TIDMFSFL
RNS Number : 3544F
Foresight Solar Fund Limited
09 March 2020
9 March 2020
Foresight Solar Fund Limited
('Foresight Solar', 'FSFL' or 'the Company')
Annual Results to 31 December 2019
Foresight Solar, a fund investing in a diversified portfolio of
ground-based solar PV assets in the UK and internationally, is
pleased to announce its Annual Results for the year ended 31
December 2019.
Highlights
-- NAV increased to GBP628.0m (31 Dec 2018: GBP610.3m) while
NAV per share decreased to 103.8p (31 Dec 2018: 111.2p),
driven predominantly by a downwards revision in UK power
price forecasts
-- Strong operational performance of the UK portfolio, 3.9%
above budget, as a result of high irradiation and asset
availability
-- UK portfolio contributed to 5.3% of total UK solar generation,
enough clean electricity to power 230,000 homes
-- Total of GBP65 million raised through an oversubscribed
fundraising to partially repay the outstanding balance
of the Company's Revolving Credit Facilities
-- Successfully progressed delivery of value enhancing initiatives
across the portfolio, including the refinancing of 28 UK
assets and a PPA re-tender for 22 UK assets
-- Dividends of 6.76 pence per share declared for the year,
in line with target and introduced Scrip Dividend option
-- Change of dividend policy to 'progressive' dividend, with
target dividend for 2020 increased to 6.91 pence per share
Key Metrics
As at As at
31 December 2019 31 December 2018
Gross Asset Value ("GAV") GBP1,071.5 million* GBP1,114.7 million
--------------------- -------------------
Net Asset Value ("NAV") GBP628.0 million GBP610.3 million
--------------------- -------------------
NAV per Share 103.8 pence 111.2 pence
--------------------- -------------------
Profit after Tax for the Year (GBP10.8 million) GBP56.0 million
--------------------- -------------------
Total Dividend per Share for 6.76 pence 6.58 pence
the period
--------------------- -------------------
Annual Total Shareholder Return
since IPO* 9.43%** 6.83%
--------------------- -------------------
* Calculated as NAV plus outstanding debt.
** Annualised from IPO on 29 October 2013.
Commenting on the Company's results, Alex Ohlsson, Chairman of
Foresight Solar Fund Limited stated:
"2019 was a successful year of portfolio consolidation, capital
structure optimisation and asset performance for the Company. The
continued work of our Asset Management team improved operational
performance, with our UK portfolio achieving record availability
and delivering a performance 3.9% above budget for the year, and
our Investment Manager oversaw the successful refinancing of 28 of
our UK assets. The Board is also delighted to have reached two
major milestones during the year, as we became the largest UK
listed solar energy investment company by market capitalisation and
entered the FTSE 250 for the first time.
"With the decarbonisation of energy markets in the UK and Europe
continuing, we are confident in both our position and ability to
identify investment opportunities in the expanding renewable energy
sector and will continue to explore subsidy-free developments,
particularly in Southern Europe, whilst maintaining our strict
criteria for risk-adjusted returns. The year ahead will see us
pursue these activities alongside a continued focus on positive
operational performance and further optimisation initiatives. We
look forward to a further year of progress."
Results presentation
Foresight Solar Fund Ltd is holding a presentation for analysts
at 08:30 today at Foresight Solar Fund Limited, The Shard, 32
London Bridge Street, London SE1 9SG. Analysts wishing to attend
should contact foresightsolar@citigatedewerogerson.com to
register.
Analysts unable to attend in person may listen to the
presentation live by using the details below:
Conference Call Dial-In Details: 0808 109 0700
Standard International Access: +44 (0) 20 3003 2666
Password: Foresight
Declaration of Dividend
Foresight Solar is also pleased to announce a fourth interim
dividend, in respect of the period 1 October 2019 to 31 December
2019, of 1.69 pence per ordinary share ("the Dividend"). The shares
will go ex-dividend on 31 April 2020 and the Dividend will be paid
on 29 May 2020 to shareholders on the register as at the close of
business on 1 May 2020.
Full details of the scrip dividend alternative that is being
offered in respect of the Dividend (the "Scrip Offer") and the
Scrip Dividend Scheme can be found in the Scrip Dividend
Alternative Offer Document (the "Scrip Document") available on the
Company's website at
https://fsfl.foresightgroup.eu/investor-relations/dividend-history/
. The Scrip Document is also available on the National Storage
Mechanism website at www. morningstar .co.uk/uk/NSM and copies are
also available for inspection at JTC House, 28 Esplanade, St.
Helier, Jersey JE2 3QA.
The reference price of the new shares issued under the Scrip
Offer will be calculated and published on or around 7 May 2020.
Shareholders will receive the Dividend in cash, unless they have
previously completed a standing election (a "Form of Election") to
receive new shares pursuant to the Scrip Offer.
Shareholders who would like to receive such new shares rather
than cash, and who have not previously submitted a Form of
Election, should complete the Form of Election at the back of the
Scrip Document and return it to the Company's Receiving Agent,
Computershare Investors Service (Jersey) Limited by no later than
5.00pm on 18 May 2020.
The expected timetable in relation to the Dividend will be as
follows:
Ex-Dividend Date 30 April 2020
Record Date 1 May 2020
Scrip Price Announcement 7 May 2020
Last Date for Submission of Forms 18 May 2020 at 17h00
of Election
Last Date Crest Elections 18 May 2020 at 17h00
Anticipated Listing of New Shares 29 May 2020
Dividend Payment Date 29 May 2020
For further information, please contact:
Foresight Group
+44 (0)20 3667 8147
Jonathon McManus
InstitutionalIR@ForesightGroup.eu
Citigate Dewe Rogerson
+44 (0)20 7638 9571
Nick Hayns
Louise Mason-Rutherford
Elizabeth Kittle
Lucy Eyles
JTC (Jersey) Limited - Company Secretary
+44 (0)203 846 9774
Christopher Gibbons
Foresightsolar@jtcgroup.com
Notes to Editors
About Foresight Solar Fund Limited
Foresight Solar is a Jersey registered, closed-end investment
company investing in a diversified portfolio of ground-based solar
PV assets in the UK and Australia.
Since its IPO in October 2013, FSFL has more than tripled in
size and raised more than GBP634 million through share placings.
The Company targets a progressive dividend policy and has paid all
target dividends to date. The target dividend for 2020 is 6.91
pence per share.
FSFL is managed by Foresight Group, a leading independent Global
Infrastructure & Private Equity manager, which provides FSFL
with depth of experience in fund management, deal origination and
execution. The Company has a fully independent Board of Directors
and is chaired by Alex Ohlsson. The lead Investment Manager for the
Company is Ricardo Piñeiro, Head of UK Solar at Foresight
Group.
audited annual report and financial statements
FOR THE YEAR 1 January 2019 to 31 december 2019
Financial Highlights
As at 31 December 2019
Key Metrics
As at As at
31 December 2019 31 December 2018
Net Asset Value ("NAV") GBP628.0 million GBP610.3 million
-------------------- -------------------
NAV per Share 103.8 pence 111.2 pence
-------------------- -------------------
Gross Asset Value ("GAV") GBP1,071.5 million* GBP1,114.7 million
-------------------- -------------------
Dividend per Share declared relating to the Year 6.76p 6.58p
-------------------- -------------------
Annual Total Shareholder Return since IPO** 9.43%
-------------------- -------------------
Market Capitalisation GBP765.6 million GBP592.9 million
-------------------- -------------------
-- NAV increased to GBP628.0m (31 Dec 2018: GBP610.3m), while
NAV per share decreased to 103.8p (31 Dec 2018: 111.2p),
driven predominantly by a downwards revision in UK power
price forecasts
-- Strong operational performance of the UK portfolio, 3.9%
above budget, as a result of high irradiation and asset
availability
-- UK portfolio contributed to 5.3% of total UK solar generation,
enough clean electricity to power 230,000 homes
-- Total of GBP65 million raised through an oversubscribed
fundraising to partially repay the outstanding balance
of the Company's Revolving Credit Facilities
-- Successfully progressed delivery of value enhancing initiatives
across the portfolio, including the refinancing of 28 UK
assets and a PPA re-tender for 22 UK assets
-- Dividends of 6.76 pence per share declared for the year,
in line with target and introduced Scrip Dividend option
-- Change of dividend policy to 'progressive' dividend, with
target dividend for 2020 increased to 6.91 pence per share
* Calculated as NAV plus outstanding debt.
** Annualised from IPO on 29 October 2013.
Target returns are not a profit forecast. There can be no
assurance that target returns will be met and they should not be
seen as an indication of the Company's expected or actual results
or returns.
Chairman's Statement
On behalf of the Board, I am pleased to present the Audited
Annual Report and Financial Statements for Foresight Solar Fund
Limited (the "Company" or the "Fund") for the year ended 31
December 2019.
The primary focus of the Company during the period has been
portfolio consolidation and capital structure optimisation,
following the most acquisitive year in the Company's life in 2018.
During 2019, the Company undertook a significant debt restructuring
exercise through which 28 UK assets were refinanced. This exercise
took advantage of the Company's growing size and significant scale
to meaningfully lower the average cost of portfolio debt and unlock
significant additional long-term value for shareholders. The
Investment Manager also successfully negotiated 22 new Power Price
Agreements ("PPA") during the period, securing enhanced revenues
from these assets for the next decade.
The Company ended the year with a market capitalisation of
GBP766 million, having reached a significant growth milestone in
2019 with its inclusion in the FTSE 250 index for the first time,
and now owns and operates one of the larger operating portfolios of
utility-scale solar assets in the listed renewables sector. This is
a result of a number of accretive acquisitions in the six years
since the Company's launch, supported by several rounds of equity
fundraising. The Company has successfully balanced sustained growth
with paying a consistent and growing annual dividend since
launch.
No acquisitions were made by the Company in 2019, reflecting the
increasingly expensive price environment for acquiring operating
subsidised assets in both the UK and other developed markets. The
Investment Manager continues to take a disciplined approach when
assessing potential additions to its portfolio.
The Company's existing portfolio continues to mature as it
approaches a 'steady state', evidenced by another year of solid
operational performance. In the UK, electricity generation for the
period was 3.9% above base case expectations. A number of
optimisation initiatives undertaken by the Asset Management team
resulted in record availability and decreased downtime across the
UK portfolio. Elsewhere, the Company continued to make progress on
its Australian solar portfolio despite local challenges which have
led to commissioning delays for some assets.
Towards the end of the year, the Company considered it prudent
to reduce its total level of debt, using the proceeds of an
oversubscribed equity raise in October 2019 to partially pay down
debt drawn on its subsidiaries' revolving credit facilities
("RCF").
KEY FINANCIALS
In 2019, the Net Asset Value ("NAV") per Ordinary Share
decreased by 7.4 pence to 103.8 pence (31 December 2018: 111.2
pence per share).
The primary detractor to the Company's financial performance in
the period was the weakening of both short and long-term UK
wholesale power price forecasts, resulting in an impact to NAV of
10.9 pence per share. Pressure on short-term wholesale prices was
driven primarily by excess levels of European gas supplies which
led to a significant reduction in the cost of gas in the UK. The
Investment Manager has a number of tools at its disposal to
mitigate its exposure to merchant power prices including the
ability to enter short-term fixed price agreements.
However, the Company will continue to have an element of its
revenue exposed to electricity price volatility over the medium to
long-term.
The largest contributor to NAV in 2019 was a 0.5% reduction in
the levered discount rate applied to the UK portfolio assets during
the year. This was a result of the competitive landscape for
operational solar assets in the current low interest rate
environment. The overall reduction in the portfolio's weighted
average discount rate to 7.1% as at 31 December 2019 had a positive
impact on the NAV of 4.9 pence per share.
Another significant positive contribution to the NAV, adding 2.1
pence per share, was the Company's successful refinancing of 28 of
its UK assets.
Other positive contributions included the extension of the
useful economic life of a small number of portfolio assets and the
successful renegotiation of PPAs across the UK portfolio.
DIVIDS AND DIVID POLICY CHANGE
The Company has declared total dividends of 6.76 pence per share
for the year, in line with its target. The fourth and final 2019
dividend of 1.69 pence will be paid on 29 May 2020.
Dividend cover for the period on a cash basis was 1.19 times
when excluding dividends paid to new shares issued during the
period and including the impact of the scrip dividend programme.
The Company has met every dividend target since its launch.
As highlighted in previous reports, the Board reviews the
dividend policy on an ongoing basis to ensure it remains reflective
of the ongoing correlation between power prices and inflation
levels, as well as the expected evolution of the investment
portfolio.
After careful consideration, the Board has decided that it is no
longer appropriate for the Company to pursue an inflation-linked
annual dividend target. This reflects reduced correlation between
UK power prices and inflation in recent years and the evolution of
the portfolio since launch. The Board recognises the importance to
shareholders of both a stable and growing dividend. The Board is
committed to a progressive dividend policy which aims to increase
the annual dividend paid to shareholders going forward, without
explicit linkage to RPI.
The target dividend for 2020 is 6.91 pence, an increase of 2.2%
compared with 2019. This increase is in line with the current level
of UK RPI.
OPERATIONAL PERFORMANCE
The UK portfolio delivered another year of positive performance
ahead of budget. Irradiation was 3.8% above base case assumptions.
Operational performance was strong, with only a few instances of
downtime, and electricity generation for the period was 3.9% above
expectations.
The Asset Manager implemented a number of optimisation
initiatives during the year. In the first half of 2019, a PPA
tender was completed for 22 UK sites resulting in significant
improvements to the commercial terms on which power is sold by
these assets. Furthermore, the Asset Manager developed the
Company's spare parts management process which led to improved
response times following outages.
In Australia the Company's sites at Longreach and Oakey 1 are
now fully operational and performing in line with expectations. The
construction of the site at Bannerton is now complete but was
affected by an export restriction representing 50% of the site's
total capacity. This restriction is a result of a grid oscillation
identified by the network operator and affects a number of
renewable generators in the area. At the time of this report the
export restriction remains in place and is expected to be lifted in
the second quarter of 2020. The Oakey 2 asset has experienced
further construction delays following storms impacting the site,
with the expected connection date delayed to the second half of
2020. As a result, the valuation of Oakey 2 has been decreased by
GBP6.9 million to reflect the impact the commissioning delay will
have on project revenues. The Investment Manager is working closely
with the network operator and project contractors to minimise the
financial impact to the Company.
SHARE CAPITAL
In October 2019, the Company raised GBP65 million of new equity
via an auction process. The placing was oversubscribed at an issue
price of 119.0 pence which was equivalent to a 9.2% premium to the
31 August 2019 NAV. The proceeds have been fully deployed through
the partial repayment of one of its subsidiaries' RCFs. The Company
has raised a total of GBP634 million of equity including the GBP150
million raised at launch in October 2013.
DEBT FACILITIES
The Fund made significant progress in optimising its capital
structure during the period with the conclusion of the refinancing
exercise. At 31 December 2019, the total outstanding debt of the
Company and its subsidiaries amounted to GBP443.5 million (31
December 2018: GBP504.4 million), with long-term debt representing
GBP403.5 million (December 2018: GBP399.4 million). Total gearing
decreased to 41% of GAV (December 2018: 45%) following a repayment
of GBP65 million of short-term debt during the period. Long-term
structural gearing represented 38% of GAV (2018: 36%), remaining
within the 40% long-term debt target set by the Board.
The Fund's RCF totalled GBP105 million at 31 December 2019, of
which GBP65 million remains available for investment, providing the
Fund with flexibility to pursue further acquisitions should
suitable opportunities arise.
The Board believes the current level of debt to be appropriate
to the size and revenue profile of the portfolio.
MARKET DEVELOPMENTS
United Kingdom
The UK remains committed to its ambitious 2050 goal of becoming
the world's first fully carbon-neutral nation and is set to take
centre stage when it hosts the 2020 United Nations Climate Change
Conference (informally known as COP26) in November. OFGEM recently
set out its vision for how gas and electricity markets will
contribute towards meeting the target in its 'Decarbonisation
Programme Action Plan' which was published in February.
Continuing to foster the growth of renewable energy and
integrating these new sources of intermittent power into the
network remains a core area of focus.
While 2019 saw a number of milestones in regard to the
contribution of renewable energy sources, including coal-generation
hitting a historic low, the period as a whole recorded relatively
modest renewables buildout compared with the growth rates witnessed
over the last decade. Offshore wind capacity continued to grow
during the year, but there were very limited onshore renewable
projects. The slowdown in new solar construction has been
particularly pronounced as the market continued to adapt to the
commercial reality of a post-subsidy environment. However, the
recent announcement that established onshore technologies such as
solar and onshore wind will once again be able to participate in
CfD auctions could see a reversal in this trend.
In addition to projects supported by government Contract for
Difference ("CfD") auctions, the emergence of a commercially viable
subsidy free sector will be vital if the UK is to continue to make
progress towards its decarbonisation goals. Whilst the number of
subsidy-free solar projects completed in 2019 was extremely
limited, there is a pipeline totalling an estimated 6GW expected to
come online in the coming years.
The re-election of the Conservative Party in December and the
comprehensive nature of the result should provide investors with a
degree of clarity on several fronts. The European Union (Withdrawal
Agreement) Act 2020 was passed into law in January 2020 leading to
the UK leaving the European Union (EU) on 31 January 2020. The
withdrawal triggered an expected 11 month transition period during
which the UK and the EU will seek to agree upon the future terms of
their economic and security partnership. The manager does not
consider that the UK's departure from the EU will have a material
impact on the Company's operations or revenues.
There were a number of regulatory developments over the course
of the year. The Office of Gas and Electricity Markets ("OFGEM")
published the long-awaited results of its Targeted Charging Review
("TCR"). The result of the TCR is the proposed end to embedded
benefits payments to electricity generators from April 2021. This
decision was published on 21 November 2019 resulting in a negative
impact on the NAV of approximately 1.6 pence per share.
Australia
In September 2019, the Clean Energy Regulator announced that
Australia had met its Renewable Energy Target a full year ahead of
its 2020 target. This achievement coincided with the end of a
decade that saw Australia achieve a significant shift away from its
historic reliance on fossil fuels to a diversified energy mix in
which renewables play a central role. In 2019, renewable energy
contributed over 21% of the country's electricity generation with
solar energy sources, both utility scale and domestic, playing a
meaningful role.
The challenge of the next decade will be the integration of
these new sources of intermittent energy generation into an ageing
grid infrastructure. If the progress made in decarbonisation is to
continue, the regulator should work closely with generators to
ensure future grid resilience and the resolution of ongoing issues
such as the Marginal Loss Factor ("MLF") methodology. The
Investment Manager continues to engage constructively with the
regulator on these issues and is hopeful a sustainable solution can
be reached which balances fairly the needs of consumers,
generators, and other market participants.
It would be remiss not to comment on the bushfires that affected
large parts of the country in the second half of the year. We are
fortunate that none of the Investment Manager's or local
contractors' staff were hurt during the widespread and destructive
bushfires and can confirm that there is no damage or disruption to
report with regards to the Company's assets. Despite the lack of
direct impact on our operations, there were some small pockets of
localised disruption, however the grid proved robust in the face of
the significant challenges. Should the events of this summer repeat
itself in coming years, it will present new challenges for the grid
and may contribute to further climate change action from policy
makers.
SUSTAINABILITY AND ESG
The importance of environmental, social and governance ("ESG")
factors to global investors continues to grow as sustainable
investing moves from the periphery to the mainstream.
Sustainability has been a key focus of the Company's investments
since launch and is embedded in every stage of the Investment
Manager's processes and asset management. The Company is well
positioned to serve the needs of those investors seeking to achieve
positive environmental and social outcomes alongside attractive
financial returns.
During the year, the Company's green credentials were recognised
by the London Stock Exchange with the award of the 'Green Economy
Mark'. The Green Economy Mark recognises companies and funds that
generate more than 50% of their annual revenues from products and
services that contribute to the global green economy.
The Company continues to contribute meaningfully to the UK's
decarbonisation efforts. This year alone the portfolio produced
enough clean energy to power 230,000 homes and the Asset Manager
continued to develop and manage its sites in a manner that
minimises their environmental footprint. This is achieved through a
proactive programme of on-site initiatives such as sustainable
drainage and flood control works, which not only improves local
biodiversity but also protects sites from potentially damaging
extreme weather events. Other habitat enhancing initiatives, such
as the installation of bat and bird-boxes and partnerships with
local beekeepers, are undertaken wherever feasible. Furthermore,
the Company continues to support the local communities in which it
operates through financial contributions to community funds that
help to directly address pressing local issues.
BOARD UPDATE
In June 2019, we were pleased to announce the appointment of
Monique O'Keefe as a Non-Executive Director, bringing the size of
the Company's Board to four, and she was subsequently named
Chairman of the Remuneration and Nomination Committee. Monique
brings a considerable amount of valuable experience to the Board
having worked in law and finance for over 20 years.
The Board, supported by its Remuneration and Nomination
Committee, has initiated a formal recruitment process with a view
to appointing a fifth Non-Executive Director to the Board. The
Board has retained an independent recruitment consultant to help
the Board identify an appropriate candidate with the desired
combination of skills, experience and knowledge. In assessing the
candidates for this appointment, the Board will also be considering
how this appointment will support further diversity on the
Company's Board.
The Board regularly, and at least annually, reviews its size and
constitution to seek an adequately diverse mix of gender,
backgrounds and professional experience.
During 2019 the Board also undertook an extensive externally
facilitated board evaluation to consider Corporate Governance,
Board Effectiveness, Board Performance and Board Strategy. Broadly,
the evaluation found that the Company was in line with best
practice, as contemplated in the AIC Code of Corporate Governance,
2019.
Following this review, key focus areas for the Board in 2020
will be Board size, Board Committee structure and composition,
considering the appointment of a Senior Independent Director and
succession planning.
OUTLOOK
As the decarbonisation of energy markets in the UK and Europe
continues, the Company is well positioned to identify investment
opportunities in an expanding renewable energy sector. The growth
in solar assets in the UK and other European markets is expected to
be delivered by subsidy free developments as regulatory support
continues to decrease. As a result of the consolidation of
subsidised European markets, pricing for operational assets is
expected to remain expensive which, combined with the Company's
disciplined approach to new acquisitions, is likely to result in
limited investment opportunities in the secondary market. The
Company will closely monitor the competitiveness of solar in future
CfD auctions given the recent government announcement on the
eligibility of established renewable technologies.
The Company continues to review the development of subsidy free
markets in both the UK and Southern Europe, supported by the
Investment Manager's extensive network of project developers in
those markets. Investments in subsidy free projects represent an
exciting opportunity for the Company and opportunities will
continue to be considered based on their risk-adjusted return
profile.
The Company's portfolio will continue to be predominantly UK
based but, despite the progress experienced in the UK subsidy free
market, the Investment Manager believes the case for subsidy free
investment is currently more compelling in Southern Europe due to
the combination of higher irradiation levels and the longer PPA
tenors available.
The Company is working closely with the Investment Manager to
identify areas of potential disruption at portfolio level resulting
from the emergence of Coronavirus and it can confirm there has been
no impact to date.
With the UK portfolio now in a 'steady state' and the capital
structure effectively optimised, the Asset Manager will be focused
on delivering continued positive operational performance. More
optimisation initiatives will be undertaken by the Asset Manager,
building on the solid platform in place, including the introduction
of further cost saving initiatives at operational level and
possibly the retrofitting of battery storage units to selected UK
assets.
The Company will continue to leverage the expertise of the Asset
Manager to deliver solid operational performance whilst placing its
sustainability targets at the centre of its operational
objectives.
Annual General Meeting
We look forward to meeting shareholders at the Company's next
Annual General Meeting ("AGM") on 18 June 2020 at 9:30am at 28
Esplanade, St. Helier, Jersey JE2 3QA.
Alexander Ohlsson
Chairman
9 March 2020
Corporate Summary and Investment Objective
CORPORATE SUMMARY
The Company is a closed-ended company with an indefinite life
and was incorporated in Jersey under the Companies (Jersey) Law
1991, as amended on 13 August 2013, with registration number
113721.
As at 31 December 2019, the Company has 605,196,526 ordinary
shares in issue which are listed on the premium segment of the
Official List and traded on the London Stock Exchange's Main
Market.
The Company makes its investments through intermediate holding
companies and underlying Project Vehicles/Special Purpose Vehicles
("SPVs").
INVESTMENT OBJECTIVE
The Company's objective is to provide investors with a
sustainable, progressive quarterly dividend and enhanced capital
value, through investment in ground-based solar assets
predominantly located in the UK.
THE COMPANY
The Company's Initial Public Offering on 24 October 2013 raised
GBP150 million, creating the largest dedicated solar investment
company listed in the UK at the time. To date, the Company has
raised a total of GBP634 million through equity issuance and
reached a gross asset value of GBP1,071.5 million as at 31 December
2019. It is the largest UK-listed dedicated solar energy investment
company by installed capacity and market capitalisation.
In October 2019, the Company announced a placing of 54,894,155
new ordinary shares, raising GBP65 million in total. The placing
was oversubscribed and the Company undertook a scaling back
exercise.
During the year the Company also introduced a Scrip Dividend
programme providing shareholders with the flexibility to receive
their quarterly dividend in cash or newly issued Ordinary shares.
In 2019, 1,360,821 new Ordinary shares were issued under the scrip
dividend programme.
Following the issuance of the new shares, via the placing and
scrip issues, the Company has 605,196,526 shares in issuance
representing a market capitalisation of GBP765.6 million as at 31
December 2019.
As at 31 December 2019, the Company's portfolio consisted of 54
assets with a net installed capacity of 869MW, including four
Australian assets (representing 146MW), one of which remains under
construction.
INVESTMENT POLICY
The Company will pursue its investment objective by acquiring
ground-based, operational solar power plants predominantly located
in the UK. Investments outside the UK and assets which are, when
acquired, still under construction will be limited to 25% of the
GAV of the Company and subsidiaries, calculated at the time of
investment.
The Company will seek to acquire majority or minority stakes in
individual ground-based solar assets. When investing in a stake of
less than 100 per cent in a solar power plant SPV, the Company will
secure its shareholder rights through shareholders' agreements and
other legal transaction documents.
Power Purchase Agreements ("PPAs") will be entered into between
each of the individual solar power plant SPVs in the portfolio and
creditworthy offtakers. Under the PPAs, the SPVs will sell solar
generated electricity and green benefits to the designated
offtaker. The Company may retain exposure to power prices through
PPAs that do not include mechanisms such as fixed prices or price
floors.
