Regulatory Story
Go to market news section View chart   Print
RNS
Foresight Solar Fund Limited   -  FSFL   

Full Year 2018 Results and Dividend Announcement

Released 07:00 06-Mar-2019

RNS Number : 9497R
Foresight Solar Fund Limited
06 March 2019
 

6 March 2019

Foresight Solar Fund Limited

('Foresight Solar', 'FSFL' or 'the Company')

 

Annual Results to 31 December 2018 and Dividend Announcement

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 2018.

Highlights

•       

NAV increased to £610.3m (31 Dec 2017: £481.3m), being 111.2p per share (31 Dec 2017: 107.0p), driven by a reduction in discount rate for UK assets, an upwards revision of UK power price forecasts and a change in short term inflation forecasts

•       

Strong operational performance of the UK portfolio, 4.9% above budget for the year, a result of performance enhancing initiatives implemented by the asset management team and levels of irradiation higher than expected

•       

Production from the UK portfolio amounted to 5.2% of total UK solar generation in 2018, enough clean electricity to power 223,049 homes

•       

Portfolio grew to 54 ground-mounted solar assets totalling 869MW of capacity (2017: 23 solar assets totalling 621MW). The Company is now the largest UKlisted dedicated solar energy investment company by installed capacity

•       

Total of £106 million raised for two accretive acquisitions through two oversubscribed fundraisings, in July and October 2018

•       

Declared dividends of 6.58 pence per share for the year ended 31 December 2018, in line with target

•       

Target dividend for 2019 increased to 6.76 pence*, in line with the UK's Retail Price Index ("RPI") for 2018

•       

During 2019, the Company will continue to focus on portfolio and capital structure optimisation, improving the performance of the Australian assets and delivering strong operational performance across the portfolio

* Target returns are not a profit forecast. There can be no assurance that target returns will be met and it should not be seen as an indication of the Company's expected or actual results or returns.

 

 

 

Key Metrics

 

As at

31 December 2018

As at

31 December 2017

Gross Asset Value ("GAV")

£1,114.7 million

£680.8 million

Net Asset Value ("NAV")

£610.3 million

£481.3 million

NAV per Share

111.2 pence

107.0 pence

Profit after Tax for the Year

£56.0 million

£35.1 million

Total Dividend per Share for the period

6.58 pence

6.32 pence

Annual Total Shareholder Return since IPO*

6.83%

7.02%

 

* Annualised from IPO on 29 October 2013.

 

Commenting on the Company's results, Alex Ohlsson, Chairman of Foresight Solar Fund Limited said:

 

"The period under review was one of significant progress for Foresight Solar Fund, with good progress against our operational objectives and the acquisition of 31 assets over the year, funded through two oversubscribed placings. Following these acquisitions, FSFL is now the largest UKlisted dedicated solar energy investment company by installed capacity. We also continued to focus on portfolio optimisation which, assisted by higher levels of irradiation, led to our UK portfolio outperforming our budget by 4.9%.

Following on from the significant portfolio growth in 2018, FSFL intends to take a more opportunistic approach towards secondary market acquisitions. We will focus on optimising our recently-acquired assets, improving the capital structure through a third-party debt refinancing and continuing to deliver strong operational performance across the portfolio. We look forward to a further year of progress."

 

Results presentation

Foresight Solar Fund Ltd is holding a presentation to analysts at 09:00 today at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London, EC2M 5SY. Analysts wishing to attend should contact foresightsolar@citigatedewerogerson.com to register.

Analysts unable to attend in person may listen to the presentation live by using the details below:

Conference Call Dial-In Details: 0808 109 0700  

Standard International Access: +44 (0) 20 3003 2666        

Password:  Foresight
 

Dividend Declaration

Foresight Solar is also pleased to announce that the fourth Quarterly dividend of 1.65 pence per share was approved by the Directors and will be paid on 24 May 2019. The dividend timetable is as follows:

 

Date

Ex-dividend Date

9 May 2019

Record Date

10 May 2019

Payment Date

24 May 2019

 

For further information, please contact:

Foresight Group 
+44 (0)20 3763 6951 
Joanna Andrews 
InstitutionalIR@ForesightGroup.eu

Stifel Nicolaus Europe Limited 
+44 (0)20 7710 7600 
Mark Bloomfield 
Neil Winward 
Gaudi Le Roux

Citigate Dewe Rogerson 
+44 (0)20 7638 9571 
Nick Hayns
Elizabeth Kittle
Lucy Eyles

 

Notes to Editors

About Foresight Solar Fund Limited

Foresight Solar is a Jersey registered, closed-end investment company investing in a diversified portfolio of ground-based solar PV assets in the UK and Australia.

Since its IPO in October 2013, FSFL has more than tripled in size and raised more than £569 million through share placings. The Company targets an index-linked annualised dividend inflated by RPI and has paid all target dividends to date. The target dividend for 2019 is 6.76 pence per share.

FSFL is managed by Foresight Group, a leading independent Global Infrastructure & Private Equity manager, which provides FSFL with depth of experience in fund management, deal origination and execution. The Company has a fully independent Board of Directors and is chaired by Alex Ohlsson. The lead Investment Manager for the Company is Ricardo Piñeiro, Head of UK Solar at Foresight Group.

 

 

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 2018.

The period under review marked the achievement of a number of significant milestones in terms of growth and progress for the Company and was its most acquisitive year to date. There has been a material improvement in portfolio performance with the UK portfolio delivering operational performance 4.9% above budget, a clear testament to the work of the Asset Management team over recent periods.

Alongside this, the Investment Manager's ability to source NAV accretive investment opportunities, in an increasingly competitive secondary market, allowed the Company to acquire 248MW of solar assets in the UK during the course of the year. The portfolio increased to a total of 869MW of installed capacity and reinforced the Company's position as the largest UK-listed dedicated solar energy investment company by installed capacity. The acquisitions were financed through two oversubscribed fundraisings totalling £106 million.

In November 2018, the Company celebrated its fifth anniversary. Since listing on the London Stock Exchange in October 2013, the UK solar market has evolved rapidly and more recently entered a period of consolidation. During this period the Company has met all target dividends, grown NAV per share from 98.0 pence at IPO to 111.2 pence as at 31 December 2018 and delivered an annual total return to shareholders of 6.83%. I would like to thank my fellow Directors, the Investment Manager and the Asset Management team for their contribution to the growth of the Company over the past five years.

The Board remains confident in the operational performance of its assets under our Asset Management team, the Investment Manager's ability to identify NAV accretive opportunities and the global movement towards a higher penetration of renewable generation, all of which support continued growth for the Company.

KEY FINANCIALS

In 2018, the NAV per Ordinary Share increased by 4.2 pence to 111.2 pence (31 December 2017: 107.0 pence). This increase was primarily driven by an upward revision of the UK power price forecast in the short and medium term, changes to the short term inflation forecasts, the positive impact of the acquisitions announced during the period and a change in discount rate for UK assets. A 0.25% discount rate reduction has been applied across the UK portfolio where debt is not held at SPV level to reflect the increase in current market valuations of operating solar assets in the UK. Profit for the year was £56.0m (2017: £35.1m) and Earnings per Share rose to 11.60 pence, up from 8.80 pence in 2017.

DIVIDENDS AND DIVIDEND GROWTH

The Company has declared total dividends of 6.58 pence per share for the year, in line with its target. The fourth and final 2018 interim dividend of 1.65 pence will be paid on 24 May 2019.

Dividend cover for the period on a cash basis was 1.38 times, excluding dividends paid immediately to new shares issued in the period and including cash balances acquired as part of the acquisitions completed in 2018. Excluding these acquired cash balances, the dividend cover was 1.20 times, up from 1.12 times for the prior year on a like-for-like basis and supported by strong operational performance and higher UK power prices.

The target dividend for 2019 is 6.76 pence, an increase of 2.70% when compared with 2018 and in line with the UK's Retail RPI 2018.

Since the IPO, the Company has met all target dividends and remains on track to maintain its RPI inflation-linked dividend supported by continued favourable market conditions and solid portfolio performance. As previously noted in the 30 June 2018 Interim Report, the Board reviews the dividend policy on an ongoing basis to ensure it remains reflective of the ongoing correlation between power prices and inflation levels as well as the expected evolution of the Investment Portfolio.

CAPITAL RAISING

In July and October 2018, the Company raised a total of £106 million in two oversubscribed placings. This equity has been fully deployed through the acquisition of UK operational solar assets in August and November 2018 and through the partial repayment of outstanding debt facilities, resulting in no cash drag to investors. The Company has raised £569 million of equity to date.

PORTFOLIO DEVELOPMENT

As the consolidation of the UK solar market continued, the Company remained active in the UK secondary solar market through the acquisition of 31 operational UK assets (totalling 248MW of installed capacity) over the course of 2018.

In April 2018, the Company acquired a portfolio of five solar assets with a total installed capacity of 53MW, accredited under the Renewable Obligation ("RO") scheme with the exception of a 3MW asset accredited under the Feed-in-Tariff ("FiT") scheme. A further 26 RO accredited assets were acquired in the second half of the year. Of these, 15 assets, with a total installed capacity of 114MW, were acquired in August 2018 and the remaining 11 assets, with a total installed capacity of 81MW, acquired in November 2018. All the assets acquired in 2018 were operational, accredited and made in line with the Company's focused, value accretive acquisition strategy.

FINANCING

At 31 December 2018, the total outstanding debt of the Company and its subsidiaries amounted to £504.4 million (31 December 2017: £200.3 million), with long term debt representing £399.4 million (December 2017: £152.4 million). The total gearing level increased to 45% of GAV (December 2017: 29%) as a result of the acquisitions completed in the year and the use of Australian assets' debt facilities. Long-term gearing represented 36% of GAV (2017: 22%), remaining within the 40% long-term debt target set by the Board.

As previously reported, the Investment Manager is undertaking a refinancing of the assets acquired in the second half of 2018 and other UK portfolio assets. The intention of the refinancing is to reduce the average annual cost of long-term debt and remove the refinancing risk of the existing project loans inherited as part of the recent acquisitions. The Company intends to achieve this through entering long-term debt facilities. The refinancing of these assets is anticipated to complete before the end of June 2019.

The Company's Revolving Credit Facilities ("RCFs") totalled £105 million at 31 December 2018, giving the Company the flexibility to adjust its gearing position in the short term. The Investment Manager will continue to actively source opportunities to enhance the Company's capital structure.

OPERATIONAL PERFORMANCE

United Kingdom

The portfolio delivered performance significantly above budget. Irradiation was 6.4% above base case assumptions, with exceptional levels of irradiation in the summer months, continuing into the second half of the year.

Operational performance was strong, with only a few instances of downtime and electricity generation for the period 4.9% above expectations after accounting for compensation events.

During the year, the Asset Manager undertook a number of optimisation initiatives. In the third quarter of 2018, a Power Purchase Agreement ("PPA") tender was undertaken for 22 UK sites which is expected to result in material improvements in pass-through rates in the medium to longer term. The new PPAs are expected to become effective by April 2019. In addition, as a result of the higher power prices experienced in 2018, the Company removed cashflow volatility in the short and medium term by increasing the percentage of electricity sales under fixed price arrangements.

In addition, a tender for Operation and Maintenance ("O&M") services was carried out across a number of assets significantly reducing the cost for O&M services.

Australia

In Australia, Longreach successfully connected to the grid in March 2018 and Bannerton reached first export in July 2018 and has been gradually increasing its export capacity since. As previously reported, on 22 November 2018, RCR Tomlinson Limited ("RCR") went into administration. RCR was under contract by the Company to provide Engineering, Procurement and Construction ("EPC") and O&M services to its Longreach and Oakey 1 assets, both located in Queensland. The Company has appointed replacement contractors to implement commissioning works. Whilst the remaining two Australian assets have experienced delays as a result of RCR going into administration, it is not expected to have a material impact on overall financial performance, or asset valuation, as the Company is contractually protected.

MARKET DEVELOPMENTS

United Kingdom

As anticipated there have been a very limited number of new large-scale solar assets constructed in the UK following the closure of the RO scheme in April 2017, with investment activity in the sector focused on secondary market acquisitions of operational assets.

Despite this limited growth in the solar market, the UK renewables market has continued to thrive. In September 2018, the capacity of renewable energy overtook that of fossil fuels in the UK for the first time with 41.9GW of generation from wind, solar, biomass and hydropower exceeding the 41.2GW of capacity from coal, gas and oil-fired power generation assets1. In the five years to 2018, renewable capacity has tripled while fossil fuel capacity has fallen by a third due to the decommissioning of fossil fuel generators1.

Whilst there has been a hiatus in financial support from government sources for large-scale solar, there has been a surge in support for renewable energy generation. The UK market is expected to require an additional 50GW of solar installations by 2050 if the government is to meet its climate change targets (80% reduction in greenhouse gas emissions by 2050). Given the existing UK solar installed capacity currently totals just 13GW, the level of growth required is expected to be met by a significant increase in new installations on a subsidy-free basis over the medium and longer term.

Relevant regulatory developments for the year include the consultation announced by Ofgem in November 2018 in relation to the Targeted Charging Review ("TCR"). This review includes reforms which would reduce revenues received by UK embedded generation assets. The reforms are yet to be finalised and, if agreed, are expected to be implemented as of 2021.

At the time of writing, the outcome of Brexit negotiations remains uncertain. The Company remains largely insulated in all Brexit scenarios and, as a result, the Investment Manager does not expect any material change to its business.

Australia

Australia has seen significant growth in the installation of wind and solar projects driven by rapidly falling technology costs and an abundant availability of wind and solar resources. In October 2018, Australia's Clean Energy Regulator reported 8.3GW of renewable generation was either operational or under construction, with solar generation accounting for 4.4GW, exceeding the 6.4GW required to meet the 2020 Renewable Energy Target of 33,000GWh from renewable generation.2

In September 2018, Prime Minister Scott Morrison announced that the National Energy Guarantee ("NEG") policy would not come into effect in its initially proposed form. This policy focused on reducing consumers' electricity prices and bringing reliability and emissions reductions to the country's National Electricity Market. Instead it has been suggested, through a number of public announcements made by the Government, that the NEG policy will be modified to focus on encouraging new investment which supports lower electricity prices and no longer be focused on the reduction of emissions. Despite the relative uncertainty as to the shape the NEG ultimately will take, the country remains committed to meeting its emissions target as outlined in the 2016 Paris Agreement and, as such, energy reliability guarantees are expected to remain in place, providing continued support to the solar sector.

SUSTAINABILITY AND ESG

Our ongoing commitment to Sustainability and Environmental, Social and Governance ("ESG") measures is reflected in the Company's investment process and asset management operations. This year alone, the Company's electricity generation represented 5.2% of the UK's solar generation and avoided the production of more than half a million tonnes of CO2. The implementation of various environmental initiatives at a number of sites, such as hedgerow planting and grassland management, has served to benefit the local eco-systems whilst simultaneously reducing the O&M burden, resulting in improved financial performance. Furthermore, the assets have received widespread support from local communities through community engagement and educational visits. The Company also continues to support local communities through the distribution of more than £100k in community benefits in 2018, which have helped to fund a number of local development projects such as upgrading sport facilities and community centres.

OUTLOOK

The fundamentals for long-term growth in UK renewables remain in place, with the majority of relevant energy policy drivers enshrined in current UK legislation. The UK government continues to be committed to its five-yearly carbon budgets and to the 2008 UK Climate Change Act targeting an 80% reduction in carbon emissions from 1990 levels by 2050.

Following on from significant UK portfolio growth in 2018, the Company will adopt an opportunistic approach to secondary market acquisitions, reflecting the current competitive landscape of the UK market as a result of the ongoing solar market consolidation.

The Company is of the view that investment opportunities in assets that benefit from government-backed subsidy mechanisms will remain available in international markets and is increasingly focusing on Western European and other international markets. The Investment Manager continues to review investment opportunities in the region and remains confident the assets have the potential to deliver attractive returns, on a risk-adjusted basis, while further diversifying the Company's portfolio.

Alongside the Western European markets, we continue to monitor developments in the unsubsidised solar market, as construction costs decrease and new PPA structures become available, both in the UK and other European markets. We will also continue to track advances made in battery technology and the potential for co-location with large scale solar assets.

Portfolio optimisation will continue to be a core objective for the Company. During 2019, the Company will continue to focus on embedding and optimising its recently acquired UK assets, improving the capital structure through a third party debt refinancing, improving the performance of the Australian assets and, importantly, continuing to deliver strong operational performance across the portfolio.

Corporate governance

We look forward to enhancing Board diversity and broadening expertise through the appointment of a new Director in the first half of 2019.

Annual General Meeting

We look forward to meeting shareholders at the Company's next Annual General Meeting ("AGM") on 25 June 2019 at 9:30am at 28 Esplanade, St. Helier, Jersey JE2 3QA.

 

Alexander Ohlsson

Chairman
5 March 2019

 

CORPORATE SUMMARY

The Company is a closed-ended company with an indefinite life and was incorporated in Jersey under the Companies (Jersey) Law 1991, as amended on 13 August 2013, with registration number 113721.

As at 31 December 2018, the Company has 548,941,550 ordinary shares in issue which are listed on the premium segment of the Official List and traded on the London Stock Exchange's Main Market.

The Company makes its investments through intermediate holding companies and underlying Project Vehicles/Special Purpose Vehicles ("SPVs").

INVESTMENT OBJECTIVE

The Company's objective is to provide investors with a sustainable, inflation-linked quarterly dividend and enhanced capital value, through investment in ground-based solar assets predominantly located in the UK.

THE COMPANY

The Company's Initial Public Offering on 24 October 2013 raised £150 million, creating the largest dedicated solar investment company listed in the UK at the time. To date, the Company has raised a total of £569 million through equity issuance and reached a gross asset value of £1,114.7 million as at 31 December 2018. It is the largest UK-listed dedicated solar energy investment company by installed capacity.

In June and October 2018, the Company announced two placings of 44,995,209 and 53,994,250 new shares respectively, raising £106 million in total. Both placings were oversubscribed and in both instances the Company undertook a scaling back exercise. Following the issuance of the new shares, the Company has 548,941,550 shares in issuance representing a market capitalisation of £592.9 million as at 31 December 2018.

As at 31 December 2018, the Company's portfolio consisted of 54 assets with a net installed capacity of 869MW, including four Australian assets (representing 146MW), two of which remain under construction.

INVESTMENT POLICY

The Company will pursue its investment objective by acquiring ground-based, operational solar power plants predominantly located in the UK. Investments outside the UK and assets which are, when acquired, still under construction will be limited to 25 percent of the GAV of the Company and subsidiaries, calculated at the time of investment.

The Company will seek to acquire majority or minority stakes in individual ground-based solar assets. When investing in a stake of less than 100 per cent in a solar power plant SPV, the Company will secure its shareholder rights through shareholders' agreements and other legal transaction documents.

Power Purchase Agreements ("PPAs") will be entered into between each of the individual solar power plant SPVs in the portfolio and creditworthy offtakers. Under the PPAs, the SPVs will sell solar generated electricity and green benefits to the designated offtaker. The Company may retain exposure to power prices through PPAs that do not include mechanisms such as fixed prices or price floors.

Investment may be made in equity or debt or intermediate instruments but not in any instruments traded on any investment exchange.

The Company is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.

In order to spread risk and diversify its portfolio, at the time of investment no single asset shall exceed in value (or, if it is an additional stake in an existing investment, the combined value of both the existing stake and the additional stake acquired) 30 per cent of the Company's GAV post-acquisition. The GAV of the Company will be calculated based on the last published gross investment valuation of the Company's portfolio, including cash, plus acquisitions made since the date of such valuation at their cost of acquisition. The Company's portfolio will provide diversified exposure through the inclusion of not less than five individual solar power plants and the Company will also seek to diversify risk by ensuring that a significant proportion of its expected income stream is derived from regulatory support (which will consist of, for example, without limitation, ROCs and FiTs for UK assets). Diversification will also be achieved by the Company using a number of different third-party providers such as developers, EPC contractors, 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 percent at the time of drawdown. It is the Board's current intention that long-term gearing (including long-term, asset level gearing), calculated as Group borrowings (excluding intra-group borrowings (i.e. borrowings between members of the Group) and revolving credit facilities) as a percentage of the Company's GAV will not exceed 40 per cent at the time of drawdown.

Any material change to the investment policy will require the prior approval of shareholders by way of an ordinary resolution (for so long as the Ordinary Shares are listed on the Official List) in accordance with the Listing Rules.

SIGNIFICANT SHAREHOLDERS

The Company's shareholders include a substantial number of blue-chip institutional investors.

Shareholders in the Company with more than a 5% holding as at 31 December 2018 are as follows:

 

% Shareholding in Fund

BlackRock Investment Management Ltd

16.17

Newton Investment Management Ltd

7.34

Baillie Gifford & Co Ltd

7.25

Legal & General Investment Mgmt Ltd

7.24

Schroders Plc

6.81

Tredje AP Fonden

5.16

Total

49.97%

 

ALTERNATIVE INVESTMENT FUND MANAGEMENT DIRECTIVE ("AIFMD")

The AIFMD, which was implemented across the EU on 22 July 2013 with the transition period ending on 22 July 2014, aims to harmonise the regulation of Alternative Investment Fund Managers ("AIFMs") and imposes obligations on managers who manage or distribute Alternative Investment Funds ("AIFs") in the EU or who market shares in such funds to EU investors. Under the AIFMD, the Company is self-managed and acts as its own Alternative Investment Fund Manager.

Both the Company and the Investment Manager are located outside the European Economic Area ("EEA") but the Company's marketing activities in the UK are subject to regulation under the AIFMD.

PACKAGED RETAIL AND INSURANCE-BASED INVESTMENT PRODUCTS REGULATION

A new EU regulation, the Packaged Retail and Insurance-based Investment Products Regulation ("PRIIPS"), came into effect on 1 January 2018. Its aim is to ensure retail investors are provided with transparent and consistent information across different types of financial products. This new regulation requires the Company to publish a Key Information Document ("KID"). The KID is available on the Company's website under Publications and can be found at the following website address: www.fsfl.foresightgroup.eu.

