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

Good morning, and welcome to the Foresight Solar Fund Limited investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. [Operator Instructions] I'd now like to hand you over to Managing Director, Ross Driver. Good morning, sir.

Good morning. Thanks, [Lori]. Good morning, everyone, and welcome to the Foresight Solar Investor Meet Webinar for the interim results for 2023. So we just kick off. I think you should be able to see the slides on the screen here. So I'll take you through the highlights, some information of the NAV, operational finance performance, the corporate initiatives we're currently underway with and how we see the outlook for the future. Okay. So a little bit -- I'm Ross Driver. I'm Managing Director at Foresight Group and Fund Lead for Foresight Solar. I'm joined by my colleagues today, Toby Virno and Matheus Fierro. Toby is Senior Manager within the infrastructure team here and a full-time member of the Foresight Solar team, and Matheus is our lead for Investor Relations. We are also supported still these days by Ricardo Pineiro, who is now Head of Infrastructure for Foresight Group and has been a partner and lead fund manager for the Foresight Solar for the last 10 years since inception. A little bit on Foresight Group itself. The business is now -- is an international fund manager headquartered in London, but we also have offices in Madrid, Rome and Australia, along with Luxembourg. We have GBP 10 billion infrastructure assets under management as a fund manager. We also have 2 other parts of the business, Foresight Capital Management -- it is under the funds manager, investing in it listed equities with GBP 1.3 billion of AUM and also our private equity business, which is a U.K. regional focused business with about GBP 1.4 billion under management. So I think the thing to say really about Foresight Group with its strength and depth here. We've got managing over 400 infrastructure assets globally now with over 170 in infrastructure professionals, and that covers the investment side, asset management, construction management as well, and over 4 gigawatts of green energy infrastructure being managed there globally. On to the next a little bit about the fund itself. It's a sustainable investment proposition here with a progressive dividend and looking to add an element of modest growth. So I think it's fair to say that the fund has been from inception [indiscernible] and Australia. And it's also been looking to increase it's on a progressive dividend, but looking to give an increase in that dividend on an annual basis supported by inflation-linked revenues there as well. Both the fund size and average asset size that we are looking to invest in are key drivers to the efficiency of scale. And it's got a proven dividend track record all target dividends paid and we've got a robust dividend cover of about 1.5x for the next few years. On to the next slide. On the portfolio itself, there is 723 megawatts of solar in the U.K. That is all sort of -- that is all U.K. ROC backed subsidy-based investments here in the U.K. that were built up between the fund launch in 2013 and through 2017. There's about 50 assets covering the South of England and the Midlands there as well. The company then went in 2017 and '18 moved into the Australian market, where we've got 4 assets in Australia, again, with about 3 of them also benefiting from long-term subsidies, fixed price contracts and also LGC certificates, similar to ROCs in the U.K. Also in Australia, 3 projects in Queensland and 1 in the South in Victoria there as well. Following that in 2019, the company via its Madrid office, we also made 4 investments into solar projects in Spain. We've got 125 megawatts across 4 assets there at the moment. And those projects, although they're not subsidy based, they have 10-year PPAs with high-quality Offtakers. So we've got offtake agreements with Shell and Statkraft and they're at fixed price arrangements for the majority around 70% of revenues there. Lastly, in 2021, we changed the mandate to allow us to invest into battery storage. Currently got a share the equivalent of 75 megawatts, 1 project under construction at the moment with 2 more up in Scotland that are ready to build status where we can move ahead with construction contracts. Finally, we made our first investment into -- we acquired a pipeline of just under 470 megawatts. So that's 7 projects that are not yet reached planning consent, but are in the process to do so. Where we think the first of those projects could come through in the first half of next year. So in total 61 projects across solar and battery storage. Just touching quickly on the highlights. We'll go through these in more detail, but the highlights for the fund during the period. I think it's quite clear to everyone that the power price has been falling and also with discount pressure on discount rates in the time. So the NAV like many in the peer group did decrease during the first half of the year. It was 5% down to 119.9p per share. Primarily driven by the fall in near-term power prices, but also an increase in discount rates. It's also that downside was significantly mitigated by the active power price hedging and attractive rates at which we fixed offtake prices for the merchant power sales in the first half of the year. It's also being mitigated by higher-than-forecast inflation. Then the underlying portfolio itself is actually performing -- we're quite happy with the performance on that field. It's performing robustly. The global electricity production was just under 3% above forecast for the period with both revenue and EBITDA coming through between 11% and 12% there ahead of the prior period of last year, which we'll come into a little bit because we've been able to keep increasing revenues and profits at a time while power prices falling, and that's really down to our revenue hedging strategy on the wholesale power price sales. Returns have been falling in the last year in the immediate term. I think we've posted a 9.4% total shareholder return for the last 3 years and a 52% total NAV return during the same period as well. On the acquisition side, we have moved -- made that first move into development stage projects with a big acquisition -- the 7 projects in Spain in the South in Andalusia, we're working with a developer to take those forward under a development services agreement. And I'd say our focus really at the moment to drive continued growth and returns is on the development stage projects and projects that are construction ready in order to meet the returns of the fund needs. On a financial outlook basis, the dividend -- the full year target dividend of 7.5p is on track to be paid -- having made the first payment of 3.75p per share during the period. And that is well covered with we see 1.5x dividend cover on a cash basis out until at least [indiscernible] there's a number I wanted to talk on at the moment. There's a number of corporate initiatives underway. I don't think it's lost on ourselves or [indiscernible] environments that we're working into this challenging most of the peer group, in fact, nearly all of them are trading at quite significant discounts to NAV at the moment, and that's where we feel there is a disconnect between the underlying value of the portfolio and the projects we have and the way that the market...

