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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Foresight Solar Fund Limited | LSE:FSFL | London | Ordinary Share | JE00BD3QJR55 | ORD NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 84.40 | 84.00 | 84.70 | 84.40 | 84.20 | 84.20 | 351,505 | 09:27:20 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Finance Services | 162.99M | 154.47M | 0.2610 | 3.23 | 498.25M |
TIDMFSFL
RNS Number : 8511J
Foresight Solar Fund Limited
22 August 2019
22 August 2019
Foresight Solar Fund Limited
('Foresight Solar' or 'the Company')
Interim Results to 30 June 2019 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 Interim Results for the six-month period ended 30 June 2019.
Highlights
-- Continued solid operational performance of the portfolio, with production for the period 2.9% above base case, generating over 400GWh of clean energy -- NAV decreased to GBP601.5m (31 Dec 2018: GBP610.3m), being 109.6p per share (31 Dec 2018: 111.2p). This was predominantly driven by a downward revision of UK power price forecasts but partially offset by a 0.25% reduction in the discount rate applied to the UK portfolio and improved financing terms -- Declared total dividend of 3.38p per share during the period and on track to deliver 2019 target dividend of 6.76p per share* -- Positive progress on delivering value enhancing initiatives across the portfolio, including a successful PPA re-tender for 22 UK assets in April 2019, resulting in improved commercial terms for the sale of electricity and ROCs -- Successful GBP245m refinancing closed post period end, negotiated on attractive terms delivering significant value and capital structure flexibility. Due to the material impact of the new terms, this has been taken into consideration for the NAV as at 30 June 2019 -- The Company's operating portfolio produced enough clean electricity to power c.130,000 UK homes and avoid the equivalent of over 309,283 tonnes of C0(2) production
* 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 30 June 2019 30 June 2018 Gross Asset Value ("GAV") GBP1,100.6 million GBP749.0 million ------------------- ----------------- Net Asset Value ("NAV") GBP601.5 million GBP473.1 million ------------------- ----------------- NAV per Share 109.6 pence 105.2 pence ------------------- ----------------- Profit after Tax for the Year GBP9.4 million GBP6.0 million ------------------- ----------------- Total Dividend per Share for 3.38 pence 3.28 pence the period ------------------- ----------------- Annual Total Shareholder Return since IPO** 8.78% 7.03% ------------------- -----------------
** Annualised from IPO on 29 October 2013.
Commenting on the Company's results, Alex Ohlsson, Chairman of Foresight Solar Fund Limited said:
"As expected, the first half of 2019 has been a successful period of portfolio consolidation and performance optimisation for the Company. I am particularly pleased with the work of the Asset Management team in delivering substantial improvements to the operational performance of the portfolio, with production continuing to be above budget.
"We remain confident that, with the positive operational performance of our assets, the delivery of value enhancing initiatives and the successful refinancing of 28 UK assets post-period, Foresight Solar continues to be well-positioned to deliver further growth in the second half of the year.
"We remain on track to deliver the target total dividend of 6.76 pence per share for the year."
Results presentation
A presentation for analysts will take place at 09:00 today at Foresight Group's offices, The Shard, 32 London Bridge Street, London SE1 9SG. Analysts wishing to attend or dial in should contact foresightsolar@citigatedewerogerson.com to register.
Dividend Declaration
Foresight Solar is also pleased to announce a second interim dividend, in respect of the period 1 April 2019 to 30 June 2019, of 1.69 pence per ordinary share ("the Dividend"). The shares will go ex-dividend on 24 October 2019 and the Dividend will be paid on 29 November 2019 to shareholders on the register as at the close of business on 25 October 2019.
Full details of the scrip dividend alternative that is being offered in respect of the Dividend (the "Scrip Offer") and the Scrip Dividend Scheme can be found in the Scrip Dividend Alternative Offer Document (the "Scrip Document") available on the Company's website at https://fsfl.foresightgroup.eu/investor-relations/dividend-history/. The Scrip Document is also available on the National Storage Mechanism website at www.morningstar.co.uk/uk/NSM and copies are also available for inspection at JTC House, 28 Esplanade, St. Helier, Jersey JE2 3QA.
The reference price of the new shares issued under the Scrip Offer will be calculated and published on or around 31 October 2019.
Shareholders will receive the Dividend in cash, unless they have previously completed a standing election (a "Form of Election") to receive new shares pursuant to the Scrip Offer. Shareholders who would like to receive such new shares rather than cash, and who have not previously submitted a Form of Election, should complete the Form of Election at the back of the Scrip Document and return it to the Company's Receiving Agent, Computershare Investors Service (Jersey) Limited by no later than 5.00pm on 11 November 2019.
The expected timetable in relation to the Dividend will be as follows:
Ex-Dividend Date 24 October 2019 Record Date 25 October 2019 -------------------- Scrip Price Announcement 31 October 2019 -------------------- Last Date for Submission of 11 November 2019 at Forms of Election 17h00 -------------------- Last Date Crest Elections 11 November 2019 at 17h00 -------------------- Anticipated Listing of New Shares 29 November 2019 -------------------- Dividend Payment Date 29 November 2019 --------------------
For further information, please contact:
Foresight Group
+44 (0)20 3763 6932
Louise Chesworth
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
LEI: 213800VO4O83JVSSOX33
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 internationally.
Since its IPO in October 2013, the Company 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.
Foresight Solar Fund Limited is managed by Foresight Group, a leading independent global infrastructure and private equity manager, which provides the Company 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 Unaudited Interim Report and Financial Statements for Foresight Solar Fund Limited (the "Company" or the "Fund") for the six months ended 30 June 2019.
The Company has had an encouraging start to the year delivering on a number of portfolio and capital structure optimisation initiatives and benefiting from continued positive operational performance, despite the decrease in UK wholesale power prices during the period.
The portfolio continued to perform above base case. Electricity production for the six-month period was 2.9% above expectations, driven by high levels of irradiation for the period and the continued work of the asset management team, including optimising asset performance and portfolio consolidation. Post period end, the Company successfully closed the refinancing of 28 UK assets, adding significant value and flexibility to the Company's capital structure.
KEY FINANCIALS
In the six months to 30 June 2019, the NAV per Ordinary Share decreased to 109.6 pence (31 December 2018: 111.2 pence). The key driver behind the decrease was a material downward revision of UK power price forecasts obtained from independent third-party consultants.
During the period, the Investment Manager undertook a review of the discount rates applied to UK asset valuations. As a result of this analysis, discount rates for the UK assets have been reduced by 0.25% to reflect the current market valuation of operational solar assets.
Profit for the period was GBP9.4 million (six months to June 2018: GBP6.0 million) and Earnings per Share increased to 1.71 pence, up from 1.34 pence in June 2018.
CAPITAL STRUCTURE OPTIMISATION
At 30 June 2019, the total outstanding debt of the Company and its subsidiaries amounted to GBP499.1 million (31 December 2018: GBP504.4 million), with long term debt representing GBP394.1 million (December 2018: GBP399.4 million). The total gearing level remained flat at 45% of GAV (December 2018: 45%). Long-term gearing represents 36% of GAV (2018: 36%), which remains within the 40% long-term debt target set by the Board.
The Company's Revolving Credit Facilities ("RCFs") totalled GBP105 million at 30 June 2019, granting the Company the flexibility to adjust its gearing position in the short term. The RCFs were fully utilised at 30 June 2019.
Post period end, on 2 August 2019, the Investment Manager successfully completed the refinancing of 28 of its UK assets (321MW). The Company secured a GBP245 million debt refinancing comprising a GBP170 million long-term loan facility, a GBP65 million RCF and a GBP10 million debt service reserve facility. The facilities were secured on attractive terms and overall at a lower interest cost compared to the previous facilities. Due to the material impact of the new terms, this has been taken into consideration for the NAV as at 30 June 2019.
OPERATIONAL PERFORMANCE
Electricity generation from the Company's portfolio during the first half of the year was 2.9% above base case. In the UK, irradiation levels were 3.1% above base case assumptions, whilst UK asset performance, when adjusted for compensation received, outperformed base case by 2.9%. Asset outperformance during the period was driven by the strong performance of the majority of our UK assets, as we continue to experience a reduction in the number of operational incidents compared to previous periods. The Board is pleased with the continued stable performance of the Company's UK portfolio and is confident that the Asset Manager has remedied certain historic issues, evidenced by recent sustained periods of outperformance.
In Australia, three of the four assets are now operational and exporting at full capacity with the remaining asset due to be commissioned during the second half of 2019. Whilst there have been delays in the construction and commissioning of the Australian assets, the Investment Manager does not expect these to have a material adverse financial impact as the Company is contractually protected.
During the period, the Asset Manager delivered further operational improvements. A successful PPA re-tender for 22 of our UK assets was completed in April 2019. The outcome of the retender has resulted in an improvement to the commercial terms on which Renewables Obligation Certificates ("ROCs") and power are sold by the relevant assets, resulting in an average increase in expected revenue generation of approximately 2% for a period of 10 years. The Asset Manager continues to explore operational optimisation initiatives that are expected to secure long-term value for the Company.
DIVID
The Company has declared a dividend of 3.38 pence per share in the first half and is on track to deliver its target of 6.76 pence per share for the year. The second 2019 interim dividend of 1.69 pence will be paid on 30 August 2019.
Dividend cover for the period on a cash basis was 1.12 times, down from 1.14 times for the prior year on a like-for-like basis as a result of the decrease in UK wholesale power prices experienced in the period.
The target dividend for 2019 is 6.76 pence, which has grown in line with the UK's RPI 2019.
Following shareholder approval at the AGM on 11 July 2019, the Company is now offering shareholders a Scrip Dividend alternative to the Dividend. The Scrip Dividend Scheme provides shareholders with the opportunity to receive dividends in the form of new ordinary shares rather than cash and applies to any subsequent interim or final Dividends in respect of which a Scrip Dividend alternative is offered.
Since IPO, the Company has met all target dividends and has maintained dividend growth in line with UK inflation rates. As previously noted, 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 as the Company continues to explore investment opportunities in non-UK and subsidy free markets. In a scenario where the Company experiences a decrease in the proportion of its revenues which are linked to UK inflation it may become prudent to adopt a "progressive" dividend policy. Under such a policy, the Board would intend to target a positive progression of dividend levels, but not necessarily linked to UK inflation.
CORPORATE GOVERNANCE
At the beginning of June 2019, we were pleased to announce the appointment of Monique O'Keefe to the Board as an Independent Non-Executive Director. Monique provides additional breadth of expertise with over 20 years' experience in law and finance which will be invaluable to the Company in its next phase of growth.
OUTLOOK
Following the various optimisation initiatives we undertook during the first half of the year, and the post-period refinancing, we expect our UK portfolio to enter more of a steady state. We are extremely pleased with the progress made to date by the Investment Manager and Asset Management team in delivering value-enhancing initiatives and optimising performance across the portfolio and we will continue to explore new opportunities and initiatives to optimise performance further. The fourth Australian asset, which is currently under construction, is expected to become operational before year end. We also remain active in exploring opportunities to further optimise the Company's capital structure.
The Investment Manager continues to review international investment opportunities in markets that benefit from regulatory support, however European markets are showing signs of increased consolidation and inflated asset valuations at present. We maintain a disciplined approach to acquisitions, only acquiring assets that meet return requirements on a risk adjusted basis, and, as previously noted, the subsidised market in the UK remains highly competitive with limited investment opportunities based on current market valuations.
We are closely monitoring the development of subsidy-free markets in Southern Europe and the UK. In Southern Europe, this market has developed rapidly and a number of relevant transactions have recently been announced in Spain and Portugal with attractive PPA structures. In the UK, whilst this market has progressed, we remain of the view that the current market economics are not yet in-line with the Company's return requirements. However, we expect this will present significant opportunity for the Company in the future.
Alexander Ohlsson
Chairman
22 August 2019
Corporate Summary and Investment Objective
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 30 June 2019, 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 GBP1,100.6 million as at 30 June 2019. It is the largest UK-listed dedicated solar energy investment company by installed capacity.
As at 30 June 2019, the Company's portfolio consisted of 54 assets with a net installed capacity of 869MW, including four Australian assets representing 146MW, one of which remains 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 per cent 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 will 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 project developers, EPC contractors, O&M contractors, panel manufacturers and PPA providers.
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 per cent 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 30 June 2019 are as follows:
Investor % Shareholding in Fund ---------------------- BlackRock Investment Management Ltd 15.27 ------------------------------------ ---------------------- Baillie Gifford & Co Ltd 7.73 ------------------------------------ ---------------------- Newton Investment Management Ltd 7.32 ------------------------------------ ---------------------- Legal & General Investment Mgmt Ltd 7.29 ------------------------------------ ---------------------- Schroders Plc 6.76 ------------------------------------ ---------------------- Tredje AP Fonden 5.25 ------------------------------------ ---------------------- Total 49.62% ------------------------------------ ----------------------
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
The EU Packaged Retail and Insurance-based Investment Products Regulation ("PRIIPs Regulation") took effect on 1 January 2018. The PRIIPs regulation requires the Company to publish a Key Information Document ("KID") that must be accurate, fair, clear and not misleading. It is the Company's policy to review the KID on an annual basis and every time there is a change that significantly affects or is likely to significantly affect the information in the 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 25 June 2019.
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 25 June 2019.
Peter Dicks
Mr Dicks is currently a Director of a number of quoted and unquoted companies. 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 25 June 2019.
Monique O'Keefe
Mrs O'Keefe is the co-founder of investment consultancy business, Kairos Wealth Limited. She also serves on a number of boards, including Phoenix Spree Deutschland Limited which is a London Stock Exchange listed property fund, a private equity fund, a European hedge fund and an oil and gas financing fund. Mrs O'Keefe also sits on the Board of Commissioners at the Jersey Financial Services Commission.
Mrs O'Keefe was appointed as a Non-Executive Director on 1 June 2019 and was reappointed on 25 June 2019.
Investment Manager
The Company's Investment Manager, Foresight Group CI Limited, is responsible for the acquisition and management of the Company's portfolio, 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, are together referred to as "Foresight Group". Foresight Group was founded in 1984 and is a leading independent infrastructure and private equity investment company managing GBP4.0 billion of assets on behalf of institutions and retail clients with offices in Australia, Italy, South Korea, Spain and the UK.
On 5 June 2019, Foresight Group announced the acquisition of the John Laing Environmental Assets Group Limited ("JLEN") advisory mandate from John Laing Group, effective from 1 July 2019. Foresight Group maintains a formal allocation policy for investments across its funds. Following the acquisition, Foresight Group's global infrastructure investments increased to GBP3.1 billion, with a cumulative generating capacity of 1.9GW. Currently Foresight Group's infrastructure team manages 103 solar projects internationally, representing GBP1.7 billion with a total generating capacity of 1.3GW. The remaining generation capacity under management includes bioenergy projects, onshore wind, battery storage facilities and reserve power generation assets.
Foresight Group's 89 strong infrastructure team includes 39 investment professionals, with an average of 12 years industry experience.
Foresight Group's Investment Management team is led by three experienced UK-based managers, supported by a team of seven people of investment managers located in the UK and internationally. The Investment Management team based in Australia compromises three investment professionals, three portfolio managers and one member of support staff. This team is 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.
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, remaining primarily focused on identifying and acquiring 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 the Executive Committee. MATT HAMMOND, Partner Matt is a Partner in Foresight Group'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.