Board of Directors

The Directors, who are Non-Executive and independent of the Investment Manager, are responsible for the determination of the investment policy of the Company, have overall responsibility for the Company including its investment activities and for reviewing the performance of the Company's portfolio. The Directors are as follows:

Alex Ohlsson (Chairman)

Mr Ohlsson is Managing Partner of the law firm Carey Olsen in Jersey. He is recognised as a leading expert in corporate and finance law in Jersey and is regularly instructed by leading global law firms and financial institutions. He sits on the boards of a number of companies and is also Chairman of the listed company GCP Asset Backed Income Fund Limited. He is an Advisory Board member of Jersey Finance, Jersey's promotional body and Treasurer of the Jersey Law Society. He has recently retired as the independent Chairman of the States of Jersey's Audit Committee. He was educated at Victoria College, Jersey and at Queens' College, Cambridge, where he obtained an MA (Hons) in Law. He has also been an Advocate of the Royal Court of Jersey since 1995.

Mr Ohlsson was appointed as a Non-Executive Director and Chairman on 16 August 2013 and was reappointed on 11 June 2018.

Chris Ambler

Mr Ambler has been the Chief Executive of Jersey Electricity Plc since 1 October 2008. He has experience in a number of senior positions in the global industrial, energy and materials sectors working for major corporations including ICI/Zeneca, The BOC Group and Centrica/British Gas, as well as in strategic consulting roles. He is a Director on other boards including a Non-Executive Director of Apax Global Alpha Limited, a listed fund which launched on the London Stock Exchange on 15 June 2015. Mr Ambler is a Chartered Director, a Chartered Engineer and a Member of the Institution of Mechanical Engineers. He holds a First Class Honours Degree from Queens' College, Cambridge and an MBA from INSEAD.

Mr Ambler was appointed as a Non-Executive Director on 16 August 2013 and was reappointed on 11 June 2018.

Peter Dicks

Mr Dicks is currently a Director of a number of quoted and unquoted companies. In addition, he was the Chairman of Foresight VCT plc and Foresight 2 VCT plc from their launch in 1997 and 2004 respectively until 2010 and served on the Board of Foresight VCT plc until May 2018. He is also on the Board of Mercia Fund 1 General Partnership Limited and Miton UK Microcap Trust plc and Chairman of Unicorn AIM VCT plc and SVM Emerging Fund plc.

Mr Dicks was appointed as a Non-Executive Director on 16 August 2013 and was reappointed on 11 June 2018.

 

Investment Manager

 

The Company's Investment Manager, Foresight Group CI Limited, is responsible for the acquisition and management of the Company's assets, including the sourcing and structuring of new acquisitions and advising on the Company's borrowing strategy. The Investment Manager is a Guernsey registered company, incorporated under Guernsey Law with registered number 51471. The Investment Manager is licensed and regulated by the Guernsey Financial Services Commission.

The Manager and its adviser, Foresight Group LLP (together, "Foresight Group"), was founded in 1984, and is now a leading independent infrastructure and private equity investment company that currently manages over £2.8 billion of assets on behalf of institutions and retail clients with offices in Australia, Italy, South Korea, Spain and the UK. Foresight Group's global infrastructure investments total £2.3 billion, with a cumulative generating capacity of 1.6GW. The solar investment team was established in 2007 and today manages assets representing £1.6 billion, invested in 91 solar power assets across the UK, Europe and Australia with a total generating capacity of 1.2GW. In 2018, Foresight Group's UK solar portfolio under management generated c.5.8% of total UK solar generation. In the UK, the wider infrastructure team also manages 435MW of investments in bioenergy projects, onshore wind, lithium ion battery storage facilities and reserve power generation assets.

Foresight Group's 84 strong infrastructure team, includes 25 solar investment professionals, with an average of 10 years industry experience.

Foresight Group's Investment Management team is led by three experienced UK-based managers, supported by a further team of solar investment managers located in the UK and internationally. The Investment Management team based in Australia includes seven people comprising three investment professionals, three technical professionals and one support staff. This team has been instrumental in the management of the Company's four Australian assets.

Foresight Group is overseen by an Executive Committee of which Gary Fraser is a member. Foresight Group's Executive Committee provides strategic investment advice to the management team and the Board. Early in the year Jamie Richards retired from Foresight Group. Matt Hammond replaced Jamie on the Company's Investment Management team. Matt is a Partner at Foresight Group and has over 20 years' experience in the infrastructure and renewable energy sector.

RICARDO PINEIRO, PARTNER, HEAD OF UK SOLAR

Ricardo has led Foresight Group's UK solar investments team since 2011 and has been part of the Fund's advisory team since its IPO. He has overseen more than 70 acquisitions representing over 800MW and remains primarily focused on leading new renewable energy transactions across the UK and international markets. Prior to joining Foresight, Ricardo worked at Espirito Santo Investment where he focused on lending and advisory for the energy infrastructure and transportation sectors.

Gary Fraser, Partner, Chief Financial Officer

Gary is a Chartered Accountant and Chartered Fellow of the Securities Institute. He worked with Ernst & Young between 1993 and 1999, predominantly in the audit and risk assurance and corporate finance areas and joined ISIS Asset Management plc in 1999 where he was responsible for the provision of similar services to several investment companies. He joined Foresight Group in 2004 and is a member of its Executive Committee.

MATT HAMMOND, Partner

Matt is a Partner in the Foresight's infrastructure team having joined Foresight in 2015. Prior to joining Foresight Matt was a Managing Director at Macquarie where he worked in various roles for fifteen years. There he focused on infrastructure and renewable energy advisory, principal investing and lending. He has also worked at Henderson, BT Alex Brown and the WHEB Group where he raised and invested two renewable energy funds investing across Europe. 

 

Asset Manager

Foresight Group has a leading Asset Management capability with expertise across electrical and civil engineering, finance and legal disciplines. The team manages over 150 energy infrastructure projects including solar, battery storage, reserve power, bio-energy and onshore wind investments, with 1.6GW of renewable energy capacity.

The Asset Management services provided ensure the day to day operation of the sites is robust with commercial and strategic decisions dictated to the O&M counterparties. The services also include:

• 

Portfolio optimisation including negotiation of project contracts (insurance, O&M, PPA, import power, security, warranties), spare part and replacement strategy and technology improvements

• 

Oversight of O&M counterparties

• 

Contractual compliance of all contracts

• 

Reporting to debt providers and other debt compliance services

• 

Accounting, bookkeeping, tax compliance and statutory reporting of all SPVs

• 

Corporate governance activities including health and safety compliance.

 

Tom Moore, Director

Tom has responsibility for the financial and operational performance of Foresight Group's energy infrastructure assets. Tom joined Foresight Group in 2013, having previously worked as Financial Controller at a hedge fund with oversight of internal finance, operations and compliance. He also performed advisory work for M&A transactions and corporate restructurings. Before this he spent four years in practice with Saffery Champness. Tom is a Chartered Accountant and holds a BSc in Economics from The University of York.

Julian Elsworth, Senior Portfolio Manager

Julian joined Foresight Group in 2013 and has over 14 years of experience in the renewable energy industry. Julian is responsible for the management of the technical and commercial aspects of the UK solar portfolio. Prior to joining Foresight Group, Julian worked as a Senior Consultant for a large engineering consultancy where he focused on a variety of renewable energy projects globally. Julian is a Chartered Engineer and holds an MSc in Renewable Energy and the Environment from Reading University.

Tully Robertson, Technical Portfolio Manager

Tully joined Foresight Group in 2018 and is based in Sydney. He is an electrical engineer with 13 years' experience in project/contract management and design and commissioning of various high voltage infrastructure projects throughout Australia. Tully has also performed design reviews and written EPC specifications for utility scale wind and solar farm projects in Australia. Tully is a Chartered Professional Engineer (CPEng), Registered Professional Engineer of Queensland (RPEQ) and Member of the Institution of Engineers Australia (MIEAust).

Current Portfolio

 

Asset 

 Installed Peak Capacity (MW)

Connection Date 

Acquisition Cost (£m)1

Current Fair Value (£m)2

UNITED KINGDOM

1

Wymeswold

34

March 2013

45.0

49.8

2

Castle Eaton

18

March 2014

22.6

21.5

3

Highfields

12

March 2014

15.4

13.8

4

High Penn

10

March 2014

12.7

10.6

5

Pitworthy

16

March 2014

19.3

17.1

6

Hunters Race

10

July 2014

13.3

14.3

7

Spriggs Farm

12

March 2014

14.6

14.7

8

Bournemouth

37

September 2014

47.9

52.4

9

Landmead

46

December 2014

52.4

50.6

10

Kencot

37

September 2014

49.5

45.9

11

Copley

30

December 2015

32.7

38.3

12

Atherstone

15

March 2015

16.2

15.6

13

Paddock Wood

9

March 2015

10.7

11.0

14

Southam

10

March 2015

11.1

11.2

15

Port Farm

35

March 2015

44.5

45.7

16

Membury

16

March 2015

22.2

21.3

17

Shotwick

72

March 2016

75.5

86.8

18

Sandridge

50

March 2016

57.3

59.4

19

Wally Corner

5

March 2017

5.7

6.0

20

Coombeshead

10

December 2014

36.6

40.8

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

4.4

26

Crow Trees

5

February 2016

1.8

1.9

27

Cuckoo Grove

6

March 2015

2.5

2.7

28

Field House

6

March 2015

3.1

3.2

29

Fields Farm

5

March 2016

1.7

2.3

30

Gedling

6

March 2015

1.9

2.5

31

Homeland

13

March 2014

5.2

6.9

32

Marsh Farm

9

March 2015

4.0

4.2

33

Sheepbridge

5

December 2015

1.9

2.4

34

Steventon

10

June 2014

4.2

4.8

35

Tengore

4

February 2015

1.3

1.6

36

Trehawke

11

March 2014

4.7

5.7

37

Upper Huntingford

8

October 2015

3.1

3.5

38

Welbeck

11

July 2014

4.4

4.9

39

Yarburgh

8

November 2015

3.4

4.0

40

Abbey Fields

5

March 2016

1.5

2.3

41

SV Ash

8

March 2015

3.4

3.7

42

Bilsthorpe

6

November 2014

1.9

2.3

43

Bulls Head

6

September 2014

2.2

2.6

44

Lindridge

5

January 2016

1.7

2.3

45

Misson

5

March 2016

2.0

2.6

46

Nowhere

8

March 2015

3.7

3.9

47

Pen Y Cae

7

March 2015

2.9

3.5

48

Playters

9

October 2015

4.0

4.4

49

Manor Farm

14

October 2015

6.1

6.7

50

Roskrow

9

March 2015

3.7

4.4

 

UK Subtotal

723

 

685.1

720.6

AUSTRALIA

1

Bannerton

533

July 2018

22.9

22.45

2

Longreach

83

March 2018

2.7

3.1

3

Oakey 1

153

Q2 20194

4.4

4.35

4

Oakey 2

70

Q2 20194

34.0

33.35

 

Australia Subtotal

146

 

63.9

63.1

 

TOTAL

869

 

749.0

783.7

1     Original cost at time of acquisition, including transaction costs.

2     UK investments valued using an unlevered discount rate of 6.75% or a levered discount rate between 7.50% and 7.75% depending on debt structure. Australian operational assets use a levered discount rate of 8.5%.

3     Accounts for the 48.5% stake the Company holds of Bannerton (110MW), the 49% stake held of Longreach (17MW) and the 49% stake held of Oakey 1 (30MW).

4     Expected connection dates.

5     Held at cost incurred to date using a AUD/GBP exchange rate of 0.55 as at 31 December 2018.

 

KEY INVESTMENT METRICS

 

31 December 2018

31 December 2017

Market Capitalisation

£592.9 million

£486.0 million

Share Price

108.0 pence

108.0 pence

Dividend Declared per Share for the period

6.58 pence

6.32 pence

GAV

£1,114.7 million

£680.8 million*

NAV

£610.3 million

£481.3 million

NAV per Share

111.2 pence

107.0 pence

Annual Total Return (NAV) since IPO

7.36%

7.48%

Annual Total Shareholder Return since IPO

6.83%

7.02%

Profit after Tax for the Year

£56.0 million

£35.1 million

*Methodology to calculate GAV has since been updated

PORTFOLIO SUMMARY

As at 31 December 2018, the Company's portfolio comprised of 54 assets with a total net peak capacity of 869MW. In the UK, the Company has a portfolio of 50 assets representing a total installed capacity of 723MW. The Company owns a further four assets in Australia which account for 146MW of installed capacity.

All of the Company's assets benefit from government backed subsidies. The Company's UK assets are accredited under the RO scheme, with the exception of Yardwall which is a 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").

During the full year period, approximately 57% of revenues were derived from subsidies, with the remaining 43% from the sale of electricity.

The ROC buy-out price for the annual compliance period commencing in April 2018 increased to £47.22 (2017-18 compliance period: £45.58), reflecting the average monthly percentage change in RPI during 2017. On average, the Company received 1.42 ROC/MWh across the UK portfolio.

The charts on pages 16-17 show a detailed analysis of the portfolio as at 31 December 2018. The portfolio continues to be well diversified by inverter and panel manufacturers and by O&M counterparties. Through the acquisition of a further 31 UK assets in the year the Company has enhanced portfolio diversification and increased efficiencies of scale in terms of reducing ongoing operational costs.

ACQUISITIONS

2018 was the Company's most acquisitive year to date, with 31 assets acquired in total, adding a further 248MW of total installed capacity to the Company's UK portfolio across the separate transactions.

In April 2018, the Company acquired a 100% interest in a 53.3MW portfolio of five operational solar parks located in the UK. The portfolio was acquired for £36.6 million, including transaction costs and approximately £4.2 million of cash balances. The acquisition agreement included the economic benefit of all project cash flows from 1 January 2018. The portfolio included a 0.5MW, FiT accredited, onshore wind asset. This asset is expected to be sold in 2019 and is an immaterial part of the investment portfolio, representing less than 1% of the Company's NAV.

In August 2018, a 114MW portfolio was acquired for an equity consideration of £47 million, including the economic benefit of all cashflows from 1 April 2018. All of the 15 assets are operational and accredited under the RO scheme, receiving a weighted average of 1.41 ROCs/MWh.

Finally, in November 2018, the Company completed the acquisition of a 100% interest in a portfolio of 11 operational solar assets in the UK with a total installed capacity of 80.9MW. The portfolio was acquired for an equity consideration of £33.1 million, including the economic benefit of all cashflows from 1 April 2018. All of the assets are RO accredited, receiving an average of 1.35ROCs/MWh.

Both aforementioned August and November 2018 acquisitions were purchased from retail funds managed by Foresight Group LLP and supported by an independent valuation from a third party valuation expert. Previous Foresight Group ownership was beneficial in allowing for a more cost-efficient and lower risk acquisition process. Additionally, all assets had been in operation for a minimum period of two years and managed by Foresight Group's Asset Management team, thereby ensuring the quality of the assets as well as securing a clear advantage in continuing to manage these assets going forwards.

 

 

MARKET DEVELOPMENTS

UNITED KINGDOM

In December 2018, total installed capacity in the UK reached 13.09GW across approximately 976,200 installations, an increase of 2.1% (268MW) since December 20173. This modest growth was predominantly supported by new domestic roof-top installations and some ground mounted assets in Northern Ireland. This growth reflected a significant decrease from the 940MW installed in 2017 (7.9% increase against 2016) and 2.18GW in 2016 (22.5% increase against 2015), a result of the closure of the Renewables Obligation ("RO") scheme for new installations in April 2017.

In 2018, the UK solar market continued to experience a period of consolidation with a significant number of secondary transactions taking place, including the acquisitions completed by the Company. The level of activity in the secondary market, associated with the absence of new construction of large-scale solar assets, resulted in increased competition for the acquisition of operational assets.

In November 2018, Ofgem released a consultation to the Targeted Charging Review ("TCR"), which was launched initially in August 2017 as part of a review into residual network charging arrangements. The update included a number of proposed reforms, which would likely result in a reduction in revenues received by UK embedded generation assets which currently benefit from embedded benefits and could also result in an increase in network charges. Whilst the exact nature of the proposed changes is still to be confirmed, if taken forward in their present form they would be phased in from 2021. It should be noted, embedded benefits revenue represents less than 2% of lifetime revenues for the portfolio.

Brexit

At the time of going to print, the outcome of Brexit remains unclear. The Investment Manager does not consider the Company to be particularly sensitive to the various possible scenarios that the UK Government could take. The energy market in the UK is closely aligned with European markets and this is not expected to change over the long term. As an example, the draft political declaration made in November 2018 sets out a desire to "consider cooperation on carbon pricing by linking a United Kingdom national greenhouse gas emissions trading system with the EUs Emissions Trading System".

An exit from the EU would likely cause volatility in the energy markets, that volatility in itself could lead to higher electricity prices in the short term. Longer term impacts such as weaker economic demand and the availability of unskilled labor aren't deemed material to the future operations of the Company.

AUSTRALIA

The Australian renewable market continues to experience a period of growth with 8.3GW of renewable generation either operational or under construction, with solar generation accounting for 4.4GW4. On the assumption that those assets currently under construction become operational by 2020 the renewable installed capacity will exceed the 2020, total Renewable Energy Target of 33,000GWh from renewable generation.

The expected NEG policy saw significant amendments in 2018 with the Government changing its focus on encouraging new energy investments that delivers lower electricity prices only, with less focus on the reduction of emissions.

Grid connection and commissioning requirements by the Australian Energy Market Operator ("AEMO") have been identified as a general cause for commissioning delays, with new generator performance standards introduced in 2018. This has impacted the average commissioning period per project however the sector has continued to expand.

On 22 November 2018, RCR Tomlinson ("RCR"), an engineering company listed in the Australian Securities Exchange, went into administration, following a A$100 million equity raise and a write down of A$57 million in August 2018 caused by cost overruns on two solar projects under construction. RCR was involved in the construction of various solar projects since 2017. Two of the Company's assets experienced construction delays as a result of RCR going into administration however, as noted earlier, it will not have a material impact on overall financial performance as the Company is contractually protected. For more information please refer to the Asset Management section of the report.

A federal Government election is due to be held in Australia in May 2019. In November 2018, Australian opposition leader, Bill Shorten, announced the Labor Party's proposed energy plan including re-introduction of the Renewable Energy Guarantee, Contracts for Difference ("CfD") auctions, grid infrastructure investment and energy efficiency schemes with a headline goal of 50% of power from renewables by 2030. This would represent a significant increase in the existing target of c.23.5% power from renewables by 2020 under the Renewable Energy Target. The incumbent Liberal/National party coalition is yet to formally disclose its energy plan. The Investment Manager will continue actively to monitor relevant political and policy developments.

 

UNITED KINGDOM

The average power price achieved across the UK portfolio during the year, including fixed price arrangements was £49.54/MWh, versus £44.19/MWh in 2017, an increase of 12.1%.

Wholesale power prices generally remained in the mid £50's throughout the first half of the year driven by a sharp increase in March as very low temperatures and adverse weather caused higher gas prices in Europe, which consequently drove an increase in power prices. The European Emission Allowances ("EUA") carbon price also rose significantly during the first half of the year which further supported increased prices. The average power price achieved at portfolio level in the first half of the year was £46.54/MWh.

Throughout the second half of the year, spot prices initially increased reaching a peak of approximately £67/MWh in September due to increasing commodity prices, principally gas and carbon prices. The increase in commodity prices was driven mainly by the impending start of the operation of the Market Stability Reserve, which would address the current surplus of allowances. Prices remained stable from September to the end of the year. The average power price achieved at portfolio level during the second half of the year, when taking into consideration the fixed price arrangements in place for the period, was £51.53/MWh.

Throughout the course of the year, the Company took advantage of attractive forward electricity prices by entering fixed price arrangements for the sale of electricity. As at 31 December 2018, fixed price arrangements were in place across 53% of the UK portfolio at a weighted-average price of £53.38/MWh. This compares to 29% as at 31 December 2017, at a weighted average price of £43.26/MWh. The fixed price arrangements have different tenors, with the contract with the longest tenure expiring in March 2021. The percentage of fixed price arrangements will gradually decrease to 30% by October 2019 and 7.5% by October 2020. These arrangements provide greater visibility over future cash flows and limit potential price volatility in the short and medium term.

The Investment Manager regularly reassesses conditions in the electricity market and updates its view on likely future movements. The Company retains the option to fix the PPAs of its portfolio assets at any time, but the Investment Manager is satisfied that the current proportion of fixed price arrangements offers an appropriate level of price certainty.

PPA tenders

In Q3 2018, a tender was performed for the supply of PPAs to 22 UK sites representing more than 200MW of the UK portfolio. The size of the portfolio tendered, and the Company's relationships with industry leading offtakers, is expected to help secure the best possible terms. The contracts to be implemented as part of the tender are expected to become effective by April 2019.

AUSTRALIA

In 2018, average wholesale power prices in Australia decreased c.18% versus 2017 in all states except for Victoria which marginally increased by c.2%. Price drops in Queensland were largely due to power price spikes in early 2017. Average prices in 2018 were above pre-2017 prices and follow the general upward trend of the past five years, which has been driven by increasing gas prices. In the first half of the year the weighted average spot price in Queensland was A$72/MWh, this rose to A$82.5/MWh in the second half of the year. The 2018 average was A$77.25/MWh. Prices in Victoria were marginally higher across both halves of the year, A$103/MWh in H1 2018 and A$92/MWh in H2 2018, averaging A$97.5/MWh across the year.

The Investment Manager continues to review the PPA options for Oakey 2 and expects to enter an agreement in advance of the target commissioning date during the second quarter of 2019. For more information please refer to the Asset Management section.

POWER PRICE FORECASTS

The Investment Manager uses forward looking power price assumptions to assess the likely future income of the portfolio assets for valuation purposes. The Company's assumptions are formed from a blended average of the forecasts provided by third party consultants and are updated on a quarterly basis for each relevant market.

UNITED KINGDOM

During the full year period, power price forecasts increased by 0.4% mainly due to movements in the short to medium term.

In the first half of the year, forecasts dropped due to the expected higher penetration of installed renewable generation capacity in the medium and long term and forecasted decline in commodity prices.

Forecasts recovered during the second half of the year mainly due to an increase in gas prices as a result of increased oil prices and lower storage levels across Europe following the cold weather in Q1 and Q2 2018.

The Company's forecasts assume an increase in power prices in real terms over the medium to long-term of 0.6% per annum (31 December 2017: 1.3%).

Where the assumed asset life extends beyond 2050, the Investment Manager has assumed no real growth in forecast power prices.

Australia

Wholesale power prices in Australia are projected to decline between 2019 and 2021 based on the Australian Securities Exchange forward prices. During the 2020s, power prices are expected to stabilise across all regions as gas price increases are offset by additional built renewable capacity. In the early 2030s, prices are forecast to rise again due to a large amount of coal generation coming offline.