Ross, sorry to cut across. I've just sent you dial-in details. It's just that the Internet is quite patchy, and we're getting intermittent audio interference. Those dial-in details will be with you momentarily. So do carry on with your presentation, but if I could ask you to then dial in at the listing time, that would be great.

Right. Okay. Just momentarily.

Ross. It's Toby here. Happy to jump in.

Yes, Toby, if you want to jump in, you do that and takeover.

Yes, absolutely. I hope you'll be able to hear me loud and clear. So on this slide, we summarize the corporate initiatives that the company has undertaken in the period so far. This has been to address the discount to it's share price trading versus the NAV of the underlying assets, which we strongly believe in, and we think there is a disconnect there driven by macro factors. In order to address this discount, we have undertaken a number of initiatives. We've announced the launch of a divestment program of over -- of circa 200 megawatts of assets from the portfolio, the purpose of which to demonstrate value and to crystallize gains on those assets in order to fund the repayment of the RCF and also to fund the share buyback program as well as potential further investments into return accretive opportunities. We launched a share buyback program initially at a total cap of GBP 10 million, increasing that to a total of GBP 20 million in recent weeks. And as of today, we're about halfway through that initial program, having invested circa GBP 10 million in acquiring our own stock. And this has been to continue to give some output pressure on the share price at a time when there are some sellers in the market. In terms of debt facilities and debt structuring within the group, we have taken an initiative to extend the RCF, which is the short-term floating rate facility that the fund benefits from as an equity bridge, pushing out the refinancing risk until early 2026, so getting an extra year in the term of that facility while still benefiting from same attractive terms as when we entered into that facility. And then finally, the appointment of dual brokers, the Singer have been taken on board alongside Jefferies with a differentiated sales strategy targeting regional investors alongside the core clients that Jefferies had managed for the time to date. If we can move on to the next slide.

Toby, sorry just got across. Ross is now back to dial in. Ross, can you hear us okay?

Yes, I can hear you. I can hear you fine now.

Lovely. Thank you, sir.

Can you hear me okay?

We can hear you both, yes. Absolutely.

Okay. I hand over back over to you, Ross.

