PV assets through a variety of trading strategies
and thus the Company's business, including forward sale contracts
financial position, results of electricity and fixed price
of operations and business PPAs. The portfolio currently
prospects. has PPAs in place into the medium
term offering a secure route to
market. At 31 December 2018, 53%
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.
-------------------------------------- -------------------------------------------
Risks The introduction of subsidy Despite the early closure of the
relating scheme changes, either of UK RO scheme for new installations,
to regulatory a retrospective nature or the grandfathering principle states
changes not, could have a material that existing operational accredited
to subsidy adverse effect on the Company projects will continue to be supported
schemes financial results, operations for the duration of their RO eligibility
and position and valuation period (20 years from the date
of the existing portfolio. of accreditation). Furthermore,
while the UK's 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
meeting its renewable generation
targets 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. Under the LRET the support
for large scale renewable projects
will remain in place until 2030.
-------------------------------------- -------------------------------------------
Risks The Company's underlying Any new debt facilities are thoroughly
relating subsidiaries currently have appraised before they are entered
to gearing borrowings of approximately into to ensure they benefit the
GBP504.4 million. Under the Company without creating unnecessary
terms of the Facility Agreements, risk. Due to conservative gearing
the borrower has agreed to targets and sound management it
covenants as to its operation is unlikely that debt covenants
and financial conditions. would negatively impact our ability
Any failure by the borrower to pay dividends. Gearing, calculated
to fulfil obligations under as Group borrowings (including
the Facility Agreements (including any asset level gearing) as a
repayment) may permit the percentage of the Company's Gross
lender to demand repayment Asset Value will not exceed 50
of the related loan and to per cent. at the time of drawdown.
realise its security which It is the Board's current intention
may mean the loss of a solar that long-term gearing (including
power asset. 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 The Investment Manager considers
relating of solar PV assets are frequently the inflation risk presented by
to RPI partly or wholly subject these assets to be limited through
to indexation, typically the explicit inflation-linked
with reference to RPI. Additionally, nature of both operating revenues
GBP90.2 million of the Long-Term and costs. On the revenue side,
Debt in place is linked to ROC prices are formally linked
RPI. to RPI and for PPAs the electricity
price forms part of the RPI basket
of goods. For costs, 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.
In January 2019 the House of Lords
published a report on the use
of RPI in the UK market, recommending
the Government to reduce its use
in favour of CPI. This is not
expected to affect the existing
support mechanism for renewable
energy however the Investment
Manager will continue to monitor
any regulatory changes on the
use of RPI.
-------------------------------------- -------------------------------------------
Risks The Company relies on third-party The SPVs have entered into O&M
relating professionals and independent contracts with contractors pursuant
to operation contractors and other companies to which the contractor provides
and maintenance to provide the required operator both preventative and corrective
contracts and maintenance support services maintenance. Under the terms of
throughout the operating the O&M contracts the contractor
phases of the solar PV assets is typically required to keep
in the Company's investment the site available 99% of the
portfolio. If such contracted time during the hours of daylight.
parties are not able to fulfil Liquidated Damages are due to
their contractual obligations, the SPV should availability fall
the Company's ability to below the guaranteed level. The
operate the solar plants Liquidated Damages compensate
could be adversely affected for all lost revenue but are usually
and the Company may be forced capped at the annual O&M fee.
to seek recourse against Foresight Group's experience in
such parties, provide additional managing this asset type since
resources to complete their 2007 and expertise in identifying
work, or to engage other strong counterparties further
companies to complete their mitigates this risk.
work.
-------------------------------------- -------------------------------------------
Risks The Company can invest up The Investment Manager ensures
relating to 25 per cent. of its GAV that risks are mitigated through
to the in assets under construction. performance bonds and through
construction Delays in project construction the use of milestone payments,
of solar may result in a reduction with funds only being transferred
PV assets in returns caused by a delay once certain conditions are met.
in the project generating In addition, the construction
revenue. Failure in the construction progress is overseen by the in-house
of a plant, for example, Asset Management team with support
faulty components or insufficient from independent technical advisers
structural quality may not to ensure the construction milestones
be evident at the time of are achieved on schedule and in
acquisition or during any line with the specifications set
period during which a warranty up in the construction contract.
claim may be brought against
the contractor and may result
in loss of value without
full or any recourse to insurance
or construction warranties.
-------------------------------------- -------------------------------------------
Risks Changes to existing tax rates The introduction of a Labour Government
relating and legislation could impact could result in an increase in
to taxation the valuation of the portfolio the UK corporate tax to 26% according
and Company returns. to the 2017 election manifesto,
adversely impacting the valuation
of the Company's portfolio.
The Investment Manager will continue
to work with tax advisers to ensure
any potential changes in tax rates
and legislation are addressed
accordingly.
-------------------------------------- -------------------------------------------
The Company is a member of the Association of Investment Companies (the "AIC"). 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 audit. The Company has therefore not reported further in respect of these provisions.
The Board
The Company has a Board of three Independent Non-Executive Directors.
During the year, Peter Dicks acted as a Director of Foresight VCT plc. Mr Dicks resigned as a Director from the Board of Foresight VCT plc on 25 May 2018. These VCTs invest in high growth, small unquoted UK companies.
Due to the different investment focus of the Company compared with 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.
The Directors were all reappointed at the Annual General Meeting of the Company held on 11 June 2018.
The Board is in the process of appointing a fourth Director as a result of the growth of the Company size and to improve Board diversity and effectiveness. The formal appointment of the new Director is expected to be announced in the first half of 2019.
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 14 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 Audit & Remuneration
Engagement Risk &
Nomination
Alex Ohlsson 14/14 1/1 4/4 1/1
----- ----------- ------- ------------
Peter Dicks 14/14 1/1 4/4 1/1
----- ----------- ------- ------------
Chris Ambler 14/14 1/1 4/4 1/1
----- ----------- ------- ------------
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
The Investment Manager utilises Foresight Group's experience as a multi-fund asset manager and has in place established policies and procedures designed to address conflicts of interest in allocating investments among the Group's 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 an 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 and Risk 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. JTC (Jersey) Limited prepares all necessary tax returns following sign off of the annual accounts.
The Management Engagement Committee, which has responsibility for reviewing the the terms of the investment management agreement between the Company and the investment manager and other service providers as considered appropriate. This Committee meets at least annually.
The Board has established a separate Remuneration and Nomination Committee during the course of the year under review. This Committee is to review and implement a formal and transparent procedure for developing policy on new Director appointments and remuneration, including fixing the remuneration packages of individual Directors as considered appropriate. This committee comprises of Alex Ohlsson (Chairman), Peter Dicks and Chris Ambler.
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.
The Board have engaged Deloitte LLP to conduct an external review of the Board's effectiveness. The results of this review will be reported after the review has been concluded in the Company's Interim Report for the period ending 30 June 2019.
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 and Risk, Remuneration and Nomination and the Management and Engagement 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, the Investment Manager provides the Company's Board with an investment pipeline of potential assets in solar energy infrastructure investments for it to consider, 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 and Risk 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 and Risk 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 and Risk 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 2021, 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 2021.
The Directors have determined that a three year period to 31 December 2021 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 ongoing viability of the Company's long-term debt strategy.
Directors Renumeration 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 25 June 2019.
Annual Statement from the Chairman of the Remuneration and Nomination Committee
The Board, which is profiled below, consists solely of Non-Executive Directors and the Committee considers at least annually the level of the Board's fees.
Consideration by the Directors of matters relating to Directors' Remuneration
The Remuneration and Nomination 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 the investment manager in respect of the Directors' remuneration. The remuneration policy set by the Board is described below. Individual remuneration packages are determined by the Remuneration and Nomination Committee within the framework of this policy.
The Directors are not involved in deciding their own individual remuneration with each Director abstaining from voting on their own 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 2018 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. 20% of Mr Ambler's remuneration is paid to Jersey Electricity Plc. None of the Directors have 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.
The above remuneration policy was approved by the Shareholders at the Annual General Meeting held on 11 June 2018 for the financial year to 31 December 2018 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 Directors'
the year fees for
ending year ended
31 December 31 December
2019 2018
Alex Ohlsson (Chairman) GBP70,000 GBP70,000
------------ ------------
Chris Ambler GBP55,000 GBP55,000
------------ ------------
Peter Dicks GBP45,000 GBP45,000
------------ ------------
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 2018 are shown below. The Directors do not have any options over shares. Mr Ambler and Mr Dicks both had investment programmes in place during year under review. Mr Ambler has terminated his investment programme.
Ordinary shares
of nil par value
held on 31 December
2018
Alex Ohlsson (Chairman) 25,000(1)
--------------------
Chris Ambler 26,524
--------------------
Peter Dicks 65,034
--------------------
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 2019.
Audit and Risk Committee Report
The Audit and Risk Committee (the "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, including enhancing the Committee's scope to consider key risks faced by the Company.
Meetings are scheduled to coincide with the reporting cycle of the Company and the Committee has met four 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.
None of the members of the Committee have any involvement in the preparation of the financial statements of the Company.
