TIDMFSFL
Highlights
-- The first interim dividend of 3.0 pence per share was paid on 30
September 2014. The second interim dividend of 3.0 pence per share was
approved on 2 March 2015 and will be paid on 27 March 2015, bringing the
full period dividend to 6.0 pence.
-- The Directors have approved an increase in the frequency of dividend
payments from semi-annually to quarterly.
-- The Company's 231MW, ten asset UK solar portfolio is fully operational
following the recent grid connection and financial completion of the UK's
largest operating solar project, the 46MW Landmead asset in Oxfordshire.
-- The Company now owns and manages the largest operating UK solar portfolio
in its listed peer group, including four of the seven largest operational
UK solar plants.
-- The Company's portfolio of ten assets were all connected prior to the 31
March 2015 cut-off when the 1.4 Renewable Obligation Certificate ("ROC")
regime ends for projects greater than 5MWs. As the entire portfolio is
already operational, the assets are each generating income for the
benefit of the Company.
-- The Company maintains a low risk approach to the sector by seeking to
avoid blind pool, development and construction risk in its acquisition of
solar assets. This deliberate strategy minimises the exposure of its
investments to changes in regulation such as the accelerated introduction
of a cliff-edge deadline in March 2015 for ROC projects greater than 5MW.
-- Performance of the assets since their acquisition is in-line with the
expectations of the Investment Manager.
-- Financial completion of the tenth portfolio asset, Kencot, (which has a
binding agreement in place for its acquisition) is expected in the first
quarter of 2015.
-- The financial completion of the Kencot asset will utilise the remainder
of the Company's existing GBP100m acquisition facility.
-- The Company has announced the second placing of new Ordinary Shares under
the Placing Programme announced on 25 September 2014 in accordance with
the Prospectus.
Dividend Timetable
Ex-dividend Date: 12 March 2015
Record Date: 13 March 2015
Payment Date: 27 March 2015
Key Metrics
As at 31 December 2014
Share Price 104.25 pence
Number of Shares 208 million
Market Capitalisation GBP216.84 million
Dividends for the Period GBP4.50 million
Dividends for the Period per Share 3.0 pence
NAV GBP209.80 million
NAV per Share 100.90 pence
Total Return* 7.25%
*Based on Share price in period since IPO
Commenting on today's results, Alexander Ohlsson, Chairman of Foresight
Solar Fund Limited said:
""The Board and Foresight Group CI Limited, the Investment Manager,
believe that strong progress has been made in establishing the Company's
position on the UK listed market as a leading dedicated solar renewable
infrastructure company. This position is expected to strengthen further
once the exchanged contract to acquire the Kencot plant completes. This
continued growth in scale gives us confidence in achieving the original
objectives of the Company."
A conference call for analysts will be held at 9:00am on Tuesday 3 March
2015. A presentation will be provided separately prior to the call.
To register for the call please contact Malcolm Robertson at Citigate
Dewe Rogerson Malcolm.Robertson@citigatedr.co.uk or by phone: +44 (0)20
7282 2867.
For further information, please contact:
Foresight Group
Elena Palasmith
epalasmith@foresightgroup.eu +44 (0)203 667 8100
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Mark Bloomfield
Neil Winward
Tunga Chigovanyika
J.P. Morgan Cazenove +44 (0)20 7742 4000
William Simmonds
Notes to Editors
About Foresight Solar Fund Limited ("The Company" or "FSFL")
FSFL is a Jersey-registered closed-end investment company. The Company
invests in ground based UK solar power assets to achieve its objective
of providing Shareholders with a sustainable and increasing dividend
with the potential for capital growth over the long-term.
The Company raised proceeds of GBP150m through an initial public
offering ("IPO") of shares on the main market of the London Stock
Exchange in October 2013, and a further GBP60.1m through an Initial
Placing and Offer for Subscription in October 2014.
About Foresight Group
Foresight Group was established in 1984 and today is a leading
independent infrastructure and private equity investment manager with
over GBP1.3 billion of assets under management. As one of the UK's
leading solar infrastructure investment teams Foresight funds currently
manage c. GBP1 billion in over 40 separate operating Photovoltaic ("PV")
plants in the UK, the USA and southern Europe.
In May 2013 Foresight executed an innovative refinancing of its existing
UK solar assets through the issue of a GBP60m London Stock Exchange
listed index-linked Solar Bond.
Foresight Group has offices in London, Nottingham, Guernsey, Rome and
the USA.
www.foresightgroup.eu
Foresight Solar Fund Limited: Annual Results to 31 December 2014
Financial Highlights
For the period 13 August 2013 to 31 December 2014
-- Foresight Solar Fund Limited ("the Company") is a listed renewable
infrastructure company investing in ground based, operational solar power
plants, predominantly in the UK.
-- The Company raised proceeds of GBP150 million through an initial public
offering ("IPO") of shares on the main market of the London Stock
Exchange in October 2013, and a further GBP60.1 million through an
Initial Placing and Offer for Subscription in October 2014.
-- Net Asset Value ("NAV") per ordinary share of 100.9 pence at 31 December
2014, compared to 98.0 pence at IPO, a 3% increase.
-- The first interim dividend of 3.0 pence per share was paid on 30
September 2014. The second interim dividend of 3.0 pence per share was
approved on 2 March 2015 and will be paid on 27 March 2015, bringing the
full period dividend to 6.0 pence.
-- The Directors have approved an increase in the frequency of dividend
payments from semi-annually to quarterly.
-- The Company's 231MW, ten asset UK solar portfolio is fully operational
following the recent grid connection and financial completion of the UK's
largest operating solar project, the 46MW Landmead asset in Oxfordshire.
-- The Company now owns and manages the largest operating UK solar portfolio
in its listed peer group, including four of the seven largest operational
UK solar plants.
-- The Company's portfolio of ten assets were all connected prior to the 31
March 2015 cut-off when the 1.4 Renewable Obligation Certificate ("ROC")
regime ends for projects greater than 5MWs. As the entire portfolio is
already operational, the assets are each generating income for the
benefit of the Company.
-- The Company maintains a low risk approach to the sector by seeking to
avoid blind pool, development and construction risk in its acquisition of
solar assets. This deliberate strategy minimises the exposure of its
investments to changes in regulation such as the accelerated introduction
of a cliff-edge deadline in March 2015 for ROC projects greater than 5MW.
-- Performance of the assets since their acquisition is in-line with the
expectations of the Investment Manager.
-- Financial completion of the tenth portfolio asset, Kencot, (which has a
binding agreement in place for its acquisition) is expected in the first
quarter of 2015.
-- The financial completion of the Kencot asset will utilise the remainder
of the Company's existing GBP100m acquisition facility.
-- The Company has announced the second placing of new Ordinary Shares under
the Placing Programme announced on 25 September 2014 in accordance with
the Prospectus.
Key Metrics
As at 31 December 2014
Share Price 104.25 pence
Number of Shares 208 million
Market Capitalisation GBP216.84 million
Dividends for the Period GBP4.50 million
Dividends for the Period per Share 3.0 pence
NAV GBP209.80 million
NAV per Share 100.90 pence
Total Return* 7.25%
* Based on Share price in period since IPO.
Corporate Summary, Investment Objective and Dividends
Corporate Summary
Foresight Solar Fund Limited 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 Company has a single class of 208,000,000 Ordinary Shares in issue
of nil par value which are listed on the premium segment of the Official
List and traded on the London Stock Exchange's Main Market.
The Company's shareholders include a substantial number of institutional
investors.
Investment Objective
The Company seeks to provide investors with a sustainable and Retail
Price Index ("RPI") linked dividend together with the potential for
capital growth over the long-term through investment in a diversified
portfolio of predominantly UK ground based solar assets.
Investments outside the UK, and assets which are still under
construction when acquired, will be limited to 25 per cent. of the gross
asset value of the Company, calculated at the time of investment.
The Company is managed by an experienced team from Foresight Group, an
independent infrastructure and private equity investment management firm,
overseen by a strong, experienced and majority independent Board.
Dividends
The Company continues to target a 6.0 pence annual dividend per Ordinary
Share which is expected to increase in line with inflation, together
with a target unlevered Internal Rate of Return ("IRR") of between 7-8%,
net of all fees and expenses.
The first interim dividend of 3.0 pence per Ordinary Share for the
period under review was declared on 19 August 2014 and was paid on 30
September 2014. The second interim dividend of 3.0 pence per Ordinary
share was approved on 2 March 2015 and will be paid on 27 March 2015.
The Directors have approved an increase in the frequency of dividend
payments from semi-annually to quarterly. These are expected to be paid
in respect of the 3 months to 31 March, 30 June, 30 September and 31
December. The payment of dividends will remain subject to market
conditions and the Company's performance, financial position and
financial outlook.
Chairman's Statement
For the period 13 August 2013 to 31 December 2014
"The Board and Foresight Group CI Limited, the Investment Manager,
believe that strong progress has been made in establishing the Company's
position on the UK listed market as a leading dedicated solar renewable
infrastructure company. This position is expected to strengthen further
once the exchanged contract to acquire the Kencot plant completes. This
continued growth in scale gives us confidence in achieving the original
objectives of the Company."
Alexander Ohlsson, Chairman
Results
I am pleased to be able to report strong progress in the formation of
the Company's portfolio of solar investments, both before and following
the period end, which is more fully described in the Investment
Manager's Report. The Placing and Offer for Subscription pursuant to the
Prospectus published by Foresight Solar Fund Limited on 20 September
2013 proved attractive to investors with GBP150,000,000 having been
raised at the time the ordinary shares listed on 29 October 2013. A
further Placing and Offer for Subscription pursuant to the Prospectus
published by Foresight Solar Fund Limited on 25 September 2014 raised a
further GBP60.1 million in October 2014. The Company announced on 19
February 2015 that a further issue of shares under this placing
programme was due to take place during March 2015.
The NAV per Ordinary Share increased to 100.9 pence at 31 December 2014
from 98.0 pence per Ordinary Share at launch on 29 October 2013
(excluding the 3.0 pence per Ordinary Share dividend paid on 30
September 2014). The performance of the underlying portfolio is more
fully described in the Investment Manager's Report.
Dividend Policy
As noted in the Company's Prospectuses published on 20 September 2013
and 25 September 2014 and subject to market conditions, the Company's
performance, financial position and financial outlook, it is the
Directors' intention to pay a sustainable and RPI-linked level of
dividend income to Shareholders. Whilst not forming part of its
Investment Policy, the Company targeted the payment of an initial annual
dividend of 6.0 pence per Share from the year commencing 1 January 2014.
Given the nature of the Company's income streams, the Directors
anticipate being able to increase the dividend in line with Inflation in
the year commencing 1 January 2015.
The first interim dividend of 3.0 pence per Ordinary Share was paid on
30 September 2014. The dividend had a record date of 29 August 2014 and
an ex-dividend date of 27 August 2014.
I am pleased to announce that, as targeted in the Prospectus, the second
interim dividend of 3.0 pence per Ordinary Share will be paid on 27
March 2015. The dividend will have a record date of 13 March 2015 and an
ex-dividend date of 12 March 2015.
As previously announced and following discussions with the Company's
advisers, the Directors will increase the frequency of dividend
payments from semi-annually to quarterly commencing with the
quarterly payment to 31 March 2015 being made in Q2 2015.
The target dividend should not be taken as an indication of the
Company's expected future performance or results.
Share Issues
During the period from incorporation on 13 August 2013 to 31 December
2014, the Board allotted 150,000,000 Ordinary Shares at 100.0 pence per
share in October 2013 and 58,000,000 Ordinary Shares at 103.7 pence per
share in October 2014.
Valuation Policy
Investments held by the Company have been valued in accordance with IAS
39 and IFRS 13, using Discounted Cash Flow ("DCF") Principles. The
portfolio valuations are prepared by Foresight Group, reviewed and
approved by the Board quarterly and subject to audit as a minimum
annually.
Annual General Meeting
The Annual General Meeting ("AGM") was held on 4 February 2015 due to a
requirement to hold the first AGM within 18 months of incorporation at
which all of the resolutions proposed were duly passed. A separate
General Meeting to approve the Annual Report and Accounts and the
Directors' Remuneration Report and Policy will be held in due course.