Investment may be made in equity, debt or intermediate
instruments but not in instruments traded on any investment
exchange.
The Company is permitted to invest cash held for working capital
purposes and awaiting investment in cash deposits, gilts and money
market funds.
In order to spread risk and diversify its portfolio, at the time
of investment no single asset shall exceed in value (or, if it is
an additional stake in an existing investment, the combined value
of both the existing stake and the additional stake acquired) 30
per cent of the Company's GAV post-acquisition. The GAV of the
Company will be calculated based on the last published gross
investment valuation of the Company's portfolio, including cash,
plus acquisitions made since the date of such valuation at their
cost of acquisition. The Company's portfolio will provide
diversified exposure through the inclusion of not less than five
individual solar power plants and the Company will also seek to
diversify risk by ensuring that a significant proportion of its
expected income stream is derived from regulatory support (which
will consist of, for example, without limitation, ROCs and FiTs for
UK assets). Diversification will also be achieved by the Company
using a number of different third-party providers such as
developers, engineering, procurement and construction ("EPC")
contractors, operation and maintenance ("O&M") contractors,
panel manufacturers, landlords and distribution network
operators.
The Articles provide that gearing, calculated as Group Borrowing
(including any asset level gearing) as a percentage of the
Company's GAV, will not exceed 50% at the time of drawdown. It is
the Board's current intention that long-term gearing (including
long-term, asset level gearing), calculated as Group borrowings
(excluding intra-group borrowings (i.e. borrowings between members
of the Group) and revolving credit facilities) as a percentage of
the Company's GAV will not exceed 40 per cent at the time of
drawdown.
Any material change to the investment policy will require the
prior approval of shareholders by way of an ordinary resolution
(for so long as the Ordinary Shares are listed on the Official
List) in accordance with the Listing Rules.
SIGNIFICANT SHAREHOLDERS
The Company's shareholders include a substantial number of
blue-chip institutional investors.
Shareholders in the Company with more than a 5% holding as at 31
December 2019 are as follows:
Investor % Shareholding in Fund
----------------------
BlackRock Investment Management Ltd 14.52
------------------------------------------ ----------------------
Schroders Plc 8.36
------------------------------------------ ----------------------
Baillie Gifford & Co Ltd 7.10
------------------------------------------ ----------------------
Legal & General Investment Management Ltd 6.84
------------------------------------------ ----------------------
Newton Investment Management Ltd 6.67
------------------------------------------ ----------------------
Tredje AP Fonden 5.40
------------------------------------------ ----------------------
48.89%
------------------------------------------ ----------------------
ALTERNATIVE INVESTMENT FUND MANAGEMENT DIRECTIVE ("AIFMD")
The AIFMD, which was implemented across the EU on 22 July 2013,
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.
Under the AIFMD, the Company is self-managed and acts as its own
Alternative Investment Fund Manager.
Both the Company and the Investment Manager are located outside
the European Economic Area ("EEA") but the Company's marketing
activities in the UK are subject to regulation under the AIFMD and
the National Private Placement Regime.
PACKAGED RETAIL AND INSURANCE-BASED INVESTMENT PRODUCTS
REGULATION
The EU regulation, the Packaged Retail and Insurance-based
Investment Products Regulation ("PRIIPS"), came into effect on 1
January 2018. Its aim is to ensure retail investors are provided
with transparent and consistent information across different types
of financial products. This regulation requires the Company to
publish a Key Information Document ("KID"). The KID is available on
the Company's website under Publications and can be found at the
following website address: www.fsfl.foresightgroup.eu .
Board of Directors
The Directors are responsible for the determination of the
investment policy of the Company, have overall responsibility for
the Company including its investment activities and for reviewing
the performance of the Company's portfolio.
The Directors are all Non-Executive. Alex Ohlsson, Chris Ambler
and Monique O'Keefe are all considered to be independent of the
Investment Manager under the AIC Code. Peter Dicks is not
considered to be independent from the Investment Manager under the
AIC Code, due to his previous service on boards of other Funds
managed by the Investment Manager within the last three years.
However, Peter has no current material business relationships with
the Company or the Investment Manager, other than serving on the
Board of the Company. Accordingly, the Company considers Peter to
be factually independent and unimpaired as a Director of the
Company and member of the Audit and Risk Committee and Remuneration
and Nomination Committee.
Alex Ohlsson (Chairman)
Mr Ohlsson is Managing Partner of 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 sits on the boards of a
number of companies and is also Chairman of the listed company GCP
Asset Backed Income Fund Limited. He is an Advisory Board member of
Jersey Finance, Jersey's promotional body and Treasurer of the
Jersey Law Society. He has recently retired as the independent
Chairman of the States of Jersey's Audit Committee. 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 and was reappointed on 25 June 2019.
Chris Ambler
Mr Ambler has been the Chief Executive of Jersey Electricity Plc
since 1 October 2008. He has experience in a number of senior
positions in the global industrial, energy and materials sectors
working for major corporations including ICI/Zeneca, The BOC Group
and Centrica/British Gas, as well as in strategic consulting roles.
He is a Director on other boards including a Non-Executive Director
of Apax Global Alpha Limited, a listed fund which launched on the
London Stock Exchange on 15 June 2015. Mr Ambler is a Chartered
Director, 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 and was reappointed on 25 June 2019.
Peter Dicks
Mr Dicks is currently a Director of a number of quoted and
unquoted companies. He is also on the Boards of Mercia Fund 1
General Partnership Limited, Unicorn AIMTC VCT plc, and Miton UK
Microcap Trust plc and is the Chairman of the Gabelli Value Plus+
Trust Plc and SVM Emerging Fund plc.
Mr Dicks was appointed as a Non-Executive Director on 16 August
2013 and was reappointed on 25 June 2019.
Monique O'Keefe
Mrs O'Keefe is the co-founder of investment consultancy
business, Kairos Wealth Limited. She also serves on a number of
boards, including Phoenix Spree Deutschland Limited which is a
London Stock Exchange listed property fund, a private equity fund,
a European hedge fund and a non performing credit fund. Mrs O'Keefe
also sits on the Board of Commissioners at the Jersey Financial
Services Commission. Mrs O'Keefe was appointed as a Non-Executive
Director on 1 June 2019 and was reappointed on 25 June 2019.
Investment Manager
The Company's Investment Manager, Foresight Group LLP, is
responsible for the acquisition and management of the Company's
assets, including the sourcing and structuring of new acquisitions
and advising on the Company's borrowing strategy. The Investment
Manager is a UK registered company, incorporated in England and
Wales with registered number OC300878. The Investment Manager is
regulated by the Financial Conduct Authority.
The Investment Manager was founded in 1984 and is now a leading
independent infrastructure and private equity investment company
that currently manages over GBP4.2 billion of assets on behalf of
institutions and retail clients with offices in Australia, Italy,
South Korea, Spain and the UK. Foresight Group's global
infrastructure investments total GBP3.1 billion, with a cumulative
generating capacity of over 2.2GW. The infrastructure investment
team was established in 2007 and currently manages 103 solar power
assets across the UK, Europe and Australia with a total generating
capacity of 1.3GW.
In the UK, the wider infrastructure team also manages 900MW of
investments in bioenergy projects, onshore wind, lithium ion
battery storage facilities and reserve power generation assets.
Foresight Group's 89 strong infrastructure team, includes 25
solar investment professionals, with an average of 12 years
industry experience.
Foresight Group's Investment Management team is led by an
experienced team of UK based managers, supported by a further team
of solar investment managers located in the UK and internationally.
The Investment Management team based in Australia includes six
people comprising three investment professionals, three technical
professionals and one support staff. This team has been
instrumental in the management of the Company's four Australian
assets.
Foresight Group is overseen by an Executive Committee of which
Gary Fraser is a member. Foresight Group's Executive Committee
provides strategic investment advice to the management team and the
Board.
RICARDO PINEIRO, PARTNER, HEAD OF UK SOLAR
Ricardo has led Foresight Group's UK solar investments team
since 2011 and has been part of the Fund's advisory team since
its IPO. He has overseen more than 70 acquisitions representing
over 800MW and remains primarily focused on leading new renewable
energy transactions across the UK and international markets.
Prior to joining Foresight, Ricardo worked at Espirito Santo
Investment where he focused on lending and advisory for the
energy infrastructure and transportation sectors.
GARY FRASER, PARTNER, CHIEF FINANCIAL OFFICER
Gary is a Chartered Accountant and Chartered Fellow of the Securities
Institute. He worked with Ernst & Young between 1993 and 1999,
predominantly in the audit and risk assurance and corporate
finance areas and joined ISIS Asset Management plc in 1999 where
he was responsible for the provision of similar services to
several investment companies. He joined Foresight Group in 2004
and is a member of its Executive Committee.
Asset Manager
Foresight Group has a leading Asset Management capability with
expertise across electrical and civil engineering, finance,
commercial and legal disciplines. The team manages over 200 energy
infrastructure projects including solar, battery storage, reserve
power, bio-energy and onshore wind investments, with a renewable
energy capacity of 2.2GW.
As an early market entrant, Foresight has a wealth of experience
in the technical and operational management of renewable energy
infrastructure assets and has developed centralised monitoring
systems to support the team in allowing assets to be monitored
remotely in real time. Foresight has a range of monitoring tools,
including remote access to asset's control systems, direct access
to operator log sheets and detailed daily data. These then form the
basis for performance analysis and reporting. The monitoring tools
allow the Portfolio Management Team to assess the performance of
the portfolio of sites on a continuous, real-time basis. Moreover,
the systems that have been setup ensure that all information is
consistent, accurate and relevant. These systems allow the
Portfolio Management Team to identify and respond quickly to
issues, which in conjunction with the team's extensive experience,
allows operational issues to be rectified in the shortest possible
timeframe.
The Asset Management services provided ensure the day to day
operation of the sites is robust, with commercial and strategic
decisions clearly communicated to the O&M counterparties. The
services also include:
-- Portfolio optimisation including negotiation of project
contracts (insurance, O&M, PPA, import power, security,
warranties), spare part and replacement strategy and technology
improvements
-- Oversight of O&M counterparties
-- Contractual compliance of all contracts
-- Reporting to debt providers and other debt compliance
services
-- Accounting, bookkeeping, tax compliance and statutory
reporting of all SPVs
-- Corporate governance activities including health and safety
compliance.
Portfolio Assets
Current Portfolio
Asset Installed Connection Date Acquisition Cost (GBPm)(1)
Peak Capacity
(MW)
------------------- --------------- --------------- --------------------------
1 Wymeswold 34 March 2013 45.0
------------------- --------------- --------------- --------------------------
2 Castle Eaton 18 March 2014 22.6
------------------- --------------- --------------- --------------------------
3 Highfields 12 March 2014 15.4
------------------- --------------- --------------- --------------------------
4 High Penn 10 March 2014 12.7
------------------- --------------- --------------- --------------------------
5 Pitworthy 16 March 2014 19.3
------------------- --------------- --------------- --------------------------
6 Hunters Race 10 July 2014 13.3
------------------- --------------- --------------- --------------------------
7 Spriggs Farm 12 March 2014 14.6
------------------- --------------- --------------- --------------------------
8 Bournemouth 37 September 2014 47.9
------------------- --------------- --------------- --------------------------
9 Landmead 46 December 2014 52.4
------------------- --------------- --------------- --------------------------
10 Kencot 37 September 2014 49.5
------------------- --------------- --------------- --------------------------
11 Copley 30 December 2015 32.7
------------------- --------------- --------------- --------------------------
12 Atherstone 15 March 2015 16.2
------------------- --------------- --------------- --------------------------
13 Paddock Wood 9 March 2015 10.7
------------------- --------------- --------------- --------------------------
14 Southam 10 March 2015 11.1
------------------- --------------- --------------- --------------------------
15 Port Farm 35 March 2015 44.5
------------------- --------------- --------------- --------------------------
16 Membury 16 March 2015 22.2
------------------- --------------- --------------- --------------------------
17 Shotwick 72 March 2016 75.5
------------------- --------------- --------------- --------------------------
18 Sandridge 50 March 2016 57.3
------------------- --------------- --------------- --------------------------
19 Wally Corner 5 March 2017 5.7
------------------- --------------- --------------- --------------------------
20 Coombeshead 10 December 2014 36.6
------------------- --------------- --------------- --------------------------
21 Park Farm 13 March 2015
------------------- --------------- --------------- --------------------------
22 Sawmills 7 March 2015
------------------- --------------- ---------------
23 Verwood 21 February 2015
------------------- --------------- ---------------
24 Yardwall 3 June 2015
------------------- --------------- --------------- --------------------------
25 Abergelli 8 March 2015 3.7
------------------- --------------- --------------- --------------------------
26 Crow Trees 5 February 2016 1.8
------------------- --------------- --------------- --------------------------
27 Cuckoo Grove 6 March 2015 2.5
------------------- --------------- --------------- --------------------------
28 Field House 6 March 2015 3.1
------------------- --------------- --------------- --------------------------
29 Fields Farm 5 March 2016 1.7
------------------- --------------- --------------- --------------------------
30 Gedling 6 March 2015 1.9
------------------- --------------- --------------- --------------------------
31 Homeland 13 March 2014 5.2
------------------- --------------- --------------- --------------------------
32 Marsh Farm 9 March 2015 4.0
------------------- --------------- --------------- --------------------------
33 Sheepbridge 5 December 2015 1.9
------------------- --------------- --------------- --------------------------
34 Steventon 10 June 2014 4.2
------------------- --------------- --------------- --------------------------
35 Tengore 4 February 2015 1.3
------------------- --------------- --------------- --------------------------
36 Trehawke 11 March 2014 4.7
------------------- --------------- --------------- --------------------------
37 Upper Huntingford 8 October 2015 3.1
------------------- --------------- --------------- --------------------------
38 Welbeck 11 July 2014 4.4
------------------- --------------- --------------- --------------------------
39 Yarburgh 8 November 2015 3.4
------------------- --------------- --------------- --------------------------
40 Abbey Fields 5 March 2016 1.5
------------------- --------------- --------------- --------------------------
41 SV Ash 8 March 2015 3.4
------------------- --------------- --------------- --------------------------
42 Bilsthorpe 6 November 2014 1.9
------------------- --------------- --------------- --------------------------
43 Bulls Head 6 September 2014 2.2
------------------- --------------- --------------- --------------------------
44 Lindridge 5 January 2016 1.7
------------------- --------------- --------------- --------------------------
45 Misson 5 March 2016 2.0
------------------- --------------- --------------- --------------------------
46 Nowhere 8 March 2015 3.7
------------------- --------------- --------------- --------------------------
47 Pen Y Cae 7 March 2015 2.9
------------------- --------------- --------------- --------------------------
48 Playters 9 October 2015 4.0
------------------- --------------- --------------- --------------------------
49 Manor Farm 14 October 2015 6.1
------------------- --------------- --------------- --------------------------
50 Roskrow 9 March 2015 3.7
------------------- --------------- --------------- --------------------------
UK Subtotal* 723 685.1
------------------- --------------- --------------- --------------------------
1 Bannerton 53(2) July 2018 22.9
------------------- --------------- --------------- --------------------------
2 Longreach 8(2) March 2018 2.7
------------------- --------------- --------------- --------------------------
3 Oakey 1 15(2) February 2019 4.4
------------------- --------------- --------------- --------------------------
4 Oakey 2 70 H2 2020(3) 34.0
------------------- --------------- --------------- --------------------------
Australia Subtotal* 146 63.9
------------------- --------------- --------------- --------------------------
TOTAL* 869 749.0
------------------- --------------- --------------- --------------------------
1 Original cost at time of acquisition, including transaction costs.
2 Accounts for the 48.5% stake the Company holds of Bannerton
(110MW), the 49% stake held of Longreach (17MW) and the 49% stake
held of Oakey 1 (30MW).
3 Expected connection date.
* Totals may not sum due to roundings.
Investment Manager's Report
For the year ended 31 December 2019
KEY INVESTMENT METRICS
31 December 31 December
2019 2018
---------------- ------------------
Market Capitalisation GBP765.6 million GBP592.9 million
-------------------------------------- ---------------- ------------------
Share Price 126.5 pence 108.0 pence
-------------------------------------- ---------------- ------------------
Dividend Declared per Share for the 6.76 pence 6.58 pence
year
-------------------------------------- ---------------- ------------------
GAV GBP1,071.5 GBP1,114.7 million
million
-------------------------------------- ---------------- ------------------
NAV GBP628.0 million GBP610.3 million
-------------------------------------- ---------------- ------------------
NAV per Share 103.8 pence 111.2 pence
-------------------------------------- ---------------- ------------------
Annual Total Return (NAV) since IPO 6.57% 7.36%
-------------------------------------- ---------------- ------------------
Annual Total Shareholder Return since
IPO 9.43% 6.83%
-------------------------------------- ---------------- ------------------
(Loss)/Profit after Tax for the Year (GBP10.8) GBP56.0 million
million
-------------------------------------- ---------------- ------------------
PORTFOLIO SUMMARY
As at 31 December 2019, the Company's portfolio comprised 54
assets with a total net peak capacity of 869MW. In the UK, the
Company has a portfolio of 50 assets representing a total installed
capacity of 723MW. The Company owns a further four assets in
Australia which account for 146MW of installed capacity.
All of the Company's assets benefit from regulatory support. The
Company's UK assets are accredited under the Renewables Obligation
("RO") scheme, with the exception of Yardwall which is a
Feed-in-Tariff scheme ("FiT") accredited asset (representing less
than 1% of the UK portfolio). The Australian assets benefit from
subsidies in the form of Large-Scale Generation Certificates
("LGC").
In 2019, approximately 57% of revenues were derived from
subsidies, with the remaining 43% from the sale of electricity.
The Renewables Obligation Certificate ("ROC") buy-out price for
the 2019-2020 annual compliance period increased to GBP48.78
(2018-2019 compliance period: GBP47.22), reflecting the average
monthly percentage change in RPI during 2019. On average, the
Company received 1.42 ROC/MWh across the UK portfolio.
The charts on pages 15-16 show a detailed analysis of the
portfolio as at 31 December 2019. The portfolio continues to be
well diversified by inverter and panel manufacturers and by O&M
counterparties.
MARKET DEVELOPMENTS
UNITED KINGDOM
The United Kingdom continues to make progress towards its
ambitious 2050 net-zero greenhouse gas emissions target. Much of
the progress in cutting harmful emissions to date has been achieved
by a radical overhaul of the country's electricity generation
mix.
Despite the progress made in recent years, 2019 saw a marked
slowdown in the addition of new renewables capacity to the network.
A number of large offshore wind projects were completed over the
course of the year, but onshore developments were more muted. New
utility scale solar installations were conspicuously absent as the
solar industry continued a period of consolidation that started in
April 2017 with the closure of government ROC support for new
projects.
Solar capacity in the UK grew marginally in the year to 13.4GW,
with the continued adoption of rooftop solar panels driving modest
growth of approximately 233MW. Despite a slowdown in construction
compared to previous years, the solar industry passed a significant
milestone in December when the number of solar installations across
the country surpassed the one million mark for the first time.
In the absence of newly built solar projects coming to market,
competition for operating assets continued to intensify. The
combination of increased competition and a lack of operating assets
being marketed pushed valuations higher and led to a reduced number
of secondary transactions over the period.
Despite much anticipation around the arrival of the next wave of
solar construction, only a handful of small sites claiming to be
subsidy-free were completed in 2019. However, a growing pipeline of
subsidy-free assets looks set to drive an increased wave of
construction during 2020, as the economic viability of these
projects in the UK becomes a more realistic prospect. The
Investment Manager has engaged with a number of project developers
over the course of the year as it continues to assess the
suitability of subsidy-free assets for the Company's portfolio.
From a regulatory perspective, OFGEM published the Decision and
Impact Assessment of the TCR in November, detailing changes to the
'embedded benefits' currently received by generators. The result of
the TCR is the proposed end of Balancing Services Use of System
("BSUoS") payments to suppliers from April 2021. The Company has
previously highlighted the potential removal of these 'embedded
benefits' and the results of the TCR are broadly in line with the
Investment Manager's expectations. Subject to the finalisation of
the TCR and assuming no embedded benefits from April 2021, the
negative impact on the Company's NAV is anticipated to be
approximately 1.56 pence per share.
On 24 October 2019, the Secretary for State for Business, Energy
and Industrial Strategy ("BEIS") confirmed that the UK's Capacity
Market system will be reintroduced following its suspension in
November 2018. While this will not directly impact existing
portfolio assets, this will increase potential revenue streams to
those able to offer flexible supply or demand profiles to the
network via batteries or other solutions.
General Election and Brexit
Much of 2019 was dominated by ongoing debate and division
regarding the UK's decision to leave the European Union. Following
a period of political deadlock, a General Election was held on 12
December 2019 which saw the re-election of the Conservative Party
with a significant working majority.
The Conservative Party's policy on clean energy has been
consistent in recent years and the 2019 election manifesto
indicated no change of direction. The preferred renewable
technology of choice for the current Government continues to be
offshore wind. This was evident in the results of the Contracts for
Difference ("CfD") Round 3 auction in September which awarded 5.4GW
of greenfield projects to offshore wind, with the remaining 0.4GW
awarded to waste-to-energy projects.
The UK left the European Union on 31 January 2020 and the
negotiations to decide upon the future relationship are expected to
take place during the course of the year. As previously stated, the
Investment Manager does not consider the Company to be particularly
sensitive to the various possible scenarios that the UK Government
could pursue.
In December 2019, the Government announced that it plans to
abandon a proposed cut in Corporation Tax from 19% to 17%. The
Company expects this change to have a minor financial impact. For
more information please refer to the valuation sensitivity section
on page 26. The Investment Manager expects clarification on the
Government's proposals in the upcoming Budget in March 2020.
AUSTRALIA
The Federal Election in May 2019 saw the re-election of the
minority Coalition Government led by Scott Morrison. The Coalition
has restated Australia's commitment to meet its 2030 Paris
Agreement target of cutting carbon dioxide emissions by 26-28%,
from 2005 levels. Government support for renewables projects, in
the form of Large-Scale Generation Certificates, is still scheduled
to end in 2030.
September 2019 witnessed a landmark moment for renewables in
Australia when the Clean Energy Regulator announced that Australia
had met its Renewable Energy Target ahead of its 2020 goal. Despite
the significant progress made in renewable generation there have
been no plans announced to replace the 2020 target. The current
Federal policy vacuum risks a potential slowdown in future
renewables investment. However, the significant human, economic,
and environmental cost of the 2019-2020 bushfire season may
increase pressure on policy makers to consider more ambitious
climate change and renewables policies.
There are a number of proposed regulatory changes which are
under review in the National Electricity Market ("NEM") to manage
the transition of Australia from a centralised system relying on
synchronous generation to a system which increases renewable energy
through connectivity to Renewable Energy Zones. There are key areas
which the regulatory review will look to address: (i) access to
transmission (ii) delivering new build transmission and (iii)
locational signals for new build generation. These are in turn
leading to proposed regulatory changes to the fundamental value
drivers for generators including power prices, MLF calculations,
inter-regional settlement residues ("IRSRs"), transmission rights
and the creation of new markets for other power system benefits
such as capacity markets and fast frequency response.
There are a number of Australian agencies which are currently
assessing various overlapping scopes of work.
The Energy Security Board ("ESB") is conducting a post-2020
review of the market where, amongst other options, the ESB is
considering the introduction of capacity markets. The Australian
Energy Market Commission ("AEMC") is conducting a review of the
Adani submission for a rule change in respect of transitioning
marginal loss factors to average loss factors and the sharing of
IRSRs between generators and consumers. The AEMC is also conducting
a Coordination of Generation and Transmission Investment ("COGATI")
review through which the AEMC has proposed the introduction of
dynamic local pricing and non-firm financial transmission rights
from July 2022. These reviews are being submitted to the Coalition
of Australian Governments ("COAG") which is a body comprising all
State and Federal Energy Ministers. Unanimous approval by the COAG
will result in the implementation of a rule change by the AEMC. The
proposed changes are all currently under review or for public
consultation, and it is unlikely that they will be approved by the
COAG in their current form. The Company is actively engaging in the
regulatory dialogue through meetings with the regulators, written
submissions and participation in the Clean Energy Investor Group
regarding these matters.
POWER PRICES
DAILY AND MONTHLY GENERATION WEIGHTED SPOT ELECTRICITY PRICES AT
UK PORTFOLIO LEVEL (GBP/MWh)
UNITED KINGDOM
The average power price achieved across the UK portfolio during
the year, including fixed price arrangements was GBP45.38/MWh,
versus GBP49.54/MWh in 2018, a decrease of 8.4%.
The first half of 2019 saw a marked decline in wholesale power
prices. Increased volumes of natural gas imported into the UK,
coupled with a relatively mild winter, kept gas prices
significantly constrained. This led to wholesale power prices
dropping to levels as low as GBP40/MWh in June. Power price
weakness persisted throughout the summer months with several days
of gas pricing below GBP30/MWh. In line with the usual pattern of
seasonality, prices recovered in November as we entered the winter
months. However, the recovery stalled in December when Russia and
Ukraine reached an accord on natural gas flows, which secured
European gas supplies for the next five years.
As at 31 December 2019, fixed price arrangements were in place
across 32% of the UK portfolio at a weighted-average price of
GBP52.33/MWh. This compares to 53% as at 31 December 2018, at a
weighted average price of GBP53.38/MWh.
The percentage of fixed price arrangements will decrease to 8.0%
by the end of 2020 due to the expiration of contracts during the
year, with the final fixed price arrangements expiring in March
2021. Fixed price arrangements provide greater visibility over
future cash flows and limit potential price volatility in the short
and medium term.
The Investment Manager regularly reassesses conditions in the
electricity market and updates its view on likely future movements.
The Company retains the option to fix the PPAs of its portfolio
assets at any time, but the Investment Manager is satisfied that
the current proportion of fixed price arrangements offers an
appropriate level of price certainty.
PPA tenders
On 1 April 2019, new PPA contracts across 22 assets representing
179MW were entered for a period of 10 years. The new contracts
resulted in an average increase in the pass-through rates at which
ROCs and power are sold of 1.43% and 0.5%, respectively, against
the previous PPAs. This represented an opportunity to improve the
revenue profile of the assets by bringing to market a sizeable
operational portfolio.
