Edison issues flash on Foresight Solar Fund (FSFL): Optimising capital allocation
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Edison Investment Research Limited
London, UK, 14 March 2024
Edison issues flash on Foresight Solar Fund (FSFL): Optimising capital allocation Foresight Solar Fund (FSFL) celebrated its 10-year anniversary of listing on the London Stock Exchange with decade-high cash distributions from assets of £120.4m in its FY23 results (year end 31 December). FY23 also saw FSFL’s divestment programme come to fruition with the sale of a 50% stake in its Spanish Lorca portfolio at a 21% premium to its holding value. The proceeds of this divestment, along with free cash, were used to pay down the fund’s variable rate debt via its revolving credit facility by £40m and to continue to deliver on the share buyback programme, with half of the £40m being deployed in 2023. FSFL released guidance of a 6% y-o-y increase in its dividend (33% dividend growth since IPO) for FY24 at 8p/share (FY23: 7.55p/share) with dividend cover of 1.5x (FY23: 1.6x). There is significant headroom in the dividend cover to operate further out, even in a falling power price environment.
The sale of several large Renewables Obligation Certificate-backed solar portfolios in the UK provides a reliable benchmark for FSFL’s assets and what look like conservative management valuations. The latest sale of a UK solar asset indicates a value per megawatt roughly 15% above the valuation FSFL uses on its UK portfolio of £1.17m/MWh. This comes alongside the sale of two other UK solar portfolios in 2023, both at greater valuations than FSFL’s valuation per megawatt hour. We determine that there is a noticeable contrast between these private market transaction values, at premiums to holding values, compared to the market valuation of FSFL (23% discount to NAV). FSFL’s FY24 dividend target represents an 8.8% yield at the current share price with management forecasting 1.5x coverage.
All reports published by Edison are available to download free of charge from its website About Edison: Edison is a leading research and investor relations consultancy, connecting listed companies to the widest pool of global investors. By focusing on the volume and quality of investors reached – across institutions, family offices, wealth managers and retail investors – Edison can create and gauge intent to purchase, even in the darkest pools of capital, and then make introductions via non-deal roadshows, events or virtual meetings. Having been the first company in-market 17 years ago, Edison has more than 100 employees and covers every economic sector. Headquartered in London, Edison also has offices in New York, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison is not an adviser or broker-dealer and does not provide investment advice. Edison’s reports are not solicitations to buy or sell any securities. For more information, please contact Edison: Harry Kilby +44 (0)20 3681 5700 investmenttrusts@edisongroup.com Andrew Keen +44 (0)20 3077 5724 investmenttrusts@edisongroup.com Learn more at www.edisongroup.com and connect with Edison on: LinkedIn www.linkedin.com/company/edison-group-/ Twitter www.twitter.com/Edison_Inv_Res YouTube www.youtube.com/edisonitv
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1859009 14-March-2024
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