THIRD PARTY DEBT ARRANGEMENTS AND GEARING POSITION

As at 31 December 2018, total outstanding long-term debt was £399.4 million, representing 36% of the GAV (calculated as NAV plus outstanding debt) of the Company and its Subsidiaries (31 December 2017: £152.4 million or 22% of GAV). The increase in long-term debt is a result of the acquisitions completed in 2018 as the portfolios were acquired with third party debt in place.

As at 31 December 2018, the total outstanding debt including RCFs was £504.4 million, representing 45% of GAV (31 December 2017: £200.3 million or 29% of GAV.)

Long-Term Facilities

As at 31 December 2018, £399.4 million of long-term debt facilities were outstanding (includes £7.4m of nominal revaluation of the inflation-linked facilities). This figure includes £31.8 million of debt facilities included in the 53.3MW portfolio acquired in April 2018 and debt facilities representing £161.6 million relating to assets acquired in August and November 2018.

Inflation linked debt facilities represent £90.2 million of the total long-term debt outstanding as of 31 December 2018.

At 31 December 2018, the average cost of long-term debt, was 2.8% per annum (2017: 2.5%), including the cost of the inflation linked facilities of 1.28% per annum. The cost of the inflation linked facility is expected to increase over time assuming the Company's long-term annual RPI forecast of 2.75%, to an equivalent average annual cost of c.3.1% over the term of the facilities.

Revolving Credit Facilities

As part of the acquisition of five new assets in April 2018, the Company agreed a £10 million facility extension of the RCF entered into in February 2017 at the prevailing rate of LIBOR + 2%. As at 31 December 2018, RCFs of £105 million were fully drawn.

The current RCF facility in place for FS Holdco 1, for which Santander is the provider, is due to expire in March 2019. The Investment Manager is in the process of extending the facility for an additional three year period.

The RCFs were fully drawn during the period as a result of asset acquisitions. At 31 December 2018, the all-in annualised cost of the revolving credit facilities was 2.3% (2017: 1.51%). The Investment Manager expects to refinance the remaining balance either through future equity raisings or other long-term refinancing arrangements.

DEBT STRUCTURE

Debt Facilities

The following table summarises the debt position of the Fund as at 31 December 2018.

Borrower

Holding Vehicle

Provider

Facility Type

Amount Outstanding (m)

Maturity

Applicable Rate

FS Holdco

FS Holdco 1

MIDIS

Fixed rate, fully-amortising

£62.4

Mar-24

3.78%

 

 

MIDIS

Inflation linked, fully-amortising

£63.2

Mar-34

RPI Index1 + 1.08%

 

 

Santander

Term loan , fully-amortising

£25.6

Mar-34

LIBOR + 1.70%

Project SPVs (25 vehicles)

FS Holdco 2

RBS

Term loan

£161.6

Sep-19

LIBOR + 3.00%

Second Generation Portfolio 1

FS Holdco 3

MIDIS

Fixed rate, fully-amortising

£4.3

Aug-34

4.40%

 

 

 

Inflation linked, fully-amortising

£27.0

Aug-34

RPI Index1 + 1.70%

Foresight Solar Australia Pty Ltd

FS Holdco 42

CEFC

Term loan

A$60.2

Jun-27

Base rate (2.95%) + margin (2.55% to 2.80%)

Longreach Finco Pty Ltd

 

CEFC

Term loan

A$12.2

Mar-22

Base rate (2.57%)

Base rate (3.28%)3

Base rate (2.58%)

Base rate (3.14%)3

+ margin
(constr - 1.55%; operation - 1.40%)

Longreach Finco Pty Ltd

 

MUFG

Term loan

A$12.2

Mar-22

Oakey 1 Finco Pty Ltd

 

CEFC

Term loan

A$16.1

Mar-22

Oakey 1 Finco Pty Ltd

 

MUFG

Term loan

A$16.1

Mar-22

Oakey 2 Finco Pty Ltd

 

CEFC

Term loan

A$41.4

Oct-22

Base rate (2.48%) + 2.25%

TOTAL LONG TERM DEBT

 

 

 

£431.6

 

 

FS Holdco

FS Holdco 1

Santander

Revolving credit

 £40.0

Mar-19

LIBOR + 2.05%

FS Debtco

FS Holdco 2

Santander

Revolving credit

 £65.0

Feb-20

LIBOR + 2.00%

TOTAL REVOLVING DEBT

 

 

 

 £105.0

 

 

TOTAL DEBT

 

 

 

 £536.6

 

 

1     RPI Linked Facilities are assumed to have a long term inflation assumption of 2.75%

2     Australian debt presented in full and not prorated for Foresight ownership proportion

3     Interest rate swap for 100% of the outstanding debt during the initial 5 years, 75% from years six to ten and 50% thereafter

 

During the period the Company has repaid a total of £23.5 million of debt, including c.£15.5 million of project level debt associated to the UK operational portfolios acquired in the second half of 2018. This includes the full repayment of the £9.1 million Manor Farm debt facility as the facility expired in December 2018. This asset will be included in the ongoing portfolio refinancing process.

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 80% of the outstanding debt during the term of the loans. In Australia, debt facilities entered 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 MUFG have in place interest rate swaps on a decreasing nominal amount for a notional tenor of 20 years.

Refinancing

The Investment Manager is in the process of refinancing the assets acquired in August and November 2018 and other UK portfolio assets acquired in 2017. The Company intends to enter long-term, fully amortising debt facilities on a cross-collateralised basis, reducing the average annual cost of long-term debt materially below that of the existing project loans inherited as part of the acquisitions. The assets will continue to benefit from long-term interest rate swaps. The refinancing of these assets is expected to complete before the end of June 2019.

 

DIVIDENDS

The Company has met all target dividends since IPO. The Company will deliver a full year dividend for the year ended 31 December 2018 of 6.58 pence. The Company is targeting a full year dividend for the year ending 31 December 2019 of 6.76 pence, representing a 2.70% increase against the dividend declared for the 2018 financial year.

DIVIDEND TIMETABLE FOR FY2018

Dividend

Amount

Status

Payment Date

Interim 1

1.64 pence

Paid

24 August 2018

Interim 2

1.64 pence

Paid

23 November 2018

Interim 3

1.65 pence

Paid

22 February 2019

Interim 4

1.65 pence

Approved

24 May 2019

TOTAL

6.58 pence

 

 


On 5 March 2019 the Board approved the fourth interim dividend relating to FY2018 of 1.65 pence per share which will be paid on 24 May 2019.

Dividend Timetable - Interim 4

 

Ex-dividend Date

9 May 2019

Record Date

10 May 2019

Payment Date

24 May 2019

 

DIVIDEND COVER

Total dividends of £31.3 million were paid during the year to 31 December 2018. Compared with the relevant net cash flows of the Company and underlying investments, these dividends were covered 1.38 times when dividends paid immediately to new equity are excluded. When adjusting for cash acquired alongside new assets, dividend cover was 1.20 times.

FOREIGN EXCHANGE

The Company is exposed to foreign exchange movements in respect of its investments in Australia. As such, the Company continues to implement a hedging strategy in order to reduce the possible impact of currency fluctuations and to minimise the volatility of equity returns and cash flow distributions. The Company has entered into forward contracts for up to two years in an amount equivalent to c.75% of its expected distributable foreign currency cash flows at project level. Due to the predictable nature of solar irradiation in Australia, and the known dividend payment dates, the Investment Manager believes this hedging strategy will protect the cash yields from the Australian assets.

The cost of the equity investments will not benefit from foreign exchange hedging, considering the long-term investment strategy of the Company.

The Company reviews its foreign exchange strategy on a regular basis with the objective of limiting the short-term volatility in sterling distributable cash flows caused by foreign exchange fluctuations and of optimising the costs of the hedging instruments.

ONGOING CHARGES

The ongoing charges ratio for the year to 31 December 2018 was 1.18% (31 December 2017: 1.18%). This has been calculated using methodology as recommended by the Association of Investment Companies ("AIC"). Foresight Group LLP charges asset management fees directly to the assets and these are not included within the ongoing charge ratio.

INVESTMENT PERFORMANCE

The NAV per share for the Company as at 31 December 2018 increased to 111.2 pence compared to 107.0 pence as at 31 December 2017.

MOVEMENTS IN NAV

A breakdown in the movement of the Group NAV during the reporting period is shown in the table below.

 

NAV

NAV per share

NAV as at December 2017

£481.3m

107.0p

Dividend paid

£(31.3)m

(5.7)p

Equity raised

£104.8m

-

Interest earned

£36.5m

6.6p

Management fee

£(5.1)m

(0.9)p

RCF finance costs

£(1.7)m

(0.3)p

Other costs (incl. Corporation Tax)

£(0.1)m

(0.0)p

Acquisitions*

£2.2m

0.4p

Inflation*

£11.5m

2.1p

Valuation date*

£0.8m

0.1p

PR*

£(0.4)m

(0.2)p

Power curve*

£7.9m

1.4p

Discount Rate

£11.0m

2.0p

Operational inputs

£(2.8)m

(0.5)p

Other*

£(4.3)m

(0.8)p

NAV as at December 2018

£610.3m

111.2p

*        Movement in the valuation of underlying solar assets

VALUATION OF THE PORTFOLIO

The Investment Manager is responsible for providing fair market valuations of the Company's underlying assets to the Board of Directors. The Directors review and approve these valuations following appropriate challenge and examination. Valuations are undertaken quarterly. A broad range of assumptions is used in the valuation models. These assumptions are based on long-term forecasts and are not affected by short-term fluctuations, be it economic or technical.

It is the policy of the Investment Manager to value with reference to Discounted Cash Flows ("DCF") at the later of commissioning or transaction completion. This is partly due to the long periods between agreeing an acquisition price and financial completion of the acquisition. Quite often this delay reflects construction. Revenues accrued do not form part of the DCF calculation in making a fair valuation.

The current portfolio consists of non-market traded investments and valuations are based on a DCF methodology or held at cost where the assets have not yet reached commissioning. This methodology adheres to both 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 query 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.

METHODOLOGY

The discount rates applied to the valuation of the portfolio have been reduced during the year to reflect the increase in current market valuations of operating solar assets in the UK. The unlevered discount rate has been reduced from 7.00% to 6.75%. These include assets that have been acquired using RCF facilities, being Shotwick, Sandridge and Wally Corner.

Assets that have debt in place at portfolio level continue to be valued using a premium to the unlevered rate of 0.75%, at a discount rate of 7.50%. Assets that have debt at SPV level, and therefore not cross-collateralised, are considered to carry a higher premium of 1.00% and as such are valued using a discount rate of 7.75%.

The discount rate used for UK asset cashflows which have received lease extensions beyond the initial investment period of 25 years is 8.75% for years subsequent.

Longreach, the only asset within the Australian portfolio not held at cost, is valued using a 8.50% discount rate.  The remaining Australian acquisitions are valued at cost and will continue to be held at cost until the assets are connected to the grid and fully operational. These asset valuations are updated quarterly to reflect movements related to exchange rate.

The weighted average discount rate across the portfolio is 7.30% compared to 7.58% as at 31 December 2017.

Asset life

The weighted life of the UK portfolio as at 31 December 2018 is 28.4 years (31 December 2017: 28.7 years).

The average useful economic life across 37 of the 50 UK assets goes beyond 25 years, averaging 30.5 years. Additional conservative operational costs are incorporated into the extended lives and the cash flows from operations that fall after the initial 25-year period have been discounted 8.75%, reflecting the merchant risk of the expected cash flows beyond the initial 25-year period. The change in discount rate from 9.0% in previous periods to 8.75% is in line with the aforementioned methodology change.

Assets located in Australia assume a useful economic life of 25 years.

MOVEMENTS IN NAV (£M AND PENCE PER SHARE)

 

DIVIDENDS PAID

The Company paid dividends of £31.3m during the year or 6.58p per share.

EQUITY RAISED

Two oversubscribed share placings were completed, raising net proceeds of £104.8 million (gross proceeds of £106 million) from new and existing investors.

INTEREST EARNED

The Company and its subsidiaries accrued £36.5 million of investment income during the year. This is the interest accrued on shareholder loans.

COSTS

Total costs of £6.9 million, which include corporation tax, management fees, finance and other costs, were incurred by the Company and its subsidiaries on a consolidated basis during the year.

ACQUISITIONS

During the year the Company acquired 31 assets, resulting in a NAV uplift of £2.2 million which represents the difference between the acquisition internal rate of return and Fund discount rate at the time of acquisition.

In Australia, Longreach connected in March 2018 and as such has been revalued using a discounted cash flow methodology, in line with the rest of the portfolio. This resulted in a NAV uplift of £0.4 million.

INFLATION

The Investment Manager continues to use 2.75% as its medium/long-term inflation assumption. As at 31 December 2018, the models reflect Office for Budget Responsibility ("OBR") forecasts for the period 2018 to 2020 of: 3.46%, 3.14% and 3.05% respectively.

VALUATION DATE

This movement represents the impact of moving from one valuation date to another. Over the life of an asset this movement will reduce the valuation to nil. Short term increases arise from moving towards higher cash yields (and therefore discounting them less).

PERFORMANCE RATIO

The performance ratio assumptions in the valuation models are initially linked to contractually guaranteed performance and the initial technical due diligence findings at the time of acquisition. The long-term assumptions are adjusted on an ongoing basis as more data becomes available, recognising the actual performance ratios experienced across the portfolio on an asset by asset basis. This approach is applied on a quarterly basis to ensure valuation assumptions better reflect the actual performance of the sites. The movements in assumed performance ratios are implemented conservatively at a rate that ensures short term fluctuations do not inflate performance potential.

POWER CURVE

The Investment Manager uses forward looking power price assumptions to assess the likely future income of the portfolio assets for valuation purposes. The Company's assumptions are formed from a blended average of the forecasts provided by third party consultants and are updated on a quarterly basis.

During the year there was an upward movement of 0.4% in the medium to long term power price forecast. The Company's forecasts continue to assume an increase in power prices in real terms over the medium to long-term of 0.6% per annum (31 December 2017: 1.3%).

DISCOUNT RATE

The Company's discount rates reported above have been reduced by 0.25% where debt is not held at SPV level.

The Investment Manager regularly reviews the discount rate to ensure it remains in line with any changes to the market and risk profile of the Company.

OPERATIONAL INPUTS

This predominately includes insurance costs. Over the year the insurance market has rationalised industry wide concerns, especially around increasing loss ratios, which has led to an increase in premiums in the market. Insurance costs, if underlying terms such as deductibles remain the same, will increase into the long term regardless of the underwriting risk associated with an individual portfolio.

OTHER MOVEMENTS

This includes other factors behind the valuation movements, including long term PPA and insurance cost assumptions.

VALUATION SENSITIVITIES

Where possible, assumptions are based on observable market and technical data. In many cases, such as forward power prices, independent advisors are used to provide reliable and evidenced information enabling the Investment Manager to adopt a prudent approach. The Investment Manager has set out the inputs which it has ascertained would have a material effect upon the NAV in note 17 of the Financial Statements. All sensitivities are calculated independently of each other.

OUTLOOK

The ongoing consolidation of the UK solar market is increasing asset valuations in the secondary market, reducing the number of NAV-accretive opportunities available. As a result of the increasingly competitive landscape the Company is expected to adopt an opportunistic approach to new UK subsidised investments.

We continue to actively monitor and explore markets which demonstrate growth potential:

·  

Western Europe and other international markets: Solar markets characterised by subsidised assets and experienced contractors. The Investment Manager has developed strong relationships in the region with key market participants, including developers and owners of secondary assets, and will continue to actively engage with these parties in assessing acquisition opportunities.

·  

Unsubsidised Solar: Reductions in equipment and construction costs, alongside a high wholesale power price environment, have made subsidy-free assets increasingly viable. Depending on the PPA structure these assets are expected to offer a similar risk profile from a contracted revenue profile perspective.

The UK subsidy free market is still at an early stage given irradiation profiles compared to other European regions and the relative immaturity of the long-term corporate PPA market. The potential in this market area, however, is rapidly developing and the Investment Manager will continue to closely track developments. Markets in Southern Europe, like Spain and Portugal, present a more developed PPA market. The Investment Manager has significant experience in these markets having invested to date in 12 subsidy-free solar projects (totalling 53MW) in Iberia, either currently in construction or operational. The Investment Manager will continue to actively explore this market.

·  

Battery Storage co-location: Another notable market development in 2018 which continues to be actively monitored is the advances made in battery technology. Again, the Investment Manager is able to leverage Foresight Group's experience in this sector. Foresight Group was an early investor into the UK battery storage market investing in 45MW of battery storage facilities in 2018. These Foresight Group investments provide the Investment Manager with further operating experience and insight into the potential value creation that battery storage co-location could provide to the Company's existing solar assets in both the UK and Australia.

 

Foresight Group's experience in the aforementioned markets provides the Investment Manager with a solid understanding of the value accretive potential of these investment opportunities.

UK Portfolio Performance

The portfolio has generated significantly more electricity than our base cases predicted during the year. Strong operational performance throughout the year has been underpinned by high irradiation levels throughout the summer months. Although above average levels of irradiation and high temperatures were seen throughout the summer, there is not a direct linear relationship between irradiation and production. Higher temperatures reduce the efficiency of the solar modules resulting in a lower percentage of irradiation (over and above our base case) converted into electricity.

Electricity produced was 4.9% above expectations, when adjusted for compensation received, with irradiation levels being 6.4% above investment cases.

Through active management of a maturing portfolio, the Asset Manager has successfully remedied a number of historical operational issues. The optimisation of assets has been carried out with the long-term performance of the sites in mind with some short-term availability losses being a necessary consequence to enhance long term performance.

Where material incidents occurred during the year, the Company has been substantially compensated through insurance and contractual liquidated damages. The incidents were isolated events and will not affect the long-term performance of the assets.

SHOTWICK (72MW)

As disclosed in the 30 June 2018 Interim Report, on 25 June 2018, the cable connecting the solar power plant and the substation failed, forcing the site offline until 27 July 2018. Compensation is to be received through a combination of insurance and contractual protections representing a high proportion of the revenue losses. Financial losses not covered by insurance or contractual protection amounted to £0.32m.

CASTLE EATON (18MW), HIGH PENN (10MW), HIGHFIELDS (12MW) AND PITWORTHY(16MW)

The four sites have seen a significant improvement in performance in 2018, with relative performance being 10% better over the year. In the first half of the year minor incidents occurred at High Penn, Highfields and Pitworthy, which reduced site availability. Pitworthy continues to be impacted by reduced availability at inverter level and experienced a transformer failure in November to December. The Asset Manager continues to work with the O&M Contractor and the inverter manufacturer to resolve the situation.

WYMESWOLD (34MW)

Over the course of 2018 there were three separate grid disconnections lasting for one day each. In addition, a number of string insulation failures were identified over the period causing inverter downtime on a regular basis, for which the Company will be compensated. Repair works have been substantially completed.

VERWOOD (20.7MW)

Performance has been affected by a number of events over the course of the year including inverter capping, inverter failures and an unscheduled outage event.

TREHAWKE (11MW)

Overall performance has been affected by minor technical issues in the summer months. The high irradiation levels experienced caused inverter clipping to reduce performance ratios.

PEN Y CAE (7MW)

Site under performance was due to scheduled grid outages in April 2018 as well as a transformer failure at one of the stations in May 2018. A spare transformer was installed and the site brought back online within nine days.

PRODUCTION

The production figures below have been adjusted, where relevant, for events where compensation has been, or will be, received.

Site

MW

Irradiation Variance

Production
(kWh)

Production Variance

Abbey Fields

4.9

8.1%

4,715,053

11.2%

Abergelli

7.7

3.1%

6,148,330

0.5%

Atherstone

14.8

8.8%

14,635,043

7.0%

Bilsthorpe

5.7

9.6%

4,874,835

9.4%

Bournemouth

37.3

1.8%

40,884,013

4.3%

Bulls Head

5.5

13.8%

4,745,874

10.9%

Castle Eaton

17.8

9.5%

17,486,409

9.5%

Coombeshead

9.8

3.0%

9,918,949

-2.2%

Copley

30.0

7.9%

30,644,929

10.0%

Crow Trees

4.7

10.1%

3,962,039

9.5%

Cuckoo Grove

6.1

-3.6%

5,447,913

-4.6%

Field House

6.4

4.8%

5,586,251

4.1%

Fields Farm

5.0

10.8%

4,457,582

12.4%

Gedling

5.7

13.9%

4,907,926

12.8%

High Penn

9.6

5.0%

9,348,103

3.4%

Highfields

12.2

4.8%

10,962,502

-2.3%

Homeland

13.2

1.5%

11,583,787

1.3%

Hunters Race

10.3

2.9%

11,010,957

4.4%

Kencot Hill

37.2

7.2%

38,349,164

7.9%

Landmead

45.9

11.2%

46,089,806

8.7%

Lindridge

4.9

7.8%

4,248,189

8.9%

Manor Farm

14.2

10.9%

11,715,908

11.0%

Marsh Farm

9.1

5.2%

7,853,383

1.1%

Membury

16.5

4.8%

16,602,340

5.7%

Misson

5.0

8.2%

4,397,964

12.3%

Nowhere

8.1

12.3%

7,212,327

7.4%

Paddock Wood

9.2

4.6%

9,968,687

8.1%

Park Farm

13.2

6.6%

12,603,145

6.5%

Pen Y Cae

6.8

7.0%

5,301,149

-0.6%

Pitworthy

15.6

1.5%

12,862,896

-9.6%

Playters

8.6

10.0%

7,720,085

6.6%

Port Farm

34.7

7.3%

34,613,920

5.4%

Roskrow

8.9

-0.7%

7,438,959

3.9%

Sandridge

49.6

4.0%

49,560,373

4.4%

Sawmills

6.6

0.4%

6,430,390

-3.6%

Sheepbridge

5.0

16.8%

4,648,657

17.2%

Shotwick

72.2

6.7%

66,413,130

2.4%

Southam

10.3

5.9%

10,496,546

8.9%

Spriggs

12.0

2.8%

12,535,777

7.8%

Steventon

10.0

11.5%

9,063,848

9.4%

SV Ash

8.4

10.1%

7,175,180

11.3%

Tengore

3.6

2.3%

3,162,727

3.3%

Trehawke

10.6

0.2%

8,533,014

-5.2%

Upper Huntingford

7.7

6.4%

6,564,212

6.1%

Verwood

20.7

7.2%

21,033,022

0.3%

Wally Corner

5.0

7.8%

5,423,545

10.4%

Welbeck

11.3

12.5%

9,638,725

8.4%

Wymeswold

34.5

7.9%

32,304,111

3.2%

Yarburgh

8.1

9.5%

7,035,544

6.6%

Yardwall

3.0

3.3%

3,136,092

-1.0%

Total

723.1

 

691,453,309 

 4.9%

Weighted Total

 

 6.4%

 

 

AUSTRALIAN ASSETS

Two of the Australian assets became operational in 2018 with the remaining two assets due to be commissioned during the second quarter of 2019.

