Q4 2023 Net Asset Value Update
8 February 2024
Foresight Solar Fund Limited
(the "Company", "Foresight Solar" or "FSFL")
Q4 2023 Net Asset Value Update
Foresight Solar, a sustainability-focused fund investing in solar and battery storage assets in the UK and internationally, announces that its unaudited net asset value (NAV) was £697.9 million as at 31 December 2023 (30 September 2023: £706.9 million). This results in a NAV per Ordinary Share of 118.4 pence (30 September 2023: 118.1 pence per share).
Highlights:
· The uplift from the sale of the Lorca portfolio stake at a 21% premium to holding value mitigated the negative impacts from updated power price forecasts and actual inflation.
· Proceeds from the Lorca transaction, along with free cash, were used to pay down debt, reducing the balance of the RCF to the previously announced £75 million target. Total gearing is now 38.8% of GAV and the Board intends to reduce leverage further through divestments.
· Foresight Solar continued its share buyback programme, providing a NAV uplift of 0.4 pence per share for the quarter. The Company has utilised £20 million for repurchases, resulting in NAV upside of 1.1 pence per share for the full year.
· FSFL closed 2023 with record cash distributions from underlying assets of £120.4 million.
· The Company is on target to deliver an annual dividend of 7.55 pence per share. Dividend cover was 1.61x for FY23. Net dividend cover for FY24 remains in line with previous guidance.
Summary of key NAV drivers:
|
Item |
Pence per share movement |
|
NAV on 30 September 2023 |
118.1p |
|
Lorca stake sale and revaluation |
+1.6p |
|
Power price, UK capture discount forecasts |
-1.1p |
|
Inflation |
-1.3p |
|
Share buyback programme |
+0.4p |
|
Other movements |
+0.7p |
|
NAV on 31 December 2023 |
118.4p |
In the first phase of Foresight Solar's divestment programme, the Company sold a 50% stake in the Lorca portfolio at a 21% premium to the third quarter holding value, leading to a 1.6 pence per share increase in NAV. This includes the value from the cash gain on the divestment and the revaluation of the remaining 50% of the portfolio. The deal was a clear example of FSFL's approach to capital recycling and its commitment to reduce variable interest rate debt.
Near term power price forecasts continued to trend down in most markets during the period, whilst a slight increase in medium to long-term estimates was observed across all geographies. When considered against the Company's well-hedged near-term position and reduced Electricity Generator Levy payments, the overall impact was negligible. In the fourth quarter, Foresight Solar also re-benchmarked its UK solar capture price assumptions against actual observed portfolio performance, resulting in a modestly more conservative forecast for potential discounts. The combination of these factors led to a 1.1pps downside to NAV.
At 6.5%, Foresight Solar's RPI inflation assumptions for 2023 proved to be above the year's final 5.2% measure. The inclusion of actual numbers in valuation models had a negative impact of 1.3pps to NAV. For 2024, the Company forecasts UK RPI inflation to be 3.5%, moderating to 3% between 2025 and 2030, before falling to 2.25% from 2031 onward.
The ongoing share buyback programme, which was extended to up to £40 million in Q3, delivered an additional 0.4pps of NAV accretion in the final three months of 2023, bringing the total benefit to shareholders to 1.1pps since the repurchases started in May 2023.
Other movements include an increased estimate of interest receipts on cash balances, tax adjustments, and the periodic impact of rolling forward the valuation. In total, these changes added 0.7pps to the net asset value.
Trading update
Stronger-than-expected operational performance in the UK and in Spain was countered by unusually high economic curtailment in Australia. Overall, electricity generated by the global portfolio was a modest 1.9% below budget for the year.
Portfolio valuation
The recent sales of significant ROC-backed portfolios in the UK offered a market benchmark for similar assets. The price at which the latest deal closed indicates a value per megawatt more than 10% above Foresight Solar's valuation of its own portfolio in the country. Further analysis will be provided in the Company's 2023 Annual Report.
Capital allocation
As announced in November, FSFL committed capital from its record cash distributions, in addition to the proceeds from the sale of the Lorca portfolio stake, to pay down £30 million of its variable-rate revolving credit facility, bringing the balance to £75 million.
The Investment Manager continues in discussions for the next phases of the c.200MW divestment programme, reflecting the Board's commitment to reduce debt further while also maintaining its active share buyback programme.
Power price hedging and dividend cover
The Investment Manager continues to forward-fix electricity sales at attractive rates under power purchase agreements and build on the proportion of contracted revenue. In the UK, which accounted for 89% of turnover, price fixes averaged £120.70/MWh across FY23 - compared to the mean N2EX day-ahead price of £94.20/MWh during the same period.
This active hedging strategy insulated Foresight Solar from falls in near-term merchant power prices during 2023. The Company remains on target to pay its full-year dividend, and the revenue stability and solid cash distribution provide confidence in a robust net dividend cover.
Gearing
The Gross Asset Value (GAV), including Company and subsidiaries, on 31 December 2023 was £1,140.5 million (30 September 2023: £1,196.0 million). Foresight Solar's total outstanding debt was £442.6 million, representing 38.8% of GAV (30 September 2023: 40.9%), comfortably within the 50% limit.
Dividend
The Company remains on target to deliver its 7.55 pence per share dividend for the year ending 31 December 2023. The Board's intention is to declare the last interim dividend payment of 1.895 pence per share with the annual report next month.
2023 annual results date
Foresight Solar expects to publish its annual results for the full year to 31 December 2023 on 12 March 2024. A Notice of Results announcement with more details will be released in due course.
For more information, follow Foresight Solar on LinkedIn or contact:
|
Foresight Group Matheus Fierro (fsflir@foresightgroup.eu)
|
+44 (0)20 3911 2318 |
|
Jefferies International Limited Gaudi Le Roux Harry Randall
|
+44 (0)20 7029 8000 |
|
Singer Capital Markets Robert Peel Alaina Wong
|
+44 (0)20 7496 3000 |
|
Powerscourt Justin Griffiths Gilly Lock |
+44 (0)20 7250 1446 |
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