TIDMFSFL
RNS Number : 6099R
Foresight Solar Fund Limited
09 March 2021
9 March 2020
Foresight Solar Fund Limited
('Foresight Solar', 'FSFL' or 'the Company')
Annual Results to 31 December 2020
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 2020.
Highlights
-- Global portfolio generated 969,564 MWh of clean
electricity, enough to power 334,000 homes, and
helped to avoid 749,000 tonnes of carbon emissions
[1]
-- Driven predominantly by a downwards revision in
long-term UK and Australian power price forecasts,
NAV decreased to GBP582.2m (31 Dec 2019: GBP628.0m)
and NAV per share decreased to 95.8p (31 Dec 2019:
103.8p)
-- Strong operational performance of the UK portfolio,
8.4% above budget, as a result of high irradiation
and asset availability, despite the operational
challenges of COVID-19
-- Acquired four subsidy-free assets in Spain with
a generating capacity of 125 MW, the Company's first
investment into unsubsidised solar
-- Portfolio now comprises 58 assets with a total generating
capacity of 994MW across the UK, Australia and Spain
-- Declared dividends of 6.91 pence per share for the
year, with an increased FY2021 target dividend of
6.98 pence per share
-- Shareholders recently approved a change to the Company's
Investment Policy to allow an allocation of up to
10% of the Company's GAV to Battery Storage Systems,
which the Board believes to be a complementary investment
opportunity
Key Metrics
As at As at
31 December 2020 31 December 2019
Net Asset Value ("NAV") GBP582.2million GBP628.0 million
-------------------- --------------------
NAV per Share 95.8 pence 103.8 pence
-------------------- --------------------
Gross Asset Value ("GAV") GBP1,054.6 million* GBP1,071.5 million*
-------------------- --------------------
Total Dividend per Share for 6.91 pence 6.76 pence
the year
-------------------- --------------------
Annualised Total Shareholder
Return since IPO* 5.90% 9.36%
-------------------- --------------------
* Calculated as NAV plus outstanding debt.
Commenting on the Company's results, Alex Ohlsson, Chairman of
Foresight Solar Fund Limited, said:
"In a uniquely challenging environment, 2020 saw the Company
deliver a strong operational performance in the UK, make good
progress on its Australian solar portfolio, reach a significant
milestone with its first investments in continental Europe and in
unsubsidised solar and again, meet its dividend target for the
year.
"Foresight Solar's UK portfolio delivered another year of
positive performance, with UK electricity generation for the year
8.4% above base case expectations due to good irradiation levels
and asset availability. In continental Europe, the acquisition of
four greenfield assets in Spain demonstrated our ability to source
assets that should deliver stable cash flows at attractive
risk-adjusted returns and marked an important step in our
international expansion strategy. With these acquisitions, our
portfolio has grown to 58 assets with a total generating capacity
of 994MW. The recent vote by shareholders to allow the introduction
of Battery Storage Systems to the portfolio represents another
exciting area of growth for the Company.
"While we will continue to monitor and evaluate targeted growth
opportunities, the year ahead will again see us focus on delivering
our optimisation initiatives and a strong operational performance.
The safety of all our stakeholders and our commitment to providing
an attractive yield alongside positive sustainability outcomes
remain our top priorities."
Results presentation
Foresight Solar Fund Ltd is holding a webcast presentation for
analysts at 08:30 today. Analysts wishing to attend should contact
foresightsolar@citigatedewerogerson.com to register. An investor
presentation will also be uploaded to the FSFL website.
Dividend Declaration
Foresight Solar is also pleased to announce a fourth interim
dividend, in respect of the period 1 October 2020 to 31 December
2020, of 1.73 pence per ordinary share ("the Dividend"). The shares
will go ex-dividend on 29 April 2021 and the Dividend will be paid
on 28 May 2021 to shareholders on the register as at the close of
business on 30 April 2021.
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 6 May 2021.
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 17 May
2021.
The expected timetable in relation to the Dividend will be as
follows:
Ex-dividend Date 29 April 2021
Record Date 30 April 2021
---------------------
Scrip Price Announcement 7 May 2021
---------------------
Last Date for Submission of 17 May 2021 at 17h00
Forms of Election
---------------------
Last Date Crest Elections 17 May 2021 at 17h00
---------------------
Anticipated Listing of New 28 May 2021
Shares
---------------------
Dividend Payment Date 28 May 2021
---------------------
For further information, please contact:
Foresight Group
+44 (0)20 3667 8147
Jonathon McManus
InstitutionalIR@ForesightGroup.eu
Jefferies International Limited
+44 (0)20 7029 8000
Neil Winward
Gaudi Le Roux
Citigate Dewe Rogerson
+44 (0)20 7638 9571
Toby Moore
Elizabeth Kittle
Lucy Gibbs
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, Australia and Spain.
Since its IPO in October 2013, FSFL has raised more than GBP634
million through multiple share placings. It is the largest
UK-listed dedicated solar energy investment company by solar
installed capacity and market capitalisation.
The Company targets a progressive dividend policy and has paid
all target dividends to date. The target dividend for 2021 is 6.98
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 PiƱeiro, Partner at Foresight Group.
Foresight solar fund limited
AUDITED ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR
1 JANUARY 2020 TO
31 DECEMBER 2020
Financial Highlights
As at 31 December 2020
Net Asset Value ("NAV")
GBP582.2m
(31 Dec 2019: GBP628.0m)
NAV per Share
95.8p
(31 Dec 2019: 103.8p)
Gross Asset Value ("GAV")
GBP1,054.6m*
(31 Dec 2019: GBP1,071.5m)
Dividend per Share declared relating to the YEAR
6.91p
Market Capitalisation
GBP622.9m
TOTAL SHAREHOLDER RETURN SINCE IPO
50.7%
ANNUALISED TOTAL SHAREHOLDER RETURN SINCE IPO
5.9%
(1) Versus coal equivalent
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 2020.
Despite the unique challenges presented by the COVID-19 pandemic
in 2020, the Company delivered another year of growth, good
operational performance and paid its target dividend to
shareholders. The Company also took three significant strategic
steps: geographically diversifying its portfolio through the
acquisition of its first Spanish solar assets; making its first
investment into subsidy-free solar; and securing shareholder
approval to introduce Battery Storage Systems ("BSS") to the
portfolio.
Inevitably, the emergence of COVID-19 and the operational
challenges brought about by restrictions on movement were the
primary focus of the Investment Manager and Board for much of the
period. During the first UK national lockdown in April, the
Investment Manager moved swiftly to implement its Business
Continuity Plan and co-ordinated closely with its operational
service providers to ensure the safety of its staff and
stakeholders and the operational stability of the portfolio. This
rapid and co-ordinated action between key service providers meant
that there was no operational disruption during the year as a
result of the pandemic.
The shutdown of UK heavy and commercial industry during the
first lockdown led to a collapse in demand for electricity and a
sharp fall in power prices in the second quarter of 2020. Prices
gradually recovered in the second half of the year, reaching
pre-pandemic levels by year-end. Despite a fall in the price at
which generators were able to sell their power in the merchant
markets, the Company met its dividend target for the year as a
result of the strategic decision to maintain a high proportion of
fixed revenues linked to government subsidies and fixed price
arrangements in the short and medium term. As a result of the price
recovery in the last few months of 2020, the Company increased the
percentage of energy sales under fixed price arrangements for 2021
and 2022 providing additional support to future dividends.
The Company's existing UK portfolio is now well-established and
operating in a 'steady state', as evidenced by another year of
positive operational performance. In the UK, electricity generation
for the period was 8.4% above base case expectations due to good
irradiation levels and asset availability. In Australia, the
Company continued to make good progress on its solar portfolio with
Oakey 2 reaching full export capacity, with all four Australian
assets now fully operational.
The Company reached a significant growth milestone in August
when it announced the acquisition of its first asset in Spain, a
deal which also marked the Company's first venture into
subsidy-free solar. This acquisition was followed by a further
acquisition of a portfolio of three Spanish subsidy-free assets in
December. All four acquisitions are greenfield and their
construction will be overseen by the Investment Manager's team on
the ground in Madrid, a benefit of Foresight Group's significant
regional expertise in Europe.
As well as providing meaningful geographic diversification and
building upon the Company's existing Australian portfolio, these
Spanish acquisitions demonstrate the Company's ability to source
and deliver projected stable cash flows at attractive risk-adjusted
returns, and an important step in its international expansion
strategy. With these acquisitions, the portfolio has grown to 58
assets with a generating capacity of 994MW. The recent vote by
shareholders to allow an allocation to BSS of up to 10% of GAV
provides an additional and exciting area of potential growth for
the Company.
KEY FINANCIALS
In 2020, the Net Asset Value ("NAV") per Ordinary Share
decreased by 8.0 pence to 95.8 pence (31 December 2019: 103.8
pence).
The Company's financial performance in the year was negatively
affected by the weakening of both short and long-term UK wholesale
power price forecasts due to the COVID-19, resulting in an impact
to NAV of 13.1 pence per share. Much of this impact was due to a
significant decline in power prices seen in the first half of the
year. However, power prices stabilised and then recovered during
the second half of the year with a return to pre-pandemic price
levels by the end of the year.
The negative effect of power prices on the Company's NAV was
offset somewhat by a reduction in discount rates applied to the UK
portfolio during the year of -0.50%. The Board believes that a
discount rate of 6.5% is a fair and accurate rate to apply with the
reduction justified by the ongoing demand for UK operational solar
assets and recent transactions in the market.
The Investment Manager has a number of tools at its disposal to
mitigate its exposure to merchant power prices, but the Company
will continue to have an element of its revenue exposed to this
market risk.
OPERATIONAL PERFORMANCE
Operational performance across the Company's global portfolio
was in line with its target over the year, producing approximately
969,000MWh of clean electricity across the 54 operating assets,
continuing the strong performance of recent years.
The UK portfolio delivered another year of positive performance,
ahead of budget, generating 739MWh (FY19: 713MWh). Electricity
generation for the period was 8.4% above expectations, aided by
strong irradiation levels which were 8.5% above budget.
The Australian portfolio also contributed significantly to
overall production, generating 230MWh during the period (FY19:
35MWh). The Oakey 2 project reached full export capacity in October
2020, with final commissioning tests ongoing. In addition, the
export restriction which had curtailed 50% of the site's total
capacity since the last quarter of 2019 was removed in April.
Optimisation initiatives across the portfolio were successfully
deployed through the course of the year to improve energy
generation, reducing downtime and lowering operational costs. This
work will continue into 2021.
ACQUISITIONS
The Company has previously highlighted the attraction of the
Iberian solar market which benefits from very high levels of
irradiation and the ability to enter long-term PPAs with high
quality counterparties without the need for government
subsidies.
The Company is therefore pleased to have made two significant
acquisitions during the period, adding four subsidy-free assets in
Spain with strong production profiles. When construction completes
in 2021/2022, the sites will add a further 125MW of generating
capacity to the Company's global portfolio. Both acquisitions will
include long-term fixed price arrangements with highly credible
counterparties that will deliver contracted revenues and support
the Company's ability to provide attractive risk-adjusted returns
while increasing the portfolio's international diversification. At
the time of the investment, the Company's international portfolio
represented 17% of gross asset value.
DIVIDS
The Company has declared total dividends of 6.91 pence per share
for the year, in line with its target. The fourth and final FY2020
dividend of 1.73 pence per share will be paid on 29 May 2021.
Dividend cover for the period on a cash basis was 1.11 times,
including the impact of the scrip dividend programme. The Company
has met all dividend targets since its launch.
The Board is pleased to declare a target dividend of 6.98 pence
per share for FY2021, an increase of 1% compared with 2020.
DEBT FACILITIES
At 31 December 2020, the total outstanding debt of the Company
and its subsidiaries amounted to GBP472.4 million (31 December
2019: GBP443.5 million), with long term debt representing GBP391.55
million (December 2019: GBP403.5 million). Total gearing increased
to 45% of Gross Asset Value ("GAV") (December 2019: 41%) following
Revolving Credit Facility drawdowns of GBP40.9 million during the
year. Long-term debt represented 37% of GAV (2019: 38%), remaining
within the 40% long-term debt target set by the Board. The
Company's net debt position, when considering the available cash
balances, represented 37% of GAV.
The Company's Revolving Credit Facility totalled GBP105 million
at 31 December 2020, of which GBP24.1 million remains available for
investment following the two Spanish acquisitions, providing the
Company with flexibility to pursue further acquisitions should
suitable opportunities arise.
The Board believes the current level of Company debt to be
appropriate to the size and revenue profile of the portfolio.
CHANGE TO INVESTMENT POLICY
For some time the Investment Manager has been reviewing the
attractiveness and viability of BSS with a particular focus on
co-locating batteries alongside its existing UK operational assets,
leveraging the wider experience of Foresight Group in the sector.
Following an extensive review, the Investment Manager has
identified several sites with available land and grid capacity to
support BSS co-location. The market for greenfield co-location
opportunities continues to develop and is expected to represent an
attractive opportunity in the future as a significant contributor
to the transition to low-carbon energy. The Board believes that the
addition of a limited number of batteries to the existing UK solar
portfolio, along with greenfield co-location investments, will
provide clear benefits to the Company's investors, including an
additional and diversified source of portfolio revenue with
attractive risk/return characteristics. As such, a formal proposal
to approve an allocation to BSS of up to ten per cent of the
Company's GAV was put to shareholders at a General Meeting on 15
February 2021 and approved overwhelmingly. The Board looks forward
to working with the Investment Manager to gradually introduce BSS
opportunities into the portfolio.
LISTING OF INVESTMENT MANAGER
The Company's Investment Manager, Foresight Group LLP, undertook
a successful listing on the London Stock Exchange as Foresight
Group Holdings Ltd (FSG) on 9 February 2021. The Board welcomes the
additional visibility and profile this will provide for its
Investment Manager and is confident that the services provided by
the Investment Manager will remain of the same high standard
following its listing.
SUSTAINABILITY UPDATE
The World Economic Forum's 2021 edition of its Global Risks
Report has once again highlighted environmental risks such as
'Extreme Weather', 'Climate Action Failure', 'Human Environmental
Failure, and 'Biodiversity Loss' as four of its top five most
likely global risks ([2]) . While the existence of these
non-financial risks to financial returns is not new, there is a
growing focus by both governments and investors on their likelihood
and impact.
The Company has frequently reported on the positive social and
environmental benefits generated by its investments in renewable
energy assets. The portfolio has grown consistently since the
Company's inception in 2013 and each year has provided energy
suppliers, companies and households with electricity generated with
a minimal carbon footprint. The electricity generated in 2020 alone
equated to enough clean energy to power over 334,000 UK homes.
The Company has undertaken a number of initiatives during the
year to improve its sustainability credentials. The Investment
Manager has secured independent certification of compliance with
the EU Taxonomy for sustainable activities for two of its assets,
one in the UK and one in Australia, which it believes are
representative of the broader portfolio. While the green nature of
the Company's activities may appear abundantly clear, the Board
believes that third-party verification of assets in each of the
geographies in which it operates should give investors further
comfort in the Company's sustainability credentials. EU Taxonomy
certification should also help to attract the attention of
potential new investors seeking investment solutions with a
measurable social and environmental impact alongside attractive
financial returns.
As reported in the 2020 Interim report, the Investment Manager
continues to work with its key operational counterparties to ensure
they operate in a manner that places sustainability at the core of
their service delivery. During the course of the year, the
Company's three largest O&M providers entered into
Sustainability Agreements that commit them to complying with a
number of guidelines that ensure ESG considerations are embedded
into their operating practices. The Board and Investment Manager
will monitor the compliance of its counterparties with this
agreement on an annual basis with the aim of encouraging ongoing
engagement and improvement in this important area.
BOARD UPDATE
In September 2020, Ms Ann Markey was appointed as a
Non-Executive Director, bringing the size of the Company's Board to
five. Ms Markey is an experienced business leader and non-executive
director with a strong financial background and over 20 years'
experience as a senior executive and board director in a number of
businesses, in both the public and private sectors. Ms Markey has
extensive experience in the electricity industry, particularly in
thermal and renewable generation, including Photovoltaic ("PV")
solar and wind. Since her appointment in September, Ms Markey has
already proved to be a valuable addition to the Board.
OUTLOOK
Tangible progress towards net-zero remains a top priority for
the UK Government in 2021. Whilst COVID-19 has disrupted all areas
of life for individuals, businesses and society, the consequences
of the pandemic seem set to boost the decarbonisation agenda rather
than to hinder it. The 'Build Back Better' and 'Green Recovery'
agendas place renewables at the heart of the UK economic recovery
plan and the country will take centre stage in global climate
change discussions in November when Glasgow hosts the 26th UN
Climate Change Conference of the Parties. Other international
governments have also announced ambitious decarbonisation
targets.
The commitment to decarbonised economies is expected to create
new support mechanisms for solar technologies. The UK's Contracts
for Difference auction expected to take place in late 2021 will
reintroduce solar as a qualifying technology and the successful
Spanish auction announced in January 2021 awarded 2GW of new solar
PV capacity.
In this context, the demand for renewable energy assets such as
utility scale solar, is only set to increase as renewables become
an increasingly central component of the energy mix. As a result,
the pricing environment for operational assets with high levels of
contracted revenues in both the UK and Europe is set to remain
competitive, presenting modest investment opportunities for the
Company.
The measures implemented in recent periods mean that the impact
on the Company of the UK leaving the EU is expected to be minimal.
The Board and the Investment Manager will, however, continue to
review this development.
The acquisition of the Company's first subsidy-free assets is an
exciting development and the result of its targeted efforts to
identify attractive opportunities in this emerging market. It is
the Investment Manager's view that this market will continue to
develop in the UK and other international markets, in particular
Southern Europe, and will continue to monitor opportunities in the
space.
The recent change to the investment policy will also allow the
Company to target BSS investments, either alongside the existing
portfolio or as a greenfield investment, with an initial focus in
the UK market given the size of the opportunity. As the proportion
of renewable energy generation increases, the requirement for grid
stability and services that are able to rebalance the intermittent
nature of solar energy are expected to increase. BSS are expected
to have a more significant role in this energy transition
process.
At portfolio level, the Asset Manager will continue its focus on
delivering continued positive operational performance along with
optimisation initiatives, either at a technical or commercial
level. 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.
The Company will continue to prioritise the safety of all its
stakeholders and its commitment to sustainable strategies.
On behalf of the Board of Directors, I would like to conclude by
thanking our suppliers and service providers for the commitment
they have shown throughout such a challenging and uncertain
year.
Annual General Meeting
We look forward to meeting shareholders at the Company's next
Annual General Meeting ("AGM") on 16 June 2020 at 9:30am. Details
of how shareholders may participate in the AGM will be announced in
due course.