New commissioning requirements introduced by the AEMO in 2018 have caused delays to Longreach and Bannerton achieving full export capacity. Such delays are not expected to have a material impact on overall financial performance as the Company is contractually and financially protected.

Longreach

Construction of Longreach is complete and the site is operational. The site reached first export in March 2018, reaching full export capacity in the following months. RCR acted as EPC and O&M contractor. The Company is in the process of appointing a replacement O&M contractor. Contingency plans are in place to guarantee O&M services until the new contractor is appointed.

The project has been experiencing limited levels of grid curtailment in recent months caused by export constraints in one of the local substations. The Asset Manager is working with the network operator to address this.

Bannerton

Construction is complete however the project experienced grid commissioning delays. The project started exporting in July 2018 and is due to reach full export capacity in March 2019. The Asset Manager expects the financial losses resulting from grid connection delays to have minimal financial impact as the Company is contractually protected.

 

Oakey 1

Construction of Oakey 1 is mechanically complete however full commissioning has experienced delays as a result of RCR entering into administration. The project has appointed a service provider to conduct the commissioning process. The AEMO registration process is underway and the project is expected to start exporting in March 2019. Full commissioning is expected during the second quarter of 2019. As with the other Australian assets, the Company is contractually protected against commissioning delays despite RCR going into administration.

Oakey 2

Oakey 2 experienced damage whilst in construction as a result of adverse weather in October 2018 which damaged 20% of the equipment installed on site. A remedial plan has been agreed with the EPC contractor and new equipment ordered. The damage and subsequent delay is an insurable event with the project expecting to begin export in the second quarter of 2019. The works on Oakey 2 have not been affected by RCR going into administration as RCR was not involved in this project.

Sustainability and ESG

Sustainability and Environmental, Social and Governance ("ESG") considerations are at the core of the Company's strategy, helping to inform its investment process and asset management operations. Best practice across the portfolio is demonstrated through environmental stewardship, social engagement and good governance. The following reviews the recent activities taken by the Company.

ENVIRONMENTAL

Each asset is closely monitored for its localised environmental impact. The Asset Manager is a working partner of the Solar Trade Association's Large-Scale Asset Management Working Group and is a signatory to the Solar Farm Land Management Charter. 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.

Throughout the year, the Asset Manager's Environment and Sustainability Manager, James Jenkison, pursued a number of initiatives to ensure the solar power plants are being effectively managed for biodiversity. Such schemes include:

• 

Hedgerow and tree planting - To date, more than 32km of hedgerow have been planted across the portfolio. Planting helps to promote biodiversity, absorbs carbon, improves drainage and soil quality and reduces site exposure to extreme weather conditions.

• 

Building of animal refuges - Ponds, swales and hibernacula are built at a number of sites to provide natural shelter for flora and fauna as well as help improve natural drainage.

• 

Bat and bird boxes - The Asset Manager regularly 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 has worked with local bee keepers to install hives to help restore the native bee population and support crop pollination and honey production. The Asset Manager 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; any array identified as breaching this level and is declared defective and action is taken to remedy the problem.

• 

Grassland management - Grass cutting is limited to access points and the areas directly around the solar panel arrays in order to promote the growth of wildflowers and encourage biodiversity.

 

 

SOCIAL

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 ensure that local stakeholders are engaged. During 2018, the Environment and Sustainability Manager conducted over 50 site visits.

·  

Community investment - The Company supports community benefit schemes that assist local authorities in developing and maintaining community assets and organisations. In 2018, over £100k worth of grants were provided to local communities throughout the UK. At Sandridge solar farm the Parish Council used the funds to install emergency defibrillators around the Parish. Copley solar farm used the grants to repair and refurbish the local village hall and at Upper Huntingford the grants were used to fund refurbishments to the village hall, local cricket club and educational activities at the local library. In March 2018, the Company also launched the Bannerton solar park grant scheme, providing grants of up to AUS$5,000 to local community groups. The groups which were awarded grants were: Rotary Club of Robinvale - Euston; St Vincent de Paul Society - Robinvale; Murray Valley Aboriginal Co-operative - Robinvale College; Mallee Almond Blossom Festival - Englefield; V8 Car Trek team - Robinvale; Storm Rugby Club - Robinvale; Euston Netball Club and Robinvale Rowing Club and Youth Association.

·  

Educational initiatives - A large part of generating public support comes as a result of educational initiatives, generating interest in and understanding of solar power's benefits. At one of the Company's Australian sites, Bannerton, located in Victoria, students from Robinvale College visited the site and learnt about solar power. in the UK, for the second year running, the Company invited the Institution of Engineering and Technology to visit Wymeswold solar power plant in Leicestershire. The group toured the 78-hectare site to witness first-hand the operational aspects of a solar farm. Meanwhile, the site's O&M contractor, Brighter Green Engineering, explained details of the plant's day-to-day management and the steps taken to maximise operational efficiency and environmental stewardship.

·  

Health and well-being - The Health and Safety (H&S) of everyone working on or visiting the site and of local residents is of paramount importance. The management and monitoring of H&S onsite is a top priority for the O&M contractor, who is responsible for recording and reporting all H&S related incidents to the Asset Manager on an ongoing basis. In addition to this, to improve the management of SHEQ (Safety, Health, Environmental and Quality), reinforce best practice and ensure regulatory compliance, the Asset Manager appoints an independent professionally accredited H&S consultant who ensures that contractors are appointed on the basis of their health and safety competence and regularly visits the sites to ensure they are meeting industry and legal standards.

·  

Public benefit - The Company's first Australian solar project, Bannerton, will provide clean power to Melbourne's tram network. Not only will this contribute significantly to the decarbonisation of the public transport network in Melbourne, it will also reduce noise and air pollution at the point of use, increasing both the health and the well-being of the local population.

 

GOVERNANCE

The Asset Manager actively reviews the consents of all solar assets to ensure that all solar plants are compliant with the permissions and conditions attached to them and actively engages with local government organisations to ensure ongoing compliance. In addition to ensuring the Company is protected from potential legal action, this also promotes trust with local communities.

• 

GRESB (Global Real Estate Sustainability Benchmark) GRESB's Infrastructure Asset Assessment uses high-quality ESG data and advanced analytical tools to benchmark ESG performance of assets against its peers, identify areas for improvement and aid engagement with investors. The Company submitted the Southam Solar Farm to the GRESB Infrastructure ESG Assessment in 2018. Overall, the asset received an above peer average score.

• 

UNPRI (United Nations Principles for Responsible Investment) The Investment Manager has been a signatory to the UNPRI since 2013. The UNPRI is a globally recognised voluntary framework concerned with the incorporation of ESG considerations into the investment decision making process and provides a basis for potential and existing investors to judge the quality of a company's ESG processes and positioning within an industry sector. The Investment Manager achieved an A level rating across both the 'Strategy and Governance' and 'Infrastructure' modules in its 2018 submission.

SUSTAINABILITY

In 2018, the Company's 723MW operational UK portfolio produced over 691GWh of clean energy. The below table shows each asset's contribution to CO2 reduction in 2018 by comparing its lifecycle CO2 emissions to that of an equivalent amount of coal-generated electricity. Furthermore, using Ofgem's assessment that the average UK household consumes 3.1 MWh per year, it can be assumed that the Company's portfolio generated enough clean electricity to power 223,049 homes in 2018.

Site

MW

Production (MWh)

CO2 Production Avoided (t)*

Homes Powered per Year**

TOE (Tonnes of Oil Equivalent) Saved

Hedgerows Planted (m)

Sheep Grazing

Beehives Installed

Abbey Fields

5

4,715

3,640

1,521

405

700

 

 

Abergelli

8

6,148

4,747

1,983

529

500

 

 

Atherstone

15

14,635

11,298

4,721

1,258

60

 

Bilsthorpe

6

4,875

3,763

1,573

419

1,265

 

 

Bournemouth

37

40,884

31,562

13,188

3,515

2,360

 

Bulls Head

6

4,746

3,664

1,531

408

370

 

Castle Eaton

18

17,486

13,500

5,641

1,504

 

 

 

Coombeshead

10

9,919

7,657

3,200

853

 

 

 

Copley

30

30,645

23,658

9,885

2,635

1,200

 

Crow Trees

5

3,962

3,059

1,278

341

165

 

 

Cuckoo Grove

6

5,448

4,206

1,757

468

780

 

 

Field House

6

5,586

4,313

1,802

480

250

 

Fields Farm

5

4,458

3,441

1,438

383

250

 

 

Gedling

6

4,908

3,789

1,583

422

 

 

High Penn

10

9,348

7,217

3,016

804

600

 

 

Highfields

12

10,963

8,463

3,536

943

650

 

 

Homeland

13

11,584

8,943

3,737

996

130

 

Hunters Race

10

11,011

8,500

3,552

947

500

 

 

Kencot Hill

37

38,349

29,606

12,371

3,297

2,225

 

Landmead

46

46,090

35,581

14,868

3,963

2,800

 

 

Lindridge

5

4,248

3,280

1,370

365

60

 

 

Manor Farm

14

11,716

9,045

3,779

1,007

1,970

 

Marsh Farm

9

7,853

6,063

2,533

675

755

 

 

Membury

16

16,602

12,817

5,356

1,428

2,630

 

 

Misson

5

4,398

3,395

1,419

378

460

 

Nowhere

8

7,212

5,568

2,327

620

1,200

 

 

Paddock Wood

9

9,969

7,696

3,216

857

440

 

Park Farm

13

12,603

9,730

4,066

1,084

 

 

 

Pen Y Cae

7

5,301

4,092

1,710

456

 

 

 

Pitworthy

16

12,863

9,930

4,149

1,106

1,525

Playters

9

7,720

5,960

2,490

664

454

 

 

Port Farm

35

34,614

26,722

11,166

2,976

430

 

Roskrow

9

7,439

5,743

2,400

640

830

 

 

Sandridge

50

49,560

38,261

15,987

4,261

280

 

Sawmills

7

6,430

4,964

2,074

553

 

 

 

Sheepbridge

5

4,649

3,589

1,500

400

1,450

 

 

Shotwick

72

66,413

51,271

21,424

5,711

1,930

 

 

Southam

10

10,497

8,103

3,386

903

330

 

Spriggs

12

12,536

9,678

4,044

1,078

 

 

 

Steventon

10

9,064

6,997

2,924

779

660

 

 

SV Ash

8

7,175

5,539

2,315

617

1,200

 

 

Tengore

4

3,163

2,442

1,020

272

65

 

 

Trehawke

11

8,533

6,587

2,753

734

 

 

Upper Huntingford

8

6,564

5,068

2,117

564

 

 

 

Verwood

21

21,033

16,237

6,785

1,809

 

 

 

Wally Corner

5

5,424

4,187

1,750

466

 

 

 

Welbeck

11

9,639

7,441

3,109

829

 

 

 

Wymeswold

34

32,304

24,939

10,421

2,778

257

 

Yarburgh

8

7,036

5,431

2,270

605

640

 

Yardwall

3

3,136

2,421

1,012

270

 

 

 

Total

723

691,453

533,802

223,049

59,454

32,371

12

7

 

*      Compared to coal emissions

** Using the OFGEM figure of 3.1 MWh / annum / household

SUSTAINABLE INVESTING IN INFRASTRUCTURE

Over the course of 2018 Foresight Group's Infrastructure team has been seeking to refine its sustainability tracking and reporting to further improve its investment processes, enhance the sustainability performance of existing assets and demonstrate more comprehensively the environmental benefits and social contribution of the Company's activities. As such, in future the Investment Manager will be implementing Foresight Group's Sustainable Investing in Infrastructure Strategy. This strategy focuses on ensuring all assets are evaluated prior to acquisition and throughout their ownership, in accordance with Foresight Group's Sustainability Evaluation Criteria. There are five central themes to the Criteria, which cover the key areas of sustainability and ESG performance. The five criteria are:

1.

Sustainable Development Contribution: The development of affordable and clean energy and improved resource and energy efficiency.

2.

Environmental Footprint: Assessing potential environmental impact such as emissions to air, land and water, effects on biodiversity and noise and light pollution.

3.

Social Engagement: Engagement and consultation with local stakeholders. Ensuring a positive local economic and social impact, community engagement and the health and wellbeing of stakeholders.

4.

Governance: Compliance with relevant laws and regulations and ensuring best practice is followed.

5.

Third Party Interactions: Third party due diligence is conducted on key counterparties to ensure adherence to the aforementioned criteria where relevant.

 

Principal 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. Foresight Group has a comprehensive Risk Management Framework in place which is reviewed on a regular basis by the Directors.

The Directors consider the following as the principal risks and uncertainties to the Company at this time, and their mitigants.

Major Risk

Summary of Risk

Mitigants

Risks relating to the sale of electricity

A decline in the wholesale price of electricity could materially adversely affect the price of electricity generated by solar PV assets and thus the Company's business, financial position, results of operations and business prospects.

Volatility in the wholesale electricity price can be mitigated by entering hedging agreements against future price movements. This can be achieved through a variety of trading strategies including forward sale contracts of electricity and fixed price PPAs. The portfolio currently has PPAs in place into the medium term offering a secure route to market. At 31 December 2018, 53% of the UK portfolio was subject to fixed electricity prices, with the remaining PPAs allowing for electricity prices to be fixed at any point. The Investment Manager regularly reviews wholesale electricity price forecasts and would consider increasing the percentage of fixed whole sale revenues if future movements prices affect the minimum dividend cover targets.

Risks relating to regulatory changes to subsidy schemes

The introduction of subsidy scheme changes, either of a retrospective nature or not, could have a material adverse effect on the Company financial results, operations and position and valuation of the existing portfolio.

Despite the early closure of the UK RO scheme for new installations, the grandfathering principle states that existing operational accredited projects will continue to be supported for the duration of their RO eligibility period (20 years from the date of accreditation). Furthermore, while the UK's renewable energy policy has, over the last few years, experienced much development and change the Government has avoided making changes with retrospective character. In addition, the UK Government remains committed to meeting its   renewable generation targets and carbon emission reductions under the Climate Change Act.

Australia has set its federal policy to meet its Renewable Energy Target ("RET") for 33,000 GWh by 2020. Under the LRET the support for large scale renewable projects will remain in place until 2030.

Risks relating to gearing

The Company's underlying subsidiaries currently have borrowings of approximately £504.4 million. Under the terms of the Facility Agreements, the borrower has agreed to covenants as to its operation and financial conditions. Any failure by the borrower to fulfil obligations under the Facility Agreements (including repayment) may permit the lender to demand repayment of the related loan and to realise its security which may mean the loss of a solar power asset.

Any new debt facilities are thoroughly appraised before they are entered into to ensure they benefit the Company without creating unnecessary risk. Due to conservative gearing targets and sound management it is unlikely that debt covenants would negatively impact our ability to pay dividends. Gearing, calculated as Group borrowings (including any asset level gearing) as a percentage of the Company's Gross Asset Value will not exceed 50 per cent. at the time of drawdown. It is the Board's current intention that long-term gearing (including any long-term, asset level gearing), calculated as Group borrowings (excluding intra-group borrowings and any revolving credit facilities) as a percentage of the Company's Gross Asset Value will not exceed 40 per cent. at the time of drawdown.

Risks relating to RPI

The revenues and expenditure of solar PV assets are frequently partly or wholly subject to indexation, typically with reference to RPI. Additionally, £90.2 million of the Long-Term Debt in place is linked to RPI.

The Investment Manager considers the inflation risk presented by these assets to be limited through the explicit inflation-linked nature of both operating revenues and costs. On the revenue side, ROC prices are formally linked to RPI and for PPAs the electricity price forms part of the RPI basket of goods. For costs, O&M contract prices and land rents are both linked to inflation and as such there is a natural inflation linkage to costs and revenues.

In January 2019 the House of Lords published a report on the use of RPI in the UK market, recommending the Government to reduce its use in favour of CPI. This is not expected to affect the existing support mechanism for renewable energy however the Investment Manager will continue to monitor any regulatory changes on the use of RPI.

Risks relating to operation and maintenance contracts

The Company relies on third-party professionals and independent contractors and other companies to provide the required operator and maintenance support services throughout the operating phases of the solar PV assets in the Company's investment portfolio. If such contracted parties are not able to fulfil their contractual obligations, the Company's ability to operate the solar plants could be adversely affected and the Company may be forced to seek recourse against such parties, provide additional resources to complete their work, or to engage other companies to complete their work.

The SPVs have entered into O&M contracts with contractors pursuant to which the contractor provides both preventative and corrective maintenance. Under the terms of the O&M contracts the contractor is typically required to keep the site available 99% of the time during the hours of daylight. Liquidated Damages are due to the SPV should availability fall below the guaranteed level. The Liquidated Damages compensate for all lost revenue but are usually capped at the annual O&M fee. Foresight Group's experience in managing this asset type since 2007 and expertise in identifying strong counterparties further mitigates this risk.

Risks relating to the construction of solar PV assets

The Company can invest up to 25 per cent. of its GAV in assets under construction. Delays in project construction may result in a reduction in returns caused by a delay in the project generating revenue. Failure in the construction of a plant, for example, faulty components or insufficient structural quality may not be evident at the time of acquisition or during any period during which a warranty claim may be brought against the contractor and may result in loss of value without full or any recourse to insurance or construction warranties.

The Investment Manager ensures that risks are mitigated through performance bonds and through the use of milestone payments, with funds only being transferred once certain conditions are met. In addition, the construction progress is overseen by the in-house Asset Management team with support from independent technical advisers to ensure the construction milestones are achieved on schedule and in line with the specifications set up in the construction contract.

Risks relating to taxation

Changes to existing tax rates and legislation could impact the valuation of the portfolio and Company returns.

The introduction of a Labour Government could result in an increase in the UK corporate tax to 26% according to the 2017 election manifesto, adversely impacting the valuation of the Company's portfolio.

The Investment Manager will continue to work with tax advisers to ensure any potential changes in tax rates and legislation are addressed accordingly.

 

 

The Company is a member of the Association of Investment Companies (the "AIC"). The Board has considered the principles and recommendations of the AIC Code of Corporate Governance (AIC Code) by reference to the AIC Corporate Governance Guide for investment companies (AIC Guide). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to Shareholders. The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code, except as set out below.

The UK Corporate Governance Code includes provisions relating to:

• 

The role of the Chief Executive

• 

Executive Directors' remuneration

• 

The need for an internal audit function

For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board does not consider these provisions to be relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no Executive Directors, employees or internal audit. The Company has therefore not reported further in respect of these provisions.

The Board

The Company has a Board of three Independent Non-Executive Directors.

During the year, Peter Dicks acted as a Director of Foresight VCT plc. Mr Dicks resigned as a Director from the Board of Foresight VCT plc on 25 May 2018. These VCTs invest in high growth, small unquoted UK companies.

Due to the different investment focus of the Company compared with the VCTs, the Board believes there to be no conflict between the roles Mr Dicks performs. Where conflicts of interest do arise between the different funds, the common Director would seek to act fairly and equitably between different groups of Shareholders. If a conflict were to occur then decisions would be taken by the independent Directors.

The Directors were all reappointed at the Annual General Meeting of the Company held on 11 June 2018.

The Board is in the process of appointing a fourth Director as a result of the growth of the Company size and to improve Board diversity and effectiveness. The formal appointment of the new Director is expected to be announced in the first half of 2019.

Division of Responsibilities

The Board is responsible to Shareholders for the proper management of the Company and Board meetings are held on at least a quarterly basis with further ad hoc meetings scheduled as required. In the year under review 14 Board meetings were held. The Board has formally adopted a schedule of matters for which its approval is required, thus maintaining full and effective control over appropriate strategic, financial, operational and compliance issues. A Management Agreement between the Company and the Investment Manager sets out the matters over which the Investment Manager has authority, including monitoring and managing the existing investment portfolio and the limits above which Board approval must be sought. All other matters are reserved for approval by the Board of Directors.

Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties. In terms of the requirements of the Articles of Association the Directors retire periodically at every third Annual General Meeting after the AGM at which they were elected.

Full details of duties and obligations are provided at the time of appointment and are supplemented by further details as requirements change. There is no formal induction programme for the Directors as recommended by the AIC Code. However, this will be implemented should the need arise.

The Board has access to the officers of the Company Secretary who also attend Board Meetings. Representatives of the Investment Manager attend all formal Board Meetings although the Directors may meet without the Investment Manager being present. Informal meetings with the Investment Manager are also held between Board Meetings as required. The Company Secretary provides full information on the Company's assets, liabilities and other relevant information to the Board in advance of each Board Meeting. Attendance by Directors at Board and Committee meetings is detailed in the table below.

 

Board

Management Engagement

Audit &
Risk

Remuneration
&
Nomination

Alex Ohlsson

14/14

1/1

4/4

1/1

Peter Dicks

14/14

1/1

4/4

1/1

Chris Ambler

14/14

1/1

4/4

1/1

In the light of the responsibilities retained by the Board and its Committees and of the responsibilities delegated to Foresight Group CI Limited, JTC (Jersey) Limited and its legal advisors, the Company has not appointed a Chief Executive Officer, Deputy Chairman or a Senior Independent Non-Executive Director as recommended by the AIC Code. As such, the provisions of the UK Corporate Governance Code which relate to the division of responsibilities between a Chairman and a Chief Executive Officer are not considered applicable to the Company.

Investment Manager

The Investment Manager utilises Foresight Group's experience as a multi-fund asset manager and has in place established policies and procedures designed to address conflicts of interest in allocating investments among the Group's respective investment funds.

Foresight Group is fully familiar with, and has extensive experience in allocating investments, ensuring fair treatment for all investors and managing conflicts of interest should these arise. Foresight Group is keen to ensure such fair treatment for all investors. Under the rules and regulations of the Guernsey Financial Services Commission ("GFSC"), Foresight Group is also legally obliged to treat its investors fairly and handle such conflicts in an open and transparent manner and these processes are audited on an annual basis.

