Bournemouth grid outage holds back Foresight’s electricity production

Foresight Solar Fund has announced results for the year ended 31 December 2016. The NAV at the end of the period was 102.9p, the total return on NAV was 7.04% and the return to shareholders 6.58%. The company made profits after tax of £30.7m, equivalent to earnings per share of 10.38p.

They say the fund is on track to pay the target dividend of 6.17 pence per share for the year to 31 December 2016. Interim dividends of 1.54 pence per share were paid in June, September and December 2016 and a further interim dividend of 1.55 pence per share was approved by the Directors on 15 February 2017 and will be paid on 5 May 2017.

They aim to deliver a full year dividend for the year ending 31 December 2017 of 6.32 pence per share (6.00 inflated by RPI for 2014 – 2016). Since IPO, all target dividends have been achieved.

The average power price achieved across the portfolio during the year was GBP37.7/MW (2015:GBP42.2/MWh). The portfolio is now in a position to benefit from rising electricity prices due to the Manager’s decision not to fix electricity prices within the portfolios PPAs with prices of over GBP50/MWh being achieved in Q4 2016. Between its IPO in October 2013 and 31 December 2016, the Company revised its power price forecasts downwards nine times. During the year to 2016 there was a downward movement of 3.6%, however, during the second half of the year the Company made two upward revisions in forecast power prices, resulting in an average annual increase of 2.2% over that period.

Electricity production was 5.3% below forecasts. The total electricity production of the portfolio during the year was 319GWh. Irradiation levels recorded for the year were in line with expectations. The main problem was a grid outage at the Bournemouth site which resulted in 12.8GWh of lost production. The impact of the Bournemouth outage represented in a decrease in the total portfolio production for the period of 3.8% against the expectations of the Investment Manager.

Foresight have drawn shareholders’ attention to a potential problem with the solar panels installed in the UK. Potential Induced Degradation (“PID”) is widely acknowledged module defect which is anticipated to affect up to 25% of the modules installed in the UK. Manufacturing defects exacerbated by humid conditions found in the UK have been shown to cause PV modules to degrade faster than would usually be expected, reducing their efficiency over time. Since
PID was first identified improvements have been made in the manufacturing process and the issue occurs less frequently in newer modules, typically those manufactured after 2015.

Modules that are PID sensitive can see a deterioration in performance at any point in their life. If properly tested, modules show their susceptibility to PID from an early stage even though its effects may not be seen for many years. The effects of PID can be stopped or reversed (with the EPC contractor required to meet the cost if identified at an appropriate stage) through the implementation of site-specific technological solutions.

Based on the developing understanding of PID and its potential impact on the UK’s solar industry, the Asset Manager is utilising the knowledge and experience of its team to take a proactive approach. The team is currently working with industry experts and laboratories to ensure all assets are properly and thoroughly audited, both on the field and in the laboratory, and identify any that may be susceptible to PID. If detected, the defect is notified to the EPC contractor and an assessment made of the likely impact on performance over the lifetime of the asset.

FSFL : Bournemouth grid outage holds back Foresight’s electricity production