Alexander Ohlsson
Chairman
8 March 2020
Portfolio Overview
Operating Asset Locations
United Kingdom
Asset Installed Peak Capacity (MW) Connection Acquisition
Date Cost(1) (GBPm)
1 Wymeswold(2) 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
(Acquired
as portfolio)
----------------- ---------------------------- -------------- ---------------
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
----------------- ---------------------------- -------------- ---------------
49 Manor Farm 14 October 2015 6.1
----------------- ---------------------------- -------------- ---------------
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
----------------- ---------------------------- -------------- ---------------
50 Roskrow 9 March 2015 3.7
----------------- ---------------------------- -------------- ---------------
Total 723 685.1
----------------- ---------------------------- -------------- ---------------
Construction Asset Locations
Spain
Asset Installed Peak Capacity (MW) Acquisition date Acquisition
Cost(1) (GBPm)
1 Virgen del Carmen(4) 26.1MW September 2020 18.0(4)
-------------------- ---------------------------- ---------------- ---------------
Andalusia Portfolio
2 (3 assets) 98.5MW December 2020 64.2(4)
-------------------- ---------------------------- ---------------- ---------------
3
-------------------- ---------------------------- ---------------- ---------------
4
-------------------- ---------------------------- ---------------- ---------------
Total 124.6MW 82.2
-------------------- ---------------------------- ---------------- ---------------
1 Original equity cost at time of acquisition, including transaction
costs.
2 Includes the 2MW extension acquired in March 2015.
3 Accounts for the 48.5% stake the Company holds of Bannerton
(110MW) and 49% stake held of Longreach (17MW) and Oakey 1
(30MW).
4 Original equity cost at time of acquisition, including transaction
costs. For assets under construction this includes estimated
constructions costs to start of operations. International acquisition
costs converted to GBP including transaction costs at the applicable
rate at the applicable rate at the time of acquisition .
Operating Asset Locations
Australia
Asset Installed Peak Capacity (MW) Connection Acquisition
Date Cost(1) (GBPm)
1 Bannerton 53(3) July 2018 22.9
--------- ---------------------------- ------------- ---------------
2 Longreach 8(3) March 2018 2.7
--------- ---------------------------- ------------- ---------------
3 Oakey 1 15(3) February 2019 4.4
--------- ---------------------------- ------------- ---------------
4 Oakey 2 70 May 2019 34.0
--------- ---------------------------- ------------- ---------------
Total 146 64.0
--------- ---------------------------- ------------- ---------------
STRATEGIC REPORT
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.
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. Following multiple equity
raises since launch, the Company has grown steadily and now owns a
portfolio with a gross asset value of GBP1,054.6 million as at 31
December 2020. It is the largest UK-listed dedicated solar energy
investment company by installed capacity and market
capitalisation.
As at 31 December 2020, the Company has 607,711,311 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.
OPERATING STRUCTURE AND BUSINESS MODEL
As an Investment Company, the Company has no direct employees
and outsources all operations to a number of key service
providers.
The Company, makes its investments through intermediate holding
companies and underlying Project Vehicles/Special Purpose Vehicles
("SPVs").
The operating structure and key service providers are detailed
in the graphic below:
SIGNIFICANT SHAREHOLDERS
The Company's shareholders include a large mix of institutional
and retail investors.
Shareholders in the Company with more than a 5% holding as at 31
December 2020 are as follows:
% Shareholding
in Fund
BlackRock Investment
Management Ltd 16.68
Schroders Plc 8.12
Baillie Gifford & Co
Ltd 7.77
Legal & General Investment
Management Ltd 6.67
Valu-Trac Investment
Management Ltd 5.14
Total 44.38%
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 and BSS
predominantly located in the UK.
INVESTMENT POLICY
The Company pursues its investment objective by acquiring
ground-based, operational solar power plants. The Company is also
permitted to invest in utility scale battery storage systems up to
a limit of 10 per cent. of the GAV of the Company, calculated at
the time of investment.
Investments in assets which are, when acquired, still under
construction will be limited to 25 per cent. of the GAV of the
Company and subsidiaries, calculated at the time of investment.
Investments outside the UK will be limited to 25 per cent. of
the GAV of the Company and subsidiaries, calculated at the time of
investment.
INVESTMENT POLICY CHANGE - BACKGROUND AND RATIONALE
At a General Meeting of the Company held post-period end on 15
February 2021, shareholders overwhelmingly voted in favour of
proposals to amend the Company's Investment Policy. The policy
change will permit investment into BSS up to 10% of the Gross Asset
Value of the Fund.
Energy generated from renewable sources is expected to represent
an increasing proportion of the total energy generation capacity
versus other forms of generation. The intermittent nature of
primary renewable technologies (particularly solar and wind)
results in increased risk of imbalance between demand and supply on
the grid, leading to increased price volatility. BSS support a
rebalancing of the grid and prevent loss of inertia for the system
operator. In return, a number of financial incentives are available
to BSS in addition to potential arbitrage opportunities relating to
the wholesale market price itself.
Foresight Group was an early investor into the UK battery
storage market investing in 45 MW of battery storage facilities in
2018 and has since invested in BSS co-located with hydro assets.
Foresight Group is also monitoring the landscape for BSS across
other countries, including those in which the Company holds
investments. Based on this analysis the Investment Manager has
identified that at least 21 of the Company's current portfolio of
50 ground based solar power plant sites are potentially suitable
for BSS development.
Although the new Investment Policy will permit the Company to
invest in BSS assets without them having to be co-located on the
Company's solar power plants sites, co-located opportunities,
greenfield of alongside the existing solar portfolio assets,
represent a more immediately accessible opportunity-base.
Co-locating BSS with the Company's existing solar power plant sites
ensures a lower capital cost for BSS development versus investing
in standalone storage assets.
This is achieved by sharing existing infrastructure with the
site, most importantly the grid connection, but also the land,
access tracks and security arrangements.
In addition to delivering higher diversification of cash flows
available for distribution, the co-location of battery storage,
when retrofitted onto an existing portfolio solar power plant site,
is not expected to impact the value of the solar power plant
investment, as the batteries will operate within the excess grid
capacity outside of the solar generation profile.
INVESTMENT STRATEGY
The Company will seek to build a diversified portfolio of assets
by acquiring majority or minority stakes in individual ground-based
solar assets and BSS.
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/or 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.
INVESTMENT RESTRICTIONS
In order to spread risk and diversify its portfolio, at the time
of investment no single asset shall exceed 30% of the Company's GAV
post-acquisition. If the investment is an additional stake in an
existing investment, the combined value of both the existing stake
and the additional stake acquired should also not exceed 30%.
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, operations 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. borrowing 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.
Investments in BSS will be limited to 10 per cent of the GAV of
the Company and subsidiaries, calculated at the time of
investment.
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.
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. Foresight Group
is authorised and 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
listed on the London Stock Exchange that currently manages over
GBP6.8 billion of assets on behalf of institutions and retail
clients with offices in Australia, Italy, Spain, Luxembourg and the
UK. Foresight Group's global infrastructure investments total
GBP6.1 billion, with a cumulative generating capacity of over
2.7GW. The infrastructure investment team was established in 2007
and currently manages over 100 solar power assets across the UK,
Europe and Australia with a total generating capacity of 1.5GW.
Foresight Infrastructure's team consisted of 107 full time
employees as at 30 September 2020. The team is comprised of
(i) an investment management team of professionals responsible
for originating, assessing and pricing assets, managing due
diligence and executing transactions; and
(ii) an asset management team with expertise across electrical and
civil engineering, finance and legal disciplines.
The Foresight infrastructure team has substantial experience in
sourcing and executing all required elements of the capital
structure of an investment across geographies, including
project-level debt finance and other required forms of finance.
The key strengths of the infrastructure investment team include
(i) sourcing and execution of asset acquisitions; (ii) experience
of pricing complex revenue streams; (iii) pricing wholesale power
exposure; (iv) managing construction projects; and (v) finance and
structuring, including bank debt and project finance.
The asset management team consists of individuals with
engineering, consulting and operations backgrounds, accountants and
in-house personnel responsible for the process of "on-boarding" and
managing acquired assets as well as a technical team of specialist
infrastructure engineers that help by evaluating an asset's
operational and physical characteristics during due diligence,
construction management and assist the asset management team to
manage the assets by identifying and implementing optimisations
post-acquisition. Members of these teams work together throughout
the investment lifecycle.
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,
component warranties and insurance policies, spare part and
replacement strategy and technology improvements
-- Oversight of Operation & Maintenance counterparties and operational
performance
-- 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.
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.
The Company is 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.
KEY FSFL PROFESSIONALS
Ricardo PiƱeiro, 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 1GW
and remains primarily focused on leading new renewable energy and
BSS 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, CFO & COO
Gary joined Foresight in 2004 and is a Partner and CFO, based
in the London office. He has over 27 years of experience. Gary
is the Head of finance and administration within Foresight Group
LLP, providing or facilitating specialist financial input into
corporate, portfolio and VCT decisions. Prior to Foresight, Gary
worked at F&C Asset Management as a Company Secretary, where he
focused on legal & tax compliance, financial compliance, technical
and financial reporting and corporate finance. He has also worked
at EY, focusing on audit and risk assurance.
Gary is a Chartered Fellow of the Securities Institute as well
as a Chartered Accountant. He holds a BAcc from the University
of Stirling.
RISK AND RISK MANAGMENT
The Company is exposed to a number of risks that have the
potential to materially affect the Company's valuation, reputation
and financial or operational performance. The nature and levels of
risk are identified according to the Company's investment
objectives and existing policies, with the levels of risk tolerance
ultimately defined by the Board.
The Investment Manager and the Administrator have a
comprehensive Risk Management Framework in place which is reviewed
on a regular basis by the Company's Audit and Risk Committee and
then by the Board, with the objective of reducing the likelihood
and the impact of principal and emerging risks. 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 and maintain an up-to-date risk
register. The adequacy and effectiveness of the systems of internal
control are reviewed by the Audit and Risk Committee annually.
Climate change related risk and Task Force on Climate-related
Financial Disclosures ("TCFD") reporting
The Company recognises that risks traditionally considered to be
non-financial, such as climate change, have the potential to impact
upon long-term shareholder returns across many sectors. While the
Board believe that the Company's investments are making a
meaningful contribution towards decarbonisation efforts in the
countries in which it operates, the Company is working with its
manager to assess climate related-risks and opportunities within
its portfolio and to consider an appropriate reporting framework
going forwards in line with recommendations made by the Task Force
on Climate-related Financial Disclosures.
Emerging Risks
Risks that are characterised by a degree of uncertainty are
regularly reviewed by the Board, with the support of the Investment
Manager, the Administrator and other relevant advisers. During the
period, risks relating to global pandemics, such as COVID-19, and
the potential future impact on operational performance and cash
flow generation in the short and medium-term have been reviewed and
continue to be closely monitored. This risk is still considered
material by the Investment Manager however the disruption to the
portfolio operations to date has been minimal.
Principal Risks
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.
More information on the risks that should be considered before
investing in the Company are contained within the Prospectus which
is available at
https://fsfl.foresightgroup.eu/investor-relations/publications/prospectus/
Major Risk Summary of Risk Mitigation
Risks relating A decline in the wholesale Volatility in the wholesale electricity
to revenues from price of electricity price can be mitigated in the
the sale of electricity could materially adversely short and medium term by entering
affect the price of electricity into hedging agreements against
generated by solar PV future price movements. This
assets and thus the Company's can be achieved through a variety
business, financial position, of trading strategies including
results of operations forward sale contracts of electricity
and business prospects. and fixed price PPAs.
The portfolio currently has PPAs
in place offering a secure route
to market for periods between
1 and 14 years depending on the
geography. At 31 December 2020,
more than 50% of the total expected
portfolio revenues calculated
on a net present value basis
are considered fixed. The Company
has the option to increase the
proportion of contracted revenues
by entering new fixed price arrangements
in the future, subject to the
prevailing prices at that point
in time. Subsidy-free assets
are expected to have long-term
PPAs in place once operational.
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.
Major Risk Summary of Risk Mitigation
Risk relating The emergence of a new The Company works closely with
to global pandemics global pandemic could its Investment Manager and key
potentially have a materially operational counterparties to
negative impact on economic ensure adequate Business Continuity
activity, restrict freedom Plans are in place to mitigate
of movement and the hinder risks related to unforeseen operational
the Company's ability disruptions.
to service its assets. During the COVID-19 pandemic
The COVID -- 19 pandemic Business Continuity Plans were
and associated reduction deployed quickly by the Company's
in energy demand from counterparties as the pandemic
the lower economic activity unfolded. The disruption to freedom
resulted in a decline of movement during pandemic related
in power prices. Power lockdowns in 2020 resulted in
price recovery to previously little disruption to the Company's
forecast levels is uncertain. operations. New safe working
practise were quickly established
and put into place by O&M providers
allowing maintenance activities
to continue uninterrupted.
Mitigants to risks relating to
decreased revenues from the sale
of electricity are set out above.
Risks relating The introduction of subsidy Despite the early closure of
to regulatory scheme changes, whether the UK RO scheme for new installations,
changes, including of a retrospective nature the grandfathering principle
subsidy changes or not, could have a states that existing operational
material adverse effect accredited projects will continue
on the Company's financial to be supported for the duration
results, operations and of their RO eligibility period
position and valuation (20 years from the date of accreditation).
of the existing portfolio. Furthermore, while the UK's renewable
The Australian Energy energy policy has, over the last
Market Operator (AEMO) few years, experienced much development
reviews annually the and change the Government has
loss factors applicable avoided making changes with retrospective
to renewable generators character. In addition, the UK
as a result of energy Government remains committed
losses in the transmission to meeting its renewable generation
and distribution networks. targets and carbon emission reductions
A reduction in the Marginal under the Climate Change Act.
Loss Factor ("MLF") against The UK Government remains committed
the investment base case to climate change initiatives
will result in less revenue with the 'Build Back Better'
generated by the Australian and 'Green Recovery' agendas
assets in the portfolio including an important role for
and adversely affect renewable energy in the UK economic
the Company's financial recovery plan. The UK remains
position. bound by national and international
renewable obligations, including
the commitment to "net-zero"
carbon emissions by 2050 which
is expected to continue to deliver
support for further renewable
energy deployment.
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.
The Investment Manager, in conjunction
with the Company's local advisers,
reviews the anticipated levels
of MLFs on an annual basis to
identify potential changes that
could impact the value of the
assets and the ability to distribute
cash flows.
Risks related The UK left the European The Company and the Investment
to Brexit Union on 31 January 2020. Manager will continue to closely
The EU-UK Trade and Cooperation monitor the impact of the EU-UK
Agreement was agreed Trade and Cooperation Agreement
on 24 December 2020 and on the Company portfolio. A strategic
ratified by the UK Parliament review of key spare part components
on 30 December 2020. has been performed prior to Brexit
The impact of the agreement to ensure adequate levels of
to the UK energy market spare parts are available at
and impact to the regulatory portfolio level to mitigate potential
environment, legal and disruption to supply chains between
commercial operations EU countries.
of the portfolio assets
remain uncertain.
Risks relating The Company's underlying Any new debt facilities are thoroughly
to gearing subsidiaries currently appraised before they are entered
have gross borrowings into to ensure they benefit the
of GBP472.4 million. Company without creating unnecessary
Under the terms of the financial risk. Due to conservative
Facility Agreements, gearing targets and sound management
the borrower has agreed it is unlikely that debt covenants
to covenants as to its would negatively impact the ability
operation and financial to pay dividends.
position. Any failure The current low interest rate
by the borrower to fulfil environment and general availability
obligations under the of third-party debt in the market
Facility Agreements (including should minimise the refinancing
repayment) may permit risk of the revolving credit
the lender to demand facilities. In addition, renewable
repayment of the related infrastructure has shown significant
loan and to realise its support from equity investors
security which could as demonstrated in recent capital
mean the loss of one market activity in the sector,
or more solar power assets. thus suggesting the fundraising
The Company has GBP105 environment for renewable assets
million of revolving remains stable.
credit facilities to
pursue new acquisitions
and A$73.5m of term loan
facilities across three
of the Australian assets
expiring in 2022 that
might not be refinanceable
on similar terms or at
all.
Risks relating The revenues and expenditure The Investment Manager considers
to inflation of solar assets are frequently, the inflation risk presented
partly or wholly subject by these assets to be limited
to indexation, typically through the explicit inflation-linked
with reference to RPI. nature of both operating revenues
The Company also has and costs. On the revenue side,
in place debt facilities UK subsidies are formally linked
in the UK that are inflation-linked to RPI. For costs, O&M contract
prices and land rents are generally
linked to inflation and as such
there is a natural inflation
linkage to costs and revenues.
In January 2020 the UK Government
published the response to the
RPI reform consultation. The
anticipated result is an alignment
between RPI and CPIH to be introduced
by 2030.
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.
Major Risk Summary of Risk Mitigation
Risks relating Operational assets may The Asset Manager continually
to operational be subject to operating monitors plant performance and
performance and technical risks, develops management plans for
including risk of mechanical each asset and is responsible
breakdown, counterparty for monitoring and reporting
risk and other unanticipated upon the implementation of the
events that adversely plans to the Board. In particular
affect operations. the Investment Manager monitors
In the event that the aspects such as operational plant
transmission or distribution performance and spare parts management
facilities are not available to minimise production downtime
for the export of electricity as a result of component failure.
generated at solar PV The contracts entered with Operations
asset level, the Company & Maintenance service providers
may be unable to sell typically include a guaranteed
its electricity and this level of asset availability in
could have a material terms of generation and financial
adverse effect on the warranties against revenues losses.
Company's business, financial The portfolio assets maintain
status and results of comprehensive damage and business
operations. interruption insurance policies
against revenue and financial
losses.
The diversified nature of the
portfolio offers additional protection
with no single asset representing
more than 8% of the portfolio
total installed capacity.
Risks relating Delays in project construction The Investment Manager ensures
to the construction may result in a reduction that risks are mitigated through
of solar PV assets in returns caused by performance bonds and through
a delay in the project the use of milestone payments,
generating revenue. Failure with funds only being transferred
in the construction of once certain conditions are met.
a solar park, for example, In addition, the construction
due to faulty components progress is overseen by the Asset
or insufficient structural Management team with support
quality, may result in from independent technical advisers
loss of value without to ensure the construction milestones
full or any recourse are achieved on schedule and
to insurance or construction in line with the specifications
warranties. set in the construction contract.
Risks relating Changes to existing tax The Investment Manager will continue
to taxation rates and legislation to work with tax advisers to
could impact the valuation ensure any potential changes
of the portfolio and in tax rates and legislation
Company returns. are monitored and adequately
The risk of higher tax assessed.
rates level of government For an estimate of the impact
borrowing required to to the Company's NAV of the proposal
fund emergency COVID-19 to increase UK Corporation Tax
economic support measures. please refer to the Valuation
In March 2021 the UK Sensitivity analysis contained
Government stated its in the Investment Manager's report
intention to increase on page 37.
UK Corporation Tax from
19% to 25% from 2023.
Should the proposal be
signed into law it will
adversely impact the
valuation of the portfolio.
Risk relating Changes in the exchange The Company implements a hedging
to foreign currency rate between Sterling strategy in order to reduce the
movements and the currencies of possible impact of currency fluctuations
foreign countries in and to minimise the volatility
which the Company operates of cash flow distributions.
assets could have a meaningful This hedging strategy employs
impact on the value of the use of currency derivatives
international investments to mitigate the risk of significant
and cashflows generated short-term currency moves in
by these investments. both the Euro and Australian
Currently this risk relates Dollar.
to the exchange rate The capital value of the investments
between Sterling and as reflected in the NAV will
the Euro and the Australian remain exposed to foreign currency
Dollar. movements.
