Windfall tax results in small decrease in solar asset valuation for Foresight Solar Fund

The Electricity Generator Levy is set to have a small impact on Foresight Solar Fund’s portfolio, and no impact on its UK battery portfolio whatsoever.

The Autumn Statement introduced the highly controversial 45% windfall tax on all electricity generators, something that has been condemned by the generation industry. Overall taxation is much higher, as it will not be deductible from profits subject to Corporation Tax, meaning that in effect the rate is 70%.

Britain’s coal-fired and gas-fired power stations are not subject to the windfall tax, and oil and gas producers will pay a lower rate of 35% – a small increase from the 25% rate introduced in May through the Energy Profits Levy.

Foresight has stated that, in respect of the UK solar assets which are within scope, revenues earned under Feed in Tariffs (FiT), Renewable Obligation Certificates (ROCs) or Contracts for Differences (CfDs) will be exempt from the proposed Levy.

Having reviewed the details of the proposed Levy in addition to the reversed power curve discounts, the net impact of the changes would see a reduction in the 30 September net asset value (NAV) by only 0.8 pence per share (pps). The company’s unaudited NAV as of 30 September 2022 stood at £771.2 million or 126.4pps.

Several firms have been declaring the result of the new windfall tax on their renewable generation portfolio’s. For example, Bluefield Solar Fund has estimated that the impact of such legislation as well as the impact of removing the power price levy would see a 3.0pps reduction to 141.4pps across their assets. As indicated via its Autumn Statement update and Development update, the company’s NAV as of 30 September 2022 stood at £884 million or 144.6pps.

Solar and energy storage specialist fund NextEnergy Solar Fund (NESF) published its interim results as of 30 September 2022, which also suggested that the new windfall tax would have a limited impact for its portfolio given its diversification.