Foresight Solar Fund Limited (FSFL) Earnings Call Transcript & Summary

As we approach Foresight Solar's 10-year anniversary in October, we are proud of the many achievements of the last decade. We've successfully grown the portfolio of assets, expanding internationally and into new technologies. We've delivered an annualized total shareholder return of almost 6%. And since the IPO, we've paid our annual dividends on target. In that time, the dividend has grown every year, going from 6p per share to 7.55p per share, an impressive 25% increase. Looking forward, the drive to achieve net-zero targets is encouraging even greater investment into renewable generation. Solar and battery storage are major beneficiaries as both are comparatively low cost and quick to deploy. As we transition to a low-carbon economy, the growth opportunities for Foresight Solar over the next decade are considerable.

In the first half of 2023, electricity production across the portfolio was 2.8% above budget, driven by strong operational performance and good irradiation. With assets in all our geographies performing well, cash generation was exceptionally strong with receipts from underlying assets of GBP 52.3 million, which was 42% higher than in H1 2022. We're well on track to deliver our dividend target for 2023, and we forecast the company's dividends to be around 1.5x cash covered for at least the next 3 years. The Board and Foresight as investment manager, are acutely aware of the persistent discount to NAV, which the fund shares have traded at, albeit this is along with most of the sector. We believe that this has created a disconnect whereby the market is undervaluing the portfolio of assets. This has led the Board to double the share buyback program, taking it to GBP 20 million. We've also initiated a divestment process for the sale of around 200 megawatts of operational assets from across the portfolio. The proceeds of which will be used to reduce gearing and improve cash balances. Going forward, we expect the sale of select development-stage and post-construction assets from our growing pipeline to form part of an ongoing capital recycling program. And this will support investment in future returns accretive opportunities. Speaking of investments, earlier this year, we acquired the full ownership rights to a 467 megawatt development-stage pipeline in Spain. This is precisely the sort of early-stage investment that offers the potential for NAV growth and enhanced long-term yield with modest capital requirements upfront. As the investment manager, we have a strong track record in establishing partnerships with developers and see this as an attractive route for Foresight Solar to continue to grow. Another path to deliver growth is building out our construction portfolio and realizing the NAV upside from managing projects through to operations. We've successfully delivered this with our Spanish portfolio recently, and we'll continue to do this with our U.K. battery projects as well. The scale of the opportunities of Foresight Solar is hugely exciting. Of the 32 countries scheduled to add at least 1 gigawatt of new solar capacity in 2023, 14 of those are here in Europe. That's 3x more than 2 years ago. The energy storage market will also continue to grow. We have visibility over a strong pipeline of U.K. projects, and there is plenty of potential in European markets that are now implementing supportive frameworks through the regulatory process. Through Foresight's international presence, the company is particularly well positioned to take advantage of these opportunities. With measures in place to shore up the balance sheet in a challenging macroeconomic environment, a highly cash-generative portfolio and a laser-like focus on returns-accretive pipelines, Foresight Solar is well placed to continue delivering steady, resilient income with an element of NAV growth for decades to come.