Investment Manager's Report
PORTFOLIO SUMMARY
As at 31 December 2020, the Company's portfolio comprised 58
assets with a total installed capacity of 994 MW, of which 125 MW
remain under construction. In the UK, the Company has an
operational portfolio of 50 assets representing a total installed
capacity of 723 MW. The Company owns a further four operational
assets in Australia which account for 146 MW of installed capacity.
Two acquisitions in 2020 added an additional four 4 subsidy free
assets in Spain which will add an additional 125 MW on completion
of construction.
The Company's UK assets all benefit from regulatory support and
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").
The Company's recently acquired greenfield projects in Spain
will not benefit from regulatory support but are expected to
benefit from long-term PPAs providing a high proportion of
contracted revenues that, when calculated on a net present value
basis over the life of the projects, deliver an attractive risk
profile considering the Company's investment objectives.
ACQUISITIONS
The Company made two significant acquisitions in 2020 adding 125
MW to the portfolio across four assets located in Spain. These
first acquisitions in continental Europe add significant geographic
diversification to the portfolio, and also represented the
Company's first investments in the subsidy-free market.
The Spanish electricity market has been integrated into the
Iberian market or MIBEL ("Mercado IbƩrico de Electricidad") since
2006, following the liberalisation of the Spanish market in 1998.
Historically it has been vertically integrated and dominated by
large local utilities in terms of generation, distribution and
supply of electricity. The transmission network is operated
exclusively by Red ElƩctrica EspaƱola, the Spanish transmission
system operator. The market has a well-established grid
infrastructure, planning and grid connection process.
At the end of 2019 installed renewable energy capacity totalled
54 GW, or 52% of the total installed capacity, with renewable
electricity generation accounting for 39% of the total electricity
generated. Solar accounted for 8.6 GW at the end of 2019, a growth
rate of more than 93% compared to the previous year. This was the
result of a recent period of energy transition supported by the
Spanish Government's commitment to the decarbonisation targets
defined in the National Energy and Climate Plan. These targets
include the goal of renewable energy sources representing 35% of
total generation by 2030 and 100% by 2050.
The Spanish renewable energy market has also been supported by
the introduction of a new auction subsidy programme and a well
developed PPA market which enables solar operators to secure high
levels of contracted revenues in the long term from high quality
counterparties.
When combined with the country's high level of irradiation and
decreasing solar installation costs, the opportunity to invest in
greenfield subsidy-free assets delivers attractive return targets
at the PPA prices currently available in the market.
Both acquisitions will be funded through construction according
to a fixed price EPC contract with a payment schedule linked to key
construction milestones, offering additional financial protection
against commissioning delays. The construction process will be
overseen by the Investment Manager's team based in Madrid with the
support of third-party technical advisers.
Asset Name Location Installed Status Subsidy Acquisition Acquisition
Capacity status Date Cost
Virgen del September
Carmen Spain, Huelva 26.1 MW Construction Subsidy-Free 2020 EUR20.2 million
Andalusia Spain, Andalusia 98.5 MW Construction Subsidy-Free December 2020 EUR72m*
Portfolio
(3 assets)
* Includes estmated construction costs
Virgin del Carmen
In September 2020 the Company announced the acquisition of the
26.1 MW Virgen del Carmen asset. The acquisition will represent an
investment of EUR20.2 million (GBP18.0 million) once construction
is completed and will benefit from a long-term PPA entered with
into with Shell Energy Europe Limited, a subsidiary of Royal Dutch
Shell Plc, for the sale of electricity under a fixed price
agreement until 2030. Construction at the site has already begun
with operations targeted to start in the third quarter of 2021.
.
Andalusia Portfolio
On the 4 January 2021, the Company announced the acquisition on
31 December 2020 of a further 98.5 MW portfolio of three
subsidy-free greenfield assets located in the Andalusia region of
Spain. Total transaction costs are expected to amount to EUR72
million once construction is completed and include the acquisition
of development rights for approximately EUR15 million. Construction
is expected to start in Summer 2021, with operations targeted to
start in June 2022.
It is the Company's current intention to introduce a
conservative level of project finance at portfolio level to
partially fund construction milestones, with the remaining funding
being provided through the Company's existing revolving credit
facilities. The project finance facility will be in place before
the start of construction
It is anticipated that a long-term Power Purchase Agreement will
be signed with a major European energy supplier, also before the
start of construction.
MARKET DEVELOPMENTS
Governments in the UK and across Europe continue to remain
supportive of the renewables sector and have made commitments to
green energy and decarbonisation as central pillars of their
pandemic recovery packages. In November the UK Prime Minister
announced plans for a Green Industrial Revolution which included a
'Ten Point Plan' which promised to mobilise up to GBP12 billion of
state investment and potentially three times as much from the
private sector in a bid to create 250,000 'green jobs'. The UK has
also stated its intention to use both the G7 Summit in June and the
COP26 Summit in November to push other countries to follow its
ambitious net carbon neutral plans.
Despite the disruption caused by the emergence of COVID-19
during 2020, the UK continued on its path towards its 2050
decarbonisation goal with renewables continuing to play an
increasing role. While the extensive pipeline of UK subsidy free
solar expected to be constructed during the year fell short of
expectations, it is estimated that a further 545 MW of solar
capacity was connected in 2020, 60% of which was utility scale
([3]) . European markets also saw a similar impact on expected
buildout during the period but still delivered a meaningful number
of subsidy-free projects in specific markets.
This new wave of subsidy-free buildout occurred in a year when
global power prices were severely impacted by a collapse in
electricity demand in the wake of COVID-19 related national
shutdowns. The prospect for an increased rate of build out in both
the UK and Europe going forwards remains strong with prices across
Europe having now recovered from the lows of the first half of 2020
and investor appetite for solar projects expected to remain
strong.
The next UK Contract for Difference (CfD) auction in November
2021 is likely to further boost the UK renewables industry with an
additional 12 GW of capacity expected to be made available. Solar
will once again be an eligible technology in the auction having
been excluded in recent auction rounds. It remains to be seen
whether solar developers will be able to secure pricing attractive
enough to make their participation economically viable.
2020 marked the year the UK left the European Union, with the
EU-UK Trade and Cooperation Agreement agreed on 24 December 2020
and ratified by the UK Parliament on 30 December 2020. The impact
on the Company is expected to be limited considering the measures
implemented in recent periods including maintaining robust levels
of spare parts. The Investment Manager will continue to review the
impact of the Agreement on the Company's operations.
In Australia, State Governments continue to support the growth
of the renewable energy market with each State having adopted a net
zero target by 2050. New South Wales released the Energy
Infrastructure Roadmap looking to support up to 12 GW of renewables
and up to 3 GW of pumped hydro. Victoria has passed the legislation
to increase its renewable energy target to 50% by 2030 and has
developed a rooftop Solar Homes Program, which is targeting 650,000
home solar installations in Victoria over the next 10 years.
Queensland has announced A$500 million government funding for
Renewable Energy Zones and to support State owned companies
investment in renewables.
In September 2020, the Federal Energy Security Board released
its Post-2025 consultation paper which recommends changes to the
existing market design and recommends an alternative market design
to deliver a secure, reliable and lower emissions electricity
system at least-cost. The paper covered seven market design
concepts, including resource adequacy mechanisms, essential system
services, two-sided markets and transmission access reforms. The
Company is actively engaging in the regulatory dialogue through
meetings with the regulators, written submissions and participation
in industry groups and closely monitoring proposed regulatory
changes.
Investment Manager's Outlook
The operational and financial resilience shown by the portfolio
and the broader renewables industry throughout 2020 has once again
demonstrated the attractiveness of the asset class and helped to
support ongoing demand for existing operational assets as well as
fuelled continued interest from developers considering subsidy-free
development.
Given the consolidation and competition for subsidised operating
assets witnessed in previous years in both the UK and Europe, the
opportunities for the Company to make further acquisitions in this
area are likely to be limited.
However with electricity prices in the UK and other
international markets recovering from the economic impact and low
electricity demand caused by the COVID-19 pandemic, it is now
expected that a significant volume of subsidy-free solar projects
should come to market in 2021 and at a time when installation costs
continue to decrease. Investment opportunities within the
international solar market in developed economies, in particular
Southern Europe, are expected to become increasingly attractive
considering the longer PPA tenors available.
Following the acquisition of the Company's first subsidy-free
assets in Spain, the focus of the Investment Manager will be on
delivering these projects on schedule as well as continuing to
monitor the market for further attractive subsidy-free assets. The
Investment Manager will also explore options to optimise the
capital structure of the Company's significant Australian operating
portfolio following the completion of Oakey 2.
BSS co-location opportunities in the UK, either alongside the
existing portfolio or as a greenfield investment, will continue to
be developed during 2021 following the Investment Policy change
approved by shareholders in February this year, with the objective
of finalising an initial investment in 2021.
From a portfolio perspective the Asset Manager will continue to
focus on optimisation initiatives and maintaining the high
operational performance that the UK portfolio demonstrated in
2020.
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 and counterparties.
REVENUE ANALYSIS
The Company's revenues are generated from the export of
electricity from the portfolio assets into the grid. The revenues
are predominantly the result of the regulatory support mechanisms
available in the markets in which the Company operates and the sale
of electricity to third-party offtakers either at fixed or merchant
electricity prices.
In 2020, approximately 62% of revenue was derived from
subsidies, with the remaining 38% from the sale of electricity.
For 2021, 80% of the total expected revenues for the UK
portfolio are considered fixed. That percentage decreases to 71%
when total portfolio revenues are taken into consideration.
Power Prices
United Kingdom
Wholesale power prices decreased throughout the first half of
2020, reaching prices close to GBP22/MWh in May 2020 as a result of
the COVID-19 restrictions. The downward trend was initially driven
by lower natural gas prices globally as a result of new supplies
from the US and Australia entering the market at the beginning of
the period. In addition to this, historically high gas storage
levels in Western Europe, following consecutive mild winters had a
downward effect on spot and forward prices for natural gas,
resulting in further downward pressure on wholesale power prices.
From this already soft position, the UK Government's restrictions
in response to the COVID-19 pandemic drove down demand for gas, oil
and power which has resulted in even lower wholesale power prices
from March until June, with primary electricity demand in certain
periods decreasing up to 10% below the previous year.
The second half of 2020 saw a steady recovery as economic
activity resumed after the first national lockdown with prices
reaching approximately GBP44/MWh in September. Prices continued to
rise as the UK entered the winter months and the increase in demand
served to offset further Government restrictions, prices reaching a
2020 peak at approximately GBP55/MWh in December.
The average power price achieved across the UK portfolio during
the year, including fixed price arrangements was GBP37.05/MWh,
versus GBP45.38/MWh in 2019, a decrease of 18%.
As a result of the recovery in power prices and higher
short-term forecast, the Company increased the percentage of UK
electricity sales under fixed price arrangements with the aim of
delivering a higher cash flow predictability in 2021. Fixed price
arrangements for 2021 currently represent 54% of the total expected
UK electricity sales at a weighted-average price of GBP44.38/MWh,
against. 32% as at 31 December 2019, at a weighted average price of
GBP52.33/MWh.
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 in the short term.
DAILY AND MONTHLY GENERATION WEIGHTED SPOT ELECTRICITY PRICES AT
UK PORTFOLIO LEVEL (GBP/MWh)
Australia
The National Electricity Market (NEM) was less impacted than the
UK and European markets by the decreased demand for electricity due
to COVID-19. Compared to the significant drops in demand witnessed
elsewhere in Q2 2020, NEM operational demand was down only 2%
year-on-year. However, mild Q4 weather and continued strong uptake
of distributed solar PV led to an overall 2.6% decrease in
operational demand across the NEM comparing to 2019. During 2020,
approximately 3GW of distributed PV capacity was installed
Australia wide, up around 50% on the previous record in 2019.
During the period, the average wholesale power price decreased
by 47% across the NEM, mainly driven by decreased operational
demand and lower gas and coal prices due to the impact of COVID-19,
coupled with the increased variable renewable energy output.
Average wholesale prices in Queensland and Victoria were A$41/MWh
and A$52/MWh respectively in 2020, down from A$80/MWh and A$110/MWh
in 2019.
Subsidy revenues
The Renewables Obligation Certificate ("ROC") buy-out price for
the 2019-2020 annual compliance period increased to GBP48.78
(2018-19 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 2020/21
FiT rate for the Yardall asset is
GBP73.50/MWh.
In Australia, the average LGC price secured by the portfolio
assets in 2020 was A$39.2 per certificate. During the period the
Company entered new agreements for the sale of LGCs at a fixed
price with Origin Energy until 2030 for Bannerton and Oakey 2
reducing the portfolio exposure to LGC market price volatility. The
new contracts had a minor positive impact to NAV due to the higher
contracted LGC price against the market price forecast. In the case
of Bannerton, the new agreement will target the annual uncontracted
LGC volume not sold under the LGC agreement signed with the
Victorian government until 2028.
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 wholesale power price forecasts
provided by third-party consultants and are updated on a quarterly
basis for each relevant market without further adjustments from the
Investment Manager. For assets with fixed price arrangements in
place, the contracted values are used instead. The same methodology
will be applied to the Spanish subsidy-free assets acquired during
the period.
During the year the Company revisited its UK power price
forecast methodology and introduced a third independent market
consultant to the blended average forecast methodology. In the
Investment Manager's view this adjustment is expected to present a
more comprehensive forecast approach providing further stability to
the to the Company's valuation. As part of this review the Company
has also updated the expected capture price discounts for solar
technologies as a result of revised levels of penetration of low
marginal cost renewable generators on the network.
Operational and Financial Review
United Kingdom
In 2020, long-term average annual power price forecasts
decreased by 11.3% across the duration of the curves used to model
the Company's long-term cashflows. This was due to movements in the
short to medium term as a result of COVID-19 and the forecast
impact on economic activity. The longer-term outlook has also
declined as a result of the higher capture price discount assumed
for solar generation.
The Company's forecasts over the short to medium-term assume an
increase in prices in real terms of 0.8% per annum with prices then
declining 0.9% per annum in the longer term as solar capture price
discounts are expected to become more prominent. The net impact is
a 0.1% annual average decrease in the power curve forecast.
Where the assumed asset life extends beyond 2050, the Investment
Manager has assumed no real growth in forecast power prices.
Australia
The wholesale power price is expected to recover and remain
stable through the 2020s, rising in the 2030s as coal fired plants
are retired and more expensive gas and flexible technologies set
the price more frequently, with pricing shadowing the marginal cost
of gas generation.
However, the solar capture price discount to the baseload price
is forecast to widen as new capacity increases the expected timing
imbalance between peak demand and renewable energy production,
partially mitigated by an increase in storage and pumped hydro
capacity. Buildout of State-backed renewable schemes will also put
downward pressure on solar capture price in the short-to medium
term.
Asset Manager's Operational Report
UK Portfolio Performance
The UK portfolio continued to outperform expectations during the
period with electricity generation substantially above base case at
8.4% when adjusted for financial compensation received. Performance
has primarily been driven by high irradiation in the first half of
2020, giving an annual value of 8.5% above base case, combined with
a high level of asset availability.
There has been negligible impact on the operation of the
portfolio in terms of production due to the COVID-19 pandemic.
Corrective maintenance required to resolve faults has been
unaffected as asset operators were still able to act quickly and
safely as issues arose during the period. Where it was not possible
to complete preventative maintenance at the required time,
operators have still been able to complete all required
preventative maintenance across the portfolio. As per the Interim
report, whilst the Asset Manager saw DNO outages being cancelled in
the early part of 2020 given the high irradiation levels at that
time, the impact of experiencing more outages during the latter
months of the year was reduced.
Health and Safety
In 2020 a range of activities were undertaken to enhance the
Health and Safety performances of the solar assets in the
portfolio.
Health and Safety policies were reviewed at the Fund and SPV
level and are being cascaded through the supply chain that supports
the portfolio to ensure alignment in this key area. The contracting
arrangements for Asset Managers and Operations and Maintenance
(O&M) provisions were simplified to make it easier to monitor
portfolio compliance and report issues more effectively. In
addition to this, the systems and processes that govern the
management of Health and Safety were reviewed and good practices
and learnings were incorporated.
The Asset Manager worked in partnership with the O&M
contractors by providing direction and guidance as needed. In
particular, during the outbreak of the COVID-19 pandemic, close
communication with O&Ms was established, to track and
understand the emerging risks to operatives maintaining the sites.
This ensured high levels of performance were maintained while
adjusting to new working practices and keeping everyone involved in
the portfolio safe throughout this very challenging period.
During the year competency assessments were performed on the
portfolio O&M contractors to assure their Health and Safety
management systems adhered to good practice and a programme of site
audits was completed across every site in the portfolio.
The Asset Manager continues to monitor Health and Safety
incidents and uses the feedback from these events to raise
awareness and drive improvement of key Health and Safety risks.
UK Thefts
A limited number of portfolio assets were affected by cabling
thefts in the period. Where sites were targeted remedial works were
carried out promptly to minimise any downtime. The Asset Manager
continues to work with the site operators to ensure that all
security systems are appropriate and fully functional whilst also
implementing further innovations to prevent future theft
attempts.
OFGEM Audits
During the year a number of asset RO accreditations were audited
by OFGEM. To date the results of the Audits have been deemed as
satisfactory.
Optimisation
Repowering works have now started to be evaluated and examples
have now completed within the portfolio, as reported in the Interim
report, where a full inverter station was repowered at Pitworthy.
The exchange involved moving from central inverters to a bank of
string inverters. The repowering exercise has proved very
successful in terms of performance with the additional benefit that
the components exchanged can now be used as spare parts across the
wider portfolio.
The evaluation of Anti-Reflective coating at a number of the
sites within the portfolio is continuing with Contractual terms now
being discussed with a supplier with a view to rolling out further
in Q3 2021. Separately a study has been conducted to calculate the
actual degradation of the solar modules in one of the portfolio
assets by flash testing a sample of modules. The initial results
have shown that the true degradation of the modules at the asset
are lower than that assumed and the commercial impacts of this are
being now being assessed.
During 2020 the Energy Networks Association (ENA) incentivised
asset owners of generating plants to make changes to relay settings
to improve network resilience with payments for the works being
provided by the DNOs. The Asset Manager worked with the DNOs and
Operators to complete changes on 38 sites in the portfolio to
ensure the works were carried out within the required timeframe
before the works become enforceable and no payment available.
Commercial optimisation initiatives continue with examples such
as a review of the supply capacity at each asset being completed.
Where the agreed supply capacity was too great based on the actual
electricity consumption at the site these were reduced accordingly
which in turn passed on cost savings to the SPVs.
The Asset Manager is pleased to report that all of the EPC Final
Acceptance Certificate (FAC) processes for UK assets have now been
complete and all FACs have been signed between contractors and SPVs
across the UK portfolio. Over the years the process has ensured
that sites are handed over in the best possible condition after the
initial two years of operation to maintain performance for the life
of the plant and therefore has been a key optimisation
strategy.
Previous initiatives such as critical spare parts have continued
to contribute to the stable performance of the portfolio during the
year and shall continue to be evaluated. With the experience now
gained by the Asset Manager, there is the ability to feed this
practical knowledge back into the new projects that are being
developed and constructed. In particular, construction management,
site design, key component quality control, improvement of warranty
terms and key contractual terms for both EPC and O&M
Contracts.