The Committee is charged with maintaining an open and effective relationship with the Company's Auditors. The Chairman of the Committee keeps in regular contact with the Auditors throughout the audit process and the Auditors attend the Committee meetings at which the Company's 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 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. Three assets in FS Holdco 4 were held at cost at 31 December 2018. 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 the 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 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 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 Committee that they were not aware of any material misstatements. Having reviewed the reports received from the Investment Manager and Auditors, the 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 Committee considers that KPMG LLP has carried out its duties as Auditor in a diligent and professional manner.
During the year, the 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, or alternatively responsible person, 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 were the first year that the Audit Director has been in place.
The Committee considered the performance of the Auditor during the year and agreed that KPMG LLP have provided 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 IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and 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 are required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law.
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 its profit or loss for that period. In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable, relevant
and reliable;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
The Directors are responsible for keeping 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 its financial statements comply with the Companies (Jersey) Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Report 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. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
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; and
-- the Directors' report includes a fair review of the
development and performance of the business and the
position of the issuer, together with a description
of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
Alexander Ohlsson
Chairman
For and on behalf of Foresight Solar Fund Limited
5 March 2019
Independent Auditor's Report
to 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 2018 which comprise the statement of comprehensive income, statement of financial position, statement of changes in equity, 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 2018 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 prepared in accordance with the requirements
of the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
2 Key audit matters: including 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. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, were as follows:
The risk Our response
The impact of Unprecedented levels of We developed a standardised
uncertainties uncertainty firm-wide approach to the consideration
due to UK exiting All audits assess and of the uncertainties arising
the European challenge from Brexit in planning and
Union on our the reasonableness of performing our audits. Our procedures
audit estimates, included:
New risk in particular as * Our Brexit knowledge - We considered the Directors'
Refer to page described assessment of Brexit-related sources of risk for the
19 (Brexit), in "Valuation of unquoted company's business and financial resources compared
page 42 (going investments" below, and with our own understanding of the risks. We
concern), and related disclosures and considered the Directors' plans to take action to
page 63 (financial the appropriateness of mitigate the risks.
disclosures). the going concern basis
of preparation of the
financial * Sensitivity analysis - When addressing the valuation
statements (see below). of unquoted investments and other areas that depend
All of these depend on on forecasts, we compared the Directors' sensitivity
assessments of the future analysis to our assessment of the full range of
economic environment and reasonably possible scenarios resulting from Brexit
the Company's future uncertainty and, where forecasts cash flows are
prospects required to be discounted, considered adjustments to
and performance. discount rates for the level of remaining
In addition, we are uncertainty.
required
to consider the other
information * Assessing transparency - As well as assessing
presented in the Annual individual disclosures as part of our procedures on
Report including the the "Valuation of unquoted investments" we considered
principal all of the Brexit related disclosures together,
risks disclosure and the including those in the annual report, comparing the
viability statement and overall picture against our understanding of the
to consider the risks.
Directors'
statement that the annual
report and financial
statements
taken as a whole is fair,
balanced and
understandable
and provides the
information
necessary for
shareholders
to assess the Group's
position
and performance,
business.
Brexit is one of the most
significant economic
events
for the UK and at the
date
of this report its
effects
are subject to
unprecedented
levels of uncertainty of
outcomes, with the full
range of possible effects
unknown.
Valuation of Subjective valuation Our procedures included:
unquoted investments 86% (2017: 85%) of the * Control design: Documenting and assessing the design
(GBP530 million; Company's total assets and implementation of the investment valuation
2017: GBP409) (by value) is held in processes and controls.
Refer to page investments
25 (Investment where no quoted market
Manager's Report), price is available. * Control observation: Attending the year-end Audit and
page 60 (accounting The unquoted investments Risk Committee meeting where we assessed the
policy) and is a 100% controlling effectiveness of the Audit and Risk Committee's
page 77 (financial interest challenge and approval of unlisted investment
disclosures). in Foresight Solar (UK valuations.
Hold Co) Limited ("UK
Hold
Co"), a non-consolidated * Historical comparisons: Assessment of investment
subsidiary company which realisations in the period, if any, comparing actual
is measured at fair sales proceeds to prior year end valuations to
value, understand the reasons for significant variances and
being the net assets of determine whether they are indicative of bias or
UK Hold Co. error in the Company's approach to valuations.
86% (2017: 85%) of UK
Hold
Co's total assets (by * Methodology choice: In the context of observed
value) industry best practice and the provisions of the
are held in investments International Private Equity and Venture Capital
where no quoted market Valuation Guidelines, we challenged the
price is available. The appropriateness of the valuation basis selected.
unquoted investments are
100% controlling
interests * Our valuations experience: With the assistance of our
in FS Holdco Limited ("FS own valuation specialists, challenging the investment
Holdco"), FS Holdco 2 manager on key judgements affecting investee Company
Limited valuations, such as discount factors and the useful
("FS Holdco 2"), FS economic life of the underlying assets. We compared
Holdco key underlying financial data inputs to external
3 Limited ("FS Holdco sources and management information as applicable. We
3"), challenged the assumptions around sustainability of
FS Holdco 4 Limited ("FS earnings based on the plans of the investee companies
Holdco 4"). These are and whether these are achievable and we obtained an
measured understanding of existing and prospective investee
at fair value, being the company cash flows to understand whether borrowings
fair value of the net can be serviced or whether refinancing may be
assets required. Our work included consideration of events
of FS Holdco, FS Holdco which occurred subsequent to the year end up until
2, FS Holdco 3 and FS the date of this audit report.
Holdco
4.
33% (2017: 65%) of FS * Comparing valuations: Where a recent transaction has
Holdco been used to value a holding, we obtained an
2's total assets (by understanding of the circumstances surrounding the
value) transaction and whether it was considered to be on an
is held in an investment arms-length basis and suitable as an input into a
where no quoted market valuation.
price is available. This
unquoted investment is
a 100% controlling * Assessing transparency: Consideration of the
interest appropriateness, in accordance with relevant
in FS Debtco Limited ("FS accounting standards, of the disclosures in respect
Debtco"). of unquoted investments and the effect of changing
78% (2017: 70%) of FS one or more inputs to reasonably possible alternative
Holdco's, valuation assumptions.
53% (2017: 0%) of FS
Holdco
2's, 93% (2017: 0%) of
FS Holdco 3's, 100%
(2017:
100%) of FS Holdco 4's
and 73% (2017: 74%) of
FS Debtco's total assets
(by value) are held in
investments where no
quoted
market price is
available.
These are measure at
discounted
cash flow measurements
or the price of a recent
transaction.
Fair value is established
in accordance with the
International Private
Equity
and Venture Capital
Valuations
Guidelines.
The valuation of unlisted
investments requires a
number of estimates based
on unobservable inputs,
such as discount factors
and useful economic lives
of assets. As a result,
there is an inherent risk
of estimation uncertainty
in relation to the
valuation
of investments.
There is therefore a
significant
risk over valuation of
underlying investments
and that is the key
judgemental
area that our audit
focused
on.
The effect of these
matters
is that, as part of our
risk assessment, we
determined
that the valuation of
unquoted
investments has a high
degree of estimation
uncertainty,
with a potential range
of reasonable outcomes
greater than our
materiality
for the financial
statements
as a whole. The financial
statements (note 17)
disclose
the sensitivity estimated
by the Company.
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 GBP5.3m (2017: GBP4.6m), determined with reference to a benchmark of total assets, of GBP614.0m (2017: GBP482.7m), which it represents 0.9% (2017: 1.0%).
In addition, we applied materiality of GBP0.4m (2017: GBP0.4m) to management fees, interest income and Directors' fees 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 and Risk Committee any corrected or uncorrected identified misstatements exceeding GBP260,000 (2017: GBP230,000), 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 all performed at the investment manager's head office in London.
4 We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the Directors' conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee that the Company will continue in operation.
In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model, including the impact of Brexit, and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. We evaluated those risks and concluded that they were not significant enough to require us to perform additional audit procedures.
Based on this work, 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 a year from the date of approval of the financial statements.
We have nothing to report in these respects, and we did not identify going concern as a key audit matter.
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 42 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 disclosures describing these risks and explaining how they are being managed and mitigated; and
-- the Directors' explanation in the Viability Statement on page 42 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.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statement audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Company's longer-term viability.
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 is 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 and Risk Committee does not appropriately address
matters communicated by us to the Audit and Risk Committee;
or
-- a corporate governance statement 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.
6 We have nothing to report on the other matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
-- adequate 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 financial statements are not in agreement with the
accounting records; 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 45, 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) 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 our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.
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
for and on behalf of KPMG LLP
Chartered Accountants and Registered Auditor
15 Canada Square
London
E14 5GL
5 March 2019
31 December 31 December
2018 2017
Notes GBP'000 GBP'000
Revenue
Interest income 4 36,817 35,421
Gain on investments at fair value
through profit or loss 14 25,311 4,650
----------- -----------
62,128 40,071
----------- -----------
Expenditure
Administration and accountancy expenses 6 (203) (212)
Directors' fees 7 (170) (155)
Management fees 5 (5,106) (4,277)
Other expenses 8 (643) (340)
----------- -----------
Total expenditure (6,122) (4,984)
----------- -----------
Profit before tax for the year 56,006 35,087
Taxation 2.8 - -
----------- -----------
Profit and total comprehensive income
for the year 56,006 35,087
----------- -----------
Earnings per Ordinary Share (pence
per Share) 9 11.60 8.80
All items above arise from continuing operations, there have been no discontinued operations during the year.