Australia
In 2019, the average wholesale power price increased in all
states compared to 2018 which has been largely driven by increasing
gas prices and, in Victoria, the closure of Hazelwood coal fired
power station.
Average wholesale prices in Queensland and Victoria were $80/MWh
and $110/MWh respectively in 2019, up from
$73/MWh and $92/MWh in 2018. However, due to a rise in solar
generation, the price captured by solar assets started to diverge
from the average price in the second half of 2019, particularly in
Queensland where the average discount was around $10/MWh in 2019.
This trend is expected to continue as more solar generation comes
online.
POWER PRICE FORECASTS
The Investment Manager uses forward looking power price
assumptions to assess the likely future income of the portfolio
assets for valuation purposes. The Company's assumptions are formed
from a blended average of the forecasts provided by two third party
consultants and are updated on a quarterly basis for each relevant
market without further adjustments from the Investment Manager.
UNITED KINGDOM
In 2019, power price forecasts decreased by 11.5% mainly due to
movements in the short to medium term. Power curves steadily
declined in the year, largely driven by an oversupply of gas to the
UK market and depressed global gas prices.
The Company's forecasts over the medium- to long-term assume an
increase in power prices in real terms of 0.4% per annum (31
December 2018: 0.6%).
Where the assumed asset life extends beyond 2050, the Investment
Manager has assumed no real growth in forecast power prices.
Australia
The power price captured by solar assets is forecast to decrease
in the next 1-2 years as solar projects which are currently under
construction come online, pushing down daytime pricing.
However, the recent growth in renewables is expected to slow as
connection delays and MLF issues reduce investor appetite for new
build renewables. From the early 2020s, power prices are expected
to gradually increase as the upward pressure of rising gas prices
is only partially offset by an increase in renewable capacity.
In the 2030s, it is expected that power prices will further
rise, particularly in Queensland, as coal fired power stations
retire. Power price is increasingly set by the marginal cost of gas
and other flexible or technologies.
UK WHOLESALE POWER PRICES (GBP/MWH)
AUSTRALIA WHOLESALE POWER PRICES (A$/MWH)
THIRD PARTY DEBT ARRANGEMENTS AND GEARING POSITION
As at 31 December 2019, total outstanding long-term debt was
GBP403.5 million, representing 38% of the GAV (calculated as NAV
plus outstanding debt) of the Company and its Subsidiaries (31
December 2018: GBP399.4 million or 36% of GAV).
As at 31 December 2019, total outstanding debt including RCFs
was GBP443.5 million, representing 41% of GAV (31 December 2018:
GBP504.4 million or 45% of GAV).
The Company net debt position, when deducting the existing cash
balances, is GBP380.0 million, representing 35% of GAV.
Refinancing of UK debt facilities
As previously reported the Investment Manager successfully
completed the refinancing of 28 of the Company's UK assets
representing 321 MW in the period. The debt refinancing totalled
GBP245 million, comprising a GBP170 million term loan facility, a
GBP65 million RCF and a GBP10 million debt service reserve
facility. The refinancing was secured on attractive terms and
resulted in an increase in the Company's NAV of 2.1 pence per
share. Following the refinancing no further assets in the UK
portfolio include debt at project level.
The GBP65 million RCF has a three-year term and replaces the
previous GBP65 million RCF entered into in 2017.
Long-Term Facilities
As at 31 December 2019, GBP403.5 million of long-term debt
facilities were outstanding.
Inflation linked debt facilities represent GBP86.8 million of
total long-term debt outstanding as at 31 December 2019.
At 31 December 2019, the average cost of long-term debt, was
2.66% per annum (2018: 2.8%), including the cost of inflation
linked facilities of 1.32% per annum. The cost of the inflation
linked facility is expected to increase over time assuming the
Company's long-term annual RPI forecast of 2.75%, to an equivalent
average annual cost of around 3.1% over the term of the
facilities.
Revolving Credit Facilities
The Company currently holds two separate RCF facilities
totalling GBP105 million.
The GBP40 million RCF facility in place for FS Holdco 1 has been
extended for three years during the period and is now due to expire
in March 2022. The terms of the new facility offer a more
favourable margin, resulting in an ongoing interest expense saving
for the Company.
The GBP65 million RCF provided by Natwest was undrawn as of 31
December 2019.
At 31 December 2019, the weighted total cost of the RCFs was
2.8% (2018: 2.3%).
DEBT STRUCTURE
Debt Facilities
The following table summarises the debt position of the Fund as
at 31 December 2019.
Borrower Holding Provider Facility Type Amount Maturity Applicable Rate
Vehicle Outstanding
(m)
----------- ---------------- ----------------- ------------ --------- ----------------------------
Fixed rate,
FS Holdco Ltd FS Holdco 1 MIDIS fully-amortising GBP61.4 Mar-34 3.78%
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
MIDIS Inflation linked, GBP60.6 Mar-34 RPI Index + 1.08%
fully-amortising
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
Santander/Aviva Term loan, GBP21.6 Mar-24 LIBOR + 1.70%
fully-amortising
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
FS Debtco Ltd FS Holdco 2 SMBC & Helaba Term loan, GBP15.7 Mar-22 LIBOR + 1.20%
fully-amortizing
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
FS Debtco Ltd FS Holdco 2 SMBC & Helaba Term loan, GBP154.3 Mar-36 LIBOR + 1.30%
fully-amortizing
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
Second
Generation
Portfolio 1 Fixed rate,
Ltd FS Holdco 3 MIDIS fully-amortising GBP4.1 Aug-34 4.40%
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
Second FS Holdco2 MIDIS Inflation linked, GBP26.2 Aug-34 RPI Index + 1.70%
Generation fully-amortising
Portfolio 1
Ltd
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
Foresight FS Holdco CEFC Term loan A$41.7(2) Jun-27 Base rate (2.95%) + margin
Solar 42 (2.55% to 2.80%)
Australia
Pty Ltd
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
Longreach Finco Pty Ltd CEFC Term loan A$5.6(1) Mar-22 Base rate + margin
(2.57%) (constr - 1.55%;
Base rate operation -
(3.28%)(2) 1.40%)
Base rate
(2.58%)
Base rate
(3.14%)(2)
-------------------------- ---------------- ----------------- ------------ -------- ---------- ----------------
Longreach Finco Pty Ltd MUFG Term loan A$5.6(1) Mar-22
-------------------------- ---------------- ----------------- ------------ -------- ---------- ----------------
Oakey 1 Finco Pty Ltd CEFC Term loan A$7.8(1) Mar-22
-------------------------- ---------------- ----------------- ------------ --------
Oakey 1 Finco Pty Ltd MUFG Term loan A$7.8(1) Mar-22
-------------------------- ---------------- ----------------- ------------ -------- ---------- ----------------
Oakey 2 Finco Pty Ltd CEFC Term loan A$43.7 Oct-22 Base rate (2.48%) + 2.25%
-------------------------- ---------------- ----------------- ------------ -------- ----------------------------
TOTAL LONG-TERM DEBT GBP403.5
--------------------------------------------------------------- ----------------------- ----------------------------
FS Holdco Ltd FS Holdco 1 Santander Revolving credit GBP40.0 Mar-22 LIBOR + 1.75%
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
Foresight FS Top Natwest Revolving credit GBPnil Aug-22 LIBOR + 2.00%
Intermediate Holdco 2
Solar
Holding Ltd
------------- ----------- ---------------- ----------------- ------------ --------- ----------------------------
TOTAL REVOLVING DEBT GBP40.0
--------------------------------------------------------------- ----------------------- ----------------------------
TOTAL DEBT GBP443.5
--------------------------------------------------------------- ----------------------- ----------------------------
1 Australian debt prorated for Foresight asset ownership.
AUD/GBP exchange rate of 0.53 as at 31 December 2019
2 Interest rate swap for 100% of the outstanding debt during the
initial 5 years, 75% from years six to ten and 50% thereafter
During the period the Company repaid GBP10.2 million of debt,
excluding RCF payments.
The Company continues to have limited exposure to benchmark rate
movements in the UK and Australia as a result of the long-term
interest rate swaps in place to protect the Company from underlying
interest rate movements. Sterling denominated debt facilities
priced over LIBOR benefit from interest rate swaps hedging between
80% and 100% of the outstanding debt during the terms of the loans,
depending on the facility. In Australia, debt facilities entered
into with the CEFC have no exposure to the Bank Bill Swap Bid Rate
("BBSY") as the rate was fixed at financial close. Debt facilities
provided by Mitsubishi UFJ Financial Group (MUFG) have in place
interest rate swaps on a decreasing nominal amount for a notional
tenor of 20 years.
DIVIDS
The Company will deliver a full year dividend for the year ended
31 December 2019 of 6.76 pence, in line with its target. The
Company has met all target dividends since its IPO in October
2013.
DIVID TIMETABLE FOR FY2019
Dividend Amount Status Payment Date Scrip Dividend Take Up Average New Shares
Mid-Market Price per Issued
Share
----------- --------- ----------------- ---------------------- ------------------------ ----------
Interim 1 1.69 pence Paid 30 August 2019 - - -
---------- ----------- --------- ----------------- ---------------------- ------------------------ ----------
Interim 2 1.69 pence Paid 29 November 2019 42,136,915 GBP1.192 597,383
---------- ----------- --------- ------------------ ---------------------- ------------------------ ----------
Interim 3 1.69 pence Paid 28 February 2020 53,127,131 GBP1.176 763,438
---------- ----------- --------- ------------------ ---------------------- ------------------------ ----------
Interim 4 1.69 pence Approved 29 May 2020 39,984,119 GBP1.175 575,063
---------- ----------- --------- ------------------ ---------------------- ------------------------ ----------
TOTAL 6.76 pence 1,935,884
---------- ------------------------------------------ ---------------------- ------------------------ ----------
On 6 March 2020 the Board approved the fourth interim dividend
relating to FY2019 of 1.69 pence per share which will be paid on 29
May 2020.
Dividend Timetable - Interim 4
-------------
Ex-dividend Date 30 April 2020
------------------------------ -------------
Record Date 1 May 2020
------------------------------ -------------
Payment Date 29 May 2020
------------------------------ -------------
DIVID POLICY AND 2020 DIVID TARGET
The Company has moved from an inflation-linked dividend annual
growth target to a progressive dividend policy reflecting the
divergence of power prices and inflation since the launch of the
Company.
The target dividend for 2020 is 6.91 pence per share, an
increase of 2.2% compared to 2019.
DIVID COVER
Total dividends of GBP36.0 million were paid during the year to
31 December 2019. Dividend cover for the period was 1.19 times when
excluding dividends paid to new shares issued during the period and
including the impact of the scrip dividend program. Dividend cover
for the year on a cash basis was 1.12 times.
FOREIGN EXCHANGE
The Company is exposed to foreign exchange movements in respect
of its investments in Australia. As such, the Company continues to
implement a hedging strategy in order to reduce the possible impact
of currency fluctuations and to minimise the volatility of equity
returns and cash flow distributions. The Fund has entered into
forward contracts for up to two years in an amount equivalent to
c.75% of its expected distributable foreign currency cash flows at
project level. Due to the predictable nature of solar irradiation
in Australia, and the known dividend payment dates, the Investment
Manager believes this hedging strategy will protect the cash yields
from the Australian assets.
The cost of the equity investments will not benefit from foreign
exchange hedging, considering the long-term investment strategy of
the Company.
The Company reviews its foreign exchange strategy on a regular
basis with the objective of limiting the short-term volatility in
sterling distributable cash flows caused by foreign exchange
fluctuations and of optimising the costs of the hedging
instruments.
ONGOING CHARGES
The ongoing charges ratio for the year to 31 December 2019 was
1.14% (31 December 2018: 1.18%). This has been calculated using
methodology recommended by the Association of Investment Companies
("AIC").
Foresight Group LLP charges asset management fees directly to
the assets and these are not included within the ongoing charge
ratio.
INVESTMENT PERFORMANCE
As at 31 December 2019, the NAV per share for the Company
decreased to 103.8 pence from 111.2 pence at 31 December 2018.
MOVEMENTS IN NAV
A breakdown in the movement of the Group NAV during the
reporting period is shown in the table below.
NAV NAV per share
--------- -------------
NAV as at 31 December 2018 GBP610.3m 111.2p
----------------------------- --------- -------------
Dividend paid (36.0) (6.4)
----------------------------- --------- -------------
Equity raised 64.5 0.7
----------------------------- --------- -------------
Interest earned 52.0 9.3
----------------------------- --------- -------------
Management fee (6.0) (1.1)
----------------------------- --------- -------------
Finance costs (8.1) (1.4)
----------------------------- --------- -------------
Valuation date* (13.7) (2.4)
----------------------------- --------- -------------
Power curve* (61.3) (10.9)
----------------------------- --------- -------------
PPA Terms* 3.7 0.7
----------------------------- --------- -------------
UEL & Leases* 8.5 1.5
----------------------------- --------- -------------
Discount Rate* 28.1 4.9
----------------------------- --------- -------------
Refinancing* 11.7 2.1
----------------------------- --------- -------------
Targeted Charging Review* (9.5) (1.6)
----------------------------- --------- -------------
LGC Forecasts* (3.3) (0.6)
----------------------------- --------- -------------
Marginal Loss Factors (MLF)* (2.9) (0.5)
----------------------------- --------- -------------
Oakey 2 Revaluation* (6.9) (1.2)
----------------------------- --------- -------------
Other* (2.9) (0.5)
----------------------------- --------- -------------
NAV as at December 2019 GBP628.0m 103.8p
----------------------------- --------- -------------
* Movement in the valuation of underlying solar assets
VALUATION OF THE PORTFOLIO
The Investment Manager is responsible for providing fair market
valuations of the Company's underlying assets to the Board of
Directors. The Directors review and approve these valuations
following appropriate challenge and examination. Valuations are
undertaken quarterly. A broad range of assumptions is used in the
valuation models.
These assumptions are based on long-term forecasts and are not
affected by short-term fluctuations, be it economic or
technical.
It is the policy of the Investment Manager to value with
reference to Discounted Cash Flows ("DCF") at the later of
commissioning or transaction completion. This is partly due to the
long periods between agreeing an acquisition price and financial
completion of the acquisition. Revenues accrued do not form part of
the DCF calculation in making a fair valuation.
The current portfolio consists of non-market traded investments
and valuations are based on a DCF methodology or held at cost where
the assets have not yet reached commissioning. This methodology
adheres to both IFRS 9 and IFRS 13 accounting standards as well as
the International Private Equity and Venture Capital ("IPEV")
Valuation Guidelines.
The Company's Directors review and query the operating and
financial assumptions, including the discount rates, used in the
valuation of the Company's portfolio and approve them as
appropriate after due consideration based on the recommendation of
the Investment Manager.
METHODOLOGY
Following the successful refinancing of the UK debt facilities
all UK assets are valued at a levered discount rate of 7.0%, a
decrease of 0.5% compared to the 2018 financial year. The reduction
in levered discount rate over the course of the period is informed
by a wide variety of benchmarks and market intelligence. A discount
rate of 8.0% is applied to cashflows for any periods over 25 years
where the useful economic life ("UEL") of an asset has been
extended.
For the Australian portfolio a single levered discount rate of
8.0% is used, representing a decrease of 0.5% against 2018. The
overall reduction in the discount level over the period reflects
pricing available in the market for operating assets with high
quality PPAs in place, as is the case for the assets at Longreach
and Oakey 1.
The weighted average discount rate across the portfolio is now
7.1%, compared to 7.3% at 31 December 2019.
The Investment Manager regularly reviews the discount rate to
ensure it remains in line with any changes to the market and risk
profile of the Company.
USEFUL ECONOMIC LIFE (UEL)
The weighted life of the UK portfolio as at 31 December 2019 is
29.8 years (31 December 2018: 28.4 years) from the date of
commissioning. This represents a remaining portfolio useful life of
25.1 years when the historical operational periods are taken into
consideration.
The average useful economic life across 40 of the 50 UK assets
goes beyond 25 years, averaging 31.1 years from the date of
commissioning. Additional conservative operational and lifecycle
costs are incorporated into the extended useful life period. The
maximum UEL assumed for the UK portfolio is 35 years, subject to
existing land lease restrictions.
Assets located in Australia currently assume a useful economic
life of 25 years. This assumption is currently under review by the
Investment Manager.
MOVEMENTS IN NAV (GBPM AND PENCE PER SHARE)
DIVIDS PAID
The Company declared dividends of GBP36.0 million during the
year, equating to 6.76p per share.
EQUITY RAISED
One oversubscribed share placing was completed, raising net
proceeds of GBP64.5 million from new and existing investors. The
share placing resulted in a net asset value accretion of 0.7 pence
per share.
INTEREST EARNED
The Company and its subsidiaries accrued GBP52.0 million of
investment income during the year. This is the interest accrued on
shareholder loans.
VALUATION DATE
This movement represents the impact of moving from one valuation
date to another. Over the life of an asset, this movement will
reduce the valuation to nil. Short term increases arise from moving
towards higher cash yields (and therefore discounting them
less).
POWER PRICE FORECAST
The Investment Manager uses forward looking power price
assumptions to assess the likely future income of the portfolio
assets for valuation purposes. The Company's assumptions are formed
from a blended average of the forecasts provided by third party
consultants and are updated on a quarterly basis.
During the year, there was a significant downwards movement of
11.5% in the medium to long term power price forecast. The
Company's forecasts continue to assume an increase in power prices
in real terms over the medium to long-term of 0.4% per annum (31
December 2018: 0.6%).
PPA TERMS
On 1 April 2019, new PPA contracts across 22 assets representing
179MW were entered into for a period of 10 years. The new contracts
resulted in an average increase in pass-through rates at which ROCs
and power are sold of 1.43% and 0.5%, respectively, against the
previous PPAs.
DISCOUNT RATES
As reported the levered discount rate for UK operational assets
has decreased from 7.5% to 7.0%. This reduction took place over two
rate reductions in June and December 2019 and reflects the
competitive landscape for operational assets in the UK.
During the period, Oakey 1 and Bannerton have reached full
export and have been revalued using a discounted cash flow
methodology. The levered discount rate used for Australian asset
that benefit from PPAs as of 31 December 2019 is 8.0%, a 0.5%
reduction against the rate at the start of the period.
REFINANCING TERMS
This movement reflects the updated debt terms secured in the
refinancing of the Company's UK debt facilities.
The positive movement results from the margins and LIBOR swap
rates of the new facilities being lower than the refinancing
assumptions made at the time of acquisition.
TARGETED CHARGING REVIEW (TCR)
This movement reflects the impact of OFGEM's Targeted Charging
Review (TCR) findings, confirmed in November 2019, which ends
'embedded benefit' payments to generators from April 2021.
LGC Forecasts
The company uses forward looking LGC price assumptions to assess
the likely future income of the certificates generated by the
portfolio's Australian assets. The Company's assumptions are formed
from a blended average of the forecasts provided by third party
consultants and are updated on a quarterly basis.
MARGINAL LOSS FACTORS
The valuation movement reflects the FY2019 MLF published by AEMO
for the Bannerton asset and the manager's expectation of future MLF
value. The remaining assets in the Australian portfolio have
remained broadly unaffected.
Oakey 2 Revaluation
The Australian asset Oakey 2 has had its commissioning date
pushed back further due to delays following a storm in January
2020, negatively impacting its latest valuation.
OTHER MOVEMENTS
This includes other factors behind the valuation movements,
including exchange rate fluctuations and insurance cost
assumptions, amongst others.
VALUATION SENSITIVITIES
Where possible, assumptions are based on observable market and
technical data. In many cases, such as forward power prices,
independent advisors are used to provide reliable and evidenced
information enabling the Investment Manager to adopt a prudent
approach. The Investment Manager has set out the inputs which it
has ascertained would have a material effect upon the NAV. All
sensitivities are calculated independently of each other.
OUTLOOK
The decrease in regulatory support mechanisms in European
markets, associated with the ongoing consolidation in established
markets, has limited the pipeline of available investment
opportunities. Subsequently, European secondary markets remain
expensive and are expected to continue to be so in the near future.
The Investment Manager, through its network of contacts, will
continue to identify new opportunities within the Company's
investment policy however the expectation is for acquisition
activity in the secondary market for operational subsidised assets
to remain opportunistic.
On 3 March 2020 BEIS announced the decision to revoke its 2015
decision to exclude solar and onshore wind technologies from future
CfD auctions. The full details of future auctions are yet to be
disclosed however it is expected to support further deployment of
solar in the UK market. The Investment Manager will review the
impact of this announcement on the Company's pipeline opportunities
as more information becomes available.
As a result of the expected transition to subsidy free solar
markets, the growth in solar assets in the main European markets,
including the UK are expected to be delivered through subsidy free
developments.
Pipeline opportunities in the subsidy free markets will be
evaluated based on their risk-adjusted return profile, taking into
consideration the level of exposure to merchant electricity prices
and level of contracted revenues.
In the view of the Investment Manager, for subsidy-free
investments, Southern European markets continue to deliver more
attractive risk-adjusted returns compared to the UK market despite
the increased development activity observed over the last 12 months
(estimated 6.2 GW of capacity, or over 300 projects, in the UK
planning system as at December 2019). This is due to the higher
irradiation and production profile in Southern European markets and
longer PPA contractual structures.
From a portfolio perspective the Asset Manager will continue to
focus on optimisation initiatives and maintaining the high
operational performance that the UK portfolio has demonstrated in
recent periods. Short term initiatives include the further
reduction of operational costs e.g. by renegotiating existing
maintenance agreements and evaluating the opportunity to install
battery storage units in a limited number of assets included in the
UK portfolio.
Finally, we will continue to deliver an asset management
approach focused on sustainability and are aiming to deliver
best-in-class initiatives with the co-operation of local
communities.
Asset Manager's Report
UK Portfolio Performance
The portfolio has once again generated more electricity than
base case during the year reinforcing the established performance
of the operating portfolio. Electricity generation was 3.9% above
base case when adjusted for compensation received. The improved
performance of the portfolio means that production now exceeds
irradiation received at 3.8% above base case.
The Asset Manager has expanded its team of multi-disciplinary
experts supporting this portfolio, further enhancing the depth of
in-house capabilities available to optimise portfolio performance.
This team are constantly evaluating commercial and technical
enhancement opportunities to improve production from the portfolio.
An example of this approach has been the significant reduction in
production losses during 2019 which was largely due to investments
in strategic spares in 2018. Access to these strategic spare parts
combined with the predictive maintenance approach adopted by the
asset manager ensured failures were rectified very promptly.
The Asset Manager continues to review the wider portfolio and
work with O&M partners to ensure the availability of key
components to prevent extended outages.
Further examples of the asset manager's pro-active approach to
optimise portfolio production during the period include:
-- A trial of string optimisers at Kencot (37MW) to test the viability of the technology. Once
the test period is complete in Q1 2020, a review of the data and any potential uplift will
be undertaken to determine whether a more extensive roll out of the technology should be carried
out across the portfolio.
-- Liaising with key component manufactures to understand and ensure correct maintenance of plant
equipment. Negotiation of Warranty terms of key components to feed into new portfolio acquisitions.
-- Continued development and implementation of a thorough technical review at Final Acceptance
to ensure any longer-term technical issues are highlighted. Conducting and completing Final
Acceptance negotiations across the entire portfolio to ensure that the plants are in best
operational condition for future operation.
In addition to the above activities, the Asset Manager has been
reviewing the portfolio to identify opportunities to add a battery
storage system to existing sites. The battery storage system would
be using the spare grid connection capacity of the existing site
outside the solar PV peaking time to operate a merchant regime and
take advantage of energy price volatility, in addition to other
grid ancillary services. The review ensures that the existing grid
connection can be upgraded to increase the import capacity and that
there is a suitable location for the equipment on the existing
site. Planning implications are also reviewed as part of the
process. To date various sites have been identified as suitable for
the installation of a battery storage and the Asset Manager is
progressing these plans with the aim of installing a limited number
of battery storage systems in Q4 2020.
The Asset Manager also conducted a historic review of business
rates paid by the Fund's project companies which resulted in a
clawback of overpayments and contributed positively to income in
the year.
In 2019 the incidents affecting the UK portfolio were
predominantly caused by grid outages and equipment failures in
particular Welbeck and Fields Farm. As detailed in the interim
report, Wymeswold has underperformed due to string faults and
inverter issues in early 2019. Since then, a significant number of
inverter spare parts have been purchased for the site to reduce
future down time and the string repairs completed.
AUSTRALIAN PORTFOLIO UPDATE
The Company's sites at Bannerton and Oakey 1 are now operational
following the commissioning of Longreach in 2018.
Bannerton achieved full export capacity in the first quarter of
2019 but due to an oscillation issue on the network the project and
four other local generators have been constrained to 50% of output
since September 2019. The Asset Manager has been working closely
with the market operator, the network operator and the other
affected generators to resolve the issue which is expected to occur
in the second quarter of 2020.
Longreach has been experiencing limited grid curtailment since
completion of commissioning due to reduced loads in the area and a
low capacity grid transformer. The Asset Manager is working with
the local grid operator Ergon, on a plan to relieve this local grid
constraint. We are hopeful that this issue will be resolved during
the second half of 2020.
OAKEY 2 (UNDER CONSTRUCTION)
The area of Oakey 2 which was affected by storm damage in
October 2018 has been rebuilt during the period with the project
reaching initial export in April 2019.
The project has experienced gird commissioning delays following
first export as a result of initial grid compliance tests. As a
consequence, further equipment is expected to be installed on site
to address grid compliance issues identified on site, resulting in
delays to full commissioning.
Oakey 2 was damaged by a second storm in January 2020 affecting
approximately 15% of the site and further delaying commissioning
works to late 2020.
PRODUCTION
The production figures below have been adjusted, where relevant,
for events where compensation has been, or will be, received.