In terms of allocation, Foresight Group adheres to a formal written policy for allocating new investment opportunities which are overseen by Foresight Group's Investment Committee. Each opportunity is allocated with reference to the net capital available within each Foresight Group managed fund with a sector and asset class investment strategy matching the proposed investment. Where the allocation would result in any Foresight Group managed fund having insufficient liquidity or excessive portfolio concentration the allocation is revised accordingly.

Foresight Group's allocation policy is reviewed from time-to-time by the independent Board of Directors of each of the Foresight Group funds and this policy has been operated successfully for many years. Investments are allocated on pari passu terms.

After an evaluation of the performance of the Investment Manager, including review of assets purchased by the Company and the results of ongoing portfolio management, it is the opinion of the Directors that the continuing appointment of the Investment Manager on the terms currently agreed is in the interests of the Shareholders.

Board Committees

The Board has adopted formal terms of reference, which are available to view by writing to the Company Secretary at the registered office, for two standing Committees which make recommendations to the Board in specific areas.

The Audit and Risk Committee comprises Chris Ambler (Chairman), Alex Ohlsson and Peter Dicks, all of whom are considered to have sufficient financial experience to discharge the role. The Committee meets at least twice a year to, amongst other things, consider the following:

• 

Monitor the integrity of the financial statements of the Company and approve the accounts;

• 

Review the Company's internal control and risk management systems;

• 

Make recommendations to the Board in relation to the appointment of the external auditors;

• 

Review and monitor the external Auditors' independence; and

• 

Implement and review the Company's policy on the engagement of the external Auditors to supply non-audit services.

KPMG LLP has completed the Company's external audit for the period and has not performed any non-audit services during the year. 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 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.

The Board has established a separate Remuneration and Nomination Committee during the course of the year under review. This Committee is to review and implement a formal and transparent procedure for developing policy on new Director appointments and remuneration, including fixing the remuneration packages of individual Directors as considered appropriate. This committee comprises of Alex Ohlsson (Chairman), Peter Dicks and Chris Ambler.

The Board believes that, as a whole, it has an appropriate balance of skills, experience and knowledge. The Board also believes that diversity of experience and approach, including gender diversity, amongst Board members is important and it is the Company's policy to give careful consideration to issues of Board balance and diversity when making new appointments.

Copies of the terms of reference of each of the Company's Committees can be obtained from the Company Secretary upon request.

Board Evaluation

The Board undertakes an annual evaluation of its own performance and that of its Committees through an initial evaluation questionnaire. The Chairman then discusses the results with the Board and its Committees and will take appropriate action to address any issues arising from the process.

The Board have engaged Deloitte LLP to conduct an external review of the Board's effectiveness. The results of this review will be reported after the review has been concluded in the Company's Interim Report for the period ending 30 June 2019.

Relations with Shareholders

The Company communicates with Shareholders and solicits their views when it is considered appropriate to do so. Individual Shareholders are welcomed to the Annual General Meeting where they have the opportunity to ask questions of the Directors, including the Chairman, as well as the Chairman of the Audit and Risk, Remuneration and Nomination and the Management and Engagement Committee. From time to time, the Board may also seek feedback through Shareholder questionnaires and through open invitations for Shareholders to meet the Investment Manager.

Internal Control

The Directors of the Company have overall responsibility for the Company's system of internal controls and the review of their effectiveness. The internal controls system is designed to manage, rather than eliminate, the risks of failure to achieve the Company's business objectives. The system is designed to meet the particular needs of the Company and the risks to which it is exposed and by its nature can provide reasonable but not absolute assurance against misstatement or loss.

The Board's appointment of JTC (Jersey) Limited as accountant and administrator has delegated the financial administration of the Company. There is an established system of financial controls in place, to ensure that proper accounting records are maintained and that financial information for use within the business and for reporting to Shareholders is accurate and reliable and that the Company's assets are safeguarded.

Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures and applicable rules and regulations are complied with.

Pursuant to the terms of its appointment, the Investment Manager provides the Company's Board with an investment pipeline of potential assets in solar energy infrastructure investments for it to consider, and has physical custody of documents of title relating to the equity investments involved.

The Investment Manager confirms that there is a continuous process for identifying, evaluating and managing the significant risks faced by the Company. This has been in place for the year under review and up to the date of approval of the Annual Report and financial statements, and is regularly reviewed by the Board. The process is overseen by the Investment Manager and uses a risk-based approach to internal control whereby a test matrix is created that identifies the key functions carried out by the Investment Manager and other service providers, the individual activities undertaken within those functions, the risks associated with each activity and the controls employed to minimise those risks. A residual risk rating is then applied. The Board is provided with reports highlighting all material changes to the risk ratings and confirming the action that has or is being taken. This process covers consideration of the key business, operational, compliance and financial risks facing the Company and includes consideration of the risks associated with the Company's arrangements with professional advisors.

The Audit and Risk Committee has carried out a review of the effectiveness of the system of internal control, together with a review of the operational and compliance controls and risk management. The Audit and Risk Committee has reported its conclusions to the Board which was satisfied with the outcome of the review.

The Board monitors the investment performance of the Company in comparison to its objectives at each Board meeting. The Board also reviews the Company's activities since the last Board meeting to ensure that the Investment Manager adheres to the agreed investment policy and approved investment guidelines and, if necessary, approves changes to such policy and guidelines.

The Board has reviewed the need for an internal audit function. It has decided that the systems and procedures employed by the Investment Manager, the Audit and Risk Committee and other third party advisers provide sufficient assurance that a sound system of internal control to safeguard Shareholders' investment and the Company's assets, is in place and maintained. In addition, the Company's financial statements are audited by external Auditors and thus an internal audit function specific to the Company is considered unnecessary.

Directors' Professional Development

Full details of duties and obligations are provided at the time of appointment and are supplemented by further details as requirements change, although there is no formal induction programme for the Directors as recommended by the AIC Code. Directors are also provided with key information on the Company's policies, regulatory and statutory requirements and internal controls on a regular basis. Changes affecting Directors' responsibilities are advised to the Board as they arise. Directors also participate in industry seminars.

Bribery Act 2010

The Company is committed to carrying out business fairly, honestly and openly. The Investment Manager has established policies and procedures to prevent bribery within its organisation.

Criminal Finances Act 2017

The Company has committed to a policy to conduct all of its business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country.

The Company is committed to acting professionally, fairly and with integrity in all of its business dealings and relationships wherever it operates and implementing and enforcing effective systems to counter tax evasion facilitation.

The Company will uphold all laws relevant to countering tax evasion in all the jurisdictions in which the Company operates, including the Criminal Finances Act 2017.

Going Concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in this report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are referred to in the Chairman's Statement, Investment Manager's Report and Notes to the Accounts. In addition, the financial statements include the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to credit risk and liquidity risk.

The Company has sufficient financial resources together with investments and income generated. As a consequence, the Directors believe that the Company is able to manage its business risks.

The Directors have reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

 

 

Viability Statement

In accordance with the UK Corporate Governance Code, the Directors have assessed the viability of the Company over a three year period to December 2021, taking into account the Company's current position and the potential impact of the principal risks and uncertainties set out under Risk Management. Based on this assessment, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to December 2021.

The Directors have determined that a three year period to 31 December 2021 constitutes an appropriate period over which to provide its viability statement. This is the period focussed on by the Board during the strategic planning process and is considered reasonable for a business of its size and nature. Whilst the Directors have no reason to believe the Company will not be viable over a longer period, it believes this presents users of the Annual Report with a reasonable degree of confidence whilst still providing a longer-term perspective.

In making this statement, the Board carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

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 Renumeration Report

Introduction

The Board has prepared this report in line with the AIC code. An ordinary resolution to approve this report will be put to the members at the forthcoming Annual General Meeting on 25 June 2019.

Annual Statement from the Chairman of the Remuneration and Nomination Committee

The Board, which is profiled below, consists solely of Non-Executive Directors and the Committee considers at least annually the level of the Board's fees.

Consideration by the Directors of matters relating to Directors' Remuneration

The Remuneration and Nomination Committee comprises three Directors: Alex Ohlsson (Chairman), 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. The remuneration policy set by the Board is described below. Individual remuneration packages are determined by the Remuneration and Nomination Committee within the framework of this policy.

The Directors are not involved in deciding their own individual remuneration with each Director abstaining from voting on their own remuneration.

Remuneration Policy

The Board's policy is that the remuneration of Non-Executive Directors should reflect time spent and the responsibilities borne by the Directors for the Company's affairs and should be sufficient to enable candidates of high calibre to be recruited. The levels of Directors' fees paid by the Company for the year ended 31 December 2018 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. 20% of Mr Ambler's remuneration is paid to Jersey Electricity Plc. None of the Directors have a service contract but, under letters of appointment dated 16 August 2013 may resign at any time by mutual consent. No compensation is payable to Directors leaving office. As the Directors are not appointed for a fixed length of time there is no unexpired term to their appointment.

The above remuneration policy was approved by the Shareholders at the Annual General Meeting held on 11 June 2018 for the financial year to 31 December 2018 and will apply in subsequent years. Shareholders' views in respect of Directors' remuneration are communicated at the Company's Annual General Meeting and are taken into account in formulating the Directors' remuneration policy.

Details of Individual Emoluments and Compensation

The emoluments in respect of qualifying services of each person who served as a Director during the year and those forecast for the year ahead are shown below. No Director has waived or agreed to waive any emoluments from the Company in the year under review. No other remuneration was paid or payable by the Company during the current year nor were any expenses claimed by or paid to them other than for expenses incurred wholly, necessarily and exclusively in furtherance of their duties as Directors of the Company. The Company's Articles of Association do not set an annual limit on the level of Directors' fees but fees must be considered within the wider Remuneration Policy noted above. Directors' liability insurance is held by the Company in respect of the Directors.

 

Anticipated Directors' fees for the year ending

31 December 2019

Directors' fees for year ended
31 December 2018

Alex Ohlsson (Chairman)

£70,000

£70,000

Chris Ambler

£55,000

£55,000

Peter Dicks

£45,000

£45,000

The Directors are not eligible for pension benefits, share options or long-term incentive schemes.

Directors' Interests

Directors who had interests in the shares of the Company as at 31 December 2018 are shown below. The Directors do not have any options over shares. Mr Ambler and Mr Dicks both had investment programmes in place during year under review. Mr Ambler has terminated his investment programme.

 

Ordinary shares of nil par value held on 31 December 2018

Alex Ohlsson (Chairman)

25,0001

Chris Ambler

26,524

Peter Dicks

65,034

1 Shares legally and beneficially owned by a personal pension company.

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 2019.

Audit and Risk Committee Report

The Audit and Risk Committee (the "Committee") is chaired by Chris Ambler and comprises the full Board. The Committee operates within clearly defined terms of reference. The terms of reference were reviewed during the year under review and were updated as deemed appropriate, including enhancing the Committee's scope to consider key risks faced by the Company.

Meetings are scheduled to coincide with the reporting cycle of the Company and the Committee has met four times in the year under review. The function of the Committee is to ensure that the Company maintains the highest standards of integrity, financial reporting, internal and risk management systems and corporate governance.

None of the members of the Committee have any involvement in the preparation of the financial statements of the Company.

The Committee is charged with maintaining an open and effective relationship with the Company's Auditors. The Chairman of the Committee keeps in regular contact with the Auditors throughout the audit process and the Auditors attend the Committee meetings at which the Company's accounts are considered. The Committee reports directly to the Board which retains the ultimate responsibility for the financial statements of the Company.

Significant Issues Considered

The Committee has identified and considered the following principal key areas of risk in relation to the business activities and financial statements of the company:

•               

Valuation of unquoted investments. This issue was discussed with the Investment Manager and the Auditor at the 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 Holdco Limited ("FS Holdco"), FS Holdco 2 Limited ("FS Holdco 2"), FS Holdco 3 Limited ("FS Holdco 3") and FS Holdco 4 Limited ("FS Holdco 4"). 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 FS Holdco, FS Holdco 2, FS Holdco 3 FS Holdco 4 and FS Debtco.

The majority of FS Holdco's, FS Debtco's and FS Holdco 4's total assets (by value) are held in investments where no quoted market price is available. FS Holdco's and FS Debtco's assets are valued by using discounted cash flow measurements. Three assets in FS Holdco 4 were held at cost at 31 December 2018. 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 17 of the financial statements. The Investment Manager has provided sensitivities around those assumptions which are also detailed in note 17.

The Investment Manager confirmed to the Committee that they were not aware of any material misstatements. Having reviewed the reports received from the Investment Manager and Auditors, the Committee is satisfied that the key areas of risk and judgement have been addressed appropriately in the financial statements and that the significant assumptions used in determining the value of assets and liabilities have been properly appraised and are sufficiently robust. The Committee considers that KPMG LLP has carried out its duties as Auditor in a diligent and professional manner.

During the year, the Committee assessed the effectiveness of the current external audit process by assessing and discussing specific audit documentation presented to it in accordance with guidance issued by the Auditing Practices Board. The Audit Partner, or alternatively responsible person, is rotated every five years ensuring that objectivity and independence is not impaired. KPMG LLP has audited the Company since 2014. A new Audit Director was appointed in November 2017, and the 2017 financials were the first year that the Audit Director has been in place.

The Committee considered the performance of the Auditor during the year and agreed that KPMG LLP have provided a high level of service and maintained a good knowledge of the market, making sure audit quality continued to be maintained.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS 

The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations. 

Company Law requires the Directors to prepare financial statements for each financial year.  Under that law they are required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law. 

Under Company Law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.  In preparing these financial statements, the Directors are required to: 

• 

select suitable accounting policies and then apply them consistently; 

• 

make judgements and estimates that are reasonable, relevant and reliable; 

• 

state whether they have been prepared in accordance with IFRSs as adopted by the EU; 

• 

assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

• 

use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies (Jersey) Law 1991.  They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Report that complies with that law and those regulations. 

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge: 

·  

the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and 

·  

the Directors' report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face. 

 

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Alexander Ohlsson
Chairman

For and on behalf of Foresight Solar Fund Limited
5 March 2019

 

Independent Auditor's Report

to 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 2018 which comprise the statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, and the related notes, including the accounting policies in note 2.

In our opinion the financial statements:

• 

give a true and fair view of the state of Company's affairs as at 31 December 2018 and of its profit for the year then ended;

• 

have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and

• 

have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

2 Key audit matters: including our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, were as follows:

 

The risk

Our response

The impact of uncertainties due to UK exiting the European Union on our audit

New risk

Refer to page 19 (Brexit), page 42 (going concern), and page 63 (financial disclosures).

Unprecedented levels of uncertainty

All audits assess and challenge the reasonableness of estimates, in particular as described in "Valuation of unquoted investments" below, and related disclosures and the appropriateness of the going concern basis of preparation of the financial statements (see below). All of these depend on assessments of the future economic environment and the Company's future prospects and performance.

In addition, we are required to consider the other information presented in the Annual Report including the principal risks disclosure and the viability statement and to consider the Directors' statement that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business.

Brexit is one of the most significant economic events for the UK and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown.

We developed a standardised firm-wide approach to the consideration of the uncertainties arising from Brexit in planning and performing our audits. Our procedures included:

•    Our Brexit knowledge - We considered the Directors' assessment of Brexit-related sources of risk for the company's business and financial resources compared with our own understanding of the risks. We considered the Directors' plans to take action to mitigate the risks.

•    Sensitivity analysis - When addressing the valuation of unquoted investments and other areas that depend on forecasts, we compared the Directors' sensitivity analysis to our assessment of the full range of reasonably possible scenarios resulting from Brexit uncertainty and, where forecasts cash flows are required to be discounted, considered adjustments to discount rates for the level of remaining uncertainty.

•    Assessing transparency - As well as assessing individual disclosures as part of our procedures on the "Valuation of unquoted investments" we considered all of the Brexit related disclosures together, including those in the annual report, comparing the overall picture against our understanding of the risks.

Valuation of unquoted investments

(£530 million; 2017: £409)

Refer to page 25 (Investment Manager's Report), page 60 (accounting policy) and page 77 (financial disclosures).

Subjective valuation

86% (2017: 85%) of the Company's total assets (by value) is held in investments where no quoted market price is available.

The unquoted investments 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, being the net assets of UK Hold Co.

86% (2017: 85%) of UK Hold Co's total assets (by value) are held in investments where no quoted market price is available. The unquoted investments are 100% controlling interests in FS Holdco Limited ("FS Holdco"), FS Holdco 2 Limited ("FS Holdco 2"), FS Holdco 3 Limited ("FS Holdco 3"), FS Holdco 4 Limited ("FS Holdco 4"). These are measured at fair value, being the fair value of the net assets of FS Holdco, FS Holdco 2, FS Holdco 3 and FS Holdco 4.

33% (2017: 65%) of FS Holdco 2's total assets (by value) is held in an investment where no quoted market price is available. This unquoted investment is a 100% controlling interest in FS Debtco Limited ("FS Debtco").

78% (2017: 70%) of FS Holdco's, 53% (2017: 0%) of FS Holdco 2's, 93% (2017: 0%) of FS Holdco 3's, 100% (2017: 100%) of FS Holdco 4's and 73% (2017: 74%) of FS Debtco's total assets (by value) are held in investments where no quoted market price is available. These are measure at discounted cash flow measurements or the price of a recent transaction.

Fair value is established in accordance with the International Private Equity and Venture Capital Valuations Guidelines.

The valuation of unlisted investments requires a number of estimates based on unobservable inputs, such as discount factors and useful economic lives of assets. As a result, there is an inherent risk of estimation uncertainty in relation to the valuation of investments.

There is therefore a significant risk over valuation of underlying investments and that is the key judgemental area that our audit focused on.

The effect of these matters is that, as part of our risk assessment, we determined that the valuation of unquoted investments has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. The financial statements (note 17) disclose the sensitivity estimated by the Company.

          Our procedures included:

•    Control design: Documenting and assessing the design and implementation of the investment valuation processes and controls.

•    Control observation: Attending the year-end Audit and Risk Committee meeting where we assessed the effectiveness of the Audit and Risk Committee's challenge and approval of unlisted investment valuations.

•    Historical comparisons: Assessment of investment realisations in the period, if any, comparing actual sales proceeds to prior year end valuations to understand the reasons for significant variances and determine whether they are indicative of bias or error in the Company's approach to valuations.

•    Methodology choice: In the context of observed industry best practice and the provisions of the International Private Equity and Venture Capital Valuation Guidelines, we challenged the appropriateness of the valuation basis selected.

•    Our valuations experience: With the assistance of our own valuation specialists, challenging the investment manager on key judgements affecting investee Company valuations, such as discount factors and the useful economic life of the underlying assets. We compared key underlying financial data inputs to external sources and management information as applicable. We challenged the assumptions around sustainability of earnings based on the plans of the investee companies and whether these are achievable and we obtained an understanding of existing and prospective investee company cash flows to understand whether borrowings can be serviced or whether refinancing may be required. Our work included consideration of events which occurred subsequent to the year end up until the date of this audit report.

•    Comparing valuations: Where a recent transaction has been used to value a holding, 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: Consideration of 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.

 

 

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 £5.3m (2017: £4.6m), determined with reference to a benchmark of total assets, of £614.0m (2017: £482.7m), which it represents 0.9% (2017: 1.0%).

In addition, we applied materiality of £0.4m (2017: £0.4m) to management fees, interest income and Directors' fees for which we believe misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the Company's members' assessment of the financial performance of the Company.

We agreed to report to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £260,000 (2017: £230,000), in addition to other identified misstatements that warranted reporting on qualitative grounds.

Our audit of the Company was undertaken to the materiality level specified above and was all performed at the investment manager's head office in London.

4 We have nothing to report on going concern

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements ("the going concern period").

Our responsibility is to conclude on the appropriateness of the Directors' conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee that the Company will continue in operation.

In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model, including the impact of Brexit, and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. We evaluated those risks and concluded that they were not significant enough to require us to perform additional audit procedures.

Based on this work, we are required to report to you if we have anything material to add or draw attention to in relation to the Directors' statement in Note 2 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company's use of that basis for a period of at least a year from the date of approval of the financial statements.

We have nothing to report in these respects, and we did not identify going concern as a key audit matter.

5 We have nothing to report on the other information in the Annual Report

The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Disclosures of principal risks and longer-term viability

Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:

•    the Directors' confirmation within the Viability Statement on page 42 that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity;

•    the Principal Risks disclosures describing these risks and explaining how they are being managed and mitigated; and

•    the Directors' explanation in the Viability Statement on page 42 of how they have assessed the prospects of the Company, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statement 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 report to you if:

• 

we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the Directors' statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy; or

• 

the section of the annual report describing the work of the Audit and Risk Committee does not appropriately address matters communicated by us to the Audit and Risk Committee; or

• 

a corporate governance statement has not been prepared by the Company.

We are required to report to you if the Corporate Governance Report does not properly disclose a departure from the eleven provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.

We have nothing to report in these respects.

6 We have nothing to report on the other matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:

• 

adequate 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 financial statements are not in agreement with the accounting records; or

• 

we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

7 Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 45, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

8 The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

 

Henry Todd
for and on behalf of KPMG LLP

Chartered Accountants and Registered Auditor
15 Canada Square
London
E14 5GL

5 March 2019

 

 

Notes

31 December
2018

£'000

31 December
2017

£'000

 

 

 

 

Revenue

 

 

 

Interest income

4

36,817

35,421

Gain on investments at fair value through profit or loss

14

25,311

4,650

 

 

62,128

40,071

 

 

 

 

Expenditure

 

 

 

Administration and accountancy expenses

6

(203)‌‌

(212)‌‌

Directors' fees

7

(170)‌‌

(155)‌‌

Management fees

5

(5,106)‌‌

(4,277)‌‌

Other expenses

8

(643)‌‌

(340)‌‌

Total expenditure

 

(6,122)‌‌

(4,984)‌‌

 

 

 

 

Profit before tax for the year

 

56,006

35,087

Taxation

2.8

-

-

 

 

 

 

Profit and total comprehensive income for the year

 

56,006

35,087

 

 

 

 

Earnings per Ordinary Share (pence per Share)

9

11.60

8.80

All items above arise from continuing operations, there have been no discontinued operations during the year.

 

The accompanying notes on pages 63 to 92 form an integral part of these Financial Statements.