Outlook
The Board and Foresight Group is encouraged that all of the GBP210
million of equity raised to date as well as the GBP100 million
acquisition facility, secured through Royal Bank of Canada ("RBC"),
Royal Bank of Scotland ("RBS") and Santander, will have been fully
invested following the financial completion of the Kencot asset,
expected in Q1 2015.
Although the UK Government has confirmed changes to the Renewable
Obligations ("RO") incentives from March 2015, the Board and Investment
Manager both believe that a combination of the investments made to date
and the pipeline of potential opportunities currently being considered,
together with the associated benefits of scale, will continue to provide
attractive returns to shareholders over the longer term.
Alexander Ohlsson
Chairman
2 March 2015
Acquisition Solar Construction Power Purchase Agreement ("PPA")
Asset Location Status MW ROCs Date Panels Technology Counterparty Counterparty
Operational
and November
Wymeswold Leicestershire accredited 32 2.0 2013 134,000 Polycrystalline Lark Energy Total
Operational
and
Castle Eaton Wiltshire accredited 18 1.6 June 2014 60,000 Polycrystalline SunEdison SmartestEnergy
Operational
and
Highfields Essex accredited 12 1.6 June 2014 40,000 Polycrystalline SunEdison SmartestEnergy
Operational
and
High Penn Wiltshire accredited 10 1.6 June 2014 34,000 Polycrystalline SunEdison SmartestEnergy
Operational
and
Pitworthy North Devon accredited 16 1.4 June 2014 49,000 Polycrystalline SunEdison SmartestEnergy
Operational
and September
Hunters Race West Sussex accredited 11 1.4 2014 41,000 Polycrystalline Hareon Solar Statkraft
Operational
and November Bester
Spriggs Farm Essex accredited 12 1.6 2014 50,000 Polycrystalline Generation Statkraft
Operational
and December
Bournemouth Dorset accredited 37 1.4 2014 146,000 Polycrystalline Goldbeck Total
Operational
and December
Landmead Oxfordshire accredited 46 1.4 2014 483,000 Thin film Belectric NEAS
Accredited
and
awaiting
Kencot Oxfordshire completion 37 1.4 Q1 2015 144,000 Polycrystalline Conergy Statkraft
Total 231
Investment Manager's Report
For the period 13 August 2013 to 31 December 2014
Foresight Group - The Investment Manager
Foresight Group is a privately owned leading infrastructure and private
equity Investment Manager. Foresight Group manages nine separate
dedicated Solar Funds valued at c.GBP1 billion totalling over 456MW of
existing operational capacity. The Solar team has been active since 2007
and consists of 26 investment professionals.
Foresight Group manages assets of over GBP1.3 billion, raised from
pension funds and other institutional investors, UK and international
private and high net-worth individuals and family offices.
Foresight's head office is located in The Shard at London Bridge with
further offices in Guernsey, Nottingham, Rome and San Francisco.
The Company
The Company's IPO on 24 October 2013 raised GBP150 million, creating the
largest dedicated solar investment company listed in the UK at the time.
In October 2014 a further 58 million shares were issued raising gross
proceeds of GBP60.1 million increasing the shares issued by the Company
to 208 million.
On 19 May 2014, the Company entered into a GBP100 million debt
acquisition facility. This facility has been partially drawn to fund the
acquisition of the Bournemouth asset. A further draw down will be made
to fund the acquisition of the Kencot asset on financial completion
which will utilise the remainder of the facility.
The acquisition of Kencot asset will not be recognised in the financial
statements until financial completion has been reached. The Company has
the contractual right to all revenue generated from the asset since the
start of its operations in September 2014 but the vendor has entered
into sale agreements contingent on certain conditions being met. It is
the prudent policy of the Company not to recognise acquisition or
revenue generation of assets until financial completion has been
achieved.
Investment Portfolio
The Investment Manager believes the portfolio of assets has been wholly
acquired at attractive pricing and offer manufacturer and geographical
diversification across the UK for the portfolio.
Crucially, the portfolio has been designed to deliver the target return
profile without taking unnecessary risk. This is defined as the
avoidance of construction risk which, in itself, can be managed
depending on the balance sheet strength of the construction contractor.
More difficult to manage is the risk of failing to meet the 31 March ROC
subsidy deadline which in 2015 is a cliff-edge deadline given the
acceleration of the Contracts for Difference ("CfD") mechanism for
projects greater than 5MWs after this date.
Foresight Group have deliberately set out to execute a low risk strategy
of avoiding construction and subsidy risk and have negotiated these
terms accordingly with large and experienced contractors. This avoids
unnecessary risk exposure for shareholders.
Portfolio Performance
Operational performance of the assets to date is in line with
expectations, with total portfolio electricity production of 86.1
Gigawatt Hours ("GWh") for the period. As the Wymeswold asset is the
only asset that has been under our operational management for a
significant proportion of the period, providing details of operational
performance across the whole portfolio would be less directly relevant
for the Company at this time.
Foresight Group's in-house technical team continue to focus on
increasing operational efficiencies across the portfolio. We do not
expect any short-term fluctuations in power generation to affect the
medium to long-term forecasts.
Investment Performance
The NAV at launch was 98.0 pence per share. The NAV per share as at 31
December 2014 had grown to 100.9 pence, with an interim dividend of 3.0
pence per share paid in September 2014.
A breakdown in the movement of the NAV is shown in the table below.
(GBPm)
IPO Proceeds 150.0
Equity Raise 60.2
Share Issue Costs (3.9)
Valuation: Power Price Movements (11.6)
Valuation: Discount Rate Adjustment 10.8
Valuation: Other Movements 7.1
Dividends (4.5)
Management Fee (1.9)
Finance Fee (2.5)
Other Costs (1.1)
Income 7.2
The changes in portfolio valuation have been mainly driven by the
following factors:
-- Power Price - Power prices during the period were lower than expected and
our long-term power price forecasts have also been reduced. This has led
to an absolute reduction in NAV, excluding all other factors. The Company
uses a blended average of the most recent forward power curve forecasts
from a number of providers in our NAV calculations and believe the recent
changes have now been appropriately reflected. It should also be noted
that our forecasts continue to assume an increase in power prices in real
terms over the medium to long-term.
-- Discount Rate - During the period, the Company reduced its average
discount rate applied to future cashflows by 0.2% to 7.8%, which has had
a positive impact on NAV. We believe this reduction has brought the
Company in line with the UK listed solar peer group, and more accurately
reflects the risk profile of the assets that have been acquired.
-- Other - During the period, the Company saw a reduction in operational
costs through the renewal of long-term contractual arrangements. This had
a positive impact on NAV.
Valuation of the Portfolio
The Investment Manager is responsible for providing fair market
valuations of the Group's assets to the Directors. The Directors review
and approve these valuations following appropriate challenge and
examination. Valuations are undertaken quarterly.
The current portfolio consists of non-market traded investments and
valuations are based on a DCF methodology. This methodology adheres to
both IAS 39 and IFRS 13 accounting standards.
It is the policy of the Investment Manager to value with reference to
DCF immediately following acquisition. This is partly due to the long
periods between agreeing an acquisition price and financial completion
of the acquisition. Quite often this delay incorporates construction as
well as time spent applying for, and achieving, ROC accreditation upon
which the Company's acquisition of assets is usually contingent upon.
Revenues generally accrue for the benefit of the purchaser, revenues
accrued do not form part of the DCF calculation when making a fair and
proper valuation until financial completion has been achieved.
A broad range of assumptions are used in our 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.
Valuation Sensitivities
Where possible, assumptions are based on observable market and technical
data. In many cases, such as the forward power price, we make use of
professional advisors to provide reliable and evidenced information
while often applying a more prudent approach to that of than our
information providers. We have set out the inputs we have ascertained
would have a material effect upon the NAV below. All sensitivities are
calculated independently of each other.
Discount Rate
The weighted average discount rate used is 7.8%. 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.
-0.5% -0.25% Base +0.25% +0.5%
Directors' valuation 239.17 244.11 249.19 254.48 259.94
NAV per share (pence) 96.1 98.4 100.9 103.4 106.0
Energy Yield
Base case assumptions are based on P50 forecasts (50 per cent
probability of exceedance) produced by market experts. P10 (10 per cent
probability of exceedance) and P90 (90 per cent probability of
exceedance) variances are given to offer comparison across the industry.
Energy yield is a function of solar irradiance and technical
performance.
P90 P10
(10 year) Base (10 year)
Directors' valuation 225.79 249.19 269.94
NAV per share (pence) 89.60 100.9 110.9
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
1.9%.
The Company's NAV sensitivity to power price movements is lessened due
to the fact that assets representing c.40% of the portfolio's
operational capacity benefit from fixed price arrangements under the
terms of their Power Purchase Agreements ("PPAs").
-20.0% -10.0% Base +10% +20%
Directors' valuation 222.46 236.01 249.19 261.39 272.82
NAV per share (pence) 88.0 94.5 100.9 106.8 112.2
Inflation
A variable of 1.0% is considered reasonable given historic fluctuations.
We assume inflation will remain constant at 2.5%.
-1.0% -0.5% Base +0.5% +1.0%
Directors' valuation 230.17 239.46 249.19 258.80 268.44
NAV per share (pence) 91.7 96.2 100.9 105.5 110.1
Operating Costs (investment level)
Operating costs include operating and maintenance ("O&M"), insurance and
lease costs. 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% -5% Base +5% +10%
Directors' valuation 243.39 246.31 249.19 252.03 254.75
NAV per share (pence) 98.1 99.5 100.9 102.2 103.6
Financial Results
The Company has prepared financial statements for the period from
incorporation to 31 December 2014. No meaningful activities took place
between incorporation and IPO. The period represents the first full
accounting period of the Company.
As at 31 December 2014, the NAV of the Company was GBP209.8 million or
100.9 pence per Ordinary share issued. Profit before tax for the period
was GBP8.1 million and earnings per share were 5.90 pence.
The Directors have satisfied themselves with the valuation methodology
including the underlying assumptions used and have approved the
portfolio valuation. Since inception, the Company has confirmed its
intent to deliver its target dividend of 6.0 pence per Ordinary Share in
respect of its first financial period. Strong underlying asset
performance and attractive pricing gives the Directors comfort that
target distribution levels will be met whilst maintaining capital in
real terms.
Ongoing Charges
The ongoing charges ratio for the period under review is 1.57 per cent.
This has been calculated using methodology as typically recommended by
the AIC.
Financing
The proposed acquisition facility outlined in the IPO Prospectus reached
financial close within the period for a total of GBP100 million provided
equally by RBC, RBS and Santander. This facility has been partly drawn
to fund the acquisition of the Bournemouth asset. A further draw will be
made to fund the acquisition of the Kencot asset on financial completion
which will utilise the remainder of the facility. It is expected that
the facility will be repaid through a combination of excess dividend
cover, further equity issuance and/or refinancing with a long-term debt
facility.
We expect the facility to be extended up to GBP140 million in Q1 2015,
with the full facility to be provided equally by RBS and Santander.
The Articles provide that gearing, calculated as borrowings as a
percentage of the Company's Gross Asset Value will not exceed 50% at the
time of drawdown. It is the Board's current intention that gearing,
calculated as borrowings as a percentage of the Company's Gross Asset
Value, will not exceed 40 per cent. at the time of drawdown. We would
expect long term debt may be introduced at an investment level over the
medium to long-term.
Alternative Investment Fund Management Directive ("AIFMD")
The AIFMD, which was implemented across the EU on 22 July 2013 with the
transition period ending 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.
Both the Company and the Investment Manager are located outside the EEA
but the Company's marketing activities in the UK are subject to
regulation under the AIFMD.
Risk Management
Reliance is placed on the internal systems and controls of external
service providers such as the Administrator and the Investment Manager
in order to effectively manage risk across the portfolio. The
identification, quantification and management of risk are central to the
role of the Investment Manager who, for this purpose, categorises risk
per the below. Operational risks at investment level are deemed key
risks due to the impact of operational performance on the fair value of
the investments.