Yes. I think that could well with the headphones. So apologies for that. So just talking on the sustainability performance during the year. A number of this is -- we know it's important to an increasing number of investors at the moment. There's just a few points that I would like to touch on here, first being the sustainability linked RCF. That was we secured a 1-year extension to that under the existing terms and there are attractive premium over SONIA there. Also, with positive ESG performance, there's a number of criteria. If we perform well against those and take a number of boxes, we actually get a discount on the rates on that as well. We've also been looking to minimize entirely the carbon footprint of the fund. So 97% of the assets now draw from renewable tariffs, although they are clean energy producing. They do need a small amount of electricity to draw on from the grid. Those have now all been moved on to green tariffs themselves, therefore, making a further significant reduction in FSFL's own carbon footprint there. And we're also looking at the opportunity, the biodiversity net gains. So we're working with our partner organization, the Eden Project at the moment has developed a natural nature recovery blueprints across the sites that we manage for land managers. Okay. Moving to the NAV for the period. The key drivers here and just looking at that in terms of the movements, the ups and the downs. You've got normal sort of roll forward in terms of the most of the blocks on the left are actually the typical sort of movements that will show in the period, showing the dividends paid, costs of the fund and the time value of money moving forward, the valuation date. Major drivers for the side of that are actually the downside here from power prices that come through in both the project actuals and project forecast, sort of forecast dropping taking the NAV down by about 3.8p there. We've got something in here called the EGL delta. That was the forecast that we were making for what tax we would need to play under the energy generator levy as the power prices are coming down, the amount that we forecast, we need to pay is coming down as well. So we actually get some offset when the power prices are falling down towards that GBP 75 megawatt hour strike price. And the other area there in terms of the upside is inflation coming through higher than we actually had in the forecast, about 1.4p of upside. That's all being offset by a downside in the -- from the movement of the discount rate there, increasing the discount rate, the U.K. subsidy assets by 50 bps to 7.5p -- 7.5%. Okay. A few points we just wanted to raise on this for investors is around the increase in the discount rate for the fund, but also the underlying cash flows and the assumptions here around what is underpinning that valuation, too. So just looking at -- there have been some significant movements down in the power curves, but I just wanted to point to the slide -- the chart here on the left, which shows the movement how significantly in the near term, at least the power price forecasts have come down since the since the end of the year in December, and this is the highly elevated power prices that we are seeing during the period off the back of the war in Ukraine and obviously, surging gas prices. But it is where they were from about at about GBP 250 a megawatt hour at the end of '22, beginning of '23, they have now dropped to about GBP 100 in the forecast. That's the major drop that we saw in the first half of this year. Just point to the fact that the forward rates that we're now seeing, which is what we can lock in the sort of 50% of revenues that we do trade in the market and we can fix prices that are now represented by the red dotted line on there, the forward rates that we're getting out to about '27/'28 are looking a lot more in line with the budget curves that we have now from the forecasters, therefore, meaning that we're not expecting another significant fall in power prices at the moment. On the right-hand side, just pointing as well to the REGOs pricing that we assumed. This is Renewable Energy Guarantees of Obligation (sic) [ Origin ]. These are tariffs that are able to be traded by the projects as well. We'd say we've got quite conservative prices in there. We got GBP 5 a megawatt hour of the REGO for 2024, GBP 3 for '25 and then falling to about 40p thereafter. We know that we're able to lock in these prices for the REGO that's generated by the portfolio and at least about GBP 5 per megawatt hour out the way-- all the way out to about 2028 at the moment. So just making the point that we think there's further prudence there in the numbers as well. On inflation, this has been one of the major drivers and also a significant variance in the -- for all funds, you have the inflation that is applied to factors such as the ROCs here in the U.K. and also we'll be applying to the power curves that come in real terms as well. I think we just say that our inflation assumptions, and this is on an RPI basis remain pretty conservative for the next few years. So you're at 6.5% for 2023. It's fair to say that full year is going to come in significantly above that, and that's why we've seen these upsides from higher-than-forecast inflation. And there we've kept our medium-term forecast out to 2030, so from next year to 2030 at 3% and 2.25% thereafter. The chart below and this was released in the interim report as well, shows a bit of sensitivities on what if -- what the impact on the share price, the NAV per -- pence per share would be here and the NAV in total of a 1%, 2% up or down either way on 2024 inflation alone. And the point being there that a 1% higher inflation for the for the period would have given about a 1.1p upside on the share price. And just to show at the bottom there as well, we've got on the discount rates for the U.K. portfolio. We've moved them by 50 bps to 7.5%. Weighted average discount right now is at about 7.55p. That's 130 bps of increase since H1 2022. And it gives an idea there if we were -- did need we do think there could be some further pressure upward on discount rates, but a 50 basis points increase would reduce the share price by about just under 4p. I think we're showing here that there's a number of drivers that we think are quite conservative, that also have the opportunities to offset as well. Okay. I'll hand over to Toby at that point to just touch on the operational performance. Thanks.