 

 

Notes

31 December
2018

£'000

31 December
2017

£'000

 

 

 

 

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

Investments held at fair value through profit or loss

14

530,187

408,464

Total non-current assets

 

530,187

408,464

 

 

 

 

Current assets

 

 

 

Interest receivable

10

69,338

57,626

Trade and other receivables

11

265

1,933

Cash and cash equivalents

12

12,282

14,669

Total current assets

 

81,885

74,228

Total assets

 

612,072

482,692

 

 

 

 

Equity

 

 

 

Retained earnings

 

51,460

26,793

Stated capital and share premium

18

558,798

454,515

Total equity

 

610,258

481,308

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

13

1,814

1,384

 

 

 

 

Total current liabilities

 

1,814

1,384

 

 

 

 

Total liabilities

 

1,814

1,384

 

 

 

 

Total equity and liabilities

 

612,072

482,692

 

 

 

 

Net Asset Value per Ordinary Share

19

111.17

107.00

 

The Financial Statements on pages 63 to 92 were approved by the Board of Directors and signed on its behalf on 5 March 2019 by:

 

Alexander Ohlsson

Chairman

The accompanying notes on pages 63 to 92 form an integral part of these Financial Statements.

 

 

 

Notes

Stated Capital and Share Premium

£'000

Retained Earnings

£'000

Total

£'000

Balance as at 1 January 2018

 

454,515

26,793

481,308

 

 

 

 

 

Total comprehensive income for the year:

 

 

 

 

Profit for the year

 

-

56,006

56,006

 

 

 

 

 

Transactions with owners, recognised directly in equity:

 

 

 

 

Dividends paid in the year

22

-

(31,339)‌‌

(31,339)‌‌

Issue of Ordinary Shares

18

106,189

-

106,189

Capitalised issue costs

(1,906)‌‌

-

(1,906)‌‌

Balance as at 31 December 2018

558,798

51,460

610,258

For the year 1 January 2017 to 31 December 2017

 

 

 

Notes

Stated Capital and Share Premium

£'000

Retained Earnings

£'000

Total

£'000

Balance as at 1 January 2017:

 

339,003

11,767

350,770

Total comprehensive income for the year:

 

 

 

 

Profit for the year

 

-

35,087

35,087

 

 

 

 

 

Transactions with owners, recognised directly in equity:

 

 

 

 

Dividends paid in the year

22

-

(20,061)

(20,061)

Issue of Ordinary Shares

18

117,539

-

117,539

Capitalised issue costs

(2,027)

-

(2,027)

Balance as at 31 December 2017

454,515

26,793

481,308

 

The accompanying notes on pages 63 to 92 form an integral part of these Financial Statements.

 

 

 

Notes

31 December

2018

£'000

31 December

2017

£'000

 

 

 

 

Profit for the year after tax

 

56,006

35,087

 

 

 

 

Adjustments for:

 

 

 

Unrealised gain on investments

14

(25,311)‌‌

(4,650)‌‌

 

 

 

 

Operating cash flows before changes in working capital

 

30,695

30,437

 

 

 

 

Increase in interest receivables

10

(12,918)‌‌

(24,582)‌‌

Decrease in trade and other receivables

11

1,668

2,914

Increase in trade and other payables

13

430

1,268

Net cash inflow from operating activities

 

19,875

10,037

 

 

 

 

Investing activities

 

 

 

Increase in shareholder loans to subsidiary

14

(95,206)‌‌

(130,200)‌‌

Net cash outflow from investing activities

 

(95,206)‌‌

(130,200)‌‌

 

 

 

 

Financing activities

 

 

 

Dividends paid

22

(31,339)‌‌

(20,061)‌‌

Issue costs paid

18

(1,906)‌‌

(2,027)‌‌

Proceeds from issue of shares

18

106,189

117,539

 

 

 

 

Net cash inflow from financing activities

 

72,944

95,451

 

 

 

 

Net decrease in cash and cash equivalents

 

(2,387)‌‌

(24,712)‌‌

Cash and cash equivalents at the beginning of the year

 

14,669

39,381

 

 

 

 

Cash and cash equivalents at the end of the year

12

12,282

14,669

 

The accompanying notes on pages 63 to 92 form an integral part of these 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 2 Limited ("FS Holdco 2"), FS Holdco 3 Limited ("FS Holdco 3") and FS Holdco 4 Limited ("FS Holdco 4") and FS Holdco 2 also has an investment in a subsidiary, FS Holdco 2, FS Debtco Limited ("FS Debtco"). FS Holdco, FS Debtco, FS Holdco 3 and FS Holdco 4 invest in further holding companies (the "SPVs") which then invest in the underlying solar investments.

The principal activity of the Company, UK Hold Co, FS Holdco, FS Holdco 2, FS Debtco, FS Holdco 3, FS Holdco 4 and the SPVs (together "the Group") is investing in operational UK and Australian ground based solar power plants.

2.         Summary of significant accounting policies

2.1      Basis of presentation

The Financial Statements for the year ended 31 December 2018 (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.

2.2      Going concern

The Directors have considered the Company's cash flow projections for a period of no less than twelve months from the date of approval of these Financial Statements together with the Company's borrowing facilities. These projections show that the Company will be able to meet its liabilities as they fall due.

Whilst Brexit presents certain risks in relation to the operation of the UK solar portfolio (discussed in note 20.4) the Asset Manager shall be working to ensure that there are robust spare parts provision in the UK and continue to work with the operating and maintenance providers and their downstream suppliers to ensure down time is minimised across the portfolio as much as possible.

The Directors have therefore prepared the Financial Statements on a going concern basis.

2.3      Changes in accounting policies and disclosures

The Company has adopted the following IFRSs in these financial statements:

•             

IFRS 15, 'Revenue from Contracts with Customers'.

•             

IFRS 9, 'Financial Instruments - Classification and Measurement'

 

The impact of the adoption of these standards and the new accounting policies are disclosed in note 24. The other new or amended standards effective 1 January 2018 were assessed by management as not applicable to the Company.

           New and revised IFRSs in issue but not yet effective

Management have assessed all IFRS which are endorsed but not yet effective and have deemed none of them to be applicable to the Company.

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 at fair value through profit or loss.

The defined criteria of an 'investment entity' are as follows:

•                 

It holds more than one investment;

•                 

It has more than one investor;

•                 

It has investors that are not related parties to the entity; and

•                 

It has ownership interests in the form of equity or similar interests.

However, the absence of one or more of these characteristics does not prevent the entity from qualifying as an 'investment entity', provided all other characteristics are met and the entity otherwise meets the definition of an 'investment entity':

•                 

It obtains funds from one or more investors for the purpose of providing those investor(s) with professional investment management services;

•                 

It commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

•                 

It measures and evaluates the performance of substantially all of its investments on a fair value basis.

As discussed in note 1, the Company has one direct subsidiary, a 100% controlling interest in UK Hold Co and a number of indirect subsidiaries and associates.

Under IFRS 10 "Consolidated Financial Statements", the Directors deem that the Company is an investment entity and therefore the Company does not consolidate its subsidiary but carries it at fair value through profit or loss. The Company does not meet all the defined criteria of an 'investment entity' as the Company only has one investment. However, the Directors deem that the Company is nevertheless an 'investment entity' as the remaining requirements have been met and, through the Group, there is a large investment portfolio which will fill the criteria of having more than one investment. Therefore, the Company qualifies as an 'investment entity'.

As UK Hold Co is not consolidated, its subsidiaries (plus their underlying investments) are not separately presented at fair value through profit or loss in the Company's accounts. However, accounting standards require that if an investment entity is the parent of another investment entity, the parent shall also provide the additional disclosures required by IFRS 12 Interest in unconsolidated entities. These disclosures are set out in notes 16 and 17.

2.5      Income

Income comprises interest income (bank interest and loan interest) and income in the form of realised and/or unrealised gains on investments 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, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. Gains arising from changes in the fair value of the investments at fair value through profit or loss are recognised in the period in which they arise.

2.6      Expenses

Operating expenses are the Company's costs incurred in connection with the on-going management of the Company's investments and administrative costs. Operating expenses are accounted for on an accruals basis.

The Company's operating expenses are charged through the Statement of Profit and Loss and Other Comprehensive Income.

Acquisition costs of assets are capitalised on purchase of assets. Costs directly relating to the issue of Ordinary Shares are charged to the Group'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 (2017: 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 at fair value through profit or loss consists of one investment in UK Hold Co. The asset in this category is classified as non-current.

Fair value is defined as the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction.

The fair value of UK Hold Co is made up of the fair value of its net assets. UK Hold Co has four direct subsidiaries - FS Holdco, FS Holdco 2, FS Holdco 3 and FS Holdco 4, and FS Holdco 2 has one direct subsidiary - FS Debtco Limited. 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 2, FS Debtco, FS Holdco 3 and FS Holdco 4 are fair valued using their net asset value as reported at year end.

The fair value of the underlying investments held by the Company's subsidiaries, which impact the value of the Company's subsidiaries, are determined by using valuation techniques. The Directors calculate the fair value of the investments based on information received from the Investment Manager. The Investment Manager's assessment of fair value of investments is determined in accordance with the International Private Equity and Venture Capital ("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 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 at fair value through profit or loss' in the period in which they arise.

2.9.2.2       Other financial instruments at amortised cost

The financial instruments at amortised cost are non-derivative financial assets and liabilities with fixed or determinable payments that are not quoted 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.

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.

2.9.5   Financial instruments - policy applicable before 1 January 2018:

Before 1 January 2018 financial instruments were measured in terms of IAS 39 Financial Instruments: Recognition and Measurements. All changes to the accounting policies applicable before 1 January 2018 are explained in detail in note 24.

2.10    Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares have a nil par value.

2.11    Dividend distribution

Dividend distributions to the Company's shareholders are recognised as a liability in the Company's Financial Statements in the period in which the dividends are approved by the Company's shareholders.

3.         Critical accounting estimates and judgements

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies.

The Board considers that the only areas where management make critical estimates and judgements that may have a significant effect on the financial statements are in relation to the valuation of investments at fair value through profit and loss, significant judgements and key sources of estimation uncertainty 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 because the entity does not possess all the typical characteristics of an investment entity. While the absence of one or more of the typical characteristics of an investment entity described in IFRS 10 Consolidated Financial Statements does not immediately disqualify an entity from being classified as an investment entity. The entity is required to disclose its reasons for concluding that it is nevertheless an investment entity if one or more of these characteristics are not met. In order to reach that conclusion of whether the Company meets the definition of an investment entity the Board had to make significant judgements.

The Board considers that the fair value of Investments not quoted in an active market involves critical accounting estimates and judgements because it is determined by the Directors using their own valuation models, which are based on valuation methods and techniques generally recognised as standard within the industry. Models use observable data, to the extent practicable. However, they also rely on significant unobservable inputs about the output of the asset (including assumptions such as solar irradiation and technological performance of the asset), power prices, operating costs, discount and inflation rates applied to the cash flows, and the duration of the useful economic life of the asset. Furthermore, changes in these inputs and assumptions could affect the reported fair value of financial instruments. The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

4.         Interest income

 

31 December 2018

£'000

31 December 2017

£'000

Bank interest income

1

25

Interest on loan notes

33,172

32,246

Interest on shareholder loans

3,644

3,150

 

36,817

35,421

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 £250,000,000 (2017: £250,000,000). 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 was previously accrued at 9% per annum, decreasing to 2% per annum with effect from 1 April 2017, and is repayable in full on demand. An additional £4,500,000 was issued on this loan, bringing the shareholder loan balance at year end to £158,609,725 (2017: £154,109,725). These loans form part of the fair value of the investments as per note 14.

During the current year, four additional shareholder loans were issued to UK Holdco - £45,000,000 on 2 August 2018, £9,106,725 on 27 November 2018, £33,100,000 on 28 November 2018 and £3,500,000 on 18 December 2018. Loan interest on all four new shareholder loans is charged at a fixed rate of 2% per annum. These loans form part of the fair value of the investments as per note 14.

5.         Management fees

The Investment Manager of the Company, Foresight Group CI Limited, receives an annual fee of 1% of the Net Asset Value ("NAV") of the Company up to £500m - 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 2018, the Investment Manager was entitled to a management fee of £5,106,080 (2017: £4,276,808) of which £1,537,638 was outstanding as at 31 December 2018 (2017: £1,257,741).

6.         Administration and Accountancy fees

Under an Administration Agreement, the Administrator of the Company, JTC (Jersey) Limited, is entitled to receive minimum annual administration and accountancy fees of £156,000 payable quarterly in arrears. For the year ended 31 December 2018, total administration and accountancy fees were £203,220 (2017: £211,534) of which £39,000 was outstanding as at 31 December 2018 (2017: £39,000).

7.         Staff costs and Directors' fees

No members of staff were employed during the year (2017: nil).

Total Directors' fees were £170,000 (2017: £155,000).

8.         Other Expenses

 

31 December 2018

£'000

31 December 2017

£'000

Legal and professional fees

607

271

Other expenses

36

69

 

643

340

Included within legal and professional fees is £22,500 (2017: £20,500) relating to the audit of these financial statements. The total audit fee pertaining to the group is £160,000 for the year ended 31 December 2018 (2017: £88,938). There were no other fees paid to the auditors for non-audit services during the year (2017: Nil).

9.         Earnings per Ordinary share - basic and diluted

The basic profits per Ordinary Share for the Company is 11.66 pence per share. This is are based on the profit for the year of £56,005,471 (2017: £35,086,596) and on 482,619,846 (2017: 398,908,689) 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 2018

£'000

31 December 2017

£'000

Interest receivable on loan notes

56,814

48,746

Interest receivable on shareholder loans

12,524

8,880

 

69,338

57,626

Information about the Company's exposure to credit and market risk and impairment losses for interest receivable is included in note 20.

Interest receivable at 31 December 2018 has been updated for the reclassification (£1,206,000) as explained in note 14.

11.       Trade and other receivables

 

31 December 2018

£'000

31 December 2017

£'000

Prepaid expenses

17

16

Amounts due from subsidiaries*

-

1,146

Other receivables

248

771

 

265

1,933

*Amounts due from subsidiaries are unsecured, interest free and repayable on demand.

Information about the Company's exposure to credit and market risk and impairment losses for trade and other receivables is included in note 20.

12.       Cash and cash equivalents

 

31 December 2018

£'000

31 December 2017

£'000

Cash at bank

12,282

14,669

 

12,282

14,669

Information about the Company's exposure to credit and market risk and impairment losses for cash and cash equivalents is included in note 20.

13.       Trade and other payables

 

31 December 2018

£'000

31 December 2017

£'000

Accrued expenses

1,630

1,384

Amounts due to subsidiaries*

184

-

 

1,814

1,384

*Amounts due to subsidiaries are unsecured, interest free and repayable on demand.

14.       Investments at fair value through profit or loss

The following table presents the Company's investments at fair value through profit or loss:

 

 

31 December 2018

£'000

31 December 2017

£'000

Investment in UK Hold Co

Equity

-

-

 

Loans

530,187

408,464

 

 

530,187

408,464

 

 

 

 

Book cost as at 1 January

 

404,109

273,909

Opening investment holding gains

 

4,355

(295)

Valuation as at 1 January

 

408,464

273,614

 

 

 

 

Movements during the year

 

 

 

 Purchase at cost (loans drawn down)

 

95,206

130,200

 Reclassification - see below

 

1,206

-

 Investment holding gains

 

25,311

4,650

Valuation as at 31 December

 

530,187

408,464

Book cost as at 31 December

 

499,315

404,109

Closing investment holding gains/(losses)

 

30,872

4,355

 

 

530,187

408,464

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 £100) and is not quoted in an active market. Accordingly, the investment in UK Hold Co has been valued using its net assets.

These investments also consist of both debt and equity and are not quoted in an active market. 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 2, FS Debtco, FS Holdco 3 and FS Holdco 4 are fair valued using their net asset value as reported at year end.

In turn, FS Holdco, FS Holdco 2, FS Debtco, FS Holdco 3  and FS Holdco 4's investment portfolios consist of unquoted investments in solar projects, the valuations of which are based on a discounted cash flow methodology (as set out in note 17) for solar projects that are operational. Three investments in FS Holdco 4 are not yet operational at year end and are therefore valued at cost.

In turn, UK Hold Co has four investments in FS Holdco Limited ("FS Holdco"), FS Holdco 2 Limited ("FS Holdco 2"), FS Holdco 3 Limited ("FS Holdco 3") and FS Holdco 4 Limited ("FS Holdco 4"), and FS Holdco 2 has one investment in FS Debtco Limited ("FS Debtco").

During the year the Company identified a historical misallocation between the fair value of investments and the interest receivable on loan notes to the subsidiary. This has been reclassified in the current year.
Fair value hierarchy

IFRS 13 "Fair Value Measurement" requires disclosures relating to fair value measurements using a three-level fair value hierarchy. The level within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability. The following table shows investments recognised at fair value, categorised between those whose fair value is based on:

(a)      Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

(b)      Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

(c)       Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

All investments held at fair value through profit or loss are classified as level 3 within the fair value hierarchy.

As UK Hold Co's net asset value is not considered observable market data the investment in UK Hold Co has been classified as level 3. There were no movements between levels during the year.

As at 31 December 2018:

 

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Unquoted investment

-

-

530,187

530,187

 

-

-

530,187

530,187

As at 31 December 2017

 

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Unquoted investment

-

-

408,464

408,464

 

-

-

408,464

408,464

Sensitivity Analysis

Due to the nature of the Group structure and the underlying valuation basis of UK Hold Co, FS Holdco, 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 Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4 which are discussed further in note 17.

 

 

15.       Subsidiaries and associates

Investments in subsidiaries

Name

Direct or indirect holding

Country of incorporation

Principal activity

Proportion
of shares and voting rights held

Foresight Solar (UK Hold Co) Limited ("UK Hold Co")

Direct

UK

Holding Company

100%

FS Holdco Limited ("FS Holdco")

Indirect

UK

Holding Company

100%

FS 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%

Atherstone Hold Co Limited

Indirect

UK

SPV Holding Company

100%

Southam Hold Co Limited

Indirect

UK

SPV Holding Company

100%

Paddock Wood Hold Co 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%

Oakey 2 Asset Company Pty Limited

Indirect

Australia

SPV Holding Company

100%

FS Welbeck Limited

Indirect

UK

SPV Holding Company

100%

FS Trehawke Limited

Indirect

UK

SPV Holding Company

100%

FS Homeland Limited

Indirect

UK

SPV Holding Company

100%

FS Marsh Farm Limited

Indirect

UK

SPV Holding Company

100%

FS Steventon Limited

Indirect

UK

SPV Holding Company

100%

FS Fields Farm Limited

Indirect

UK

SPV Holding Company

100%

FS Gedling Limited

Indirect

UK

SPV Holding Company

100%

FS Sheepbridge Limited

Indirect

UK

SPV Holding Company

100%

FS Tengore Limited

Indirect

UK

SPV Holding Company

100%

FS Cuckoo Limited

Indirect

UK

SPV Holding Company

100%

FS Field House Limited

Indirect

UK

SPV Holding Company

100%

FS Upper Huntingford Limited

Indirect

UK

SPV Holding Company

100%

FS Abergelli Limited

Indirect

UK

SPV Holding Company

100%

FS Crow Trees Limited

Indirect

UK

SPV Holding Company

100%

FS Yarburgh Limited

Indirect

UK

SPV Holding Company

100%

FS Nowhere Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Bilsthorpe Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Bulls Head Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Roskrow Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Abbeyfields Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Lindridge Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Misson Solar Limited

Indirect

UK

SPV Holding Company

100%

FS Pentre 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%

Wymeswold Solar Farm Limited ("Wymeswold")

Indirect

UK

Investment

100%

Castle Eaton Solar Farm Limited ("Castle Eaton")

Indirect

UK

Investment

100%

Pitworthy Solar Farm Limited ("Pitworthy ")

Indirect

UK

Investment

100%

Highfields Solar Farm Limited ("Highfields")

Indirect

UK

Investment

100%

High Penn Solar Farm Limited ("High Penn ")

Indirect

UK

Investment

100%

Hunter's Race Solar Farm Limited ("Hunter's Race")

Indirect

UK

Investment

100%

Spriggs Solar Farm Limited ("Spriggs ")

Indirect

UK

Investment

100%

Bournemouth Solar Farm Limited ("Bournemouth")

Indirect

UK

Investment

100%

Landmead Solar Farm Limited ("Landmead")

Indirect

UK

Investment

100%

Kencot Hill Solar Farm Limited ("Kencot")

Indirect

UK

Investment

100%

Copley Solar Limited ("Copley")

Indirect

UK

Investment

100%

Port Farms Solar Limited (Port Farm")

Indirect

UK

Investment

100%

Membury Solar Limited ("Membury")

Indirect

UK

Investment

100%

Atherstone Solar Farm Ltd ("Atherstone")

Indirect

UK

Investment

100%

Southam Solar Farm Ltd ("Southam")

Indirect

UK

Investment

100%

Paddock Wood Solar Farm Ltd ("Paddock Wood")

Indirect

UK

Investment

100%

Shotwick Solar Limited ("Shotwick Solar")

Indirect

UK

Investment

100%

Sandridge Solar Power Limited ("Sandridge")

Indirect

UK

Investment

100%

SSR Wally Corner Limited ("SSR Wally")

Indirect

UK

Investment

100%

Foresight Solar Australia Pty Limited

Indirect

Australia

Investment

100%

RE Oakey 1 Pty Limited

Indirect

Australia

Investment

100%

RE Oakey 2 Pty Limited

Indirect

Australia

Investment

100%

Longreach Pty Limited

Indirect

Australia

Investment

100%

Second Generation Yardwall Limited ("Yardwall")

Indirect

UK

Investment

100%

Second Generation Verwood Limited ("Verwood")

Indirect

UK

Investment

100%

Second Generation Park Farm Limited ("Park Farm")

Indirect

UK

Investment

100%

Second Generation Coombeshead Limited ("Coombeshead")

Indirect

UK

Investment

100%

Second Generation Sawmills Limited ("Sawmills")

Indirect

UK

Investment

100%

Welbeck Limited ("Welbeck")

Indirect

UK

Investment

100%

Trehawke Limited ("Trehawke")

Indirect

UK

Investment

100%

Homeland Limited "(Homeland")

Indirect

UK

Investment

100%

Marsh Farm Limited ("Marsh Farm")

Indirect

UK

Investment

100%

Steventon Limited ("Steventon")

Indirect

UK

Investment

100%

Fields Farm Limited ("Fields Farm")

Indirect

UK

Investment

100%

Gedling Limited ("Gedling")

Indirect

UK

Investment

100%

Sheepbridge Limited ("Sheepbridge")

Indirect

UK

Investment

100%

Tengore Limited ("Tengore")

Indirect

UK

Investment

100%

Cuckoo Limited ("Cuckoo")

Indirect

UK

Investment

100%

Field House Limited ("Field House")

Indirect

UK

Investment

100%

Upper Huntingford Limited ("Upper Huntingford")

Indirect

UK

Investment

100%

Abergelli Limited ("Abergelli")

Indirect

UK

Investment

100%

Crow Trees Limited ("Crow Trees")

Indirect

UK

Investment

100%

Yarburgh Limited ("Yarburgh")

Indirect

UK

Investment

100%

Nowhere Solar Limited ("Nowhere Solar")

Indirect

UK

Investment

100%

Bilsthorpe Solar Limited ("Bilsthorpe Solar")

Indirect

UK

Investment

100%

Bulls Head Solar Limited ("Bulls Head Solar")

Indirect

UK

Investment

100%

Roskrow Solar Limited ("Roskrow Solar")

Indirect

UK

Investment

100%

Abbeyfields Solar Limited ("Abbeyfields Solar")

Indirect

UK

Investment

100%

Lindridge Solar Limited ("Lindridge Solar")

Indirect

UK

Investment

100%

Misson Solar Limited ("Misson Solar")

Indirect

UK

Investment

100%

Pentre Solar Limited ("Pentre 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%

Investments in associates

Name

Direct or indirect holding

Country of incorporation

Principal activity

Proportion
of shares and voting rights held

Foresight Bannerton Pty Limited

Indirect

UK

SPV Holding Company

48.50%

Longreach Asset Company Pty Limited

Indirect

Australia

SPV Holding Company

49%

Oakey 1 Asset Company Pty Limited

Indirect

Australia

SPV Holding Company

49%

 

16.       Interests in unconsolidated structured entities

Year ended 31 December 2018

The following table represents the fair values of the investments held by FS Holdco Limited as required by IFRS 12.