Australian Portfolio Update
The Company's Australian portfolio is now entirely operational
following the construction delays in Oakey 2. This asset has gone
through all the required stages of commissioning and has been able
to export at installed capacity since October 2020.
Longreach
The site has been experiencing limited grid curtailment since
commissioning due to reduced loads in the area and a low capacity
grid transformer. The Asset Manager, working closely with the local
grid operator Ergon, has supported the retrofitting of the grid
transformer, and resolved the local grid constraint in October. The
Asset Manager has also been working with the tracker manufacturer
to implement a new tracker algorithm, to increase energy yield in
diffuse light conditions and early/late winter sun hours.
Bannerton
The project first 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 were constrained to 50% of
output from September 2019 to April 2020. The Asset Manager worked
closely with the market operator, the network operator, the
inverter supplier and the other affected generators in a
collaborative industry effort to tune the inverter settings
required to resolve the issue and lift the constraint. The site
performance has been affected by the export constraint and by
irradiation levels below budget in the second half of the
period.
Oakey 2
The area of Oakey 2 which was affected by storm damage in 2020
affecting approximately 15% of the site has been rebuilt during the
period. The trackers structures have been reinforced and their
control system redesigned to meet the design wind speed required
for the site.
In parallel, the Asset Manager has successfully negotiated a
staged commissioning plan with the Network Provider to allow
commissioning to progress despite the re-construction works
affecting various areas of the plant, hence minimising the
production losses. The plant has been allowed to export at nominal
capacity since October 2020 while the final commissioning works are
ongoing and further power quality equipment is installed on
site.
The project received approximately A$6.4 million in insurance
proceeds during the period as compensation for revenue losses
resulting from the delays in the construction caused by the storm
events.
Spanish Portfolio Update
Virgin del Carmen (Under Construction)
Since deal completion all key components have been agreed and
purchase orders placed. There is already close liaison with the EPC
contractor and the network operator to ensure the grid elements of
the project are delivered on time. Construction at site is now
underway and the project plan is being closely monitored by a
dedicated Construction Manager to ensure a timely grid connection
in Q3 2021.
Andalusia portfolio (Under Construction)
Construction is expected to start in summer 2021, with
operations targeted for June 2022.
Operational and Financial Review
Production Summary
The production figures below have been adjusted, where relevant,
for events where financial compensation has been, or will be,
received.
UK
Site MW Production Production Irradiation
(MWh) variance variance
versus 2020 versus 2020
budget budget
Abbey Fields 4.9 5,506 9.7% 8.8%
Abergelli 7.7 7,380 1.5% 1.2%
Atherstone 14.8 14,458 6.8% 8.2%
Bilsthorpe 5.7 5,617 5.7% 6.6%
Bournemouth 37.3 42,039 8.3% 5.8%
Bulls Head 5.5 5,869 16.0% 11.3%
Castle Eaton 17.8 18,569 17.5% 13.7%
Coombeshead 9.8 10,323 2.5% 4.2%
Copley 30.0 30,030 8.9% 7.2%
Crow Trees 4.7 4,538 6.3% 7.7%
Cuckoo Grove 6.1 6,400 -4.3% -4.0%
Field House 6.4 6,873 8.0% 9.9%
Fields Farm 5.0 5,308 13.7% 10.5%
Gedling 5.7 5,564 7.8% 10.6%
High Penn 9.6 11,788 6.1% 8.5%
Highfields 12.2 9,938 11.1% 12.1%
Homeland 13.2 14,366 4.9% 5.4%
Hunters Race 10.3 11,023 5.5% 6.2%
Kencot Hill 37.2 39,100 10.9% 10.0%
Landmead 45.9 47,289 12.7% 15.4%
Lindridge 4.9 4,765 2.9% 5.0%
Manor Farm 14.2 13,531 9.0% 8.8%
Marsh Farm 9.1 9,662 5.9% 9.3%
Membury 16.5 17,446 12.2% 9.4%
Misson 5.0 5,001 6.9% 3.9%
Nowhere 8.1 8,585 8.7% 9.9%
Paddock Wood 9.2 10,221 11.9% 8.8%
Park Farm 13.2 12,733 8.4% 7.0%
Pen Y Cae 6.8 6,507 2.5% 4.2%
Pitworthy 15.6 15,315 8.7% 3.9%
Playters 8.6 8,929 5.5% 7.7%
Port Farm 34.7 36,417 12.1% 10.9%
Roskrow 8.9 8,797 -2.8% -0.8%
Sandridge 49.6 50,746 7.8% 9.6%
Site MW Production Production Irradiation
(MWh) variance variance
versus 2020 versus 2020
budget budget
Sawmills 6.6 6,680 0.9% 5.7%
Sheepbridge 5.0 5,297 13.8% 16.1%
Shotwick 72.2 68,413 7.8% 7.5%
Southam 10.3 10,542 10.5% 10.5%
Spriggs 12.0 12,372 7.5% 3.8%
Steventon 10.0 10,745 9.9% 11.6%
SV Ash 8.4 8,347 9.3% 9.4%
Tengore 3.6 3,917 9.2% 6.0%
Trehawke 10.6 11,228 5.7% 6.1%
Upper Huntingford 7.7 8,147 12.9% 10.2%
Verwood 20.7 23,090 10.9% 10.9%
Wally Corner 5.0 5,293 8.6% 12.2%
Welbeck 11.3 11,167 5.8% 8.1%
Wymeswold 34.5 32,653 5.3% 7.7%
Yarburgh 8.1 8,096 4.4% 6.8%
Yardwall 3.0 3,328 5.9% 5.4%
Total* 723.1 739,947 8.4%
Weighted Total 8.5%
Australia
Site MW Production Production Irradiation
(MWh) variance variance
versus 2020 versus 2020
budget budget
Longreach 8.46 16,107 -14.3% 4.1%
Bannerton 53.44 71,426 -31.3% -11.4%
Oakey 1 14.54 26,349 -9.0% 2.3%
Oakey 2 70.02 115,734 -15.2% -9.1%
Total* 146.46 229,617 -20.3% -8.0%
*Totals may not sum due to rounding
Overall Portfolio
Global MW Production Production Irradiation
(MWh) variance variance
versus 2020 versus 2020
budget budget
Total* 869.5 969,564 -0.1% -3.4%
*Totals may not sum due to rounding
Financial Report
KEY INVESTMENT METRICS
31 December 31 December
2020 2019
Market capitalisation GBP622.9 million GBP765.6 million
Share price 102.5 pence 126.5 pence
Dividend declared per share for the year 6.91 pence 6.76 pence
Gross Asset Value (GAV) GBP1,054.6 GBP1,071.5
million million
Annual total return (NAV) since IPO 5.2% 6.5%
Annual total shareholder return since IPO 5.9% 9.4%
Net Asset Value (NAV) GBP582.2 million GBP628.0 million
NAV per share 95.8 pence 103.8 pence
Loss after tax for the year (GBP7.2 million) (GBP10.8 million)
Movements in Net Asset Value
The Company's NAV per share decreased from 103.8 pence to 95.8
pence during the reporting period. A breakdown in the movement of
the NAV is shown in the table below.
NAV NAV per share
NAV as at 31 December 2019 GBP628.0m 103.8p
Dividend paid (GBP38.7m) (6.4)p
Fund costs (GBP10.4m) (1.7)p
Other adjustments GBP1.3m 0.2p
Time value GBP51.5m 8.4p
Projects actuals GBP3.7m 0.6p
Forex GBP2.9m 0.4p
Power forecasts (GBP79.3m) (13.1p)
Discount rate GBP22.8m 3.7p
Corporation tax (GBP3.2m) (0.5)p
Inflation (GBP5.2m) (0.9)p
Operational GBP1.7m 0.2p
Asset life GBP7.0m 1.1p
NAV as at December 2020 GBP582.2m 95.8p
*Totals may not sum due to rounding
Valuation methodology
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 examination and challenge. Valuations are
undertaken quarterly. A broad range of assumptions are used in the
valuation models. These assumptions are based on long-term
forecasts and are not materially affected by short-term
fluctuations, economic or technical.
It is the policy of the Investment Manager to value with
reference to Discounted Cash Flows ("DCF") from the date of
acquisition. Assets under construction are valued at cost until the
date of commissioning and start of operations. Revenues accrued
during construction or commissioning process 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 IAS 39 and IFRS 13 accounting standards as well as
the International Private Equity and Venture Capital ("IPEV")
Valuation Guidelines.
The Company's Directors review and challenge the operating and
financial assumptions, including the discount rates, used in the
valuation of the Company's portfolio and approve them based on the
recommendation of the Investment Manager.
Discount rates for valuation
During the period, the Investment Manager undertook a review of
the discount rates applied to the valuation of the portfolio as a
result of the valuation information received from participating in
a number of tender processes to acquire UK operational assets
during the period. As a result of this analysis, discount rates for
the UK portfolio have been reduced by 0.50% from 7.00% to 6.50% on
a levered basis in order to bring valuations in line with the
expected market pricing for operational assets.
The discount rate used for UK asset cashflows which have
received lease extensions beyond the initial investment period of
25 years is 7.50% for subsequent years, reflecting the merchant
risk of the expected cash flows beyond the initial 25-year
period.
For the Australian portfolio, assets are valued using a discount
rate which is dependent on the level of contracted revenues in
place. The weighted average discount rate across the Australian
portfolio is 8.60% on a levered basis. This has increased over the
period as a result of the Oakey 2 asset being valued on a DCF
methodology for the first time. Adding the Oakey 2 asset to the DCF
during the period had a negative impact on valuation of
approximately GBP7.7 million, predominantly due to the adoption of
a lower power price forecast compared to the forecast at the date
of acquisition.
For the Australian portfolio, assets are valued using a discount
rate which is dependent on the level of contracted revenues in
place. The weighted average discount rate across the Australian
portfolio is 8.60% on a levered basis. This has increased over the
period as a result of Oakey 2 being valued on a DCF methodology for
the first time. The Oakey 2 asset was added to the DCF during the
period at a valuation below historical cost due to adoption of a
lower power price forecast compared to the forecast at the date of
acquisition.
The weighted average levered discount rate across the portfolio
is now 6.74% compared to 7.06% as at 31 December 2019.
Assets under construction are valued at cost and will continue
to be held at cost until the assets are connected to the grid and
fully operational.
Non-UK assets valuations are updated quarterly to reflect
movements related to exchange rates.
Asset life
The expected weighted average life of the UK portfolio as at 31
December 2020 is 30.6 years (31 December 2019: 29.8 years) from the
date of commissioning. This represents a remaining portfolio useful
life of 24.8 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 32.0 years from the date of
commissioning. Additional conservative operational and lifecycle
costs are incorporated into the extended useful life period.
The useful economic life for assets located in Australia
increased to 30 years from the 25 year assumption at the date of
acquisition.
Movements in Net Asset Value (GBPm and Pence Per Share)
Totals may not sum due to rounding
Dividends Paid
The Company paid dividends of GBP38.7 million during the year to
31 December 2020.
Fund Costs
Total costs of GBP10.4 million, which include management fees,
financing, other costs and corporation tax were incurred by the
Company and its subsidiaries on a consolidated basis during the
year.
Time Value
A value uplift resulting from moving the valuation date forward
and therefore bringing future cash flows closer to the present date
(and therefore discounting them less).
Projects Actuals
Cash generation from UK projects exceeded modelled forecasts by
GBP3.7 million in the year due to base case outperformance.
Foreign Exchange Movements
Fluctuations in the exchange rate over the period impacted the
GBP valuation of Australian assets.
Power Price Forecasts
The Company uses forward looking power price assumptions to
assess the likely future income of the portfolio assets for
valuation purposes. The Company's assumptions are based upon a
blended average of the forecasts provided by third party
consultants and are updated on a quarterly basis. The valuation
change during the period includes the impact of moving Oakey 2 to
the DCF and adopting the latest Queensland power price forecast
resulting in a materially adverse impact to the project
valuation.
Discount Rate
The levered discount rate for UK operational assets has
decreased from 7.00% to 6.50% and the Australian portfolio average
rate increased to 8.60%.
Corporation Tax
The Government has held the corporation tax rate flat at 19% at
the beginning of the period, abandoning the previously announced
plan to cut the rate to 17%.
The Investment Manager notes the announcement, post-period end,
made by the UK Chancellor as part of his Budget on 3 March 2021
stating his intention to increase the rate of UK Corporation tax
from 19% to 25% from 2023. The impact of this proposal is not
currently reflected in the 31 December 2020 NAV. Please refer to
the Valuation Sensitivities section of this report for an estimate
of the impact of the proposals.
Inflation Forecasts
UK RPI in 2020 was below the forecast rate used by the Company,
which results in an adverse impact to the valuation as a
significant portion of forecast revenue is RPI-linked.
The Company increased its medium-term inflation forecast by
0.25% to 3.00% for the purposes of UK asset valuations. Post 2030,
the inflation forecast decreases to reflect the impact of the RPI
reform now confirmed by the UK Government. The impact of such
reform remains uncertain with the Investment Manager assuming an
inflation rate of 2.25% based on the historical analysis between
RPI and CPI rates and current pricing of long-term inflation
swaps.
Operational
Multiple assets in the UK portfolio have signed contracts fixing
prices for 2021 and 2022 above the forecast power prices.
Additionally, this step includes a review of operational cost
assumptions across the Australian portfolio.
Asset Life
The Company has extended the forecast useful economic life of UK
and Australian solar assets to 40 years and 30 years respectively
within existing land lease restrictions.
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 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 in note 16 of the
Financial Statements. All sensitivities are calculated
independently of each other.
The Investment Manager notes the announcement made by the UK
Chancellor as part of his Budget on 3 March 2021 stating his
intention to increase the rate of UK Corporation tax from 19% to
25% from 2023.
The impact of this proposal is not currently reflected in the 31
December 2020 NAV. It is anticipated that should the proposal be
implemented this will have an estimated impact on NAV of GBP(8.7)
million or (1.4) pence per share.
Financial Review
The Company applies IFRS 10 and Investment Entities: Amendments
to IFRS 10, IFRS 12 and IAS 28, which states that investment
entities should measure all their subsidiaries that are themselves
investment entities at fair value. The Company accounts for its
interest in its wholly owned direct subsidiary Foresight Solar (UK
Hold Co) Limited as an investment at fair value through profit or
loss.
The primary impact of this application, in comparison to
consolidating subsidiaries, is that the cash balances, the working
capital balances and borrowings in the intermediate holding
companies are presented as part of the Company's fair value of
investments.
The Company's intermediate holding companies provide services
that relate to the Company's investment activities on behalf of the
parent which are incidental to the management of the portfolio.
The Company and its intermediate holding companies (the "Group")
hold investments in 58 portfolio assets which make distributions in
the form of interest on loans and dividends of equity as well as
loan repayments and equity redemptions.
For more information on the basis of accounting and Company
structure please see refer to the Notes to the Financial Statements
starting on page 52.
Key metrics for the year ended 31 December 2020
All amounts presented in GBPmillion (except Year ended Year ended
as noted) 31-December 2020 31-December 2019
Net assets(1) 582.2 628.0
Gross portfolio value(2) 983.7 1,030.3
Operating income and gains/(losses) on
fair value of investments (0.3) (3.8)
Net assets per share 95.8p 103.8p
Distributions from solar investments(3) 76.7 52.0
Loss before tax (7.2) (10.8)
(1) Also referred to as Net Asset Value or "NAV".
(2) Classified as fair value of underlying gross assets in the
portfolio.
(3) Prior to the refinancing in August 2019, distributions were
made after SPV level debt service.
Net Assets
Net assets decreased from GBP628.0 million at 31 December 2019
to GBP582.2 million at 31 December 2020, primarily driven by the
reduction of the long-term power price forecast on the portfolio
value.
The net assets of GBP582.2 million comprise the GBP983.7 million
portfolio of UK, Australian and Spanish solar investments, the
group's cash balance of GBP85.9 million (including the Company's
cash balance of GBP16.9 million), partially offset by GBP391.5
million long term debt, GBP80.9 million of RCF outstanding debt and
other net liabilities of GBP15.0 million.
The intermediate holding companies' net liabilities of GBP472.4
million comprises long term debt of GBP391.5 million and GBP80.9
million outstanding on the RCF.
Analysis of the Group's net assets at 31 December 2020
All amounts presented in GBPmillion (except At 31 December At 31 December
as noted) 2020 2019
Gross portfolio value (1) 983.7 1,030.3
Intermediate holding companies' cash 69.0 42.8
Intermediate holding companies' long term
debt (391.5) (403.5)
Intermediate holding companies' revolving
credit facility (80.9) (40.0)
Intermediate holding companies' other
assets / (liabilities) (14.9) (18.6)
Fair value of the Company's investment
in portfolio 565.4 611.0
Company's cash 16.9 18.9
Company's other liabilities (0.1) (1.9)
Net Asset Value 582.2 628.0
Number of shares 607,711,311 605,196,526
Net Asset Value per share 95.8p 103.8p
(1) Gross portfolio value is equal to the sum of the portfolio
value, Intermediate holding companies' cash, Intermediate
holding companies'
other liabilities, Company's cash and Company's other liabilities
Third Party Debt Arrangements and Gearing Position
As at 31 December 2020, total outstanding long-term debt was
GBP391.5 million, representing 37% of the GAV (calculated as NAV
plus outstanding debt) of the Company and its subsidiaries (31
December 2019: GBP403.5 million or 38% of GAV).
As at 31 December, total outstanding debt including RCFs was
GBP472.4 million, representing 45% of GAV (31 December 2019:
GBP443.5 million or 41% of GAV).
The Company's Group net debt position, after deducting existing
Group cash balances, is GBP386.5 million, representing 37% of
GAV.
Long-Term Facilities
As at 31 December 2020, GBP391.5 million of long-term debt
facilities were outstanding.
Inflation linked debt facilities represent GBP82.3 million of
total long-term debt outstanding as at 31 December 2020.
At 31 December, the average cost of long-term debt, was 2.69%
per annum, including the cost of inflation linked facilities of
1.33% per annum. The cost of the inflation linked facility is
expected to increase over time in line with the Company's long-term
RPI expectations of 3% in the medium term and 2.25% post 2030 to
reflect RPI reform.
Revolving Credit Facilities
The Company currently holds two separate RCF facilities
totalling GBP105 million. At the end of the period GBP24.1 million
remain undrawn.
At 31 December 2020, the weighted total cost of the RCFs was
2.5% per annum (2019: 2.8%).
The existing RCF facilities will expire in March and August 2022
and are expected to be refinanced during the second half of
2021.
Debt Structure
The following table summarises the debt position of the Company
as 31 December.