Portfolio Assets
Current Portfolio
Asset Installed Net MW Connection Acquisition Current Fair Peak Capacity Date Cost(1) (GBPm) Value (2) (GBPm) (MW) ------------------ -------------- ------ ------------- --------------- ----------------- UK ------------------------------------------------------------------------------------------------- 1 Wymeswold(3) 34 34 March 2013 45.0 49.3 ------------------ -------------- ------ ------------- --------------- ----------------- 2 Castle Eaton 18 18 March 2014 22.6 21.3 ------------------ -------------- ------ ------------- --------------- ----------------- 3 Highfields 12 12 March 2014 15.4 13.5 ------------------ -------------- ------ ------------- --------------- ----------------- 4 High Penn 10 10 March 2014 12.7 10.5 ------------------ -------------- ------ ------------- --------------- ----------------- 5 Pitworthy 16 16 March 2014 19.3 16.7 ------------------ -------------- ------ ------------- --------------- ----------------- 6 Hunters Race 10 10 July 2014 13.3 13.9 ------------------ -------------- ------ ------------- --------------- ----------------- 7 Spriggs Farm 12 12 March 2014 14.6 14.3 ------------------ -------------- ------ ------------- --------------- ----------------- September 8 Bournemouth 37 37 2014 47.9 52.2 ------------------ -------------- ------ ------------- --------------- ----------------- 9 Landmead 46 46 December 2014 52.4 49.6 ------------------ -------------- ------ ------------- --------------- ----------------- September 10 Kencot 37 37 2014 49.5 45.9 ------------------ -------------- ------ ------------- --------------- ----------------- 11 Copley 30 30 December 2015 32.7 37.7 ------------------ -------------- ------ ------------- --------------- ----------------- 12 Atherstone 15 15 March 2015 16.2 15.3 ------------------ -------------- ------ ------------- --------------- ----------------- 13 Paddock Wood 9 9 March 2015 10.7 10.7 ------------------ -------------- ------ ------------- --------------- ----------------- 14 Southam 10 10 March 2015 11.1 11.1 ------------------ -------------- ------ ------------- --------------- ----------------- 15 Port Farm 35 35 March 2015 44.5 45.4 ------------------ -------------- ------ ------------- --------------- ----------------- 16 Membury 16 16 March 2015 22.2 21.1 ------------------ -------------- ------ ------------- --------------- ----------------- 17 Shotwick 72 72 March 2016 75.5 84.9 ------------------ -------------- ------ ------------- --------------- ----------------- 18 Sandridge 50 50 March 2016 57.3 58.1 ------------------ -------------- ------ ------------- --------------- ----------------- 19 Wally Corner 5 5 March 2017 5.7 5.9 ------------------ -------------- ------ ------------- --------------- ----------------- 20 Coombeshead 10 10 December 2014 36.6 39.7 ------------------ -------------- ------ ------------- --------------- ----------------- 21 Park Farm 13 13 March 2015 ------------------ -------------- ------ ------------- --------------- ----------------- 22 Sawmills 7 7 March 2015 ------------------ -------------- ------ ------------- 23 Verwood 21 21 February 2015 ------------------ -------------- ------ ------------- 24 Yardwall 3 3 June 2015 ------------------ -------------- ------ ------------- --------------- ----------------- 25 Abergelli 8 8 March 2015 3.7 4.9 ------------------ -------------- ------ ------------- --------------- ----------------- 26 Crow Trees 5 5 February 2016 1.8 2.1 ------------------ -------------- ------ ------------- --------------- ----------------- 27 Cuckoo Grove 6 6 March 2015 2.5 3.3 ------------------ -------------- ------ ------------- --------------- ----------------- 28 Field House 6 6 March 2015 3.1 3.7 ------------------ -------------- ------ ------------- --------------- ----------------- 29 Fields Farm 5 5 March 2016 1.7 2.5 ------------------ -------------- ------ ------------- --------------- ----------------- 30 Gedling 6 6 March 2015 1.9 2.8 ------------------ -------------- ------ ------------- --------------- ----------------- 31 Homeland 13 13 March 2014 5.2 7.8 ------------------ -------------- ------ ------------- --------------- ----------------- 32 Marsh Farm 9 9 March 2015 4.0 4.8 ------------------ -------------- ------ ------------- --------------- ----------------- 33 Sheepbridge 5 5 December 2015 1.9 2.7 ------------------ -------------- ------ ------------- --------------- ----------------- 34 Steventon 10 10 June 2014 4.2 5.4 ------------------ -------------- ------ ------------- --------------- ----------------- 35 Tengore 4 4 February 2015 1.3 1.8 ------------------ -------------- ------ ------------- --------------- ----------------- 36 Trehawke 11 11 March 2014 4.7 6.5 ------------------ -------------- ------ ------------- --------------- ----------------- 37 Upper Huntingford 8 8 October 2015 3.1 4.1 ------------------ -------------- ------ ------------- --------------- ----------------- 38 Welbeck 11 11 July 2014 4.4 5.5 ------------------ -------------- ------ ------------- --------------- ----------------- 39 Yarburgh 8 8 November 2015 3.4 4.5 ------------------ -------------- ------ ------------- --------------- ----------------- 40 Abbey Fields 5 5 March 2016 1.5 3.2 ------------------ -------------- ------ ------------- --------------- ----------------- 41 SV Ash 8 8 March 2015 3.4 4.2 ------------------ -------------- ------ ------------- --------------- ----------------- 42 Bilsthorpe 6 6 November 2014 1.9 2.7 ------------------ -------------- ------ ------------- --------------- -----------------
September 43 Bulls Head 6 6 2014 2.2 3.0 ------------------ -------------- ------ ------------- --------------- ----------------- 44 Lindridge 5 5 January 2016 1.7 2.6 ------------------ -------------- ------ ------------- --------------- ----------------- 49 Manor Farm 14 14 October 2015 6.1 6.8 ------------------ -------------- ------ ------------- --------------- ----------------- 45 Misson 5 5 March 2016 2.0 2.9 ------------------ -------------- ------ ------------- --------------- ----------------- 46 Nowhere 8 8 March 2015 3.7 4.5 ------------------ -------------- ------ ------------- --------------- ----------------- 47 Pen Y Cae 7 7 March 2015 2.9 3.9 ------------------ -------------- ------ ------------- --------------- ----------------- 48 Playters 9 9 October 2015 4.0 4.9 ------------------ -------------- ------ ------------- --------------- ----------------- 50 Roskrow 9 9 March 2015 3.7 4.9 ------------------ -------------- ------ ------------- --------------- ----------------- UK Subtotal 723 723 685.1 723.1 ------------------ -------------- ------ ------------- --------------- ----------------- AUSTRALIA ------------------------------------------------------------------------------------------------- 1 Bannerton 110 53(4) July 2018 22.9 20.0(6) ------------------ -------------- ------ ------------- --------------- ----------------- 2 Longreach 17 8(4) March 2018 2.7 2.9 ------------------ -------------- ------ ------------- --------------- ----------------- 3 Oakey 1 30 15(4) February 2019 4.4 4.8(6) ------------------ -------------- ------ ------------- --------------- ----------------- 4 Oakey 2 70 70 Q4 2019(5) 34.0 32.7(6) ------------------ -------------- ------ ------------- --------------- ----------------- Australia Subtotal 227 146 63.9 60.4 ------------------ -------------- ------ ------------- --------------- ----------------- Total 950 869 749.0 783.5 ------------------ -------------- ------ ------------- --------------- ----------------- 1 Original cost at time of acquisition, including transaction costs.
2 UK investments valued using an unlevered discount rate of 6.50% or a levered discount rate between 7.25% and 7.50% depending on the debt structure. Australian operational assets use a levered discount rate of 8.5%.
3 Includes the 2MW extension acquired in March 2015. 4 Accounts for the 49% stake the Company holds of this asset 5 Expected connection date.
6 Held at cost incurred to date. This does not represent expected final cost and assumes an AUD/GBP exchange rate of 0.55 as at 30 June 2019.
Investment Manager's Report
For the period ended 30 June 2019
KEY INVESTMENT METRICS
30 June 2019 31 December 2018 30 June 2018 ------------------ ------------------ ---------------- Market Capitalisation GBP659.8 million GBP592.9 million GBP489.5 million ------------------------------------------- ------------------ ------------------ ---------------- Share Price 120.2 pence 108.0 pence 108.8 pence ------------------------------------------- ------------------ ------------------ ---------------- Dividend Declared per Share for the period 3.38 pence 6.58 pence 3.28 pence ------------------------------------------- ------------------ ------------------ ---------------- GAV GBP1,100.6 million GBP1,114.7 million GBP749.0 million ------------------------------------------- ------------------ ------------------ ---------------- NAV GBP601.5 million GBP610.3 million GBP473.1 million ------------------------------------------- ------------------ ------------------ ---------------- NAV per Share 109.6 pence 111.2 pence 105.2 pence ------------------------------------------- ------------------ ------------------ ---------------- Annual Total Return (NAV) since IPO 7.61% 7.36% 6.89% ------------------------------------------- ------------------ ------------------ ---------------- Annual Total Shareholder Return since IPO 8.78% 6.83% 7.03% ------------------------------------------- ------------------ ------------------ ---------------- Profit after Tax for the Period GBP9.4 million GBP56.0 million GBP6.0 million ------------------------------------------- ------------------ ------------------ ----------------
PORTFOLIO SUMMARY
As at 30 June 2019, the Company's portfolio consisted of 54 assets with a total net peak capacity of 869MW. Of the 54 assets, 50 assets are located in the UK and represent 723MW of total installed capacity. The remaining four assets are located in Australia and account for 146MW of total installed capacity.
All of the Company's assets benefit from government-backed subsidies. The UK assets are accredited under the Renewable Obligation scheme, except for Yardwall which is a Feed-in Tariff accredited asset (representing less than 1% of the UK portfolio). In Australia, the assets benefit from subsidies in the form of Large-Scale Generation Certificates. During the six-month period, approximately 60% of total revenue was derived from subsidies and 40% from the sale of electricity.
The ROC buy-out price for the annual compliance period which commenced in April 2019 increased to GBP48.78 (2018-19 compliance period: GBP47.22), reflecting the average monthly percentage change in RPI during 2018. On average, the Company received 1.42 ROC/MWh during the period across the UK portfolio at an average price of GBP46.24/ROC (30 June 2018: GBP44.50/ROC).
During the period the Company sold the 0.5MW onshore wind asset included in the 53.3MW solar portfolio acquired in April 2018.
Further details on the portfolio as at 30 June 2019 is shown in the charts on pages 14-15. The analysis provided illustrates the diversification of the portfolio across inverter and panel manufacturers and O&M counterparties. The level of diversification achieved allows for efficiencies of scale through reducing ongoing operational costs.
Market Developments
UNITED KINGDOM
In June 2019, Prime Minister Theresa May announced the UK's intention to introduce new legislation which would commit the UK to eradicating its net contribution to climate change by 2050. This announcement further strengthens the UK's role in leading climate change initiatives. The target is expected to be achieved through a combination of initiatives including balancing carbon emissions with carbon removal (e.g. carbon capture and storage technologies) and the adoption of low-carbon technologies. Whilst the announcement does not address the solar industry directly, it reinforces the UK's long-term commitment to renewable generation sources.
There has been no update on the UK's capacity market, which continues to be in a "standstill" period following its suspension in November 2018. An update is expected at the end of September 2019 in relation to the potential approval of new state aid. The Company has no revenues directly linked to the capacity market mechanism.
In July 2018, Ofgem initiated a consultation into residual network charging arrangements. Amongst the reforms is a change to the Balancing Services Use of System ("BSUoS"), BSUoS being the means through which the cost to National Grid of balancing the network is recovered. Currently, generators connecting into the distribution network receive BSUoS as a credit, in light of the positive effect this capacity had on alleviating constraint on the transmission network. This was in response to changes in the use of the network due to growing volumes of renewable and distribution connected generation. In May 2019, Ofgem published an update on timing and next steps. Ofgem ruled out making any changes to embedded benefits before April 2021 and similarly the possibility of new arrangements for residual charging will not be implemented before April 2023. The Investment Manager continues to actively monitor the situation and engage with Ofgem. Embedded benefits revenue represents less than 2% of lifetime revenues for the portfolio and any expected impact on valuations is expected to be limited.
In March 2019, the UK's deadline to exit the European Union was extended. As Brexit negotiations continue the Investment Manager remains of the view that Brexit is unlikely to have a significant impact on the Company's prospects, from both a financial and operational perspective.
AUSTRALIA
On 18 May 2019, the Federal Government elections took place in Australia. The incumbent minority Coalition Government, consisting of the Liberal and National parties, was elected for a third three-year term. The elected Coalition Government will be led by Scott Morrison who replaced former Prime Minister Malcolm Turnbull on 31 August 2018 following an internal leadership vote.
The Coalition Government has confirmed the emissions reduction target at 26%-28% by 2030 (against 2005 levels) and proposed no replacement to the existing Renewable Energy Target for which the target gigawatt hours from renewable generation does not increase beyond 2020. Support in the form of Large-Scale Generation Certificates ("LGCs") remained unchanged and is expected to end in 2030. Following the election result, the Investment Manager does not expect any relevant energy policy updates in the immediate future.
In May 2019, Marginal Loss Factors ("MLFs") for FY2019 were published by the Australian Energy Market Operator ("AEMO"). MLFs reflect the amount of energy assumed to be lost in the transmission network and are assigned to each individual renewable asset. The MLFs published indicated a decrease in MLFs of up to 5% which will have an adverse impact on generators in 2019-20. The change was based on the expected increase in the number of new generators coming online and an ageing transmission network. The Bannerton asset was the most affected asset in our Australian portfolio with the annual MLF for 2019-20 decreasing by more than 10%.
It is the Investment Manager's view the MLF methodology is not fit for purpose and it is working alongside other industry participants to recommend amendments to the existing MLF methodology to reflect a more accurate transmission loss factor based on regional local consumption. The Investment Manager will reflect the results of its assessment relative to the MLF methodology in due course.
Whilst the country adapts to new technologies and greater demand and the associated challenges, the market does continue to benefit from significant electricity demand and an irradiation profile well suited to solar development.
HISTORIC POWER PRICES
UNITED KINGDOM
Wholesale power prices decreased throughout the reported period to approximately GBP40/MWh in June 2019 following a period of relatively high prices during the second half of 2018. This reduction was driven by declining natural gas prices globally as a result of new supplies from the US and Australia entering the market. In addition to this, historically high gas storage levels in Western Europe following one of the mildest winters on record had a downward effect on spot and forward prices for natural gas resulting in further downward pressure on wholesale power prices.
The average power price achieved across the UK portfolio during the period, including fixed price arrangements was GBP47.25/MWh, versus GBP46.54/MWh in the first half of 2018, an increase of 1.5%. The proportion of current revenues subject to fixed price arrangements across the UK portfolio as at 30 June 2019 was 45%, at a weighted average price of GBP53.38/MWh.
The existing fixed price arrangements have differing tenures. The contract with the longest tenure expires in March 2021. The percentage of fixed price arrangements will gradually decrease between 30 June 2019 and March 2021. These arrangements provide greater visibility over future cash flows and limit potential price volatility in the short and medium term. The Company will continue to monitor forward electricity prices and, where appropriate, will enter into new fixed price arrangements.
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 for its assets at any time. The Investment Manager is satisfied that the current proportion of fixed price arrangements provides the appropriate level of price certainty.
PPA tenders
As announced in the 2018 Annual Report, in Q3 2018 the Company launched a tender for the supply of PPAs to 22 UK sites representing 179MW. On 1 April 2019, the new PPA contracts were entered into for a period of 10 years resulting in an average increase in pass-through rates at which ROCs and power are paid of 1.43% and 0.5%, respectively, against the previous agreements. The new PPA agreements had a positive impact on the Company's NAV of GBP3.7m.
AUSTRALIA
Gas peaking power plants remain a key price setter for the Australian electricity markets.
Wholesale power prices in Victoria increased dramatically during the Australian summer months. On 25 January 2019, spot prices reached the maximum level of A$14,500/MWh. This was driven by extremely high temperatures as well as impacted by three of out six generation units being offline.
During the period, the weighted average spot price in Queensland was A$83.50/MWh, versus A$72.00/MWh in the first half of 2018, an increase of 16%.
Prices were higher in Victoria with a weighted average spot price of A$157.00/MWh, versus A$103.00/MWh in the first half of 2018, an increase of 52%.