The accompanying notes on pages 63 to 92 form an integral part of these Financial Statements.
31 December 31 December
2018 2017
Notes GBP'000 GBP'000
Assets
Non-current assets
Investments held at fair value through
profit or loss 14 530,187 408,464
----------- -----------
Total non-current assets 530,187 408,464
Current assets
Interest receivable 10 69,338 57,626
Trade and other receivables 11 265 1,933
Cash and cash equivalents 12 12,282 14,669
----------- -----------
Total current assets 81,885 74,228
----------- -----------
Total assets 612,072 482,692
----------- -----------
Equity
Retained earnings 51,460 26,793
Stated capital and share premium 18 558,798 454,515
----------- -----------
Total equity 610,258 481,308
----------- -----------
Liabilities
Current liabilities
Trade and other payables 13 1,814 1,384
----------- -----------
Total current liabilities 1,814 1,384
Total liabilities 1,814 1,384
----------- -----------
Total equity and liabilities 612,072 482,692
----------- -----------
Net Asset Value per Ordinary Share 19 111.17 107.00
The Financial Statements on pages 63 to 92 were approved by the Board of Directors and signed on its behalf on 5 March 2019 by:
Alexander Ohlsson
Chairman
The accompanying notes on pages 63 to 92 form an integral part of these Financial Statements.
Stated Capital
and Share
Premium Retained Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January 2018 454,515 26,793 481,308
Total comprehensive income for
the year:
Profit for the year - 56,006 56,006
Transactions with owners, recognised
directly in equity:
Dividends paid in the year 22 - (31,339) (31,339)
Issue of Ordinary Shares 18 106,189 - 106,189
Capitalised issue costs 18 (1,906) - (1,906)
-------------- ----------------- --------
Balance as at 31 December 2018 558,798 51,460 610,258
-------------- ----------------- --------
For the year 1 January 2017 to 31 December 2017
Stated Capital
and Share
Premium 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 year 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
-------------- ----------------- --------
The accompanying notes on pages 63 to 92 form an integral part of these Financial Statements.
31 December 31 December
2018 2017
Notes GBP'000 GBP'000
Profit for the year after tax 56,006 35,087
Adjustments for:
Unrealised gain on investments 14 (25,311) (4,650)
----------- -----------
Operating cash flows before changes in
working capital 30,695 30,437
Increase in interest receivables 10 (12,918) (24,582)
Decrease in trade and other receivables 11 1,668 2,914
Increase in trade and other payables 13 430 1,268
----------- -----------
Net cash inflow from operating activities 19,875 10,037
----------- -----------
Investing activities
Increase in shareholder loans to subsidiary 14 (95,206) (130,200)
----------- -----------
Net cash outflow from investing activities (95,206) (130,200)
----------- -----------
Financing activities
Dividends paid 22 (31,339) (20,061)
Issue costs paid 18 (1,906) (2,027)
Proceeds from issue of shares 18 106,189 117,539
----------- -----------
Net cash inflow from financing activities 72,944 95,451
----------- -----------
Net decrease in cash and cash equivalents (2,387) (24,712)
Cash and cash equivalents at the beginning
of the year 14,669 39,381
----------- -----------
Cash and cash equivalents at the end of
the year 12 12,282 14,669
----------- -----------
The accompanying notes on pages 63 to 92 form an integral part of these Financial Statements.
1. Company information
Foresight Solar Fund Limited (the "Company") is a closed-ended public 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"). UK Holdco has investments in four subsidiaries: 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 also has an investment in a subsidiary, FS Holdco 2, FS Debtco Limited ("FS Debtco"). FS Holdco, FS Debtco, FS Holdco 3 and FS Holdco 4 invest in further holding companies (the "SPVs") which then invest 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 and Australian 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 2018 (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.
Whilst Brexit presents certain risks in relation to the operation of the UK solar portfolio (discussed in note 20.4) the Asset Manager shall be working to ensure that there are robust spare parts provision in the UK and continue to work with the operating and maintenance providers and their downstream suppliers to ensure down time is minimised across the portfolio as much as possible.
The Directors have therefore prepared the Financial Statements on a going concern basis.
2.3 Changes in accounting policies and disclosures
The Company has adopted the following IFRSs in these financial statements:
-- IFRS 15, 'Revenue from Contracts with Customers'.
-- IFRS 9, 'Financial Instruments - Classification
and Measurement'
The impact of the adoption of these standards and the new accounting policies are disclosed in note 24. The other new or amended standards effective 1 January 2018 were assessed by management as not applicable to the Company.
New and revised IFRSs in issue but not yet effective
Management have assessed all IFRS which are endorsed but not yet effective and have deemed none of them to be applicable to the Company.
2.4 Consolidation
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.
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).
Investment Entity exemption
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 and associates.
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 large 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 entities. These disclosures are set out in notes 16 and 17.
2.5 Income
Income comprises interest income (bank interest and loan interest) and income in the form of realised and/or unrealised gains on investments at fair value through profit or loss. 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. Gains arising from changes in the fair value of the investments at fair value through profit or loss are recognised in the period in which they arise.
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 operating expenses are charged through the Statement of Profit and Loss and Other 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 share capital and share premium 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. No tax has been charged in the current year (2017: nil).
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 relating to foreign operations which will impact the investment value on the Company's balance sheet. The assets and liabilities relating to these foreign operations, including fair value adjustments arising on investments, are translated into GBP at the exchange rates at the reporting date. The income and expenses relating to foreign operations are translated into GBP at the exchange rates at the dates of the transactions.
2.9 Financial instruments 2.9.1 Recognition and initial measurement
Financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss, transactions costs that are directly attributable to its acquisition or issue.
2.9.2 Classification and subsequent measurement 2.9.2.1 Investments held at fair value through profit or loss
The investments 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.
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 year 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 year 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. The Board and the Investment Manager consider that the discounted cash flow valuation methodology used in deriving a fair value of the underlying assets is in accordance with the fair value requirements of IFRS 9. Investments not yet operational are measured at cost less any impairment as this is considered the best approximation of fair value.
Gains or losses arising from changes in the fair value of the 'investments at fair value through profit or loss' are presented in the Statement of Profit and Loss and Other Comprehensive Income within 'gains/(losses) on investments at fair value through profit or loss' in the period in which they arise.
2.9.2.2 Other financial instruments at amortised cost
The financial instruments at amortised cost are non-derivative financial assets and liabilities 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 on 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 (in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
All of the above are subsequently held at amortised cost.
2.9.3 Derecognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire. The Company also derecognises a financial asset when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred. Lastly, the Company also derecognises the financial asset when it neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognises a financial liability when its terms are modified and the cash flows or the modified liability are subsequently different, in which case a new financial liability based on the modified terms is recognised at fair value. Any gain or loss on derecognition is recognised in profit or loss.
2.9.4 Impairment of financial assets
The Company applies the simplified approach to measuring expected credit losses, as permitted by IFRS 9, which uses a 12 month expected loss allowance for all trade receivables and interest receivable.
2.9.5 Financial instruments - policy applicable before 1 January 2018:
Before 1 January 2018 financial instruments were measured in terms of IAS 39 Financial Instruments: Recognition and Measurements. All changes to the accounting policies applicable before 1 January 2018 are explained in detail in note 24.
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 investments at fair value through profit and loss, significant judgements and key sources of estimation uncertainty related to the determination that the Company meets the definition of an investment entity.
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 judgement 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 judgements because it is determined by the Directors using their own valuation models, which are 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 Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
4. Interest income
31 December 2018 31 December 2017
GBP'000 GBP'000
Bank interest income 1 25
Interest on loan notes 33,172 32,246
Interest on shareholder loans 3,644 3,150
---------------- ----------------
36,817 35,421
---------------- ----------------
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 (2017: 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. An additional GBP4,500,000 was issued on this loan, bringing the shareholder loan balance at year end to GBP158,609,725 (2017: GBP154,109,725). These loans form part of the fair value of the investments as per note 14.
During the current year, four additional shareholder loans were issued to UK Holdco - GBP45,000,000 on 2 August 2018, GBP9,106,725 on 27 November 2018, GBP33,100,000 on 28 November 2018 and GBP3,500,000 on 18 December 2018. Loan interest on all four new shareholder loans is charged at a fixed rate of 2% per annum. 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 up to GBP500m - NAV in excess to this is charged at 0.9% per annum. This is payable quarterly in arrears and is calculated based on the published quarterly NAV. For the year ended 31 December 2018, the Investment Manager was entitled to a management fee of GBP5,106,080 (2017: GBP4,276,808) of which GBP1,537,638 was outstanding as at 31 December 2018 (2017: GBP1,257,741).
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 2018, total administration and accountancy fees were GBP203,220 (2017: GBP211,534) of which GBP39,000 was outstanding as at 31 December 2018 (2017: GBP39,000).
7. Staff costs and Directors' fees
No members of staff were employed during the year (2017: nil).
Total Directors' fees were GBP170,000 (2017: GBP155,000).
8. Other Expenses
31 December 2018 31 December 2017
GBP'000 GBP'000
Legal and professional fees 607 271
Other expenses 36 69
---------------- ----------------
643 340
---------------- ----------------
Included within legal and professional fees is GBP22,500 (2017: GBP20,500) relating to the audit of these financial statements. The total audit fee pertaining to the group is GBP160,000 for the year ended 31 December 2018 (2017: GBP88,938). There were no other fees paid to the auditors for non-audit services during the year (2017: Nil).