Borrower Holding Provider Facility Amount Maturity Applicable Rate
Vehicle Type Outstanding
(m)
FS Holdco Fixed rate,
FS Holdco Ltd 1 MIDIS fully-amortising GBP59.7 Mar-34 3.78%
MIDIS Inflation GBP57.4 Mar-34 RPI Index + 1.08%
linked,
fully-amortising
Santander/Aviva Term loan, GBP17.2 Mar-24 LIBOR + 1.70%
fully-amortising
FS Debtco Ltd FS Holdco SMBC & Term loan, GBP9.82 Mar-22 LIBOR + 1.20%
2 Helaba fully-amortizing
FS Debtco Ltd FS Holdco SMBC & Term loan, GBP154.3 Mar-36 LIBOR + 1.30%
2 Helaba fully-amortizing
Second
Generation
Portfolio 1 FS Holdco Fixed rate,
Ltd 3 MIDIS fully-amortising GBP3.8 Aug-34 4.40%
Second FS Holdco(1) MIDIS Inflation GBP24.9 Aug-34 RPI Index + 1.70%
Generation linked,
Portfolio 1 fully-amortising
Ltd
Foresight FS Holdco CEFC Term loan A$40.7(2) Jun-27 Base rate (2.95%)
Solar 4(1) + margin (2.55%
Australia to 2.80%)
Pty
Ltd
Longreach Finco CEFC Term loan A$5.5(2) Mar-22 Base rate + margin
Pty Ltd (2.57%) (construction
Base rate - 1.55%;
(3.28%) operation
Base rate - 1.40%)
(2.58%)(1)
Base rate
(3.14%)(1)
Longreach Finco MUFG Term loan A$5.5(2) Mar-22
Pty Ltd
Oakey 1 Finco CEFC Term loan A$8.2(2) Mar-22
Pty Ltd
Oakey 1 Finco MUFG Term loan A$8.2(2) Mar-22
Pty Ltd
Oakey 2 Finco CEFC Term loan A$46.1 Oct-22 Base rate (2.48%)
Pty Ltd + 2.25%
TOTAL LONG-TERM GBP391.5
DEBT
FS Holdco Ltd FS Holdco Santander Revolving GBP40.0 Mar-22 LIBOR + 1.75%
1 credit
Foresight FS Top NatWest Revolving GBP40.9 Aug-22 LIBOR + 2.00%
Intermediate Holdco credit
Solar 2
Holding
Ltd
TOTAL REVOLVING GBP80.9
DEBT
TOTAL DEBT GBP472.4
(1) Interest rate swap for 100% of the outstanding debt during
the initial five years, 75% from years six to ten and 50%
thereafter
(2) Australian debt prorated for Company's share of asset
ownership. AUD/GBP exchange rate of 0.56 as at 31 December 2020
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 from financial close. Term loans totalling
A$73.5m linked to three Australian portfolio assets and the
Company's GBP105 million revolving credit facilities will expire in
2022 and are expected to be refinanced during 2021.
Profit and Loss
The Company's loss before tax for the year ended 31 December
2020 is GBP(7.2)m, generating losses of 1.2 pence per share.
All amounts presented in GBPmillion (except Year ended Year ended
as noted) 31 December 31 December
2020 2019
Interest received on Foresight Solar (UK HoldCo)
loan notes 39.6 39.2
Net losses on investments at fair value (39.9) (43.0)
Operating income and losses on fair value
of investments (0.3) (3.8)
Operating expenses (6.9) (6.9)
Loss before tax (7.2) (10.8)
Earnings per share (1.2)p (1.8)p
In the year to 31 December 2020, the operating income and
gains/(losses) on fair value of investments was GBP(0.3) million
which comprised of the receipt of GBP39.6 million of interest on
the Foresight Solar (UK HoldCo) loan notes and GBP39.9m net losses
on investments at fair value incurred in the year.
Operating expenses included in the income statement for the year
were GBP6.9 million, in line with expectations. These comprise
Investment Management fees of GBP5.8 million and GBP1.1 million of
operating expenses. The details on how the Investment Management
fees are charged are set out in note 5 to the financial
statements.
Cash flow
The Company had a total cash balance at 31 December 2020 of
GBP16.9 million (31 December 2019 of GBP18.9 million). This amount
excludes cash held in Subsidiaries. The breakdown of the movements
in cash during the year is shown below.
Cash flows of the Company only for the year to 31 December 2020
(GBPmillion)
All amounts presented in GBPmillion (except Year ended Year ended
as noted) 31 December 31 December
2020 2019
Cash balance at 1 January 18.9 12.3
Net proceeds from share issues - 64.5
Investment in UK HoldCo (equity and loan notes) - (55.0)
Interest on loan notes received from Foresight
Solar (UK HoldCo) 45.1 40.0
Directors' fees and expenses (0.2) (0.2)
Investment Management fees (1) (7.3) (6.0)
Administrative expenses (0.9) (0.7)
Dividends paid in cash to shareholders (38.7) (36.0)
Company cash balance at 31 December 16.9 18.9
(1) Investment management fee for quarter ending December 2019
was settled in the quarter ending March 2020, therefore five
quarters were settled in the year ending 31 December 2020.
Cash flows of the Portfolio for the year to 31 December 2020
(GBPmillion)
For the year to 31 December, the underlying UK and Australian
assets generated GBP90.6m and A$12.3m in revenue from the sale of
electricity and related subsidies. GBP19.7m and A$4.6m of operating
expenses were paid in the same period.
In the year, GBP2.5m was paid in relation to the Second
Generation Portfolio 1 debt facility and $4.2m in relation to the
Australian debt facilities that are not included within the
Group.
All amounts presented in GBPmillion (except UK Australia ($m)
as noted)
Revenue 90.6 12.3
Operating Expenses (19.7) (4.6)
VAT / Tax (SPVs) 0.0 0.8
Solar investment operating cash flow 71.0 8.4
Debt Service (2.5) (4.2)
Insurance Proceeds 0.0 9.5
Capital expenditure (0.1) (8.0)
Other 0.6 (1.0)
Net cash generation from underlying investments(1) 68.9 4.7
Total Net cash generation from underlying
investments(2) 71.6
(1) Relates only to the cash inflows and outflows within the year
to December 2020. No adjustments have been made for timing
differences in revenue receipts and working capital.
Cash flows of the Company and intermediate holding companies for
the year to 31 December 2020 (GBPmillion)
During the year to 31 December the underlying solar assets paid
GBP76.7 million of ordinary distributions to the intermediate
holding companies.
Cash received from underlying solar investments covers the
long-term debt repayments, financing costs and the operating and
administrative expenses of the Company and the intermediate holding
companies as well as the dividends declared to shareholders.
During the year the Group received GBP6.3m in relation to a bond
call on the EPC contract at Shotwick.
The total Group cash balance of GBP85.9 million includes RCF
proceeds of GBP13.7 million in relation to the acquisitions of
Virgen Del Carmen and Andalusia Portfolio to be invested in
2021.
All amounts presented in GBPmillion (except as noted) Year ended
31 December
2020
Cash distributions from solar investments 76.7
Administrative expenses (1.5)
Directors' fees and expenses (0.2)
Investment Management fees (7.5)
Financing costs (net of interest income) (5.5)
Repayments of long-term debt facilities (19.1)
Cash flow from operations 42.9
Acquisition of new investments (27.2)
Bond call proceeds 6.3
Proceeds from revolving credit facility borrowings 40.9
Dividends paid in cash to shareholders (38.7)
Cash movement in the period 24.2
Group cash balance at 1 January 61.7
Group cash balance at 31 December 85.9
Dividend Cover
Total dividends of GBP38.7 million were paid during the year 31
December 2020. Compared with the relevant net cash flows from
operations of the Company and underlying investments of GBP42.9
million, these dividends were covered 1.11 times (31 December 2019:
1.10 times), including the impact of the scrip dividend
programme.
Dividends
The Company has declared dividends for the year ended 31
December 2020 of 6.91 pence.
The Company has met all target dividends since IPO and follows a
progressive dividend policy aiming to grow its dividend over
time.
Dividend Timetable for FY2020
Dividend Amount per Status Payment Date
share
Interim 1 1.72 pence Paid 28 August 2020
Interim 2 1.73 pence Paid 27 November
2020
Interim 3 1.73 pence Paid 5 March 2021
Interim 4 1.73 pence Declared 28 May 2021
TOTAL 6.91 pence
On 9 March 2021 the Board announced a fourth and final dividend
relating to FY2020 of 1.73 pence per share.
Dividend Timetable - Interim 2 Date
Ex-dividend Date 29 April 2021
Record Date 30 April 2021
Payment Date 28 May 2021
Full details of the scrip dividend alternative that is being
offered in respect of the Dividend (the "Scrip Offer"), its
timetable and the Scrip Dividend Scheme can be found in the Scrip
Dividend Alternative Offer Document (the "Scrip Document")
available on the Company's website to view and/or download at
fsfl.foresightgroup.eu/investor-relations/. 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.
Foreign Exchange
The Company is exposed to foreign exchange movements in respect
of its investments in Australia and Spain. 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.
Foreign exchange hedging will not be applied to the cost of the
equity investments, considering the long-term investment strategy
of the Company.
For Australian assets the Company has entered into a rolling
2-year forward contracts strategy for an amount equivalent to
approximately 75% of its expected distributable foreign currency
cash flows at project level. For the Spanish assets recently
acquired, the Company has implemented a 10-year rolling foreign
currency hedging strategy covering c.80% of the expected annual
cash flows.
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 optimising the costs of the hedging
instruments.
Ongoing Charges
The ongoing charges ratio for the year to 31 December was 1.18%
(31 December 2019: 1.14%). This has been calculated using
methodology as recommended by the Association of Investment
Companies ("AIC"). Asset management fees charged by Foresight Group
LLP on an arm's length basis at project level are excluded from the
ongoing charge ratio.
SUSTAINABILITY AND ESG REPORT
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. 2020 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.
2020 Highlights
-- Generated 969,564 MWh of clean electricity, enough to power
334,000 UK homes
-- Avoided 749,000 tonnes of Carbon emissions that would have
been emitted by traditional carbon intensive energy sources
such as coal
-- EU Taxonomy compliance independently verified for two portfolio
assets in the UK and Australia
-- O&M Sustainability Agreements established with major O&M counterparties
which seek to improve working practices across the ESG spectrum
-- Contributed GBP129,000 to the communities in which it operates
via community benefits payments to Local Authorities
EU Taxonomy Asset Accreditation
During 2020 the Company took the landmark step of seeking
independent validation of its compliance with the EU Taxonomy for
Sustainable Finance framework.
According to the EU, 'the EU taxonomy is a classification
system, establishing a list of environmentally sustainable economic
activities. The EU taxonomy is an important enabler to scale up
sustainable investment and to implement the European Green Deal.
Notably, by providing appropriate definitions to companies,
investors and policymakers on which economic activities can be
considered environmentally sustainable, it is expected to create
security for investors, protect private investors from
greenwashing, help companies to plan the transition, mitigate
market fragmentation and eventually help shift investments where
they are most needed.' ([4])
Details of the EU Taxonomy for Sustainable Activities is
available on the European Commission website:
https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
Working with leading environmental consultant Aardvark EM the
Company submitted two of its assets for certification, Paddock Wood
in the United Kingdom and Oakey I in Australia. The review was
conducted against the criteria set out in the EU Taxonomy for
Sustainable Finance's Technical Report dated June 2019, Section
22.3 - Production of Electricity from Solar PV.
The validation of compliance of both assets was confirmed in
December 2020.
The Investment Manager is also seeking to obtain validation for
the newly acquired construction project in Spain, Virgen del
Carmen.
The validation reports are available on the Company's website
https://fsfl.foresightgroup.eu/.
O&M Sustainability Agreements
As reported in the 2020 Interim Reports the Investment Manager
has established an O&M Provider Sustainability Agreement which
has been signed by three of the Company's major O&M providers.
As important stakeholders in the success of the Company, we are
pleased that these key O&M providers have agreed to align their
approach with that of our own in placing sustainability at the
heart of their operations.
This ground-breaking agreement stipulates where the Investment
Manager believes positive environmental and social outcomes can be
achieved within supplier activity. The Investment Manager also
believes that adherence can offer long-term cost benefits and
business opportunities through more efficient use of resources and
intelligent forward planning.
In the long-term, Foresight will expect its O&M providers to
track their own performances in these areas and provide related
evidence. Foresight also expects its O&M providers to
communicate these requirements and standards within their supply
chain.
In order to review the performance of our O&M providers, the
Investment Manager will meet with them once a year and discuss how
these principles worked in practice, as well as working together to
update the principles, if necessary. Foresight plans to integrate
these principles into future O&M contracts.
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 Nations 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 Examples of Foresight Group's commitment
DEVELOPMENT GOALS
Goal 3: "Good Health Achieved through the reduction of pollution
and Well-Being" and emitted greenhouse gases ("GHGs")
Ensure healthy by the installation and management of
lives and promote clean, low-carbon energy generation assets.
well-being for * 334,000 UK homes powered by clean energy in 2020
all at all ages.
* Independent, professionally accredited Health and
Safety consultants appointed to ensure contractors
are selected on the basis of their Health and Safety
competence
* In 2020, c.GBP129,000 of grants provided to local
communities to improve facilities
Goal 7: "Affordable Achieved by reducing reliance on fossil
and Clean Energy" fuels by investment in utility-scale,
Ensure access to renewable energy generation assets.
affordable, reliable, * As at 31 December 2020, the Company's portfolio
sustainable and comprised 58 solar assets, 4 of which are under
modern energy. construction and not yet generating electricity
* 334,000 UK homes powered by clean energy in 2020
Goal 9: "Industry, Achieved by future-proofing energy systems
Innovation and through investment in de-centralised,
Infrastructure" interconnected generation assets, using
Build resilient the latest technologies to maximise electrical
infrastructure, output
promote inclusive * As at 31 December 2020, the Company's portfolio
and sustainable comprises 58 solar assets
industrialization
and foster innovation.
Goal 13: "Climate Achieved by demonstrating commitment to
Action" the 2015 Paris Agreement and contributing
Take urgent action to the globally supported decarbonisation
to combat climate agenda through investment in low-carbon,
change and its renewable energy assets
impacts. * 749,000 tonnes of CO2 avoided
* 83,000 tonnes of oil equivalent ("TOE") saved
Goal 15: "Life Achieved by preserving the integrity of
on Land" land through investment in low-impact
Sustainably manage and low-polluting technologies and introducing
forests, combat environmental initiatives through active
desertification, asset management, supporting biodiversity
halt and reverse and the ecosystem.
land degradation, * Beehives installed across the portfolio sites to
halt biodiversity support crop pollination and honey production
loss.
* 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
* A significant number of 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 2020
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 2020, the Company's operational portfolio produced over
969GWh of renewable energy. Furthermore, using OFGEM's assessment
that the average UK household consumes 2.9 MWh per year, it can be
inferred that the Company's portfolio generated enough clean
electricity to power c. 334,000 UK homes during the period.
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 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 installs 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.
-- 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 working conditions 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.
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.
-- Community investment - The Company supports community benefit
schemes which assist local communities in developing and maintaining
community assets and organisations. In 2020, approximately
GBP129,000 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. Our usual programme of educational
events was unfortunately disrupted in 2020 by the emergence
of COVID-19 but we hope to resume in 2021.
-- Health and well-being - The management and monitoring of Health
and Safety on site is a top priority for O&M contractors, which
are responsible for recording and reporting all Health and
Safety related incidents to the Asset Manager on an ongoing
basis. Furthermore, to improve the management of safety, health,
environmental and quality, and to reinforce best practice and
ensure regulatory compliance, the Asset Manager appoints independent
professionally accredited Health and Safety 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 - The Company has established an
O&M Sustainability Agreement which has been signed by a number
of the Company's largest operational counterparties. The Investment
Manager will monitor compliance with this agreement on an
annual basis via direct engagement and seek to implement improvements
in O&M working practices where necessary.
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:
-- 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 2020 assessment, the Investment Manager achieved
an A+ level rating for both 'Strategy and Governance' and
'Infrastructure', the highest possible rating in each category,
surpassing the peer average and improving on its 2019 score.
Module 2020 Score 2019 Score
Strategy and Governance A+ A+
Infrastructure A+ A
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).
The AIC Code includes an explanation of how this Code 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 Company has applied the Principles and complied with the
Provisions of the AIC Code published in February 2019.
The Board
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 re-elected on 16 July 2020.
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 re-elected on 16 July 2020.
Peter Dicks
Mr Dicks is currently a Director of a number of quoted and unquoted
companies. He is also on the Board of Mercia Fund 1 General Partnership
Limited and Miton UK Microcap Trust plc and Chairman of SVM Emerging
Fund plc and Gabelli Value Plus+ Trust PLC.
Mr Dicks was appointed as a Non-Executive Director on 16 August
2013 and was re-elected on 16 July 2020.
Monique O'Keefe
Mrs O'Keefe is the co-founder of investment consultancy business,
Kairos Wealth Limited. She serves on a number of boards, including
Phoenix Spree Deutschland Limited which is a London Stock Exchange
listed property fund, as well as 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 re-elected on 16 July 2020.
Ann Markey (appointment effective from 4 September 2020)
Ms Markey is an experienced business leader and non-executive
director with a strong financial background and over 20 years'
experience as a senior executive and board director in a number
of businesses. Ms Markey has extensive experience in the electricity
industry, particularly in thermal and renewable generation, including
PV solar and wind. She was a senior executive with ESB, a leading
Irish electricity utility, and with Greencoat Capital, a leading
renewable energy investment manager.
Ms Markey is a Fellow of Chartered Accountants Ireland having trained
and qualified with Arthur Andersen. She is currently a board Member
and Chair of the Audit & Risk Committee of the Sustainable Energy
Authority of Ireland (SEAI), the national sustainable energy authority
of Ireland. Ann is also a Member of the Audit & Risk Committee
of Ireland's national public health service provider, Health Services
Executive (HSE), and a board Member of the Digital Hub Development
Agency (DHDA), Ireland's largest cluster of digital companies.
The Company has a Board of five Non-Executive Directors and all
directors are considered by the Board to be independent. During the
year, the Board recruited Ann Markey as an independent
non-executive director.
Ms Markey's strong financial expertise and substantial renewable
energy experience will not only contribute to the Board's current
mix of skills, experience and knowledge, but also support the
Board's pursuit of diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths as set out in the
Company's diversity policy. The Board now has 40% female
representation on the Board and will continue to look for
opportunities to further promote diversity on the Board under its
diversity policy.
During the year, Chris Ambler was appointed as the Senior
Independent Director ("SID"). As SID, Mr Ambler will be responsible
for providing a sounding board for the Chairman and will serve as
an intermediary for the other Directors and Shareholders.
Mr. Ohlsson, Mr. Ambler, Mrs. O'Keefe and Mr. Dicks were all
reappointed at the Annual General Meeting of the Company held on 16
July 2021. All of these Directors will, again, offer themselves for
re-election at the Company's 2021 Annual General Meeting. Ms Markey
will also stand for election at the 2021 Annual General
Meeting.
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 10 Board meetings were held, including
quarterly meetings and ad hoc meetings.
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. The Investment 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 Audit & Remuneration Remuneration Nomination
Engagement Risk & Nomination(2)
Alex Ohlsson 10/10 2/2 3/3 2/2 0/0 1/1
Peter Dicks 9/10 2/2 3/3 2/2 0/0 1/1
Chris Ambler 9/10 2/2 3/3 2/2 0/0 1/1
Monique O'
Keefe 10/10 2/2 3/3 2/2 0/0 1/1
Ann Markey(1) 3/3 2/2 1/1 0/0 0/0 0/0
(1) appointed September 2020
(2) Remuneration & Nomination Committee was split into two committees
the Remuneration Committee and the Nomination Committee on
27 March 2020 appointment.
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 four 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, Ann Markey 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 year
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, Ann Markey, Monique O'Keefe and Chris Ambler.
