Foresight Solar Fund enjoyed a bright March & April - ICYMI

Foresight Solar Fund Ltd fund manager Ross Driver told Proactive that UK generation had rebounded following a weaker 2024.

Driver joined the Proactive studio earlier this week, as Foresight week updated investors on the performance and outlook of the fund’s solar and battery storage portfolio.

Output 9.5% above budget to the end of April - or 12.5% when excluding network outages, Foresight revealed.

Driver said that the strong performance was driven by record sunshine in March and April, helping bring the fund’s budget performance back on track. He added that the operational portfolio “continues to generate cash that gets paid out to shareholders via dividends.”

Here, we take a closer look at what he had to say.

 

Proactive: Joining me is Foresight Solar Fund fund manager Ross Driver. Ross, very good to speak with you. The UK Met Office announced March and April had some of the most sun hours since records began.

How's your portfolio performed so far this year?

Ross Driver: Good to be with you as always. Yes, in terms of that — well, it’s fair to say the first couple of months of this year weren't the best for solar resource in the UK, but we had that record sunshine in March and April.

That meant the portfolio, on a nameplate basis, performed particularly strongly.

For the UK, our electricity generation was about 9.5% above budget for the year to 30 April.

If we exclude network outages, which are outside of our control, it was about 12.5% above budget.

Spain and Australia did suffer from some lower generation due to lower irradiance, which is part of having a balanced portfolio.

Overall, generation for the portfolio was 2% higher when you include those network outages.

The good news is that solar generation is back on track following a low irradiation year in 2024.

Our operational portfolio continues to generate cash, which gets paid out to shareholders via dividends — and that’s what we're looking to provide.

 

Proactive: You've executed new hedges to fix power prices for the next couple of years. What's the importance of this proactive approach? Where are you with it now?

Ross Driver: The sale of electricity makes up about half our revenue, alongside subsidies. So our proactive power price hedging strategy is one way to lock in these advantageous electricity prices.

We agree on a price for customers to buy the energy from us. This gives us income visibility and supports dividend cover.

In the last few months, even though power prices have fallen, we've struck agreements at levels we see as accretive to dividend cover. The average hedge price for our UK portfolio is between £80 and £85 per megawatt-hour between 2025 and 2027.

As of now, 90% of our contracted revenues are fixed for this year, 71% for next year, and 62% for 2027.

We build that hedging profile as we go forward. That links into our confidence in achieving a 1.3x dividend cover this year and generating more than enough cash to pay our dividend.

Foresight shares currently yield almost 11%, which we see as a very good investment proposition.

 

Proactive: It sounds like the income element of your strategy is well in train. What about the growth portion of the investment objective?

How's the proprietary development pipeline advancing?

Ross Driver: We have a development pipeline of almost four gigawatts of solar and battery storage projects, predominantly in Spain.

These assets allow us to capture value as they move from development through construction and potentially to operations, if we don't sell them first — much like a plot of land gaining value once planning permission is secured.

We expect the first project in our solar pipeline to reach ready-to-build status later this year.

We’re also seeing momentum from our 400MW battery storage pipeline in Spain.

 

Proactive: Last week you announced a formal proposal which ultimately didn't advance. Can you give us more details on that?

Ross Driver: This relates to actions and commentary from the board around exploring all options, including potential consolidation.

Factors such as higher interest rates, cost disclosure issues and market pressures have affected the renewable energy infrastructure investment trust sector.

These challenges have pushed down share prices and increased discounts to NAV. Foresight has been no exception.

In March, the board announced its intention to explore all options to achieve the best outcome for shareholders. This led to a formal proposal, but it didn't advance.

Company rules mean we can't say much more at this stage. However, directors will continue to evaluate all options to maximise shareholder value.

 

 

Proactive: So, Ross, what's next for Foresight Solar?

Ross Driver: Addressing the share price discount to NAV is a top priority.

We’ve implemented measures to meet varying shareholder needs, combining longer-term initiatives with new ones.

We’ve launched a £50 million share buyback program — one of the largest in the sector relative to NAV — which returns capital to shareholders almost daily and contributes to a modest increase in NAV.

We’re also proceeding with a divestment programme — the sale of our Australian assets continues, and we’re appointing advisers to divest an additional 75MW of operational assets to prove valuations and recycle capital.

We've also reduced management fees and announced a new fee structure, aligning our interests with investors’. Based on the latest NAV and share price, that’s a 20% annual saving.

And, as mentioned, the board continues to review strategic options. Despite current market turbulence and wider geopolitical impacts, we still believe the future of renewable energy investment is very positive.
Governments in the UK and Europe remain supportive, aiming to rapidly electrify their economies.
We believe Foresight Solar is well-positioned to benefit from that.

Proactive: Ross, I hope you continue to keep us posted on your progress. Thank you very much for the update.