9. Earnings per Ordinary share - basic and diluted
The basic profits per Ordinary Share for the Company is 11.66 pence per share. This is are based on the profit for the year of GBP56,005,471 (2017: GBP35,086,596) and on 482,619,846 (2017: 398,908,689) Ordinary Shares, being the weighted average number of shares in issue during the year.
There is no difference between the weighted average ordinary or diluted number of shares.
10. Interest receivable
31 December 2018 31 December 2017
GBP'000 GBP'000
Interest receivable on loan
notes 56,814 48,746
Interest receivable on shareholder
loans 12,524 8,880
---------------- ----------------
69,338 57,626
---------------- ----------------
Information about the Company's exposure to credit and market risk and impairment losses for interest receivable is included in note 20.
Interest receivable at 31 December 2018 has been updated for the reclassification (GBP1,206,000) as explained in note 14.
11. Trade and other receivables
31 December 2018 31 December 2017
GBP'000 GBP'000
Prepaid expenses 17 16
Amounts due from subsidiaries* - 1,146
Other receivables 248 771
---------------- ----------------
265 1,933
---------------- ----------------
*Amounts due from subsidiaries are unsecured, interest free and repayable on demand.
Information about the Company's exposure to credit and market risk and impairment losses for trade and other receivables is included in note 20.
12. Cash and cash equivalents
31 December 2018 31 December 2017
GBP'000 GBP'000
Cash at bank 12,282 14,669
---------------- ----------------
12,282 14,669
---------------- ----------------
Information about the Company's exposure to credit and market risk and impairment losses for cash and cash equivalents is included in note 20.
13. Trade and other payables
31 December 2018 31 December 2017
GBP'000 GBP'000
Accrued expenses 1,630 1,384
Amounts due to subsidiaries* 184 -
---------------- ----------------
1,814 1,384
---------------- ----------------
*Amounts due to subsidiaries are unsecured, interest free and repayable on demand.
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 2018 31 December 2017
GBP'000 GBP'000
Investment in UK Hold
Co Equity - -
Loans 530,187 408,464
---------------- ----------------
530,187 408,464
---------------- ----------------
Book cost as at 1 January 404,109 273,909
Opening investment
holding gains 4,355 (295)
---------------- ----------------
Valuation as at 1 January 408,464 273,614
Movements during the
year
Purchase at cost (loans
drawn down) 95,206 130,200
Reclassification -
see below 1,206 -
Investment holding
gains 25,311 4,650
---------------- ----------------
Valuation as at 31
December 530,187 408,464
---------------- ----------------
Book cost as at 31
December 499,315 404,109
Closing investment
holding gains/(losses) 30,872 4,355
---------------- ----------------
530,187 408,464
---------------- ----------------
The Company has one investment in Foresight Solar (UK Hold Co) Limited ("UK Hold Co"). This investment consists of both debt and equity (Share Capital of GBP100) and is not quoted in an active market. Accordingly, the investment in UK Hold Co has been valued using its net assets.
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 year 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 year end.
In turn, FS Holdco, FS Holdco 2, FS Debtco, FS Holdco 3 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 17) for solar projects that are operational. Three investments in FS Holdco 4 are not yet operational at year end and are therefore valued at cost.
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").
During the year the Company identified a historical misallocation between the fair value of investments and the interest receivable on loan notes to the subsidiary. This has been reclassified in the current year. 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 2018:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investment - - 530,187 530,187
-------- -------- -------- --------
- - 530,187 530,187
-------- -------- -------- --------
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
-------- -------- -------- --------
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 Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4 which are discussed further in note 17.
15. Subsidiaries and associates
Investments in subsidiaries
Proportion
of shares
Direct and voting
or indirect Country of rights
Name holding incorporation Principal activity held
Foresight Solar (UK Hold Co)
Limited ("UK Hold Co") Direct UK Holding Company 100%
FS Holdco Limited ("FS Holdco") Indirect UK Holding Company 100%
FS Holdco 2 Limited ("FS Holdco
2") Indirect UK Holding Company 100%
FS Debtco Limited ("FS Debtco") Indirect UK Holding Company 100%
FS Holdco 3 Limited ("FS Holdco
3") Indirect UK Holding Company 100%
FS Holdco 4 Limited ("FS Holdco
4") Indirect UK Holding Company 100%
SPV Holding
FS Wymeswold Limited Indirect UK Company 100%
SPV Holding
FS Castle Eaton Limited Indirect UK Company 100%
SPV Holding
FS Pitworthy Limited Indirect UK Company 100%
SPV Holding
FS Highfields Limited Indirect UK Company 100%
SPV Holding
FS High Penn Limited Indirect UK Company 100%
SPV Holding
FS Hunter's Race Limited Indirect UK Company 100%
SPV Holding
FS Spriggs Limited Indirect UK Company 100%
SPV Holding
FS Bournemouth Limited Indirect UK Company 100%
SPV Holding
FS Landmead Limited Indirect UK Company 100%
SPV Holding
FS Kencot Limited Indirect UK Company 100%
SPV Holding
FS Copley Limited Indirect UK Company 100%
SPV Holding
FS Port Farms Solar Limited Indirect UK Company 100%
SPV Holding
FS Membury Limited Indirect UK Company 100%
SPV Holding
FS Southam Solar Limited Indirect UK Company 100%
SPV Holding
FS Atherstone Solar Limited Indirect UK Company 100%
SPV Holding
FS Paddock Wood Solar Farm Limited Indirect UK Company 100%
SPV Holding
Atherstone Hold Co Limited Indirect UK Company 100%
SPV Holding
Southam Hold Co Limited Indirect UK Company 100%
SPV Holding
Paddock Wood Hold Co Limited Indirect UK Company 100%
SPV Holding
FS Shotwick Limited Indirect UK Company 100%
SPV Holding
FS Sandridge Limited Indirect UK Company 100%
SPV Holding
FS Wally Corner Limited Indirect UK Company 100%
SPV Holding
Acquisition Co 4 Limited Indirect UK Company 100%
SPV Holding
Oakey 2 Asset Company Pty Limited Indirect Australia Company 100%
SPV Holding
FS Welbeck Limited Indirect UK Company 100%
SPV Holding
FS Trehawke Limited Indirect UK Company 100%
SPV Holding
FS Homeland Limited Indirect UK Company 100%
SPV Holding
FS Marsh Farm Limited Indirect UK Company 100%
SPV Holding
FS Steventon Limited Indirect UK Company 100%
SPV Holding
FS Fields Farm Limited Indirect UK Company 100%
SPV Holding
FS Gedling Limited Indirect UK Company 100%
SPV Holding
FS Sheepbridge Limited Indirect UK Company 100%
SPV Holding
FS Tengore Limited Indirect UK Company 100%
SPV Holding
FS Cuckoo Limited Indirect UK Company 100%
SPV Holding
FS Field House Limited Indirect UK Company 100%
SPV Holding
FS Upper Huntingford Limited Indirect UK Company 100%
SPV Holding
FS Abergelli Limited Indirect UK Company 100%
SPV Holding
FS Crow Trees Limited Indirect UK Company 100%
SPV Holding
FS Yarburgh Limited Indirect UK Company 100%
SPV Holding
FS Nowhere Solar Limited Indirect UK Company 100%
SPV Holding
FS Bilsthorpe Solar Limited Indirect UK Company 100%
SPV Holding
FS Bulls Head Solar Limited Indirect UK Company 100%
SPV Holding
FS Roskrow Solar Limited Indirect UK Company 100%
SPV Holding
FS Abbeyfields Solar Limited Indirect UK Company 100%
SPV Holding
FS Lindridge Solar Limited Indirect UK Company 100%
SPV Holding
FS Misson Solar Limited Indirect UK Company 100%
SPV Holding
FS Pentre Solar Limited Indirect UK Company 100%
SPV Holding
FS Playters Solar Limited Indirect UK Company 100%
SPV Holding
FS PS Manor Farm Solar Limited Indirect UK Company 100%
SPV Holding
FS SV Ash Solar Park Limited Indirect UK Company 100%
SPV Holding
FS Pen Y Cae Solar Limited Indirect UK Company 100%
Second Generation Portfolio SPV Holding
Holdings 1 Indirect UK Company 100%
Second Generation Portfolio SPV Holding
1 Indirect UK Company 100%
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%
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%
RE Oakey 1 Pty Limited Indirect Australia Investment 100%
RE Oakey 2 Pty Limited Indirect Australia Investment 100%
Longreach Pty Limited Indirect Australia Investment 100%
Second Generation Yardwall Limited
("Yardwall") Indirect UK Investment 100%
Second Generation Verwood Limited
("Verwood") Indirect UK Investment 100%
Second Generation Park Farm
Limited ("Park Farm") Indirect UK Investment 100%
Second Generation Coombeshead
Limited ("Coombeshead") Indirect UK Investment 100%
Second Generation Sawmills Limited
("Sawmills") Indirect UK Investment 100%
Welbeck Limited ("Welbeck") Indirect UK Investment 100%
Trehawke Limited ("Trehawke") Indirect UK Investment 100%
Homeland Limited "(Homeland") Indirect UK Investment 100%
Marsh Farm Limited ("Marsh Farm") Indirect UK Investment 100%
Steventon Limited ("Steventon") Indirect UK Investment 100%
Fields Farm Limited ("Fields
Farm") Indirect UK Investment 100%
Gedling Limited ("Gedling") Indirect UK Investment 100%
Sheepbridge Limited ("Sheepbridge") Indirect UK Investment 100%
Tengore Limited ("Tengore") Indirect UK Investment 100%
Cuckoo Limited ("Cuckoo") Indirect UK Investment 100%
Field House Limited ("Field
House") Indirect UK Investment 100%
Upper Huntingford Limited ("Upper
Huntingford") Indirect UK Investment 100%
Abergelli Limited ("Abergelli") Indirect UK Investment 100%
Crow Trees Limited ("Crow Trees") Indirect UK Investment 100%