The Board had a Remuneration and Nomination Committee, but, on
27 March 2020, resolved to split this Committee into two
committees, a Remuneration Committee and a Nomination Committee.
The Remuneration and Nomination Committee, did, however, meet twice
during the year and its primary responsibility was 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 comprised of Monique O'Keefe
(Chairman), Peter Dicks, Alex Ohlsson and Chris Ambler.
The Remuneration Committee (as a standalone committee) did not
meet during the year, but this committee now is responsible for the
development of remuneration policies and practices that will be
designed to support the Company's strategy and to promote its
long-term success. Further, this committee is responsible for the
implementation of a formal and transparent procedure for developing
policy on remuneration, determining the policy and setting the
remuneration for the Chair. This committee comprises of Monique
O'Keefe (Chairman), Peter Dicks, Ann Markey, Alex Ohlsson and Chris
Ambler.
The Nomination Committee met once during the year (as a
standalone committee) to consider the Company's recruitment of Ann
Markey to the Board. The Nomination Committee is responsible for
leading the process for appointments, ensuring plans are in place
for orderly succession to the Board and to oversee the development
of a diverse pipeline for succession. This committee will also be
responsible for promoting diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths on the Board in line
with the Company's diversity policy. This committee comprises of
Monique O'Keefe (Chairman), Peter Dicks, Ann Markey, Alex Ohlsson
and Chris Ambler.
With the addition of Ms Markey to the Board, and now that her
initial period with the Board is complete, the Board is reviewing
the composition of its Board committees to assess the most
appropriate committee structure to fully leverage the skill sets of
each director. The Nomination Committee is working with the
Chairman of the Board to make recommendations on how the Board
committees could be most efficiently served with the new larger
board. Previously, with only four Board members on the Board, the
Board was of the view that having all board members share the
workload of the board's committee was the most appropriate
approach.
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.
Board Performance Evaluation
The Board undertakes an annual evaluation of its own performance
and that of its Committees through an initial evaluation
questionnaire. The Chair then discusses the results with the Board
and its Committees and takes appropriate action to address any
issues arising from the process. The Board undertakes an externally
facilitated effectiveness assessment every three years.
During the year under review the Company conducted an internal
review of the Board's effectiveness. This review included an
evaluation of the Chairman, each Director, the Board as a whole,
and each of the Board's committee.
Under the leadership of the Nomination Committee, this
effectiveness review identified a number of points for the Board
and the Committee to consider in order to improve its
effectiveness. The Board identified that, while historical
engagement with shareholders and stakeholders has been good,
additional shareholder and stakeholder engagement would be
desirable during 2021. The Board also emphasised the need to ensure
that the Board and its Management Engagement Committee were
providing robust and constructive challenge to the Company's
Investment Manager. As referenced earlier in this section of the
Annual Report, the Board will also be considering the membership of
each of the Board's committees in order to ensure that each
committee has the appropriate skills, experience and expertise and
that the workload of these committees is appropriate distributed
amongst the Company's five directors.
Overall the Board is of the view that the Board, the Chair, each
of the Directors and all Committees have performed well during the
year and have adapted well to the challenging circumstances which
arose during the pandemic. The Board continues to work well with
the Investment Manager in developing the Company's growth strategy
and promoting the long-term success of the Company.
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.
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 an 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 50.
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 positive 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.
Summary of Key Stakeholders
Stakeholder Key Stakeholders How does the Company interact? Key decisions impacting
Group Stakeholder Group
during period
Shareholders
* Institutional & Retail shareholders * Annual General Meeting * Investment in to Spain to support the Company's
growth aspirations
* Regular market announcements
* Changed investment policy to allow up to 10% of GAV
to be invested in BSS
* Investor communications including Quarterly
Factsheets
* Dedicated website
* Investor Roadshows
* Annual and Interim Reports
* Views and feedback sought from institutional
shareholders via Broker
Investment Foresight Group
Manager * Regular Board meetings during the period attended by
key investment personnel
* Meetings to discuss and approve investment
recommendations
* Annual service provider questionnaire
Commercial
Service * Administration agent * Regular scheduled update calls as well as specific * Appointment of Jefferies as corporate broker in March
Providers interactions on corporate actions and new portfolio 2020
acquisitions
* Corporate Broker
* Collaboration on the publication of annual and
* Legal advisors interim reports with multiple service providers.
* Public Relations Agency * Annual service provider questionnaire
* Auditors & Tax advisors
Asset-level
Counterparties * Operations & Maintenance (O&M) contractors * Frequent communication with O&M providers to ensure
adequate oversight of portfolio operations
* Supply chain counterparties
* Focused engagement on value enhancement opportunities,
including rationalisation of service provision for
* Landowners cost savings and/or improved services
* Increased scrutiny of and resource allocation to
emerging risks identified
Stakeholder Key Stakeholders How does the Company interact? Key decisions impacting
Group Stakeholder Group
during period
Local
communities * Local authorities and agencies * Frequent engagement with local authorities to ensure * GBP129,000 distributed to Local Authorities via
safe and compliant operation of our assets community benefit payments during the period
* Community funds
* Actively engage with local authorities on * Educational site visits were paused during the period
construction planning and obtaining necessary due to the Health & Safety risks related to COVID-19
* Land-owners planning permissions
* Local environment * Regular interaction between the owners of land on
which our assets operate and the Investment Advisor's
asset management team
* Conduct educational site visits for local community
schools and colleges
Debt
Providers * Banks * Regular updates provided on covenant compliance and
current positioning
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 uses a risk-based approach to internal control whereby
a Business Risk Assessment is maintained on a risk matrix 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
procedures for managing its capital; its financial risk management
objectives; and its exposures to credit risk and liquidity
risk.
An evaluation of the cash flow impact of reduced generation of
electricity, reduced power prices and the removal of the three
highest generating assets in the portfolio, for the period to 30
June 2022 (the "going concern assessment period"), was undertaken
by the Investment Manager and approved by the board of Directors.
The evaluation demonstrated the Company would be able to meet it
liabilities and could continue to meet its dividend target in the
going concern assessment period. It was also noted no debt
covenants would be breached in the same period.
Consequently, the Directors are confident that the company will
have sufficient funds to continue to meet its liabilities as they
fall due for the going concern assessment period and have therefore
prepared the financial statements on a going concern basis.
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 31 December 2023, 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 31
December 2023.
The Directors have determined that a three year period to 31
December 2023 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 and emerging 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 the 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 2021 Annual General Meeting.
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 Committee comprises five Directors: Monique
O'Keefe (Chairman), Alex Ohlsson, Ann Markey, 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 Committee will consider seeking external guidance from an
independent remuneration consultant during 2021 to review the fees
paid to the Directors.
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
2020 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 16 July 2020 for the
financial year to 31 December 2020 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'
Directors' fees for year
fees for the ended
year ending 31 December
31 December 2020
2021
Alex Ohlsson (Chairman) GBP70,000 GBP70,000
Chris Ambler GBP55,000 GBP55,000
Peter Dicks GBP45,000 GBP45,000
Monique O'Keefe GBP45,000 GBP45,000
Ann Markey(1) GBP45,000 GBP14,522
(1) Ann Markey's annual fee on joining the Board was GBP45,000
per annum. Fees paid during 2020 reflect the fact that she
joined the Board in on 4 September 2020.
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.
The Board, supported by its Nomination Committee, assesses the
need for succession planning on an annual basis. The Nomination
Committee has recently considered the tenure of Mr Ohlsson, Mr
Ambler and Mr Dicks. In light of the high performance of the
directors, the longer term nature of the assets, and the refreshed
board composition (following the recent appointments of Mrs O'Keefe
and Ms Markey), the Nomination Committee has recommended to the
Board that the continued service of these directors on the Board be
welcomed.
Directors' Interests
Directors who had interests in the shares of the Company as at
31 December 2020 are shown below. The Directors do not have any
options over shares. Mr Dicks had an investment programme in place
during the year whereby the dividends paid to him during the year
were used by him to acquire further shares in the Company.
Ordinary shares Ordinary shares
of nil par of nil par
value held value held
on 31 December on 31 December
2020 2019
Alex Ohlsson (Chairman)(1) 25,000 25,000
Chris Ambler 36,162 26,524
Peter Dicks(2) 73,184 68,782
Monique O'Keefe 0 0
Ann Markey 0 N/A
(1) Shares legally and beneficially owned by a personal pension
company.
(2) At the time of publication Peter Dicks holds 73,184 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 2021.
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.
Historically, the Board considered it appropriate to have the
Chair of the Board on the Audit and Risk Committee given the size
of the Board and in order to take advantage of the experience and
expertise held by Mr Ohlsson. With the growth of the Board to five
directors in 2020 and the additional relevant financial experience
and expertise held by Ms. Markey, the Board will review the
composition of the Audit and Risk Committee during 2021 and will
consider if it remains necessary for the Chair of the Board to
continue to serve on the Audit and Risk Committee.
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 the aforementioned.
The majority of FS Holdco's and FS Debtco'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. FS Holdco 4 contains four assets
held at cost at 31 December 2020. 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 has historically employed two independent
energy consultants to provide forward looking power price forecasts
which are a key input into portfolio valuations. Given the
increased volatility witnessed in short term-power prices during
the year the Investment Manager has added an additional
consultant's power forecasts to its valuations in an attempt to
improve the accuracy of this key input.
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 its IPO in 2013, the first
financial year end being 31 December 2014. A new audit partner was
appointed in November 2017, and the current audit partner rotated
onto the Company's audit in November 2020.
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
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.
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditor is unaware; and each director has taken all the steps that
they ought to have taken as a director to make themselves aware of
any relevant audit information and to establish that the Company's
auditor is aware of that information.
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
8 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
spain
Virgen del Carmen, Huelva Andalusia Portfolio (3 assets)
Under construction Under construction
Subsidy-free Subsidy-free
Acquisition Date Acquisition Date
September '20 December '20
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 2020 which
comprise the Statement of Profit and Loss and Other 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, in accordance with International
Financial Reporting Standards as adopted by the EU, of the
state of the Company's affairs as at 31 December 2020, and
of its loss for the year then ended; and
-- have been properly prepared in accordance with 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 believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were first appointed as auditor by the Directors to complete
the audit of the Company for the period ended 31 December 2014. The
period of total uninterrupted engagement is for the 7 financial
periods ended 31 December 2020. We have fulfilled our ethical
responsibilities under, and we remain independent of the Company in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities. No
non-audit services prohibited by that standard were provided.
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 matter in arriving at our audit opinion above,
together with our key audit procedures to address that matter 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. This matter was 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 this matter.
Valuation of Subjective valuation: Our procedures included:
unquoted investments 86% (2019: 86%) of Control design:
(GBP502.3million; the Company's total * We obtained an understanding of the Company's
2019: GBP542.2 assets (by value) is processes for determining the fair value of unquoted
million) held in investments investments. We documented and assessed the design
Refer to page where no quoted market and implementation of the investment valuation
65 (Audit & price is available. processes and controls.
Risk Committee This unquoted investment
Report), page at fair value through
94 (accounting profit or loss represents * We performed the tests below rather than seeking to
policy) and a 100% holding in Foresight rely on any of the Company's controls because the
page 97 (financial Solar (UK Holdco) Ltd nature of the balance is such that we would expect to
disclosures). ("the Holdco"). As obtain audit evidence primarily through the detailed
Risk level the underlying investments procedures described.
remains unchanged held by the Holdco
from prior are all held at fair
year. value, the valuation Methodology choice:
of financial assets * In the context of observed industry best practice and
is determined by reference the provisions of the International Private Equity
to the underlying investments. and Venture Capital Valuation Guidelines (December
Fair value is established 2018), we challenged the appropriateness of the
in accordance with valuation basis selected.
the International Private
Equity and Venture
Capital Valuations Historical comparisons:
Guidelines. * We completed a retrospective assessment over the
The valuation of unlisted actual performance of assets during the year. We
investments requires requested historical revenue and EBITDA information
significant estimation for a sample of assets and compared against the
based on unobservable Company's previous forecasts. We made inquiries over
inputs, such as discount the events during the year which had an effect on the
factors and useful operations and the performance of assets; most
economic lives of assets. notably performance ratio and revenue generation.
As a result, there
is a high degree of
estimation uncertainty Our valuations experience:
in relation to the With the assistance of our valuation
valuation of investments specialists:
with a potential range * We challenged the key assumptions affecting the
of reasonable outcomes unquoted investments valuation such as discount rates
greater than our materiality ,
for the financial statements the useful economic life of underlying assets,
as a whole. The financial inflation rates and power price curves. We compared
statements (note 16) key assumptions to external sources such as financial
disclose the sensitivity information of comparable businesses, lease
estimated by the Company. agreements for the assets and third party power price
reports as applicable.
* We challenged the reasonableness of the cashflows
used in the valuation models. We agreed key inputs to
the revenue and expense cashflows for each asset to
due diligence reports prepared by third party
engineers who we assessed over their competence,
objectivity and independence. We agreed the subsidy
revenue and wholesale revenue to agreements in place
such as Power Purchase Agreements. Significant
forecasted expenses were agreed to underlying
supporting documentation. This included reference to
supplier invoices received for expenses to date (as a
basis for future costs) and where possible to
underlying agreements for i.e. leases and operations
and maintenance contracts.
* We independently constructed discounted cash flow
models for each underlying asset and compared the
resultant valuation to the Company's reported
valuation.
Comparing valuations:
* Where a recent transaction has been used to value an
investment, we obtained an understanding of the
circumstances surrounding the transaction and whether
it was considered to be on an arms-length basis and
suitable as an input into a valuation.
Assessing transparency:
* We considered the appropriateness, in accordance with
relevant accounting standards, of the disclosures in
respect of unquoted investments and the effect of
changing one or more inputs to reasonably possible
alternative valuation assumptions.
Our findings:
* We found the Company's valuation of unquoted
investments to be balanced (2019: balanced).
In the prior year we reported a key audit matter in respect of
the impact of uncertainties due to the UK exiting the European
Union. Following the trade agreement between the UK and the EU, and
the end of the EU-exit implementation period, the nature of these
uncertainties has changed. We continue to perform procedures over
material assumptions in forward looking assessments, however we no
longer consider the effect of the UK's departure from the EU to be
a separate key audit matter.
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
GBP5.83m (2019: GBP6.00m), determined with reference to a benchmark
of total assets, of which it represents 1% (2019: 0.9%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at 75% (2019: 75%) of
materiality for the financial statements as a whole, which equates
to GBP4.37m (2019: GBP4.50m). We applied this percentage in our
determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP0.29m (2019:
GBP0.30m) 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 performed by a single audit team.
4. 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 the period ending 30 June 2022 ("the going
concern assessment period").
We used our knowledge of the Company, its industry, and the
general economic environment to identify the inherent risks to its
business model and analysed how those risks might affect the
Company's financial resources or ability to continue operations
over the going concern period. The risks that we considered most
likely to adversely affect the Company's available financial
resources, metrics relevant to debt covenants and its ability to
operate over this period were:
-- The impact of a significant reduction in the valuation of
the assets in the portfolio, driven predominately by decreases
in revenue, which impact the Company and its subsidiaries
ability to meet the covenants in place; and
-- The deterioration of the liquidity of the investment portfolio
which will impact the Company and its subsidiaries' ability
to meet their liabilities as they fall due.
We assessed downside scenarios in which these risks could
plausibly affect the liquidity and covenant compliance of the
Company in the going concern period. This included scenarios which
we considered to be beyond what is plausible to assess the level of
headroom available. This took into account the Company's current
and projected cash and liquid asset positions.
We considered whether the going concern disclosure in note 2.2
to the financial statements gives a full and accurate description
of the Directors' assessment of going concern, including the
identified risks and related sensitivities.
Our conclusions based on this work:
-- We consider that the Directors' use of the going concern basis
of accounting in the preparation of the financial statements
is appropriate;
-- We have not identified, and concur with the Directors' assessment
that there is not, a material uncertainty related to events
or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a
going concern for the going concern period; and
-- We have nothing 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 the going concern period,
and we found the going concern disclosure in note 2.2 to be
acceptable.
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 above conclusions are not a guarantee that the
Company will continue in operation.
5. Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-- Enquiring of the Directors and Administrator as to the Company's
high-level policies and procedures to prevent and detect fraud,
as well as whether they have knowledge of any actual, suspected
or alleged fraud;
-- Assessing the segregation of duties in place between the Directors,
the Administrator and the Company's Investment Manager; and
-- Reading Board minutes, Audit Committee minutes and quarterly
Compliance reports prepared by the Administrator.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in particular
to the risk that management may be in a position to make
inappropriate accounting entries. We evaluated the design and
implementation of the controls over journal entries and other
adjustments and made inquiries of the Administrator about
inappropriate or unusual activity relating to the processing of
journal entries and other adjustments. We substantively tested all
material post-closing entries by comparing the identified entries
to supporting documentation and, based on the results of our risk
assessment procedures and understanding of the process, including
the segregation of duties between the Directors and the
Administrator, no further high-risk journal entries or other
adjustments were identified.
On this audit we have rebutted the fraud risk related to revenue
recognition because the revenue is non-judgemental and
straightforward, with limited opportunity for manipulation. We did
not identify any significant unusual transactions or additional
fraud risks.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience and
through discussion with the Directors and the Administrator (as
required by auditing standards) and discussed with the Directors
the policies and procedures regarding compliance with laws and
regulations.
As the Company is regulated, our assessment of risks involved
gaining an understanding of the control environment including the
entity's procedures for complying with regulatory requirements.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Company is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation as set out by Companies (Jersey)
Law 1991, taxation legislation, and the Listing Rules, and we
assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement
items.
Secondly, the Company is subject to many other laws and
regulations where the consequences of non-compliance could have a
material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation. We identified the following areas as those most likely
to have such an effect: anti-bribery, data protection, anti-money
laundering, market abuse regulations and certain aspects of company
legislation recognising the financial and regulated nature of the
Company's activities and its legal form. Auditing standards limit
the required audit procedures to identify non-compliance with these
laws and regulations to enquiry of the Directors and the
Administrator and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6. 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 and emerging risks and longer-term
viability
We are required to perform procedures to identify whether there
is a material inconsistency between the Directors' disclosures in
respect of emerging and principal risks and the viability
statement, and the financial statements and our audit
knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
-- the Directors' confirmation within the Viability Statement
on page 62 that they have carried out a robust assessment of
the emerging and principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency and liquidity;
-- the Principal and Emerging Risks disclosures describing these
risks and how emerging risks are identified, 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.
Based on the above procedures, we have concluded that the above
disclosures are materially consistent with the financial statements
and our audit knowledge.
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
judgements 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 perform procedures to identify whether there
is a material inconsistency between the Directors' corporate
governance disclosures and the financial statements and our audit
knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
-- 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;
-- the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
audit committee considered in relation to the financial statements,
and how these issues were addressed; and
-- the section of the annual report that describes the review
of the effectiveness of the Company's risk management and internal
control systems.
We are required to review the part of the Corporate Governance
Statement relating to the Company's compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review. We have nothing to report in this respect.
7. 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:
-- proper accounting records have not been kept by the Company,
or
-- proper returns adequate for our audit have not been received
from branches not visited by us; or
-- the Company's accounts 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.
8. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 67,
the Directors are responsible for: the preparation of financial
statements that 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 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 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 .
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.