Day-to-Day Risk Management Monitoring performance of contractors
Promoting safe, compliant and reliable operating
environments
Monitoring levels of solar irradiation
Review of insurances
Review of land and property, including lease negotiation
Environmental reviews, including health and safety
concerns
Review of technology (including suppliers, warranties
and quality)
Business and Strategic Risk Integration of risk management into key business processes
Management such as acquisition identification, performance management,
resource allocation
Monitoring economic factors including power prices,
interest rates and inflation
Monitoring political factors including tax and energy
subsidy legislation
Monitoring financial and technical reporting accuracy
and timeliness
The Board provide oversight to identify and mitigate
Corporate Oversight and Governance significant risks. The Board are responsible for monitoring
the Company's reliance on professional advisors
Monitoring potential conflicts of interest
Monitoring performance against financial objectives
Outlook
Financial completion of the Kencot asset is expected to take place
before the end of March 2015 and will be funded using the remainder of
the acquisition facility. The asset was connected to the grid in
September 2014 and received accreditation at the 1.4 ROC rate in
December 2014. Under the terms of the share purchase agreement agreed
with RWE, the cash flows generated by the asset since the time of
connection are being accrued at a project level for the benefit of the
Company.
The March 2015 1.4 ROC branding deadline for assets over 5MW has so far
driven large amounts of activity this year in terms of new capacity
being installed, with total UK solar capacity expected to reach
approximately 7GW by the end of the Quarter. This scale of UK installed
solar capacity has created an active market in large-scale secondary
assets, and as such we are reviewing a number of secondary
opportunities.
Following the March 2015 deadline, the ROC regime for assets over 5MW
will be replaced by the Contracts for Difference ("CfD") mechanism. The
results of the first CfD auction were released on 26 February 2015 with
five Solar PV projects being awarded contracts. We had expected a
limited number of solar projects to compete in this first auction as
developers focussed on the completion of ROC projects before the 31st
March 2015 deadline. Moving forward we expect to see more large scale
projects entering the auction process following the end of the ROC
subsidy for assets over 5MW and as installation costs in the UK solar
sector continue to decrease. This should lead to solar becoming cost
competitive with onshore wind in the short term, allowing for an
increase in CfD allocation in the next auction rounds. We continue to
work closely with developers to ensure that we are well placed to take
advantage of potential CfD projects in the future.
We also expect large portfolios of up to 5MW 1.3 ROC assets to deliver
significant pipeline volume going forward and have identified a strong,
near-term pipeline of such assets for connection from 1 April 2015.
The Company expects to benefit from the pipeline of projects outlined
above through the refinancing of the existing acquisition facility
alongside further equity issuances.
From 1 January 2015 the Directors will increase the frequency of
dividend payments from semi-annually to quarterly. The payment of
dividends will remain subject to market conditions and the Company's
performance, financial position and financial outlook.
Foresight Group CI Limited
Investment Manager
2 March 2015
Corporate Governance Report
The Board has considered the principles and recommendations of the AIC
Code of Corporate Governance (AIC Code) by reference to the AIC
Corporate Governance Guide for investment Companies (AIC Guide). The AIC
Code, as explained by the AIC Guide, addresses all the principles set
out in the UK Corporate Governance Code, as well as setting out
additional principles and recommendations on issues that are of specific
relevance to the Company.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide
(which incorporates the UK Corporate Governance Code), will provide
better information to shareholders. The Company has complied with the
recommendations of the AIC Code and the relevant provisions of the UK
Corporate Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating to:
-- The role of the Chief Executive
-- Executive Directors' remuneration
-- The need for an internal audit function
For the reasons set out in the AIC Guide, and as explained in the UK
Corporate Governance Code, the Board does not consider these provisions
to be relevant to the position of the Company, being an externally
managed investment company. In particular, all of the Company's
day-to-day management and administrative functions are outsourced to
third parties. As a result, the Company has no Executive Directors,
employees or internal operations. The Company has therefore not reported
further in respect of these provisions.
The Board
The Company has a Board of three Non-Executive Directors, two of whom
are considered to be independent. Peter Dicks is considered
non-independent under the listing rules by virtue of being a Director of
other Foresight Venture Capital Trusts ("VCTs") which are also managed
by Foresight Group.
Peter Dicks is a Director of Foresight VCT plc, Foresight 2 VCT plc,
Foresight 3 VCT plc and Foresight 4 VCT plc. Due to the different
investment focus of the Company the Board believes there to be no
conflict between the roles Mr Dicks performs. Where conflicts of
interest do arise between the different funds, the common Director would
seek to act fairly and equitably between different groups of
shareholders. If a conflict were to occur then decisions would be taken
by the independent Directors.
Division of Responsibilities
The Board is responsible to shareholders for the proper management of
the Company and Board meetings are held on at least a quarterly basis
with further ad hoc meetings scheduled as required. In the period under
review 16 Board meetings were held. The Board has formally adopted a
schedule of matters for which its approval is required, thus maintaining
full and effective control over appropriate strategic, financial,
operational and compliance issues. A Management Agreement between the
Company and the Manager sets out the matters over which the Manager has
authority, including monitoring and managing the existing investment
portfolio and the limits above which Board approval must be sought. All
other matters are reserved for the approval by the Board of Directors.
Individual Directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them in the
furtherance of their duties. In view of its Non-Executive nature and the
requirements of the Articles of Association that Directors retire by
rotation at the third Annual General Meeting after the AGM at which they
were elected, the Board considers that it is not appropriate for the
Directors to be appointed for a specific term as recommended by the AIC
Code.
Full details of duties and obligations are provided at the time of
appointment and are supplemented by further details as requirements
change. There is no formal induction programme for the Directors as
recommended by the AIC Code.
The Board has access to the officers of the Company Secretary who also
attend Board Meetings. Representatives of the Manager attend all formal
Board Meetings although the Directors may meet without the Manager being
present. Informal meetings with the Manager are also held between Board
Meetings as required. The Company Secretary
provides full information on the Company's assets, liabilities and other
relevant information to the Board in advance of each Board Meeting.
Attendance by Directors at Board and Committee meetings is detailed in
the table below.
Board Management Engagement & Remuneration Audit
Alex Ohlsson 15/16 1/1 2/2
Peter Dicks 15/16 1/1 2/2
Christopher Ambler 16/16 1/1 2/2
In the light of the responsibilities retained by the Board and its
Committees and of the responsibilities delegated to Foresight Group CI
Limited, JTC (Jersey) Limited and its legal advisors, the Company has
not appointed a Chief Executive Officer, Deputy Chairman or a Senior
Independent Non-Executive Director as recommended by the AIC Code. As
such, the provisions of the UK Corporate Governance Code which relate to
the division of responsibilities between a Chairman and a Chief
Executive Officer are not considered applicable to the Company.
Investment Manager
As an experienced multi-fund asset manager, Foresight Group has in place
established policies and procedures designed to address conflicts of
interest in allocating investments among its respective investment
funds.
Foresight Group is fully familiar with, and has extensive experience in
allocating investments, ensuring fair treatment for all investors and
managing conflicts of interest should these arise. Foresight Group is
keen to ensure such fair treatment for all investors. Under the rules
and regulations of the Guernsey Financial Services Commission ("GFSC"),
Foresight Group is also legally obliged to treat its investors fairly
and handle such conflicts in an open and transparent manner and such
processes are audited on an annual basis.
In terms of allocation, Foresight Group adheres to a formal written
policy for allocating new investments which are overseen by the Group's
Investment Committee and signed off by the CIO. Each available funding
opportunity is allocated pro-rata to the net amounts raised by each
Foresight Group managed fund with a sector and asset class investment
strategy matching the proposed investment. Where the allocation would
result in any Foresight Group managed fund having insufficient liquidity
or excessive portfolio concentration, or would fail to reach a
deployment deadline set by regulation or contract, the allocation is
revised accordingly.
Foresight Group's allocation policy is reviewed from time-to-time by the
independent Board of Directors of each of the Foresight Group funds and
has been operated successfully for many years. All investments are
allocated on pari passu terms. Foresight Group seek to ensure that the
interests of all clients are appropriately protected and that
investments are allocated and executed fairly.
After a full evaluation of the performance of the Investment Manager,
including review of assets purchased by the Company and the results of
ongoing portfolio management, it is the opinion of the Directors that
the continuing appointment of the Investment Manager on the terms
currently agreed is in the interests of the shareholders.
Board Committees
The Board has adopted formal terms of reference, which are available to
view by writing to the Company Secretary at the registered office, for
two standing committees which make recommendations to the Board in
specific areas.
The Audit Committee comprises Christopher Ambler (Chairman), Alexander
Ohlsson and Peter Dicks, all of whom are considered to have sufficient
financial experience to discharge the role. The Committee meets at least
twice a year to, amongst other things, consider the following:
-- Monitor the integrity of the financial statements of the Company and
approve the accounts;
-- Review the Company's internal control and risk management systems;
-- Make recommendations to the Board in relation to the appointment of the
external auditors;
-- Review and monitor the external Auditors' independence; and
-- Implement and review the Company's policy on the engagement of the
external Auditors to supply non-audit services.
KPMG LLP has completed the Company's external audit for the period and
has not performed any non-audit services during the year. Ernst & Young
LLP prepares all necessary tax returns following sign off of the annual
accounts.
The Management Engagement & Remuneration Committee, which has
responsibility for reviewing the remuneration of the Directors,
comprises Alexander Ohlsson (Chairman), Peter Dicks and Christopher
Ambler and meets at least annually to consider the levels of
remuneration of the Directors, specifically reflecting the time
commitment and responsibilities of the role. The Management Engagement &
Remuneration Committee also undertakes external comparisons and reviews
to ensure that the levels of remuneration paid are in line with industry
standards. The Management Engagement & Remuneration Committee also
reviews the appointment and terms of engagement of the Manager.
The Board believes that, as a whole, it has an appropriate balance of
skills, experience and knowledge. The Board also believes that diversity
of experience and approach, including gender diversity, amongst Board
members is important and it is the Company's policy to give careful
consideration to issues of Board balance and diversity when making new
appointments.
Copies of the terms of reference of each of the Company's committees can
be obtained from the Company Secretary upon request.
Board Evaluation
The Board undertakes an annual evaluation of its own performance and
that of its Committees through an initial evaluation questionnaire. The
Chairman then discusses the results with the Board and its Committees
and will take appropriate action to address any issues arising from the
process. The first evaluation will take place in 2015.
Relations with Shareholders
The Company communicates with shareholders and solicits their views when
it is considered appropriate to do so. Individual shareholders are
welcomed to the Annual General Meeting where they have the opportunity
to ask questions of the Directors, including the Chairman, as well as
the Chairman of the Audit, Remuneration and the Management Engagement &
Remuneration Committee. From time to time, the Board may also seek
feedback through shareholder questionnaires and through open invitations
for shareholders to meet the Investment Manager.
Internal Control
The Directors of the Company have overall responsibility for the
Company's system of internal controls and the review of their
effectiveness. The internal controls system is designed to manage,
rather than eliminate, the risks of failure to achieve the Company's
business objectives. The system is designed to meet the particular needs
of the Company and the risks to which it is exposed and by its nature
can provide reasonable but not absolute assurance against misstatement
or loss.
The Board's appointment of JTC (Jersey) Limited as accountant and
administrator has delegated the financial administration of the Company.
There is an established system of financial controls in place, to ensure
that proper accounting records are maintained and that financial
information for use within the business and for reporting to
shareholders is accurate and reliable and that the Company's assets are
safeguarded.
Directors have access to the advice and services of the Company
Secretary, who is responsible to the Board for ensuring that Board
procedures and applicable rules and regulations are complied with.
Pursuant to the terms of its appointment, Foresight Group invests the
Company's assets in infrastructure investments and have physical custody
of documents of title relating to the equity investments involved.