 

Cost at

 1 January 2018

£'000

Additions / (Disposals)

£'000

Cost as at 31 December 2018

£'000

 

Unrealised gain/(loss) as at 1 January 2018

£'000

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss) as at 31 December 2018

£'000

Fair value as at

31 December 2018

£'000

FS Wymeswold Limited

48,590

-

48,590

(272)

1,502

1,230

49,820

FS Castle Eaton Limited

21,630

-

21,630

(835)

675

(160)

21,470

FS Pitworthy Limited

18,210

-

18,210

(1,582)

495

(1,087)

17,123

FS Highfields Limited

14,300

-

14,300

(726)

269

(457)

13,843

FS High Penn Limited

11,310

-

11,310

(804)

123

(681)

10,629

FS Hunter's Race Limited

13,160

-

13,160

389

743

1,132

14,292

FS Spriggs Limited

14,580

-

14,580

(699)

828

129

14,709

FS Bournemouth Limited

50,060

-

50,060

364

1,999

2,363

52,423

FS Landmead Limited

51,580

-

51,580

(3,096)

2,070

(1,026)

50,554

FS Kencot Limited

47,210

-

47,210

(2,151)

822

(1,329)

45,881

FS Copley Limited

35,670

-

35,670

1,390

1,288

2,678

38,348

FS Paddock Wood Limited

10,621

-

10,621

553

(147)

406

11,027

FS Atherstone Limited

16,004

-

16,004

(321)

(83)

(404)

15,600

FS Southam Limited

11,145

-

11,145

115

(13)

102

11,247

FS Port Farms Limited

44,215

-

44,215

92

1,442

1,534

45,749

FS Membury Limited

21,160

-

21,160

(460)

614

154

21,314

 

429,445

-

429,445

(8,043)

12,627

4,584

434,029

 

The cost and valuation of the indirect investments in solar farms directly correlate to the cost and valuation of the direct SPV investments as presented in the table above.

Year ended 31 December 2017

The following table represents the fair values of the investments held by FS Holdco Limited as required by IFRS 12.

 

Cost at 1 January 2017

£'000

Additions/ (Disposals)

£'000

Cost as at 31 December 2017

£'000

Unrealised gain/(loss) as at 1 January 2017

£'000

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss)
as at 31 December 2017

£'000

Fair value as at 31 December 2017

£'000

FS Wymeswold Limited

48,590

-

48,590

1,510

(1,782)‌‌

(272)‌‌

48,318

FS Castle Eaton Limited

21,630

-

21,630

270

(1,105)‌‌

(835)‌‌

20,795

FS Pitworthy Limited

18,210

-

18,210

90

(1,672)‌‌

(1,582)‌‌

16,628

FS Highfields Limited

14,300

-

14,300

700

(1,426)‌‌

(726)‌‌

13,574

FS High Penn Limited

11,310

-

11,310

690

(1,494)‌‌

(804)‌‌

10,506

FS Hunter's Race Limited

13,160

-

13,160

340

49

389

13,549

FS Spriggs Limited

14,580

-

14,580

220

(919)‌‌

(699)‌‌

13,881

FS Bournemouth Limited

50,060

-

50,060

1,240

(876)‌‌

364

50,424

FS Landmead Limited

51,580

-

51,580

2,520

(5,616)‌‌

(3,096)‌‌

48,484

FS Kencot Limited

47,210

-

47,210

1,790

(3,941)‌‌

(2,151)‌‌

45,059

FS Copley Limited

35,670

-

35,670

2,330

(940)‌‌

1,390

37,060

FS Paddock Wood Limited

10,621

-

10,621

879

(326)‌‌

553

11,174

FS Atherstone Limited

16,004

-

16,004

596

(917)‌‌

(321)‌‌

15,683

FS Southam Limited

11,145

-

11,145

655

(540)‌‌

115

11,260

FS Port Farms Limited

44,215

-

44,215

1,785

(1,693)‌‌

92

44,307

FS Membury Limited

21,160

-

21,160

740

(1,200)‌‌

(460)‌‌

20,700

 

429,445

-

429,445

16,355

(24,398)‌‌

(8,043)‌‌

421,402

The above individual project valuations do not include a (£5,010,200) relating to future tax payments which will be settled at the Foresight Solar Fund Limited level.

 

Year ended 31 December 2018

The following table represents the fair values of the investments held by FS Holdco 2 Limited as required by IFRS 12.

 

Cost at

1 January 2018

£'000

Additions / (Disposals)

£'000

Cost as at 31 December 2018

£'000

Unrealised gain/(loss) as at 1 January 2018

£'000

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss) as at

31 December 2018

£'000

Fair value as at

31 December 2018

£'000

FS Debtco Limited - Equity

-

-

-

10,269

4,642

14,911

14,911

FS Debtco Limited - Loan

74,894

-

74,894

-

-

-

74,894

FS Welbeck Limited

-

4,350

4,350

-

561

561

4,911

FS Trehawke Limited

-

4,670

4,670

-

1,069

1,069

5,739

FS Homeland Limited

-

5,190

5,190

-

1,686

1,686

6,876

FS Marsh Farm Limited

-

3,960

3,960

-

267

267

4,227

FS Steventon Limited

-

4,210

4,210

-

579

579

4,789

FS Fields Farm Limited

-

1,670

1,670

-

589

589

2,259

FS Gedling Limited

-

1,930

1,930

-

557

557

2,487

FS Sheepbridge Limited

-

1,890

1,890

-

492

492

2,382

FS Tengore Limited

-

1,330

1,330

-

267

267

1,597

FS Cuckoo Limited

-

2,500

2,500

-

248

248

2,748

FS Field House Limited

-

3,120

3,120

-

96

96

3,216

FS Upper Huntingford Limited

-

3,110

3,110

-

362

362

3,472

FS Abergelli Limited

-

3,650

3,650

-

772

772

4,422

FS Crow Trees Limited

-

1,810

1,810

-

93

93

1,903

FS Yarburgh Limited

-

3,420

3,420

-

579

579

3,999

FS Nowhere Solar Limited

-

3,672

3,672

-

211

211

3,883

FS Bilsthorpe Solar
Limited

-

1,893

1,893

-

437

437

2,330

 

FS Bulls Head Solar Limited

-

2,203

2,203

-

371

371

2,574

FS Roskrow Solar Limited

-

3,674

3,674

-

748

748

4,422

FS Abbeyfields Solar Limited

-

1,526

1,526

-

743

743

2,269

FS Lindridge Solar Limited

-

1,721

1,721

-

561

561

2,282

FS Misson Solar Limited

-

2,011

2,012

-

550

550

2,562

FS Playters Solar Limited

-

3,963

3,963

-

428

428

4,391

FS PS Manor Farm Solar Limited

-

6,116

6,116

-

558

558

6,674

FS SV Ash Solar Park Limited

-

3,387

3,387

-

317

317

3,704

FS Pen Y Cae Solar Limited

-

2,927

2,927

-

599

599

3,526

 

74,894

79,904

154,798

10,269

18,382

28,651

183,449

 

Year ended 31 December 2017

The following table represents the fair values of the investments held by FS Holdco 2 Limited as required by IFRS 12.

 

Cost at 1 January 2017

£'000

Additions / (Disposals)

£'000

Cost as at 31 December 2017

£'000

 

Unrealised gain/(loss) as at 1 January 2017

£'000

 

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss)
as at 31 December 2017

£'000

Fair value as at 31 December 2017

£'000

FS Debtco Limited - Equity

-

-

-

-

10,269

10,269

10,269

FS Debtco Limited - Loan

-

74,894

74,894

-

-

-

74,894

 

-

74,894

74,894

-

10,269

10,269

85,163

 

 

Year ended 31 December 2018

The following table represents the fair values of the investments held by FS Debtco Limited as required by IFRS 12.

 

Cost at

1 January 2018

£'000

Additions / (Disposals)

£'000

Cost as at 31 December 2018

£'000

Unrealised gain/(loss) as at 1 January 2018

£'000

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss) as at 31 December 2018

£'000

Fair value as at 31 December 2018

£'000

FS Shotwick Solar Limited

74,894

-

74,894

9,696

2,193

11,889

86,783

FS Sandridge Solar Power Limited

57,046

-

57,046

959

1,363

2,322

59,368

FS SSR Wally Corner Limited

5,718

-

5,718

41

195

236

5,954

 

137,658

-

137,658

10,696

3,751

14,447

152,105

 

Year ended 31 December 2017

The following table represents the fair values of the investments held by FS Debtco Limited as required by IFRS 12.

 

Cost at 1 January 2017

£'000

Additions / (Disposals)

£'000

Cost as at 31 December 2017

£'000

 

Unrealised gain/(loss) as at 1 January 2017

£'000

 

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss)
as at 31 December 2017

£'000

Fair value as at 31 December 2017

£'000

FS Shotwick Solar Limited

-

74,894

74,894

-

9,696

9,696

84,590

FS Sandridge Solar Power Limited

-

57,046

57,046

-

959

959

58,005

FS SSR Wally Corner Limited

-

5,718

5,718

-

41

41

5,759

 

-

137,658

137,658

-

10,696

10,696

148,354

 

Year ended 31 December 2018

The following table represents the fair values of the investments held by FS Holdco 3 Limited as required by IFRS 12.

 

Cost at 1 January 2018

£'000

Additions / (Disposals)

£'000

Cost as at 31 December 2018

£'000

Unrealised gain/(loss) as at 1 January 2018

£'000

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss) as at 31 December 2018

£'000

Fair value as at 31 December 2018

£'000

FS Yardwall Limited

-

2,474

2,474

-

165

165

2,639

FS Verwood Limited

-

13,955

13,955

-

1,933

1,933

15,888

FS Park Farm Limited

-

8,116

8,116

-

995

995

9,111

FS Coombeshead Limited

-

7,126

7,126

-

904

904

8,030

FS Sawmills Limited

-

4,453

4,453

-

637

637

5,090

 

-

36,124

36,124

-

4,634

4,634

40,758

 

FS Holdco 3 commenced trading during the year and therefore no comparatives are shown.

Year ended 31 December 2018

The following table represents the fair values of the investments held by FS Holdco 4 Limited as required by IFRS 12.

 

 

Adjusted Cost at 1 January 2018

£'000**

Additions / (Disposals)

£'000

Cost as at 31 December 2018

£'000

 

Unrealised gain/(loss) as at 1 January 2018

£'000

 

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss)
as at 31 December 2018

£'000

 

Fair value as at 31 December 2018

£'000

Bannerton Solar Farm

12,482

10,400

22,882

-

(450)*‌‌

(450)*‌‌

22,432

Longreach

2,650

-

2,650

-

431

431

3,081

Oakey 1

4,367

-

4,367

-

(85)*

(85)*

4,282

Oakey 2

22,153

11,835

33,988

200*

(881)*‌‌

(681)‌*‌

33,307

 

41,652

22,235

63,887

200

(985)‌‌

(785)‌‌

63,102

 

*This relates to FX gain on translation from AUD to GBP at 31 December 2018 and 31 December 2017.

**In the prior year the cost was reflected as per the Share Purchase Agreement. In the current year it is split per the production output of each investment.

Year ended 31 December 2017

The following table represents the fair values of the investments held by FS Holdco 4 Limited as required by IFRS 12.

 

Cost at 1 January 2017

£'000

Additions / (Disposals)

£'000

Cost as at 31 December 2017

£'000

 

Unrealised gain/(loss) as at 1 January 2017

£'000

 

Movement on unrealised gain/(loss)

£'000

Unrealised gain/(loss)
as at 31 December 2017

£'000

 

Fair value as at 31 December 2017

£'000

 

 

 

 

 

 

 

 

Bannerton Solar Farm

-

12,482

12,482

-

-

-

12,482

Canadian Solar

-

28,970

28,970

-

200*

200*

29,170

 

-

41,452

41,452

-

200

200

41,652

 

17.       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 Valuation Guidelines ("IPEVC"), using levered and unlevered Discounted Cash Flow principles. The Investment Manager and Directors consider that the discounted cash flow methodology used in deriving a fair value is in accordance with the fair value requirements of IFRS 13. Certain investments held by FS Holdco 4 were valued at cost as at 31 December 2018 and 31 December 2017 as these projects were not yet operational, and are therefore not included in the sensitivity analysis on the following pages.

Useful economic lives ("UELs")

The valuation of the Company's investments is determined based on the discounted value of future cash flows of those investments over their UELs.

The UEL of individual assets is determined by reference to a fixed contractual lease term, and therefore, the Board and Manager do not consider that the UEL can have a significant impact on the valuation of the investments.

However, the Board notes that if extended contractual lease terms were negotiated for individual assets, this would increase the value of those assets. Similarly, if the assets did not operate for the duration of the fixed contractual period, this would reduce the value of those assets.

Sensitivity analysis of significant changes in unobservable inputs within Level hierarchy of underlying Investments

The majority of the Company's underlying investments (indirectly held through its unconsolidated subsidiaries FS Holdco, FS Holdco 2, 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.

Discount rate

The weighted average discount rate used is 7.30% (2017: 7.60%). 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%

Directors' valuation (£m)

773.6

758.2

743.1

728.4

714.4

NAV per share (pence)

116.7

113.9

111.2

108.5

105.9

Change vs Base Case (%)

4.1

2.0

0.0

(2.0)

(3.9)

 

 

Production

Base case production is a function of a number of separate assumptions including irradiation levels, availability of the sites and technical performance of the equipment. A sensitivity of +/-10% is considered reasonable given stable levels of irradiation, contractual availability guarantees and understanding of future performance levels of the equipment.

 

-10%

Base

+10%

Directors' valuation (£m)

636.7

743.1

847.9

NAV per share (pence)

91.8

111.2

130.3

Change vs Base Case (%)

(14.3)

0.0

14.1

 

Power Price

DCF models assume power prices that are consistent with the Power Purchase Agreements ("PPA") currently in place. At the PPA end date, the model reverts to the power price forecast.

The power price forecasts are updated quarterly and based on power price forecasts from leading independent sources. The Investment Manager adjusts where more conservative assumptions are considered appropriate and applies expected PPA sales discounts. The forecast assumes an average annual increase in power prices in real terms of approximately 0.6% (2017: 1.3%).

During the year, c.57% of the Company's operational performance came from the sale of renewable obligation certificates ("ROCs"). These revenues are directly and explicitly linked to inflation for 20 years from the accreditation date under the ROC regime and therefore are not considered for sensitivity analysis. The remaining c.43% of revenue is derived from electricity sales which are subject to power price movements.

 

-20.0%

-10.0%

Base

+10.0%

+20.0%

Directors' valuation (£m)

643.3

692.9

743.1

792.7

842.0

NAV per share (pence)

93.0

102.0

111.2

120.2

129.2

Change vs Base Case (%)

(13.4)

(6.8)

0.0

6.7

13.3

 

Inflation

A variable of 1.5% is considered reasonable given historic fluctuations. A long term inflation rate of 2.75% (2017: 2.75%) has been used.

 

-1.50%

-0.75%

Base

+0.75%

+1.50%

Directors' valuation (£m)

647.3

693.0

743.1

797.1

855.4

NAV per share (pence)

93.7

102.1

111.2

121.0

131.6

Change vs Base Case (%)

(12.9)

(6.7)

0.0

7.3

15.1

 

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%

Directors' valuation (£m)

758.1

750.4

743.1

735.5

727.8

NAV per share (pence)

113.9

112.5

111.2

109.8

108.4

Change vs Base Case (%)

2.0

1.0

0.0

(1.0)

(2.1)

 

18.       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.

Ordinary Shares

 

31 December

2018

Shares

31 December

2017

Shares

Opening balance

449,952,091

340,950,912

Issued during the year

98,989,459

109,001,179

Closing balance

548,941,550

449,952,091


 

 

31 December

2018

£'000

31 December

2017

£'000

Opening balance

454,515

339,003

Proceeds from share issue

106,189

117,539

Less: issue costs capitalised

(1,906)‌‌

(2,027)‌‌

Closing balance

558,798

454,515

19.       NAV per Ordinary Share

The Net Asset Value ("NAV") per redeemable Ordinary Share for the Company is 111.17 pence per ordinary share. This is based on the Net Asset Value at the reporting date of £610,257,766 (2017: £481,307,486) and on 548,941,550 (2017: 449,952,091) redeemable Ordinary Shares, being the number of Ordinary Shares in issue at the end of the year.

20.       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:

20.1    Market risk

           (a)      Foreign currency risk

Foreign currency risk, as defined in IFRS 7, arises as the values of recognised monetary assets and monetary liabilities denominated in other currencies fluctuate due to changes in foreign exchange rates. Transactions in foreign currency are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to pounds sterling at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in income.

The Company has no direct exposure to foreign currency risk, however through its underlying investment in FS Holdco 4 it has indirect exposure. FS Holdco 4 is directly exposed to fluctuations in foreign currency due to its investments in Australian dollar denominated assets. The Group mitigates its exposure to fluctuations in foreign currency through the use of forward exchange contracts.

The carrying amount of FS Holdco 4's foreign currency exposure at the reporting date is as follows:

 

31 December 2018

£'000

31 December 2017

£'000

AUD

63,102

41,652

 

The FX rate applied at 31 December 2018 was 0.5523 (2017: 0.5782). A 10% weakening or strengthening of the FX rate would have a £6,310,200 impact on the valuation of assets denominated in AUD (2017: £4,165,000).

           (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 2018, 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 £53,018,750 (2017: £40,846,400). The impact of changes in unobservable inputs to the underlying investments is considered in note 17.

           (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 (2017: Nil).

 

Total portfolio

31 December 2018

£'000

Weighted average interest rate

31 December 2018

%

Weighted average time for which rate is fixed

31 December 2018

Days

Loan notes

250,000

11.00%

780

Shareholder loans

249,316

2%

1,287

Cash and cash equivalents

12,282

0.05%

-

 

511,598

 

 

 

 

Total portfolio

31 December 2017 (restated) £'000

 

Weighted average interest rate

31 December 2017

%

Weighted average time for which rate is fixed

31 December 2017

Days

Loan notes

250,000

11.00%

415

Shareholder loans

154,110

4.30%

922

Cash as cash equivalents

14,669

0.05%

-

 

418,779

 

 

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:

 

 

Total

Indirect exposure

2018

£'000

 

Weighted average interest rate

2018

%

Weighted average time for which

rate is fixed

2018

Days

Investments - FS Holdco*

343,731

8.00

365**

Investments - FS Holdco 2, FS Holdco 3 & FS Holdco 4*

266,064

5.00

1,320

Cash and cash equivalents

445

-

1,320

Total indirect exposure interest rate risk

610,240

 

 

 

 

 

 

 

Total

Indirect exposure (restated)

2017

£'000

 

Weighted average interest rate

2017

%

Weighted average time for which

rate is fixed

2017

Days

 

Investment - FS Holdco*

343,731

8.00

365**

Investments - FS Holdco 2 & FS Holdco 4*

116,345

5.00

955

Cash and cash equivalents

540

0.05

-

Total indirect exposure interest rate risk

460,616

 

 

*      The loan portion of the investments are subject to interest rate risk

**    These loans do not have a repayment date and are repayable on demand. However, the Directors do not intend to demand repayment in at least 12 months after year end.

 

20.2    Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due as a result of the maturity of assets and liabilities not matching. An unmatched position potentially enhances profitability, but can also increase the risk of losses. Liquidity could be impaired by an inability to access secured and/or unsecured sources of financing to meet financial commitments. The Board monitors the Company's liquidity requirements to ensure there is sufficient cash to meet the Company's operating needs.

           31 December 2018

 

Carrying amount

£'000

Contractual Total

£'000

Less than 6 months

£'000

6 to 12 Months

£'000

Greater than 12 months

£'000

Financial Assets

 

 

 

 

 

Investments

530,187

530,187

-

-

530,187

Trade and other receivables

265

265

265

-

-

Interest receivable

69,338

69,338

69,338

-

-

Cash and cash equivalents

12,282

12,282

12,282

-

-

Total Financial assets

612,072

612,072

81,885

-

530,187

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

Trade and other payables

(1,814)‌‌

(1,814)‌‌

(1,814)‌‌

-

-

Total financial liabilities

(1,814)‌‌

(1,814)‌‌

(1,814)‌‌

-

-

Net position

610,258

610,258

80,071

-

530,187

          

 

31 December 2017

 

Carrying
amount

£'000

Contractual
Total

£'000

Less than
6 months

£'000

6 to 12 Months

£'000

Greater than 12 months

£'000

Financial Assets

 

 

 

 

 

Investments

408,464

408,464

-

-

408,464

Trade and other Receivables

1,933

1,933

1,933

-

-

Interest receivable

57,626

57,626

57,626

-

-

Cash and cash equivalents

14,669

14,669

14,669

-

-

Total Financial assets

482,692

482,692

74,228

-

408,464

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

Trade and other payables

(1,384)‌‌

(1,384)‌‌

(1,384)‌‌

-

-

Total financial liabilities

(1,384)‌‌

(1,384)‌‌

(1,384)‌‌

-

-

Net position

481,308

481,308

72,844

-

408,464

20.3 Credit risk

           a)        Exposure to credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.