Fang Fang Zhou
for and on behalf of KPMG LLP
Chartered Accountants and Recognised Auditor
15 Canada Square
Canary Wharf
London
E1 5GL
08 March 2021
FINANCIALS
Statement of Profit and Loss and Other Comprehensive Income
As at 31 December 2020
31 December 31 December
2020 2019
Notes GBP'000 GBP'000
Revenue
Interest income 4 39,630 39,199
Loss on investments held at fair value
through profit or loss 14 (39,900) (43,001)
----------- -----------
(270) (3,802)
----------- -----------
Expenditure
Administration fees 6 (189) (186)
Directors' fees 7 (230) (196)
Management fees 5 (5,796) (5,967)
Other expenses 8 (712) (600)
----------- -----------
Total expenditure (6,927) (6,949)
----------- -----------
Loss before tax for the year (7,197) (10,751)
Taxation 2.7 - -
----------- -----------
Loss for the year (7,197) (10,751)
Other comprehensive income - -
----------- -----------
Loss and other comprehensive loss for
the year (7,197) (10,751)
----------- -----------
Loss per Ordinary Share (pence per Share) 9 (1.19) (1.89)
All items above arise from continuing operations, there have
been no discontinued operations during the year.
The accompanying notes on pages 88 to 118 form an integral part
of these Financial Statements.
Statement of Financial Position
As at 31 December 2020
31 December 31 December
2020 2019
Notes GBP'000 GBP'000
Assets
Non-current assets
Investments held at fair value through
profit or loss 14 502,286 542,186
----------- -----------
Total non-current assets 502,286 542,186
Current assets
Interest receivable 10 63,137 68,553
Trade and other receivables 11 275 255
Cash and cash equivalents 12 16,875 18,933
----------- -----------
Total current assets 80,287 87,741
----------- -----------
Total assets 582,573 629,927
----------- -----------
Equity
Retained earnings (45,491) 3,102
Stated capital and share premium 17 627,649 624,922
----------- -----------
Total equity 582,158 628,024
----------- -----------
Liabilities
Current liabilities
Trade and other payables 13 415 1,903
----------- -----------
Total current liabilities 415 1,903
Total liabilities 415 1,903
----------- -----------
Total equity and liabilities 582,573 629,927
----------- -----------
Net Asset Value per Ordinary Share 18 95.80 103.77
The Financial Statements on pages -- to -- were approved by the
Board of Directors and signed on its behalf on -- March 2021
by:
Alexander Ohlsson
Chairman
Statement of Changes in Equity
For the year ended 31 December 2020
The accompanying notes on pages 88 to 118 form an integral part
of these Financial Statements.
Stated Capital
and Share Retained
Premium Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January 2020 624,922 3,102 628,024
Total comprehensive loss for
the year:
Loss for the year - (7,197) (7,197)
Transactions with owners, recognised
directly in equity:
Dividends paid in the year 21 - (38,669) (38,669)
Issue of Scrip Dividends 17 2,727 (2,727) -
-------------- --------- --------
Balance as at 31 December 2020 627,649 (45,491) 582,158
-------------- --------- --------
For the year 1 January 2019 to 31 December 2019:
Stated Capital
and Share Retained
Premium Earnings Total
Notes GBP'000 GBP'000 GBP'000
Balance as at 1 January 2019: 558,798 51,460 610,258
Total comprehensive loss 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
-------------- --------- --------
The accompanying notes on pages 88 to 118 form an integral part
of these Financial Statements.
Statement of Cash Flows
For the year ended 31 December 2020
31 December 31 December
2020 2019
Notes GBP'000 GBP'000
Loss for the year after tax (7,197) (10,751)
Adjustments for:
Unrealised loss on investments 14 39,900 43,001
----------- -----------
Operating cash flows before changes
in working capital 32,703 32,250
Decrease in interest receivables 10 5,416 785
(Increase)/decrease in trade and
other receivables 11 (20) 10
(Decrease)/increase in trade and
other payables 13 (1,488) 89
----------- -----------
Net cash inflow from operating activities 36,611 33,134
----------- -----------
Investing activities
Increase in shareholder loans to
subsidiary 14 - (55,000)
----------- -----------
Net cash outflow from investing
activities - (55,000)
----------- -----------
Financing activities
Dividends paid 21 (38,669) (35,997)
Issue costs paid 17 - (810)
Proceeds from issue of shares 17 - 65,324
----------- -----------
Net cash (outflow)/inflow from financing
activities (38,669) 28,517
----------- -----------
Net (decrease)/increase in cash
and cash equivalents (2,058) 6,651
Cash and cash equivalents at the
beginning of the year 18,933 12,282
----------- -----------
Cash and cash equivalents at the
end of the year 12 16,875 18,933
----------- -----------
The accompanying notes on pages 88 to 118 form an integral part
of these Financial Statements.
Notes to the Financial Statements
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").
UK Holdco has investments in four subsidiaries: 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"). FS Holdco 3 in turn has an investment in a subsidiary,
SGP Holdings 1 Limited ("SGP Holdings 1") which in turn holds has
an investment in Second Generation Portfolio 1 ("SGP 1"). Topco in
turn has an investment in a subsidiary, Foresight Intermediate
Solar Holdings Limited ("FISH"); FISH in turn has an investment in
a subsdiary, FS Holdco 2 Limited ("FS Holdco 2") and FS Holdco 2 in
turn has an investment in a subsidiary, FS Debtco Limited ("FS
Debtco"). FS Holdco, FS Debtco, FS Holdco 3, SGP 1 and FS Holdco 4
invest in further holding companies (the "SPVs") which then invest
in the underlying solar investments.
The principal activity of the Company, UK Hold Co, FS Holdco,
Topco, FISH, FS Holdco 2, FS Debtco, FS Holdco 3, SGP Holdings 1,
SGP 1, FS Holdco 4, and the SPVs (together "the Group") is
investing in operational UK and Australian ground based solar power
plants. During the year the Group acquired a single Spanish asset
in September and a portfolio of three assets in December, all
ground base solar plants, through FS Holdco 4. FS Holdco 4
purchased these new Spanish ground solar power plants through its
new acquisition Foresight Solar Spain Holding S.L ("FSSH").
2. Summary of significant accounting policies
2.1 Basis of presentation
The Financial Statements for the year ended 31 December 2020
(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
During 2020, since the outbreak of COVID-19 global commercial
activities have been adversely impacted. Although market conditions
stabilised towards the end of 2020 the impact of COVID-19 continues
to be monitored along with the potential for another global
economic slowdown following further outbreaks of the virus.
The Directors acknowledge the pandemic has impacted the
Financial Statements as at 31 December 2020 as a result of lower
power price forecasts reducing the net asset value. However, the
Directors do not believe there is any impact on the Company's
ability to continue as a going concern. The Directors refer to cash
flow forecasts prepared by the Investment Manager for the period to
30 June 2022 (the "going concern assessment period"), which
includes scenarios considered to be beyond what is plausible.
In making this assessment the Investment Manager has considered
the largely predictable revenue streams stemming from the
underlying portfolio companies trading on solar sites, a large
proportion of which is fixed through PPAs as well as government
backed subsidies. Despite the reduction in power prices driven by a
reduced forecast electricity demand as a result of COVID-19 induced
economic restrictions, the Directors have concluded that the
impacts of movements in market prices do not significantly impact
the Company's ability to continue as a going concern. The Directors
have considered forward looking power prices assumptions by third
party providers in making this assessment.
The Investment Manager continues to monitor developments
relating to COVID-19 and continues to coordinate its operational
response based on existing business continuity plans and on
guidance from global health organisations, relevant governments,
and general pandemic response best practices.
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 subsidiaries of the Company, FS Holdco Limited, FS Debtco
Limited and Foresight Intermediate Solar holding Limited are
required to complete quarterly debt compliance reporting. The three
covenants that the subsidiaries are required to report on are the
12 months look back debt service cover ratio, the 12 months look
forward debt service cover ratio and the loan life cover ratio. The
Directors are happy to confirm that there were no instances of
non-compliance throughout the year or subsequently.
An evaluation of the going concern was prepared by the Company's
Investment Manager, then approved by the audit committee and the
board of Directors. This evaluation included cash flow workings
from 1 January 2021 until 30 June 2022 and therefore demonstrates
the Company is able to continue operations for the going concern
assessment period.
Cashflow analysis was completed to consider the following
negative scenarios. These scenarios were completed individually and
not analysed together. In each of the scenarios, the forecasts
display a significant level of headroom above minimum cash and
covenant requirements throughout the going concern assessment
period.
1) The projects consistently generate P90 level of electricity
output;
2) Power prices were reduced by 10% across the portfolio;
and
3) The three highest yielding projects, Wymeswold, Sandridge
and Shotwick stopped distributing.
If any of these scenarios were to materialise, the Company could
still meet its target dividend paid per share for the going concern
assessment period. However, the Directors would continue to review
on a periodic basis whether the dividend paid per share is
appropriate considering the reduced cash flow. The cash flow
forecasts show that operating costs would still be covered, but the
cash balance would reduce gradually during the going concern
assessment period, without causing any issues with operational
ability.
Consequently, the Directors are confident that the Company will
have sufficient funds to continue to meet its liabilities as they
fall due for the going concern assessment period and have therefore
prepared the financial statements on a going concern basis.
The financial statements do not include any adjustments that
would result from the basis of preparation being inappropriate.
2.3 Changes in accounting policies and disclosures
New and revised IFRSs adopted by the Company
The accounting policies adopted are consistent with those of the
previous financial year, except for the following new and amended
IFRS effective for the Company as of 1 January 2020. Management
have assessed all new standards and amendments to standards and
interpretations that are effective for annual periods after 1
January 2020. This adoption has not had any material impact on the
disclosures or on the amounts reported in these financial
statements:
IAS 1 'Presentation of financial statements' and IAS 8
'Accounting policies, changes in accounting estimates and error' on
definition of material
These amendments to IAS 1, IAS 8 and consequential amendments to
other IFRSs:
- use a consistent definition of materiality throughout IFRSs
and the Conceptual Framework for Financial Reporting;
- clarify the explanation of the definition of material;
and
- incorporate some of the guidance in IAS 1 about immateriality
information.
IFRS 3 'Business Combinations'
On 22 October 2018, the IASB issued 'Definition of a Business
(Amendments to IFRS 3)' aimed at resolving the difficulties that
arise when an entity determines whether it has acquired a business
or a group of assets.
The amendments are effective for business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after 1 January 2020.
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 2020 that
are deemed to be material to the Company.
2. Summary of significant accounting policies (continued)
2.4 Consolidation
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.
Under the definition of an investment entity, the entity should
satisfy all three of the following tests:
-- obtains funds from one or more investors for the purpose
of providing those investors with investment management
services; and
-- commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both (including having an exit strategy
for investments); and
-- measures and evaluates the performance of substantially
of all its investments on a fair value basis.
In assessing whether the Company meets the definition of an
investment entity set out in IFRS 10 the Directors note that:
-- the Company is an investment company that invests funds
obtained from multiple investors in a diversified portfolio
of solar energy infrastructure assets and related infrastructure
assets and has appointed the Investment Manager to manage
the Company's investments;
-- the Company's purpose is to invest funds for investment
income and potential capital appreciation and will exit
its investments at the end of their economic lives or
when their planning permissions or leasehold land interests
expire (unless it has repowered their sites) and may also
exit investments earlier for reasons of portfolio balance
or profit; and
-- the Board evaluates the performance of the Company's investments
on a fair value basis as part of the quarterly management
accounts review and the Company values its investments
on a fair value basis twice a year for inclusion in its
annual and interim financial statements with the movement
in the valuations taken to the Income Statement and, therefore,
is measured within its earnings.
Taking these factors into account, the Directors are of the
opinion that the Company has all the typical characteristics of an
investment entity and meets the definition set out in IFRS 10.
The Directors believe the treatment outlined above provides the
most relevant information to investors.
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. Should
subsidiaries fail to meet the definition of Investments entity the
Company would have to consolidate its subsidiaries.
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. Summary of significant accounting policies (continued)
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 (2019: 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 which are in turn determined by the fair value of its
underlying 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, Topco, FISH, FS Holdco 2 and FS Debtco
are fair valued using their net asset value as reported at year
end.
2. Summary of significant accounting policies (continued)
2.9 Financial instruments (continued)
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. In accordance
with IFRS 13 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.
The financial instruments at amortised cost are non-derivative
financial assets and liabilities with fixed or determinable
payments that are not quoted in 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.
2.9.2.2 Other financial instruments at amortised cost
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. Summary of significant accounting policies (continued)
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 through equity in the Company's Financial Statements in
the period in which the dividends are approved by the Company's
shareholders.
Under Jersey law, the Company can pay dividends in excess of its
retained earnings provided it satisfies the solvency test
prescribed under the Companies Law (Jersey) 1991. The solvency test
considers whether the Company is able to pay its debts when they
fall due, and whether the value of the Company's assets is greater
than its liabilities. The Company satisfied the solvency test in
respect of all dividends declared or paid in the year.
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 judgement is related 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.
In assessing whether the Company meets the definition of an
investment entity set out in IFRS 10 the Board used the below
criteria to make their significant judgement.
-- the Company is an investment company that invests funds
obtained from multiple investors in a diversified portfolio
of solar energy
-- infrastructure assets and related infrastructure assets
and has appointed the Investment Manager to manage the
Company's investments;
-- the Company's purpose is to invest funds for investment
income and potential capital appreciation and will exit
its investments at the end of their economic lives or when
their planning permissions or leasehold land interests
expire (unless it has repowered their sites) and may also
exit investments earlier for reasons of portfolio balance
or profit; and
-- the Board evaluates the performance of the Company's investments
on a fair value basis as part of the quarterly management
accounts review and the Company values its investments
on a fair value basis twice a year for inclusion in its
annual and interim financial statements with the movement
in the valuations taken to the Income Statement and, therefore,
is measured within its earnings.
Taking these factors into account, the Directors are of the
opinion that the Company has all the typical characteristics of an
investment entity and meets the definition set out in IFRS 10.
3. Critical accounting estimates and judgements (continued)
The Board considers that the fair value of the underlying
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 and in line with the applicable standards. Directors 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.
The COVID-19 pandemic has impacted the net asset value of the
investments as a result of lower power price forecasts used in
determining the valuation of investments.
4. Interest income
31 December 31 December
2020 2019
GBP'000 GBP'000
Interest on loan notes 33,442 34,110
Interest on shareholder loans 6,188 5,089
----------- -----------
39,630 39,199
----------- -----------
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 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 (2019: 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. The shareholder loan balance at period end is
GBP304,316,450 (2019: GBP304,316,450). These loans form part of the
fair value of the investments as per note 14.
5. Management fees
The investment manager of the Fund was Foresight Group CI
Limited. Following an internal restructuring at Foresight Group on
26 February 2020, Foresight Group LLP (the "Investment Manager")
has replaced Foresight Group CI Limited as investment manager to
the Fund.
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 2020, the Investment Manager was entitled to a
management fee of GBP5,795,475 (2019: GBP5,966,823) of which
GBP34,410 was outstanding as at 31 December 2020 (2019:
GBP1,571,139).
6. Administration 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 2020, total
administration and accountancy fees were GBP188,925 (2019:
GBP186,358) of which GBP91,100 was outstanding as at 31 December
2020 (2019: GBP45,500).
7. Staff costs and Directors' fees
No members of staff were employed during the year (2019:
nil).
Total directors' fees were GBP229,552 (2019: GBP196,444).
8. Other Expenses
31 December 31 December
2020 2019
GBP'000 GBP'000
Legal and professional fees 482 542
General expenses 230 58
----------- -----------
712 600
----------- -----------
Included within legal and professional fees is GBP40,641 (2019:
GBP32,500) relating to the audit of these financial statements. The
total audit fee paid to KPMG LLP in relation to the audit of the
Group is GBP200,000 for the year ended 31 December 2020 (2019:
GBP180,000). There were no other fees paid to the auditors for
non-audit services during the year (2019: Nil).
9. Loss per Ordinary share - basic and diluted
The basic loss per Ordinary Share for the Company is 1.19 pence
per share (2019: basic loss of 1.89 pence per share). This is based
on the loss for the year of GBP7,196,980 (2019: GBP10,750,671 loss)
and on 606,924,133 (2019: 567,804,584) 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
2020 2019
GBP'000 GBP'000
Interest receivable on loan notes 39,176 50,780
Interest receivable on shareholder loans 23,961 17,773
----------- -----------
63,137 68,553
----------- -----------
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
2020 2019
GBP'000 GBP'000
Prepaid expenses 25 5
Other receivables 250 250
----------- -----------
275 255
----------- -----------
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
2020 2019
GBP'000 GBP'000
Cash at bank 16,875 18,933
------------ ------------
16,875 18,933
------------ ------------
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
2020 2019
GBP'000 GBP'000
Accrued expenses 228 1,716
Amounts due to subsidiaries* 187 187
----------- -----------
415 1,903
----------- -----------
*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
2020 2019
GBP'000 GBP'000
Investment in UK Hold Co Equity - -
Loans 502,286 542,186
----------- -----------
502,286 542,186
----------- -----------
Book cost as at 1 January 554,315 499,315
Opening investment holding (loss)/gains (12,129) 30,872
----------- -----------
Valuation as at 1 January 542,186 530,187
Movements during the year
Purchase at cost (loans drawn down) - 55,000
Investment holding losses (39,900) (43,001)
----------- -----------
Valuation as at 31 December 502,286 542,186
----------- -----------
Book cost as at 31 December 554,315 554,315
Closing investment holding losses (52,029) (12,129)
----------- -----------
502,286 542,186
----------- -----------
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"). FS
Holdco 3 has one investment in SGP Holdings 1 Limited ("SGP
Holdings 1") which in turn has one investment in Second Generation
Portfolio 1 ("SGP 1"). 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, SGP Holdings 1, 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, SGP 1 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 16) for solar projects that
are operational.
14. Investments held at fair value through profit or loss (continued)
Fair value hierarchy
(a) 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, 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.
categorised between those whose fair value is based on:
As at 31 December 2020:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments held at fair
value through profit or
loss - - 502,286 502,286
-------- -------- -------- --------
- - 502,286 502,286
-------- -------- -------- --------
As at 31 December 2019:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments held at fair
value through profit or
loss - - 542,186 542,186
-------- -------- -------- --------
- - 542,186 542,186
-------- -------- -------- --------
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
of shares
Direct and voting
or indirect Country of rights
Name holding incorporation Principal activity 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%
Proportion
of shares
Direct and voting
or indirect Country of rights
Name holding incorporation Principal activity held
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%
Foresight Solar Spain Holding
S.L ("FSSH") Indirect Spain 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%
Wally Corner Limited ("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%
Proportion
of shares
Direct and voting
or indirect Country of rights
Name holding incorporation Principal activity held
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 Solar") 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%
Virgen del Carmen Solar S.L("Virgen") Indirect Spain Investment 100%
Solar Energy Veintisiete
S.L ("Lorca") Indirect Spain Investment 100%
Investments in associates
Proportion
of shares
Direct and voting
or indirect Country of rights
Name holding incorporation Principal activity 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. The Spanish assets held by FS Holdco 4
were valued at cost as at 31 December 2020 as these projects were
not yet operational, and are therefore not included in the
sensitivity analysis on the following pages.