The Investment Manager confirms that there is a continuous process for
identifying, evaluating and managing the significant risks faced by the
Company. This has been in place for the period under review and up to
the date of approval of the Annual Report and financial statements, and
is regularly reviewed by the Board and accords with the guidance. The
process is overseen by the Investment Manager and uses a risk-based
approach to internal control whereby a test matrix is created that
identifies the key functions carried out by the Investment Manager and
other service providers, the individual activities undertaken within
those functions, the risks associated with each activity and the
controls employed to minimise those risks. A residual risk rating is
then applied. The Board is provided with reports highlighting all
material changes to the risk ratings and confirms the action that has or
is being taken. This process covers consideration of the key business,
operational, compliance and financial risks facing the Company and
includes consideration of the risks associated with the Company's
arrangements with professional advisors.
The Audit Committee has carried out a review of the effectiveness of the
system of internal control, together with a review of the operational
and compliance controls and risk management. The Audit Committee has
reported its conclusions to the Board which was satisfied with the
outcome of the review.
The Board monitors the investment performance of the Company in
comparison to its objective at each Board meeting. The Board also
reviews the Company's activities since the last Board meeting to ensure
that the Investment Manager adheres to the agreed investment policy and
approved investment guidelines and, if necessary, approves changes to
such policy and guidelines.
The Board has reviewed the need for an internal audit function. It has
decided that the systems and procedures employed by the Investment
Manager, the Audit Committee and other third party advisers
provide sufficient assurance that a sound system of internal control to
safeguard shareholders' investment and the Company's assets, is
maintained. In addition, the Company's financial statements are audited
by external Auditors and thus an internal audit function specific to the
Company is considered unnecessary.
Directors' Professional Development
Full details of duties and obligations are provided at the time of
appointment and are supplemented by further details as requirements
charge, although there is no formal induction programme for the
Directors as recommended by the AIC Code. Directors are also provided
with key information on the Company's policies, regulatory and statutory
requirements and internal controls on a regular basis. Changes affecting
Directors' responsibilities are advised to the Board as they arise.
Directors also participate in industry seminars.
Bribery Act 2010
The Company is committed to carrying out business fairly, honestly and
openly. The Investment Manager has established policies and procedures
to prevent bribery within its organisation.
Directors Remuneration Report
Introduction
The Board has prepared this report in line with the AIC code. An
ordinary resolution to approve this report will be put to the members at
the forthcoming Annual General Meeting.
The law requires the Company's Auditor, KPMG LLP, to audit certain of
the disclosures provided. Where disclosures have been audited, they are
indicated as such. The Auditor's opinion is included in the 'Independent
Auditor's Report.'
Annual Statement from the Chairman of the Management Engagement &
Remuneration Committee.
The Board, which is profiled below, consists solely of Non-Executive
Directors and considers at least annually the level of the Board's fees.
Consideration by the Directors of matters relating to Directors'
Remuneration
The Management Engagement & Remuneration Committee comprises three
Directors: Alexander Ohlsson (Chairman), Christopher Ambler and Peter
Dicks. The Committee has responsibility for reviewing the remuneration
of the Directors, specifically reflecting the time commitment and
responsibilities of the role, and meets at least annually. The Committee
also undertakes external comparisons and reviews to ensure that the
levels of remuneration paid are broadly in line with industry standards
and members have access to independent advice where they consider it
appropriate.
During the year neither the Board nor the Committee has been provided
with external advice or services by any person, but has received
industry comparison information from management in respect of the
Directors' remuneration. The remuneration policy set by the Board is
described below. Individual remuneration packages are determined by the
Remuneration Committee within the framework of this policy. The
Directors are not involved in deciding their own individual
remuneration.
Remuneration Policy
The Board's policy is that the remuneration of Non-Executive Directors
should reflect time spent and the responsibilities borne by the
Directors for the Company's affairs and should be sufficient to enable
candidates of high calibre to be recruited. The levels of Directors'
fees paid by the Company for the period ended 31 December 2014 were
agreed during the year. It is considered appropriate that no aspect of
Directors' remuneration should be performance related in light of the
Directors' Non-Executive status.
The Company's policy is to pay the Directors quarterly in arrears, to
the Directors personally (or to a third party if requested by any
Director). Mr Ohlsson's remuneration is paid to Carey Olsen Corporate
Services Jersey Limited. None of the Directors has a service contract
but, under letters of appointment dated 16th August 2013 may resign at
any time by mutual consent. No Compensation is payable to Directors
leaving office. As the Directors are not appointed for a fixed length of
time there is no unexpired term to their appointment but, as noted above,
the Directors will retire by rotation every year. It is the intention of
the Board that the above remuneration policy will, subject to
shareholder approval, come into effect immediately following the next
Annual General Meeting of the Company and will continue for the
financial year ended 31 December 2015 and subsequent years.
Shareholders' views in respect of Directors' remuneration are
communicated at the Company's Annual General Meeting and are taken into
account in formulating the Directors' remuneration policy.
Details of Individual Emoluments and Compensation
The emoluments in respect of qualifying services of each person who
served as a Director during the period and those forecast for the year
ahead are shown below. No Director has waived or agreed to waive any
emoluments from the Company in the period under review. No other
remuneration was paid or payable by the Company during the current
period nor were any expenses claimed by or paid to them other than for
expenses incurred wholly, necessarily and exclusively in furtherance of
their duties as Directors of the Company. The Company's Articles of
Association do not set an annual limit on the level of Directors' fees
but fees must be considered within the wider Remuneration Policy noted
above. Directors' liability insurance is held by the Company in respect
of the Directors.
Anticipated Directors' fees for the year ended Anticipated one off fees paid for additional services Audited Directors' fees for the period from 16th August
31 December 2015 in relation to the issuance of new 2013 to 31 December
equity during the year ended 2014
31 December 2015
Alexander GBP60,000 GBP10,000 GBP75,796
Ohlsson
(Chairman)
Christopher GBP45,000 GBP10,000 GBP55,122
Ambler
Peter Dicks GBP35,000 GBP10,000 GBP41,342
The Directors are not eligible for pension benefits, share options or
long-term incentive schemes.
Directors' Interests
Directors who had interests in the shares of the Company as at 31
December 2014 are shown below. There were no changes in the interests
shown as at 2 March 2015. The Directors do not have any options over
shares.
Ordinary shares of nil par value held at 31 December
2014
Alexander Ohlsson 25,000(1)
Christopher Ambler Nil
Peter Dicks 51,433
1 Includes 25,000 shares legally and beneficially owned by a
personal pension company.
Approval of Report
The Board will propose a resolution in the forthcoming AGM that the
remuneration of the Directors will remain at the levels shown above for
the year to 31 December 2015.
The Audit Committee Report
The Audit Committee is chaired by Christopher Ambler and comprises the
full Board. The Committee operates within clearly defined terms of
reference. The terms of reference were reviewed during the period under
review and were deemed appropriate.
Meetings are scheduled to coincide with the reporting cycle of the
Company and the committee has met twice in the period under review. The
function of the Committee is to ensure that the Company maintains the
highest standards of integrity, financial reporting, internal and risk
management systems and corporate governance and maintains an effective
relationship with the Company's Auditors. None of the members of the
Audit Committee has any involvement in the preparation of the financial
statements of the Company.
The Audit Committee is charged with maintaining an open relationship
with the Company's Auditors. The Chairman of the Audit Committee keeps
in regular contact with the Auditors throughout the audit process and
the Auditors attend the Audit Committee meeting at which the annual and
interim accounts are considered. The Committee reports directly to the
Board which retains the ultimate responsibility for the financial
statements of the Company.
Significant issues Considered
The Audit Committee has identified and considered the following key
areas of risk in relation to the business activities and financial
statements of the company:
-- Valuation and existence of unquoted investments. This issue was discussed
with the Investment Manager and the Auditor at the conclusion of the
audit of the financial statements, as explained below:
Valuation and Existence of Unquoted Investments
The most significant risk in the annual accounts is that of the
valuation of unquoted investments. There is an inherent risk of the
Investment Manager unfairly valuing investments due to the Investment
Managers fee being linked directly to the Net Asset Value of the
Company.
During the valuation process the Board and Audit Committee and the
Investment Manager follow the valuation methodologies for unlisted
investments as set out in the International Private Equity and Venture
Capital Valuation guidelines and appropriate industry valuation
benchmarks. These valuation policies are set out in Note 3 of the
accounts. These were then further reviewed by the Audit Committee. The
Investment Manager confirmed to the Audit Committee that the investment
valuations had been calculated consistently throughout the period and in
accordance with published industry guidelines, taking account of the
latest available information about investee companies and current market
data. Furthermore, the Investment Manager held discussions regarding the
investment valuations with the Auditors.
The Investment Manager has agreed the valuation assumptions with the
Audit Committee.
Key assumptions used in the valuation forecasts are detail in note 17 of
the financial statements. The Investment Manager has provided
sensitivities around those assumptions which are detailed in note 17.
The Investment Manager and Auditors confirmed to the Audit Committee
that they were not aware of any material misstatements. Having reviewed
the reports received from the Investment Manager and Auditors, the Audit
Committee is satisfied that the key areas of risk and judgement have
been addressed appropriately in the financial statements and that the
significant assumptions used in determining the value of assets and
liabilities have been properly appraised and are sufficiently robust.
The Audit Committee considers that KPMG LLP has carried out its duties
as Auditor in a diligent and professional manner.
During the year, the Audit Committee assessed the effectiveness of the
current external audit process by assessing and discussing specific
audit documentation presented to it in accordance with guidance issued
by the Auditing Practices Board. The audit partner is rotated every five
years ensuring that objectivity and independence is not impaired. This
is the first period end that both KPMG LLP and the audit partner has
been in place for. No tender for the audit of the Company has been
undertaken since this date. As part of its review of the continuing
appointment of the Auditors, the Audit Committee considers the need to
put the audit out to tender, its fees and independence from the
Investment Manager along with any matters raised during each audit.
The Audit Committee considered the performance of the Auditor during the
year and agreed that KPMG LLP continued to provide a high level of
service and maintained a good knowledge of the market, making sure audit
quality continued to be maintained.
Statement of Directors Responsibilities
The Directors of the Company have accepted responsibility for the
preparation of these non-statutory accounts for the period ended 31
December 2014 which are intended by them to give a true and fair view of
the state of affairs of the Company and of the profit or loss for that
period. They have decided to prepare the non-statutory accounts in
accordance with International Financial Reporting Standards as adopted
by the European Union ("EU").
In preparing these non-statutory accounts, the Directors have:
-- Selected suitable accounting policies and applied them consistently;
-- Made judgements and estimates that are reasonable and prudent;
-- Stated whether they have been prepared in accordance with IFRS as adopted
by the EU; and
-- Prepared the non-statutory accounts on the going concern basis as they
believe that the Company will continue in business.
The Directors have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
For and on behalf of the Board
Alexander Ohlsson
Chairman
2 March 2015
Directors
The Directors, who are Non-Executive and, other than Mr Dicks,
independent of the Investment Manager, are responsible for the
determination of the investment policy of the Company, have overall
responsibility for the Company's activities including its investment
activities and for reviewing the performance of the Company's portfolio.
The Directors are as follows:
Alexander Ohlsson (Chairman)
Mr Ohlsson is Managing Partner for 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 is the independent chairman of the States of
Jersey's Audit Committee and an Advisory Board member of Jersey Finance,
Jersey's promotional body. He is also a member of the Financial and
Commercial Law Sub-Committee of the Jersey Law Society which reviews as
well as initiates proposals for legislative changes. 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.
Christopher Ambler
Mr Ambler has been the Chief Executive of Jersey Electricity plc since 1
October 2008. He previously held various senior positions in the global
industrial, energy and materials sectors working for major corporations,
such as ICI/ Zeneca, the BOC Group and Centrica/British Gas as well as
in strategic consulting roles. Mr Ambler is 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.
Peter Dicks
Mr Dicks is currently a Director of a number of quoted and unquoted
companies. In addition, he was the Chairman of Foresight VCT plc and
Foresight 2 VCT plc from their launch in 1997 and 2004 respectively
until 2009 and since then he has continued to serve on both of these
boards. He is also on the Board of Foresight 3 VCT plc, Foresight 4 VCT
plc, Graphite Enterprise Trust plc and Mears Group plc. He is also
Chairman of Unicorn AIM VCT plc and Private Equity Investor plc.
