Edison issues update on Foresight Solar Fund (FSFL): Generating solar power and cash
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Edison Investment Research Limited
London, UK, 30 October 2023
Edison issues update on Foresight Solar Fund (FSFL): Generating solar power and cash Foresight Solar Fund (FSFL) presents investors with an attractive dividend yield (8.6%), a 10-year track record of dividend growth (25% since IPO), strong cash dividend coverage (1.5x until at least 2025) and underlying revenue security (contracted revenue accounts for 90% of total revenue in 2023, 85% in 2024 and 75% in 2025). These appealing metrics are even more surprising given the fund operates in a structural growth industry. As FSFL reaches its 10-year anniversary, the competitiveness and opportunities in solar continue to grow. Like many of its peers, in a rising rate environment, it trades at a discount to NAV (26%), which we see as an attractive opportunity. FSFL’s yield is attractive given management’s confidence of a minimum dividend cover of 1.5x until at least 2025. FSFL continues to forward-fix its price exposure in the short and medium term, through contracted revenues and power purchase agreements (PPAs), providing greater revenue certainty. FSFL can fix power prices in six-month blocks, up to five years ahead via hedging. In addition, we argue that the market does not appreciate the value of FSFL’s potential pipeline and its ability to recycle capital from its current portfolio into higher return new opportunities. Investors have been attracted towards fixed income and money market products in a rising interest rate environment, although these present negative real investment returns. FSFL offers positive real yields, well covered by cash generation, and an ultimate end use with a strong structural growth story with a proportion of revenues linked to inflation that help support a growing dividend. FSFL is also trading at a 26% discount to NAV, offering an attractive entry point to investors.
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: Andrew Keen +44 (0)20 3077 5700 investmenttrusts@edisongroup.com Harry Kilby +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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1760489 30-Oct-2023
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