Yarburgh Limited ("Yarburgh") Indirect UK Investment 100%
Nowhere Solar Limited ("Nowhere
Solar") Indirect UK Investment 100%
Bilsthorpe Solar Limited ("Bilsthorpe
Solar") Indirect UK Investment 100%
Bulls Head Solar Limited ("Bulls
Head Solar") Indirect UK Investment 100%
Roskrow Solar Limited ("Roskrow
Solar") Indirect UK Investment 100%
Abbeyfields Solar Limited ("Abbeyfields
Solar") Indirect UK Investment 100%
Lindridge Solar Limited ("Lindridge
Solar") Indirect UK Investment 100%
Misson Solar Limited ("Misson
Solar") Indirect UK Investment 100%
Pentre Solar Limited ("Pentre
Solar) Indirect UK Investment 100%
Playters Solar Limited ("Playters
Solar") Indirect UK Investment 100%
PS Manor Farm Solar Limited
("PS Manor Farm Solar") Indirect UK Investment 100%
SV Ash Solar Park Limited ("SV
Ash Solar Park") Indirect UK Investment 100%
Pen Y Cae Solar Limited ("Pen
Y Cae Solar") Indirect UK Investment 100%
Investments in associates
Proportion
of shares
Direct and voting
or indirect Country of rights
Name holding incorporation Principal activity held
SPV Holding
Foresight Bannerton Pty Limited Indirect UK Company 48.50%
Longreach Asset Company Pty SPV Holding
Limited Indirect Australia Company 49%
SPV Holding
Oakey 1 Asset Company Pty Limited Indirect Australia Company 49%
16. Interests in unconsolidated structured entities
Year ended 31 December 2018
The following table represents the fair values of the investments held by FS Holdco Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at 31 as at
1 January Additions at 31 December January on unrealised December 31 December
2018 / (Disposals) 2018 2018 gain/(loss) 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
FS Wymeswold
Limited 48,590 - 48,590 (272) 1,502 1,230 49,820
FS Castle Eaton
Limited 21,630 - 21,630 (835) 675 (160) 21,470
FS Pitworthy
Limited 18,210 - 18,210 (1,582) 495 (1,087) 17,123
FS Highfields
Limited 14,300 - 14,300 (726) 269 (457) 13,843
FS High Penn
Limited 11,310 - 11,310 (804) 123 (681) 10,629
FS Hunter's
Race Limited 13,160 - 13,160 389 743 1,132 14,292
FS Spriggs
Limited 14,580 - 14,580 (699) 828 129 14,709
FS Bournemouth
Limited 50,060 - 50,060 364 1,999 2,363 52,423
FS Landmead
Limited 51,580 - 51,580 (3,096) 2,070 (1,026) 50,554
FS Kencot
Limited 47,210 - 47,210 (2,151) 822 (1,329) 45,881
FS Copley
Limited 35,670 - 35,670 1,390 1,288 2,678 38,348
FS Paddock Wood
Limited 10,621 - 10,621 553 (147) 406 11,027
FS Atherstone
Limited 16,004 - 16,004 (321) (83) (404) 15,600
FS Southam
Limited 11,145 - 11,145 115 (13) 102 11,247
FS Port Farms
Limited 44,215 - 44,215 92 1,442 1,534 45,749
FS Membury
Limited 21,160 - 21,160 (460) 614 154 21,314
---------- -------------- -------------- ------------- -------------- ------------ ------------
429,445 - 429,445 (8,043) 12,627 4,584 434,029
---------- -------------- -------------- ------------- -------------- ------------ ------------
The cost and valuation of the indirect investments in solar farms directly correlate to the cost and valuation of the direct SPV investments as presented in the table above.
Year ended 31 December 2017
The following table represents the fair values of the investments held by FS Holdco Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at as at 31
1 January Additions/ at 31 December January on unrealised 31 December December
2017 (Disposals) 2017 2017 gain/(loss) 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
FS Wymeswold
Limited 48,590 - 48,590 1,510 (1,782) (272) 48,318
FS Castle Eaton
Limited 21,630 - 21,630 270 (1,105) (835) 20,795
FS Pitworthy
Limited 18,210 - 18,210 90 (1,672) (1,582) 16,628
FS Highfields
Limited 14,300 - 14,300 700 (1,426) (726) 13,574
FS High Penn
Limited 11,310 - 11,310 690 (1,494) (804) 10,506
FS Hunter's
Race Limited 13,160 - 13,160 340 49 389 13,549
FS Spriggs Limited 14,580 - 14,580 220 (919) (699) 13,881
FS Bournemouth
Limited 50,060 - 50,060 1,240 (876) 364 50,424
FS Landmead
Limited 51,580 - 51,580 2,520 (5,616) (3,096) 48,484
FS Kencot Limited 47,210 - 47,210 1,790 (3,941) (2,151) 45,059
FS Copley Limited 35,670 - 35,670 2,330 (940) 1,390 37,060
FS Paddock Wood
Limited 10,621 - 10,621 879 (326) 553 11,174
FS Atherstone
Limited 16,004 - 16,004 596 (917) (321) 15,683
FS Southam Limited 11,145 - 11,145 655 (540) 115 11,260
FS Port Farms
Limited 44,215 - 44,215 1,785 (1,693) 92 44,307
FS Membury Limited 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) relating to future tax payments which will be settled at the Foresight Solar Fund Limited level.
Year ended 31 December 2018
The following table represents the fair values of the investments held by FS Holdco 2 Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at as at
1 January Additions at 31 December January on unrealised 31 December 31 December
2018 / (Disposals) 2018 2018 gain/(loss) 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
FS Debtco
Limited
- Equity - - - 10,269 4,642 14,911 14,911
FS Debtco
Limited
- Loan 74,894 - 74,894 - - - 74,894
FS Welbeck
Limited - 4,350 4,350 - 561 561 4,911
FS Trehawke
Limited - 4,670 4,670 - 1,069 1,069 5,739
FS Homeland
Limited - 5,190 5,190 - 1,686 1,686 6,876
FS Marsh Farm
Limited - 3,960 3,960 - 267 267 4,227
FS Steventon
Limited - 4,210 4,210 - 579 579 4,789
FS Fields Farm
Limited - 1,670 1,670 - 589 589 2,259
FS Gedling
Limited - 1,930 1,930 - 557 557 2,487
FS Sheepbridge
Limited - 1,890 1,890 - 492 492 2,382
FS Tengore
Limited - 1,330 1,330 - 267 267 1,597
FS Cuckoo
Limited - 2,500 2,500 - 248 248 2,748
FS Field House
Limited - 3,120 3,120 - 96 96 3,216
FS Upper
Huntingford
Limited - 3,110 3,110 - 362 362 3,472
FS Abergelli
Limited - 3,650 3,650 - 772 772 4,422
FS Crow Trees
Limited - 1,810 1,810 - 93 93 1,903
FS Yarburgh
Limited - 3,420 3,420 - 579 579 3,999
FS Nowhere
Solar
Limited - 3,672 3,672 - 211 211 3,883
FS Bilsthorpe
Solar
Limited - 1,893 1,893 - 437 437 2,330
FS Bulls Head
Solar Limited - 2,203 2,203 - 371 371 2,574
FS Roskrow Solar
Limited - 3,674 3,674 - 748 748 4,422
FS Abbeyfields
Solar Limited - 1,526 1,526 - 743 743 2,269
FS Lindridge Solar
Limited - 1,721 1,721 - 561 561 2,282
FS Misson Solar
Limited - 2,011 2,012 - 550 550 2,562
FS Playters Solar
Limited - 3,963 3,963 - 428 428 4,391
FS PS Manor Farm
Solar Limited - 6,116 6,116 - 558 558 6,674
FS SV Ash Solar
Park Limited - 3,387 3,387 - 317 317 3,704
FS Pen Y Cae Solar
Limited - 2,927 2,927 - 599 599 3,526
------ ------ ------- ------ ------ ------ -------
74,894 79,904 154,798 10,269 18,382 28,651 183,449
------ ------ ------- ------ ------ ------ -------
Year ended 31 December 2017
The following table represents the fair values of the investments held by FS Holdco 2 Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at as at 31
1 January Additions at 31 December January on unrealised 31 December December
2017 / (Disposals) 2017 2017 gain/(loss) 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
FS Debtco
Limited
- Equity - - - - 10,269 10,269 10,269
FS Debtco
Limited
- Loan - 74,894 74,894 - - - 74,894
---------- -------------- --------------- ------------- --------------- ------------ ----------
- 74,894 74,894 - 10,269 10,269 85,163
---------- -------------- --------------- ------------- --------------- ------------ ----------
Year ended 31 December 2018
The following table represents the fair values of the investments held by FS Debtco Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at 31 as at 31
1 January Additions at 31 December January on unrealised December December
2018 / (Disposals) 2018 2018 gain/(loss) 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
FS Shotwick
Solar Limited 74,894 - 74,894 9,696 2,193 11,889 86,783
FS Sandridge
Solar Power
Limited 57,046 - 57,046 959 1,363 2,322 59,368
FS SSR Wally
Corner Limited 5,718 - 5,718 41 195 236 5,954
---------- -------------- --------------- ------------ -------------- ------------ ----------
137,658 - 137,658 10,696 3,751 14,447 152,105
---------- -------------- --------------- ------------ -------------- ------------ ----------
Year ended 31 December 2017
The following table represents the fair values of the investments held by FS Debtco Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at as at 31
1 January Additions at 31 December January on unrealised 31 December December
2017 / (Disposals) 2017 2017 gain/(loss) 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
FS Shotwick
Solar Limited - 74,894 74,894 - 9,696 9,696 84,590
FS Sandridge
Solar Power
Limited - 57,046 57,046 - 959 959 58,005
FS SSR Wally
Corner Limited - 5,718 5,718 - 41 41 5,759
---------- -------------- --------------- ------------- --------------- ------------ ----------
- 137,658 137,658 - 10,696 10,696 148,354
---------- -------------- --------------- ------------- --------------- ------------ ----------
Year ended 31 December 2018
The following table represents the fair values of the investments held by FS Holdco 3 Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at 31 as at 31
1 January Additions at 31 December January on unrealised December December
2018 / (Disposals) 2018 2018 gain/(loss) 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
FS Yardwall
Limited - 2,474 2,474 - 165 165 2,639
FS Verwood
Limited - 13,955 13,955 - 1,933 1,933 15,888
FS Park Farm
Limited - 8,116 8,116 - 995 995 9,111
FS Coombeshead
Limited - 7,126 7,126 - 904 904 8,030
FS Sawmills
Limited - 4,453 4,453 - 637 637 5,090
---------- -------------- --------------- ------------ -------------- ------------ ----------
- 36,124 36,124 - 4,634 4,634 40,758
---------- -------------- --------------- ------------ -------------- ------------ ----------
FS Holdco 3 commenced trading during the year and therefore no comparatives are shown.