Mr Dicks was appointed as a non-executive Director on 16 August 2013.
Environmental and Social Governance
Environmental
The Company invests in solar farms. The environmental benefits received
through the production of renewable energy are widely publicised.
Further to the obvious environmental advantages of large scale renewable
energy, each investment is closely scrutinised for localised
environmental impact. Where improvements can be made the Company will
work with planning and local authorities to minimise visual and auditory
impact of sites.
Biodiversity Assessments
During the period, the Investment Manager appointed Kent Wildlife to
explore the feasibility of maximising the biodiversity and wildlife
potential for all of its UK solar assets. The initial phase of the
initiative has involved undertaking site visits involving a walkover
survey and preliminary desktop ecological study. The results have been
used to prepare scoping reports which identify existing features of
wildlife importance and assess the opportunities for biodiversity
enhancements that each site offers.
These initial reports will be used for the preparation of a series of
site specific biodiversity enhancement and management plan to secure
long-term gains for wildlife. These assessments are still in progress
across the portfolio.
Social
Wymeswold Solar Farm was invited by the Solar Trade Association to open
its operations to visitors from local homes, schools, businesses and
community groups on 4 July 2014 as part of the nationwide Solar
Independence day event. The event formed part of an educational push to
communicate the benefits of solar and the need for more stable policy
support.
An educational visit to Hunters Race Solar Farm by a local college in
Chichester has been planned for March 2015 and we continue to actively
seek similar opportunities for the other assets within the portfolio.
The Investment Manager appointed a health and safety consultant to
review all portfolio assets to ensure they not only meet, but outclass,
industry and legal standards. Desktop assessments and site visits of the
solar assets are underway.
Foresight Group is a signatory to the United Nations-supported
Principles for Responsible Investment ("UNPRI"). The UNPRI is a global,
collaborative network of investors established in 2006.
Independent Auditor's Report to the Members of Foresight Solar Fund
Limited only
Independent Auditor's Report
Opinions and conclusions arising from our audit
1 Our opinion on the Group Financial Statements is unmodified
We have audited the Group Financial Statements of Foresight Solar Fund
Limited for the period from 13 August 2013 (date of incorporation) to 31
December 2014 which comprise the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Financial Position, the
Consolidated Statement of Changes in Equity, the Consolidated Statement
of Cash Flows and the related notes on below. In our opinion, the Group
Financial Statements:
-- give a true and fair view of the Group's affairs as at 31 December 2014,
and of its profit for the period then ended;
-- have been properly prepared in accordance with International Financial
Reporting Standards as adopted by the European Union; and
-- have been properly prepared in accordance with the Companies (Jersey) Law
1991.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the
risk of material misstatement that had the greatest effect on our audit
was as follows:
Valuation of Unquoted Investments: GBP249.19m
Refer to (Audit Committee Report), note 2 (accounting policy) and
(Financial Statements).
The risks: 94% of the Group's total assets (by value) is held in
investments where no quoted market price is available. Unquoted
investments are measured at fair value which is established in
accordance with the International Private Equity and Venture Capital
Valuation Guidelines by using discounted cash flow measurements. There
is a significant risk over the valuation of these investments and this
is the key judgemental area that our audit focused on.
Our response: Our procedures included:
-- Documenting and assessing the design and implementation of the investment
valuation processes and controls in place.
-- Challenging the Investment Manager on key judgements affecting the
investee company valuations in the context of observed industry best
practice and the provisions of the International private Equity and
Venture Capital Valuation Guidelines. In particular, we challenged the
appropriateness of the valuation basis selected as well as underlying
assumptions, such as energy yield, power price, costs and inflation rates
which produce the cash flow projections and the appropriate discount
factors. We compared key underlying financial data inputs to external
sources and management information as applicable. We challenged the
assumptions around the sustainability of earnings based on the plans of
the investee companies and whether these are achievable, and we obtained
an understanding of existing and prospective investee company cash flows
to understand whether borrowings can be serviced or refinancing may be
required. Our work included consideration of events which incurred
subsequent to the year end up until the date of this audit report.
-- Attending the year end Audit Committee meeting where we assessed the
effectiveness of the Audit Committee's challenge and approval of unlisted
investment valuations; and
-- Consideration of the appropriateness, in accordance with relevant
accounting standards, of the disclosures in Note 17 in respect of
unquoted investments and the effect of changing one or more inputs to
reasonably possible alternative valuation assumptions.
3 Our application of materiality and an overview of the scope of our
audit
The materiality for the Financial Statements as a whole was set at
GBP5.29 million. This was determined using a benchmark of Total Assets
(of which it represents 2%). Total Assets which is primarily composed of
the Company's capital and revenue performance and, as such, we consider
it to be one of the principal considerations for members of the Company
in assessing the financial performance of the Company.
In addition, we applied a materiality of GBP0.57 million to income from
investments for which we believe misstatements of lesser amounts than
materiality as a whole could be reasonably expected to influence the
economic decisions of the members of the Company taken on the basis of
the Financial Statements.
We report to the Audit Committee any corrected and uncorrected
identified misstatements exceeding GBP265,000, in addition to other
audit misstatements that warrant reporting on qualitative grounds.
The Group audit team performed the audit of the Group as if it was a
single aggregated set of financial information. The audit was performed
using the materiality level set out above and covered 100% of total
Group revenue,
Group profit before tax and total Group assets, and was performed at
Foresight Group, the Shard, 32 London Bridge Street, London, SE1 9SG.
4 We have nothing to report in respect of the matters on which we are
required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based
on the knowledge we acquired during our audit, we have identified other
information in the annual report that contains a material inconsistency
with either that knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
-- we have identified material inconsistencies between the knowledge we
acquired during our audit and the Directors' statement that they consider
that the annual report and financial statements taken as a whole is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Group's performance, business model and
strategy; or
-- the Audit Committee Report does not appropriately address matters
communicated by us to the audit committee.
-- Under the Companies (Jersey) Law 1991 we are required to report to you if,
in our opinion:
-- proper accounting records have not been kept by the Company; or
-- the Company's accounts are not in agreement with the accounting records;
or
-- we have not received all the information and explanations we require for
our audit.
Under the Listing Rules we are required to review the part of the
Corporate Governance Statement on below relating to the Company's
compliance with the ten provisions of the 2012 UK Corporate Governance
Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors' Responsibilities Statement set
out above, the Directors are responsible for the preparation of Group
financial statements which give a true and fair view. Our responsibility
is to audit, and express an opinion on, the Group financial statements
in accordance with applicable law and international Standards of
Auditing (UK and Ireland). Those standards require us to comply with the
UK Ethical Standards for Auditors.
Scope of an audit of financial statements performed in accordance with
ISAs (UK and Ireland)
A description of the scope of an audit of financial statements is
provided on our website at www.kpmg.com/ uk/auditscopeukco2014. This
report is made subject to important explanations regarding our
responsibilities, as published on that website, which are incorporated
into this report as if set out in full and should be read to provide an
understanding of the purpose of this report, the work we have undertaken
and the basis of our opinions.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body, in
accordance with Article 113A of the Companies (Jersey) Law 1991. Our
audit work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company and the Company's members, as a body, for our audit work, for
this report, or for the opinions we have formed.
Jatin Patel (Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants and Recognised Auditor
15 Canada Square London
E14 5GL
2 March 2015
Consolidated Statement of Comprehensive Income
For the period 13 August 2013 to 31 December 2014
Period
13 August 2013
to
31 December
2014
Notes GBP
Continuing operations
Revenue
Interest revenue 4 7,206,401
Gains on investments at fair value through profit
or loss 16 6,353,929
Total revenue 13,560,330
Expenditure
Finance costs 5 (2,473,614)
Management fees 6 (1,920,972)
Administration and accountancy expenses 7 (147,922)
Launch costs 8 (339,044)
Directors' fees 9 (172,260)
Other expenses 10 (399,295)
Total expenditure (5,453,107)
Profit before tax for the period 8,107,223
Taxation 11 -
Profit and total comprehensive income for the period. 8,107,223
Earnings per Ordinary Share (pence per share) 12 5.90
All items above arise from continuing operations,
there have been no discontinuing operations during
the period. This is the the first period since incorporation
and as such no comparative figures are provided.
The accompanying notes on below form an integral part
of these Consolidated Financial Statements
Consolidated Statement of Financial Position
As at 31 December 2014
31 December
2014
Notes GBP
Assets
Non-current assets
Investments held at fair value through profit or loss 16 249,190,000
Total non-current assets 249,190,000
Current assets
Trade and other receivables 13 8,636,531
Cash and cash equivalents 14 6,768,491
Total current assets 15,405,022
Equity
Retained earnings 3,607,223
Stated capital 18 206,225,694
Total equity 209,832,917
Liabilities
Non-current liabilities
Long-term borrowings 21 48,105,000
Total non-current liabilities 48,105,000
Current liabilities
Trade and other payables 15 6,657,105
Total current liabilities 6,657,105
Total liabilities 54,762,105
Total Equity and Liabilities 264,595,022
Net Asset Value ("NAV") per Ordinary Share (GBP) 19 1.01
The Consolidated Financial Statements on were approved
by the Board of Directors and signed on its behalf
on 2 March 2015 by:
Christopher Ambler
Director
This is the the first period since incorporation and as such no
comparative figures are provided.
The accompanying notes below form an integral part of these Consolidated
Financial Statements.
Consolidated Statement of Changes in Equity
For the period 13 August 2013 to 31 December 2014
Retained
Stated Capital Earnings Total
Notes GBP GBP GBP
Balance as at 13 August 2013 - - -
Total comprehensive income for the period:
Profit for the period - 8,107,223 8,107,223
Transactions with owners, recognised
directly in equity:
Dividends paid in the period - (4,500,000) (4,500,000)
Issue of Ordinary Shares 18 210,146,000 - 210,146,000
Capitalised issue costs 18 (3,920,306) - (3,920,306)
Balance as at 31 December 2014 206,225,694 3,607,223 209,832,917
This is the first period since incorporation and as
such no comparative figures are provided.
The accompanying notes below form an integral part
of these Consolidated Financial Statements
Consolidated Statement of Cash Flows
For the period 13 August 2013 to 31 December 2014
Period
13 August 2013
to 31 December
2014
GBP
Profit for the period after tax from continuing operations 8,107,223
Adjustments for:
Unrealised gains on investments (6,353,929)
Investment income (7,189,815)
Finance costs 2,473,614
Operating cash flows before movements in working capital (2,962,907)
Decrease in trade and other receivables (23,676)
Increase in trade and other payables 643,860
Net receipts from investments 153,748
Investment income 2,728,661
Net cash outflow from operating activities 539,686
Investing activities
Advances for future investments (154,892)
Acquisition of investments (241,276,325)
Net cash outflow from investing activities (241,431,217)
Financing activities
Dividends paid (4,500,000)
Finance costs paid (2,141,001)
Bank facility drawn down 50,205,000
Repayment of bank facility drawn down (2,100,000)
Net excess launch costs paid (29,671)
Capitalised issue costs paid (3,920,306)
Proceeds from issues of shares 210,146,000
Net cash inflow from financing activities 247,660,022
Net increase in cash and cash equivalents 6,768,491
Cash and cash equivalents at beginning of period -
Effects of foreign exchange rates -
Cash and cash equivalents at end of period 6,768,491
This is the the first period since incorporation and
as such no comparative figures are provided.
The accompanying notes on below form an integral part of these
Consolidated Financial Statements.
Notes to the Consolidated Financial Statements
For the period 13 August 2013 to 31 December 2014
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:
Elizabeth House, 9 Castle Street, St Helier, Jersey, JE2 3RT.
The Company has one investment, Foresight Solar (UK Hold Co) Limited
("UK Hold Co"). UK Hold Co invests in further holding companies (the
"SPVs") which then invest in the underlying investments.
The principal activity of the Company and UK Hold Co (together "the
Group") is investing in operational UK ground based solar power plants.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
Consolidated Financial Statements (the "Financial Statements") are set
out below.