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 market.
UNITED KINGDOM
During the period, power price forecasts decreased by 3.8% mainly due to movements in the short and medium term. The main driver of this reduction was the stronger pound assumptions forecast by one of the third-party consultants. In the longer term the deployment of more low-cost generation, notably onshore wind, is expected to help offset the upward pressure from an increase in demand.
The Company's forecasts assume an increase in power prices in real terms over the medium to long-term of 0.4% per annum (31 December 2018: 0.6%).
Where the assumed asset life extends beyond 2050, the Investment Manager has assumed no real growth in forecast power prices.
Australia
During the period, Queensland and Victoria power price forecasts increased by 3.15% and 7.23% respectively,
mainly due to assumptions around the retirement of coal plants in the medium to long term. This is not only driven by increasing maintenance costs, but also by future decarbonisation ambitions, which are expected to require the retirement of coal capacity to reach current policy targets.
The Company's forecasts assume an increase in Queensland and Victoria power prices in real terms over the medium to long-term of 1.16% and 0.79% respectively, per annum.
THIRD PARTY DEBT ARRANGEMENTS AND GEARING POSITION
As at 30 June 2019, total outstanding long-term debt was GBP394.1 million, representing 36% of the GAV (calculated as NAV plus outstanding debt) of the Company and its Subsidiaries (31 December 2018: GBP399.4 million or 36% of GAV).
At period end, total outstanding debt including RCFs was GBP499.1 million, representing 45% of GAV (31 December 2018: GBP504.4 million or 45% of GAV.)
Long-Term Facilities
As at 30 June 2019, GBP394.1 million of long-term debt facilities were outstanding (including GBP4.8m of nominal revaluation of the inflation-linked facilities).
Inflation linked debt facilities represented GBP89.1 million of the total long-term debt outstanding as at 30 June 2019.
At 30 June 2019, the average cost of long-term debt, was 2.9% per annum (2018: 2.8%), including the cost of the interest inflation linked facilities of 1.29% per annum.
Revolving Credit Facilities
The Company currently holds two separate RCF facilities totalling GBP105 million. The RCFs remained fully drawn during the period.
The GBP40 million RCF facility in place for FS Holdco 1 has been extended for three years and is now due to expire in March 2022. The terms of the new facility offer a more favourable margin, resulting in an ongoing interest expense saving for the Company.
At 30 June 2019, the total annualised cost of the RCFs was 2.8% (2018: 1.7%). The increase in costs compared to 2018 is due to the facilities being fully drawn following the acquisitions completion in 2018.
The Investment Manager expects to refinance the remaining balance either through future equity raisings or other long-term refinancing arrangements.
Debt Facilities
The following table summarises the debt position of the Fund as at 30 June 2019.
Borrower Holding Provider Facility Amount Maturity Applicable Rate Vehicle Type Outstanding (m) ---------- ---------- ------------------------ ------------- --------- ---------------------- FS Holdco Fixed rate, FS Holdco 1 MIDIS fully-amortising GBP62.3 Mar-24 3.78% ------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- MIDIS Inflation GBP62.1 Mar-34 RPI Index1 + linked, fully-amortising 1.08% ------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- Santander Term loan, GBP23.9 Mar-34 LIBOR + 1.70% fully-amortising ------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- Project SPVs FS Holdco RBS Term loan GBP159.2 Sep-19 LIBOR + 1.75% (25 vehicles) 2
------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- Second Generation FS Holdco Fixed rate, Portfolio 1 3 MIDIS fully-amortising GBP4.2 Aug-34 4.40% ------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- Inflation GBP27.0 Aug-34 RPI Index1 + linked, 1.70% fully-amortising ------------------------ ------------- -------------------------------------------------- ---------------------- Foresight Solar FS Holdco CEFC Term loan A$62.0 Jun-27 Base rate (2.95%) Australia Pty 42 + margin (2.55% Ltd to 2.80%) ------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- Longreach Finco CEFC Term loan A$12.0 Mar-22 Base rate + margin Pty Ltd (2.57%) (constr Base rate - 1.55%; (3.28%)3 operation Base rate - 1.40%) (2.58%) Base rate (3.14%)3 ------------------------------ ---------- ------------------------ ------------- -------- ---------- ---------- Longreach Finco MUFG Term loan A$12.0 Mar-22 Pty Ltd ------------------------------ ---------- ------------------------ ------------- -------- ---------- ---------- Oakey 1 Finco CEFC Term loan A$16.1 Mar-22 Pty Ltd ------------------------------ ---------- ------------------------ ------------- -------- Oakey 1 Finco MUFG Term loan A$16.1 Mar-22 Pty Ltd ------------------------------ ---------- ------------------------ ------------- -------- ---------- ---------- Oakey 2 Finco CEFC Term loan A$42.5 Oct-22 Base rate (2.48%) Pty Ltd + 2.25% ------------------------------ ---------- ------------------------ ------------- -------- ---------------------- TOTAL LONG-TERM GBP427.4 DEBT -------------------------------------------------------------------- ------------------------ ---------------------- FS Holdco FS Holdco Santander Revolving GBP40.0 Mar-22 LIBOR + 1.75% 1 credit ------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- FS Debtco FS Holdco Santander Revolving GBP65.0 Feb-20 LIBOR + 2.00% 2 credit ------------------ ---------- ---------- ------------------------ ------------- --------- ---------------------- TOTAL REVOLVING GBP105.0 DEBT -------------------------------------------------------------------- ------------------------ ---------------------- TOTAL DEBT GBP532.4 -------------------------------------------------------------------- ------------------------ ---------------------- 1 RPI-linked facilities 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 repaid total debt of GBP6.3 million.
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 terms of the loans. In Australia, debt facilities entered into 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 of UK debt facilities
Post period end, on 2 August 2019, the Investment Manager successfully completed the refinancing of 28 of the Company's UK assets (321 MW). The debt refinancing totalled GBP245 million, compromising a GBP170 million term loan facility, a GBP65 million RCF and a GBP10 million debt service reserve facility. The refinancing was secured on attractive terms. Although the refinancing was not completed until after the end of the period, due to the material impact of the new terms this has been taken into consideration for the NAV as at 30 June 2019, resulting in an increase in the Company's NAV of GBP17.0 million.
The GBP170 million fully amortising term loan facility will expire in March 2036 and will be provided jointly by Landesbank Hessen-Thüringen Girozentrale ("Helaba") and Sumitomo Mitsui Banking Corporation ("SMBC"). The term loan facility all-in annual cost of debt is approximately 230bps and includes interest rate swaps hedging 100% of the outstanding debt during the term of the loan. The proceeds of the loan facility will be used partially to refinance the asset-level debt facilities expiring in September 2019.
The GBP65 million RCF has a three-year term and will be provided by National Westminster Bank plc ("NatWest"). This facility replaces the existing GBP65 million RCF entered into in 2017.
Based on the Company's 30 June 2019 GAV and following the refinancing, the total outstanding long-term debt of GBP404.9 million represents gearing of approximately 37%. The total outstanding debt including revolving credit facilities of GBP509.9 million represents approximately 46% of GAV.
DIVIDS
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. The Company has met all target dividends since IPO.
DIVID TIMETABLE FOR FY2019
Dividend Amount Status Payment Date ---------- -------- ---------------- Interim 1 1.69 pence Approved 30 August 2019 --------- ---------- -------- ---------------- Interim 2 1.69 pence Approved 29 November 2019 --------- ---------- -------- ---------------- Interim 3 1.69 pence Targeted Q1 2020 --------- ---------- -------- ---------------- Interim 4 1.69 pence Targeted Q2 2020 --------- ---------- -------- ---------------- TOTAL 6.76 pence --------- ---------- -------- ----------------
The first interim dividend of 1.69 pence for the year ending 31 December 2019 will be paid on 30 August 2019.
On 19 August 2019 the Board approved the second interim dividend relating to FY2019 of 1.69 pence per share.
Dividend Timetable - Interim 2 ---------------- Ex-dividend Date 24 October 2019 ------------------------------ ---------------- Record Date 25 October 2019 ------------------------------ ---------------- Payment Date 29 November 2019 ------------------------------ ----------------
Full details of the scrip dividend alternative that is being offered in respect of the Dividend (the "Scrip Offer"), its timetable and the Scrip Dividend Scheme can be found in the Scrip Dividend Alternative Offer Document (the "Scrip Document") available on the Company's website to view and/or download at fsfl.foresightgroup.eu/investor-relations/. The Scrip Document is also available on the National Storage Mechanism website at www.morningstar.co.uk/uk/NSM and copies are also available for inspection at JTC House, 28 Esplanade, St. Helier, Jersey JE2 3QA.
DIVID COVER
Total dividends of GBP18.1 million were paid during the period to 30 June 2019 with GBP35.2 million paid during the 12 months to 30 June 2019. Compared with the relevant net cash flows of the Company and underlying investments, these dividends were covered 1.12 times (30 June 2018: 1.14 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 for an amount equivalent to approximately 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.
Foreign exchange hedging will not be applied to the cost of the equity investments, 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 period to 30 June 2019 was 1.18% (31 December 2018: 1.18%). This has been calculated using methodology as recommended by the Association of Investment Companies ("AIC"). Asset management fees charged by Foresight Group LLP on an arm's length basis at project level are excluded from the ongoing charge ratio.
INVESTMENT PERFORMANCE
The NAV per share as at 30 June 2019 decreased to 109.6 pence compared to 111.2 pence as at 31 December 2018.
MOVEMENTS IN NAV
A breakdown in the movement of the Company's NAV during the reporting period is shown in the table below.
NAV NAV per share ----------- ------------- NAV as at December 2018 GBP610.3m 111.2p ------------------------------------------- ----------- ------------- Dividend paid GBP(18.1)m (3.3)p ------------------------------------------- ----------- ------------- Interest earned GBP22.9m 4.2p ------------------------------------------- ----------- ------------- Management fee GBP(3.1)m (0.6)p ------------------------------------------- ----------- ------------- Finance costs GBP(1.3)m (0.2)p ------------------------------------------- ----------- ------------- Other costs (incl. Corporation Tax) GBP(2.2)m (0.4)p ------------------------------------------- ----------- ------------- Inflation* GBP(2.3)m (0.4)p ------------------------------------------- ----------- ------------- Refinancing Terms* GBP17.0m 3.0p ------------------------------------------- ----------- ------------- PPA Terms* GBP3.7m 0.7p ------------------------------------------- ----------- ------------- Discount Rate* GBP14.7m 2.7p ------------------------------------------- ----------- ------------- Valuation Date* GBP(3.0)m (0.5)p ------------------------------------------- ----------- ------------- Power Curve* GBP(32.4)m (5.9)p ------------------------------------------- ----------- ------------- Large-Scale Generation Certificate ("LGC") Curve* GBP(3.7)m (0.7)p ------------------------------------------- ----------- ------------- Other (incl. FX)* GBP(1.0)m (0.2)p ------------------------------------------- ----------- ------------- NAV as at June 2019 GBP601.5m 109.6p ------------------------------------------- ----------- ------------- * Movement in the valuation of underlying solar assets
VALUATION OF THE PORTFOLIO
The Investment Manager is responsible for providing fair market valuations of the Company's underlying assets to the Board of Directors. The Directors review and approve these valuations following appropriate challenge and examination. Valuations are undertaken quarterly. A broad range of assumptions are used in the valuation models. These assumptions are based on long-term forecasts and are not affected by short-term fluctuations, be it economic or technical.
It is the policy of the Investment Manager to value with reference to Discounted Cash Flows ("DCF") from 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. Occasionally 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 challenge 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
During the period, the Investment Manager undertook a review of the discount rates applied to the valuation of the portfolio. As a result of this analysis, discount rates for the UK portfolio have been reduced by 0.25% in order to bring valuations in line with the expected market pricing for operational assets.
The unlevered discount rate has been reduced from 6.75% to 6.50%. This applies to assets that have been acquired using the RCF facilities of the Company, 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 7.25%. Assets that have debt at SPV level, and are therefore not cross-collateralised, are considered to carry a higher premium of 1.00% and as such are valued using a discount rate of 7.50%.
The discount rate used for UK asset cashflows which have received lease extensions beyond the initial investment period of 25 years is 8.50% for years subsequent, reflecting the merchant risk of the expected cash flows beyond the initial 25-year period.
For the Australian portfolio, operational assets with PPAs in place are valued using an 8.50% discount rate. Assets under construction 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 rates.
The weighted average discount rate across the portfolio is 7.15% compared to 7.30% as at 31 December 2018.
Asset life
The weighted life of the UK portfolio as at 30 June 2019 is 28.4 years (31 December 2018: 28.4 years) from the date of commissioning.
The average useful economic life across 37 of the 50 UK assets goes beyond 25 years, averaging 30.5 years from the date of commissioning. Additional conservative operational and lifecycle costs are incorporated into the extended useful life period.
Assets located in Australia currently assume a useful economic life of 25 years. This assumption is currently under review by the Investment Manager.
DIVIDS PAID
The Company paid dividends of GBP18.1m during the six-month period to 30 June 2019 or 3.38p per share.
INTEREST EARNED
The Company and its subsidiaries accrued GBP22.9 million of investment income during the period. This is the interest accrued on shareholder loans.
COSTS
Total costs of GBP6.6 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 period.
INFLATION
The Company continues to use 2.75% as its medium/long-term inflation assumption. As at 30 June 2019, the valuation models reflect Office for Budget Responsibility ("OBR") RPI forecasts for the periods 2019, 2020 and 2021 of 2.95%, 2.77% and 3.02% respectively. The Company's RPI assumption adopted for subsequent years has remained unchanged at 2.75%.
REFINANCING TERMS
This movement reflects the updated debt terms secured in the post-period refinancing of UK debt facilities. The positive movement results from the margins and LIBOR swap rates of the new facilities being lower than the refinancing assumptions made at the time of acquisition.
PPA TERMS
On 1 April 2019, new PPA contracts across 22 assets representing 179MW were entered for a period of 10 years. The new contracts resulted in an average increase in pass-through rates at which ROCs and power are sold of 1.43% and 0.5%, respectively, against the previous PPAs.
DISCOUNT RATE
As reported above, the Company's UK discount rates have been reduced by 0.25% for unlevered and levered assets.
During the period, Oakey 1 and Bannerton have reached full export and have been revalued using a discount rate methodology, applying an 8.5.% discount rate for operational assets with PPA arrangements in place.
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.
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).
POWER CURVE
The Company 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 period there was a downward movement of 3.8% in the medium to long-term power price forecast for the UK market. The Company's forecasts continue to assume an increase in power prices in real terms over the medium to long-term of 0.4% per annum (31 December 2018: 0.6%).
Movements during the period also include the impact of revaluing Bannerton using a discount rate methodology and consequent update of the Victoria power price curve against the assumption made at the time of acquisition, resulting in a negative impact on the asset valuation. The impact for Oakey 1 was negligible.
Large-scale Generation Certificates ("LGC") CURVE
The Company uses forward looking LGC price assumptions to assess the likely future income of the certificates generated by the Australian 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.
OTHER MOVEMENTS
This includes other factors behind the valuation movements, including long term O&M cost assumptions, insurance premiums and changes in exchange rate 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 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 UK has more than 13GW of solar PV installed capacity however the market has demonstrated only marginal growth since the closure of the RO Scheme in 2016. As a result, investment opportunities in the UK subsidised market continue to be limited as the ongoing consolidation in the secondary market is compressing returns to levels that do not meet the minimum requirements of the Company.
We continue to review international investment opportunities in markets that benefit from regulatory support. However, European markets are also showing signs of increased consolidation and inflated asset valuations at present. This trend is expected to continue in European markets as competition for assets increase as a result of new entrants with lower target yield requirements and as the introduction of new subsidies is expected to be limited over time.
The announcement of the UK's intention to commit to a net zero emissions target by 2050 was a positive development for the renewable industry and although it did not address the solar industry directly it is expected to create a supportive environment for the future growth of installed capacity, at a time when the solar levelised cost of energy continues on a downwards trajectory. This is expected to act as a catalyst for subsidy-free investment opportunities.
