Foresight Solar Fund — Q3 NAV and first sale of divestment programme

Foresight Solar Fund (LSE: FSFL)

Last close As at 17/05/2024

GBP0.82

0.40 (0.49%)

Market capitalisation

472m

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Research: Investment Companies

Foresight Solar Fund — Q3 NAV and first sale of divestment programme

Foresight Solar Fund (FSFL) achieved record cash generation of £87.8m from its underlying assets to 30 September 2023, driven by favourable fixed prices, despite production being below budget. As a result, FSFL paid down £10m of its revolving credit facility (RCF) during the period. After the Q3 period, FSFL sold 50% of its 99MW Lorca portfolio in Spain for €26.9m, at a 21% premium to its Q3 holding value. The proceeds from this transaction will be used to further reduce the RCF. Global revenues are 85% contracted for 2024, ensuring forecast net dividend cover of 1.5x until at least 2025. FSFL remains on target to pay its full year dividend.

Written by

Andrew Keen

MD - Head of Content, Energy & Resources, Industrials

Foresight Solar Fund_resized

Investment Companies

Foresight Solar Fund

Q3 NAV and first sale of divestment programme

Investment companies

Renewable energy infrastructure

17 November 2023

Price

97.8p

Market cap

£585m

NAV

£706.9m

NAV/share

118.1p

Discount to NAV*

16.6%

*Including income at 30 September 2023

Yield

7.72%

Ordinary shares in issue*

598m

*As at 30 September 2023

Code/ISIN

FSFL/JE00BD3QJR55

Primary exchange

LSE

AIC sector

Renewable Energy Infrastructure

52-week high/low

119.8p

84.0p

NAV* high/low

126.5p

95.6p

*Including income

Total gearing*

40.9%

*At 30 September 2023 (total long-term debt/GAV)

Fund objective

Foresight Solar Fund’s (FSFL’s) investment objective is to provide investors with a sustainable and progressive quarterly dividend underpinned by investments in a geographically diverse portfolio of assets. FSFL aims to preserve and, where possible, enhance capital value. It acquires largescale solar power plants, identifying solar opportunities in the UK and overseas markets (to 25% of gross asset value). FSFL can also invest in battery storage systems (BSS) up to a limit of 10% of gross asset value (GAV) and in solar or BSS assets in development stage up to 5% of GAV.

Analysts

Andrew Keen

+44 (0)20 3077 5700

Harry Kilby

+44 (0)20 3077 5724

investmenttrusts@edisongroup.com

Edison profile page

Foresight Solar Fund is a research client of Edison Investment Research Limited

Foresight Solar Fund (FSFL) achieved record cash generation of £87.8m from its underlying assets to 30 September 2023, driven by favourable fixed prices, despite production being below budget. As a result, FSFL paid down £10m of its revolving credit facility (RCF) during the period. After the Q3 period, FSFL sold 50% of its 99MW Lorca portfolio in Spain for €26.9m, at a 21% premium to its Q3 holding value. The proceeds from this transaction will be used to further reduce the RCF. Global revenues are 85% contracted for 2024, ensuring forecast net dividend cover of 1.5x until at least 2025. FSFL remains on target to pay its full year dividend.

£m

Q322

Q422

Q123

Q223

Q323

NAV

771.2

771.5

757.5

726.6

706.9

NAV per share (p)

126.4

126.5

124.2

119.9

118.1

GAV

1,299.7

1,296.3

1,268.2

1,237.2

1,196.0

Source: FSFL data, Edison Investment Research. Note: Year end is 31 December 2023.

With yields on UK government bonds continuing to edge higher in the period, FSFL raised its discount rates for its UK levered solar assets by 50bp to 8%, as well as increasing the discount rates for its Australian and Spanish assets both 25bp to 8.3% and 7.6%, respectively. Despite FSFL raising its discount rates resulting in a negative 3.5p move in the NAV, the company’s NAV per share, compared to Q223, remained relatively flat. The majority of the offset (+1.9p) came from prices for Renewable Energy Guarantees of Origin, which have consistently traded above FSFL’s estimates and have remained conservative. With materially higher prices for its portfolio’s green certificates in the coming years, FSFL has revised its pricing forecast to £5/MWh until 2028 and £2/MWh for the remaining life of the assets.

