Present energy prices are ‘unsustainably high’ warns Foresight Solar Fund

Foresight Solar Fund has 50 solar assets in the UK, as well as sites in Spain and Australia. Image: Andreas Gücklhorn (unsplash).

Power prices are continuing to boost solar asset value, with Foresight Solar Fund reporting its net asset value (NAV) per share, EBITDA and consolidated revenues jumping over the first six months of 2022, but they are unsustainably high currently, the fund said.

The company’s NAV increased from £660 million as of 31 December 2021, to £754.9 million as of 30 June 2022. As such, its NAV per share increased 14.4% from 108.2 pence to 123.8 pence.

During the same period, its consolidated revenues grew 18% ahead of budget, and EBITDA grew 26% ahead of budget.

This growth came predominantly from the continued high power prices seen in Britain, as the market remains particularly volatile due to high gas prices, driven by the Russian invasion of Ukraine and subsequent geopolitical tension.

For example, baseload prices for November and December were being traded above £900/MWh during the first week of September on the back of Gazprom stopping flows of gas through its Nord Stream 1 pipeline.

“The war in Ukraine has compounded upward pressure on European gas prices that had already started the year at elevated levels due to supply shortages. In the current environment it is difficult to judge when energy prices and inflation will peak, although present levels are unsustainably high and in need of downward correction,” Foresight Solar Fund’s chairman Alexander Ohlsson wrote in a statement alongside the updated financial results.

“The Board is pleased with the operational performance of the portfolio during the first half of this year. Strong asset availability has allowed the Company to benefit from particularly high irradiation in the UK, resulting in generation significantly above budget.”

Foresight Solar Funds’ UK portfolio – made up of 50 solar assets – performed 8.0% above base case, with irradiance 8.9% above budget. Globally, the company’s portfolio performed 2.8% above base case for H1 2022.

The company has continued its active management of power price exposure, and has entered into new fixed priced agreements for UK assets for various periods of up to four years in advance.

It noted that this has allowed Foresight to secure more stable and predictable incomes streams for the years ahead, underpinning its dividend cover. As a percentage of total expected revenues, the company’s fixed revenues are now at 82% in 2023, 80% in 2024 and 72% in 2025.

Average fixed prices are at £106/MWh in 2022, £115/MWh in 2023, £96/MWh in 2024 and £87/MWh in 2025.

“During the first six months of 2022, the Investment Manager focused on securing new fixed price energy sale agreements for periods up to four years ahead,” wrote Ohlsson.

“A flexible approach to power price hedging has allowed the Company to secure strong forecast dividend cover for 2022 and provides greater certainty on future revenues for the coming years, underpinned by attractive rates.”

For the first six months, Foresight has reported a dividend of 3.56 pence per share, and reiterated that it is on track to deliver its target of 7.12 pence per share for the year.

Following the first six months of 2022, the company acquired its second battery energy storage asset as it works to continue to diverse its portfolio. It acquired a 50% stake in the 50MW Clayfords project in Aberdeenshire at the beginning of August.

Foresight Solar Fund’s diversification strategy is progressing well, noted Ohlsson.

“Shareholder approval to allocate up to 5% of the Company’s GAV into development stage solar and battery storage assets represents another exciting channel of growth, and we are already well progressed in evaluating several development pipelines in both the UK and Europe.

“Solar power has an integral part to play in a well-balanced future energy mix and the reduction of wholesale energy prices. An environment that supports the development of low-cost renewable generation, as well as grid balancing technology, will provide a clear path to energy security and the Company is seeing robust demand from investors to fund the construction of these low carbon technologies.”

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