2.1 Basis of preparation
The Financial Statements of the Group have been prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union ("IFRS") which comprise standards and interpretations
issued by the International Accounting Standards Board ("IASB"), and
International Accounting Standards and Standing Interpretations approved
by the International Financial Reporting Interpretation Committee that
remain in effect and to the extent they have been adopted by the
European Union. The Financial Statements have been prepared on the
historical cost convention as modified for the measurement of certain
financial instruments at fair value through profit or loss and in
accordance with the provisions of the Companies (Jersey) Law 1991.
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
Group's accounting policies. 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. Judgements made by management in the
application of IFRS that have a significant effect on the Financial
Statements and estimates with a significant risk of material adjustment
in the next year are disclosed in note 3.
2.2 Comparative information
There are no comparative figures within these Financial Statements as
there is no comparable period as defined in IAS 1 paragraph 38 given the
Group was created on 13 August 2013.
2.3 Going concern
The Directors have considered the Group's cash flow projections for a
period of no less than twelve months from the date of approval of these
consolidated Financial Statements together with the Group's borrowing
facilities. These projections show that the Group will be able to meet
its liabilities as they fall due.
The Directors have therefore prepared the Financial Statements on a
going concern basis.
2.4 Changes in accounting policies and disclosures
Application of new and revised International Financial Reporting
Standards ("IFRSs")
As this is the Group's first period of preparing Financial Statements
there are no new/revised standards relevant to the Group which have been
adopted in the preparation of these Financial Statements given that
there are no comparative amounts as stated in note 2.2 above.
2 Summary of significant accounting policies (continued)
2.4 Changes in accounting policies and disclosures (continued)
New and revised IFRSs in issue but not yet effective
The Group has chosen to early adopt the following amendment in the
preparation of the Financial Statements which has a material impact on
the Group.
-- 'Investment Entities' (Amendments to IFRS 10, IFRS 12 and IAS 27)
(effective for accounting periods commencing on or after 1 January 2013,
EU endorsement from 1 January 2014'). An exemption from consolidation of
subsidiaries is now provided under the amended IFRS 10 'Consolidated
Financial Statements' for entities which meet the definition of an
'investment entity'. Instead, investments in particular subsidiaries are
measured at fair value through profit or loss in accordance with IFRS 9
'Financial Instruments' or IAS 39 'Financial Instruments: Recognition and
Measurement'. See note 2.5 for further details.
-- At the date of authorisation of these Financial Statements, the following
standards and interpretations, which have not been applied in these
Financial Statements, were in issue but not yet effective:
-- IFRS 9, 'Financial Instruments - Classification and Measurement'. There
is currently no mandatory effective date, however the IASB has
tentatively proposed that this will be effective for accounting periods
commencing on or after 1 January 2018 (EU endorsement is outstanding).
New and revised IFRSs in issue but not yet effective (continued)
-- Amendment to IAS 32 'Offsetting Financial Assets and Financial
Liabilities'. This amendment is effective for accounting periods
commencing on or after 1 January 2014.
-- Amendments to IFRS 7 and IFRS 9 'Mandatory Effective Date and
Transition Disclosures'. These amendments are effective for accounting
periods commencing on or after 1 January 2015.
These standards and interpretations will be adopted when they become
effective.
The Directors are currently assessing the impact of these standards and
interpretations on the Financial Statements and anticipate that the
adoption of the majority of these standards and interpretations in
future periods will not have a material impact on the Financial
Statements or results of the Company.
2.5 Consolidation
Subsidiaries
All subsidiaries are entities over which the Group has control. The
Group controls an entity when the Group 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.
As discussed in note 1, the Company has one investment, a 100%
controlling interest in UK Hold Co. UK Hold Co itself invests in holding
companies (the SPVs) which then invest in the underlying investments.
The Group has elected to early adopt the 'Investment Entities' amendment
to IFRS 10 "Consolidated Financial Statements" which relieves an entity
that meets the definition of an 'investment entity' of the obligation to
produce a consolidated set of financial statements. As a result, the
Group does not consolidate the SPVs but carries them 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 obtain 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
2 Summary of significant accounting policies (continued)
2.5 Consolidation (continued)
-- It measures and evaluates the performance of substantially all of its
investments on a fair value basis The Company has consolidated its
holding in UK Hold Co for the purposes of these Consolidated Financial
Statements as UK Hold Co provides investment related services to the
Company and is viewed as being simply an extension of the investment
entity's investing activities. The Company does not meet all the defined
criteria of an 'investment entity' as the Company only has one
investment. However, Management deem that the Company is nevertheless an
'investment entity' as the remaining requirements have been met and,
through UK Hold Co, there is a diverse investment portfolio which will
fill the criteria of having more than one investment. UK Hold Co does not
meet all the defined criteria of an 'investment entity' as it is 100%
owned by the Company. However, Management deem that UK Hold Co is
nevertheless an 'investment entity' as the remaining requirements have
been met and the Company that holds 100% of the share capital has a
number of investors. Therefore, the Group meets the requirements of
an 'investment entity'. The Group accounts for its subsidiaries at
fair value through profit or loss in accordance with IAS 39 "Financial
Statements: Recognition and Measurement". The financial assets at fair
value through profit or loss carried in the Consolidated Statement of
Financial Position represent the Group's investments in the SPVs as
described above. See note 16 for more detail on the investments held at
fair value through profit or loss.
Details of the undertakings which the Company held as at 31 December
2014 are listed below:
Proportion
Direct or of shares
indirect Country of Principal and voting
Name holding incorporation activity rights held
Foresight Solar
(UK Hold Co) Holding
Limited Direct United Kingdom Company 100%
FS Wymeswold
Limited Indirect United Kingdom SPV 100%
FS Castle Eaton
Limited Indirect United Kingdom SPV 100%
FS Pitworthy
Limited Indirect United Kingdom SPV 100%
FS Highfields
Limited Indirect United Kingdom SPV 100%
FS High Penn
Limited Indirect United Kingdom SPV 100%
FS Hunter's Race
Limited Indirect United Kingdom SPV 100%
FS Spriggs Limited Indirect United Kingdom SPV 100%
FS Bournemouth
Limited Indirect United Kingdom SPV 100%
FS Landmead
Limited Indirect United Kingdom SPV 100%
Wymeswold Solar
Farm Limited
("Wymeswold
Solar") Indirect United Kingdom Investment 100%
Castle Eaton Solar
Farm Limited
("Castle Eaton
Solar") Indirect United Kingdom Investment 100%
Pitworthy Solar
Farm Limited
("Pitworthy
Solar") Indirect United Kingdom Investment 100%
Highfields Solar
Farm Limited
("Highfields
Solar") Indirect United Kingdom Investment 100%
High Penn Solar
Farm Limited
("High Penn
Solar") Indirect United Kingdom Investment 100%
Hunter's Race
Solar Farm Limited
("Hunter's
Race Solar") Indirect United Kingdom Investment 100%
Spriggs Solar Farm
Limited ("Spriggs
Solar") Indirect United Kingdom Investment 100%
Bournemouth Solar
Farm Limited
("Bournemouth
Solar") Indirect United Kingdom Investment 100%
Landmead Solar
Farm Limited
("Landmead
Solar") Indirect United Kingdom Investment 100%
The direct subsidiary (UK Hold Co) is included in these Consolidated
Financial Statements; the indirect subsidiaries are held at fair value
through profit or loss as the Group meets the definition of an
'investment entity' under IFRS 10.
2 Summary of significant accounting policies (continued)
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources
and assessing performance of the operating segments, has been identified
as the Board of Directors, as a whole. For management purposes, the
Group is organised into one main operating segment. All of the Group's
income derives from the United Kingdom and Jersey. All of the Group's
non-current assets are located in the United Kingdom.
2.7 Income
Income comprises interest income (bank interest and loan interest) and
dividend income. Interest income is recognised when it is probable that
the economic benefits will flow to the Group and the amount of revenue
can be measured reliably. Loan interest income is accrued on a time
basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial
recognition.
Dividend income is recognised on the date that the related investments
are marked ex-dividend. Dividends receivable on equity shares where no
ex-dividend date is quoted are brought into account when the Company's
right to receive payment is established.
2.8 Expenses
Operating expenses are the Group's costs incurred in connection with the
on-going management of the Company's investments and administrative
costs. Operating expenses are accounted for on an accruals basis.
The Group's management and administration fees, finance costs and all
other expenses are charged through the Consolidated Statement of
Comprehensive Income.
Acquisition costs of assets are capitalised on purchase of assets.
Costs directly relating to the issue of Ordinary Shares are charged to
the Group's stated capital reserve.
2.9 Taxation
The Company is currently registered in Jersey. The Company is taxed at
0% which is the general rate of corporate tax in Jersey.
UK Hold Co is a UK registered company and as such is subject to
corporation tax at the small profits rate of 20%.
Current tax arising in jurisdictions other than Jersey is based on
taxable profit for the period and is calculated using tax rates that
have been enacted or substantially enacted.
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from net profit as reported in the Consolidated
Statement of Comprehensive Income because it excludes items of income
and expense that are taxable or deductible in other periods or that are
never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted by the year-end date.
Deferred tax is the tax arising on differences on the carrying amounts
of assets and liabilities in the Financial Statements and the
corresponding tax bases used in the computation of taxable profit, and
is accounted for using the liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where the
Group is able to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the near
future.
2 Summary of significant accounting policies (continued)
2.9 Taxation (continued)
The carrying amount of deferred tax assets is reviewed at each year end
date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the
asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset realised.
Deferred tax is charged or credited in the consolidated statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
2.10 Foreign currency translation
(a) Functional and presentational currency
The Directors consider the Group's functional currency to be Pounds
Sterling ("GBP") as this is the currency in which the majority of the
Group's assets and liabilities and significant transactions are
denominated. The Directors have selected GBP as the Group's presentation
currency.
(b) Transactions and balances
Transactions in currencies other than GBP are recorded at the rates of
exchange prevailing on the dates of the transactions. At each year-end
date, monetary assets and liabilities that are denominated in foreign
currencies are revalued at the rates prevailing at the year-end date.
Non-monetary assets and liabilities carried at fair value which are
denominated in foreign currencies are revalued at the rates prevailing
at the date when the fair value was determined. Gains and losses arising
on revaluation are recognised in the Consolidated Statement of
Comprehensive Income.
2.11 Financial assets
2.11.1 Classification
The Group classifies its financial assets in the following categories:
at fair value through profit or loss; and loans and receivables. The
classification depends on the nature and purpose for which the financial
assets and is determined at the time of initial recognition by
Management.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss comprise the
investments made in the SPVs. Assets in this category are classified as
current assets if they are expected to be settled within 12 months,
otherwise they are classified as non-current.
(b) Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
comprise trade and other receivables and cash and cash equivalents.
2.11.2 Recognition and measurement
Purchases and sales of financial assets are recognised on the trade-date
(the date on which the Group commits to purchase or sell the asset).
Investments are initially recognised at fair value, being the
consideration given. It is the policy of the Investment Manager to value
with reference to discounted cash flows immediately following
acquisition. Investments treated as 'financial assets at fair value
through profit or loss' are subsequently measured at fair value. Loans
and receivables are initially recognised at fair value plus transaction
costs that are directly attributable to the acquisition, and
subsequently carried at amortised cost using the effective interest rate
method, less provision for impairment. The effect of discounting on
these financial assets is not considered to be material. Financial
assets (in whole or in part) are derecognised either:
-- when the Group has transferred substantially all the risks and rewards of
ownership; or
-- when it has neither transferred nor retained substantially all the risks
and rewards and when it no longer has control over the assets or a
portion of the asset; or
-- when the contractual right to receive cash flow has expired.
Fair value is defined as the amount for which an asset could be
exchanged between knowledgeable willing parties in an arm's length
transaction. The Directors base the fair value of the investments based
on information received from the Investment Manager. The Investment
Manager's assessment of fair value of investments is determined in
accordance with IAS 39 and IFRS 13, using unlevered Discounted Cash Flow
principles (unless a more appropriate methodology is applied).