Site MW Production Production Irradiation
(kWh) Variance Variance
----- ----------- ---------- -----------
Abbey Fields 4.9 5,381,454 6.8% 6.2%
------------------ ----- ----------- ---------- -----------
Abergelli 7.7 7,299,419 0.0% -0.1%
------------------ ----- ----------- ---------- -----------
Atherstone 14.8 14,224,380 4.5% 5.8%
------------------ ----- ----------- ---------- -----------
Bilsthorpe 5.7 5,697,719 6.8% 6.7%
------------------ ----- ----------- ---------- -----------
Bournemouth 37.3 40,178,200 3.0% -1.8%
------------------ ----- ----------- ---------- -----------
Bulls Head 5.5 5,469,279 7.7% 7.8%
------------------ ----- ----------- ---------- -----------
Castle Eaton 17.8 17,590,918 10.7% 6.9%
------------------ ----- ----------- ---------- -----------
Coombeshead 9.8 10,386,364 2.7% 3.0%
------------------ ----- ----------- ---------- -----------
Copley 30.0 30,106,402 8.6% 5.9%
------------------ ----- ----------- ---------- -----------
Crow Trees 4.7 4,612,474 7.6% 7.3%
------------------ ----- ----------- ---------- -----------
Cuckoo Grove 6.1 6,393,893 -4.8% -2.5%
------------------ ----- ----------- ---------- -----------
Field House 6.4 6,494,995 1.6% 1.8%
------------------ ----- ----------- ---------- -----------
Fields Farm 5.0 4,405,592 -6.0% 5.1%
------------------ ----- ----------- ---------- -----------
Gedling 5.7 5,593,604 7.9% 9.0%
------------------ ----- ----------- ---------- -----------
High Penn 9.6 9,544,478 6.1% 0.5%
------------------ ----- ----------- ---------- -----------
Highfields 12.2 11,329,781 1.5% 2.7%
------------------ ----- ----------- ---------- -----------
Homeland 13.2 13,647,412 -0.8% -1.9%
------------------ ----- ----------- ---------- -----------
Hunters Race 10.3 10,879,922 3.7% 1.3%
------------------ ----- ----------- ---------- -----------
Kencot Hill 37.2 37,303,933 5.4% 4.6%
------------------ ----- ----------- ---------- -----------
Landmead 45.9 45,212,723 7.2% 9.8%
------------------ ----- ----------- ---------- -----------
Lindridge 4.9 4,875,374 4.8% 2.9%
------------------ ----- ----------- ---------- -----------
Manor Farm 14.2 13,262,296 6.4% 4.7%
------------------ ----- ----------- ---------- -----------
Marsh Farm 9.1 9,225,811 0.7% 2.0%
------------------ ----- ----------- ---------- -----------
Membury 16.5 16,217,894 3.8% 2.5%
------------------ ----- ----------- ---------- -----------
Misson 5.0 4,872,681 3.7% 3.8%
------------------ ----- ----------- ---------- -----------
Nowhere 8.1 8,560,482 8.0% 7.4%
------------------ ----- ----------- ---------- -----------
Paddock Wood 9.2 9,788,315 6.7% 3.2%
------------------ ----- ----------- ---------- -----------
Park Farm 13.2 12,670,160 7.4% 5.3%
------------------ ----- ----------- ---------- -----------
Pen Y Cae 6.8 6,397,086 0.4% 1.5%
------------------ ----- ----------- ---------- -----------
Pitworthy 15.6 14,316,652 1.1% 1.2%
------------------ ----- ----------- ---------- -----------
Playters 8.6 8,658,418 1.9% 4.0%
------------------ ----- ----------- ---------- -----------
Port Farm 34.7 34,989,437 7.1% 4.7%
------------------ ----- ----------- ---------- -----------
Roskrow 8.9 8,705,229 4.2% -1.5%
------------------ ----- ----------- ---------- -----------
Sandridge 49.6 47,702,642 0.9% 2.7%
------------------ ----- ----------- ---------- -----------
Sawmills 6.6 6,679,958 0.5% 0.2%
------------------ ----- ----------- ---------- -----------
Sheepbridge 5.0 5,083,277 8.8% 10.5%
------------------ ----- ----------- ---------- -----------
Shotwick 72.2 66,286,620 4.1% 3.1%
------------------ ----- ----------- ---------- -----------
Southam 10.3 10,129,711 5.6% 3.9%
------------------ ----- ----------- ---------- -----------
Spriggs 12.0 12,076,074 4.4% -0.2%
------------------ ----- ----------- ---------- -----------
Steventon 10.0 10,272,536 4.6% 6.8%
------------------ ----- ----------- ---------- -----------
SV Ash 8.4 8,335,361 8.6% 6.2%
------------------ ----- ----------- ---------- -----------
Tengore 3.6 3,632,459 0.9% 2.6%
------------------ ----- ----------- ---------- -----------
Trehawke 10.6 10,882,217 2.0% 2.6%
------------------ ----- ----------- ---------- -----------
Upper Huntingford 7.7 7,495,155 3.4% 3.6%
------------------ ----- ----------- ---------- -----------
Verwood 20.7 21,405,369 2.4% 2.4%
------------------ ----- ----------- ---------- -----------
Wally Corner 5.0 5,253,985 7.4% 5.1%
------------------ ----- ----------- ---------- -----------
Welbeck 11.3 10,728,819 1.2% 8.0%
------------------ ----- ----------- ---------- -----------
Wymeswold 34.5 31,315,766 0.5% 6.3%
------------------ ----- ----------- ---------- -----------
Yarburgh 8.1 8,175,048 5.0% 7.4%
------------------ ----- ----------- ---------- -----------
Yardwall 3.0 3,173,172 0.6% 1.2%
------------------ ----- ----------- ---------- -----------
Total* 723.1 712,920,946 3.9%
------------------ ----- ----------- ---------- -----------
Weighted Total 3.8%
------------------ ----- ----------- ---------- -----------
Australia
Site MW Production Production Irradiation
(kWh) Variance Variance
---- ---------- ---------- -----------
Longreach 17.3 34,753,522 -9.8% 5.8%
---------- ---- ---------- ---------- -----------
*Totals may not sum due to rounding
Sustainability and ESG Considerations
Approach
Sustainability and Environmental, Social and Governance ("ESG")
considerations are firmly at the centre of the Company's strategy,
helping to inform its investment process and its asset management
operations. 2019 marked a year of significant development in terms
of how the Company embeds ESG considerations in the way it does
business to achieve sustainable growth, recognising that such
factors are of increasing importance to global investors.
The nature of the Company's business means it is well positioned
to serve the needs of those investors seeking to achieve positive
environmental and social outcomes alongside attractive financial
returns.
Over the course of the year, Foresight Group refined its
sustainability tracking and reporting to:
-- further improve its investment processes;
-- enhance the sustainability performance of existing assets; and
-- demonstrate more comprehensively the environmental benefits and social contribution of the
Group's activities.
This resulted in the implementation of the Company's
'Sustainable Investing in Infrastructure' strategy, which focuses
on ensuring all assets are evaluated prior to acquisition and
consistently throughout their ownership, in order to meet the
Company's Sustainability Evaluation Criteria.
GREEN ECONOMY MARK
In September 2019 the London Stock Exchange launched a new
initiative to support sustainable finance
on its markets.
The Green Economy Mark recognises companies and investment funds
in all segments of the Main Market and AIM that derive 50% or more
of their total annual revenues from products and services that
contribute to the global green economy.
The initiative is designed to support issuers implementing
sustainable business models, and investors who are increasingly
focusing on environmental products and services supporting the
transition to a low carbon economy.
We are pleased to report that Foresight Solar Fund Ltd was one
of approximately 75 UK listed companies which received the
designation at the launch of the initiative.
CONTRIBUTION TO SUSTAINABLE DEVELOPMENT GOALS
Demonstrating Foresight Group's commitment to sustainability is
the Company's ability to report against the United Nations
Sustainable Development Goals ("SDGs"). The SDGs, which were
adopted by all United Nationals member states in 2015, comprise the
most urgent economic, social and environmental issues to be
addressed for peace and prosperity for people and the planet.
While we support all SDGs, Foresight Group contributes most
significantly to the following:
CONTRIBUTION TO SUSTAINABLE DEVELOPMENT GOALS Examples of Foresight Group's commitment
Goal 3: "Good Health and Well-Being" Achieved through the reduction of pollution and emitted
Ensure healthy lives and promote well-being for all at greenhouse gases ("GHGs") by the installation
all ages. and management of clean, low-carbon energy generation
assets.
* 230,000 UK homes powered by clean energy in 2019
* Independent, professionally accredited health and
safety consultants appointed to ensure contractors
are selected on the basis of their health and safety
competence
* In 2019, c.GBP184,000 of grants provided to local
communities to improve facilities
------------------------------------------------------- -----------------------------------------------------------
Goal 7: "Affordable and Clean Energy" Achieved by reducing reliance on fossil fuels by investment
Ensure access to affordable, reliable, sustainable and in utility-scale, renewable energy
modern energy. generation assets.
* As at 31 December 2019, the Company's portfolio
comprised 54 solar assets
* 230,000 UK homes powered by clean energy in 2019
------------------------------------------------------- -----------------------------------------------------------
Goal 9: "Industry, Innovation and Infrastructure" Achieved by future-proofing energy systems through
Build resilient infrastructure, promote inclusive and investment in de-centralised, interconnected
sustainable industrialization and foster generation assets, using the latest technologies to
innovation. maximise electrical output
* As at 31 December 2019, the Company's portfolio
comprises 54 solar assets
------------------------------------------------------- -----------------------------------------------------------
Goal 13: "Climate Action" Achieved by demonstrating commitment to the 2015 Paris
Take urgent action to combat climate change and its Agreement and contributing to the globally
impacts. supported decarbonisation agenda through investment in
low-carbon, renewable energy assets
* 550,000 tonnes of CO2 avoided
* 61,000 tonnes of oil equivalent ("TOE") saved
------------------------------------------------------- -----------------------------------------------------------
Goal 15: "Life on Land" Achieved by preserving the integrity of land through
Sustainably manage forests, combat desertification, investment in low-impact and low-polluting
halt and reverse land degradation, halt technologies and introducing environmental initiatives
biodiversity loss. through active asset management, supporting
biodiversity and the ecosystem.
* 25 beehives installed to support crop pollination and
honey production
* More than 35 kilometres of hedgerows planted to
promote biodiversity, absorb carbon, improve drainage
and soil quality and reduce site exposure to extreme
weather conditions
* Hibernacula, log piles and 'insect hotels'
established to provide natural habitats and improve
natural drainage.
* A grassland cutting timetable has been implemented,
limiting cutting in the summer months, to promote
growth, flowering and seed spreading of wildflowers
to encourage biodiversity and forage for insects and
birds
* 15 sites have been built or adapted to ensure their
suitability for sheep grazing.
* Flood risk assessments carried out for all sites and
related initiatives implemented to ensure safe
working conditions and good soil conditions which
further promotes diverse grass and wildflower growth
------------------------------------------------------- -----------------------------------------------------------
Sustainability priorities and progress in 2019
There are five central themes to Foresight Group's
Sustainability Evaluation Criteria:
-- Sustainable development contribution
-- Environmental footprint
-- Social engagement
-- Governance
-- Third party interactions
The Company's adherence, and contribution, to these themes is
assessed below.
1. SUSTAINABLE DEVELOPMENT CONTRIBUTION
This theme supports reporting on the development of affordable
and clean energy, improved resource and energy efficiency and
contributions to the fight against climate change.
In 2019, the Company's operational portfolio produced over
712GWh of renewable energy. Furthermore, using OFGEM's assessment
that the average UK household consumes 3.1 MWh per year, it can be
inferred that the Company's portfolio generated enough clean
electricity to power c. 230,000 UK homes during the period.
Site MW Production CO2 Homes TOE (Tonnes of Hedgerows Sheep Beehives
(MWh) Production Powered Oil Planted (m) Grazing Installed
Avoided (t)* per Year** Equivalent)
Saved
--- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Abbey Fields 5 5,381 4,154 1,736 462 700
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Abergelli 8 7,299 5,635 2,355 627 500
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Atherstone 15 14,224 10,981 4,589 1222 60
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Bilsthorpe 6 5,698 4,399 1,838 489 1,265
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Bournemouth 37 40,178 31,018 12,961 3451 2,360
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Bulls Head 6 5,469 4,222 1,764 470 370
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Castle Eaton 18 17,591 13,581 5,675 1511
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Coombeshead 10 10,386 8,018 3,350 892
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Copley 30 30,106 23,242 9,712 2586 1,200
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Crow Trees 5 4,612 3,561 1,488 396 165
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Cuckoo Grove 6 6,394 4,936 2,063 549 780
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Field House 6 6,495 5,014 2,095 558 250
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Fields Farm 5 4,406 3,401 1,421 378 250
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Gedling 6 5,594 4,319 1,805 481
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
High Penn 10 9,544 7,368 3,079 820 600
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Highfields 12 11,330 8,747 3,655 973 650
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Homeland 13 13,647 10,536 4,402 1172 130
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Hunters Race 10 10,880 8,400 3,510 935 500
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Kencot Hill 37 37,304 28,799 12,034 3204 2,225
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Landmead 46 45,213 34,905 14,585 3884 2,800
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Lindridge 5 4,876 3,764 1,573 419 60
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Manor Farm 14 13,262 10,238 4,278 1139 1,970 2
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Marsh Farm 9 9,226 7,123 2,976 792 755
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Membury 16 16,218 12,521 5,232 1393 2,630
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Misson 5 4,873 3,762 1,572 419 460
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Nowhere 8 8,560 6,608 2,761 735 1,200
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Paddock Wood 9 9,788 7,556 3,158 841 440 4
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Park Farm 13 12,670 9,781 4,087 1088 1,826
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Pen Y Cae 7 6,397 4,939 2,064 549
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Pitworthy 16 14,317 11,053 4,619 1230 1,525
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Playters 9 8,658 6,684 2,793 744 454
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Port Farm 35 34,989 27,012 11,287 3005 430 2
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Roskrow 9 8,705 6,720 2,808 748 830
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Sandridge 50 47,703 36,827 15,389 4098 280
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Sawmills 7 6,680 5,157 2,155 574
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Sheepbridge 5 5,083 3,924 1,640 437 1,450 10
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Shotwick 72 66,287 51,175 21,384 5694 1,930
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Southam 10 10,130 7,821 3,268 870 330 4
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Spriggs 12 12,076 9,323 3,896 1037 735
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Steventon 10 10,273 7,931 3,314 882 660 3
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
SV Ash 8 8,335 6,435 2,689 716 1,200
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Tengore 4 3,632 2,804 1,172 312 65
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Trehawke 11 10,882 8,401 3,510 935 460
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Upper
Huntingford 8 7,495 5,786 2,418 644
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Verwood 21 21,405 16,525 6,905 1839
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Wally Corner 5 5,254 4,056 1,695 451
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Welbeck 11 10,729 8,283 3,461 922
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Wymeswold 34 31,316 24,176 10,102 2690 257
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Yarburgh 8 8,175 6,311 2,637 702 640
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Yardwall 3 3,173 2,450 1,024 273 380
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Total*** 723 712,921 550,383 229,982 61, 237 35,772 15 sites 25
------------- --- ------------ ------------ ------------ -------------- ------------ ------------ ------------
* Compared to coal emissions
** Using the OFGEM figure of 3.1 MWh / annum / household
*** Totals may not sum due to rounding
2. ENVIRONMENTAL FOOTPRINT
Each asset is closely monitored for its localised environmental
impact. As such, this criterion assesses potential environmental
impacts such as emissions to air, land and water, effects on
biodiversity and noise and light pollution. The Asset Manager
ensures that solar power plants are managed in a manner that
maximises the agricultural, landscape, biodiversity and wildlife
potential, which can also contribute to lowering maintenance costs
and enhancing security.
The Asset Management team has continued to pursue a number of
initiatives to ensure the solar power plants are being effectively
managed for agriculture, landscape, and biodiversity. Such schemes
include:
-- Hedgerow and tree planting - To date, more than 35km of
hedgerows have been planted across the portfolio. With
the majority of hedgerow planting now complete, the hedgerows
are managed to ensure they develop into dense species-rich
habitats. Hedgerows help to promote biodiversity, absorb
carbon, improve both drainage and soil quality and reduce
site exposure to extreme weather conditions.
-- Building of animal refuges - Hibernacula, log piles and
'insect hotels' have been established at Kencot Hill,
Crow Trees and Sheepbridge, and ponds and swales have
been installed or restored at Bilsthorpe, Castle Eaton,
Crow Trees, Gedling Atherstone, Fields Farm, Paddock Wood,
Sandridge, Sheepbridge, Southam and Upper Huntingford
to provide natural habitat as well as to help improve
natural drainage.
-- Bat and bird boxes - The Asset Manager installed bird
and bat boxes to attract local species to the sites.
-- Sheep grazing - Numerous sites have been either built
or adapted through the installation of barriers and the
protection of cabling, to ensure their suitability for
continued sheep grazing.
-- Beehive installation - The Asset Manager continues to
work with local beekeepers to install hives as a means
of helping to restore the native bee population, support
crop pollination and honey production. The Asset Manager
also encourages the productivity of these hives through
the planting of nectar-rich wildflower species. As at
31 December 2019, 25 beehives had been installed.
-- Climate change risk - Flood risk assessments have been
carried out for all sites. Panels are installed above
the 'worst-case scenario' water level and land drains,
swales and ponds are also maintained to ensure safe workingconditions
and good soil conditions which further promotes diverse
grass and wildflower growth.
-- Grassland management - A grassland cutting timetable is
being implemented to limit cutting in the summer months.
This promotes the growth, flowering and seed spreading
of wildflowers to encourage biodiversity and forage for
insects and birds.
As a working partner of the Solar Trade Association ("STA"), the
Asset Manager recently helped to co-author the organisation's
report, The Natural Capital Value of Solar (June 2019), and
subsequently contributed to developing the STA's good practice
guidelines on Land and Vegetation Management to Preserve and
Enhance Natural Capital to promote better solar farm management
throughout the industry. In the first report, Foresight Group
highlights the importance of wetlands, drainage and on-site water
management at solar sites, how hedge planting can reduce flood risk
and the associated benefits such as the reduction of both nitrogen
loads and intermittent pesticide fluxes on surrounding land.
Managing our environmental footprint -
making a Positive Impact
ENCOURAGING BIO-DIVERSITY
Solar farms are managed to promote wildflower meadows. 35
kilometres new hedgerows have been planted and are managed to
flower and produce berries for wildlife. Habitat enhancements such
as bird and bat boxes have also been installed to promote a
diversity of fauna in and around each site.
Sustainable drainage and flood control are features of most
sites. Incorporating strategically placed filter drains, swales and
balancing ponds keep ground around arrays sufficiently firm for
safe access, inspection, operation and monitoring. They also
promote good grass and wildflower growth and maintain soil
structure, with swales and ponds also encouraging aquatic
wildlife.
The Asset Manager has an active programme of encouraging
professional beekeepers to establish hives at the solar farms.
Foresight Group sponsored a Bee and Honey tent at the Royal County
of Berkshire Show. The beekeepers often attend Foresight Group's
staff inductions and community tours and give informative lectures
on the important role bees play in local ecosystems and
horticulture.
3. SOCIAL ENGAGEMENT
During the acquisition process, and throughout an asset's
lifecycle, the Company engages with contractors, local residents,
community organisations, landowners and local authorities to
promote public support for the project, maximise the local benefit
and minimise any actual or perceived negative effects. This has
been achieved through a number of initiatives:
-- Community engagement - The Asset Manager regularly attends
parish council and local community meetings, conducts visits
with O&M providers, landowners and construction companies
to encourage community engagement and education. This ensures
that local stakeholders understand the Asset Manager's
expectations of site management and to discuss areas of
improvement in management techniques. 79 site inspections,
10 community meetings, 3 community tours and 5 staff induction
tours have been conducted during the year.
-- Community investment - The Company supports community benefit
schemes which assist local communities in developing and
maintaining community assets and organisations. In 2019,
approximately GBP184,000 worth of grants were provided
to local communities throughout the UK. Examples of community
work to which the grants have contributed include improvements
to sports grounds, parks, playgrounds and community halls.
Smaller investments, still important to the lives of rural
communities, include bus shelters, installation of defibrillators
and installation of signs to encourage car speed reduction.
-- Educational initiatives - A large part of generating public
support comes as a result of educational initiatives, which
help to promote an understanding, and appreciation of,
the benefit of solar power generation. In 2019, college
tours were undertaken at Gedling, Southam and Wymeswold
where students and staff were able to witness first-hand
the operational aspects of a solar farm and the steps taken
to maximise operational efficiency and environmental stewardship.
Southam is also part of a university arachnid research
initiative.
The Asset Manager also sponsored the Bee and Honey Tent at the
annual Royal County of Berkshire Show as part of its initiative to
promote wildflower meadows, the national bee population and local
artisanal bee product businesses.
-- Health and well-being - The management and monitoring of
Health and Safety ("H&S") on site is a top priority for
the O&M contractors, which are responsible for recording
and reporting all H&S related incidents to the Asset Manager
on an ongoing basis. Furthermore, to improve the management
of safety, health, environmental and quality ("SHEQ"),
and to reinforce best practice and ensure regulatory compliance,
the Asset Manager appoints independent professionally accredited
H&S consultants. Consultants ensure that contractors are
appointed on the basis of their health and safety competence
and regularly visit the sites to ensure they are meeting
industry and legal standards.
4. GOVERNANCE
The Asset Manager actively reviews the regulatory and property
consents of every solar asset to ensure compliance with the
permissions and conditions attached to each site and actively
engages with local government organisations to ensure ongoing
compliance. In addition to ensuring the Company is protected from
potential legal issues, this promotes trust with the sites' local
communities.
Compliance
Integral to the maintenance of the Company's reputation is its
regulatory compliance and adherence to relevant laws. The Company
is committed to carrying out business fairly, honestly and in
compliance with laws and regulations and the Investment Manager has
established policies and procedures to prevent bribery within its
organisation. The Company is also committed to a policy to conduct
all its business in an honest and ethical manner, taking a
zero-tolerance approach to facilitation of tax evasion, whether
under Jersey Law, UK law or under the law of any foreign
country.
As a means of ensuring that sustainability considerations are at
the forefront of the investment process, the Investment Manager
delivers 'Best Practice' sessions to its staff. These sessions
focus on how the sustainability performance of a given asset can be
assessed, measured and improved, whilst also demonstrating how good
ESG management can result in financial benefits. Foresight Group's
staff are taken on induction tours of the assets and educated on
how the sites are managed for biodiversity and habitat gain, as
well as the processes undertaken to ensure the sites are in
compliance with environmental and planning laws.
More details of the Company's approach to governance are
contained in the Corporate Governance Report.
5. Third Party Interactions
Counterparty due diligence forms an essential part of ensuring
that key counterparties are reputable, experienced, competent and
that they have robust and sustainable supply chains and have an
approach to governance, compliance and ESG aligned with the
Company, which must be evidenced by appropriate policies.
Two initiatives are being undertaken by the Company to further
enhance these processes, with a view to improving overall asset
performance and protecting the Company against reputational
risk.
-- Enhanced supplier and counterparty checks - The Company
now contracts out due diligence to an expert third party.
Using a highly specialised legal advisory and consultancy
firm allows for a greater depth of analysis to be conducted
in a shorter space of time, thus speeding up the acquisition
process and providing a higher degree of assurance that
the counterparties involved are both legally and financially
sound.
-- Active Supplier Engagement - A more formalised approach
to supplier engagement on the topic of ESG is being developed,
with the aim of encouraging more sustainable practices
in the operation and maintenance of the solar sites.
While the Company actively tracks data pertaining to the above
criteria on an internal basis, it also seeks external validation of
its performance through third party organisations:
-- Global Real Estate Sustainability Benchmark ("GRESB") -
The Company submitted the Southam Solar Farm to the GRESB
Infrastructure ESG Assessment in 2019, believing this particular
asset was representative of the portfolio as a whole.
Southam is a 10MW solar farm in Warwickshire which was connected
to the grid in March 2015. In 2019 the site generated enough energy
to power over 3,200 homes.
The site scored significantly higher than its peer group in a
number of areas including Management, Policy & Disclosure,
Risks & Opportunities, and Stakeholder Engagement.
Asset Class Solar
--------------------------------
Asset Name Southam Solar Farm Peer Average
------------------------ ------------------ ------------
Management 74 51
------------------------ ------------------ ------------
Policy & Disclosure 65 52
------------------------ ------------------ ------------
Risks & Opportunities 39 32
------------------------ ------------------ ------------
Monitoring & EMS 30 36
------------------------ ------------------ ------------
Stakeholder Engagement 41 36
------------------------ ------------------ ------------
Performance Indicators 34 44
------------------------ ------------------ ------------
Certifications & Awards 0 0
------------------------ ------------------ ------------
GRESB Star Rating *** -
------------------------ ------------------ ------------
We continue to work closely with GRESB on helping to ensure that
their scoring framework adequately aligns with Foresight's Group's
approach to assessing sustainability.
-- Principles for Responsible Investment ("PRI") - The Investment
Manager has been a signatory to the United Nations-backed
PRI since 2013. The PRI is a globally recognised voluntary
framework concerned with the incorporation of ESG considerations
into the investment decision making process. As a signatory,
the Investment Manager reports annually on its responsible
investment activities by responding to asset-specific modules
in the PRI's Reporting Framework.
-- In its recent 2019 assessment, the Investment Manager achieved
an A+ level rating for 'Strategy and Governance', the highest
possible rating, surpassing the peer average (A). An A
rating was achieved in the 'Infrastructure' module, with
scoring improving by four points to 27 out of 30 (2018;
23 points). The Investment Manager's approach to post-investment
monitoring and active ownership of ESG within the asset
class contributed to the higher score.
Module 2019 Score Peer Average
---------- ------------
Strategy and Governance A+ (29/30) A
----------------------- ---------- ------------
Infrastructure A (27/30) A
----------------------- ---------- ------------
Principal Risks
Foresight Group has a comprehensive Risk Management Framework in
place which is reviewed on a regular basis by the Directors.
Reliance is placed on the internal systems and controls of the
Investment Manager and external service providers such as the
Administrator to effectively manage risk across the portfolio.
The Company is exposed to a number of potential risks which may
impact the Company's reputation, financial or operational
performance, including macro-economic factors. However, set out
below are the principal risks and uncertainties which the Company
believes are most relevant, given the nature of its business,
together with their mitigants.
Major Risk Summary of Risk Mitigants
-------------------------------------- --------------------------------------
Risks relating to the sale of A decline in the wholesale price of Volatility in the wholesale
electricity electricity could materially adversely electricity price in the short term
affect the price can be mitigated by entering
of electricity generated by solar PV into hedging agreements against future
assets and thus the Company's price movements. This can be achieved
business, financial position, through a variety
results of operations and business of trading strategies including
prospects. forward sale contracts of electricity
and fixed price PPAs.