We continue to review the Australian market and are closely monitoring the development of subsidy-free markets in Southern Europe and the UK. In Southern Europe, this market has developed rapidly and a number of relevant transactions have recently been announced in Spain and Portugal with attractive PPA structures. In the UK, whilst this market has progressed, we remain of the view that the current market economics are not yet in-line with the Company's return requirements. However, we expect this market to develop rapidly and it therefore could present significant opportunity in the future.
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.
In recent periods we have identified and delivered on a significant number of optimisation initiatives that have created additional value for the Company, including the post-period completion of the GBP245 million refinancing and the PPA re-tender finalised in April 2019. We will continue to explore value enhancement initiatives across the portfolio, including the Australian assets, as the consolidation of the existing portfolio progresses and new technical, commercial and financial solutions are identified.
Asset Manager's Report
The Asset Management services provided ensure the day to day operation of the sites is robust with sound operational and commercial decisions. The comprehensive list of services includes:
-- Technical and financial performance monitoring -- Contractual compliance of all operational agreements -- Portfolio optimisation including renegotiation of project contracts, spare parts management and equipment replacement strategy and technology improvements -- Liaising with and oversight of O&M counterparties -- Debt reporting and other debt compliance services -- Accounting, bookkeeping, tax compliance and statutory reporting of all SPVs -- Corporate governance activities including health and safety compliance.
Portfolio Performance
The operational performance during the period has been robust with electricity generation 2.9% above base case, when adjusted for compensation received. Performance has been driven by irradiation 3.1% above base case.
The portfolio has benefited from previous remedial works to specific sites and optimisation initiatives to improve the reliability of the assets in general. In addition, the Asset Manager has continued to pro-actively engage with service providers including Distribution Network Operators ("DNOs") and Operation and Maintenance ("O&M") contractors and sub-contractors. The Asset Manager believes this will result in improved optimisation of 'planned' outages and a reduction in unplanned outages.
The use of real-time data at asset level, together with closely working with O&M providers, is expected to reduce downtime, improve efficiency in the short term and build a greater understanding of the replacement of key components. It is also expected to help with warranty management down to string, solar panel level or inverter performance level thereby optimising output while minimising the total operating cost base.
Incidents affecting the UK portfolio during the period were mainly caused by grid outages (Fields Farm, Welbeck) and equipment failures that have been promptly rectified during the period, as was the case with Wymeswold which was affected by faults on string cables and inverter issues.
During the period, in Australia, two additional assets reached full export capacity, Bannerton and Oakey 1. The projects have previously experienced construction and commissioning delays due to the new grid commissioning requirements introduced by AEMO in 2018 and as a result of EPC contractor RCR Tomlinson ("RCR") going into administration in November 2018, particularly in the case of Oakey 1. The delays in commissioning are not expected to have a material impact on overall financial performance as the Company is contractually and financially protected and the Company will continue to enforce all its contractual rights.
Longreach continues to experience some limited levels of grid curtailment caused by export constraints at one of the local substations. A solution to the curtailment issue is being discussed with the local DNO and is expected to be implemented in 2020.
ASSETS UNDER CONSTRUCTION
Oakey 2 achieved initial export in April 2019 as part of staged commissioning process in the Australian market. The project is expected to begin full commissioning in the second half of 2019.
PRODUCTION
The production figures below have been adjusted, where relevant, for events where compensation has been, or will be, received.
MW Total Production Production Irradiation (kWh) Variance Variance ----- ---------------- ---------- ----------- Abbey Fields 4.9 2,858,791 5.5% 5.3% ------------------ ----- ---------------- ---------- ----------- Abergelli 7.7 3,958,282 -1.6% -2.2% ------------------ ----- ---------------- ---------- ----------- Atherstone 14.8 7,665,666 5.9% 6.6% ------------------ ----- ---------------- ---------- ----------- Bilsthorpe 5.7 3,051,355 6.0% 8.8% ------------------ ----- ---------------- ---------- ----------- Bournemouth 37.3 21,618,620 3.2% -2.4% ------------------ ----- ---------------- ---------- ----------- Bulls Head 5.5 2,972,019 8.5% 7.7% ------------------ ----- ---------------- ---------- ----------- Castle Eaton 17.8 9,474,475 9.7% 4.4% ------------------ ----- ---------------- ---------- ----------- Coombeshead 9.8 5,470,793 0.3% 1.0% ------------------ ----- ---------------- ---------- ----------- Copley 30.0 16,345,528 9.4% 5.8% ------------------ ----- ---------------- ---------- ----------- Crow Trees 4.7 2,517,206 9.6% 8.6% ------------------ ----- ---------------- ---------- ----------- Cuckoo Grove 6.1 3,395,399 -9.7% -5.7% ------------------ ----- ---------------- ---------- ----------- Field House 6.4 3,467,484 1.0% 0.7% ------------------ ----- ---------------- ---------- ----------- Fields Farm 5.0 2,005,628 -20.1% 5.1%
------------------ ----- ---------------- ---------- ----------- Gedling 5.7 3,038,120 8.0% 8.6% ------------------ ----- ---------------- ---------- ----------- High Penn 9.6 5,094,344 4.0% -4.2% ------------------ ----- ---------------- ---------- ----------- Highfields 12.2 5,991,541 0.2% 3.6% ------------------ ----- ---------------- ---------- ----------- Homeland 13.2 7,225,856 -4.3% -4.9% ------------------ ----- ---------------- ---------- ----------- Hunters Race 10.3 5,917,826 4.0% 1.9% ------------------ ----- ---------------- ---------- ----------- Kencot Hill 37.2 20,204,496 6.3% 4.7% ------------------ ----- ---------------- ---------- ----------- Landmead 45.9 23,869,171 5.1% 8.2% ------------------ ----- ---------------- ---------- ----------- Lindridge 4.9 2,694,682 7.1% 3.2% ------------------ ----- ---------------- ---------- ----------- Longreach 17.3 16,810,431 -7.1% 3.4% ------------------ ----- ---------------- ---------- ----------- Manor Farm 14.2 7,275,845 9.7% 7.3% ------------------ ----- ---------------- ---------- ----------- Marsh Farm 9.1 4,964,413 -0.1% 0.9% ------------------ ----- ---------------- ---------- ----------- Membury 16.5 8,690,608 2.8% 1.0% ------------------ ----- ---------------- ---------- ----------- Misson 5.0 2,724,775 6.8% 3.2% ------------------ ----- ---------------- ---------- ----------- Nowhere 8.1 4,685,693 10.3% 10.1% ------------------ ----- ---------------- ---------- ----------- Paddock Wood 9.2 5,115,386 5.0% 1.8% ------------------ ----- ---------------- ---------- ----------- Park Farm 13.2 7,116,383 12.4% 6.1% ------------------ ----- ---------------- ---------- ----------- Pen Y Cae 6.8 3,417,142 -2.7% -1.6% ------------------ ----- ---------------- ---------- ----------- Pitworthy 15.6 7,736,037 -0.4% -0.9% ------------------ ----- ---------------- ---------- ----------- Playters 8.6 4,711,475 1.6% 4.4% ------------------ ----- ---------------- ---------- ----------- Port Farm 34.7 18,838,830 6.1% 2.6% ------------------ ----- ---------------- ---------- ----------- Roskrow 8.9 4,672,968 -5.7% -2.6% ------------------ ----- ---------------- ---------- ----------- Sandridge 49.6 25,691,297 -0.4% 1.5% ------------------ ----- ---------------- ---------- ----------- Sawmills 6.6 3,548,373 -1.3% -2.0% ------------------ ----- ---------------- ---------- ----------- Sheepbridge 5.0 2,755,980 11.1% 11.2% ------------------ ----- ---------------- ---------- ----------- Shotwick 72.2 36,378,464 3.1% 2.8% ------------------ ----- ---------------- ---------- ----------- Southam 10.3 5,433,151 5.3% 4.1% ------------------ ----- ---------------- ---------- ----------- Spriggs 12.0 6,596,490 6.8% 0.5% ------------------ ----- ---------------- ---------- ----------- Steventon 10.0 5,380,741 1.5% 5.5% ------------------ ----- ---------------- ---------- ----------- SV Ash 8.4 4,464,156 7.1% 4.0% ------------------ ----- ---------------- ---------- ----------- Tengore 3.6 1,931,979 2.0% 0.7% ------------------ ----- ---------------- ---------- ----------- Trehawke 10.6 5,997,694 2.4% 2.4% ------------------ ----- ---------------- ---------- ----------- Upper Huntingford 7.7 3,929,512 -0.1% 0.3% ------------------ ----- ---------------- ---------- ----------- Verwood 20.7 11,351,409 1.8% 0.8% ------------------ ----- ---------------- ---------- ----------- Wally Corner 5.0 2,819,692 6.9% 5.0% ------------------ ----- ---------------- ---------- ----------- Welbeck 11.3 5,653,498 -1.1% 8.8% ------------------ ----- ---------------- ---------- ----------- Wymeswold 34.5 16,852,756 0.6% 7.9% ------------------ ----- ---------------- ---------- ----------- Yarburgh 8.1 4,524,994 6.3% 8.0% ------------------ ----- ---------------- ---------- ----------- Yardwall 3.0 1,718,255 0.9% 0.1% ------------------ ----- ---------------- ---------- ----------- Total 740.4 400,625,711 ------------------ ----- ---------------- ---------- ----------- Weighted Total 2.9% 3.1% ------------------ ----- ---------------- ---------- -----------
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 its asset management operations. The following is a review of recent activities undertaken by the Company in terms of environmental stewardship, social engagement and good governance.
As mentioned in the Company's 2018 Annual Report, Foresight Group's Infrastructure team has refined 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 Group's activities. This resulted in the implementation of its Sustainable Investing in Infrastructure strategy, which focuses on ensuring all assets are evaluated prior to acquisition and throughout their ownership, in accordance with Foresight Group's Sustainability Evaluation Criteria. Based on the key metrics this exercise provides, the Company is able to report against the United Nations Sustainable Development Goals ("SDGs"). The SDGs represent a call to action for all UN member states to promote prosperity while protecting the environment. Of the SDGs, the Company contributes most significantly to the following:
CONTRIBUTION TO SUSTAINABLE DEVELOPMENT GOALS --------------------------------------------------------------------------- Goal 3: "Good Health and Well-Being. Ensure healthy lives and promote well-being for all at all ages." Achieved through the reduction of pollution and emitted greenhouse gases ("GHGs") by the installation and management of clean, low-carbon energy generation assets. --------------------------------------------------------------------------- Goal 7: "Affordable and Clean Energy. Ensure access to affordable, reliable, sustainable and modern energy." Achieved by driving a reduced reliance on fossil fuels by investment in utility-scale, renewable energy generation assets. --------------------------------------------------------------------------- Goal 9: "Industry, Innovation and Infrastructure. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation." Achieved by future-proofing energy systems through investment in de-centralised, interconnected generation assets, using the latest technologies to maximise electrical output. --------------------------------------------------------------------------- Goal 13: "Climate Action. Take urgent action to combat climate change and its impacts." Achieved by demonstrating commitment to the 2015 Paris Agreement and contributing to the globally supported decarbonisation agenda through investment in low-carbon, renewable energy assets. --------------------------------------------------------------------------- Goal 15: "Life on Land. Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss." Achieved by preserving the integrity of land through investment in low-impact and low-polluting technologies and introducing environmental initiatives through active asset management, supporting biodiversity and the ecosystem.
There are five central themes to Foresight Group's Sustainability Evaluation Criteria. The Company's adherence, and contribution, to these themes is assessed below.
1. SUSTAINABLE DEVELOPMENT CONTRIBUTION
This theme supports reporting on the development of affordable and clean energy, improved resource and energy efficiency and contributions to the fight against climate change. In H1 2019, the Company's 740MW operational portfolio produced over 400GWh of renewable energy. Furthermore, using Ofgem's assessment that the average UK household consumes 3.1 MWh per year, it can be inferred that the Company's portfolio generated enough clean electricity to power c. 130,000 UK homes during the period.
2. ENVIRONMENTAL FOOTPRINT
Each asset is closely monitored for its localised environmental impact. As such, this criterion assesses potential environmental impacts such as emissions to air, land and water, effects on biodiversity and noise and light pollution. 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.
As a working partner of the Solar Trade Association, the Asset Manager recently helped to co-author the organisation's report, The Natural Capital Value of Solar (June 2019), which is available to download at:
https://www.solar-trade.org.uk/wp-content/uploads/2019/06/The-Natural-Capital-Value-of-Solar.pdf. In this report, Foresight Group highlights the importance of wetlands, drainage and on-site water management at solar sites, and the associated benefits such as the reduction of both nitrogen loads and intermittent pesticide fluxes on surrounding land, with the added positive effect of enhanced ease of access for O&M contractors and a resultant lower susceptibility to long-term land damage.
Furthermore, the Asset Manager's Environment and Sustainability Manager, James Jenkison, has continued to pursue 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 35km of hedgerows have been planted across the portfolio. With the majority of hedgerow planting now complete, the hedgerows are managed to ensure they develop into dense species-rich habitats. Hedgerows help to promote biodiversity, absorb carbon, improve both drainage and soil quality and reduce site exposure to extreme weather conditions. -- Hedgerows are managed in the winter months every second year to ensure that hedges and trees can flower and produce berries as forage for insects, birds and other wildlife, whilst also being managed to maintain good structure and diversity in accordance with best practice guidance. -- Building of animal refuges - Hibernacula and log piles are built at most sites to provide natural shelter as well as to 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 continues to work with local bee keepers to install hives as a means of helping to restore the native bee population and support crop pollination and honey production. The Asset Manager also 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 and land drains, swales and ponds are also maintained to ensure safe working conditions and good soil condition which further promotes diverse grass and wildflower growth. -- Grassland management - A grassland cutting timetable is being implemented to limit cutting in the Summer so as to promote the growth, flowering and seed spreading of wildflowers to encourage biodiversity and forage for insects and birds. 3. SOCIAL ENGAGEMENT
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 understand the Asset Manager's expectations of site management and to discuss areas of improvement in management techniques. To date, over 67 site visits have been conducted by the Environment and Sustainability Manager. -- Community investment - The Company supports community benefit schemes which assist local authorities in developing and maintaining community assets and organisations. In the six-month period to 30 June 2019, over GBP80k worth of grants were provided to local communities throughout the UK, bringing the total grants provided to date to GBP225k. Further details of the community projects that have benefitted from these funds will be provided in the 2019 Annual Report. -- Educational initiatives - A large part of generating public support comes as a result of educational initiatives, which help to promote an understanding, and appreciation of, the benefit of solar power generation. To date in 2019, college tours have been undertaken at Gedling, Southam and Wymeswold where students and staff were able to witness first-hand the operational aspects of a solar farm and the steps taken to maximise operational efficiency and environmental stewardship. -- Health and well-being - The management and monitoring of Health and Safety ("H&S") onsite is a top priority for the O&M contractor, which 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 independent professionally accredited H&S consultants. Consultants ensure that contractors are appointed on the basis of their health and safety competence and regularly visit the sites to ensure they are meeting industry and legal standards. 4. GOVERNANCE
The Asset Manager actively reviews the regulatory and property consents of every solar asset to ensure compliance with the permissions and conditions attached and actively engages with local government organisations to ensure ongoing compliance. In addition to ensuring the Company is protected from potential legal action, this promotes trust with the sites' local communities.
Compliance
Integral to the maintenance of the Company's reputation is its regulatory compliance and adherence to relevant laws. The Company is committed to carrying out business fairly, honestly and openly and the Investment Manager has established policies and procedures to prevent bribery within its organisation. The Company has also committed to a policy to conduct all its business in an honest and ethical manner, taking a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country.