2 Summary of significant accounting policies (continued)
2.11 Financial assets (continued)
Gains or losses arising from changes in the fair value of the 'financial
assets at fair value through profit or loss' category are presented in
the Consolidated Statement of Comprehensive Income within 'gains/
(losses) on investments at fair value through profit or loss' in the
period in which they arise. Dividend income from financial assets at
fair value through profit or loss is recognised in the Consolidated
Statement of Comprehensive Income as part of other income when the
Group's right to receive payments is established.
2.12 Financial liabilities
Financial liabilities consist of trade and other payables and bank
loans. The classification of financial liabilities at initial
recognition depends on the purpose for which the financial liability was
issued and its characteristics. All financial liabilities are initially
recognised at fair value net of transaction costs incurred. All
purchases of financial liabilities are recorded on trade date, being the
date on which the Group becomes party to the contractual requirements of
the financial liability. Unless otherwise indicated the carrying amounts
of the Group's financial liabilities approximate to their fair values.
The Group's financial liabilities only consist of only financial
liabilities measure at amortised cost.
2.12.1 Financial liabilities measured at amortised cost
These include trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest rate method.
2.12.2 Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when the
Group has extinguished its contractual obligations, it expires or is
cancelled. Any gain or loss on derecognition is taken to the
Consolidated Statement of Comprehensive Income.
2.12.3 Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums
payable on settlement or redemption and direct issue costs, are
accounted for on an accruals basis in the Consolidated Statement of
Comprehensive Income using the effective interest rate method and are
added to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
2.13 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported
in the Statement of Financial Position when there is a legally
enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis or realise the asset and settle the
liability simultaneously.
2.14 Impairment of financial assets
Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is
objective evidence that a financial asset or group of financial assets
is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that occurred
after the initial recognition of the asset (a 'Loss Event') and that
Loss Event (or Events) has an impact on the estimated future cash flows
of the financial asset or group of financial assets that can be reliably
estimated.
Evidence of impairment may include indications that a debtor or a group
of debtors is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganisation, and where
observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
For loans and receivables category, the amount of the loss is measured
as the difference between the asset's carrying amount and the present
value of estimated future cash flows (excluding future credit losses
that have not been incurred) discounted at the financial asset's
original effective interest rate. The carrying amount of the asset is
reduced and the amount of the loss is recognised in the Statement of
Comprehensive Income. If a loan or held-to-maturity investment has a
variable interest rate, the discount rate for measuring any impairment
loss is the current effective interest rate determined under the
contract. As a practical expedient, the Group may measure impairment on
the basis of an instrument's fair value using an observable market
price.
2 Summary of significant accounting policies (continued)
2.14 Impairment of financial assets (continued)
If, in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring after
the impairment was recognised (such as an improvement in a debtor's
credit rating), the reversal of the previously recognised impairment
loss is recognised in the Consolidated Statement of Comprehensive
Income.
2.15 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and
other short-term highly liquid investments with an original maturity of
three months or less that are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.
2.16 Trade payables
Trade payables are obligations to pay for goods or services that have
been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due
within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current
liabilities.
2.17 Stated Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new ordinary shares are shown in equity as
a deduction, net of tax, from the proceeds. Ordinary shares have a nil
par value.
2.18 Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a
liability in the Group's Financial Statements in the period in which the
dividends are approved and are paid from the revenue reserve.
3 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the
related actual results. Revisions to accounting estimates are recognised
in the year in which the estimate is revised if the revision only
affects that year, or in the year of the revision and future years if
the revision affects both current and future years. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the
next financial year are addressed below.
3.1 Fair value of investments
The fair value of the investments is determined by using valuation
techniques. The Directors base the fair value of the investments based
on information received from the Investment Manager. The Investment
Manager's assessment of fair value of investments is determined in
accordance with the International Private Equity and Venture Capital
("IPEVC") Valuation Guidelines, using unlevered Discounted Cash Flow
principles (unless a more appropriate methodology is applied). As
described more fully on below, valuations such as these entail
assumptions about solar irradiance, power prices, technological
performance, discount rate, operating costs and inflation over a 25 year
period. It is in the opinion of the Investment Manager that the IPEVC
valuation methodology used in deriving a fair value is not materially
different from the fair value requirements of IAS 39.
4 Interest revenue
Period
13 August 2013 to
31 December
2014
GBP
Loan interest receivable 6,673,317
Other interest receivable 47,260
Bank interest receivable 485,824
7,206,401
5 Finance costs
Period
13 August 2013 to
31 December
2014
GBP
Credit facility agreement arrangement fees (see note
21) 2,005,866
Credit facility agreement commitment fees (see note
21) 331,773
Interest on credit facility drawn down (see note 21) 58,499
Other finance costs 77,476
2,473,614
6 Management fees
The Investment Manager of the Group, Foresight Group CI Limited,
receives an annual fee of 1% of the Net Asset Value ("NAV") of the
Group. This is payable quarterly in arrears and is calculated based on
the published quarterly NAV. For the period 13 August 2013 to 31
December 2014, the Investment Manager was entitled to a management fee
of GBP1,920,972 of which GBP500,230 was outstanding as at 31 December
2014.
7 Administration and accountancy fees
Under an Administration Agreement, the Administrator of the Company, JTC
(Jersey) Limited, is entitled to receive a minimum annual administration
fee of GBP80,000 payable quarterly in arrears. From December 2014 this
increased to a minimum of GBP100,000 per annum resulting from an
increase in stated capital. This minimum fee also includes accountancy
fees. For the period 13 August 2013 to 31 December 2014, the
Administrator was entitled to total administration and accountancy fees
of GBP147,922 of which GBPnil was outstanding as at 31 December 2014.
8 Launch costs
Period
13 August 2013 to
31 December
2014
GBP
Administration fees 23,257
Legal and professional fees 440,342
Other fees 377
Listing fees 88,712
Excess launch costs paid by Foresight Group CI Limited
(see explanation below) (213,644)
339,044
In line with the Prospectus, the total launch costs to be borne by the
Shareholders of the Company were capped at 2% of the launch proceeds of
GBP150,000,000 (i.e. GBP3,000,000) with any excess launch costs being
reimbursed to the Company from Foresight Group CI Limited. Of this
GBP3,000,000, GBP2,660,956 was attributed to issue costs and therefore
offset against the share proceeds in the stated capital reserve.
9 Directors' fees
Remuneration of the Directors of the Group is currently paid at a total
rate of GBP125,000 per annum. All of the Directors are Non-Executive
Directors.
Remuneration of Directors due for the period 13 August 2013 to 31
December 2014 were as follows:
Company UK Hold Co Group
GBP GBP GBP
Peter Dicks 41,342 - 41,342
Alexander Ohlsson 75,796 - 75,796
Christopher Ambler 55,122 - 55,122
172,260 - 172,260
10 Other expenses
Period
13 August 2013 to
31 December
2014
GBP
Bank charges 290
Annual fees 111,038
Listing fees 10,600
Legal and professional fees 277,367
399,295
Included in legal and professional fees, are audit fees of GBP32,000
payable to KPMG LLP for the period (GBP13,000 for the non-statutory
audit for the period from 13 August 2013 to 30 June 2014; and GBP19,000
for the statutory audit for the period from 13 August 2013 to 31
December 2014). As at the period end, GBP19,000 was outstanding.
11 Taxation
The Company is currently registered in Jersey and is subject to the
Jersey standard tax rate of 0%.
Tax arises in the United Kingdom in respect of UK Hold Co for which it
is subject to the small profits tax rate currently at 20%.
The tax on the Group's profit before tax differs from the theoretical
amount that would arise using the weighted average tax rate applicable
to profits of the consolidated entities of 21.92% as follows:
Period
13 August 2013
to
31 December
2014
GBP
Profit before tax for the period 8,107,223
Expected tax charge at 21.92% 1,777,401
Effects of:
Lower Tax Rate in Jersey (1,305,213)
Expenses not deductible for tax purposes 919,124
Unrealised gains not taxable (1,393,015)
Losses not recognised 1,703
Tax charge for the period -
The Group has tax losses which arose in the UK of GBP8,000 that are
available indefinitely for offsetting against future taxable profits of
the company in which the losses arose. Deferred tax assets have not been
recognised in respect of these losses as they may not be used to offset
taxable profits elsewhere in the Group and there is no evidence of
recoverability in the near future.
The temporary differences associated with unrealised gains on
investments in subsidiaries, for which a deferred tax liability has not
been recognised, aggregate to GBP1,271,000.
No taxes would be payable on the unremitted earnings of the Group's
subsidiaries.
12 Earnings per Ordinary share - basic and diluted
The basic and diluted profits per Ordinary Share for the Company are
based on the profit for the period of GBP8,107,223 and on 137,367,589
Ordinary Shares, being the weighted average number of shares in issue
during the period.
13 Trade and other receivables
31 December
2014
GBP
Accrued income 4,461,154
Prepaid expenses 23,676
Advances for future investments 154,892
Other receivables 29,671
Amounts receivable from Pitworthy Solar 730,240
Amounts receivable from Bournemouth Solar 252,692
Amounts receivable from Landmead Solar 2,984,206
8,636,531
14 Cash and cash equivalents
31 December
2014
GBP
Cash at bank 6,768,491
31 December
2014
15 Trade and other payables GBP
Accrued investment costs 1,559,746
Accrued expenses 976,473
Amounts payable to Castle Eaton Solar 839,872
Amounts payable to Highfields Solar 563,420
Amounts payable to High Penn Solar 29,736
Amounts payable to Pitworthy Solar 665,223
Amounts payable to Hunter's Race Solar 2,022,635
6,657,105
16 Investments held at fair value through profit or loss
Cost as at Fair value as at
Cost as at 13 August Additions - 31 December 31 December
2013 Additions - equity shareholder loans 2014 Unrealised gain/(loss) 2014
GBP GBP GBP GBP GBP GBP
Wymeswold
Solar - 12,804,828 32,240,897 45,045,725 3,684,275 48,730,000
Castle Eaton
Solar - 2,039,214 20,468,644 22,507,858 192,142 22,700,000
Pitworthy
Solar - 1,834,895 17,436,812 19,271,707 243,293 19,515,000
Highfields
Solar - 1,265,913 14,137,400 15,403,313 246,687 15,650,000
High Penn
Solar - 1,051,596 11,571,705 12,623,301 (123,301) 12,500,000
Hunter's
Race Solar - 1,915,090 11,120,983 13,036,073 (26,073) 13,010,000
Spriggs
Solar - 2,075,661 12,545,719 14,621,380 698,620 15,320,000
Bournemouth
Solar - 6,674,542 41,236,379 47,910,921 249,079 48,160,000
Landmead
Solar - 10,000 52,405,793 52,415,793 1,189,207 53,605,000
- 29,671,739 213,164,332 242,836,071 6,353,929 249,190,000
17 Fair value of assets and liabilities 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:
1. Level 1 - Quoted (unadjusted) market prices in active markets for
identical assets or liabilities;
2. Level 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable; and
3. 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.
Valuation process for Level 3 valuations
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 Valuation Guidelines ("IPEVCV"), using unlevered
Discounted Cash Flow principles. It is in the opinion of the Investment
Manager and Directors that the IPEVCV methodology used in deriving a
fair value is not materially different from the fair value requirements
of IFRS 13.
Sensitivity analysis to significant changes in unobservable inputs
within Level hierarchy
The Groups' investments 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 significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy together with a
quantitative sensitivity analysis as at 31 December 2014 are as shown
below:
The Discounted Cash Flow ("DCF") valuations of the solar assets form the
majority of the NAV calculation. The Directors consider the following
assumptions to be significant inputs to the DCF calculation.
17 Fair value of assets and liabilities (continued) Discount rate
The weighted average discount rate used is 7.8%. 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.
-0.5% -0.25% Base +0.25% +0.5%
Directors' valuation 239.17 244.11 249.19 254.48 259.94
NAV per share (pence) 96.1 98.4 100.9 103.4 106.0
Energy Yield
Base case assumptions are based on P50 forecasts (50 per cent
probability of exceedance) produced by market experts. P10 (10 per cent
probability of exceedance) and P90 (90 per cent probability of
exceedance) variances are given to offer comparison across the industry.
