Power price volatility creates positive momentum for Foresight’s portfolio

Full Foresight portfolio gets digitalisation boost in new Sennen partnership

Foresight now owns and operates c.£4.0 billion in electricity generating assets, including the Shoals Hook solar farm (pictured). Image: Foresight.

Power price volatility helped provide positive momentum for Foresight Group Holdings’s portfolio of assets in the six months to 30 September.

The company has seen its assets under management (AUM) jump to £8.1 billion, an annualised growth rate of 25%. Correspondingly the infrastructure and private equity manager’s funds under management (FUM) also grew, hitting £6 billion as of 30 September 2021, a growth of 34%.

“The current volatility in power pricing in the UK and beyond has provided some positive momentum for Foresight’s balanced portfolio of infrastructure assets,” said Bernard Fairman, executive chairman of Foresight Group Holdings Limited. “More broadly it highlights the need for further acceleration of the transition to a reliable, resilient and low carbon energy system, a space in which Foresight has established itself as a leader.”

Foresight deployed £295 million during the period across infrastructure and private equity, a significant jump on £206 million over the same period in 2020. This allowed the infrastructure team to deploy 25 projects globally, while 26 UK businesses revived capital from the equity arm.

Retail net inflows between March and September 2021 had returned to pre-pandemic levels, totalling c. £0.8 billion.

“We have experienced substantial growth in FUM as a result of strong retail net inflows plus further institutional fund closes and together with the near-term pipeline of new fund launches and deployment, this gives the board confidence in achieving the group’s full year FY2022 targets,” said Fairman.

During the six months the company celebrated its successful close of Foresight Energy Infrastructure Partners (“FEIP”), securing commitments of £724 million (€851 million). This was 70% ahead of the company’s original target, and will allow the company to fund further development of green energy.

Foresight now owns and operates c.£4.0 billion in electricity generating assets, much of the production from which is set at fixed prices through renewable obligation certificates or sold forward at fixed prices, as shown in Foresight Solar Fund’s results in the first half of 2021.

“However, c. 15% is benefitting from the near quadrupling of electricity prices with a further c. 25% likely to similarly benefit as their fixes expire during the next two years, should electricity prices remain elevated,” continued Fairman.

“Electricity generating assets are valued using third party power curves which continue to maintain that electricity will revert to its long-term average of £40-£50 per megawatt hour after about a year. The current market dynamics provide potential significant upside to these curves, which would benefit Foresight over the medium term.”

Power prices have been particularly volatile through September, as a global gas shortage lead to prices increasing 250% since the beginning of the year. Combined with some key outages – including the IFA interconnector which suffered a fire – and low wind speeds at the beginning of the month, power prices skyrocketed.

With day-ahead prices hitting record highs – reaching a peak of £1,675.30/MWh for EPEX and £1,750/MWh for Nordpool for 14 September and the balancing mechanism hitting £4,037.80/MWh on 10 September – those with reactive assets and strong generation have had ample opportunity to capitalise on the constrained capacity.

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