Year ended 31 December 2018
The following table represents the fair values of the investments held by FS Holdco 4 Limited as required by IFRS 12.
Unrealised Unrealised
Adjusted gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at as at 31
1 January Additions at 31 December January on unrealised 31 December December
2018 / (Disposals) 2018 2018 gain/(loss) 2018 2018
GBP'000** GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Bannerton
Solar
Farm 12,482 10,400 22,882 - (450)* (450)* 22,432
Longreach 2,650 - 2,650 - 431 431 3,081
Oakey 1 4,367 - 4,367 - (85)* (85)* 4,282
Oakey 2 22,153 11,835 33,988 200* (881)* (681) * 33,307
----------- -------------- -------------- ------------- -------------- ------------ ------------
41,652 22,235 63,887 200 (985) (785) 63,102
----------- -------------- -------------- ------------- -------------- ------------ ------------
*This relates to FX gain on translation from AUD to GBP at 31 December 2018 and 31 December 2017.
**In the prior year the cost was reflected as per the Share Purchase Agreement. In the current year it is split per the production output of each investment.
Year ended 31 December 2017
The following table represents the fair values of the investments held by FS Holdco 4 Limited as required by IFRS 12.
Unrealised Unrealised
gain/(loss) gain/(loss) Fair value
Cost at Cost as as at 1 Movement as at as at 31
1 January Additions at 31 December January on unrealised 31 December December
2017 / (Disposals) 2017 2017 gain/(loss) 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Bannerton Solar
Farm - 12,482 12,482 - - - 12,482
Canadian Solar - 28,970 28,970 - 200* 200* 29,170
---------- -------------- -------------- ------------- -------------- ------------ ------------
- 41,452 41,452 - 200 200 41,652
---------- -------------- -------------- ------------- -------------- ------------ ------------
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. Certain investments held by FS Holdco 4 were valued at cost as at 31 December 2018 and 31 December 2017 as these projects were not yet operational, and are therefore not included in the sensitivity analysis on the following pages.
Useful economic lives ("UELs")
The valuation of the Company's investments is determined based on the discounted value of future cash flows of those investments over their 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 can have a significant impact on the valuation of the investments.
However, the Board 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.
Sensitivity analysis of significant changes in unobservable inputs within Level hierarchy of underlying Investments
The majority of the Company's underlying investments (indirectly held through its unconsolidated subsidiaries FS Holdco, FS Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4) 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 to be significant inputs to the discounted cash flows ("DCF") calculation.
Discount rate
The weighted average discount rate used is 7.30% (2017: 7.60%). 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) 773.6 758.2 743.1 728.4 714.4
------ ------ ----- ------
NAV
per
share
(pence) 116.7 113.9 111.2 108.5 105.9
------ ------ ----- ------
Change
vs Base
Case
(%) 4.1 2.0 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) 636.7 743.1 847.9
------ -----
NAV per share (pence) 91.8 111.2 130.3
------ -----
Change vs Base Case (%) (14.3) 0.0 14.1
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.
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 0.6% (2017: 1.3%).
During the year, c.57% of the Company's operational performance came from the sale of renewable obligation certificates ("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.43% of revenue is derived from electricity sales which are subject to power price movements.
-20.0% -10.0% Base +10.0% +20.0%
------ ------ ----- ------
Directors'
valuation
(GBPm) 643.3 692.9 743.1 792.7 842.0
------ ------ ----- ------
NAV per
share
(pence) 93.0 102.0 111.2 120.2 129.2
------ ------ ----- ------
Change
vs Base
Case
(%) (13.4) (6.8) 0.0 6.7 13.3
Inflation
A variable of 1.5% is considered reasonable given historic fluctuations. A long term inflation rate of 2.75% (2017: 2.75%) has been used.
-1.50% -0.75% Base +0.75% +1.50%
------ ------ ----- ------
Directors'
valuation
(GBPm) 647.3 693.0 743.1 797.1 855.4
------ ------ ----- ------
NAV
per
share
(pence) 93.7 102.1 111.2 121.0 131.6
------ ------ ----- ------
Change
vs Base
Case
(%) (12.9) (6.7) 0.0 7.3 15.1
Operating costs (investment level)
Operating costs include operating and maintenance ("O&M"), insurance and lease 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 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) 758.1 750.4 743.1 735.5 727.8
------ ----- ----- -----
NAV per
share
(pence) 113.9 112.5 111.2 109.8 108.4
------ ----- ----- -----
Change
vs Base
Case
(%) 2.0 1.0 0.0 (1.0) (2.1)
18. Stated Capital and Share Premium
The share capital and share premium 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). The holders of the Ordinary Shares are entitled to receive dividends from time to time.
Ordinary Shares
31 December 31 December
2018 2017
Shares Shares
Opening balance 449,952,091 340,950,912
Issued during the year 98,989,459 109,001,179
----------- -----------
Closing balance 548,941,550 449,952,091
----------- -----------
31 December 31 December
2018 2017
GBP'000 GBP'000
Opening balance 454,515 339,003
Proceeds from share issue 106,189 117,539
Less: issue costs capitalised (1,906) (2,027)
----------- -----------
Closing balance 558,798 454,515
----------- -----------
19. NAV per Ordinary Share
The Net Asset Value ("NAV") per redeemable Ordinary Share for the Company is 111.17 pence per ordinary share. This is based on the Net Asset Value at the reporting date of GBP610,257,766 (2017: GBP481,307,486) and on 548,941,550 (2017: 449,952,091) redeemable Ordinary Shares, being the number of Ordinary Shares in issue at the end of the year.
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 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 2018 31 December 2017
GBP'000 GBP'000
AUD 63,102 41,652
---------------- ----------------
The FX rate applied at 31 December 2018 was 0.5523 (2017: 0.5782). A 10% weakening or strengthening of the FX rate would have a GBP6,310,200 impact on the valuation of assets denominated in AUD (2017: GBP4,165,000).
(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 2018, 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 GBP53,018,750 (2017: GBP40,846,400). 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 (2017: Nil).