The Investment Manager considers climate risk on the portfolio
of investments. This is reflected in the discount rate as with
other risks discussed.
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 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.
The investment manager has adjusted the sensitivities
calculation methodology from an asset level cash flows only basis
to a calculation based on asset level cash flow less holdco level
debt cash outflows. This has resulted mainly in a reduction of the
Discount rate sensitivity disclosed below.
16. Fair value of the investments in unconsolidated entities (continued)
The base valuation of GBP555.0 million represents the levered
discounted value of future cash flows of the underlying operational
assets with assets under construction held at cost, less the long
term debt held at holding companies level. The valuation of the
Australian assets is net of debt.
Discount rate
The weighted average discount rate used is 6.74% (2019: 7.06%).
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 GBP579.5m GBP567.1m GBP555.0m GBP543.4m GBP532.2m
(GBPm)
Change in portfolio GBP24.5m GBP12.0m (GBP11.6m) (GBP22.9m)
valuation (GBPm)
NAV per share change
(pence) 4.0p 2.0p 95.8p (1.9p) (3.8p)
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.
-10.0% Base +10.0%
Portfolio valuation (GBPm) GBP449.2m GBP555.0m GBP657.6m
Change in portfolio valuation (GBPm) (GBP105.9m) GBP102.5m
NAV per share change (pence) (17.4p) 95.8p 16.9p
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 1.3%.
16. Fair value of the investments in unconsolidated entities (continued)
Power Price (continued)
During the year, c.80% of the investment's operational revenues
came from Regulatory support mechanisms. The remaining c.20% of
revenue is derived from electricity sales which are subject to
power price movements. On a net present value basis, future
electricity sales which are subject to price movements represent
c48% of total revenues.
The latest blended curves applied to the underlying portfolio is
an average -8% below the pre COVID-19 curve. This includes the
current impact of COVID-19, and anticipated recovery, which has
driven down demand for fuels and thereby reducing wholesale power
prices.
-20.0% -10.0% Base +10.0% +20.0%
Directors' valuation GBP455.4m GBP505.5m GBP555.0m GBP604.0m GBP652.6m
(GBPm)
Change in portfolio (GBP99.6m) (GBP49.6m) GBP48.9m GBP97.6m
valuation (GBPm)
NAV per share change
(pence) (16.4p) (8.2p) 95.8p 8p 16.1p
Inflation
A variable of 0.5% to 1.0% is considered reasonable given
historic fluctuations. An inflation rate of 3.00% (2019: 2.75%) has
been used to 2030 and then 2.25% (2019: 2.75%) thereafter.
-1.0% -0.5% Base +0.5% +1.0%
Directors' valuation GBP498.2m GBP525.8m GBP555.0m GBP585.5m GBP617.4m
(GBPm)
Change in portfolio (GBP56.8m) (GBP29.3m) GBP30.5m GBP62.4m
valuation (GBPm)
NAV per share change
(pence) (9.4p) (4.8p) 95.8p 5p 10.3p
16. Fair value of the investments in unconsolidated entities (continued)
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 GBP572.3m GBP563.7m GBP555.0m GBP546.5m GBP537.9m
(GBPm)
Change in portfolio GBP17.2m GBP8.7m (GBP8.5m) (GBP17.2m)
valuation (GBPm)
NAV per share change
(pence) 2.8p 1.4p 95.8p (1.4p) (2.8p)
Tax rate
On 3 March 2021 the UK Chancellor, as part of his Budget,
announced his intention to increase the rate of UK Corporation tax
from 19% to 25% from 2023.
The impact of this proposal is not currently reflected in the 31
December 2020 NAV. On that basis, a variable of 1.0% is considered
reasonable given historic information.
It is anticipated that should the proposal be implemented this
will have an estimated impact on NAV of GBP8.7 million or 1.4 pence
per share.
-1.0% Base +1.0%
Directors' valuation (GBPm) GBP556.6m GBP555.0m GBP553.4m
Change in portfolio valuation (GBPm) GBP1.6m (GBP1.6m)
NAV per share change (pence) 0.3p 95.8p (0.3p)
16. Fair value of the investments in unconsolidated entities (continued)
AUD/GBP Exchange Rate
The Fund is directly exposed to fluctuations in foreign currency
due to its investments in Australian dollar denominated assets.
Whilst the Group mitigates its exposure to fluctuations in AUD
through the use of forward contracts, the valuations of these
assets will be directly impacted. Whilst we would not expect to see
fluctuations quite this large, a variable of 20% is considered
appropriate.
Following the acquisition of Spanish assets, the Fund is exposed
to fluctuations in EUR. A sensitivity has not been included for
EUR/GBP exchange rates as the Spanish assets are currently
-20.0% -10.0% Base +10.0% +20.0%
Portfolio valuation GBP546.1m GBP550.6m GBP555.0m GBP559.5m GBP564.0m
(GBPm)
Change in portfolio (GBP8.9m) (GBP4.5m) GBP4.5m GBP8.9m
valuation (GBPm)
NAV per share change
(pence) (1.5p) (0.7p) 95.8p 0.7p 1.5p
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
2020 2019
Shares Shares
Ordinary shares - nil par value Unlimited Unlimited
Issued Ordinary Shares
31 December 31 December
2020 2019
Shares Shares
Opening balance 605,196,526 548,941,550
Issued during the year - 54,894,155
Scrip dividends issued during the year 2,514,785 1,360,821
----------- -----------
Closing balance 607,711,311 605,196,526
----------- -----------
17. Stated Capital and Share Premium (continued)
Issued Ordinary Shares (continued)
31 December 31 December
2020 2019
GBP'000 GBP'000
Opening balance 624,922 558,798
Proceeds from share issue - 65,324
Value of scrip dividends issued 2,727 1,610
Less: issue costs capitalised - (810)
----------- -----------
Closing balance 627,649 624,922
----------- -----------
During quarter 1, 575,063 shares at a value of GBP1.175 per
share were issued in lieu of cash dividends. During quarter 2,
540,307 shares at a value of GBP1.066 per share were issued in lieu
of cash dividends. During quarter 3, 709,388 shares at a value of
GBP1.084 per share were issued in lieu of cash dividends. During
quarter 4, 690,027 shares at a value of GBP1.023 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 95.80 (2019: 103.77) pence per ordinary share. This
is based on the Net Asset Value at the reporting date of
GBP582,157,904 (2019: GBP628,023,734) and on 607,711,311 (2019:
605,196,526) 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 Euro and 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 31 December
2020 2019
GBP'000 GBP'000
AUD 44,643 50,185
EUR 26,619 -
19. Financial instruments and risk profile (continued)
19.1 Market risk (continued)
(a) Foreign currency risk (continued)
The FX rate applied at 31 December 2020 was AUD/GBP 0.5645
(2019: 0.5306) and EUR/GBP 0.8951. The Group had no Euro
denominated assets in 2019.
The sensitivities linked to the assets denominated in Australian
Dollars and Euros are set out in note 16 as these assets are held
in the underlying investments.
(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 2020, 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
GBP50,228,573 (2019: GBP54,218,661). 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 (2019:
Nil).
Weighted
Weighted average time
average interest for which
Total portfolio rate rate is fixed
31 December 31 December 31 December
2020 2020 2020
GBP'000 % Days
Loan notes 250,000 11.00 1,511
Shareholder loans 304,316 2.00 2,018
Cash and cash equivalents 16,875 0.05 -
---------------
571,191
---------------
(c) Interest rate risk (continued)
Weighted
Weighted average time
average interest for which
Total portfolio rate rate is fixed
31 December 31 December 31 December
2019 2019 2019
GBP'000 % Days
Loan notes 250,000 11.00 1,145
Shareholder loans 304,316 2.00 1,652
Cash as cash equivalents 18,933 0.05 -
---------------
573,249
---------------
19. Financial instruments and risk profile (continued)
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 time
Total for which
Weighted
Indirect average interest
exposure rate rate is fixed
2020 2020 2020
GBP'000 % Days
Investments - FS Holdco* 343,731 8.00 365**
Investments - Topco, FS Holdco 3 &
FS Holdco 4* 290,215 5.00 2,051
Cash and cash equivalents 14,766 0.05 -
-----------
Total indirect exposure interest rate
risk 648,712
-----------
Weighted
average time
Total for which
Weighted
Indirect average interest
exposure rate rate is fixed
2019 2019 2019
GBP'000 % Days
Investment - FS Holdco* 343,731 8.00 365**
Investments - FS Holdco 2, 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
-----------
*Allthough interest is charged on the loan portion of the
investments, the risk is low as the loans are inter-group and
therefore not subject to significant fluctuations.
**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.
19. Financial instruments and risk profile (continued)
19.2 Liquidity risk (continued)
31 December 2020
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 502,286 502,286 - - 502,286
Trade and other
receivables 275 275 275 - -
Interest receivable 63,137 63,137 63,137 - -
Cash and cash equivalents 16,875 16,875 16,875 - -
-------- ----------- --------- -------- ------------
Total Financial
assets 582,573 582,573 80,287 - 502,286
-------- ----------- --------- -------- ------------
Financial Liabilities
Trade and other
payables 415 415 415 - -
-------- ----------- --------- -------- ------------
Total financial
liabilities 415 415 415 - -
-------- ----------- --------- -------- ------------
Net position 582,158 582,158 79,872 - 502,286
-------- ----------- --------- -------- ------------
31 December 2019
Carrying Contractual Less than Greater than
amount Total 6 months 6 to 12 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
-------- ----------- --------- -------------- ------------
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:
19. Financial instruments and risk profile (continued)
19.3 Credit risk (continued)
31 December
Moody's Credit 2020
Rating GBP'000
Cash in bank:
Royal Bank of Scotland International Limited P2 16,875
Lloyds Bank International Limited P1 -
-----------
Total cash and cash equivalents 16,875
-----------
31 December
Moody's Credit 2019
Rating GBP'000
Cash in bank:
Royal Bank of Scotland International Limited
P2 P2 18,933
Lloyds Bank International Limited P1 2
-----------
Total cash and cash equivalents 18,933
-----------
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 GBP633,946,309 (2019: GBP607,327,419), being the
portion of UK Hold Co investments that are made up of loans as at
31 December 2020, these loans are however all within the Group.
Included within this are the related party loans as disclosed
within note 22 . External long term debt facility entered into by
FS Holdco, FS Debtco and FISH with Santander and Natwest
respectively. The balance of the external debt facility as at year
end amounted to GBP373,331,640 (2019: GBP347,846,425).
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 still considers as material, 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.
19. Financial instruments and risk profile (continued)
19.4 Other risk (continued)
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.
After the completion of Brexit the Asset Manager continues to
ensure that there is a robust spare parts provision in the UK and
continues to work with the O&M providers and their downstream
suppliers to ensure down time is minimised across the portfolio as
much as possible.
For the last year the emergence of the COVID-19 pandemic has
prompted the Directors and the Investment Manager to assess the
risks to the Company and the portfolio. The Directors consider the
risks identified are still the material ones, but it is clear that
COVID-19 has changed the way in which some of these risks may be
experienced in the future. The key risk COVID-19 poses to the
Company is a negative impact on the power price market, therefore
adversely affecting the distributions received from underlying
solar investments. The power prices are therefore continuously
reviewed by the investment manager, with a proportion of the assets
opting to fix the power prices they receive in the short term. In
respect to the operations of the underlying investments, the
investment manager has reviewed the Business Continuity Plans of
all sub-contractors and PPA offtakers and continues to review their
performance during the pandemic.
The directors do not believe there to be any material impact on
the short term cash flows of the Company and the Directors do not
believe there is any financial impact to the Financial Statements
as at 31 December 2020, as a result of this event. The Manager is
monitoring developments relating to COVID-19 and is coordinating
its operational response based on existing business continuity
plans and on guidance from global health organisations, relevant
governments, and general pandemic response best practices.
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
2020 2019
2020 Pence/Ordinary 2019 Pence/Ordinary
GBP'000 share GBP'000 share
Quarter 1 9,552 1.69 9,057 1.65
Quarter 2 9,662 1.69 9,058 1.65
Quarter 3 9,659 1.72 8,565 1.56
Quarter 4 9,796 1.73 9,317 1.54
-------- --------
38,669 35,997
-------- --------
The shares issued in lieu of cash dividends for each quarter is
disclosed in note 17.
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 2020:
Increase Repayment Closing Balance
Opening Balance in of as at
as at 1 January loan/Interest loan/Interest 31 December
2020 charged repaid 2020
GBP'000 GBP'000 GBP'000 GBP'000
Loan Notes 250,000 - - 250,000
Interest on Loan Notes 50,780 33,442 (45,046) 39,176
Shareholder Loan 304,316 - - 304,316
Interest on Shareholder
Loan 17,773 6,188 - 23,961
Non interest bearing loan
included in trade and other
payables 187 - - 187
For the year ended 31 December 2019:
Increase Repayment Closing Balance
Opening Balance in of as at
as at 1 January loan/Interest loan/Interest 31 December
2019 charged repaid 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 17,773
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 3 separate placing proceeds during 2019.
22. Related party disclosures (continued)
Transactions between UK Hold Co and its underlying
subsidiaries
Transactions with FS Holdco
For the year ended 31 December 2020:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 January in loan/Interest of loan/Interest December
2020 charged repaid 2020
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 343,731 - - 343,731
Interest on investment loan
1 51,701 27,423 (19,350) 59,774
Interest bearing Investment
loan 2 (40,000) - - (40,000)
Interest on investment loan
2 (3,253) (2,000) - (5,253)
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 2019:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 January in loan/Interest of loan/Interest December
2019 charged repaid 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
Transactions with Topco
For the year ended 31 December 2020:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 January in loan/Interest of loan/Interest December
2020 charged repaid 2020
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 167,256 167,256
Interest on investment loan (3,193) 9,485 (6,292) -
Interest bearing Investment
loan 2 - 40,867 - 40,867
Non interest bearing loan (8,850) (13,438) - (22,288)
For the year ended 31 December 2019:
Closing Balance
Opening Balance Increase Repayment as at
as at 1 January in loan/Interest of 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 - 3,264 (6,457) (3,193)
Non interest bearing loan - (8,965) 115 (8,850)
22. Related party disclosures (continued)
Transactions with FISH
There were no transactions between UK Holdco and FISH.
-- Transactions with FS Holdco 2
For the period ended 31 December 2020:
There were no transactions between UK Holdco and FS Holdco 2 for
the year.
For the year ended 31 December 2019:
Closing Balance
Opening Balance Increase Repayment as at
as at 1 January in loan/Interest of loan/Interest 31 December
2019 charged repaid 2019
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 74,894 - (74,894) -
Interest on investment loan
1 - 2,185 (2,185) -
Interest bearing Investment
loan 2 9,107 - (9,107) -
Interest on investment loan
2 - 266 (266) -
Interest bearing Investment
loan 3 33,094 - (33,094) -
Interest on investment loan
3 - 966 (966) -
Interest bearing Investment
loan 4 3,432 - (3,432) -
Interest on investment loan
4 - 100 (100) -
Interest bearing Investment
loan 5 46,500 - (46,500) -
Interest on investment loan
5 - 1,357 (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
22. Related party disclosures (continued)
Transactions with FS Debtco
For the year ended 31 December 2020:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 January in loan/Interest of loan/Interest December
2020 charged repaid 2020
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing loan 1 55,000 - - 55,000
Interest on loan 1 7,519 2,750 - 10,269
Non interest bearing loan 140 - - 140
For the year ended 31 December 2019:
Closing Balance
Opening Balance Increase Repayment as at
as at 1 January in loan/Interest of loan/Interest 31 December
2019 charged repaid 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
Transactions with FS Holdco 3
For the year ended 31 December 2020:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 January in loan/Interest of loan/Interest December
2020 charged repaid 2020
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 36,124 36,124
Interest on investment loan
1 911 1,806 (2,717) -
Non interest bearing loan
payable (2,595) (3,570) - (6,165)
For the year ended 31 December 2019:
Closing Balance
Opening Balance Increase Repayment as at
as at 1 January in loan/Interest of loan/Interest 31 December
2019 charged repaid 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)
22. Related party disclosures (continued)
Transactions with FS Holdco 4
For the year ended 31 December 2020:
Closing Balance
Opening Balance Increase Repayment as at 31
as at 1 January in loan/Interest of loan/Interest December
2020 charged repaid 2020
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing Investment
loan 1 28,970 - - 28,970
Interest on investment loan
1 2,897 1,449 - 4,346
Interest bearing Investment
loan 2 12,482 - - 12,482
Interest on investment loan
2 1,411 624 - 2,035
Interest bearing Investment
loan 3 10,380 - - 10,380
Interest on investment loan
3 904 519 - 1,423
Interest bearing Investment
loan 4 8,386 - - 8,386
Interest on investment loan
4 627 419 - 1,046
Interest bearing Investment
loan 5 3,141 - - 3,141
Interest on investment loan
5 264 157 - 421
Interest bearing Investment
loan 6 - 26,619 - 26,619
Non interest bearing loan 1,506 - (263) 1,243
For the year ended 31 December 2019:
Closing Balance
Opening Balance Increase Repayment as at
as at 1 January in loan/Interest of loan/Interest 31 December
2019 charged repaid 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
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 Spanish 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 2020:
Opening Balance Net amount
receivable/ Amounts paid (payable)/
(payable) on behalf Amounts received receivable
as at of from as at 31
1 January SPV SPV December
2020 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
FS Holdco and its SPVs (24,183) 28,894 (38,357) (33,646)
FS Debtco and its SPVs (834) 29,620 (39,878) (11,092)
For the year ended 31 December 2019:
Opening balance Net amounts
receivable/ Amounts paid Amounts (payable)/
(payable) on behalf received receivable
as at 1 of from as at 31
January SPV SPV 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)
Transactions with the manager
The investment manager of the Fund was Foresight Group CI
Limited. Following an internal restructuring at Foresight Group on
26 February 2020, Foresight Group LLP has replaced Foresight Group
CI Limited ("The Investment Manager") as investment manager to the
Fund.
The Investment Manager, a related party of Foresight Group CI,
charged asset management fees to the underlying projects of
GBP1,584,364 during the period (2019: GBP1,584,364).
23. Commitments and contingent liabilities
There are no commitments or contingent liabilities in the
current year (2019: 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.
OVERVIEW OF INVESTMENT ACTIVITIES
The Company's investment activities during the year are
disclosed in full in the Investment Manager's Report on page 19 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 30 of the
Annual Report.
A list of the Company's portfolio investments is included on
page 8-9 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 37-40 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 2020
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.
AIFMD Dislcosures (unaudited)
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
Jefferies
100 Bishopsgate
London
EC2N 4JL
INVESTMENT MANAGER
Foresight Group LLP
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
INDEPENT 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 CI Limited
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 contractors
PPA Power Purchase Agreements
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
[1] Versus coal equivalent
[2] http://reports.weforum.org/global-risks-report-2021/survey-results/
[3] Source: Solar Energy UK (formerly the Solar Trade
Association) and Solar Media analysis, January 2021
[4]
https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
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.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FIFSRVRIAIIL
(END) Dow Jones Newswires
March 09, 2021 02:00 ET (07:00 GMT)
Foresight Solar (LSE:FSFL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Foresight Solar (LSE:FSFL)
Historical Stock Chart
From Jul 2023 to Jul 2024