The Company and its subsidiaries place cash with authorised deposit takers and is therefore potentially at risk from the failure of such institutions.

In respect of credit risk arising from other financial assets and liabilities, which mainly comprise of cash and cash equivalents, exposure to credit risk arises from default of the counterparty with a maximum exposure equal to the carrying amounts of these instruments. In order to mitigate such risks, cash is maintained with major international financial institutions. During the year and at the reporting date, the Company maintained relationships with the following financial institutions:

 

Moody's Credit Rating

31 December 2018

£'000

Cash in bank:

 

 

Royal Bank of Scotland International Limited

P2

12,280

 Lloyds Bank International Limited

 P1

2

Total cash and cash equivalents

 

12,282

 

 

Moody's Credit Rating

31 December 2017

£'000

Cash in bank:

 

 

 Royal Bank of Scotland International Limited

P2

14,659

 Lloyds Bank International Limited

P1

10

Total cash and cash equivalents

 

14,669

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 £610,239,946 (2017: £460,076,279), being the portion of UK Hold Co investments that are made up of loans as at 31 December 2018. Included within this are the related party loans as disclosed within note 23 as well as an external long term debt facility entered into by FS Holdco and FS Debtco and Santander. The balance of the external debt facility as at year end amounted to £251,057,609 (2017: £152,446,577).

           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.

20.4 Other risks

Political and economic risk

The value of Ordinary Shares may be affected by uncertainties such as political or diplomatic developments, social and religious instability, changes in government policies, taxation or interest rates, currency repatriation and other political and economic developments in law or regulations and, in particular, the risk of expropriation, nationalisation, and confiscation of assets and changes in legislation relating to the level of foreign ownership.

Governmental authorities at all levels are actively involved in the promulgation and enforcement of regulations relating to taxation, land use and zoning and planning restrictions, environmental protection, safety and other matters. The introduction and enforcement of such regulations could have the effect of increasing the expense and lowering the income or rate of return from, as well as adversely affecting the value of, the Company's assets.

For the Company's UK solar sites the main risks from Brexit that the Company is currently considering are the stability of the operating and maintenance (O&M) companies that are employed across the portfolio and the supply chain of components as part of either corrective or preventative maintenance work.

In relation to the O&M companies themselves, all of the primary O&M companies across a majority of the UK portfolio are UK based operations who are wholly owned by UK entities.

The supply chain for spare parts is the other main risk that Management foresees due to Brexit in terms of getting spare parts to sites promptly from other parts of the EU, especially in the event of a no deal Brexit.

Whilst Brexit presents certain risks in relation to the operation of the UK solar portfolio the Asset Manager shall be working to ensure that there are robust spare parts provision in the UK and continue to work with the O&M providers and their downstream suppliers to ensure down time is minimised across the portfolio as much as possible.

21.       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.

 

 

22.       Dividends

 

2018

£'000

2018

Pence/Ordinary share

2017

£'000

2017

Pence/Ordinary share

Quarter 1

7,109

1.58

6,414

1.58

Quarter 2

7,109

1.58

6,538

1.58

Quarter 3

8,118

1.64

7,109

1.58

Quarter 4

9,003

1.64

7,110

1.58

 

31,339

 

27,171

 

23.       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 2018:

 

Opening Balance

as at 1

January 2018

£'000

Increase in

loan/Interest

charged

£'000

Repayment of

loan/Interest

repaid

£'000

Closing Balance

as at 31

December 2018

£'000

Loan Notes

250,000

-

-

250,000

Interest on Loan Notes

48,746

33,172

(25,104)

56,814

Shareholder Loan 1

154,110

95,206

-

249,316

Interest on Shareholder Loan 1

8,880

3,644

-

12,524

Non interest bearing loan included in trade and other receivables

1,116

-

(1,116)

-

Non interest bearing loan included in trade and other payables

-

183

-

183

The increases in the shareholder loan of £95,206,725 were funded through 2 separate placing proceeds during 2018.

For the year ended 31 December 2017

 

Opening Balance

as at

1 January

2017

£'000

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31 December

2017

£'000

Loan Notes

250,000

-

-

250,000

Interest on Loan Notes

27,315

32,246

(10,815)‌‌

48,746

Shareholder Loan

23,910

130,200

-

154,110

Interest on Shareholder Loan

5,730

3,150

-

8,880

Non interest bearing loan included in trade and other receivables

4,694

1,116

(4,694)

1,116

The increases in the shareholder loan of £130,200,000 were funded through 3 separate placing proceeds during 2016 and 2017.

Transactions between UK Hold Co and its underlying subsidiaries

Transactions with FS Holdco

For the year ended 31 December 2018:

 

Opening Balance

as at 1

January 2018

£'000

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31 December 2018

£'000

Interest bearing Investment loan 1

343,731

-

-

343,731

Interest on investment loan 1

37,711

27,499

(18,157)

47,053

Interest bearing Investment loan 2

-

(40,000)

-

(40,000)

Interest on investment loan 2

-

(1,403)

150

(1,253)

Non interest bearing loan

(143,504)

-

-

(143,504)

Non interest bearing loan included in trade and other receivables

715

160

-

875

For the year ended 31 December 2017:

 

Opening Balance

as at 1

January 2017

£'000

 

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31

December 2017

£'000

Interest bearing Investment loan 1

343,731

-

-

343,731

Interest on investment loan 1

20,512

27,121

(9,922)

37,711

Non interest bearing loan

183,504

-

(40,000)

143,504

Non interest bearing loan included in trade and other receivables

662

53

-

715

Transactions with FS Holdco 2

For the year ended 31 December 2018:

 

Opening Balance

as at 1

January 2018

£'000

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31 December 2018

£'000

Interest bearing Investment loan 1

74,894

-

-

74,894

Interest on investment loan 1

-

3,745

(2,797)

948

Interest bearing Investment loan 2

-

9,107

-

9,107

Interest on investment loan 2

-

42

-

42

Interest bearing Investment loan 3

-

33,094

-

33,094

Interest on investment loan 3

-

150

-

150

Interest bearing Investment loan 4

-

3,432

-

3,432

Interest on investment loan 4

-

6

-

6

Interest bearing Investment loan 5

-

46,500

-

46,500

Interest on investment loan 5

-

962

-

962

Interest bearing loan payable 1

(28,970)

-

-

(28,970)

Interest on loan payable 1

-

(1,448)

87

(1,361)

Interest bearing loan payable 2

(13,000)

-

-

(13,000)

Interest on interest bearing loan payable 2

(169)

(650)

-

(819)

Interest bearing loan payable 3

-

(7,082)

-

(7,082)

Interest on loan payable 3

-

(263)

-

(263)

Interest bearing loan payable 4

-

(8,386)

-

(8,386)

Interest on loan payable 4

-

(208)

-

(208)

Non interest bearing loan 1

(3,734)

-

1,130

(2,604)

Non interest bearing loan 2

-

(875)

-

(875)

For the year ended 31 December 2017:

 

Opening Balance

as at 1

January 2017

£'000

 

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31

December 2017

£'000

Interest bearing Investment loan 1

-

74,894

-

74,894

Interest on investment loan 1

-

3,221

(3,221)

-

Interest bearing loan payable 1

-

(28,970)

-

(28,970)

Interest on interest bearing loan payable 1

-

-

-

-

Interest bearing loan payable 2

-

(13,000)

-

(13,000)

Interest on interest bearing loan payable 2

-

(169)

-

(169)

Non interest bearing loan

-

(3,734)

-

(3,734)

Transactions with FS Debtco

For the year ended 31 December 2018:

 

 

Opening Balance

as at 1

January 2018

£'000

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31 December 2018

£'000

Interest bearing loan 1

55,000

-

-

55,000

Interest on loan 1

2,019

2,750

-

4,769

Non interest bearing loan

-

140

-

140

For the year ended 31 December 2017:

 

 

Opening Balance

as at 1

January 2017

£'000

 

Increase in loan/Interest charged

£'000

 

Repayment of loan/Interest repaid

£'000

 

Closing Balance

as at 31

December 2017

£'000

Interest bearing loan 1

-

55,000

-

55,000

Interest on loan 1

-

2,019

-

2,019

Transactions with FS Holdco 3

For the year ended 31 December 2018:

 

 

Opening Balance

as at 1

January 2018

£'000

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31 December 2018

£'000

Interest bearing Investment loan 1

-

36,124

-

36,124

Interest on investment loan 1

-

1,267

(1,267)

-

Non interest bearing loan payable

-

317

-

317

FS Holdco 3 commenced trading in the current year thus no comparatives are shown.

 

 

Transactions with FS Holdco 4

For the year ended 31 December 2018:

 

 

Opening Balance

as at 1

January 2018

£'000

Increase in loan/Interest charged

£'000

Repayment of loan/Interest repaid

£'000

Closing Balance

as at 31 December 2018

£'000

Interest bearing Investment loan 1

28,970

-

-

28,970

Interest on investment loan 1

-

1,489

-

1,489

Interest bearing Investment loan 2

12,482

-

-

12,482

Interest on investment loan 2

162

624

-

786

Interest bearing Investment loan 3

-

10,380

-

10,380

Interest on investment loan 3

-

385

-

385

Interest bearing Investment loan 4

-

8,386

-

8,386

Interest on investment loan 4

-

208

-

208

Interest bearing Investment loan 5

-

3,141

-

3,141

Interest on investment loan 5

-

110

-

110

Non interest bearing loan

-

353

-

353

For the year ended 31 December 2017:

 

 

Opening Balance

as at 1

January 2017

£'000

 

Increase in loan/Interest charged

£'000

 

Repayment of loan/Interest repaid

£'000

 

Closing Balance

as at 31

December 2017

£'000

Interest bearing Investment loan 1

-

28,970

-

28,970

Interest on investment loan 1

-

-

-

-

Interest bearing Investment loan 2

-

12,482

-

12,482

Interest on investment loan 2

-

162

-

162

Transactions between FS Holdco, FS Debtco, FS Holdco 3, FS Holdco 4 and their SPVs

All of the SPVs are cash generating solar farms (except for the non-operational Australian investments). On occasion revenues received and expenses are paid on their behalf by FS Holdco, FS Holdco 2, FS Debtco, FS Holdco 3 and FS Holdco 4. All of these transactions are related party transactions.

 

Opening Balance receivable/ (payable)

as at

1 January

2018

£'000

Amounts paid

on behalf of

SPV

2018

£'000

Amounts received

from

SPV

2018

£'000

Net amount

(payable)/ receivable

as at 31 December

2018

£'000

FS Holdco and its SPVs

(11,437)‌‌

33,009

(37,166)‌‌

(15,594)‌‌

FS Holdco 2 and its SPVs

-

1,501

(4,190)‌‌

(2,689)‌‌

FS Debtco and its SPVs

(6,968)‌‌

12,231

(8,026)‌‌

(2,763)‌‌

 

 

 

 

Opening balance

receivable/

(payable)

as at 1

January

2017

£'000

Amounts paid

on behalf of

SPV

2017

£'000

Amounts

received from

SPV

2017

£'000

Net amounts

(payable)/

receivable

as at 31

December

2017

£'000

FS Holdco and its SPVs

(935)‌‌

30,883

(41,385)‌‌

(11,437)‌‌

Other

During the year under review, UK Hold Co made use of a tax credit of £nil (2017: £1,646,395) availed by its subsidiary, FS Holdco, to reduce the tax liability of UK Holdco at the reporting date.

During the year under review, FS Holdco 2 acquired 26 new investments from Foresight Solar EIS funds. See note 16 for further details regarding the investments required.

            Transactions with the manager

Foresight Group LLP, a related party of Foresight Group CI, charged asset management fees to the underlying projects of £1,002,002 during the year (2017: £587,333), of which £204,052 was payable at year end (2017: £65,850).

Brighter Green Engineering, a related party of Foresight Group LLP, charged fees to the underlying projects under both the O&M contracts and EPC defect remedial work of £4,686,275 during the year (2017: £4,015,368), of which £469,114 was payable at year end (2017: £Nil).

24.       Change in accounting policies

This note explains the impact of the adoption of IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from Contracts with Customers' on the Company's financial statements and also discloses the new accounting policies that have been applied from 1 January 2018, where they are different to those applied in prior periods.

As a result of the changes in the Company's accounting policies, prior year financial statements did not have to be restated as there were no material reclassifications or adjustments arising from the new impairment rules.

IFRS 15

IFRS 15 applies to all contracts with customers.

Application to the Company:

The adoption of IFRS 15 does not have a material impact on the Company's two revenue streams:

-        Interest revenue earned from loans that have been issued to underlying Companies within the Group; and

-                   Gains on its investments at fair value through profit and loss.

IAS 18 specifies that interest revenue is recognised using the effective interest method. The measurement principles for interest revenue have been included in IFRS 9 which similarly will require that interest revenue be recognised using the effective interest method.

Revenue arising from changes in the fair value of financial assets and financial liabilities or their disposal is specifically excluded from the scope of IAS 18. Revenue from financial instruments and other contractual rights or obligations within the scope of IFRS 9 is specifically excluded from the scope of IFRS 15. Both revenue streams fall within the scope of IFRS 9 and thus specifically excluded from the scope of IFRS 15, the adoption of IFRS 15 did not have a material impact on the Company's annual report and did not result in any changes to accounting policies.

The adoption of IFRS 15 has no effect on

-        the retained earnings at 1 January 2018 and 2017,

-        the statement of financial position as at 31 December 2018 or 2017,

-        the statement of comprehensive income for the year ended 31 December 2018 or 2017, or

-        the statement of cash flows for the year ended 31 December 2018 or 2017.

IFRS 9

a)           Impact on classification and measurement

IFRS 9 IFRS 9 was adopted by the Company in the current year. The impact of this adoption is set out below.

Application to the Company:

Investments held at fair value through profit or loss

The Company's investment in UK Hold Co (which comprises both debt and equity) was previously held at fair value through profit or loss under IAS 39. In terms of IFRS 9, the investment in its entirety continues to be held at fair value through profit or loss as the equity portion of the investment is not held for trading nor will the fair value through other comprehensive income option be elected and the debt portion of the investment meets the following conditions;

-        the fair value through profit or loss classification eliminates an accounting mismatch; and

-        the debt investment forms part of a group of assets that are managed and performance evaluated on a fair value basis.

Therefore there is no change in the recognition or measurement of investments held at fair value through profit or loss.

Interest receivable, trade and other receivables, cash and cash equivalents

Interest receivable, trade and other receivables and cash and cash equivalents were previously measured at amortised cost under IAS 39. Under IFRS 9 assets can be classified under amortised cost under the following conditions;

-        The assets must be held in a business model whose objective is to collect the contractual cash flows i.e. "held to collect"; and

-        the contractual cash flows must represent repayment of the principal and interest on the principal amount outstanding

These assets by their nature meet the above conditions and will therefore continue to be held at amortised cost under IFRS 9.

Trade and other payables

Under IAS 39, trade and other payables are measured at amortised cost. This does not change with the application of IFRS 9.

The following table explains the original measurement categories under IAS39 and the new measurement categories under IFRS 9 for each class of the Company's financial assets and financial liabilities as at 1 January 2018.

 

Original

classification

under IAS 39

New

classification

under IFRS 9

Original

carrying

amount

under IAS 39

31 December 2017

£'000

New

carrying

amount

under IFRS 9

31 December 2017

£'000

Financial assets

 

 

 

 

Investments

Designated as at fair value through profit or loss

Mandatorily at fair value through profit or loss

408,464

408,464

Trade and other receivables

Amortised cost

Amortised cost

1,933

1,933

Interest receivable

Amortised cost

Amortised cost

57,626

57,626

Cash and cash equivalents

Amortised cost

Amortised cost

14,669

14,669

Total financial assets

 

 

482,692

482,692


 

 

Original

classification

under IAS 39

New

classification

under IFRS 9

Original

carrying

amount

under IAS 39

31 December 2017

£'000

New

carrying

amount

under IFRS 9

31 December 2017

£'000

Financial liabilities

 

 

 

 

Trade and other payables

Amortised cost

Amortised cost

(1,384)‌‌

(1,384)‌‌

Total financial liabilities

 

 

(1,384)‌‌

(1,384)‌‌

b)           IFRS 9 impact on impairment

The Company was required to revise its impairment methodology under IFRS 9 for each class of financial asset.

From 1 January 2018, the Company assesses on a forward looking basis the expected credit losses ("ECL") associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The ECL assessment of financial assets is disclosed in note 20.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.

Interest receivable

The Company ECL uses a 12 month expected loss allowance for all interest receivable. The Company has completed some high-level analysis and forward looking qualitative and quantitative information, to determine if the interest receivable is low credit risk. Based on this analysis the expected credit loss on interest receivable is not material and therefore no impairment adjustments were accounted for.

Trade and other receivables

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 is not material and therefore no impairment adjustments were accounted for.

c)            Accounting policies applied from 1 January 2018 - IFRS 9

The accounting policies applied under IFRS9 applicable from 1 January 2018 is set out in detail in note 2.9.

25.       Commitments and contingent liabilities

There are no commitments or contingent liabilities in the current year (2017: £Nil).

26.       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.

27.       Post balance sheet events

There were no post balance sheet events requiring disclosure.

Alternative Investments Fund Manager Directive Report

In accordance with the Alternative Investments Fund Manager Directive Report (the "Directive"), the Company is required in its capacity as the Alternative Investment Fund Manager ("AIFM") and the Alternative Investment Fund ("AIF") to disclose specific information in relation to the following aspects of the Company's management:

OVERVIEW OF INVESTMENT ACTIVITIES

The Company's investment activities during the year is disclosed in full in the Investment Manager's Report on page 20 of the Annual Report.

The Company's portfolio's performance during the year is disclosed in full in the Asset Manager's Report on page 36 of the Annual Report.

A list of the Company's portfolio holdings is included on page 16 of the Annual Report.

LEVERAGE AND BORROWING

Leverage is defined as any method by which the Company increases its exposure through debt, borrowed capital or the use of derivatives.

The Company and its subsidiaries' leverage position and third party debt arrangements are disclosed in full in the Investment Manager's Report on page 20 of the Annual Report.

'Exposure' is defined in two ways - 'Gross method' and 'Commitment method' - and the Company must not exceed maximum exposures under both methods.

The Directors are required to calculate and monitor the level of leverage of the Company, 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 2018 is as follows:

Gross method: 22%

Commitment method: 30%

LIQUIDITY

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due as a result of the maturity of assets and liabilities not matching. An unmatched position potentially enhances profitability, but can also increase the risk of losses. Liquidity could be impaired by an inability to access secured and/or unsecured sources of financing to meet financial commitments. The Board monitors the Company's liquidity requirements to ensure there is sufficient cash to meet the Company's operating needs.

The financial position of the Company, its cash flows, liquidity position and borrowing facilities are referred to in the Chairman's Statement, Strategic Report and Notes to the Accounts. In addition, the financial statements include the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to credit risk and liquidity risk.

The Company has sufficient financial resources together with investments and income generated. As a consequence, the Directors believe that the Company is able to manage its business risks.

RISK MANAGEMENT POLICY NOTE

Please refer to Principal Risks report on page 43 of the Annual Report.

REMUNERATION

As AIFM, the Company is subject to a remuneration code which is consistent with the requirements of the FCA which apply to the AIFM. 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.

ADMINISTRATOR & COMPANY SECRETARY

JTC (Jersey) Limited

JTC House

28 Esplanade

St. Helier Jersey

JE4 2QP

 

REGISTRAR

Computershare Investor Services (Jersey)

Queensway House

Hilgrove Street

St. Helier Jersey

JE1 1ES

 

CORPORATE BROKER

Stifel Nicolaus Europe Limited (formerly Oriel Securities)

150 Cheapside

London

EC2V 6ET

 

INVESTMENT MANAGER

Foresight Group CI Limited

PO Box 156

Dorey Court

St. Peter Port

Guernsey

GY1 4EU

 

LEGAL ADVISORS TO THE COMPANY AS TO ENGLISH LAW

Dickson Minto W.S.

Broadgate Tower

20 Primrose Street

London

EC2A 2EW

 

LEGAL ADVISORS TO THE COMPANY AS TO JERSEY LAW

Ogier

Ogier House

The Esplanade

St. Helier

Jersey

JE4 9WG

 

LEGAL ADVISORS TO THE COMPANY AS TO THE ACQUISITION OF SOLAR ASSETS

Osborne Clarke

One London Wall

London

EC2Y 5EB

 

INDEPENDENT AUDITOR

KPMG LLP

15 Canada Square

London

E14 5GL

 

Glossary of Terms

 

AEMO

Australian Energy Market Operator

AIC

The Association of Investment Companies

AIC Code

The Association of Investment Companies Code of Corporate Governance

AIC Guide

The Association of Investment Companies Corporate Governance Guide for Investment Companies

AIFs

Alternative Investment Funds

AIFMs

Alternative Investment Fund Managers

AIFMD

The Alternative Investment Fund Management Directive

Asset Manager

The Company's underlying investments have appointed Foresight Group LLP, a subsidiary of Foresight Group CI, to act as Asset Manager

BBSY

Bank Bill Swap Bid Rate

Company

Foresight Solar Fund Limited

CEFC

The Clean Energy Finance Corporation

DCF

Discounted Cash Flow

EEA

European Economic Area

EPC

Engineering, Procurement & Construction

ESG

Environmental, Social and Governance

EUA

European Emission Allowances

FiT

Feed-in Tariff. The Feed-in-Tariff scheme is the financial mechanism introduced on 1 April 2010 by which the UK Government incentivises the deployment of renewable and low-carbon electricity generation of up to 5MW of installed capacity.

GAV

Gross Asset Value on Investment Basis including debt held at SPV level

GFSC

Guernsey Financial Services Commission

Group Borrowing

Group Borrowing refers to all third-party debt by the Company and its subsidiaries.

GWh

Gigawatt hour

IAS

International Accounting Standard

IFRS

International Financial Reporting Standards as adopted by the EU

Investment Manager

Foresight Group 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

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
FR UGURCWUPBGBA
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Full Year 2018 Results and Dividend Announcement - RNS