Weighted average
Weighted average time for which
Total portfolio interest rate rate is fixed
31 December 2018 31 December 2018 31 December 2018
GBP'000 % Days
Loan notes 250,000 11.00% 780
Shareholder
loans 249,316 2% 1,287
Cash and cash
equivalents 12,282 0.05% -
-----------------
511,598
-----------------
Weighted average
Weighted average time for which
Total portfolio interest rate rate is fixed
31 December 2017 31 December 2017 31 December 2017
(restated) GBP'000 % Days
Loan notes 250,000 11.00% 415
Shareholder
loans 154,110 4.30% 922
Cash as cash
equivalents 14,669 0.05% -
-------------------
418,779
-------------------
The Company is also indirectly exposed to interest rate risk through its investment in UK Hold Co. Details of the indirect interest rate risk exposure are as follows:
Weighted
average time
Total for which
Indirect Weighted average
exposure interest rate rate is fixed
2018 2018 2018
GBP'000 % Days
Investments - FS Holdco* 343,731 8.00 365**
Investments - FS Holdco
2, FS Holdco 3 & FS Holdco
4* 266,064 5.00 1,320
Cash and cash equivalents 445 - 1,320
-----------
Total indirect exposure
interest rate risk 610,240
-----------
Weighted
average time
Total for which
Indirect
exposure Weighted average
(restated) interest rate rate is fixed
2017 2017 2017
GBP'000 % Days
Investment - FS Holdco* 343,731 8.00 365**
Investments - FS Holdco
2 & FS Holdco 4* 116,345 5.00 955
Cash and cash equivalents 540 0.05 -
-------------
Total indirect exposure
interest rate risk 460,616
-------------
* The loan portion of the investments are subject to interest rate risk
** These loans do not have a repayment date and are repayable on demand. However, the Directors do not intend to demand repayment in at least 12 months after year end.
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 2018
Carrying Contractual Less than Greater than
amount Total 6 months 6 to 12 Months 12 months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial
Assets
Investments 530,187 530,187 - - 530,187
Trade
and other
receivables 265 265 265 - -
Interest
receivable 69,338 69,338 69,338 - -
Cash and
cash equivalents 12,282 12,282 12,282 - -
-------- ----------- --------- -------------- ------------
Total
Financial
assets 612,072 612,072 81,885 - 530,187
-------- ----------- --------- -------------- ------------
Financial
Liabilities
Trade
and other
payables (1,814) (1,814) (1,814) - -
-------- ----------- --------- -------------- ------------
Total
financial
liabilities (1,814) (1,814) (1,814) - -
-------- ----------- --------- -------------- ------------
Net position 610,258 610,258 80,071 - 530,187
-------- ----------- --------- -------------- ------------
31 December 2017
Carrying Contractual Less than Greater than
amount Total 6 months 6 to 12 Months 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
-------- ----------- --------- -------------- ------------
Financial
Liabilities
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
-------- ----------- --------- -------------- ------------
20.3 Credit risk
a) Exposure to 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:
Moody's Credit 31 December 2018
Rating GBP'000
Cash in bank:
Royal Bank of Scotland International
Limited P2 12,280
Lloyds Bank International Limited P1 2
----------------
Total cash and cash equivalents 12,282
----------------
Moody's Credit 31 December 2017
Rating GBP'000
Cash in bank:
Royal Bank of Scotland International
Limited P2 14,659
Lloyds Bank International Limited P1 10
----------------
Total cash and cash equivalents 14,669
----------------
The Company is also indirectly exposed to credit risk through its investment in UK Hold Co. The Board of UK Hold Co has determined that the maximum exposure to credit risk in relation to investments is GBP610,239,946 (2017: GBP460,076,279), being the portion of UK Hold Co investments that are made up of loans as at 31 December 2018. Included within this are the related party loans as disclosed within note 23 as well as an external long term debt facility entered into by FS Holdco and FS Debtco and Santander. The balance of the external debt facility as at year end amounted to GBP251,057,609 (2017: GBP152,446,577).
b) Expected credit loss assessment
Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.
The Company applies the simplified approach to measuring expected credit losses, as permitted by IFRS 9, which uses a 12 month expected loss allowance for all trade receivables. The expected credit loss on trade receivables and the balance at year end was deemed by management to be not material and therefore no impairment adjustments were accounted for.
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.
For the Company's UK solar sites the main risks from Brexit that the Company is currently considering are the stability of the operating and maintenance (O&M) companies that are employed across the portfolio and the supply chain of components as part of either corrective or preventative maintenance work.
In relation to the O&M companies themselves, all of the primary O&M companies across a majority of the UK portfolio are UK based operations who are wholly owned by UK entities.
The supply chain for spare parts is the other main risk that Management foresees due to Brexit in terms of getting spare parts to sites promptly from other parts of the EU, especially in the event of a no deal Brexit.
Whilst Brexit presents certain risks in relation to the operation of the UK solar portfolio the Asset Manager shall be working to ensure that there are robust spare parts provision in the UK and continue to work with the O&M providers and their downstream suppliers to ensure down time is minimised across the portfolio as much as possible.
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
2018 2017
2018 Pence/Ordinary 2017 Pence/Ordinary
GBP'000 share GBP'000 share
Quarter 1 7,109 1.58 6,414 1.58
Quarter 2 7,109 1.58 6,538 1.58
Quarter 3 8,118 1.64 7,109 1.58
Quarter 4 9,003 1.64 7,110 1.58
-------- --------------- -------- ---------------
31,339 27,171
-------- --------------- -------- ---------------
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
For the year ended 31 December 2018:
Repayment
Opening Balance Increase in of Closing Balance
as at 1 loan/Interest loan/Interest as at 31
January 2018 charged repaid December 2018
GBP'000 GBP'000 GBP'000 GBP'000
Loan Notes 250,000 - - 250,000
Interest on Loan
Notes 48,746 33,172 (25,104) 56,814
Shareholder Loan
1 154,110 95,206 - 249,316
Interest on Shareholder
Loan 1 8,880 3,644 - 12,524
Non interest bearing
loan included in
trade and other receivables 1,116 - (1,116) -
Non interest bearing
loan included in
trade and other payables - 183 - 183
The increases in the shareholder loan of GBP95,206,725 were funded through 2 separate placing proceeds during 2018.
For the year ended 31 December 2017
Opening Balance Closing Balance
as at Increase Repayment as at 31
1 January in loan/Interest of loan/Interest December
2017 charged repaid 2017
GBP'000 GBP'000 GBP'000 GBP'000
Loan Notes 250,000 - - 250,000
Interest on Loan Notes 27,315 32,246 (10,815) 48,746
Shareholder Loan 23,910 130,200 - 154,110
Interest on Shareholder Loan 5,730 3,150 - 8,880
Non interest bearing loan
included in trade and other
receivables 4,694 1,116 (4,694) 1,116
The increases in the shareholder loan of GBP130,200,000 were funded through 3 separate placing proceeds during 2016 and 2017.
Transactions between UK Hold Co and its underlying subsidiaries
Transactions with FS Holdco
For the year ended 31 December 2018:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2018 charged repaid 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 343,731 - - 343,731
Interest on investment loan
1 37,711 27,499 (18,157) 47,053
Interest bearing Investment
loan 2 - (40,000) - (40,000)
Interest on investment loan
2 - (1,403) 150 (1,253)
Non interest bearing loan (143,504) - - (143,504)
Non interest bearing loan
included in trade and other
receivables 715 160 - 875
For the year ended 31 December 2017:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2017 charged repaid 2017
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 343,731 - - 343,731
Interest on investment loan
1 20,512 27,121 (9,922) 37,711
Non interest bearing loan 183,504 - (40,000) 143,504
Non interest bearing loan
included in trade and other
receivables 662 53 - 715
Transactions with FS Holdco 2
For the year ended 31 December 2018:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2018 charged repaid 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 74,894 - - 74,894
Interest on investment loan
1 - 3,745 (2,797) 948
Interest bearing Investment
loan 2 - 9,107 - 9,107
Interest on investment loan
2 - 42 - 42
Interest bearing Investment
loan 3 - 33,094 - 33,094
Interest on investment loan
3 - 150 - 150
Interest bearing Investment
loan 4 - 3,432 - 3,432
Interest on investment loan
4 - 6 - 6
Interest bearing Investment
loan 5 - 46,500 - 46,500
Interest on investment loan
5 - 962 - 962
Interest bearing loan payable
1 (28,970) - - (28,970)
Interest on loan payable
1 - (1,448) 87 (1,361)
Interest bearing loan payable
2 (13,000) - - (13,000)
Interest on interest bearing
loan payable 2 (169) (650) - (819)
Interest bearing loan payable
3 - (7,082) - (7,082)
Interest on loan payable
3 - (263) - (263)
Interest bearing loan payable
4 - (8,386) - (8,386)
Interest on loan payable
4 - (208) - (208)
Non interest bearing loan
1 (3,734) - 1,130 (2,604)
Non interest bearing loan
2 - (875) - (875)
For the year ended 31 December 2017:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2017 charged repaid 2017
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 - 74,894 - 74,894
Interest on investment loan
1 - 3,221 (3,221) -
Interest bearing loan payable
1 - (28,970) - (28,970)
Interest on interest bearing
loan payable 1 - - - -
Interest bearing loan payable
2 - (13,000) - (13,000)
Interest on interest bearing
loan payable 2 - (169) - (169)
Non interest bearing loan - (3,734) - (3,734)
Transactions with FS Debtco
For the year ended 31 December 2018:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2018 charged repaid 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loan 1 55,000 - - 55,000
Interest on loan 1 2,019 2,750 - 4,769
Non interest bearing loan - 140 - 140
For the year ended 31 December 2017:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2017 charged repaid 2017
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loan 1 - 55,000 - 55,000
Interest on loan 1 - 2,019 - 2,019
Transactions with FS Holdco 3
For the year ended 31 December 2018:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2018 charged repaid 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 - 36,124 - 36,124
Interest on investment loan
1 - 1,267 (1,267) -
Non interest bearing loan
payable - 317 - 317
FS Holdco 3 commenced trading in the current year thus no comparatives are shown.