The portfolio currently has PPAs in
place into the medium term offering a
secure route to
market. At 31 December 2019, 32% of
the UK portfolio was subject to fixed
electricity prices,
with the remaining PPAs allowing for
electricity prices to be fixed at any
point. The Investment
Manager regularly reviews wholesale
electricity price forecasts and would
consider increasing
the percentage of fixed wholesale
revenues if future movements in prices
might affect the
dividend cover targets however the
Company will continue to have exposure
to electricity price
volatility in the long term.
-------------------------------------- -------------------------------------- --------------------------------------
Risks relating to regulatory changes The introduction of subsidy scheme Despite the early closure of the UK RO
to subsidy schemes changes, whether of a retrospective scheme for new installations, the
nature or not, could grandfathering principle
have a material adverse effect on the states that existing operational
Company's financial results, accredited projects will continue to
operations and position be supported for the
and valuation of the existing duration of their RO eligibility
portfolio. period (20 years from the date of
accreditation). Furthermore,
while the UK's renewable energy policy
has, over the last few years,
experienced much development
and change the Government has avoided
making changes with retrospective
character. In addition,
the UK Government remains committed to
meeting its renewable generation
targets and carbon
emission reductions under the Climate
Change Act.
Australia has met its federal policy
to meet its Renewable Energy Target
("RET") of 33,000
GWh by 2020. Under the Large scale
Renewable Energy Target ("LRET"),
support for large scale
renewable projects will remain in
place until 2030.
-------------------------------------- -------------------------------------- --------------------------------------
Risks relating to gearing The Company's underlying subsidiaries Any new debt facilities are thoroughly
currently have borrowings of GBP443.5 appraised before they are entered into
million. Under to ensure they
the terms of the Facility Agreements, benefit the Company without creating
the borrower has agreed to covenants unnecessary financial risk. Due to
as to its operation conservative gearing
and financial position. Any failure by targets and sound management it is
the borrower to fulfil obligations unlikely that debt covenants would
under the Facility negatively impact the
Agreements (including repayment) may ability to pay dividends. Gearing,
permit the lender to demand repayment calculated as Group borrowings
of the related (including any asset level
loan and to realise its security which gearing) as a percentage of the
could mean the loss of one or more Company's GAV, will not exceed 50% at
solar power assets. the time of drawdown.
It is the Board's current intention
that long-term gearing (including any
long-term, asset
level gearing), calculated as Group
borrowings (excluding intra-group
borrowings and any revolving
credit facilities) as a percentage of
the Company's GAV, will not exceed 40%
at the time of
drawdown.
-------------------------------------- -------------------------------------- --------------------------------------
Major Risk Summary of Risk Mitigants
-------------------------------------- --------------------------------------
Risks relating to RPI The revenues and expenditure of solar The Investment Manager considers the
PV assets are frequently, partly or inflation risk presented by these
wholly subject to assets to be limited
indexation, typically with reference through the explicit inflation-linked
to RPI. Additionally, GBP86.8 million nature of both operating revenues and
of the Company's costs. On the
long-term debt is linked to RPI. revenue side, ROC prices are formally
linked to RPI and for PPAs the
electricity price forms
part of the RPI basket of goods. For
costs, O&M contract prices and land
rents are both linked
to inflation and as such there is a
natural inflation linkage to costs and
revenues.
In January 2019 the House of Lords
published a report on the use of RPI
in the UK market,
recommending the Government to reduce
its use in favour of CPI. This is not
expected to affect
the existing support mechanism for
renewable energy but the Investment
Manager will continue
to monitor any regulatory changes on
the use of RPI.
-------------------------------------- -------------------------------------- --------------------------------------
Risks relating to Marginal Loss The Australian Energy Market Operator The Company's Australian portfolio
Factors (AEMO) reviews annually the loss assets are located across different
factors applicable renewable energy zones
to renewable generators as a result ("REZ"), limiting the exposure at
of energy losses due to the portfolio level to MLF changes
electrical resistance and affecting specific REZ. In
the heating of conductors through the addition, the portfolio includes long
transmission and distributions term power purchase agreements that
networks. Loss factors offer protection
are calculated and fixed annually. A against adverse MLF movements.
reduction in the MLFs against the The Investment Manager is actively
investment base case monitoring and participating in AEMO
will result in less revenue generated consultation sessions
by the Australian assets in the and workshops to try to assess the
portfolio and adversely impact of changes to the annual MLFs.
affect the Company's financial It's' also part of
position. the Clean Energy Investor Group, an
investor group comprising of 20
renewable energy investors
and developers focused in identifying
a solution to the challenges presented
by the existing
MLF calculation methodology.
-------------------------------------- -------------------------------------- --------------------------------------
Risks relating to the construction of The Company can invest up to 25% of The Investment Manager ensures that
solar PV assets its GAV in assets under construction. risks are mitigated through
Delays in project performance bonds and through
construction may result in a reduction the use of milestone payments, with
in returns caused by a delay in the funds only being transferred once
project generating certain conditions are
revenue. Failure in the construction met. In addition, the construction
of a plant, for example, faulty progress is overseen by the in-house
components or insufficient Asset Management team
structural quality may not be evident with support from independent
at the time of acquisition or in any technical advisers to ensure the
period during which construction milestones are
a warranty claim may be brought achieved on schedule and in line with
against the contractor and may result the specifications set up in the
in loss of value without construction contract.
full or any recourse to insurance or
construction warranties.
-------------------------------------- -------------------------------------- --------------------------------------
Risks relating to taxation Changes to existing tax rates and The Government has announced proposals
legislation could impact the valuation to maintain UK corporation tax at 19%,
of the portfolio abandoning a
and Company returns. previously announced plan to cut the
rate to 17%. We await clarification of
this policy change.
The Investment Manager will continue
to work with tax advisers to ensure
any potential changes
in tax rates and legislation are
addressed accordingly.
-------------------------------------- -------------------------------------- --------------------------------------
Corporate Governance Report
The Company is a member of the Association of Investment
Companies ("AIC"). The board has considered the Principles and
Provisions of the AIC Code of Corporate Governance (AIC Code). The
AIC Code addresses the relevant Principles and Provisions set out
in the UK Corporate Governance Code (the UK Code), as well as
setting out additional Provisions on issues that are of specific
relevance to the Foresight Solar Fund Limited.
The AIC Code is available on the AIC website (
https://www.theaic.co.uk/aic-code-of-corporate-governance-0 )
The AIC Code includes an explanation of how this adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and is supported by the Jersey
Financial Services Commission (JFSC), provides more relevant
information to shareholders.
The Board has not complied with the AIC Code in the following
respects:
-- The Board has not appointed a Senior Independent Director.
However, as the Board is expected to grow to 5 Directors,
the Board will consider the appointment of a Senior Independent
Director during the 2020 financial year.
The company has applied the Principles and, save for specific
items set out above, has substantially complied with the Provisions
of the AIC Code published in February 2019.
The Board
The Company has a Board of four Non-Executive Directors and all
directors are considered to be independent. The Board has 25%
female representation on the Board and is actively pursuing a fifth
director appointment to promote further diversity on the Company's
Board and to supplement the Boards existing skills, experience and
knowledge.
The Directors were all reappointed at the Annual General Meeting
of the Company held on 25 June 2019.
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 year under review 13 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
Investment Manager sets out the matters over which the Investment
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
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 terms of the requirements of
the Articles of Association the Directors retire periodically at
every third Annual General Meeting after the AGM at which they were
elected.
Full details of duties and obligations are provided at the time
of appointment and are supplemented by further details as
requirements change. A formal induction programme for all new
Directors appointed to the Board is now in place.
The Board has access to the officers of the Company Secretary
who also attend Board Meetings.
Representatives of the Investment Manager attend all formal
Board Meetings although the Directors may meet without the
Investment Manager being present. Informal meetings with the
Investment 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 Audit & Remuneration
Risk &
Nomination
----- --------------------- ------- ------------
Alex Ohlsson 13/13 1/1 3/3 2/2
------------------ ----- --------------------- ------- ------------
Peter Dicks 13/13 1/1 3/3 2/2
------------------ ----- --------------------- ------- ------------
Chris Ambler 13/13 1/1 3/3 2/2
------------------ ----- --------------------- ------- ------------
Monique O' Keefe* 8/13 1/1 2/3 0/2
------------------ ----- --------------------- ------- ------------
* appointed 1 June 2019
Investment Manager
The Investment Manager utilises Foresight Group's experience as
a multi-fund asset manager and has in place established policies
and procedures designed to address conflicts of interest in
allocating investments among the Group's 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 these processes are
audited on an annual basis.
In terms of allocation, Foresight Group adheres to a formal
written policy for allocating new investment opportunities which
are overseen by Foresight Group's Investment Committee. Each
opportunity is allocated with reference to the net capital
available within 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 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 this policy has been operated
successfully for many years. Investments are allocated on pari
passu terms.
Following an internal restructuring at Foresight Group the Board
announced that Foresight Group LLP had replaced Foresight Group CI
Limited in February 2020. The investment advisory arrangement that
the Company had in place with Foresight CI Limited has now been
novated, amended and restated and the Company has now entered into
an investment management agreement directly with Foresight LLP.
The material terms and fees contained in the new investment
management agreement are the same as in the previous investment
management agreement with Foresight CI. The team members providing
investment management services to the Company will not change as a
result of this restructuring.
After an 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 three standing Committees which make
recommendations to the Board in specific areas.
The Audit and Risk Committee comprises Chris Ambler (Chairman),
Alex Ohlsson, Monique O'Keefe and Peter Dicks, all of whom are
considered to have sufficient financial experience to discharge the
role. The Committee meets at least three times 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 Auditor's 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. JTC (Jersey) Limited prepares all necessary tax returns
following sign off of the annual accounts.
The Management Engagement Committee, which has responsibility
for reviewing the terms of the investment management agreement
between the Company and the investment manager and other service
providers as considered appropriate. This Committee meets at least
annually. This committee comprises of Alex Ohlsson (Chairman),
Peter Dicks, Monique O'Keefe and Chris Ambler.
The Board has established a separate Remuneration and Nomination
Committee during the course of the year under review. This
Committee is to review and implement a formal and transparent
procedure for developing policy on new Director appointments and
remuneration, including fixing the remuneration packages of
individual Directors as considered appropriate. This committee
comprises of Monique O'Keefe (Chairman), Peter Dicks, Alex Ohlsson
and Chris Ambler.
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.
In 2018, the Board adopted a formal Diversity Policy in order to
support the Board's commitment to increasing diversity at board
level as an essential element in maintaining an effective
Board.
Copies of the terms of reference of each of the Company's
Committees can be obtained from the Company Secretary upon request
and are available on the Company's website.
Board Performance 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.
During the year under review the Company engaged Sean O'Connor
to conduct an external review of the Board's effectiveness. This
review included an evaluation of the Chairman, each Director, the
Board as a whole, and each Board committee.
The results of this review will be considered by the Board and
reported in the Company's Interim Report for the period ending 30
June 2020.
Stakeholder Engagement
Directors are required to act in good faith at all times and to
act in a way that promotes the long-term success of the company for
the benefits of stakeholders as a whole. While the Company is an
externally managed Investment Company with no employees, the
Company has identified the following key stakeholders:
-- The Company's shareholders.
-- The Company's Investment Manager.
-- The communities in which the Company's assets are located.
-- The Company's business partners and key service providers.
Engagement with shareholders
Shareholders are the primary stakeholders in an Investment
Company and all key decisions are carefully considered with their
long-term interests in mind. The Company, supported by its
Investment Manager, communicates with its shareholders through a
variety of means and welcomes their views at all times. This
includes the publication of comprehensive Annual and Interim
reports, market announcements, investor factsheets, and through the
Company's dedicated website.
All shareholders are invited 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 and
Risk, Remuneration and Nomination and the Management and Engagement
Committee. The Board also makes itself available to meet with key
shareholders at their request. From time to time, the Board may
also seek feedback through shareholder questionnaires.
The Investment Manager undertakes shareholder roadshows
following the publication of Annual and Interim results giving
shareholders the opportunity to meet key members of the team
responsible for portfolio management. The Investment Manager also
makes itself available to meet shareholders and analysts throughout
the year as required.
In addition, the Investment Manager and the Company's broker
report to the Board on, at least, a quarterly basis and provide the
Board with an overview of feedback and recommendations on how to
address any issues raised.
Engagement with the Investment Manager
The Company, supported by its Management Engagement Committee,
conducts an annual review of the Investment Manager's performance
and the terms of engagement of the Investment Manager. This review
is focused on constructive engagement with the Investment Manager
in order to ensure that the expectations of the shareholders are
being met and that the Board is cognisant of challenges being faced
by the Investment Manager. The Board and the Investment Manager
maintain an ongoing and open dialogue on key issues facing the
Company with a view to ensuring that recommendations by the
Investment Manager and key decisions taken by the Board are aligned
with achieving long term shareholder value.
Engagement with communities
The Company remains committed to proactively engaging with the
communities within which the Company operates. The details of the
Company's community initiatives can be found on page 37.
Engagement with business partners and key service providers
The Company, supported by its Management Engagement Committee,
reviews all key service providers and the terms of their
engagement. During the year, the Company enhanced its review
process by proactively seeking feedback from its key service
providers. This process allows for two-way engagement between the
Board and key service providers on service delivery expectations
and feedback on important issues experienced by service providers
during the year. The intention of the Company is to maintain and
develop high standard of business conduct across all key service
providers.
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, the Investment Manager
provides the Company's Board with an investment pipeline of
potential assets in solar energy infrastructure investments for it
to consider, and has 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 year
under review and up to the date of approval of the Annual Report
and financial statements, and is regularly reviewed by the Board.
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 confirming 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 and Risk 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 and Risk 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 objectives 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 and Risk 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 in place and 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 change. A formal induction programme for new Directors
is now in place. 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.
Criminal Finances Act 2017
The Company has committed to a policy to conduct all of its
business in an honest and ethical manner. The Company takes a
zero-tolerance approach to facilitation of tax evasion, whether
under UK law or under the law of any foreign country.
The Company is committed to acting professionally, fairly and
with integrity in all of its business dealings and relationships
wherever it operates and implementing and enforcing effective
systems to counter tax evasion facilitation.
The Company will uphold all laws relevant to countering tax
evasion in all the jurisdictions in which the Company operates,
including the Criminal Finances Act 2017.
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in this report. The financial position of the Company,
its cash flows, liquidity position and borrowing facilities are
referred to in the Chairman's Statement, Investment Manager's
Report and Notes to the Accounts. In addition, the financial
statements include the Company's objectives, policies and processes
for managing its capital; its financial risk management objectives;
and its exposures to credit risk and liquidity risk.
The Company has sufficient financial resources together with
investments and income generated. As a consequence, the Directors
believe that the Company is able to manage its business risks.
The Directors have reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the annual financial
statements.
Viability Statement
In accordance with the UK Corporate Governance Code, the
Directors have assessed the viability of the Company over a three
year period to December 2022, taking into account the Company's
current position and the potential impact of the principal risks
and uncertainties set out under Risk Management. Based on this
assessment, the Directors confirm that they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period to
December 2022.
The Directors have determined that a three year period to 31
December 2022 constitutes an appropriate period over which to
provide its viability statement. This is the period focussed on by
the Board during the strategic planning process and is considered
reasonable for a business of its size and nature. Whilst the
Directors have no reason to believe the Company will not be viable
over a longer period, it believes this presents users of the Annual
Report with a reasonable degree of confidence whilst still
providing a longer-term perspective.
In making this statement, the Board carried out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. A summary of key valuation sensitivities is
set out earlier in this document.
The Board also considers the ability of the Company to raise
finance and deploy capital. The results take into account the
availability and likely effectiveness of the mitigating actions
that could be taken to avoid or reduce the impact or occurrence of
the underlying risks.
This review has considered the principal risks which were
identified by the Investment Manager. The Board concentrated its
effort on the major factors which affect the economic, regulatory
and political environment. The Board also paid particular attention
to the importance of its close working relationship with the
Investment Manager.
As part of this process, the Directors have also considered the
ongoing viability of the Company's long-term debt strategy.
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 on 18 June
2020.
Annual Statement from the Chairman of the Remuneration and
Nomination Committee
The Board, which is profiled below, consists solely of
Non-Executive Directors and the Committee considers at least
annually the level of the Board's fees.
Consideration by the Directors of matters relating to Directors'
Remuneration
The Remuneration and Nomination Committee comprises four
Directors: Monique O'Keefe (Chairman), Alex Ohlsson, Chris 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 the Investment
Manager in respect of the Directors' remuneration and from the
external board evaluator. The remuneration policy set by the Board
is described below. Individual remuneration packages are determined
by the Remuneration and Nomination Committee within the framework
of this policy.
The Directors are not involved in deciding their own individual
remuneration with each Director abstaining from voting on their own
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 year ended 31 December
2019 were agreed in 2016. 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 Plc. 20% of Mr
Ambler's remuneration is paid to Jersey Electricity Plc. None of
the Directors has a service contract but, under their individual
letters of appointment 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.
The above remuneration policy was approved by the Shareholders
at the Annual General Meeting held on 25 June 2019 for the
financial year to 31 December 2019 and will apply in 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 year 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 year under review. No
other remuneration was paid or payable by the Company during the
current year 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 ending Directors' fees for year ended
31 December 2020 31 December 2019
----------------------------------------------- ------------------------------
Alex Ohlsson (Chairman) GBP70,000 GBP70,000
----------------------- ----------------------------------------------- ------------------------------
Chris Ambler GBP55,000 GBP55,000
----------------------- ----------------------------------------------- ------------------------------
Peter Dicks GBP45,000 GBP45,000
----------------------- ----------------------------------------------- ------------------------------
Monique O'Keefe GBP45,000 GBP26,250*
----------------------- ----------------------------------------------- ------------------------------
* Monique O'Keefe's annual fee on joining the Board was
GBP45,000 per annum. Fees paid during 2019 reflect the fact that
she joined the Board in July 2019.
The Directors are not eligible for pension benefits, share
options or long-term incentive schemes.
Appointments and Succession Planning
All appointments to the Board are subject to a formal, rigorous
and transparent procedure and are typically supported by external
search consultants. The requirements for vacancies on the Board are
set with reference to objective criteria and promote diversity of
gender, social and ethnic backgrounds, cognitive and personal
strengths.
Further, the Board reviews, at least annually, its effectiveness
and its combination of skills, experience and knowledge.
Alex Ohlsson, Chris Ambler and Peter Dicks have all served on
the Board of the Company for more than 6 years. Accordingly, all
directors are within the tenure limits prescribed by the Code.
However, the Board, supported by its Remuneration and Nomination
Committee, assesses the need for succession planning on an annual
basis.
Directors' Interests
Directors who had interests in the shares of the Company as at
31 December 2019 are shown below. The Directors do not have any
options over shares. Mr Dicks had an investment programme in place
during the year.
Ordinary shares of nil par value held on 31 Ordinary shares of nil par value held on 31
December 2019 December 2018
------------------------------------------- --------------------------------------------
Alex Ohlsson (Chairman)(1) 25,000 25,000
--------------------------- ------------------------------------------- --------------------------------------------
Chris Ambler 26,524 26,524
--------------------------- ------------------------------------------- --------------------------------------------
Peter Dicks(2) 68,782 65,034
--------------------------- ------------------------------------------- --------------------------------------------
Monique O'Keefe 0 N/A
--------------------------- ------------------------------------------- --------------------------------------------
1 Shares legally and beneficially owned by a personal pension company.
2 At the time of publication Peter Dicks holds 69,783 ordinary shares.
Approval of Report
The Board will propose a resolution at the forthcoming AGM that
the remuneration of the Directors will be at the levels shown above
for the year to 31 December 2020.
Audit and Risk Committee Report
Audit and risk Committee Report
The Audit and Risk Committee (the "Committee") is chaired by
Chris Ambler and comprises the full Board. The Committee operates
within clearly defined terms of reference. The terms of reference
were reviewed during the year under review and were updated as
deemed appropriate, including enhancing the Committee's scope to
consider key risks faced by the Company.
Meetings are scheduled to coincide with the reporting cycle of
the Company and the Committee has met four times in the year 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.
None of the members of the Committee have any involvement in the
preparation of the financial statements of the Company.
The Committee is charged with maintaining an open and effective
relationship with the Company's Auditors. The Chairman of the
Committee keeps in regular contact with the Auditors throughout the
audit process and the Auditors attend the Committee meetings at
which the Company's 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 Committee has identified and considered the following
principal key areas of risk in relation to the business activities
and financial statements of the company:
-- Valuation of unquoted investments. This issue was discussed
with the Investment Manager and the Auditor at the planning
and conclusion of the audit of the financial statements,
as explained below:
Valuation of Unquoted Investments
The unquoted investment is a 100% controlling interest in
Foresight Solar (UK Hold Co) Limited ("UK Hold Co"), a
non-consolidated subsidiary company which is measured at fair
value. The majority of UK Hold Co's total assets (by value) are in
companies where no quoted market price is available. 100%
controlling interests are held in these companies, being FS Top
Holdco 2 Ltd, FS Holdco Limited ("FS Holdco"), FS Holdco 3 Limited
("FS Holdco 3") and FS Holdco 4 Limited ("FS Holdco 4"). FS Top
Holdco 2 Ltd ("FS Top Holdco 2") in turn holds a 100% controlling
interest in Foresight Intermediate Solar Holding Limited ("FISH")
that then holds a 100% controlling interest in FS Holdco 2 ("FS
Holdco 2"). FS Holdco 2 also has a 100% controlling interest
investment in FS Debtco Limited ("FS Debtco"). These are all
non-consolidated subsidiary companies which are also measured at
fair value, established by using the fair value of the net assets
of afore described companies.
The majority of FS Holdco's, FS Debtco's and FS Holdco 4's total
assets (by value) are held in investments where no quoted market
price is available. FS Holdco's and FS Debtco's assets are valued
by using discounted cash flow measurements. One asset in FS Holdco
4 is held at cost at 31 December 2019. These valuations of
underlying investments are seen to be areas of inherent risk and
judgement. There is an inherent risk of the Investment Manager
unfairly valuing the investment due to the Investment Manager's fee
being linked directly to the Net Asset Value of the Company.
During the valuation process the Board and the 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
2 of the accounts. These were then further reviewed by the
Committee. The Investment Manager confirmed to the Audit Committee
that the underlying investment valuations had been calculated
consistently throughout the year 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 Committee.
Key assumptions used in the valuation forecasts are detailed in
note 16 of the financial statements. The Investment Manager has
provided sensitivities around those assumptions which are also
detailed in note 16.
The Investment Manager confirmed to the Committee that they were
not aware of any material misstatements.
Having reviewed the reports received from the Investment Manager
and Auditors, the 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 Committee considers that KPMG LLP
has carried out its duties as Auditor in a diligent and
professional manner.
During the year, the 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, or
alternatively responsible person, is rotated every five years
ensuring that objectivity and independence is not impaired. KPMG
LLP has audited the Company since 2014. A new Audit Director was
appointed in November 2017, and the 2017 financials were the first
year that the Audit Director has been in place.
The Committee considered the performance of the Auditor during
the year and agreed that KPMG LLP have provided a high level of
service and maintained a good knowledge of the market, making sure
audit quality continued to be maintained. There were no non-audit
services provided by the Companies auditor during the year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law and
regulations.
Company Law requires the Directors to prepare financial
statements for each financial year. Under that law they are
required to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law.
Under Company Law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of its profit or
loss for that period. In preparing these financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable, relevant
and reliable;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they
either intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies (Jersey) Law
1991.
They are responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and 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.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report, Directors'
Remuneration Report and Corporate Governance Report that complies
with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position
and profit or loss of the company; and
-- the Directors' report includes a fair review of the development
and performance of the business and the position of the
issuer, together with a description of the principal risks
and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
Alexander Ohlsson
Chairman
For and on behalf of Foresight Solar Fund Limited
6 March 2020
Asset Summaries
UNITED KINGDOM
Wymeswold , Leicestershire Castle Eaton, Wiltshire
ROCs 2.0/1.4 ROCs 1.6
Acquisition Date Acquisition Date
November '13 / March '15 June '14
Highfields, Essex High Penn, Wiltshire
ROCs 1.6 ROCs 1.6
Acquisition Date Acquisition Date
June '14 June '14
Pitworthy, North Devon Hunters Race, West Sussex
ROCs 1.4 ROCs 1.4
Acquisition Date Acquisition Date
June '14 September '14
Spriggs Farm, Essex Bournemouth, Dorset
ROCs 1.6 ROCs 1.4
Acquisition Date Acquisition Date
November '14 December '14
Landmead , Oxfordshire Kencot, Oxfordshire
ROCs 1.4 ROCs 1.4
Acquisition Date Acquisition Date
December '14 March '15
Copley, Lincolnshire Atherstone, Warwickshire
ROCs 1.3 ROCs 1.4
Acquisition Date Acquisition Date
June '15 July '15
Paddock Wood, Kent Southam, Warwickshire
ROCs 1.4 ROCs 1.4
Acquisition Date Acquisition Date
July '15 July '15
Port Farm, Wiltshire Membury, Berkshire
ROCs 1.4 ROCs 1 .4
Acquisition Date Acquisition Date
August '15 September '15
Shotwick , Flintshire Sandridge, Wiltshire
ROCs 1.3 ROCs 1.3
Acquisition Date Acquisition Date
February '17 February '17
Wally Corner, South Oxfordshire Coombeshead, Devon
ROCs 1.2 ROCs 1.4
Acquisition Date Acquisition Date
July '17 April '18
Park Farm, Leicestershire Sawmills, Devon
ROCs 1.4 ROCs 1.4
Acquisition Date Acquisition Date
April '18 April '18
Verwood, Dorset Yardwall, Somerset
ROCs 1.4 FiT
Acquisition Date Acquisition Date
April '18 April '18
Abergelli , Swansea Crow Trees, Nottinghamshire
ROCs 1.4 ROCs 1.3
Acquisition Date Acquisition Date
August '18 August '18
Cuckoo Grove, Pembrokeshire Field House, Hampshire
ROCs 1.4 ROCs 1.4
Acquisition Date Acquisition Date
August '18 August '18
Fields Farm, Warwickshire Gedling, Nottinghamshire
ROCs 1.3 ROCs 1.4
Acquisition Date Acquisition Date
August '18 August '18
Homeland, Dorset Marsh Farm, Wiltshire
ROCs 1.6 ROCs 1.4
Acquisition Date Acquisition Date
August '18 August '18
Sheepbridge , Berkshire Steventon, Oxfordshire
ROCs 1.3 ROCs 1.4
Acquisition Date Acquisition Date
August '18 August '18
Tengore, Somerset Trehawke, Cornwall
ROCs 1.4 ROCs 1.6
Acquisition Date Acquisition Date
August '18 August '18
Upper Huntingford, Gloucestershire Welbeck, Nottinghamshire
ROCs 1.3 ROCs 1.4
Acquisition Date Acquisition Date
August '18 August '18
Yarburgh, Lincolnshire Abbey Fields, Kent
ROCs 1.3 ROCs 1.3
Acquisition Date Acquisition Date
August '18 November '18
SV Ash, Shropshire Bilsthorpe, Nottinghamshire
ROCs 1.4 ROCs 1.4
Acquisition Date Acquisition Date
November '18 November '18
Bulls Head, Buckinghamshire Lindridge, Leicestershire
ROCs 1.4 ROCs 1.3
Acquisition Date Acquisition Date
November '18 November '18
Manor Farm, Bedfordshire Misson, Nottinghamshire
ROCs 1.3 ROCs 1.3
Acquisition Date Acquisition Date
November '18 November '18
Nowhere, Lincolnshire Pen Y Cae, Camarthenshire
ROCs 1.4 ROCs 1.4
Acquisition Date Acquisition Date
November '18 November '18
Playters, Suffolk Roskrow, Cornwall
ROCs 1.3 ROCs 1.4
Acquisition Date Acquisition Date
November '18 November '18
AUSTRALIA
Bannerton, Victoria Longreach, Queenstand
LGC accredited LGC accredited
Acquisition Date Acquisition Date
September '17 October '17
Oakey 1, Queensland Oakey 2, Queensland
LGC eligible LGC eligible
Acquisition Date Acquisition Date
October '17 October '17
Independent Auditor's Report
to the members of Foresight Solar Fund Limited
1. Our opinion is unmodified
We have audited the financial statements of Foresight Solar Fund
Limited ("the Company") for the year ended 31 December 2019 which
comprise the Statement of Comprehensive Income, Statement of
Financial Position, Statement of Changes in Equity, Statement of
Cash Flows, and the related notes, including the accounting
policies in note 2.