As a means of ensuring that sustainability considerations are at the forefront of the investment process, the Investment Manager delivers Best Practice sessions to its staff. These sessions focus on how the sustainability performance of a given asset can be assessed, measured and improved, whilst also demonstrating how good ESG management can result in a financial upside.
5. Third Party Interactions
Counterparty due diligence forms an essential part of ensuring that key counterparties are reputable, that they have a robust and sustainable supply chain and have a similarly aligned approach to governance, compliance and ESG as the Company, which must be evidenced by appropriate policies. Consequently, two initiatives are being undertaken by the Company to further enhance these processes with a view to improving overall asset performance and protecting the Company against reputational risk.
-- Enhanced supplier and counterparty checks - The Company now contracts out due diligence to an expert third party. Using this highly specialised legal advisory and consultancy firm allows for a greater depth of analysis to be conducted in a shorter space of time, thus speeding up the acquisition process and giving a higher degree of assurance that the counterparties involved are both legally and financially sound. -- Active Supplier Engagement - A more formalised approach to supplier engagement on the topic of ESG is being developed, with the aim of encouraging more sustainable practices in the operation and maintenance of the solar sites.
While the Company actively tracks data pertaining to the above criteria on an internal basis, it also seeks external validation of its performance through third party organisations:
-- GRESB (Global Real Estate Sustainability Benchmark) - The Company submitted the Southam Solar Farm to the GRESB Infrastructure ESG Assessment in 2018, believing this particular asset was representative of the portfolio as a whole. For consistency it has also been resubmitted for the 2019 assessment year. As a means of further demonstrating our commitment to external validation, the Investment Manager is currently reviewing options for assessing the Company as a whole, one of which is the GRESB Infrastructure ESG Fund Assessment. The results of our 2018 GRESB Infrastructure ESG Assessment are below. The results of the 2019 submission are due to be released in September 2019 and will be published in the 2019 Annual report:
Module 2018 Score Peer Average ---------- ------------ Environment 61/100 52/100 ------------ ---------- ------------ Social 71/100 60/100 ------------ ---------- ------------ Governance 47/100 46/100 ------------ ---------- ------------ -- PRI (Principles for Responsible Investment) - The Investment Manager has been a signatory to the United Nations-backed PRI since 2013. The PRI is a globally recognised voluntary framework concerned with the incorporation of ESG considerations into the investment decision making process. As a signatory, the Investment Manager reports annually on its responsible investment activities by responding to asset-specific modules in the PRI's Reporting Framework. In its recent 2019 assessment, the Investment Manager achieved an A+ level rating for 'Strategy and Governance', the highest possible rating, surpassing the peer average (A). An A rating was achieved in the 'Infrastructure' module, with scoring improving by four points to 27 out of 30, up from 23 points awarded in 2018. The Investment Manager's approach to post-investment monitoring and active ownership of ESG within the asset class contributed to the higher score. -- PRI (Principles for Responsible Investment) - The Investment Manager has been a signatory to the United Nations-backed PRI since 2013. The PRI is a globally recognised voluntary framework concerned with the incorporation of ESG considerations into the investment decision making process. As a signatory, the Investment Manager reports annually on its responsible investment activities by responding to asset-specific modules in the PRI's Reporting Framework. In its recent 2019 assessment, the Investment Manager achieved an A+ level rating for 'Strategy and Governance', the highest possible rating, surpassing the peer average (A). An A rating was achieved in the 'Infrastructure' module, with scoring improving by four points to 27 out of 30, up from 23 points awarded in 2018. The Investment Manager's approach to post-investment monitoring and active ownership of ESG within the asset class contributed to the higher score. Module 2019 Score Peer Average ---------- ------------ Strategy and Governance 29/30 (A+) A ----------------------- ---------- ------------ Infrastructure 27/30 (A) A ----------------------- ---------- ------------
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 Company's Directors.
The Directors consider the following as the principal risks and uncertainties to the Company at this time:
-- Risks relating to the sale of electricity -- Risks relating to regulatory changes to subsidy schemes -- Risks relating to gearing -- Risks relating to RPI -- Risks relating to marginal loss factors applicable to the Australian assets -- Risks relating to the construction of solar PV assets -- Risks relating to exchange rate
More detailed information on the risks and uncertainties affecting the Company can be found on pages 19-37 of the Company's most recent Prospectus issued on 3 March 2017 and the Risk Management section in the Company's latest Full Year Results Report for the year ended 31 December 2018.
Statement of Directors' Responsibilities
For the period 1 January 2019 to 30 June 2019
The Disclosure Guidance and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Unaudited Half-Yearly Financial Report for the six months ended 30 June 2019.
The Directors confirm to the best of their knowledge that:
(a) the summarised set of financial statements has been prepared in accordance with the pronouncement on interim reporting issued by the Accounting Standards Board;
(b) the Unaudited Half-Yearly Financial Report for the six months ended 30 June 2019 includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months of the year and a description of principal risks and uncertainties that the Company faces for the remaining six months of the year);
(c) the summarised set of financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4R; and
(d) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
Alexander Ohlsson
Chairman
For and on behalf of Foresight Solar Fund Limited
22 August 2019
Asset Summaries
UNITED KINGDOM
Wymeswold, Leicestershire Castle Eaton, Wiltshire ROCs 2.0/1.4 ROCs 1.6 Acquisition Date Acquisition Date November '13 / March '15 June '14 Highfields, Essex High Penn, Wiltshire ROCs 1.6 ROCs 1.6 Acquisition Date Acquisition Date June '14 June '14 Pitworthy, North Devon Hunters Race, West Sussex ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date June '14 September '14 Spriggs Farm, Essex Bournemouth, Dorset ROCs 1.6 ROCs 1.4 Acquisition Date Acquisition Date November '14 December '14 Landmead, Oxfordshire Kencot, Oxfordshire ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date December '14 March '15 Copley, Lincolnshire Atherstone, Warwickshire ROCs 1.3 ROCs 1.4 Acquisition Date Acquisition Date June '15 July '15 Paddock Wood, Kent Southam, Warwickshire ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date July '15 July '15 Port Farm, Wiltshire Membury, Berkshire ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date August '15 September '15 Shotwick, Flintshire Sandridge, Wiltshire ROCs 1.3 ROCs 1.3 Acquisition Date Acquisition Date February '17 February '17 Wally Corner, South Oxfordshire Coombeshead, Devon ROCs 1.2 ROCs 1.4 Acquisition Date Acquisition Date July '17 April '18 Park Farm, Leicestershire Sawmills, Devon ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date April '18 April '18 Verwood, Dorset Yardwall, Somerset ROCs 1.4 FiT Acquisition Date Acquisition Date April '18 April '18 Abergelli, Swansea Crow Trees, Nottinghamshire ROCs 1.4 ROCs 1.3 Acquisition Date Acquisition Date August '18 August '18 Cuckoo Grove, Pembrokeshire Field House, Hampshire ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date August '18 August '18 Fields Farm, Warwickshire Gedling, Nottinghamshire ROCs 1.3 ROCs 1.4 Acquisition Date Acquisition Date August '18 August '18 Homeland, Dorset Marsh Farm, Wiltshire ROCs 1.6 ROCs 1.4 Acquisition Date Acquisition Date August '18 August '18 Sheepbridge, Berkshire Steventon, Oxfordshire ROCs 1.3 ROCs 1.4 Acquisition Date Acquisition Date August '18 August '18 Tengore, Somerset Trehawke, Cornwall ROCs 1.4 ROCs 1.6 Acquisition Date Acquisition Date August '18 August '18 Upper Huntingford, Gloucestershire Welbeck, Nottinghamshire ROCs 1.3 ROCs 1.4 Acquisition Date Acquisition Date August '18 August '18 Yarburgh, Lincolnshire Abbey Fields, Kent ROCs 1.3 ROCs 1.3 Acquisition Date Acquisition Date August '18 November '18 SV Ash, Shropshire Bilsthorpe, Nottinghamshire ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date November '18 November '18 Bulls Head, Buckinghamshire Lindridge, Leicestershire ROCs 1.4 ROCs 1.3
Acquisition Date Acquisition Date November '18 November '18 Manor Farm, Bedfordshire Misson, Nottinghamshire ROCs 1.3 ROCs 1.3 Acquisition Date Acquisition Date November '18 November '18 Nowhere, Lincolnshire Pen Y Cae, Camarthenshire ROCs 1.4 ROCs 1.4 Acquisition Date Acquisition Date November '18 November '18 Playters, Suffolk Roskrow, Cornwall ROCs 1.3 ROCs 1.4 Acquisition Date Acquisition Date November '18 November '18
AUSTRALIA
Bannerton, Victoria Longreach, Queenstand LGC accredited LGC accredited Acquisition Date Acquisition Date September '17 October '17 Oakey 1, Queensland Oakey 2, Queensland LGC eligible LGC eligible Acquisition Date Acquisition Date October '17 October '17
Statement of Comprehensive Income
For the period 1 January 2019 to 30 June 2019
Unaudited Unaudited Period Period 1 January 2019 1 January 2018 Audited year 1 January 2018 to 31 to 30 June 2019 to 30 June 2018 December 2018 Notes GBP'000 GBP'000 GBP'000 Revenue Interest income 4 19,698 18,322 36,817 (Loss) / Gain on investments at fair value through profit or loss 14 (6,972) (9,542) 25,311 ---------------- ---------------- ----------------------------------- 12,726 8,780 62,128 ---------------- ---------------- ----------------------------------- Expenditure Management fees 5 (2,972) (2,299) (5,106) Administration and accountancy expenses 6 (83) (84) (203) Directors' fees 7 (85) (85) (170) Other expenses 8 (189) (267) (643) ---------------- ---------------- ----------------------------------- Total expenditure (3,329) (2,735) (6,122) ---------------- ---------------- ----------------------------------- Profit before tax for the period/year 9,397 6,045 56,006 Taxation - - - ---------------- ---------------- ----------------------------------- Profit for the period/year 9,397 6,045 56,006 Other comprehensive income - - - ---------------- ---------------- ----------------------------------- Profit and total comprehensive income for the period/year 9,397 6,045 56,006 ---------------- ---------------- ----------------------------------- Earnings per Ordinary Share (pence per Share) 9 1.71 1.34 11.60
All items above arise from continuing operations, there have been no discontinued operations during the period.
The accompanying notes on pages 46 to 80 form an integral part of these Financial Statements.
Statement of Financial Position
As at 30 June 2019
Unaudited Unaudited Audited 30 June 30 June 31 December 2019 2018 2018 Notes GBP'000 GBP'000 GBP'000 Assets Non-current assets Investments held at fair value through profit or loss 14 523,215 403,422 530,187 --------- --------- ------------ Total non-current assets 523,215 403,422 530,187 Current assets Interest receivable 10 74,190 68,948 69,338 Trade and other receivables 11 258 1,926 265 Cash and cash equivalents 12 5,710 180 12,282 --------- --------- ------------ Total current assets 80,158 71,054 81,885 --------- --------- ------------ Total assets 603,373 474,476 612,072 --------- --------- ------------ Equity Retained earnings 42,742 18,619 51,460 Stated capital 18 558,798 454,515 558,798 --------- --------- ------------ Total equity 601,540 473,134 610,258 --------- --------- ------------ Liabilities Current liabilities Trade and other payables 13 1,833 1,342 1,814 --------- --------- ------------ Total current liabilities 1,833 1,342 1,814 Total liabilities 1,833 1,342 1,814 --------- --------- ------------ Total equity and liabilities 603,373 474,476 612,072 --------- --------- ------------ Net Asset Value per Ordinary Share 19 109.6 105.2 111.2
The Financial Statements on pages 42 to 80 were approved by the Board of Directors and signed on its behalf on 21 August 2019 by:
Chairman
The accompanying notes on pages 46 to 80 form an integral part of these Financial Statements.
Statement of Changes in Equity
For the period 1 January 2019 to 30 June 2019
Stated Capital Retained Earnings Total Notes GBP'000 GBP'000 GBP'000 Balance as at 1 January 2019 (unaudited) 558,798 51,460 610,258 Total comprehensive income for the period: Profit for the period - 9,397 9,397 Transactions with owners, recognised directly in equity: Dividends paid in the period 22 - (18,115) (18,115) -------------- ----------------- -------- Balance as at 30 June 2019 558,798 42,742 601,540 -------------- ----------------- --------
For the period 1 January 2018 to 30 June 2018 (unaudited)
Stated Capital 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 period: Profit for the period - 6,045 6,045 Transactions with owners, recognised directly in equity: Dividends paid in the period 22 - (14,219) (14,219) -------------- ----------------- -------- Balance as at 30 June 2018 454,515 18,619 473,134 -------------- ----------------- --------
For the period 1 January 2018 to 31 December 2018 (audited)
Stated Capital 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 Issue costs 18 (1,906) - (1,906) -------------- ----------------- -------- Balance as at 31 December 2018 558,798 51,460 610,258
-------------- ----------------- --------
The accompanying notes on pages 46 to 80 form an integral part of these Financial Statements.
Statement of Cash Flows
For the period 1 January 2019 to 30 June 2019
Unaudited Period Unaudited Audited 1 January Period year 2019 1 January 2018 1 January 2018 to 30 June to 30 June to 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Profit for the period after tax from continuing operations 9,397 6,045 56,006 Adjustments for: Unrealised loss/(gain) on investments 6,972 9,542 (25,311) Investment income (19,698) (18,322) (36,817) Finance costs - - 1 ----------- --------------- --------------- Operating cash flows (3,329) (2,735) (6,121) Decrease in trade and other receivables 7 7 1,668 (Decrease)/Increase in trade and other payables 19 (42) 430 ----------- --------------- --------------- Net cash outflow from operating activities (3,303) (2,770) (4,023) ----------- --------------- --------------- Investing activities Increase in shareholder loan to/from subsidiary - (4,500) (95,206) Investment income received 14,846 7,000 23,898 ----------- --------------- --------------- Net cash inflow/(outflow) from investing activities 14,846 2,500 (71,308) ----------- --------------- --------------- Financing activities Dividends paid (18,115) (14,219) (31,339) Issue costs paid - - (1,906) Proceeds from issue of shares - - 106,189 ----------- --------------- --------------- Net cash (outflow)/inflow from financing activities (18,115) (14,219) 72,944 ----------- --------------- --------------- Net decrease in cash and cash equivalents (6,572) (14,489) (2,387) Cash and cash equivalents at the beginning of the period 12,282 14,669 14,669 ----------- --------------- --------------- Cash and cash equivalents at the end of the period 5,710 180 12,282 ----------- --------------- ---------------
The accompanying notes on pages 46 to 80 form an integral part of these Financial Statements.
Notes to the Financial Statements
For the year ended 30 June 2019
1. Company information
Foresight Solar Fund Limited (the "Company") is a closed-ended company with an indefinite life and was incorporated in Jersey under the Companies Law (Jersey) 1991, as amended, on 13 August 2013, with registered number 113721. The address of the registered office is: 28 Esplanade, St Helier, Jersey, JE4 2QP.
The Company has one investment, Foresight Solar (UK Hold Co) Limited ("UK Hold Co"). 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 Debtco Limited ("FS Debtco"). FS Holdco, FS Holdco 2, 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 Unaudited Interim Financial Statements (the "Interim Financial Statements") for the period 1 January 2019 to 30 June 2019 have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ("IAS 34").
The Interim Financial Statements do not include all the information and disclosures required in the annual Financial Statements and should be read in conjunction with the annual Financial Statements as at 31 December 2018.
These are not statutory accounts in accordance with Article 105 of the Companies Law (Jersey) 1991, as amended and the financial information for the period ended 30 June 2019 and 30 June 2018 has been neither audited nor formally reviewed. Statutory accounts in respect of the period to 31 December 2018 have been audited and reported on by the Company's auditors and delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under Article 113B (3) or 113B (6) of the Companies Law (Jersey) 1991. No statutory accounts in respect of any period after 31 December 2018 have been reported on by the Company's auditors or delivered to the Registrar of Companies.