Transactions with FS Holdco 4
For the year ended 31 December 2018:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2018 charged repaid 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 28,970 - - 28,970
Interest on investment loan
1 - 1,489 - 1,489
Interest bearing Investment
loan 2 12,482 - - 12,482
Interest on investment loan
2 162 624 - 786
Interest bearing Investment
loan 3 - 10,380 - 10,380
Interest on investment loan
3 - 385 - 385
Interest bearing Investment
loan 4 - 8,386 - 8,386
Interest on investment loan
4 - 208 - 208
Interest bearing Investment
loan 5 - 3,141 - 3,141
Interest on investment loan
5 - 110 - 110
Non interest bearing loan - 353 - 353
For the year ended 31 December 2017:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 in loan/Interest of loan/Interest December
January 2017 charged repaid 2017
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 - 28,970 - 28,970
Interest on investment loan
1 - - - -
Interest bearing Investment
loan 2 - 12,482 - 12,482
Interest on investment loan
2 - 162 - 162
Transactions between FS Holdco, FS Debtco, FS Holdco 3, FS Holdco 4 and their SPVs
All of the SPVs are cash generating solar farms (except for the non-operational Australian investments). On occasion revenues received and expenses are paid on their behalf by FS Holdco, FS Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4. All of these transactions are related party transactions.
Opening Balance Net amount
receivable/ Amounts paid (payable)/
(payable) on behalf Amounts received receivable
as at of from as at 31
1 January SPV SPV December
2018 2018 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
FS Holdco and its SPVs (11,437) 33,009 (37,166) (15,594)
FS Holdco 2 and its SPVs - 1,501 (4,190) (2,689)
FS Debtco and its SPVs (6,968) 12,231 (8,026) (2,763)
Opening balance Net amounts
receivable/ Amounts paid Amounts (payable)/
(payable) on behalf received receivable
as at 1 of from as at 31
January SPV SPV December
2017 2017 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
FS Holdco and its SPVs (935) 30,883 (41,385) (11,437)
Other
During the year under review, UK Hold Co made use of a tax credit of GBPnil (2017: GBP1,646,395) availed by its subsidiary, FS Holdco, to reduce the tax liability of UK Holdco at the reporting date.
During the year under review, FS Holdco 2 acquired 26 new investments from Foresight Solar EIS funds. See note 16 for further details regarding the investments required.
Transactions with the manager
Foresight Group LLP, a related party of Foresight Group CI, charged asset management fees to the underlying projects of GBP1,002,002 during the year (2017: GBP587,333), of which GBP204,052 was payable at year end (2017: GBP65,850).
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 GBP4,686,275 during the year (2017: GBP4,015,368), of which GBP469,114 was payable at year end (2017: GBPNil).
24. Change in accounting policies
This note explains the impact of the adoption of IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from Contracts with Customers' on the Company's financial statements and also discloses the new accounting policies that have been applied from 1 January 2018, where they are different to those applied in prior periods.
As a result of the changes in the Company's accounting policies, prior year financial statements did not have to be restated as there were no material reclassifications or adjustments arising from the new impairment rules.
IFRS 15
IFRS 15 applies to all contracts with customers.
Application to the Company:
The adoption of IFRS 15 does not 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 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 is specifically excluded from the scope of IFRS 15. Both revenue streams fall within the scope of IFRS 9 and thus specifically excluded from the scope of IFRS 15, the adoption of IFRS 15 did not have a material impact on the Company's annual report and did not result in any changes to accounting policies.
The adoption of IFRS 15 has no effect on
- the retained earnings at 1 January 2018 and 2017, - the statement of financial position as at 31 December 2018 or 2017, - the statement of comprehensive income for the year ended 31 December 2018 or 2017, or - the statement of cash flows for the year ended 31 December 2018 or 2017.
IFRS 9
a) Impact on classification and measurement
IFRS 9 IFRS 9 was adopted by the Company in the current year. The impact of this adoption is set out below.
Application to the Company:
Investments held at fair value through profit or loss
The Company's investment in UK Hold Co (which comprises both debt and equity) was previously held at fair value through profit or loss under IAS 39. In terms of IFRS 9, the investment in its entirety continues 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.
Therefore there is no change 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 were previously 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 does not change with the application of IFRS 9.
The following table explains the original measurement categories under IAS39 and the new measurement categories under IFRS 9 for each class of the Company's financial assets and financial liabilities as at 1 January 2018.
Original New
carrying carrying
amount amount
under IAS under IFRS
Original New 39 9
classification classification 31 December 31 December
under IAS under IFRS 2017 2017
39 9 GBP'000 GBP'000
Financial assets
Designated
as at fair Mandatorily
value through at fair value
profit or through profit
Investments loss or loss 408,464 408,464
Amortised Amortised
Trade and other receivables cost cost 1,933 1,933
Amortised Amortised
Interest receivable cost cost 57,626 57,626
Amortised Amortised
Cash and cash equivalents cost cost 14,669 14,669
------------ ------------
Total financial assets 482,692 482,692
------------ ------------
Original New
carrying carrying
amount amount
under IAS under IFRS
Original New 39 9
classification classification 31 December 31 December
under IAS under IFRS 2017 2017
39 9 GBP'000 GBP'000
Financial liabilities
Amortised Amortised
Trade and other payables cost cost (1,384) (1,384)
------------ ------------
Total financial liabilities (1,384) (1,384)
------------ ------------
b) IFRS 9 impact on impairment
The Company was required to revise its impairment methodology under IFRS 9 for each class of financial asset.
From 1 January 2018, the Company assesses on a forward looking basis the expected credit losses ("ECL") associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The ECL assessment of financial assets is disclosed in note 20.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.
Interest receivable
The Company ECL uses a 12 month expected loss allowance for all interest receivable. The Company has completed some high-level analysis and forward looking qualitative and quantitative information, to determine if the interest receivable is low credit risk. Based on this analysis the expected credit loss on interest receivable is not material and therefore no impairment adjustments were accounted for.
Trade and other receivables
The Company applies the simplified approach to measuring expected credit losses, as permitted by IFRS 9, which uses a 12 month expected loss allowance for all trade receivables. The expected credit loss on trade receivables is not material and therefore no impairment adjustments were accounted for.
c) Accounting policies applied from 1 January 2018 - IFRS 9
The accounting policies applied under IFRS9 applicable from 1 January 2018 is set out in detail in note 2.9.
25. Commitments and contingent liabilities
There are no commitments or contingent liabilities in the current year (2017: 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.
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 2018 is as follows:
Gross method: 22%
Commitment method: 30%
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.
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 Energy 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
AIFs Alternative Investment Funds
AIFMs Alternative Investment Fund Managers
AIFMD The Alternative Investment Fund Management Directive
Asset Manager The Company's underlying investments have appointed
Foresight Group LLP, a subsidiary of Foresight Group
CI, to act as Asset Manager
BBSY Bank Bill Swap Bid Rate
Company Foresight Solar Fund Limited
CEFC The Clean Energy Finance Corporation
DCF Discounted Cash Flow
EEA European Economic Area
EPC Engineering, Procurement & Construction
ESG Environmental, Social and Governance
EUA European Emission Allowances
FiT Feed-in Tariff. The Feed-in-Tariff scheme is the
financial mechanism introduced on 1 April 2010 by
which the UK Government incentivises the deployment
of renewable and low-carbon electricity generation
of up to 5MW of installed capacity.
GAV Gross Asset Value on Investment Basis including debt
held at SPV level
GFSC Guernsey Financial Services Commission
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 Manager Foresight Group CI Limited
IPEV International Private Equity and Venture Capital
IPO Initial Public Offering
KID Key Information Document
KPMG LLP KPMG is the Company's Auditor
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
LRET Large-Scale Renewable Energy Target. The LRET creates
a financial incentive in Australia for the establishment
and growth of renewable energy power stations, such
as wind and solar farms, or hydro electric power
stations
Main Market The main securities market of the London Stock Exchange
MIDIS Macquarie Infrastructure Debt Investment Solutions
MUFG Bank of Tokyo-Mitsubishi UFJ
MWh Megawatt hour
NAV Net Asset Value
NEG National Energy Guarantee
OBR Office for Budget Responsibility
Official List The Premium Segment of the UK Listing Authority's
Official List
O&M Operation and Maintenance contractors
PPA Power Purchase Agreements
PR Performance Ratio
PRIIPS Packaged Retail and Insurance-Based Investment Products
PV Photovoltaic
RET Renewable Energy Target
RO Scheme The financial mechanism by which the UK Government
incentivises the deployment of large-scale renewable
electricity generation by placing a mandatory requirement
on licensed UK electricity suppliers to source a
specified and annually increasing proportion of electricity
they supply to customers from eligible renewable
sources or pay a penalty.
ROC Renewable Obligation Certificates
RPI The Retail Price Index
SCR Significant Code Review
SPV The Special Purpose Vehicles which hold the Company's
investment portfolio of underlying operating assets
TCR Targeted Charging Review
UK The United Kingdom of Great Britain and Northern
Ireland
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR UGURCWUPBGBA
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March 06, 2019 02:00 ET (07:00 GMT)
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