Bluefield Solar Income Fund earnings rises as it restrikes PPAs at ‘significantly higher levels’

Bluefield NAV remains strong at £476.7m through H2 2020

Bluefield Solar Income Fund also saw its NAV rise, as well as an increase in its dividend forecast. Image: Bluefield

Bluefield Solar Income Fund (BSIF) has seen its underlying earnings rise to £21.4 million as high power prices, investments into battery storage – with two-hour durations a possibility – and lower than expected irradiation all shaping H2 2021.

In its interim results for the six months to 31 December 2021, BSIF’s underlying earnings pre amortization of debt were £21.4 million compared to £18.7 million for the same period a year prior.

Total operating income, meanwhile, rose significantly to £54,510,638 compared to £14,189,525.

James Armstrong, managing partner of Bluefield Partners, told Solar Power Portal in a call following the release of today’s (22 February) results that these were driven by two factors, one of which is increased revenues from RPI linkage. The other is that the company is selling power at “significantly higher levels than we were previously”.

“The power markets have moved in our favour, but also have the beneficiary of being able to move very quickly and nimbly to be able to restrike contracts,” he said.

Indeed, the company is restriking 150MWp of contracts – around 25% of its portfolio – in H1 2022, with this forming part of BSIF’s power purchase agreement (PPA) strategy.

“Periodically we have contracts coming on and off, because what we were looking to do is to make sure that we could benefit- so protect investors on the downside, but also have the opportunity, if needed, to be able to reach the higher prices,” Armstrong said.

“They are going to be restruck at significantly higher levels than they are currently.”

Indeed, the prices struck for BSIF’s PPAs have been rising. The company struck contracts at an average price of £71.34/MWh post July 2021, while in early 2022 it achieved an average of £115.26/MWh.

The weighted average contracted price per MWh across its portfolio had risen to £51.8/MWh as at 31 December 2021, compared with £51.6/MWh for contracts starting post 30 June 2021.

This comes as a result of the high prices seen over the last six month or so, with UK day-ahead power prices rising from c.£78/MWh on average in June 2021 to c.£245/MWh in December 2021 as European gas hub prices rose to record highs.

BSIF cited the tightness across global gas markets, below average gas storage levels and ongoing Russian gas supply limitations which it said are “potentially exacerbated by development on the Ukrainian border”.

Further price pressure was created by lower than usual renewable power generation and colder weather conditions, BSIF said.

BSIF currently has an operational solar portfolio of 613MWp, with this consisting of 106 PV plants. This breaks down to 65 large scale sites, 39 micro sites and two rooftop sites.

It also includes 128MWp of utility-scale subsidy free ready to build solar projects and 45MWp of ready to build battery storage assets.

During the period, BSIF acquired two ready-to-build projects, these being a co-located 45MWp solar and 25MWp battery site for £5 million, and a 20MWp standalone battery storage development for £1.5 million from Shaw-Energi Ltd.

The battery project is based in Liverpool, with construction expected to begin during 2022. The acquisition follows the broadening of the company’s mandate in 2020, allowing it to invest in battery storage and wind.

When asked by Solar Power Portal as to the durations of battery storage BSIF is looking at – with recent trends showing more companies eyeing up two hour durations including Harmony Energy and Gresham House – Armstrong said that one hour was the pre-eminent strategy until relatively recently, with there now being an increasing focus on two hour.

“It’s something we are looking at, as to whether two hours would be a better solution. There are pros and cons to both.

“Because it’s still in that development stage, we’re not at the stage where we make the decision, but we’ll make that decision relatively soon,” he said.

Post period end, BSIF also acquired a 47.5MWp wind and solar portfolio from Good Energy, with all of the solar sites in this portfolio located in the South West. 

The company detailed how it has 100MWp of consented PV projects, while its pipeline of solar and battery developments grew to c.800MWp.

However, during the period, irradiation was c.2.9% below expectations, which when combined with planned annual HV and general maintenance activity during Q2 that required plants to be temporarily placed under outage resulted in the total generation and generation yield being 3.6% behind forecasts.

Armstrong was quick to assure that this this is a deviation from a “very high level of generation” and is not expected to continue as a trend moving forward.

The interim results also detailed how over 332MWp of the company’s portfolio has secured extensions from 25 years to up to 40 years, which Armstrong said is a way of creating value from the existing portfolio.

The company has also entered a selection of its projects into the fourth round of the Contracts for Difference scheme, and is awaiting the outcomes of the qualification review at the end of February 2022.

BSIF’s net asset value has also risen to £610.0 million from £471.4 million for the same period a year prior, while there has also been an increase in the dividend forecast.

“There’s also a lot of very good news that’s going to be coming down the line throughout the financial year, and then beyond,” Armstrong said.

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