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 Interim Financial Statements together with the Company's borrowing facilities. These projections show that the Company will be able to meet its liabilities as they fall due.
The Directors have therefore prepared the Interim Financial Statements on a going concern basis.
2.3 Changes in accounting policies and disclosures
New and revised IFRSs adopted by the Company
Management have assessed all new standards and amendments to standards and interpretations are effective for annual periods after 1 January 2019 and have deemed none of them to be applicable to the Fund.
New and revised IFRSs in issue but not yet effective
There are no standards, amendments or interpretations in issue at the reporting date which are effective after 1 January 2019 that are deemed to be material to the Fund.
2.4 Consolidation
Associates
Associates are entities over which the Company has significant influence, being the power to participate in the financial and operating policy decisions of the investee (but not control or joint control).
Subsidiaries
All subsidiaries are entities over which the Company has control. The Company controls an entity when the Company is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Investment Entity
Qualifying entities that meet the definition of an investment entity are not required to produce a consolidated set of Financial Statements and instead account for subsidiaries at fair value through profit or loss.
The defined criteria of an 'investment entity' are as follows:
-- It holds more than one investment; -- It has more than one investor; -- It has investors that are not related parties to the entity; and -- It has ownership interests in the form of equity or similar interests.
However, the absence of one or more of these characteristics does not prevent the entity from qualifying as an 'investment entity', provided all other characteristics are met and the entity otherwise meets the definition of an 'investment entity':
-- It obtains funds from one or more investors for the purpose of providing those investor(s) with professional investment management services; -- It commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and -- It measures and evaluates the performance of substantially all of its investments on a fair value basis.
As discussed in note 1, the Company has one direct subsidiary, a 100% controlling interest in UK Hold Co and a number of indirect subsidiaries 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 diverse investment portfolio which will fill the criteria of having more than one investment. Therefore, the Company qualifies as an 'investment entity'.
As UK Hold Co is not consolidated, its subsidiaries (plus their underlying investments) are not separately presented at fair value through profit or loss in the Company's accounts. However accounting standards require that if an investment entity is the parent of another investment entity, the parent shall also provide the additional disclosures required by IFRS 12 Interest in unconsolidated subsidiaries. These disclosures are set out in notes 16 and 17.
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 models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. Models use observable data, to the extent practicable. However, they also rely on significant unobservable inputs about the output of the asset (including assumptions such as solar irradiation and technological performance of the asset), power prices, operating costs, discount and inflation rates applied to the cash flows, and the duration of the useful economic life of the asset. Furthermore, changes in these inputs and assumptions could affect the reported fair value of financial instruments. The determination of what constitutes 'observable' requires significant judgement by the 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 30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Bank interest income - - 1 Interest on loan notes 17,203 16,751 33,172 Interest on shareholder loans 2,495 1,571 3,644 -------- -------- ----------- 19,698 18,322 36,817 -------- -------- -----------
Loan notes were issued by the Company to UK Hold Co for the purchase of investments. Interest is payable 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 the 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 period end on which interest is charged is GBP250,000,000 (30 June 2018: GBP250,000,000, 31 December 2018: 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 is accrued at 2% per annum and is repayable in full on demand. The shareholder loan balance at period end is GBP158,609,725 (30 June 2018: GBP158,609,725, 31 December 2018: GBP158,609,725). These loans form part of the fair value of the investments as per note 14.
During the prior 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 period ended 30 June 2019, the Investment Manager was entitled to a management fee of GBP2,971,549 (1 January 2018 to 30 June 2018: GBP2,299,044, 1 January 2018 to 31 December 2018: GBP5,106,080) of which GBP1,506,292 was outstanding as at 30 June 2019 (30 June 2018: GBP1,341,858, 31 December 2018: GBP1,537,638).
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 (2018: GBP156,000) payable quarterly in arrears. For the period ended 30 June 2018, total administration and accountancy fees were GBP82,557 (1 January 2018 to 30 June 2018: GBP84,105, 1 January 2018 to 31 December 2018: GBP203,220) of which GBP39,000 was outstanding as at 30 June 2019 (1 January 2018 to 30 June 2018: GBP39,000, 1 January 2018 to 31 December 2018: GBP39,000).
7. Directors' fees
No members of staff were employed during the period (period ended 30 June 2018: nil, year ended 31 December 2018: nil).
Total directors' fees were GBP85,000 (1 January 2018 to 30 June 2018: GBP85,000, 1 January 2018 to 31 December 2018: GBP170,000).
8. Other Expenses 30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Legal and professional fees 187 120 607 Other expenses 2 147 36 -------- -------- ----------- 189 267 643 -------- -------- -----------
Included within legal and professional fees is GBP11,250 (1 January 2018 to 30 June 2018: GBP19,750, 1 January 2018 to 31 December 2018: GBP22,500) relating to the accrual of the 2019 audit fees. There were no other fees paid to the auditors for non-audit services (1 January 2018 to 30 June 2018: GBPnil, 1 January 2018 to 31 December 2018: GBPnil).
9. Earnings per Ordinary share - basic and diluted
The basic and diluted loss per Ordinary Share for the Company is 1.71 pence per share (period ended 30 June 2018: 1.34 profit, year ended 31 December 2018: 11.60 profit). This is based on the profit for the period of GBP9,397,313 (1 January 2018 to 30 June 2018: GBP6,044,557, 1 January 2018 to 31 December 2018: GBP56,005,471) and on 548,941,550 (1 January 2018 to 30 June 2018: 449,952,091, 1 January 2018 to 31 December 2018: 482,619,846) Ordinary Shares, being the weighted average number of shares in issue during the period.
There is no difference between the weighted average ordinary or diluted number of shares.
10. Interest receivable 30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Interest receivable on loan notes 61,017 65,497 56,814 Interest receivable on shareholder loan 13,173 3,451 12,524 -------- -------- ----------- 74,190 68,948 69,338 -------- -------- -----------
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 30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Prepaid expenses 8 4 17 Amounts due from subsidiaries* - 1,146 - Other receivables 250 776 248 -------- -------- ----------- 258 1,926 265 -------- -------- -----------
*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 30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Cash at bank 5,710 180 12,282 -------- -------- ----------- 5,710 180 12,282 -------- -------- -----------
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 30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Accrued expenses 1,646 1,342 1,630 Amounts due to subsidiaries* 187 - 184 -------- -------- ----------- 1,833 1,342 1,814 -------- -------- -----------
*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:
30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Investment in UK Hold Co Equity - - - Loans 523,215 403,422 530,187 -------- -------- ----------- 523,215 403,422 530,187 -------- -------- ----------- Book cost as at 1 January 499,315 404,109 404,109 Opening investment holding gains 30,872 4,355 4,355 -------- -------- ----------- Valuation as at 1 January 530,187 408,464 408,464 Movements during the period Purchase at cost - 4,500 95,206 Reclassification - see below - - 1,206 Investment holding (losses)/gains (6,972) (9,542) 25,311 -------- -------- ----------- Valuation as at 30 June/ 31 December 523,215 403,422 530,187 -------- -------- ----------- Book cost as at 30 June/ 31 December 499,315 408,609 499,315 Closing investment holding gains 23,900 (5,187) 30,872 -------- -------- ----------- 523,215 403,422 530,187 -------- -------- -----------
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 period 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. One investment held by FS Holdco 4 is not yet operational at period end and is 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 prior 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 prior 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 period.
As at 30 June 2019:
Level 1 Level 2 Level 3 Total GBP'000 GBP'000 GBP'000 GBP'000 Unquoted investment - - 523,215 523,215 -------- -------- -------- -------- - - 523,215 523,215 -------- -------- -------- --------
As at 30 June 2018:
Level 1 Level 2 Level 3 Total GBP'000 GBP'000 GBP'000 GBP'000 Unquoted investment - - 403,422 403,422 -------- -------- -------- -------- - - 403,422 403,422 -------- -------- -------- --------
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 -------- -------- -------- --------
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 Direct or indirect Country of of shares and voting Name holding incorporation Principal activity rights 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%
FS Wymeswold Limited Indirect UK SPV Holding Company 100% FS Castle Eaton Limited Indirect UK SPV Holding Company 100% FS Pitworthy Limited Indirect UK SPV Holding Company 100% FS Highfields Limited Indirect UK SPV Holding Company 100% FS High Penn Limited Indirect UK SPV Holding Company 100% FS Hunter's Race Limited Indirect UK SPV Holding Company 100% FS Spriggs Limited Indirect UK SPV Holding Company 100% FS Bournemouth Limited Indirect UK SPV Holding Company 100% FS Landmead Limited Indirect UK SPV Holding Company 100% FS Kencot Limited Indirect UK SPV Holding Company 100% FS Copley Limited Indirect UK SPV Holding Company 100% FS Port Farms Solar Limited Indirect UK SPV Holding Company 100% FS Membury Limited Indirect UK SPV Holding Company 100% FS Southam Solar Limited Indirect UK SPV Holding Company 100% FS Atherstone Solar Limited Indirect UK SPV Holding Company 100% FS Paddock Wood Solar Farm Limited Indirect UK SPV Holding Company 100% Atherstone Hold Co Limited Indirect UK SPV Holding Company 100% Southam Hold Co Limited Indirect UK SPV Holding Company 100% Paddock Wood Hold Co Limited Indirect UK SPV Holding Company 100% FS Shotwick Limited Indirect UK SPV Holding Company 100% FS Sandridge Limited Indirect UK SPV Holding Company 100% FS Wally Corner Limited Indirect UK SPV Holding Company 100% Acquisition Co 4 Limited Indirect UK SPV Holding Company 100% FS Welbeck Limited Indirect UK SPV Holding Company 100% FS Trehawke Limited Indirect UK SPV Holding Company 100% FS Homeland Limited Indirect UK SPV Holding Company 100% FS Marsh Farm Limited Indirect UK SPV Holding Company 100% FS Steventon Limited Indirect UK SPV Holding Company 100% FS Fields Farm Limited Indirect UK SPV Holding Company 100% FS Gedling Limited Indirect UK SPV Holding Company 100% FS Sheepbridge Limited Indirect UK SPV Holding Company 100% FS Tengore Limited Indirect UK SPV Holding Company 100% FS Cuckoo Limited Indirect UK SPV Holding Company 100% FS Field House Limited Indirect UK SPV Holding Company 100% FS Upper Huntingford Limited Indirect UK SPV Holding Company 100% FS Abergelli Limited Indirect UK SPV Holding Company 100% FS Crow Trees Limited Indirect UK SPV Holding Company 100% FS Yarburgh Limited Indirect UK SPV Holding Company 100% FS Nowhere Solar Limited Indirect UK SPV Holding Company 100% FS Bilsthorpe Solar Limited Indirect UK SPV Holding Company 100% FS Bulls Head Solar Limited Indirect UK SPV Holding Company 100% FS Roskrow Solar Limited Indirect UK SPV Holding Company 100% FS Abbeyfields Solar Limited Indirect UK SPV Holding Company 100% FS Lindridge Solar Limited Indirect UK SPV Holding Company 100% FS Misson Solar Limited Indirect UK SPV Holding Company 100% FS Pentre Solar Limited Indirect UK SPV Holding Company 100% FS Playters Solar Limited Indirect UK SPV Holding Company 100% FS PS Manor Farm Solar Limited Indirect UK SPV Holding Company 100% FS SV Ash Solar Park Limited Indirect UK SPV Holding Company 100% FS Pen Y Cae Solar Limited Indirect UK SPV Holding Company 100% Second Generation Portfolio Holdings 1 Indirect UK SPV Holding Company 100% Second Generation Portfolio 1 Indirect UK SPV Holding Company 100% Oakey 2 Asset Company Pty Limited Indirect Australia SPV Holding 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 Pty Limited Indirect Australia Investment 100% Oakey Network Pty Limited Indirect Australia Investment 100% Longreach Asset
Company 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 Principal rights Name holding of incorporation activity held Kiamco Hanwha Foresight Bannerton SPV Holding Pty Limited Indirect UK Company 48.50% Longreach New Holdco Pty Limited Indirect Australia Investment 49% Oakey 1 New Holdco Pty Limited Indirect Australia Investment 49% 16. Interests in unconsolidated structured entities
Period ended 30 June 2019
Unrealised Unrealised Fair value Cost as at gain/(loss) Movement on gain/(loss) as as at Cost at Additions / 30 June as at 1 unrealised at 30 June 30 June 1 January 2019 (Disposals) 2019 January 2019 gain/(loss) 2019 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 FS Wymeswold Limited 48,590 - 48,590 1,230 (564) 666 49,256 FS Castle Eaton Limited 21,630 - 21,630 (160) (199) (359) 21,271 FS Pitworthy Limited 18,210 - 18,210 (1,087) (445) (1,532) 16,678 FS Highfields Limited 14,300 - 14,300 (457) (356) (813) 13,487 FS High Penn Limited 11,310 - 11,310 (681) (151) (832) 10,478 FS Hunter's Race Limited 13,160 - 13,160 1,132 (399) 733 13,893 FS Spriggs Limited 14,580 - 14,580 129 (393) (264) 14,316 FS Bournemouth Limited 50,060 - 50,060 2,363 (240) 2,123 52,183 FS Landmead Limited 51,580 - 51,580 (1,026) (960) (1,986) 49,594 FS Kencot Limited 47,210 - 47,210 (1,329) 47 (1,282) 45,928 FS Copley Limited 35,670 - 35,670 2,678 (654) 2,024 37,694 FS Paddock Wood Limited Limited 11,145 - 11,145 406 (422) (16) 11,129 FS Atherstone Limited 16,004 - 16,004 (404) (268) (672) 15,332 FS Southam Limited 10,621 - 10,621 102 (39) 63 10,684 FS Port Farms Limited 44,215 - 44,215 1,534 (390) 1,144 45,359 FS Membury Limited 21,160 - 21,160 154 (250) (96) 21,064 -------------- -------------- ---------- ------------- -------------- -------------- ---------- 429,445 - 429,445 4,584 (5,683) (1,099) 428,346 -------------- -------------- ---------- ------------- -------------- -------------- ----------
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.
Period ended 30 June 2018
The following table represents the fair values of the investments held by FS Holdco Limited as required by IFRS12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 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) 433 161 48,751 FS Castle Eaton
Limited 21,630 - 21,630 (835) 28 (807) 20,823 FS Pitworthy Limited 18,210 - 18,210 (1,582) (117) (1,699) 16,511 FS Highfields Limited 14,300 - 14,300 (726) (91) (817) 13,483 FS High Penn Limited 11,310 - 11,310 (804) (145) (949) 10,361 FS Hunter's Race Limited 13,160 - 13,160 389 135 524 13,684 FS Spriggs Limited 14,580 - 14,580 (699) 52 (647) 13,933 FS Bournemouth Limited 50,060 - 50,060 364 112 476 50,536 FS Landmead Limited 51,580 - 51,580 (3,096) (77) (3,173) 48,407 FS Kencot Limited 47,210 - 47,210 (2,151) 74 (2,077) 45,133 FS Copley Limited 35,670 - 35,670 1,390 92 1,482 37,152 FS Paddock Wood Limited 10,621 - 10,621 553 (71) 482 11,103 FS Atherstone Limited 16,004 - 16,004 (321) (113) (434) 15,570 FS Southam Limited 11,145 - 11,145 115 (63) 52 11,197 FS Port Farms Limited 44,215 - 44,215 92 (14) 78 44,293 FS Membury Limited 21,160 - 21,160 (460) (9) (469) 20,691 ---------- -------------- -------- ------------ -------------- ------------ ---------- 429,445 - 429,445 (8,043) 226 (7,817) 421,628 ---------- -------------- -------- ------------ -------------- ------------ ----------
The above individual project valuations do not include a (GBP6,200,517) adjustment relating to future tax payments which will be settled at the Fund level.
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 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 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 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.