Energy yield is a function of solar irradiance and technical
performance.
P90 (10 year) Base P10 (10 year)
Directors' valuation 225.79 249.19 269.94
NAV per share (pence) 89.6 100.9 110.9
17 Fair value of assets and liabilities (continued) 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
1.9%.
-20.0% -10.0% Base +10% +20%
Directors' valuation 222.46 236.01 249.19 261.39 272.82
NAV per share (pence) 88.0 94.5 100.9 106.8 112.2
Base
Inflation
A variable of 1.0% is considered reasonable given historic fluctuations.
We assume inflation will remain constant at 2.5%.
-1.0% -0.5% Base +0.5% +1.0%
Directors' valuation 230.17 239.46 249.19 258.80 268.44
NAV per share (pence) 91.7 96.2 100.9 105.5 110.1
17 Operating costs (investment level)
Operating costs include operating and maintenance ("O&M"), insurance and
lease costs. 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% -5% Base +5% +10%
Directors' valuation 243.39 246.31 249.19 252.03 254.75
NAV per share (pence) 98.1 99.5 100.9 102.2 103.6
Level 3 reconciliation
The following table shows a reconciliation of all movements in the fair
value of investments categorised within Level 3 between the beginning
and the end of the reporting period:
Total
GBP
Balance at 13 August 2013 -
Total gains and (losses) in Consolidated Statement
of Comprehensive Income:
- realised -
- unrealised from fair value adjustments 6,353,929
Purchases at cost 242,836,071
Sales - proceeds -
Balance at 31 December 2014 249,190,000
Assets and liabilities not carried at fair value but for which fair
value is disclosed
The following table analyses within the fair value hierarchy the Group's
assets and liabilities not measured at fair value at 31 December 2014
but for which fair value is disclosed:
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Assets
Trade and other receivables - 8,636,531 - 8,636,531
Cash and cash equivalents 6,768,491 - - 6,768,491
Total assets 6,768,491 8,636,531 - 15,405,022
Liabilities
Trade and other payables - 6,657,105 - 6,657,105
Long-term borrowings - 48,105,000 - 48,105,000
Total Liabilities - 54,762,105 - 54,762,105
18 Stated Capital
The stated capital of the Company consists solely of Ordinary Shares of
nil par value. 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).
Ordinary Shares
31 December 31 December
2014 2014
Shares GBP
Opening balance - -
Issued during the period 208,000,000 -
Redeemed during the period - -
Closing balance 208,000,000 -
Stated capital
31 December
2014
GBP
Opening balance -
Proceeds from share issue 210,146,000
less: issue costs capitalised (3,920,306)
Closing balance 206,225,694
19 NAV per Ordinary Share
The Net Asset Value ("NAV") per redeemable Ordinary Share for the
Company is based on the Net Asset Value at the reporting date of
GBP209,832,917 and on 208,000,000 redeemable Ordinary Shares, being the
number of Ordinary Shares in issue at the end of the period.
20 Financial instruments and risk profile
The Group holds cash and liquid resources as well as having receivables
and payables that arise directly from its operations. The Group's
investment activities expose it to various types of risk associated with
solar power. The main risks arising from the Group's financial
instruments are market risk, liquidity risk, credit risk and interest
rate risk. The Directors regularly 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. As the
Group operates only within the United Kingdom and Jersey, the Directors
have concluded that the Group is not exposed to foreign exchange risk.
(b) Price risk
Price risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices.
20.2 Liquidity risk
Liquidity risk is the risk that the Group 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 Group's liquidity requirements to ensure there is
sufficient cash to meet the Group's operating needs.
Contractual Maturity Analysis (including estimated interest payments)
Carrying Contractual Less than 6 Greater than 12
amount Total months 6 to 12 months months
GBP GBP GBP GBP GBP
Financial Assets
Investments 249,190,000 249,190,000 - - 249,190,000
Trade and other
receivables 4,669,393 4,669,393 4,669,393 - -
Cash and cash
equivalents 6,768,491 6,768,491 6,768,491 - -
Total financial
assets 260,627,884 260,627,884 11,437,884 - 249,190,000
Financial
Liabilities
Long-term
borrowings (48,105,000) (52,438,607) (722,268) (722,268) (50,994,071)
Trade and other
payables (6,657,105) (6,657,105) (6,657,105) - -
Total financial
liabilities (54,762,105) (59,095,712) (7,379,373) (722,268) (50,994,071)
Net position 205,865,779 201,532,172 4,058,511 (722,268) 198,195,929
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 Group.
The Fund 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 Group maintained relationships with the following
financial institutions:
31 December
Moody's 2014
Credit Ratin GBP
Cash in hand:
Royal Bank of Scotland International Limited P-2 2,332,268
Royal Bank of Scotland Plc P-2 4,164,864
Lloyds Bank International Limited P-1 270,853
Santander UK Plc P-1 506
Total cash in hand 6,768,491
Total Group cash and cash equivalents 6,768,491
Total Group cash balances held by banks 6,768,491
Trade and other receivables comprise part of the financial assets and
the Board has determined the maximum Credit Risk exposure is the
carrying amount in the Consolidated Statement of Financial Position.
The above amounts are deemed to be of a sufficient credit quality, are
neither past due nor impaired and are deemed to be fully recoverable.
Royal Bank of Scotland International's ratings are the same as those
assigned to its ultimate parent, The Royal Bank of Scotland plc.
20 Financial instruments and risk profile (continued)
20.4 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 Group's exposure to the risk of changes in market
interest rates relates primarily to the Group's long-term borrowing with
a floating interest rate element (the LIBOR element). See note 23 for
further details of the Group's long-term borrowings. When making
investments of an equity and debt nature, consideration is given during
the structuring process to the potential implications of interest rate
risk and the resulting investment is structured accordingly. The maximum
exposure to interest rate risk for the Group was GBP268,037,823 at 31
December 2014.
Weighted
average
Weighted average time for which
interest rate rate is fixed
Total portfolio 31 December 31 December 31 December
2014 2014 2014
GBP % Days
Shareholder
Loans 213,164,332 9.00 8,973
Cash 6,768,491 0.07 -
Long-term
borrowings 48,105,000 3.00 23
Total
exposed to
interest
rate risk 268,037,823
20.5 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 Group's assets.
21 Long-term borrowings
On 15 May 2014, the Group entered into a GBP100,000,000 Revolving Credit
Facility Agreement (the "Facility Agreement") with The Royal Bank of
Scotland Plc as agent and Santander Global Banking and Markets, Royal
Bank of Canada and The Royal Bank of Scotland Plc as arrangers who have
agreed a Facility Commitment of GBP33,333,333, GBP33,333,333 and
GBP33,333,334 respectively.
The rate of interest for each interest period on the amount of the
Facility Commitment drawn down (the "Loan") from each arranger is the
percentage rate per annum which is the aggregate of the applicable: (a)
Margin; and (b) LIBOR: The Margin applied is dependent on the number of
months since the first drawdown and the Loan amount during the Interest
Period. For the first drawdown of GBP2,100,000, the applicable rates
were 2.50% and 0.49% respectively. For the second drawdown of
GBP48,105,000 the applicable rates were 2.50% and 0.50228% respectively
(this is therefore the rates at which estimated future interest rates
have been provisionally calculated on). Accrued interest on each Loan is
paid on the last of each Interest Period, if the Interest Period is
longer than six months, interest is payable on the dates falling at six
monthly intervals after the first day of the Interest Period.
As at 31 December 2014, GBP48,105,000 of the Facility Agreement was
drawn down and outstanding (GBP16,035,000 from Santander Global Banking
and Markets; GBP16,035,000 from Royal Bank of Canada and GBP16,035,000
from The Royal Bank of Scotland Plc).
The interest payable on the drawn down Facility Agreement for the period
ended 31 December 2014 amounted to GBP58,499 of which GBP31,661 was
outstanding at the period-end date.
21 Long-term borrowings (continued)
As at 31 December 2014, GBP2,005,866 arrangement fees relating to the
Facility Agreement were expensed as were GBP331,773 commitment fees of
which GBP19,010 and GBP225,778 were outstanding respectively at the
period- end date.
22 Capital management
The Group'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 Group 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.
Consistent with others in the industry, the Group monitors capital on
the basis of the gearing ratio. This ratio is calculated as net debt
divided by total capital. Net debt is calculated as total borrowings
(including 'current and non-current borrowings' as shown in the
consolidated balance sheet) less cash and cash equivalents. Total
capital is calculated as 'equity' as shown in the Consolidated Statement
of Financial Position plus net debt.
The gearing ratio as at 31 December 2014 was as follows:
31 December
2014
GBP
Total borrowings 48,105,000
Less: cash and cash equivalents (6,768,491)
Net debt 41,336,509
Total equity 209,832,917
Total capital 251,169,426
Gearing ratio 16.46%
23 Dividends
Dividends paid during the period comprise an interim dividend in respect
of the period from 13 August 2013 to 31 December 2014 of 3.0 pence per
Ordinary Share.
The Directors have proposed a final dividend in respect of the period
from 13 August 2013 to 31 December 2014 of 3.0 pence per Ordinary Share.
This has not been accrued for as at 31 December 2014 as the dividend was
not approved before the period end.
24 Related party disclosures
For the purposes of these Consolidated Financial Statements, a related
party is an entity or entities who are able to exercise significant
influence directly or indirectly on the Group's operations. Transactions
between the Company and its subsidiary, which is a related party, have
been eliminated on consolidation and are not disclosed in this note.
All the SPVs of the Group are cash generating solar farms with all
revenues and expenses being related party transactions. During the
period, the Group was entitled to loan interest on the shareholder loans,
from the SPVs, totalling GBP6,673,317 of which GBP4,093,297 was
outstanding at the period-end. During the period, UK Hold Co paid
certain expenses on behalf of the SPVs in addition to also receiving
some of their revenues. The net intercompany receivables and payables
positions are stated in notes 13 and 15.
Please refer to the "Directors' Interest" section above for the
Directors' Shareholdings.
25 Transactions with the manager
Foresight Group CI Limited, acting as investment manager to the Group in
respect of its investments, earned fees of GBP1,920,972 during the
period, of which GBP500,230 was outstanding at the period-end.
As set out in note 8, pursuant to the terms of the Prospectus, the total
launch costs to be borne by the Shareholders of the Company were capped
at 2% of the launch proceeds of GBP150,000,000 (i.e. GBP3,000,000) with
any excess launch costs being reimbursed to the Company from Foresight
Group CI Limited. Launch costs to be reimbursed from Foresight Group CI
Limited amounted to GBP213,644 of which GBP29,671 was receivable as at
31 December 2014.
26 Commitments and contingent liabilities
The Company has entered into an agreement to purchase the entire share
capital of Kencot Hill Solar Farm Limited, a 37 MW solar farm in
Oxfordshire. The purchase is subject to final due diligence being
performed.
27 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 Group with a view to gaining economic benefits from its direction.
28 Post balance sheet events
J.P. Morgan Cazenove were appointed as brokers alongside Stifel Nicolaus
Europe Limited (formerly Oriel Securities Limited) on 16 January 2015.
On 2 March 2015, the Directors approved the second interim dividend of
3.0 pence per Ordinary Share to be paid on 27 March 2015.
Advisors
ADMINISTRATOR & COMPANY SECRETARY
JTC (Jersey) Limited
Elizabeth House
9 Castle Street
St Helier
Jersey
JE4 2QP
REGISTRAR
Computershare Investor Sevices (Jersey)
Queensway House
Hilgrove Street
St. Helier
Jersey
JE1 1ES
JOINT CORPORATE BROKERS
Stifel Nicolaus Europe Limited (formerly Oriel Securities)
150 Cheapside
London
EC2V 6ET
J. P. Morgan Cazenove
25 Bank Street,
Canary Wharf
London
E14 5JP
INVESTMENT MANAGER
Foresight Group CI Limited
Frances House
Sir William Place
St. Peter Port
Guernsey
GY1 1WF
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 AUDITORS
KPMG LLP
15 Canada Square
London
E14 5GL
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Foresight Solar Fund Limited via Globenewswire
HUG#1898902
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