In our opinion the financial statements:
-- give a true and fair view of the state of Company's affairs
as at 31 December 2019 and of its loss for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European
Union; and
-- have been prepared in accordance with the requirements
of the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and we are independent of the Company in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
2. Key audit matters: including our assessment of risks of
material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key audit matters (unchanged from 2018) in arriving at our
audit opinion above together with our key audit procedures to
address those matters and our findings from those procedures in
order that the Company's members as a body may better understand
the process by which we arrived at our audit opinion. These matters
were addressed, and our findings are based on procedures
undertaken, in the context of, and solely for the purpose of, our
audit of the financial statements as a whole, and in forming our
opinion thereon, and consequently are incidental to that opinion,
and we do not provide a separate opinion on these matters.
The risk Our response
-------------------------------------- --------------------------------------
The impact of uncertainties due to the Unprecedented levels of uncertainty Our response
UK exiting the European Union on our All audits assess and challenge the We developed a standardised
audit reasonableness of estimates, in firm-wide approach to the
Refer to page 4 (Chairman's particular as described consideration of the
Statement), page 11 (Investment in valuation of unquoted investments uncertainties arising
Manager's), page 71 (accounting below, and related disclosures and the from Brexit in planning and
policy) and page 83 (financial appropriateness performing our audits. Our
disclosures). of the going concern basis of procedures included:
preparation of the financial Our Brexit knowledge - We
statements (see below). All of considered the directors'
these depend on assessments of the assessment of Brexit-related
future economic environment and the sources of
Company's future prospects risk for the Company's business
and performance. and financial resources
In addition, we are required to compared with our own
consider the other information understanding
presented in the Annual Report of the risks. We considered the
including the principal risks directors' plans to take action
disclosure and the viability statement to mitigate the risks.
and to consider the directors' Sensitivity analysis - When
statement that the annual report and addressing the valuation of
financial statements taken as a whole unquoted investments and other
is fair, balanced areas
and understandable and provides the that depend on forecasts, we
information necessary for shareholders compared the directors'
to assess the Company's analysis to our assessment of
position and performance, business the full
model and strategy. range of reasonably possible
Brexit is one of the most significant scenarios resulting from Brexit
economic events for the UK and its uncertainty and, where forecast
effects are subject cash flows are required to be
to unprecedented levels of uncertainty discounted, considered
of consequences, with the full range adjustments to discount rates
of possible effects for the
unknown. level of remaining uncertainty.
Assessing transparency - As
well as assessing individual
disclosures as part of our
procedures
on the valuation of unquoted
investments we considered all
of the Brexit related
disclosures
together, including those in
the annual report, comparing
the overall picture against our
understanding of the risks.
Our findings
As reported under the valuation
of unquoted investments, we
found the resulting estimates
and related disclosures in
relation to going concern to be
balanced. However, no audit
should
be expected to predict the
unknowable factors or all
possible future implications
for a Company
and this is particularly the
case in relation to Brexit.
-------------------------------------- -------------------------------------- --------------------------------------
Valuation of unquoted investments Subjective valuation Our procedures included:
(GBP542.2 million; 2018: GBP530.2 86% (2018: 86%) of the Company's total
million) assets (by value) is held in Historical comparisons: Assessment
Refer to page 49 (Audit & Risk investments where no quoted of investment realisations in the
Committee Report), page 71 (accounting market price is available. period, if any, comparing
policy) and page 83 The unquoted investments is a 100% actual sales proceeds to prior
(financial disclosures). controlling interest in Foresight year end valuations to understand
Solar (UK Hold Co) Limited the reasons for significant
("UK Hold Co"), a non-consolidated variances and determine whether
subsidiary company which is measured they are indicative of bias or
at fair value, being error in the Company's approach
the net assets of UK Hold Co. to valuations;
85% (2018: 86%) of UK Hold Co's total
assets (by value) are held in Methodology choice: In the context
investments where no quoted of observed industry best practice
market price is available. The and the provisions of
unquoted investments are 100% the International Private Equity
controlling interests in FS Holdco and Venture Capital Valuation
Limited ("FS Holdco"), FS Holdco 3 Guidelines, we challenged the
Limited ("FS Holdco 3"), FS Holdco 4 appropriateness of the valuation
Limited ("FS Holdco basis selected;
4") and FS Top Holco 2 Limited ("Top
Co"). These are measured at fair Our valuations experience: With
value, being the respective the assistance of our own
fair value of the net assets of each valuation specialists, we
company. challenged
100% (2018: n/a) of Top Co's total the investment manager on key
assets (by value) is an investment in judgements affecting investee
Foresight Intermediate company valuations, such as
Solar Holdings Limited ("FISH"). In discount
turn, 96% (2018: n/a) of FISH's total factors and the useful economic
assets (by value) life of the underlying assets. We
are held in FS Holdco 2 Limited ("FS compared key underlying
Holdco 2"), where no quoted market financial data inputs to external
price is available. sources and management information
FS Holdco 2 holds one unquoted as applicable. We challenged
investment in a 100% controlling the assumptions around
interest in FS Debtco Limited sustainability of earnings based
("FS Debtco"), representing 88.5% of on the plans of the investee
total assets (by value) (2018: 6%) companies
65% (2018: 78%) of FS Holdco's, 89% and whether these are achievable
(2018: 93%) of FS Holdco 3's, 99% and we obtained an understanding
(2018: 100%) of FS Holdco of existing and prospective
4's and 91% (2018: 73%) of FS Debtco's investee company cashflows to
total assets (by value) are held in understand whether borrowings can
investments where be serviced or whether refinancing
no quoted market price is available. may be required for debt that is
These are measured on discounted cash held by the Company or its holding
flow measurements companies. Our work included
or the price of a recent transaction. consideration of events which
As at 31 December 2019, FS Holdco 2 occurred subsequent to the year
held no direct investments end up until the date of this
into assets refers to above (2018: audit report;
53%)
--------------------------------------
Fair value is established in accordance with the -- Comparing valuations: Where a recent transaction
International Private Equity and Venture has been used to value a holding, we obtained
Capital Valuations Guidelines. an understanding of the circumstances surrounding the
The valuation of unlisted investments requires a number transaction and whether it was considered
of estimates based on unobservable to be on an arms-length basis and suitable as an
inputs, such as discount factors and useful economic input into a valuation; and
lives of assets. As a result, there is -- Assessing transparency: we considered the
an inherent risk of estimation uncertainty in relation to appropriateness, in accordance with relevant
the valuation of investments. accounting standards, of the disclosures in respect
There is therefore a significant risk over valuation of of the valuation of unquoted investments
underlying investments and that is and the effect of changing one or more inputs to
the key judgemental area that our audit focused on. reasonably possible alternative valuation
The effect of these matters is that, as part of our risk assumptions.
assessment, we determined that the Our findings: We found the Company's valuation of
valuation of unquoted investments has a high degree of unquoted investments to be balanced with
estimation uncertainty, with a potential proportionate disclosure of the related assumptions
range of reasonable outcomes greater than our materiality and sensitivities.
for the financial statements as
a whole. The financial statements (note 16) disclose the
sensitivity estimated by the Company.
---------------------------------------------------------
3. Our application of materiality and an overview of the scope
of our audit
Materiality for the financial statements as a whole was set at
GBP6.0million (2018: GBP5.3million), determined with reference to a
benchmark of total assets, of which it represents 0.9% (2018:
0.9%).
In addition, we applied materiality of GBP0.4million (2018:
GBP0.4million) to interest income and management fees for which we
believe misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to
influence the Company's members' assessment of the financial
performance of the Company.
We agreed to report to the Audit & Risk Committee any
corrected or uncorrected identified misstatements exceeding
GBP300,000 (2018: GBP260,000), in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above and was all performed at the investment manager's
head office in London.
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the
Directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Company will
continue in operation.
In our evaluation of the Directors' conclusions, we considered
the inherent risks to the Company's business model, including the
impact of Brexit, and analysed how those risks might affect the
Company's financial resources or ability to continue operations
over the going concern period. We evaluated those risks and
concluded that they were not significant enough to require us to
perform additional audit procedures.
Based on this work, we are required to report to you if we have
anything material to add or draw attention to in relation to the
directors' statement in Note 2.2 to the financial statements on the
use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Company's
use of that basis for a period of at least twelve months from the
date of approval of the financial statements.
We have nothing to report in these respects, and we did not
identify going concern as a key audit matter.
5. We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw attention
to in relation to:
-- the directors' confirmation within the viability statement
on page 45 that they have carried out a robust assessment
of the principal risks facing the Company, including those
that would threaten its business model, future performance,
solvency and liquidity;
-- the Principal Risks disclosures describing these risks
and explaining how they are being managed and mitigated;
and
-- the directors' explanation in the viability statement of
how they have assessed the prospects of the Company, over
what period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements audit.
As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgments that were reasonable at the time they were made, the
absence of anything to report on these statements is not a
guarantee as to the Company's longer-term viability.
Corporate governance disclosures
We are required to report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our financial statements
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
Company's position and performance, business model and
strategy; or
-- the section of the annual report describing the work of
the Audit & Risk Committee does not appropriately address
matters communicated by us to the Audit & Risk Committee;
or
-- a corporate governance statement has not been prepared
by the Company.
We are required to report to you if the Corporate Governance
Report does not properly disclose a departure from the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review.
We have nothing to report in these respects.
Based solely on our work on the other information described
above:
-- with respect to the Corporate Governance Report disclosures
about internal control and risk management systems in
relation to financial reporting processes and about share
capital structures:
-- we have not identified material misstatements therein;
and
-- the information therein is consistent with the financial
statements; and
-- in our opinion, the Corporate Governance Report has been
prepared in accordance with relevant rules of the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority.
6. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies (Jersey) Law 1991, we are required to report
to you if, in our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches
not visited by us; or
-- proper returns adequate for our audit have not been received
from branches not visited by us; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 50,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see
below), or error, and to issue our opinion in an auditor's report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud, other irregularities or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
8. 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
and the terms of our engagement by the Company. 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 the further matters we are required to state to them in
accordance with the terms agreed with the Company 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.
Henry Todd
for and on behalf of KPMG LLP
Chartered Accountants and Registered Auditor
15 Canada Square,
London,
E14 5GL
6 March 2020
Statement of Profit and Loss and Other Comprehensive Income
For the year ended 31 December 2019
31 December 31 December
2019 2018
Notes GBP'000 GBP'000
Revenue
Interest income 4 39,199 36,817
(Loss)/gain on investments held at fair value through profit or loss 14 (43,001) 25,311
----------- -----------
(3,802) 62,128
----------- -----------
Expenditure
Administration and accountancy expenses 6 (186) (203)
Directors' fees 7 (196) (170)
Management fees 5 (5,967) (5,106)
Other expenses 8 (600) (643)
----------- -----------
Total expenditure (6,949) (6,122)
----------- -----------
(Loss)/profit before tax for the year (10,751) 56,006
Taxation 2.7 - -
----------- -----------
(Loss)/profit for the year (10,751) 56,006
Other comprehensive income - -
----------- -----------
(Loss)/profit and other comprehensive income for the year (10,751) 56,006
----------- -----------
Earnings per Ordinary Share (pence per Share) 9 (1.89) 11.60
All items above arise from continuing operations, there have
been no discontinued operations during the year.
The accompanying notes on pages 68 to 94 form an integral part
of these Financial Statements.
Statement of Financial Position
As at 31 December 2019
31 December 31 December
2019 2018
Notes GBP'000 GBP'000
Assets
Non-current assets
Investments held at fair value through profit or loss 14 542,186 530,187
----------- -----------
Total non-current assets 542,186 530, 187
Current assets
Interest receivable 10 68,553 69,338
Trade and other receivables 11 255 265
Cash and cash equivalents 12 18,933 12,282
----------- -----------
Total current assets 87,741 81,885
----------- -----------
Total assets 629,927 612,072
----------- -----------
Equity
Retained earnings 3,102 51,460
Stated capital and share premium 17 624,922 558,798
----------- -----------
Total equity 628,024 610,258
----------- -----------
Liabilities
Current liabilities
Trade and other payables 13 1,903 1,814
----------- -----------
Total current liabilities 1,903 1,814
Total liabilities 1,903 1,814
----------- -----------
Total equity and liabilities 629,927 612,072
----------- -----------
Net Asset Value per Ordinary Share 18 103.77 111.17
The Financial Statements on pages 64 to 67 were approved by the
Board of Directors and signed on its behalf on 6 March 2020 by:
Alexander Ohlsson
Chairman
The accompanying notes on pages 68 to 94 form an integral part
of these Financial Statements.
Statement of Changes in Equity
For the year ended 31 December 2019
Stated Capital and Share Premium Retained Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January 2019 558,798 51,460 610,258
Total comprehensive income for the year:
Loss for the year - (10,751) (10,751)
Transactions with owners, recognised directly in
equity:
Dividends paid in the year 21 - (35,997) (35,997)
Issue of Ordinary Shares 17 65,324 - 65,324
Issue of Scrip Dividends 17 1,610 (1,610) -
Capitalised issue costs 17 (810) - (810)
-------------------------------- ----------------- --------
Balance as at 31 December 2019 624,922 3,102 628,024
-------------------------------- ----------------- --------
For the period 1 January 2018 to 31 December 2018:
Stated Capital and Share Premium Retained Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January 2018: 454,515 26,793 481,308
Total comprehensive income for the year:
Profit for the year - 56,006 56,006
Transactions with owners, recognised directly in
equity:
Dividends paid in the year 21 - (31,339) (31,339)
Issue of Ordinary Shares 17 106,189 - 106,189
Capitalised issue costs 17 (1,906) - (1,906)
-------------------------------- ----------------- --------
Balance as at 31 December 2018 558,798 51,460 610,258
-------------------------------- ----------------- --------
The accompanying notes on pages 68 to 94 form an integral part
of these Financial Statements.
Statement of Cash Flows
For the year ended 31 December 2019
31 December 31 December
2019 2018
Notes GBP'000 GBP'000
(Loss)/profit for the year after tax (10,751) 56,006
Adjustments for:
Unrealised (loss)/gain on investments 14 43,001 (25,311)
----------- -----------
Operating cash flows before changes in working capital 32,250 30,695
Decrease/(Increase) in interest receivables 10 785 (12,918)
Decrease in trade and other receivables 11 10 1,668
Increase in trade and other payables 13 89 430
----------- -----------
Net cash inflow from operating activities 33,134 19,875
----------- -----------
Investing activities
Increase in shareholder loans to subsidiary 14 (55,000) (95,206)
----------- -----------
Net cash outflow from investing activities (55,000) (95,206)
----------- -----------
Financing activities
Dividends paid 21 (35,997) (31,339)
Issue costs paid 17 (810) (1,906)
Proceeds from issue of shares 17 65,324 106,189
----------- -----------
Net cash inflow from financing activities 28,517 72,944
----------- -----------
Net increase/(decrease) in cash and cash equivalents 6,651 (2,387)
Cash and cash equivalents at the beginning of the year 12,282 14,669
----------- -----------
Cash and cash equivalents at the end of the year 12 18,933 12,282
----------- -----------
The accompanying notes on pages 68 to 94 form an integral part
of these Financial Statements.
Notes to the Financial Statements
For the year ended 31 December 2019
1. Company information
Foresight Solar Fund Limited (the "Company") is a closed-ended
public 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: 28 Esplanade, St Helier, Jersey, JE4 2QP.
The Company has one investment, Foresight Solar (UK Hold Co)
Limited ("UK Hold Co").
1.1 Restructure
Up to 29 May 2019, UK Hold Co had investments in four
subsidiaries: FS Holdco Limited ("FS Holdco"), FS
Holdco 2 Limited ("FS Holdco 2"), FS Holdco 3 Limited
("FS Holdco 3") and FS Holdco 4 Limited ("FS Holdco
4") and FS Holdco 2 also had an investment in a subsidiary,
FS Debtco Limited ("FS Debtco").
On 29 May 2019, UK Hold Co incorporated a subsidiary,
FS Top Holdco 2 Limited ("Topco"), which in turn incorporated
a subsidiary, Foresight Intermediate Solar Holdings
Limited ("FISH"). UK Holdco subsequently transferred
ownership of FS Holdco 2 to FISH. As at 31 December
2019, the four subsidiaries of UK Hold Co were FS
Holdco, FS Holdco 3, FS Holdco 4 and Topco. FS Holdco,
FS Debtco, FS Holdco 3 and FS Holdco 4 invest in further
holding companies (the "SPVs") which then invest in
the underlying solar investments.
Topco holds an investment in FISH. FISH in turn holds
an investment in FS Holdco 2. During the year all
SPVs owned by FS Holdco 2 were sold - 25 to FS Debtco
and 1 to FS Holdco 3. As at 31 December 2019, FS Holdco
2 held a single investment in FS Debtco. FS Debtco
invests in further holding companies (the "SPVs")
which then invest in the underlying solar investments.
1.2 Principal activities
The principal activity of the Company, UK Hold Co,
FS Holdco, FS Holdco 3, FS Holdco 4, Topco, FISH,
FS Holdco 2, FS Debtco, and the SPVs (together "the
Group") is investing in operational UK and Australian
ground based solar power plants.
1.3 Business combinations
On 29 May 2019, UK Hold Co incorporated a subsidiary,
FS Top Holdco 2 Limited ("Topco"), which in turn incorporated
a subsidiary, Foresight Intermediate Solar Holdings
Limited ("FISH"). UK Hold Co owns 100% of the shares
in Topco, and Topco in turn owns 100% of the shares
in FISH. As both entities are newly incorporated entities,
no goodwill on acquisition has been recognised.
As is set out in note 2.4, under IFRS 10 "Consolidated
Financial Statements", the directors deem that the
Company is an investment entity and therefore the
Company does not consolidate its subsidiary but carries
it at fair value through profit or loss. As UK Hold
Co is not consolidated, its subsidiaries (thus including
the newly acquired Topco and FISH) are not separately
presented at fair value through profit or loss in
the Company's accounts.
2. Summary of significant accounting policies
2.1 Basis of presentation
The Financial Statements for the year ended 31 December
2019 (the "Financial Statements") 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 investment in UK Hold Co is held at net asset value
on the Statement of Financial Position in line with the
International Private Equity and Venture Capital 2018
("IPEVC") Valuation Guidelines.
2.2 Going concern
The Directors have considered the Company's cash flow
projections for a period of no less than twelve months
from the date of approval of these Financial Statements.
These projections show that the Company will be able to
meet its liabilities as they fall due.
Brexit presents certain risks in relation to the operation
of the UK solar portfolio (discussed in note 19.4) the
Asset Manager will be working to ensure there are robust
spare parts provision in the UK and continue to work with
the operating and maintenance providers and their downstream
suppliers to ensure down time is minimised across the
portfolio as much as possible.
The Directors have therefore prepared the Financial Statements
on a going concern basis.
2.3 Changes in accounting policies and disclosures
New and revised IFRSs adopted by the Company
The Directors have assessed all new standards and amendments
to standards and interpretations which are effective for
annual periods after 1 January 2019 and have deemed none
of them to be applicable to the Company.
New and revised IFRSs in issue but not yet effective
There are no standards, amendments or interpretations
in issue at the reporting date which are effective after
1 January 2019 that are deemed to be material to the Company.
2.4 Consolidation
Business combinations
The Company accounts for business combinations using the
acquisition method when control is transferred to the
Company. The consideration transferred in the acquisition
is generally measured at fair value, as are the identifiable
net assets acquired. Any goodwill that arises is tested
annually for impairment. Any gain on a bargain purchase
is recognised in profit or loss immediately. Transaction
costs are expensed as incurred, except if related to the
issue of debt or equity securities.
Subsidiaries
Subsidiaries are entities over which the Company has control.
The Company controls an entity when the Company 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.
Associates
Associates are entities over which the Company has significant
influence, being the power to participate in the financial
and operating policy decisions of the investee (but not
control or joint control).
Investment Entity exemption
Qualifying entities that meet the definition of an investment
entity are not required to produce a consolidated set
of Financial Statements and instead account for subsidiaries,
joint ventures and associates 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 obtains 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
-- It measures and evaluates the performance of
substantially all of its investments on a fair
value basis.
As discussed in note 1, the Company has one direct subsidiary, a
100% controlling interest in UK Hold Co and a number of indirect
subsidiaries and associates. The investment in UK Hold Co is held
at net asset value on the Statement of Financial Position in line
with the International Private Equity and Venture Capital 2018
("IPEVC") Valuation Guidelines.
Under IFRS 10 "Consolidated Financial Statements", the directors
deem that the Company is an investment entity and therefore the
Company does not consolidate its subsidiary but carries it at fair
value through profit or loss. The Company does not meet all the
defined criteria of an 'investment entity' as the Company only has
one investment. However, the Directors deem that the Company is
nevertheless an 'investment entity' as the remaining requirements
have been met and, through the Group, there is a large investment
portfolio which will fill the criteria of having more than one
investment. Therefore, the Company qualifies as an 'investment
entity'.
As UK Hold Co is not consolidated, its subsidiaries (plus their
underlying investments) are not separately presented at fair value
through profit or loss in the Company's accounts.
2.5 Income
Income comprises interest income (loan interest) and income
in the form of realised and/or unrealised gains on investments
held at fair value through profit or loss. Interest income
is recognised when it is probable that the economic benefits
will flow to the Company 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. Unrealised
gains arising from changes in the fair value of the investments
held at fair value through profit or loss are recognised
in the period in which they arise.
2.6 Expenses
Operating expenses are the Company'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 Company's operating expenses are charged through the
Statement of Profit and Loss and Other 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 Company's share capital and
share premium reserve.
2.7 Taxation
The Company is currently registered in Jersey. The Company
is taxed at 0% which is the general rate of Corporation
tax in Jersey. No tax has been charged in the current
year (2018: nil).
2.8 Functional and presentational currency
The Directors consider the Company's functional currency
to be Pounds Sterling ("GBP") as this is the currency
in which the majority of the Company's assets and liabilities
and significant transactions are denominated. The Directors
have selected GBP as the Company's presentation currency.
Indirect subsidiaries of the Company may have assets and
liabilities relating to foreign operations which will
impact the investment value on the Company's balance sheet.
The assets and liabilities relating to these foreign operations,
including fair value adjustments arising on investments,
are translated into GBP at the exchange rates at the reporting
date. The income and expenses relating to foreign operations
are translated into GBP at the exchange rates at the dates
of the transactions.
2.9 Financial instruments
2.9.1 Recognition and initial measurement
Financial assets and financial liabilities are initially
recognised when the Company becomes a party to the contractual
provisions of the instrument.
A financial asset or financial liability is initially
measured at fair value plus, for an item not at fair value
through profit or loss, transactions costs that are directly
attributable to its acquisition or issue.
2.9.2 Classification and subsequent measurement
2.9.2.1 Investments held at fair value through profit
or loss
The investments held at fair value through profit or loss
consists of one investment in UK Hold Co. The asset in
this category is classified as non-current.
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 fair value of UK Hold Co is made up of the fair value
of its net assets. UK Hold Co has four direct subsidiaries
- FS Holdco, FS Holdco 3, FS Holdco 4 and TopCo, and TopCo
has one direct subsidiary - FISH - which in turn holds
FS Holdco 2, which holds FS Debtco. FS Holdco is fair
valued using its net asset value as reported at year end,
with adjustments to its long term external debt to reflect
the fact that the carrying value at amortised cost is
not considered to be the best approximation of its fair
value. FS Holdco 3, FS Holdco 4, FISH, Topco, FS Holdco
2 and FS Debtco are fair valued using their net asset
value as reported at year end.
The fair value of the underlying investments held by the
Company's subsidiaries, which impact the value of the
Company's subsidiaries, are determined by using valuation
techniques. The Directors calculate 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 2018 ("IPEVC") Valuation Guidelines,
using a Discounted Cash Flow valuation methodology. The
Board and the Investment Manager consider that the discounted
cash flow valuation methodology used in deriving a fair
value of the underlying assets is in accordance with the
fair value requirements of IFRS 9. Investments not yet
operational are measured at cost less any impairment as
this is considered the best approximation of fair value.
Gains or losses arising from changes in the fair value
of the 'investments held at fair value through profit
or loss' are presented in the Statement of Profit and
Loss and Other Comprehensive Income within 'gains/(losses)
on investments held at fair value through profit or loss'
in the period in which they arise.