Period ended 30 June 2019
The following table represents the fair values of the investments held by FS Holdco 2 Limited as required by IFRS 12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 2019 / (Disposals) 2019 2019 gain/(loss) 2019 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 FS Debtco Limited - Equity - - - 14,911 (486) 14,425 14,425 FS Debtco Limited - Loan 74,894 - 74,894 - - - 74,894 FS Welbeck Limited 4,350 - 4,350 561 584 1,145 5,495 FS Trehawke Limited 4,670 - 4,670 1,069 809 1,878 6,548 FS Homeland Limited 5,190 - 5,190 1,686 954 2,640 7,830 FS Marsh Farm Limited 3,960 - 3,960 267 571 838 4,798 FS Steventon Limited 4,210 - 4,210 579 570 1,149 5,359 FS Fields Farm Limited 1,670 - 1,670 589 276 865 2,535 FS Gedling Limited 1,930 - 1,930 557 353 910 2,840 FS Sheepbridge Limited 1,890 - 1,890 492 305 797 2,687 FS Tengore Limited 1,330 - 1,330 267 222 489 1,819 FS Cuckoo Limited 2,500 - 2,500 248 542 790 3,290 FS Field House Limited 3,120 - 3,120 96 495 591 3,711 FS Upper Huntingford Limited 3,110 - 3,110 362 627 989 4,099 FS Abergelli Limited 3,650 - 3,650 772 455 1,227 4,877 FS Crow Trees Limited 1,810 - 1,810 93 166 259 2,069 FS Yarburgh Limited 3,420 - 3,420 579 538 1,117 4,537 FS Nowhere Solar Limited 3,672 - 3,672 211 613 824 4,496 FS Bilsthorpe Solar Limited 1,893 - 1,893 437 402 839 2,732 FS Bulls Head Solar Limited - - 2,203 371 475 846 3,049 FS Roskrow Solar Limited - - 3,674 748 470 1,218 4,892 FS Abbeyfields Solar Limited - - 1,526 743 978 1,721 3,247 FS Lindridge Solar Limited - - 1,721 561 296 857 2,578 FS Misson Solar Limited - - 2,012 550 309 859 2,871 FS Playters Solar Limited - - 3,963 428 536 964 4,927 FS PS Manor Farm Solar Limited - - 6,116 558 99 657 6,773 FS SV Ash Solar
Park Limited - - 3,387 317 496 813 4,200 FS Pen Y Cae Solar Limited - - 2,927 599 356 955 3,882 ---------- -------------- -------- ------------ --------------- ------------ ---------- 127,269 - 154,798 28,651 12,011 40,662 195,460 ---------- -------------- -------- ------------ --------------- ------------ ----------
Period ended 30 June 2018
The following table represents the fair values of the investments held by FS Holdco 2 Limited as required by IFRS 12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 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 (873) 9,756 9,756 FS Debtco Limited - Loan 74,894 74,894 74,894 - - - 74,894 ---------- -------------- -------- ------------- --------------- ------------ ---------- 74,894 74,894 74,894 10,269 (873) 9,756 84,650 ---------- -------------- -------- ------------- --------------- ------------ ----------
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 ---------- -------------- -------------- ------------- -------------- ------------ ------------ Sub-total carried forward 74,894 52,375 127,269 10,269 13,507 23,776 151,045 ---------- -------------- -------------- ------------- -------------- ------------ ------------
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 (continued).
Unrealised Unrealised Cost as gain/(loss) Movement gain/(loss) Fair value Cost at at 31 as at 1 on as at as at 1 January Additions December January 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 Sub-total brought forward 74,894 52,375 127,269 10,269 13,507 23,776 151,045 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 - 2,012 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 ---------- ------------- ------------ ------------- ------------- ------------ -------------
Period ended 30 June 2019
The following table represents the fair values of the investments held by FS Debtco Limited as required by IFRS 12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 2019 / (Disposals) 2019 2019 gain/(loss) 2019 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 FS Shotwick Solar Limited 74,894 - 74,894 11,889 (1,844) 10,045 84,939 FS Sandridge Solar Power Limited 57,046 - 57,046 2,322 (1,306) 1,016 58,062 FS SSR Wally Corner Limited 5,718 - 5,718 236 (57) 179 5,897 ---------- -------------- -------- ------------- --------------- ------------ ------------ 137,658 - 137,658 14,447 (3,207) 11,240 148,898 ---------- -------------- -------- ------------- --------------- ------------ ------------
Period ended 30 June 2018
The following table represents the fair values of the investments held by FS Debtco Limited as required by IFRS12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 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 (429) 9,267 84,161 FS Sandridge Solar Power Limited 57,046 - 57,046 959 (415) 544 57,590 FS SSR Wally Corner Limited 5,718 - 5,718 41 (26) 15 5,733 ---------- -------------- -------- ------------- --------------- ------------ ------------ 137,658 - 137,658 10,696 (870) 9,826 147,484 ---------- -------------- -------- ------------- --------------- ------------ ------------
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 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 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 ---------- -------------- -------------- ------------- -------------- ------------ -------------
Period ended 30 June 2019
The following table represents the fair values of the investments held by FS Holdco 3 Limited as required by IFRS 12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 2019 / (Disposals) 2019 2019 gain/(loss) 2019 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 FS Yardwall Limited 2,474 - 2,474 165 (70) 95 2,569 FS Verwood Limited 13,955 - 13,955 1,933 (424) 1,509 15,464 FS Park Farm Limited 8,116 - 8,116 995 (243) 752 8,868 FS Coombeshead Limited 7,126 - 7,126 904 (214) 690 7,816 FS Sawmills Limited 4,453 - 4,453 637 (136) 501 4,954 ---------- -------------- -------- ------------- --------------- ------------ ------------ 36,124 - 36,124 4,634 (1,087) 3,547 39,671 ---------- -------------- -------- ------------- --------------- ------------ ------------
Period ended 30 June 2018
The following table represents the fair values of the investments held by FS Holdco 3 Limited as required by IFRS12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 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 - 2,530 2,530 - 35 35 2,565 FS Verwood Limited - 14,110 14,110 - (122) (122) 13,988 FS Park Farm Limited - 8,180 8,180 - (111) (111) 8,069 FS Coombeshead Limited - 7,240 7,240 - (98) (98) 7,142 FS Sawmills Limited - 4,530 4,530 - (61) (61) 4,469 ---------- -------------- -------- ------------- --------------- ------------ ------------ - 36,590 36,590 - (357) (357) 36,233 ---------- -------------- -------- ------------- --------------- ------------ ------------
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 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 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 ---------- -------------- -------------- ------------- -------------- ------------ -------------
Perid ended 30 June 2019
The following table represents the fair values of the investments held by FS Holdco 4 Limited as required by IFRS 12.
Unrealised Unrealised Cost as gain/(loss) gain/(loss) Fair value Cost at at as at 1 Movement as at as at 1 January Additions 30 June January on unrealised 30 June 30 June 2019 / (Disposals) 2019 2019 gain/(loss) 2019 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Bannerton Solar Farm 22,882 - 22,882 (450)* (2,472) (2,922) 19,960 Longreach New Holdco Pty Limited 2,650 295 2,945 431 (524) (93) 2,852 Oakey 1 New Holdco Pty Limited 4,367 479 4,846 (85)* 37 (48) 4,798 FS Oakey 2 Pty
Limited 33,988 - 33,988 (681)* (625)* (1,306)* 32,682 ----------- -------------- -------- ------------ --------------- ------------ ------------ 63,887 774 64,661 (785) (3,584) (4,369) 60,292 ----------- -------------- -------- ------------ --------------- ------------ ------------
*This relates to FX gain on translation from AUD to GBP at 30 June 2019 and 31 December 2018.
Period ended 30 June 2018
The following table represents the fair values of the investments held by FS Holdco 4 Limited as required by IFRS12.
Unrealised Unrealised Adjusted Cost as gain/(loss) Movement gain/(loss) Fair value Cost at Cost at at as at on as at as at 1 January 1 January Additions 30 June 1 January unrealised 30 June 30 June 2018 2018 / (Disposals) 2018 2018 gain/(loss) 2018 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Bannerton Solar Farm 12,482 12,482 10,400 22,882 - - - 22,882 Longreach New Holdco Pty Limited 5,218 2,613 37 2,650 - 370 370 3,020 Oakey 1 New Holdco Pty Limited 7,842 4,306 61 4,367 80* (80) - 4,367 FS Oakey 2 Pty Limited 15,910 22,051 3,552 25,603 120* (120) - 25,603 ---------- ---------- ------------- -------- ------------ ------------- ------------ ---------- 41,452 41,452 14,050 55,502 200 170 370 55,872 ---------- ---------- ------------- -------- ------------ ------------- ------------ ----------
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 Cost as gain/(loss) Movement gain/(loss) Fair value Cost at at 31 as at 1 on as at as at 1 January Additions December January 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 Bannerton Solar Farm 12,482 10,400 22,882 - (450)* (450)* 22,432 Longreach New Holdco Pty Limited 2,650 - 2,650 - 431 431 3,081 Oakey 1 New Holdco Pty Limited 4,367 - 4,367 - (85)* (85)* 4,282 FS Oakey 2 Pty Limited 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 outpout of each investment.
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 ("IPEV") Valuation Guidelines, 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 30 June 2019, 30 June 2018 and 31 December 2018 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 7.15% (2018: 7.30%). 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) 835.8 819.8 804.3 789.3 774.7 -------------- ------ ------ ----- ------ ------ NAV per share (pence) 115.3 112.4 109.6 106.8 104.2 -------------- ------ ------ ----- ------ ------ Change vs Base Case (%) 3.92 1.93 0.00 (1.87) (3.68) -------------- ------ ------ ----- ------ ------
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) 694.7 804.3 913.2 ---------------------------- ------- ----- ----- NAV per share (pence) 89.6 109.6 129.4 ---------------------------- ------- ----- ----- Change vs Base Case (%) (13.62) 0.00 13.54 ---------------------------- ------- ----- -----
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 1.3%.
During the year, c.60% 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.40% 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) 697.3 751.0 804.3 857.4 910.4 -------------- ------- ------ ----- ------ ------ NAV per share (pence) 90.1 99.9 109.6 119.3 128.9 -------------- ------- ------ ----- ------ ------ Change vs Base Case (%) (13.30) (6.63) 0.00 6.60 13.19 -------------- ------- ------ ----- ------ ------
Inflation
A variable of 1.5% is considered reasonable given historic fluctuations. A long term inflation rate of 2.75% (2018: 2.75%) has been used.
-1.50% -0.75% Base +0.75% +1.50% ------- ------ ----- ------ ------ Directors' valuation (GBPm) 710.4 755.6 804.3 856.9 913.9 -------------- ------- ------ ----- ------ ------ NAV per share (pence) 92.5 100.7 109.6 119.2 129.5 -------------- ------- ------ ----- ------ ------ Change vs Base Case (%) (11.67) (6.06) 0.00 6.54 13.62 -------------- ------- ------ ----- ------ ------
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) 820.1 812.2 804.3 796.4 788.4 -------------- ------ ----- ----- ------ ------ NAV per share (pence) 112.5 111.0 109.6 108.1 106.7 -------------- ------ ----- ----- ------ ------ Change vs Base Case (%) 1.97 0.98 0.00 (0.99) (1.97) -------------- ------ ----- ----- ------ ------ 17. Fair value of the investments in unconsolidated entities (continued)
AUD/GBP Exchange Rate
The Fund is directly exposed to fluctuations in foreign currency due to its investments in Australian dollar denominated assets. Whilst the Group mitigates its exposure to fluctuations in AUD through the use of forward contracts, the valuations of these assets will be directly impacted. Whilst we would not expect to see fluctuations quite this large, a variable of 20% is considered appropriate.
-20.0% -10.0% Base +10.0% +20.0% ------ ------ ----- ------ ------ Directors' valuation (GBPm) 792.0 798.2 804.3 810.4 816.5 -------------- ------ ------ ----- ------ ------ NAV per share (pence) 107.3 108.5 109.6 110.7 111.8 -------------- ------ ------ ----- ------ ------ Change vs Base Case (%) (1.52) (0.76) 0.00 0.76 1.52 -------------- ------ ------ ----- ------ ------ 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
30 June 30 June 31 December 2019 2018 2018 Shares Shares Shares Opening balance 548,941,550 449,952,091 449,952,091 Issued during the period - - 98,989,459 ----------- ----------- ----------- Closing balance 548,941,550 449,952,091 548,941,550 ----------- ----------- ----------- 30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 Opening balance 588,798 454,515 454,515 Proceeds from share issue - - 106,189 Less: issue costs - - (1,906) -------- -------- ----------- Closing balance 588,798 454,515 558,798 -------- -------- ----------- 19. NAV per Ordinary Share
The Net Asset Value ("NAV") per redeemable Ordinary Share for the Company 109.6 pence per ordinary share (period ended 30 June 2018: 105.2, year ended 31 December 2018: 111.2) This is based on the Net Asset Value at the reporting date of GBP601,540,008 (30 June 2018: GBP473,133,573, 31 December 2018: GBP610,257,766) and on 548,941,550 (30 June 2018: 449,952,091, 31 December 2018: 548,941,550) redeemable Ordinary Shares, being the number of Ordinary Shares in issue at the end of the period.
20. Financial instruments and risk profile
The Company holds cash and liquid resources as well as having receivables and payables that arise directly from its operations. The underlying investments of the Company's investment activities indirectly expose it to various types of risk associated with solar power. The main risks arising from the Company's financial instruments are market risk, liquidity risk, credit risk and interest rate 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 exchange 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:
30 June 30 June 31 December 2019 2018 2018 GBP'000 GBP'000 GBP'000 AUD 60,292 55,872 63,102 -------- -------- -----------
The FX rate applied at 30 June 2019 0.55 (30 June 2018: 0.56, 31 December 2018: 0.55). A 10% weakening or strengthening of the FX rate would have a GBP6,028,200 impact on the valuation of assets denominated in AUD.
(b) Price risk
The Company's investments are susceptible to market price risk arising from uncertainties about future values of the instruments. The Board's Investment Manager provides the Company with investment recommendations. The Board's Investment Manager's recommendations are reviewed and approved by the Investment Manager before the investment decisions are implemented. To manage the market price risk, the Board'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 30 June 2019, 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 period would have been GBP52,321,494 (30 June 2018: GBP40,342,170, 31 December 2018: GBP53,018,750). 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 period end the Company had no long term borrowings with third parties (1 January 2018 to 30 June 2018: GBPNil, 1 January 2018 to 31 December 2018: GBPNil).
Weighted average Weighted average time for which Total portfolio interest rate rate is fixed 30 June 30 June 30 June 2019 2019 2019 GBP'000 % Days Loan notes 250,000 11.00% 961 Shareholder loans 249,316 2.00% 1,652 Cash 5,710 0.05% - --------------- 505,026 --------------- Weighted average Weighted average time for which Total portfolio interest rate rate is fixed 30 June 30 June 30 June 2018 2018 2018 GBP'000 % Days Loan notes 250,000 11.00% 234 Shareholder loans 158,610 2.00% 741 Cash 180 - - --------------- 408,790 --------------- Weighted average Weighted average time for which Total portfolio interest rate rate is fixed 31 December 31 December 31 December 2018 2018 2018 GBP'000 % Days Loan notes 250,000 11.00% 780 Shareholder loans 249,316 2.00% 1,287 Cash 12,282 0.05% - --------------- 511,598 --------------- 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.
