Bluefield Solar Income (BSIF), the £445m renewables fund that put up for sale itself and its fund manager this week, has disclosed the biggest potential hit if the government pursues its most radical proposal for replacing the inflation measure used in ROC and FIT incentives. 

The Department of Energy’s first option of a simple switch from RPI to CP would knock 2p, or 2%, from net asset value (NAV), BSIF said today.  

However, a second proposal for a freeze in the subsidy until 2035 to claw back what officials view as historic overpayments to renewable operators would remove 11p, or 10%, from the NAV of the 12%-yielder whose shares trail at a 35% discount to asset value. 

This follows announcements by Renewables Infrastructure Group (TRIG) of 0.5% and 2.2% hits from the two proposals, Octopus Renewables (ORIT), which estimated 1.1% and 4% impacts, and GCP Infrastructure (GCP), which anticipated 0.5% and 1.2% declines to NAV. 

Winterflood analyst Ashley Thomas said the bigger impact for BSIF, which was likely to be higher than those of rivals NextEnergy (NESF) and Foresight (FSFL) solar funds, was its relatively younger fleet of 26 years’ remaining life, which would see a longer period of reduced income under the shift to CPI. 

BSIF shares had been more insulated by the launch of the sale process, but renewable trusts had fallen by 4% this week as Thomas said the market had “arguably discounted option one but not fully option two”. 

“No understanding” of investors

Stifel analyst Iain Scouller criticised the Department of Energy Security and Net Zero’s release of price sensitive information through the posting of two press releases on its website last Friday afternoon. He said there should have been a 7am announcement via the regulatory news service (RNS) to ensure the market knew of the proposals before trading started.  

“It is clear the Department has no understanding of the concept of stability for investors, risk premiums and cost of capital. We think this announcement has probably added 100 basis points [1%] of risk premium to UK renewable investments,” he said. 

Scouller added: “We suspect the Department either forgot these listed companies with renewable projects existed or thought that the change wouldn’t have any impact on the valuations. Either way, we think they are about to be reminded of the importance of the listed sector over the next few weeks when they will receive a barrage of hostile responses  to the consultation.”