FSFL continued to repurchase shares through its £20m buyback programme, acquiring 7.5m more shares to 30 September 2023, delivering an additional 0.3p uplift to the company NAV per share in the period, and a cumulative 0.4p uplift since the beginning of the programme. FSFL continues to recognise the disconnect between the company’s underlying portfolio and its current share price and has elected to allocate an additional £20m to the ongoing share buyback programme, bringing the total to a potential £40m, with the aim of adding further NAV accretion.

FSFL delivered on the first stages of its divestment programme, selling a 50% stake of its Lorca portfolio. The stake was sold to a specialist fund advised by EB-SIM, the sustainable investment arm of Evangelische Bank, for the sum of €26.9m for a 50% share of the three Spanish solar farms. The value of the sale was at a 21% premium to the assets’ third quarter holding value and represented an exit internal rate of return of 12.1% on funds invested to date on the stake sold. This sale further demonstrates that, despite the fact FSFL is trading at a significant discount to NAV (20.2%), renewable energy assets like these remain in high demand in the market. This, therefore, provides validation, based on market prices, for the company’s valuation at year-end. The sale will also give the investment manager confidence to continue advancing discussions for the next phases of the c 200MW divestment programme that will continue into 2024.

General disclaimer and copyright

This report has been commissioned by Foresight Solar Fund and prepared and issued by Edison, in consideration of a fee payable by Foresight Solar Fund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is in relation to Foresight Solar Fund Limited (the “Company”) and has been approved by Foresight Group LLP (“Foresight”) for the purposes of section 21 of the Financial Services and Markets Act 2000 (“FSMA”) on 13 November 2023. Foresight is authorised and regulated by the Financial Conduct Authority (FRN 198020). Foresight’s registered office is at The Shard, 32 London Bridge Street, London, SE1 9SG.

This document has been prepared and provided by Edison for information and discussion purposes only and may not be used for the purpose of, and does not constitute an offer to sell, or the solicitation of an offer to acquire securities in the Company. Investors should not subscribe for or purchase any securities except on the basis of information in the Prospectus published by the Company. The information and opinions contained in this document are for background purposes only and do not purport to be full or complete. No reliance may be placed for any purpose on the information or opinions expressed in this document for their accuracy and completeness. This document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This document does not constitute a part of the Prospectus and recipients should not construe the contents of this document as financial, legal, accounting, tax or investment advice. Recipients should seek their own independent advice and then rely on their own independent assessment of the Company.

There are a number of risks associated with the Company and a comprehensive list of these risks are set out within the Prospectus and should be carefully considered. Recipients should be aware that losses up to the amount invested could be incurred and capital is at risk. Past performance is not a reliable indicator of future performance.

This document contains certain forward-looking statements. In some cases forward-looking statements can be identified by the user of terms such as “believes”, “estimates”, “anticipates”, “projects”, “expects”, “intends”, “may”, “will”, “seeks” or “should” or variations thereof, or by discussions of strategy plans, objectives, goals, future events or intentions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Foresight Solar Fund and prepared and issued by Edison, in consideration of a fee payable by Foresight Solar Fund. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is in relation to Foresight Solar Fund Limited (the “Company”) and has been approved by Foresight Group LLP (“Foresight”) for the purposes of section 21 of the Financial Services and Markets Act 2000 (“FSMA”) on 13 November 2023. Foresight is authorised and regulated by the Financial Conduct Authority (FRN 198020). Foresight’s registered office is at The Shard, 32 London Bridge Street, London, SE1 9SG.

This document has been prepared and provided by Edison for information and discussion purposes only and may not be used for the purpose of, and does not constitute an offer to sell, or the solicitation of an offer to acquire securities in the Company. Investors should not subscribe for or purchase any securities except on the basis of information in the Prospectus published by the Company. The information and opinions contained in this document are for background purposes only and do not purport to be full or complete. No reliance may be placed for any purpose on the information or opinions expressed in this document for their accuracy and completeness. This document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This document does not constitute a part of the Prospectus and recipients should not construe the contents of this document as financial, legal, accounting, tax or investment advice. Recipients should seek their own independent advice and then rely on their own independent assessment of the Company.

There are a number of risks associated with the Company and a comprehensive list of these risks are set out within the Prospectus and should be carefully considered. Recipients should be aware that losses up to the amount invested could be incurred and capital is at risk. Past performance is not a reliable indicator of future performance.

This document contains certain forward-looking statements. In some cases forward-looking statements can be identified by the user of terms such as “believes”, “estimates”, “anticipates”, “projects”, “expects”, “intends”, “may”, “will”, “seeks” or “should” or variations thereof, or by discussions of strategy plans, objectives, goals, future events or intentions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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