30 June 2019
Carrying Contractual Less than 6 to 12 Greater than amount Total 6 months Months 12 months GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Financial Assets Investments 523,215 523,215 - - 523,215 Trade and other Receivables 258 258 258 - - Interest receivable 74,190 74,190 74,190 - - Cash and cash equivalents 5,710 5,710 5,710 - - -------- ----------- --------- -------- ------------ Total Financial assets 603,373 603,373 80,158 - 523,215 Trade and other payables (1,833) (1,833) (1,833) - - -------- ----------- --------- -------- ------------ Total financial liabilities (1,833) (1,833) (1,833) - - -------- ----------- --------- -------- ------------ Net position 601,540 601,540 78,325 - 523,215 -------- ----------- --------- -------- ------------
30 June 2018
Carrying Contractual Less than 6 to Greater than amount Total 6 months 12 Months 12 months GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Financial Assets Investments 403,422 403,422 - - 403,422 Trade and other Receivables 1,926 1,926 1,926 - - Interest receivable 68,948 68,948 68,948 - - Cash and cash equivalents 180 180 180 - - -------- ----------- --------- ---------- ------------ Total Financial assets 474,476 474,476 71,054 - 403,422 Trade and other payables (1,342) (1,342) (1,342) - - -------- ----------- --------- ---------- ------------ Total financial liabilities (1,342) (1,342) (1,342) - - -------- ----------- --------- ---------- ------------ Net position 473,134 473,134 69,712 - 403,422 -------- ----------- --------- ---------- ------------
31 December 2018
Carrying Contractual Less than 6 to Greater than amount Total 6 months 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 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 -------- ----------- --------- ---------- ------------ 20.3 Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
The Company places 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 period and at the reporting date, the Company maintained relationships with the following financial institutions:
Moody's Credit 30 June 2019 Rating GBP'000 Cash in hand: Royal Bank of Scotland International Limited P2 5,708 Lloyds Bank International Limited P1 2 ------------ Total cash balances held by banks 5,710 ------------ Moody's 30 June 2018 Credit Rating GBP'000 Cash in hand: Royal Bank of Scotland International Limited P2 10 Lloyds Bank International Limited P1 170 ------------ Total cash balances held by banks 180 ------------ Moody's Credit 31 December 2018 Rating GBP'000 Cash in hand: Royal Bank of Scotland International Limited P2 12,280 Lloyds Bank International Limited P1 2 ---------------- Total cash balances held by banks 12,282 ----------------
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, being the portion of UK Hold Co investments that are made up of loans as at 30 June 2019 (30 June 2018: GBP582,019,152, 31 December 2018: GBP610,239,946). 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 period end amounted to GBP251,057,609 (30 June 2018: GBP251,057,609, 31 December 2018: GBP251,057,609).
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 30 June 2019 Pence/ 30 June 2018 Pence/ 31 December 2018 Pence/ 2019 Ordinary 2018 Ordinary 2018 Ordinary GBP'000 share GBP'000 share GBP'000 share Quarter 1 9,057 1.64 7,110 1.58 7,109 1.58 Quarter 2 9,058 1.64 7,109 1.58 7,109 1.58 Quarter 3 N/A N/A N/A N/A 8,118 1.64 Quarter 4 N/A N/A N/A N/A 9,003 1.64 -------- -------- ----------- 18,115 14,219 31,339 -------- -------- ----------- 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 period ended 30 June 2019:
Opening Balance Increase Repayment as at in of Closing Balance 1 January loan/Interest loan/Interest as at 2019 charged repaid 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000 Loan Notes 250,000 - - 250,000 Interest on Loan Notes 56,814 17,203 (13,000) 61,017 Shareholder Loan 1 249,316 - - 249,316 Interest on Shareholder Loan 1 12,524 2,495 (1,846) 13,173 Non interest bearing loan included in trade and other payables 183 4 - 187
For the period ended 30 June 2018:
Opening Balance Increase Repayment as at in of Closing Balance 1 January loan/Interest loan/Interest as at 2018 charged repaid 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000 Loan Notes 250,000 - - 250,000 Interest on Loan Notes 48,746 16,751 - 65,497 Shareholder Loan 1 154,110 4,500 - 158,610 Interest on Shareholder Loan 1 8,880 1,571 (6,920) 3,531 Non interest bearing loan included in trade and other receivables 1,116 - - 1,116
For the period ended 31 December 2018:
Increase Repayment Opening Balance in of Closing Balance as at loan/Interest loan/Interest as at 31 December 1 January 2018 charged repaid 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.
Transactions between UK Hold Co and its underlying subsidiaries
Transactions with FS Holdco
For the period ended 30 June 2019:
Opening Balance as at Increase Repayment Closing Balance 1 January in loan/Interest of loan/Interest as at 2019 charged repaid 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000 Interest bearing Investment loan 1 343,731 - - 343,731 Interest on investment loan 1 47,053 13,636 (10,532) 50,157 Interest bearing Investment loan 2 (40,000) - - (40,000) Interest on investment loan 2 (1,253) (992) - (2,245) Non interest bearing loan (143,504) - - (143,504) Non interest bearing loan included in trade and other receivables 875 - - 875
For the period ended 30 June 2018:
Opening Balance as at Increase Repayment Closing Balance 1 January in loan/Interest of loan/Interest as at 2018 charged repaid 30 June 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 13,636 - 51,347 Interest bearing Investment loan 2 - (40,000) - (40,000) Interest on investment loan 2 - (395) - (395) Non interest bearing loan (143,504) - - (143,504) Non interest bearing loan included in trade and other receivables 715 160 - 875
For the period ended 31 December 2018:
Opening Balance Closing Balance as at Increase Repayment as at 1 January in loan/Interest of loan/Interest 31 December 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
Transactions with FS Holdco 2
For the period ended 30 June 2019:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 30 June January 2019 charged repaid 2019 GBP'000 GBP'000 GBP'000 GBP'000 Interest bearing Investment loan 1 74,894 - - 79,894 Interest on investment loan 1 3,745 1,857 - 5,602 Interest bearing Investment loan 2 9,107 - - 9,107 Interest on investment loan 2 42 226 - 268 Interest bearing Investment loan 3 33,094 - - 33,094 Interest on investment loan 3 150 820 - 970 Interest bearing Investment loan 4 3,432 - - 3,432 Interest on investment loan 4 6 85 - 91 Interest bearing Investment loan 5 46,500 - - 46,500 Interest on investment loan 5 962 1,153 - 2,115 Interest bearing loan payable 1 (28,970) - - (28,970) Interest on loan payable 1 (1,449) (718) - (2,167) Interest bearing loan payable 2 (13,000) - - (13,000) Interest on interest bearing loan payable 2 (819) (322) - (1,141) Interest bearing loan payable 3 (7,082) - - (7,082) Interest on loan payable 3 (263) (176) - (439) Interest bearing loan payable 4 (8,386) - - (8,386) Interest on loan payable 4 (208) (208) - (416) Non interest bearing loan 1 (2,604) (63) - (2,667) Non interest bearing loan 2 (875) - - (875)
For the period ended 30 June 2018:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 30 June 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 - 1,857 - 1,857 Interest bearing loan payable 1 (28,970) - - (28,970) Interest on loan payable 1 - (718) - (718) Interest bearing loan payable 2 (13,000) - - (13,000) Interest on interest bearing loan payable 2 (169) (322) - (491) Interest bearing loan payable 3 - (7,082) - (7,082) Interest on loan payable 3 - - - - Non interest bearing loan 1 (3,734) - 102 (3,632) Non interest bearing loan 2 (715) (160) - (875)
For the year ended 31 December 2018:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 31 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 - 3,745 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 - (1,449) - (1,449) 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 (715) (160) - (875)
Transactions with FS Debtco
For the period ended 30 June 2019:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 30 June January 2019 charged repaid 2019 GBP'000 GBP'000 GBP'000 GBP'000 Interest bearing loan 1 55,000 - - 55,000 Interest on loan 1 4,769 1,364 - 6,133 Non interest bearing loan 140 - - 140
For the period ended 30 June 2018:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 30 January 2018 charged repaid June 2018 GBP'000 GBP'000 GBP'000 GBP'000 Interest bearing loan 1 55,000 - - 55,000 Interest on loan 1 2,019 1,364 - 3,383 Non interest bearing loan - 140 - 140
For the year ended 31 December 2018:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 31 January 2018 charged repaid December 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
Transactions with FS Holdco 3
For the period ended 30 June 2019:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 30 January 2019 charged repaid June 2019 GBP'000 GBP'000 GBP'000 GBP'000 Interest bearing Investment loan 1 36,124 - - 36,124 Interest on investment loan 1 - 450 (450) - Non interest bearing loan payable 317 3,259 (981) 2,595
For the period ended 30 June 2018:
Closing Balance Opening Balance Increase Repayment as at as at 1 in loan/Interest of loan/Interest 31 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 - 144 (500) (356)
For the period year 31 December 2018:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 31 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
Transactions with FS Holdco 4
For the period ended 30 June 2019:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 31 December January 2019 charged repaid 2019 GBP'000 GBP'000 GBP'000 GBP'000 Interest bearing Investment loan 1 28,970 - - 28,970 Interest on investment loan 1 1,449 718 - 2,167 Interest bearing Investment loan 2 12,482 - - 12,482 Interest on investment loan 2 786 310 - 1,096 Interest bearing Investment loan 3 10,380 - - 10,380 Interest on investment loan 3 385 258 - 643 Interest bearing Investment loan 4 8,386 - - 8,386 Interest on investment loan 4 208 208 - 416 Interest bearing Investment loan 5 3,141 - - 3,141 Interest on investment loan 5 107 78 - 185 Non interest bearing loan 353 788 - 1,141
For the period ended 30 June 2018:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 30 June 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 - 718 - 718 Interest bearing Investment loan 2 12,482 - - 12,482 Interest on investment loan 2 162 310 - 472 Interest bearing Investment loan 3 - 10,380 - 10,380 Interest on investment loan 3 - 124 - 124 Interest bearing Investment loan 5 - 3,141 - 3,141 Interest on investment loan 5 - - - - Non interest bearing loan - 353 - 353
For the year ended 31 December 2018:
Opening Balance Increase Repayment Closing Balance as at 1 in loan/Interest of loan/Interest as at 31 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 - 1,449 - 1,449 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 - 107 - 107 Non interest bearing loan - 353 - 353
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.
For the period ended 30 June 2019:
Opening Balance receivable/ Amounts paid Net amount (payable) on behalf Amounts received (payable)/ as at of from receivable 1 January SPV SPV as at 30 June 2019 2019 2019 2019 GBP'000 GBP'000 GBP'000 GBP'000 FS Holdco and its SPVs (15,594) 11,225 (8,888) (13,257) FS Holdco 2 and its SPVs (2,689) 1,819 (689) (1,559) FS Debtco and its SPVs (2,763) 4,799 (3,353) (1,317)
For the period ended 30 June 2018:
Opening Balance receivable/ Amounts paid Net amount (payable) on behalf Amounts received (payable)/ as at of from receivable 1 January SPV SPV as at 30 June 2018 2018 2018 2018 GBP'000 GBP'000 GBP'000 GBP'000 FS Holdco and its SPVs (11,437) 15,154 (13,749) (10,032) FS Holdco 2 and its SPVs - 3,054 (621) 2,433 FS Debtco and its SPVs (6,968) 7,885 (1,697) (780)
For the year ended 31 December 2018:
Opening Balance receivable/ Amounts paid Net amount (payable) on behalf Amounts received (payable)/ as at of from receivable 1 January SPV SPV as at 31 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)
Transactions with the manager
Foresight Group LLP, a related party of Foresight Group CI, charged asset management fees to the underlying projects of GBP792,182 during the period (1 January 2018 to 30 June 2018: GBP304,000, 1 January 2018 to 31 December 2018: GBP1,002,002).
24. Commitments and contingent liabilities
There are no commitments nor contingent liabilities.
25. 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.
26. Post balance sheet events
Post period end, on 2 August 2019, the Investment Manager successfully completed the refinancing of 28 of its UK assets (321MW) under FS Holdco 2, an indirect subsidiary of the Company.
AIFMD Disclosures (unaudited)
Alternative Investments Fund Manager Directive Report
In accordance with the Alternative Investments Fund Manager Directive Report (the "Directive"), the Company is required in its capacity as the Alternative Investment Fund Manager ("AIFM") and the Alternative Investment Fund ("AIF") to disclose specific information in relation to the following aspects of the Company's management:
OVERVIEW OF INVESTMENT ACTIVITIES
The Company's investment activities during the year is disclosed in full in the Investment Manager's Report on page 20 of the Annual Report.
The Company's portfolio's performance during the year is disclosed in full in the Asset Manager's Report on page 36 of the Annual Report.
A list of the Company's portfolio holdings is included on page 16 of the Annual Report.
LEVERAGE AND BORROWING
Leverage is defined as any method by which the Company increases its exposure through debt, borrowed capital or the use of derivatives.
The Company and its subsidiaries' leverage position and third-party debt arrangements are disclosed in full in the Investment Manager's Report on page 20 of the Annual Report.
'Exposure' is defined in two ways - 'Gross method' and 'Commitment method' - and the Company must not exceed maximum exposures under both methods.
The Directors are required to calculate and monitor the level of leverage of the Company, expressed as a ratio between the exposure of the Company and its Net Asset Value (Exposure/NAV), under both the Gross method and the Commitment method.
'Gross method' exposure is calculated as the sum of all positions of the Company (both positive and negative), that is, all eligible assets, liabilities and derivatives, including derivatives held for risk reduction purposes.
'Commitment method' exposure is also calculated as the sum of all positions of the Company (both positive and negative), but after netting off derivative and security positions as specified by the Directive.
For the "Gross method", the following has been excluded:
- the value of any cash and cash equivalents which are highly liquid investments held in the local currency of the Company that are readily convertible to a known amount of cash, subject to an insignificant risk of changes in value and which provide a return no greater than the rate of the 3-month high quality government bond;
- cash borrowings that remain in cash or cash equivalents as defined above and where the amounts of that payable are known.
The total amount of leverage calculated as at 30 June 2019 is as follows:
Gross method: 24%
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 an AIFM, the Company is subject to a remuneration code which is consistent with the requirements of the FCA that 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 Investment Management services in this regard are provided by staff members of Foresight Group LLPCI Limited with the support of 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 20178) are available from the AIFM on request.
Advisors
ADMINISTRATOR & COMPANY SECRETARY
JTC (Jersey) Limited
JTC House
28 Esplanade
St. Helier Jersey
JE4 2QP
REGISTRAR
Computershare Investor Services (Jersey)
Queensway House
Hilgrove Street
St. Helier Jersey
JE1 1ES
CORPORATE BROKER
Stifel Nicolaus Europe Limited (formerly Oriel Securities)
150 Cheapside
London
EC2V 6ET
INVESTMENT MANAGER
Foresight Group CI Limited
PO Box 156
Dorey Court
St. Peter Port
Guernsey
GY1 4EU
LEGAL ADVISORS TO THE COMPANY AS TO ENGLISH LAW
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London
EC2A 2EW
LEGAL ADVISORS TO THE COMPANY AS TO JERSEY LAW
Ogier
Ogier House
The Esplanade
St. Helier
Jersey
JE4 9WG
LEGAL ADVISORS TO THE COMPANY AS TO THE ACQUISITION OF SOLAR ASSETS
Osborne Clarke
One London Wall
London
EC2Y 5EB
INDEPENDENT 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 BSUoS Balancing Services Use of System BBSY Bank Bill Swap Bid Rate Company Foresight Solar Fund Limited CEFC The Clean Energy Finance Corporation DCF Discounted Cash Flow DNO Distribution Network Operator 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. GRESB Global Real Estate Sustainability Benchmark GWh Gigawatt hour Hibernacula A shelter occupied during the winter by a dormant animal IAS International Accounting Standard IFRS International Financial Reporting Standards as adopted by the EU Investment Manager Foresight Group CI Limited IPEV Valuation Guidelines International Private Equity and Venture Capital Valuation Guidelines 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 hydroelectric power stations Main Market The main securities market of the London Stock Exchange MIDIS Macquarie Infrastructure Debt Investment Solutions MLF Marginal Loss Factor 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 Ofgem Office of Gas and Electricity Markets (UK Government regulator) O&M Operation and Maintenance contractors PPA Power Purchase Agreements PR Performance Ratio PRI Principles for Responsible Investment 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 SDG United Nations Sustainable Development Goal 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
IR UARORKSAWUUR
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