2.9.2.2 Other financial instruments at amortised cost
The financial instruments at amortised cost are non-derivative
financial assets and liabilities with fixed or determinable
payments that are not quoted on an active market. They
comprise trade and other receivables, interest receivable,
cash and cash equivalents and trade and other payables.
Trade and other receivables are rights to receive compensation
for goods or services that have been provided in the ordinary
course of business to customers. Accounts receivable are
classified as current assets if receipt 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 assets.
Interest receivable is the right to receive payments at
fixed or variable interest rates on loans issued by the
Company. Interest receivable is classified as current
if the receipt is due within one year or less. If not,
it is presented as a non-current asset.
Cash and cash equivalents comprise cash on hand.
Trade and other 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 (in the normal operating cycle of the business
if longer). If not, they are presented as non-current
liabilities.
All of the above are subsequently held at amortised cost.
2.9.3 Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire.
The Company also derecognises a financial asset when it
transfers the rights to receive the contractual cash flows
in a transaction in which substantially all of the risks
and rewards of ownership of the financial asset are transferred.
Lastly, the Company also derecognises the financial asset
when it neither transfers nor retains substantially all
of the risks and rewards of ownership and it does not
retain control of the financial asset.
The Company derecognises a financial liability when its
contractual obligations are discharged or cancelled, or
expire. The Company also derecognises a financial liability
when its terms are modified and the cash flows or the
modified liability are subsequently different, in which
case a new financial liability based on the modified terms
is recognised at fair value. Any gain or loss on derecognition
is recognised in profit or loss.
2.9.4 Impairment of financial assets
The Company applies the simplified approach to measuring
expected credit losses, as permitted by IFRS 9, which
uses a 12 month expected loss allowance for all trade
receivables and interest receivable.
2.10 Share 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.
2.11 Dividend distribution
Dividend distributions to the Company's shareholders are
recognised as a liability in the Company's Financial Statements
in the period in which the dividends are approved by the
Company's shareholders.
3. Critical accounting estimates and judgements
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 Company's accounting policies.
The Board considers that the only areas where management make
critical estimates that may have a significant effect on the
financial statements are in relation to the valuation of
investments held at fair value through profit and loss. The most
significant judgements relate to the determination that the Company
meets the definition of an investment entity.
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.
The Board considers that the determination that the Company
meets the definition of an investment entity involves significant
judgement because the entity does not possess all the typical
characteristics of an investment entity. While the absence of one
or more of the typical characteristics of an investment entity
described in IFRS 10 Consolidated Financial Statements does not
immediately disqualify an entity from being classified as an
investment entity. The entity is required to disclose its reasons
for concluding that it is nevertheless an investment entity if one
or more of these characteristics are not met. In order to reach
that conclusion of whether the Company meets the definition of an
investment entity the Board had to make significant judgements.
The Board considers that the fair value of Investments not
quoted in an active market involves critical accounting estimates
because it is determined by the Directors using their own valuation
models, which are based on valuation methods and techniques
generally recognised as standard within the industry. Models use
observable data, to the extent practicable. However, they also rely
on significant unobservable inputs about the output of the asset
(including assumptions such as solar irradiation and technological
performance of the asset), power prices, operating costs, discount
and inflation rates applied to the cash flows, and the duration of
the useful economic life of the asset. The Directors calculate 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 2018 ("IPEVC")
Valuation Guidelines, using a Discounted Cash Flow valuation
methodology. Furthermore, changes in these inputs and assumptions
could affect the reported fair value of financial instruments. The
determination of what constitutes 'observable' requires judgement
by the Company. The Company considers observable data to be market
data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant
market.
4. Interest income
31 December 31 December
2019 2018
GBP'000 GBP'000
Bank interest income - 1
Interest on loan notes 34,110 33,172
Interest on shareholder loans 5,089 3,644
----------- -----------
39,199 36,817
----------- -----------
Loan notes were issued by the company to UK Hold Co for the
purchase of investments. Interest accrues at 9% per annum in
arrears on each Interest Payment Date (28 / 29 February and 31
August each year). Where interest is not paid on the payment date,
it will compound and future interest shall accrue at 11% per annum
from the due date up to the date of actual payment compounding on
each Interest Payment Date. The loan notes balance at year end on
which interest is charged is GBP250,000,000 (2018: GBP250,000,000).
These loans form part of the fair value of the investments as per
note 14.
A Shareholder loan is created when the total amount paid by the
Company on behalf of UK Hold Co to acquire the underlying
investments is more than the total loan notes issued by the Company
to UK Hold Co. Interest accrues at 2% per annum, and is repayable
in full on demand. During the current year, an additional
GBP55,000,000 was issued on this loan, bringing the shareholder
loan balance at year end to GBP304,316,450 (2018: GBP249,316,450).
These loans form part of the fair value of the investments as per
note 14.
5. Management fees
The Investment Manager of the Company, Foresight Group CI
Limited, receives an annual fee of 1% of the Net Asset Value
("NAV") of the Company up to GBP500m - NAV in excess to this is
charged at 0.9% per annum. This is payable quarterly in arrears and
is calculated based on the published quarterly NAV. For the year
ended 31 December 2019, the Investment Manager was entitled to a
management fee of GBP5,966,823 (2018: GBP5,106,080) of which
GBP1,571,139 was outstanding as at 31 December 2019 (2018:
GBP1,537,638).
6. Administration and Accountancy fees
Under an Administration Agreement, the Administrator of the
Company, JTC (Jersey) Limited, is entitled to receive minimum
annual administration and accountancy fees of GBP156,000 payable
quarterly in arrears. For the year ended 31 December 2019, total
administration and accountancy fees were GBP186,358 (2018:
GBP203,220) of which GBP45,500 was outstanding as at 31 December
2019 (2018: GBP39,000).
7. Staff costs and Directors' fees
No members of staff were employed during the year (2018:
nil).
Total directors' fees were GBP196,444 (2018: GBP170,000).
8. Other Expenses
31 December 31 December
2019 2018
GBP'000 GBP'000
Legal and professional fees 542 607
Other expenses 58 36
----------- -----------
600 643
----------- -----------
Included within legal and professional fees is GBP32,500 (2018:
GBP22,500) relating to the audit of these financial statements. The
total audit fee paid to KPMG LLP pertaining to the group is
GBP180,000 for the year ended 31 December 2019 (2018: GBP160,000).
There were no other fees paid to the auditors for non-audit
services during the year (2018: Nil).
9. Earnings per Ordinary share - basic and diluted
The basic losses per Ordinary Share for the Company is 1.89
pence per share (2018: basic profit of 11.60 pence per share). This
is based on the loss for the year of GBP10,750,671 (2018:
GBP56,005,471 profit) and on 567,804,584 (2018: 482,619,846)
Ordinary Shares, being the weighted average number of shares in
issue during the year.
There is no difference between the weighted average ordinary or
diluted number of shares.
10. Interest receivable
31 December 31 December
2019 2018
GBP'000 GBP'000
Interest receivable on loan notes 50,780 56,814
Interest receivable on shareholder loans 17,773 12,524
----------- -----------
68,553 69,338
----------- -----------
Information about the Company's exposure to credit and market
risk and impairment losses for interest receivable is included in
note 19.
11. Trade and other receivables
31 December 31 December
2019 2018
GBP'000 GBP'000
Prepaid expenses 5 17
Other receivables 250 248
----------- -----------
255 265
----------- -----------
Information about the Company's exposure to credit and market
risk and impairment losses for trade and other receivables is
included in note 19.
12. Cash and cash equivalents
31 December 31 December
2019 2018
GBP'000 GBP'000
Cash at bank 18,933 12,282
----------- -----------
18,933 12,282
----------- -----------
Information about the Company's exposure to credit and market
risk and impairment losses for cash and cash equivalents is
included in note 19.
13. Trade and other payables
31 December 31 December
2019 2018
GBP'000 GBP'000
Accrued expenses 1,716 1,630
Amounts due to subsidiaries* 187 184
----------- -----------
1,903 1,814
----------- -----------
*Amounts due to subsidiaries are unsecured, interest free and
repayable on demand.
14. Investments held at fair value through profit or loss
The following table presents the Company's investments held at
fair value through profit or loss:
31 December 31 December
2019 2018
GBP'000 GBP'000
Investment in UK Hold Co Equity - -
Loans 542,186 530,187
----------- -----------
542,186 530,187
----------- -----------
Book cost as at 1 January 499,315 404,109
Opening investment holding gains 30,872 4,355
----------- -----------
Valuation as at 1 January 530,187 408,464
Movements during the year
Purchase at cost (loans drawn down) 55,000 95,206
Reclassification - see below - 1,206
Investment holding (losses)/gains (43,001) 25,311
----------- -----------
Valuation as at 31 December 542,186 530,187
----------- -----------
Book cost as at 31 December 554,315 499,315
Closing investment holding (losses)/gains (12,129) 30,872
----------- -----------
542,186 530,187
----------- -----------
The Company has one investment in Foresight Solar (UK Hold Co)
Limited ("UK Hold Co"). This investment consists of both debt and
equity (Share Capital of GBP100) and is not quoted in an active
market. Accordingly, the investment in UK Hold Co has been valued
using its net assets.
In turn, UK Hold Co has four investments in FS Holdco Limited
("FS Holdco"), FS Holdco 3 Limited ("FS Holdco 3"), FS Holdco 4
Limited ("FS Holdco 4") and FS Top Holdco 2 Limited ("Topco"), and
Topco has one investment in Foresight Intermediate Solar Holdings
Limited ("FISH"). FISH has one investment in FS Holdco 2 and FS
Holdco 2 has one investment in FS Debtco Limited ("FS Debtco").
These investments also consist of both debt and equity and are not
quoted in an active market. FS Holdco and FS Debtco are fair valued
using their net asset value as reported at year end, with
adjustments to their long term external debt to reflect the fact
that the carrying value at amortised cost is not considered to be
the best approximation of their fair value. FS Holdco 3, FS Holdco
4, FISH, FS Holdco 2 and Topco are fair valued using their net
asset value as reported at year end.
In turn, FS Holdco, FS Debtco, FS Holdco 3 and FS Holdco 4's
investment portfolios consist of unquoted investments in solar
projects, the valuations of which are based on a discounted cash
flow methodology (as set out in note 17) for solar projects that
are operational. Three investments held by FS Holdco 4 previously
valued at cost became operational during the year.
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:
(a) Level 1 - Quoted (unadjusted) market prices in active
markets for identical assets or liabilities;
(b) Level 2 - Valuation techniques for which the lowest
level input that is significant to the fair value measurement
is directly or indirectly observable; and
(c) 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.
As UK Hold Co's net asset value is not considered observable
market data the investment in UK Hold Co has been classified as
level 3. There were no movements between levels during the
year.
As at 31 December 2019:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investment - - 542,186 542,186
-------- -------- -------- --------
- - 542,186 542,186
-------- -------- -------- --------
As at 31 December 2018:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investment - - 530,187 530,187
-------- -------- -------- --------
- - 530,187 530,187
-------- -------- -------- --------
Sensitivity Analysis
Due to the nature of the Group structure and the underlying
valuation basis of UK Hold Co, FS Holdco, Topco, FISH, FS Holdco 2,
FS Debtco, FS Holdco 3, FS Holdco 4 and the underlying solar
project investments, the valuation of the Company's investment at
fair value through profit or loss is directly linked to the
valuation of the underlying solar investments. Therefore, the
unobservable inputs driving the valuation of the Company's
investments in UK Hold Co are directly attributable to the
valuation of the unquoted investments in FS Holdco, FS Debtco, FS
Holdco 3 and FS Holdco 4 which are discussed further in note
16.
15. Subsidiaries and associates
Investments in subsidiaries
Proportion
Direct or of shares
indirect Country of and voting
Name holding incorporation Principal activity rights held
Foresight Solar (UK Hold Co) Limited ("UK Hold Co") Direct UK Holding Company 100%
FS Holdco Limited ("FS Holdco") Indirect UK Holding Company 100%
FS Top Holdco 2 Limited ("Topco") Indirect UK Holding Company 100%
Foresight Intermediate Solar Holdings Limited
("FISH") Indirect UK Holding Company 100%
FS Holdco 2 Limited ("FS Holdco 2") Indirect UK Holding Company 100%
FS Debtco Limited ("FS Debtco") Indirect UK Holding Company 100%
FS Holdco 3 Limited ("FS Holdco 3") Indirect UK Holding Company 100%
FS Holdco 4 Limited ("FS Holdco 4") Indirect UK Holding Company 100%
FS Wymeswold Limited Indirect UK SPV Holding Company 100%
FS Castle Eaton Limited Indirect UK SPV Holding Company 100%
FS Pitworthy Limited Indirect UK SPV Holding Company 100%
FS Highfields Limited Indirect UK SPV Holding Company 100%
FS High Penn Limited Indirect UK SPV Holding Company 100%
FS Hunter's Race Limited Indirect UK SPV Holding Company 100%
FS Spriggs Limited Indirect UK SPV Holding Company 100%
FS Bournemouth Limited Indirect UK SPV Holding Company 100%
FS Landmead Limited Indirect UK SPV Holding Company 100%
FS Kencot Limited Indirect UK SPV Holding Company 100%
FS Copley Limited Indirect UK SPV Holding Company 100%
FS Port Farms Solar Limited Indirect UK SPV Holding Company 100%
FS Membury Limited Indirect UK SPV Holding Company 100%
FS Southam Solar Limited Indirect UK SPV Holding Company 100%
FS Atherstone Solar Limited Indirect UK SPV Holding Company 100%
FS Paddock Wood Solar Farm Limited Indirect UK SPV Holding Company 100%
Southam Holdco Limited Indirect UK SPV Holding Company 100%
Atherstone Holdco Limited Indirect UK SPV Holding Company 100%
Paddock Wood Holdco Limited Indirect UK SPV Holding Company 100%
FS Shotwick Limited Indirect UK SPV Holding Company 100%
FS Sandridge Limited Indirect UK SPV Holding Company 100%
FS Wally Corner Limited Indirect UK SPV Holding Company 100%
Acquisition Co 4 Limited Indirect UK SPV Holding Company 100%
FS Welbeck Limited Indirect UK SPV Holding Company 100%
FS Trehawke Limited Indirect UK SPV Holding Company 100%
FS Homeland Limited Indirect UK SPV Holding Company 100%
FS Marsh Farm Limited Indirect UK SPV Holding Company 100%
FS Steventon Limited Indirect UK SPV Holding Company 100%
FS Fields Farm Limited Indirect UK SPV Holding Company 100%
FS Gedling Limited Indirect UK SPV Holding Company 100%
FS Sheepbridge Limited Indirect UK SPV Holding Company 100%
FS Tengore Limited Indirect UK SPV Holding Company 100%
FS Cuckoo Limited Indirect UK SPV Holding Company 100%
FS Field House Limited Indirect UK SPV Holding Company 100%
FS Upper Huntingford Limited Indirect UK SPV Holding Company 100%
FS Abergelli Limited Indirect UK SPV Holding Company 100%
FS Crow Trees Limited Indirect UK SPV Holding Company 100%
FS Yarburgh Limited Indirect UK SPV Holding Company 100%
FS Nowhere Solar Limited Indirect UK SPV Holding Company 100%
FS Bilsthorpe Solar Limited Indirect UK SPV Holding Company 100%
FS Bulls Head Solar Limited Indirect UK SPV Holding Company 100%
FS Roskrow Solar Limited Indirect UK SPV Holding Company 100%
FS Abbeyfields Solar Limited Indirect UK SPV Holding Company 100%
FS Lindridge Solar Limited Indirect UK SPV Holding Company 100%
FS Misson Solar Limited Indirect UK SPV Holding Company 100%
FS Playters Solar Limited Indirect UK SPV Holding Company 100%
FS PS Manor Farm Solar Limited Indirect UK SPV Holding Company 100%
FS SV Ash Solar Park Limited Indirect UK SPV Holding Company 100%
FS Pen Y Cae Solar Limited Indirect UK SPV Holding Company 100%
Second Generation Portfolio Holdings 1 Indirect UK SPV Holding Company 100%
Second Generation Portfolio 1 Indirect UK SPV Holding Company 100%
FS Oakey 2 Pty Limited Indirect Australia SPV Holding Company 100%
Wymeswold Solar Farm Limited ("Wymeswold") Indirect UK Investment 100%
Castle Eaton Solar Farm Limited ("Castle Eaton") Indirect UK Investment 100%
Pitworthy Solar Farm Limited ("Pitworthy ") Indirect UK Investment 100%
Highfields Solar Farm Limited ("Highfields") Indirect UK Investment 100%
High Penn Solar Farm Limited ("High Penn ") Indirect UK Investment 100%
Hunter's Race Solar Farm Limited ("Hunter's Race") Indirect UK Investment 100%
Spriggs Solar Farm Limited ("Spriggs ") Indirect UK Investment 100%
Bournemouth Solar Farm Limited ("Bournemouth") Indirect UK Investment 100%
Landmead Solar Farm Limited ("Landmead") Indirect UK Investment 100%
Kencot Hill Solar Farm Limited ("Kencot") Indirect UK Investment 100%
Copley Solar Limited ("Copley") Indirect UK Investment 100%
Port Farms Solar Limited (Port Farm") Indirect UK Investment 100%
Membury Solar Limited ("Membury") Indirect UK Investment 100%
Atherstone Solar Farm Ltd ("Atherstone") Indirect UK Investment 100%
Southam Solar Farm Ltd ("Southam") Indirect UK Investment 100%
Paddock Wood Solar Farm Ltd ("Paddock Wood") Indirect UK Investment 100%
Shotwick Solar Limited ("Shotwick Solar") Indirect UK Investment 100%
Sandridge Solar Power Limited ("Sandridge") Indirect UK Investment 100%
SSR Wally Corner Limited ("SSR Wally") Indirect UK Investment 100%
Foresight Solar Australia Pty Limited Indirect Australia Investment 100%
RE Oakey Pty Limited Indirect Australia Investment 100%
Oakey Network Pty Limited Indirect Australia Investment 100%
Longreach Asset Company Pty Limited Indirect Australia Investment 100%
Second Generation Yardwall Limited ("Yardwall") Indirect UK Investment 100%
Second Generation Verwood Limited ("Verwood") Indirect UK Investment 100%
Second Generation Park Farm Limited ("Park Farm") Indirect UK Investment 100%
Second Generation Coombeshead Limited ("Coombeshead") Indirect UK Investment 100%
Second Generation Sawmills Limited ("Sawmills") Indirect UK Investment 100%
Welbeck Limited ("Welbeck") Indirect UK Investment 100%
Trehawke Limited ("Trehawke") Indirect UK Investment 100%
Homeland Limited "(Homeland") Indirect UK Investment 100%
Marsh Farm Limited ("Marsh Farm") Indirect UK Investment 100%
Steventon Limited ("Steventon") Indirect UK Investment 100%
Fields Farm Limited ("Fields Farm") Indirect UK Investment 100%
Gedling Limited ("Gedling") Indirect UK Investment 100%
Sheepbridge Limited ("Sheepbridge") Indirect UK Investment 100%
Tengore Limited ("Tengore") Indirect UK Investment 100%
Cuckoo Limited ("Cuckoo") Indirect UK Investment 100%
Field House Limited ("Field House") Indirect UK Investment 100%
Upper Huntingford Limited ("Upper Huntingford") Indirect UK Investment 100%
Abergelli Limited ("Abergelli") Indirect UK Investment 100%
Crow Trees Limited ("Crow Trees") Indirect UK Investment 100%
Yarburgh Limited ("Yarburgh") Indirect UK Investment 100%
Nowhere Solar Limited ("Nowhere Solar") Indirect UK Investment 100%
Bilsthorpe Solar Limited ("Bilsthorpe Solar") Indirect UK Investment 100%
Bulls Head Solar Limited ("Bulls Head Solar") Indirect UK Investment 100%
Roskrow Solar Limited ("Roskrow Solar") Indirect UK Investment 100%
Abbeyfields Solar Limited ("Abbeyfields Solar") Indirect UK Investment 100%
Lindridge Solar Limited ("Lindridge Solar") Indirect UK Investment 100%
Misson Solar Limited ("Misson Solar") Indirect UK Investment 100%
Playters Solar Limited ("Playters Solar") Indirect UK Investment 100%
PS Manor Farm Solar Limited ("PS Manor Farm Indirect UK Investment 100%
SV Ash Solar Park Limited ("SV Ash Solar Park") Indirect UK Investment 100%
Pen Y Cae Solar Limited ("Pen Y Cae Solar") Indirect UK Investment 100%
Investments in associates
Proportion
Direct or of shares
indirect Country of and voting
Name holding incorporation Principal activity rights held
Kiamco Hanwha Foresight Bannerton Pty Limited Indirect UK SPV Holding Company 48.50%
Longreach New Holdco Pty Limited Indirect Australia SPV Holding Company 49%
Oakey 1 New Holdco Pty Limited Indirect Australia SPV Holding Company 49%
16. Fair value of the investments in unconsolidated entities
Valuation process
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 2018 ("IPEVC") Valuation Guidelines, using
levered and unlevered Discounted Cash Flow principles. The
Investment Manager and Directors consider that the discounted cash
flow methodology used in deriving a fair value is in accordance
with the fair value requirements of IFRS 13.
Certain investments held by FS Holdco 4 were valued at cost as
at 31 December 2019 and 31 December 2018 as these projects were not
yet operational, and are therefore not included in the sensitivity
analysis on the following pages.
Useful economic lives ("UELs")
The valuation of the Company's investments is determined based
on the discounted value of future cash flows of those investments
over their UELs.
The UEL of individual assets is determined by reference to a
fixed contractual lease term, and therefore, the Board and Manager
do not consider that the UEL can have a significant impact on the
valuation of the investments.
However, the Board notes that if extended contractual lease
terms were negotiated for individual assets, this would increase
the value of those assets. Similarly, if the assets did not operate
for the duration of the fixed contractual period, this would reduce
the value of those assets.
Sensitivity analysis of significant changes in unobservable
inputs within Level hierarchy of underlying Investments
The majority of the Company's underlying investments (indirectly
held through its unconsolidated subsidiaries FS Holdco, FS Debtco,
FS Holdco 3, TopCo, FISH and FS Holdco 4) 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 Directors consider the following to be significant inputs to
the discounted cash flows ("DCF") calculation.
Discount rate
The weighted average discount rate used is 7.10% (2018: 7.30%).
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.
-0.50% -0.25% Base +0.25% +0.50%
------ ------ ----- ------ ------
Portfolio valuation
(GBPm) 925.2 907.2 889.8 872.9 856.5
--------------------- ------ ------ ----- ------ ------
Change in portfolio
valuation (GBPm) 35.4 17.4 - (16.9) (33.3)
--------------------- ------ ------ ----- ------ ------
NAV per share change
(pence) 5.9 2.9 - (2.8) (5.5)
--------------------- ------ ------ ----- ------ ------
Production
Base case production is a function of a number of separate
assumptions including irradiation levels, availability of the sites
and technical performance of the equipment. A sensitivity of +/-10%
is considered reasonable given stable levels of irradiation,
contractual availability guarantees and understanding of future
performance levels of the equipment.
-10% Base +10%
------- ----- -------
Portfolio valuation (GBPm) 775.4 889.8 1,003.8
------------------------------------- ------- ----- -------
Change in portfolio valuation (GBPm) (114.4) 114.0
------------------------------------- ------- ----- -------
NAV per share change (pence) (18.9) 18.8
------------------------------------- ------- ----- -------
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
forecast assumes an average annual increase in power prices in real
terms of approximately 0.4%.
During the year, c.57% of the investment's operational revenues
came from Regulatory support mechanisms. The remaining c.43% of
revenue is derived from electricity sales which are subject to
power price movements.
-20.0% -10.0% Base +10.0% +20.0%
------- ------ ----- ------ -------
Portfolio valuation
(GBPm) 779.1 834.5 889.9 945.1 1,000.4
--------------------- ------- ------ ----- ------ -------
Change in portfolio
valuation (GBPm) (110.7) (55.3) - 55.3 110.6
--------------------- ------- ------ ----- ------ -------
NAV per share change
(pence) (18.3) (9.1) - 9.1 18.3
--------------------- ------- ------ ----- ------ -------
Inflation
A variable of 0.5% to 1.0% is considered reasonable given
historic fluctuations. A long term inflation rate of 2.75% (2018:
2.75%) has been used.
-1.0% -0.5% Base +0.5% +1.0%
------ ------ ----- ----- -----
Portfolio valuation
(GBPm) 813.0 850.3 889.8 931.5 975.8
--------------------- ------ ------ ----- ----- -----
Change in portfolio
valuation (GBPm) (76.8) (39.4) - 41.7 86.0
--------------------- ------ ------ ----- ----- -----
NAV per share change
(pence) (12.7) (6.5) - 6.9 14.2
--------------------- ------ ------ ----- ----- -----
Operating costs (investment level)
Operating costs include operating and maintenance ("O&M"),
insurance and lease costs. Other costs are fixed and are therefore
not considered to be sensitive to changes in unobservable inputs.
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.
-10.0% -5.0% Base +5.0% +10.0%
------ ----- ----- ----- ------
Portfolio valuation
(GBPm) 906.8 898.3 889.8 881.3 872.8
--------------------- ------ ----- ----- ----- ------
Change in portfolio
valuation (GBPm) 17.0 8.5 - (8.5) (17.0)
--------------------- ------ ----- ----- ----- ------
NAV per share change
(pence) 2.8 1.4 - (1.4) (2.8)
--------------------- ------ ----- ----- ----- ------
17. Stated Capital and Share Premium
The share capital and share premium of the Company consists
solely of Ordinary Shares of nil par value and therefore the value
of the stated capital relates only to share premium. 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). The
holders of the Ordinary Shares are entitled to receive dividends
from time to time.
Authorised Ordinary Shares
31 December 31 December
2019 2018
Shares Shares
Ordinary shares - nil par value Unlimited Unlimited
Issued Ordinary Shares
31 December 31 December
2019 2018
Shares Shares
Opening balance 548,941,550 449,952,091
Issued during the year 54,894,155 98,989,459
Scrip dividends issued during the year 1,360,821 -
----------- -----------
Closing balance 605,196,526 548,941,550
----------- -----------
31 December 31 December
2019 2018
GBP'000 GBP'000
Opening balance 558,798 454,515
Proceeds from share issue 65,324 106,189
Value of scrip dividends issued 1,610 -
Less: issue costs capitalised (810) (1,906)
----------- -----------
Closing balance 624,922 558,798
----------- -----------
During quarter three 597,383 shares at a value of GBP1.192 per
share were issued in lieu of cash dividends. During quarter two
763,438 shares at a value of GBP1.176 per share were issued in lieu
of cash dividends.
