Foresight Solar Income Fund is reporting its results for the year ended 31 December 2015. The net asset value dipped a little – from 100.9p to 99p. earnings per share were 5.91p but they are still planning to pay 6.1p of dividends for the year and are targeting a full year dividend for the period ended 31 December 2016 of 6.17 pence
Energy generated from the portfolio amounted to 298.76 GWh, resulting in revenue of £36.7m across the Company’s portfolio.
They bought seven assets totalling 142MW during the year. All of the portfolio is producing electricity. They are utilising £146m of their £150m acquisition facility and plan to either replace this with cheaper long-term debt and / or raise additional equity.
The irradiance (sunshine) for the period under review was 0.6% above forecast. For sites that have more than 12 months of operational data, production was 0.4% above expectations. These figures were held back by a couple of operational problems (described below) if you adjust for these, the adjusted production was 4.5% above expectations.
The first problem was the discovery that photovoltaic (“PV”) Modules at Highfields, High Penn and Pitworthy assets
were not performing in line with guarantees. As such, the Company is now in advanced negotiations with SunEdison in order to receive full financial compensation for loss in performance over the lifetime of the plants. The contractual performance guarantees will remain in place following the conclusion of these negotiations.
Secondly, the production of the Pitworthy asset was further compromised by a lightning strike event which led to a partial outage of the plant from 1 July 2015 until 6 August 2015. This incident was fully covered by the plant insurance.
They acknowledge the impact of the UK government’s announcements on the solar industry in the UK saying, the changes have led to increased uncertainty in the sector, but believe the announced RO subsidy changes will have no impact on the existing installed capacity of their portfolio, the immediate pipeline of assets, nor does it impact the dividend cover.
This is what they had to say about power prices: “UK power prices continued a downward trend throughout 2015, driven in part by lower gas prices due to stockpiles of liquefied gas and above average winter temperatures during first and fourth quarters of 2015. As a result, the Company has revised downwards its forecast power prices by an average of c.13% over the period, with a greater revision being seen in the front end of the curve. This has had a negative impact on NAV.
The Company continues to take a conservative approach to power curve forecasts. Since the IPO in October 2013, the Company has revised downwards its forecast power curve seven times, by a cumulative average amount of c. 25%. The Company uses a blended average of the forward power curve forecasts from a number of third party providers in its NAV calculations and believes that power price declines have been appropriately reflected. The Company’s forecasts continue to assume an increase in power prices in real terms over the medium to long term of 1.8% per annum.
It should be noted that the impact of falling power prices on the portfolio is mitigated, to a certain extent, by the fact that 60% of portfolio revenues received are from subsidies and associated green benefits which are grandfathered and index-linked.”
FSFL : Foresight Solar sees slight dip in NAV