18. NAV per Ordinary Share
The Net Asset Value ("NAV") per redeemable Ordinary Share for
the Company is 103.77 (2018: 111.17) pence per ordinary share. This
is based on the Net Asset Value at the reporting date of
GBP628,023,734 (2018: GBP610,257,766) and on 605,196,526 (2018:
548,941,550) redeemable Ordinary Shares, being the number of
Ordinary Shares in issue at the end of the year.
19. Financial instruments and risk profile
The Company holds cash and liquid resources as well as having
receivables and payables that arise directly from its operations.
The underlying investments of the Company's investment activities
indirectly expose it to various types of risks associated with
solar power. The main risks arising from the Company's financial
instruments are market risk, liquidity risk and credit risk. The
Directors regulatory review and agree policies for managing each of
these risks and these are summarised below:
19.1 Market risk
(a) Foreign currency 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. Transactions in foreign currency are translated at
the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated to pounds sterling at the
foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in income.
The Company has no direct exposure to foreign currency risk,
however through its underlying investment in FS Holdco 4 it has
indirect exposure. FS Holdco 4 is directly exposed to fluctuations
in foreign currency due to its investments in Australian dollar
denominated assets. The Group mitigates its exposure to
fluctuations in foreign currency through the use of forward
exchange contracts.
The carrying amount of FS Holdco 4's foreign currency exposure
at the reporting date is as follows:
31 December 2019 31 December 2018
GBP'000 GBP'000
AUD 50,185 63,102
The FX rate applied at 31 December 2019 was 0.5306 (2018:
0.5523). A 10% weakening or strengthening of the FX rate would have
a GBP5,018,500 impact on the valuation of assets denominated in AUD
(2018: GBP6,310,200).
(b) Price risk
The Company's investments are susceptible to market price risk
arising from uncertainties about future values of the instruments.
The Company's Investment Manager provides the Company with
investment recommendations.
The Company's Investment Manager's recommendations are reviewed
and approved by the Board before the investment decisions are
implemented. To manage the market price risk, the Company's
Investment Manager reviews the performance of the investments on a
regular basis and is in regular contact with the management of the
non current investments for business and operational matters.
Price risk is the risk that the fair value or cash flows of a
financial instrument will fluctuate due to changes in market
prices. At 31 December 2019, the Company's only investment was
valued at net assets excluding the outstanding loans issued by the
Company. Were this value to increase by 10%, the increase in net
assets attributable to shareholders for the year would have been
GBP54,218,661 (2018: GBP53,018,750). The impact of changes in
unobservable inputs to the underlying investments is considered in
note 16.
(c) 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 Company's exposure to the
risk of changes in market interest rates relates primarily to the
Company's long-term borrowing to its subsidiary. At year end the
Company had no long term borrowings with third parties (2018:
Nil).
Weighted average Weighted average time for which
Total portfolio interest rate rate is fixed
31 December 2019 31 December 2019 31 December 2019
GBP'000 % Days
Loan notes 250,000 11.00% 1,145
Shareholder loans 304,316 2.00% 1,652
Cash and cash equivalents 18,933 0.05% -
-----------------
573,249
-----------------
Weighted average time for which
Weighted average rate
Total portfolio interest rate is fixed
31 December 2018 31 December 2018 31 December 2018
GBP'000 % Days
Loan notes 250,000 11.00% 780
Shareholder loans 249,316 2.00% 1,287
Cash as cash equivalents 12,282 0.05% -
-----------------
511,598
-----------------
The Company is also indirectly exposed to interest rate risk
through its investment in UK Hold Co. Details of the indirect
interest rate risk exposure are as follows:
Weighted average
Total Weighted average time for which
Indirect exposure interest rate rate is fixed
2019 2019 2019
GBP'000 % Days
Investments - FS Holdco* 343,731 8.00 365**
Investments - Topco, FS Holdco
3 & FS Holdco 4* 263,597 5.00 1,685
Cash and cash equivalents 54
------------------
Total indirect exposure interest
rate risk 607,382
------------------
Weighted average
Total Weighted average time for which
Indirect exposure interest rate rate is fixed
2018 2018 2018
GBP'000 % Days
Investment - FS Holdco* 343,731 8.00 365**
Investments - FS Holdco 2, FS
Holdco 3 & FS Holdco 4* 266,509 5.00 1,320
Cash and cash equivalents 445 -
------------------
Total indirect exposure interest
rate risk 610,685
------------------
* The loan portion of the investments are subject to interest
rate risk
** These loans do not have a repayment date and are repayable on
demand. However, the directors do not intend to demand repayment in
at least 12 months after year end.
19.2 Liquidity risk
Liquidity risk is the risk that the Company 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 Company's liquidity
requirements to ensure there is sufficient cash to meet the
Company's operating needs.
31 December 2019
Carrying Contractual Less than 6 to 12 Greater than
amount Total 6 months Months 12 months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial Assets
Investments 542,186 542,186 - - 542,186
Trade and other receivables 255 255 255 - -
Interest receivable 68,553 68,553 68,553 - -
Cash and cash equivalents 18,933 18,933 18,933 - -
-------- ----------- --------- -------- ------------
Total Financial assets 629,927 629,927 87,741 - 542,186
-------- ----------- --------- -------- ------------
Financial Liabilities
Trade and other payables (1,903) (1,903) (1,903) - -
-------- ----------- --------- -------- ------------
Total financial liabilities (1,903) (1,903) (1,903) - -
-------- ----------- --------- -------- ------------
Net position 628,024 628,024 85,838 - 542,186
-------- ----------- --------- -------- ------------
31 December 2018
Carrying Contractual Less than 6 to 12 Greater than
amount Total 6 months Months 12 months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial Assets
Investments 530,187 530,187 - - 530,187
Trade and other Receivables 265 265 265 - -
Interest receivable 69,338 69,338 69,338 - -
Cash and cash equivalents 12,282 12,282 12,282 - -
-------- ----------- --------- -------- ------------
Total Financial assets 612,072 612,072 81,885 - 530,187
-------- ----------- --------- -------- ------------
Financial Liabilities
Trade and other payables (1,814) (1,814) (1,814) - -
-------- ----------- --------- -------- ------------
Total financial liabilities (1,814) (1,814) (1,814) - -
-------- ----------- --------- -------- ------------
Net position 610,258 610,258 80,071 - 530,187
-------- ----------- --------- -------- ------------
19.3 Credit risk
a) Exposure to credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company.
The Company and its subsidiaries place 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 year and at the reporting date, the Company maintained
relationships with the following financial institutions:
31 December 2019
Moody's Credit Rating GBP'000
Cash in bank:
Royal Bank of Scotland International Limited P2 18,933
Lloyds Bank International Limited P1 -
----------------
Total cash and cash equivalents 18,933
----------------
31 December 2018
Moody's Credit Rating GBP'000
Cash in bank:
Royal Bank of Scotland International Limited P2 12,280
Lloyds Bank International Limited P1 2
----------------
Total cash and cash equivalents 12,282
----------------
The Company is also indirectly exposed to credit risk through
its investment in UK Hold Co. The Board of UK Hold Co has
determined that the maximum exposure to credit risk in relation to
investments is GBP607,327,419 (2018: GBP610,239,946), being the
portion of UK Hold Co investments that are made up of loans as at
31 December 2019. Included within this are the related party loans
as disclosed within note 22 as well as an external long term debt
facilities entered into by FS Holdco and FISH with Santander and
Natwest. The balance of the external debt facility as at year end
amounted to GBP251,057,609 (2018: GBP251,057,609).
b) Expected credit loss assessment
Investments held at fair value through profit or loss are not
subject to IFRS 9 impairment requirements.
The Company applies the simplified approach to measuring
expected credit losses, as permitted by IFRS 9, which uses a 12
month expected loss allowance for all trade receivables. The
expected credit loss on trade receivables and the balance at year
end was deemed by management to be not material and therefore no
impairment adjustments were accounted for.
19.4 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
Company's assets.
For the Company's UK solar sites the main risks from Brexit that
the Company is currently considering are the stability of the
operating and maintenance (O&M) companies that are employed
across the portfolio and the supply chain of components as part of
either corrective or preventative maintenance work.
In relation to the O&M companies themselves, all of the
primary O&M companies across a majority of the UK portfolio are
UK based operations who are wholly owned by UK entities.
The supply chain for spare parts is the other main risk that
Management foresees due to Brexit in terms of getting spare parts
to sites promptly from other parts of the EU, especially in the
event of no deal being achieved in the negotiations post the recent
UK exit from the EU.
Whilst Brexit presents certain risks in relation to the
operation of the UK solar portfolio the Asset Manager shall be
working to ensure that there are robust spare parts provision in
the UK and continue to work with the O&M providers and their
downstream suppliers to ensure down time is minimised across the
portfolio as much as possible.
20. Capital Management
The Company'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
Company 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.
21. Dividends
2019 2018
2019 Pence/Ordinary 2018 Pence/Ordinary
GBP'000 share GBP'000 share
Quarter 1 9,057 1.65 7,109 1.58
Quarter 2 9,058 1.65 7,109 1.58
Quarter 3 8,565 1.69 8,118 1.64
Quarter 4 9,317 1.69 9,003 1.64
-------- --------
35,997 31,339
-------- --------
During quarter three 597,383 shares at a value of GBP1.192 per
share were issued in lieu of cash dividends. During quarter two
763,438 shares at a value of GBP1.176 per share were issued in lieu
of cash dividends.
22. Related party disclosures
For the purposes of these Financial Statements, a related party
is an entity or entities who are able to exercise significant
influence directly or indirectly on the Company's operations.
As noted in note 2, the Company does not consolidate its
subsidiary. However, the Company and its subsidiaries (direct and
indirect) are a Group and therefore, are considered to be related
parties.
Transactions with UK Hold Co
For the year ended 31 December 2019:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2019 charged repaid 31 December 2019
GBP'000 GBP'000 GBP'000 GBP'000
Loan Notes 250,000 - - 250,000
Interest on Loan Notes 56,814 34,110 (40,144) 50,780
Shareholder Loan 1 249,316 55,000 - 304,316
Interest on Shareholder Loan 1 12,524 5,089 (160) 17,453
Non interest bearing loan included in trade and
other payables 184 1,850 (1,847) 187
The increases in the shareholder loan of GBP55,000,000 were
funded through three separate placing proceeds during 2019.
Transactions with UK Hold Co
For the year ended 31 December 2018:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2018 charged repaid 31 December 2018
GBP'000 GBP'000 GBP'000 GBP'000
Loan Notes 250,000 - - 250,000
Interest on Loan Notes 48,746 33,172 (25,104) 56,814
Shareholder Loan 1 154,110 95,206 - 249,316
Interest on Shareholder Loan 1 8,880 3,644 - 12,524
Non interest bearing loan included in trade and
other receivables 1,116 - (1,116) -
Non interest bearing loan included in trade and
other payables - 184 - 184
The increases in the shareholder loan of GBP95,206,725 were
funded through two separate placing proceeds during 2018.
Transactions between UK Hold Co and its underlying
subsidiaries
Transactions with FS Holdco
For the year ended 31 December 2019:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2019 charged repaid 31 December 2019
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment loan 1 343,731 - - 343,731
Interest on investment loan 1 47,053 27,499 (22,851) 51,701
Interest bearing Investment loan 2 (40,000) - - (40,000)
Interest on investment loan 2 (1,253) (2,000) - (3,253)
Non interest bearing loan (143,504) - - (143,504)
Non interest bearing loan included in trade and
other receivables 875 - - 875
For the year ended 31 December 2018:
Opening Balance Increase Repayment Closing Balance
as at in of as at
1 January loan/Interest loan/Interest 31 December
2018 charged repaid 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 343,731 - - 343,731
Interest on investment
loan 1 37,711 27,499 (18,157) 47,053
Interest bearing Investment
loan 2 - (40,000) - (40,000)
Interest on investment
loan 2 - (1,403) 150 (1,253)
Non interest bearing
loan (143,504) - - (143,504)
Non interest bearing
loan included in trade
and other receivables 715 160 - 875
Transactions with Topco
For the year ended 31 December 2019:
Opening Balance Increase Repayment Closing Balance
as at in of as at
1 January loan/Interest loan/Interest 31 December
2019 charged repaid 2019
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan - 167,256 - 167,256
Interest on investment
loan - 2,805 (2,805) -
Non interest bearing
loan - (8,965) 115 (8,850)
Topco commenced trading during the year and therefore no
comparatives are shown.
Transactions with FISH
There were no transactions between UK Holdco and FISH.
Transactions with FS Holdco 2
For the year ended 31 December 2019:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2019 charged repaid 31 December 2019
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment loan 1 74,894 - (74,894) -
Interest on investment loan 1 948 1,237 (2,185) -
Interest bearing Investment loan 2 9,107 - (9,107) -
Interest on investment loan 2 42 224 (266) -
Interest bearing Investment loan 3 33,094 - (33,094) -
Interest on investment loan 3 150 816 (966) -
Interest bearing Investment loan 4 3,432 - (3,432) -
Interest on investment loan 4 6 94 (100) -
Interest bearing Investment loan 5 46,500 - (46,500) -
Interest on investment loan 5 962 395 (1,357) -
Interest bearing loan payable 1 (28,970) - 28,970 -
Interest on loan payable 1 (1,361) (845) 2,206 -
Interest bearing loan payable 2 (13,000) - 13,000 -
Interest on loan payable 2 (819) (379) 1,198 -
Interest bearing loan payable 3 (7,082) - 7,082 -
Interest on loan payable 3 (263) (207) 470 -
Interest bearing loan payable 4 (8,386) - 8,386 -
Interest on loan payable 4 (208) (245) 453 -
Non interest bearing loan 1 (2,604) (63) 2,667 -
Non interest bearing loan 2 (875) - - (875)
For the year ended 31 December 2018:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2018 charged repaid 31 December 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment loan 1 74,894 - - 74,894
Interest on investment loan 1 - 3,745 (2,797) 948
Interest bearing Investment loan 2 - 9,107 - 9,107
Interest on investment loan 2 - 42 - 42
Interest bearing Investment loan 3 - 33,094 - 33,094
Interest on investment loan 3 - 150 - 150
Interest bearing Investment loan 4 - 3,432 - 3,432
Interest on investment loan 4 - 6 - 6
Interest bearing Investment loan 5 - 46,500 - 46,500
Interest on investment loan 5 - 962 - 962
Interest bearing loan payable 1 (28,970) - - (28,970)
Interest on loan payable 1 - (1,448) 87 (1,361)
Interest bearing loan payable 2 (13,000) - - (13,000)
Interest on loan payable 2 (169) (650) - (819)
Interest bearing loan payable 3 - (7,082) - (7,082)
Interest on loan payable 3 - (263) - (263)
Interest bearing loan payable 4 - (8,386) - (8,386)
Interest on loan payable 4 - (208) - (208)
Non interest bearing loan 1 (3,734) - 1,130 2,604
Non interest bearing loan 2 - (875) - (875)
Transactions with FS Debtco
For the year ended 31 December 2019:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2019 charged repaid 31 December 2019
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loan 1 55,000 - - 55,000
Interest on loan 1 4,769 2,750 - 7,519
Non interest bearing loan 140 - - 140
For the year ended 31 December 2018:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2018 charged repaid 31 December 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loan 1 55,000 - - 55,000
Interest on loan 1 2,019 2,750 - 4,769
Non interest bearing loan - 140 - 140
Transactions with FS Holdco 3
For the year ended 31 December 2019:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2019 charged repaid 31 December 2019
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment loan 1 36,124 - - 36,124
Interest on investment loan 1 - 1,806 (895) 911
Non interest bearing loan payable (317) (3,259) 981 (2,595)
For the year ended 31 December 2018:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2018 charged repaid 31 December 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment loan 1 - 36,124 - 36,124
Interest on investment loan 1 - 1,267 (1,267) -
Non interest bearing loan payable - 317 - 317
Transactions with FS Holdco 4
For the year ended 31 December 2019:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2019 charged repaid 31 December 2019
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment loan 1 28,970 - - 28,970
Interest on investment loan 1 1,489 1,408 - 2,897
Interest bearing Investment loan 2 12,482 - - 12,482
Interest on investment loan 2 786 625 - 1,411
Interest bearing Investment loan 3 10,380 - - 10,380
Interest on investment loan 3 385 519 - 904
Interest bearing Investment loan 4 8,386 - - 8,386
Interest on investment loan 4 208 419 - 627
Interest bearing Investment loan 5 3,141 - - 3,141
Interest on investment loan 5 110 154 - 264
Non interest bearing loan 353 1,153 - 1,506
For the year ended 31 December 2018:
Opening Balance Increase in Repayment of Closing Balance
as at loan/Interest loan/Interest as at
1 January 2018 charged repaid 31 December 2018
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment loan 1 28,970 - - 28,970
Interest on investment loan 1 - 1,489 - 1,489
Interest bearing Investment loan 2 12,482 - - 12,482
Interest on investment loan 2 162 624 - 786
Interest bearing Investment loan 3 - 10,380 - 10,380
Interest on investment loan 3 - 385 - 385
Interest bearing Investment loan 4 - 8,386 - 8,386
Interest on investment loan 4 - 208 - 208
Interest bearing Investment loan 5 - 3,141 - 3,141
Interest on investment loan 5 - 110 - 110
Non interest bearing loan - 353 - 353
Transactions between FS Holdco, FS Debtco, FS Holdco 3, FS
Holdco 4 and their SPVs
All of the SPVs are cash generating solar farms (except for the
non-operational Australian investments). On occasion revenues
received and expenses are paid on their behalf by FS Holdco, FS
Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4. All of these
transactions are related party transactions.
For the year ended 31 December 2019:
Opening Balance Closing Balance
receivable/ Amounts (payable)/
(payable) Amounts paid received receivable
as at on behalf of from as at
1 January SPV SPV 31 December
2019 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
FS Holdco and its SPVs (15,594) 29,987 (38,576) (24,183)
FS Holdco 2 and its SPVs (2,689) 2,689 - -
FS Debtco and its SPVs (2,763) 1,929 - (834)
For the year ended 31 December 2018:
Opening Balance Closing Balance
receivable/ (payable)/
(payable) Amounts paid Amounts receivable
as at on behalf of received from as at
1 January SPV SPV 31 December
2018 2018 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
FS Holdco and its SPVs (11,437) 33,009 (37,166) (15,594)
FS Holdco 2 and its SPVs - 1,501 (4,190) (2,689)
FS Debtco and its SPVs (6,968) 12,231 (8,026) (2,763)
Other
During the year under review, FS Holdco 2 transferred all 26
investments - 25 to FS Debtco and 1 to FS Holdco 3. See note 1.1
for details of the restructure.
Transactions with the manager
Foresight Group LLP, a related party of Foresight Group CI,
charged asset management fees to the underlying projects of
GBP1,584,364 during the year (2018: GBP1,002,002), of which
GBP15,961 was payable at year end (2018: GBP204,052).
23. Commitments and contingent liabilities
There are no commitments or contingent liabilities in the
current year (2018: GBPNil).
24. 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 Company with a view to gaining economic
benefits from its direction.
25. Post balance sheet events
There were no post balance sheet events requiring
disclosure.
AIFMD Disclosures (unaudited)
OVERVIEW OF INVESTMENT ACTIVITIES
The Company's investment activities during the year are
disclosed in full in the Investment Manager's Report on page 20 of
the Annual Report.
The performance of the Company's portfolio during the year is
disclosed in full in the Asset Manager's Report on page 36 of the
Annual Report.
A list of the Company's portfolio holdings is included on page
16 of the Annual Report.
LEVERAGE AND BORROWING
Leverage is defined as any method by which the Company increases
its exposure through debt, borrowed capital or the use of
derivatives.
The Company and its subsidiaries' leverage position and third
party debt arrangements are disclosed in full in the Investment
Manager's Report on page 20 of the Annual Report.
'Exposure' is defined in two ways - 'Gross method' and
'Commitment method' - and the Company must not exceed maximum
exposures under both methods.
The Directors are required to calculate and monitor the
Company's leverage, expressed as a ratio between the exposure of
the Company and its Net Asset Value (Exposure/NAV), under both the
Gross method and the Commitment method.
'Gross method' exposure is calculated as the sum of all
positions of the Company (both positive and negative), that is, all
eligible assets, liabilities and derivatives, including derivatives
held for risk reduction purposes.
'Commitment method' exposure is also calculated as the sum of
all positions of the Company (both positive and negative), but
after netting off derivative and security positions as specified by
the Directive.
For the "Gross method", the following has been excluded:
- the value of any cash and cash equivalents which are highly
liquid investments held in the local currency of the Company that
are readily convertible to a known amount of cash, subject to an
insignificant risk of changes in value and which provide a return
no greater than the rate of the 3-month high quality government
bond;
- cash borrowings that remain in cash or cash equivalents as
defined above and where the amounts of that payable are known.
The total amount of leverage calculated as at 31 December 2019
is as follows:-
- Gross method: 22%
- Commitment method: 30%
LIQUIDITY
Liquidity risk is the risk that the Company 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 Company's liquidity
requirements to ensure there is sufficient cash to meet the
Company's operating needs.
The financial position of the Company, its cash flows, liquidity
position and borrowing facilities are referred to in the Chairman's
Statement, Strategic Report and Notes to the Accounts. In addition,
the financial statements include the Company's objectives, policies
and processes for managing its capital; its financial risk
management objectives; and its exposures to credit risk and
liquidity risk.
The Company has sufficient financial resources together with
investments and income generated. As a consequence, the Directors
believe that the Company is able to manage its business risks.
RISK MANAGEMENT POLICY NOTE
Please refer to Principal Risks report on page 43 of the Annual
Report.
REMUNERATION
As an AIFM, the Company is subject to a remuneration code which
is consistent with the requirements of the FCA. The remuneration
policy is designed to ensure that any relevant conflicts of
interest can be managed appropriately at all times and that the
remuneration of the Directors and senior management is in line with
the risk policies and objectives of the funds managed by the
AIFM.
The Company does not directly employ any staff members. The
services in this regard are provided by staff members of Foresight
Group LLP.
In accordance with the AIFMD, information in relation to the
remuneration of the Company's AIFM is required to be made available
to investors. In accordance with the Directive, the AIFM's
remuneration policy and the numerical remuneration disclosures in
respect of the AIFM's relevant reporting period (year ending
December 2017) are available from the AIFM on request.
Advisors
ADMINISTRATOR & COMPANY SECRETARY
JTC (Jersey) Limited
JTC House
28 Esplanade
St. Helier Jersey
JE4 2QP
REGISTRAR
Computershare Investor Services (Jersey)
Queensway House
Hilgrove Street
St. Helier Jersey
JE1 1ES
CORPORATE BROKER
Stifel Nicolaus Europe Limited (formerly Oriel Securities)
150 Cheapside
London
EC2V 6ET
INVESTMENT MANAGER
Foresight Group LLP (previously Foresight Group CI Limited)
The Shard, 32 London Bridge Street
London
SE1 9SG
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 AUDITOR
KPMG LLP
15 Canada Square
London
E14 5GL
Glossary of Terms
AEMO Australian Energy Market Operator
AIC The Association of Investment Companies
AIC Code The Association of Investment Companies Code of Corporate Governance
AIC Guide The Association of Investment Companies Corporate Governance Guide for Investment Companies
AIFs Alternative Investment Funds
AIFMs Alternative Investment Fund Managers
AIFMD The Alternative Investment Fund Management Directive
Asset Manager The Company's underlying investments have appointed Foresight Group LLP, a subsidiary of Foresight
Group CI, to act as Asset Manager
BBSY Bank Bill Swap Bid Rate
Company Foresight Solar Fund Limited
CEFC The Clean Energy Finance Corporation
DCF Discounted Cash Flow
EEA European Economic Area
EPC Engineering, Procurement & Construction
ESG Environmental, Social and Governance
EUA European Emission Allowances
FiT Feed-in Tariff. The Feed-in-Tariff scheme is the financial mechanism introduced on 1 April
2010 by which the UK Government incentivises the deployment of renewable and low-carbon
electricity
generation of up to 5MW of installed capacity.
GAV Gross Asset Value on Investment Basis including debt held at SPV level
GFSC Guernsey Financial Services Commission
Group Borrowing Group Borrowing refers to all third-party debt by the Company and its subsidiaries.
GWh Gigawatt hour
IAS International Accounting Standard
IFRS International Financial Reporting Standards as adopted by the EU
Investment Manager Foresight Group LLP
IPEV International Private Equity and Venture Capital
IPO Initial Public Offering
KID Key Information Document
KPMG LLP KPMG is the Company's Auditor
LGC Large-Scale Generation Certificate
LIBOR London Interbank Offered Rate
Listing Rules The set of FCA rules which must be followed by all companies listed in the UK
LRET Large-Scale Renewable Energy Target. The LRET creates a financial incentive in Australia for
the establishment and growth of renewable energy power stations, such as wind and solar farms,
or hydro electric power stations
Main Market The main securities market of the London Stock Exchange
MIDIS Macquarie Infrastructure Debt Investment Solutions
MUFG Bank of Tokyo-Mitsubishi UFJ
MWh Megawatt hour
NAV Net Asset Value
NEG National Energy Guarantee
OBR Office for Budget Responsibility
Official List The Premium Segment of the UK Listing Authority's Official List
O&M Operation and Maintenance
PPA Power Purchase Agreement
PR Performance Ratio
PRIIPS Packaged Retail and Insurance-Based Investment Products
PV Photovoltaic
RET Renewable Energy Target
RO Scheme The financial mechanism by which the UK Government incentivises the deployment of large-scale
renewable electricity generation by placing a mandatory requirement on licensed UK electricity
suppliers to source a specified and annually increasing proportion of electricity they supply
to customers from eligible renewable sources or pay a penalty.
ROC Renewable Obligation Certificates
RPI The Retail Price Index
SCR Significant Code Review
SPV The Special Purpose Vehicles which hold the Company's investment portfolio of underlying operating
assets
TCR Targeted Charging Review
UK The United Kingdom of Great Britain and Northern Ireland
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FLFFRVRIDIII
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March 09, 2020 03:00 ET (07:00 GMT)
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