Thank you, Ross. So to cover off both the production and revenue performance for the fund. I'm pleased to say that the funds has continued to perform strongly with the portfolio, producing 2% -- 2.8% of our forecast globally, primarily driven by the Australian and U.K. portfolios, which benefited from higher-than-expected irradiation. And the team, keeping those assets running with excellent uptime to take advantage of that high solar resource. For the first year, the Spanish portfolio is contributing to production as all assets are now operational. Unfortunately, in the period, the portfolio suffered from adverse weather with total production falling 2.2% below forecast, though we remain very positive as we've been very successfully commissioned as they have come online just in the last half year. If we move on to the next slide, we then look to some revenue analysis and also cash generation. So the portfolio has been highly cash generative during the period, GBP 52.3 million in cash receipts from subsidiaries, which is 42% up year-on-year. This is evidencing the strong performance of the fund that has been enabled through our power hedging strategy. So in spite of a falling backdrop of falling power prices, the fund has been able to lock in advantageous pricing and continue to sell power at attractive levels as we secured in the last year or 2. The U.K. accounted for the majority of revenues at 84% with the average fixed price that is secured for the period being GBP 127 per megawatt hour. In the second half of the slide, we present the outlook for the revenue stack for the next 3 years. And what we're trying to illustrate here is the strength of the contracted revenue position for the fund in the near term. What you can see is the teal bar at the bottom of each of the columns and that represents the contracted revenues that come from the ROC subsidies. So the Renewable Obligation Certificate subsidies. These are the inflation linked price certificates that underpin the contracted revenues for whole fund. On top of that, the darker blue bar represents the proportion of wholesale electricity sales that have been fixed in price as of the end of Q2. What can be seen there is that we have built a substantial position of fixes in 2023, bringing the total level of contracted revenues with fixed prices, circa 90%. That falls slightly year-on-year to 85% and then circa 73% in 2025, and that reflects the building positions as the fund continuously adds to it's price fixes in years to come and seasons to come. The gold bar at the top represents the proportion of our revenues that is currently exposed to floating price movements and effectively our merchant headroom that gives us that exposure to wholesale prices. Significantly, contracted revenues support the overall dividend cover position, which is forecast to be at least 1.5x for the next 3 years. If we can move on to the next slide, please. Here, we present the consolidated P&L for the global portfolio. A couple of points that we wanted to draw out here. Firstly, that Spain, as mentioned before, is now actively contributing to the P&L for the group, with all assets being operational and bringing a total operating profit of GBP 4.7 million to the combined GBP 79 million for the group. Both revenue and EBITDA are up almost 12% year-on-year. And gross profit margin continues to be very strong at 87%. Again, against the backdrop and in the context of the falling power prices and inflationary pressures, this demonstrates extremely strong performance and is emblematic of the success of the active price hedging strategy that the fund has pursued. If we move on to the next slide, we focus on Gearing. The fund has total outstanding debt of GBP 510 million, of which GBP 150 million is the short-term revolving RCF facility. Total Gearing for the funds is 41.3%. And of that, the long-term gearing is 32%, both of which were comfortably within the mandate restrictions of -- and 50% and the aspiration for long-term gearing to not be more than 40%, respectively. The vast majority of debt that the fund holds is fully swapped out and amortizing over the long term. The exposure to floating rates sits with the RCF, where the full facility is currently floating at a margin above SONIA. And that's why in this current higher interest rate environment, the priority for the fund is to pay down the RCF quickly to control costs and also to reduce gearing. If we could move over to the next slide, please. And I think I'm going to hand over to Ross to go in some more detail into the corporate initiatives that the fund is pursuing.

Matheus, if you just jump back again, just picking up a couple of questions we're going through. I think it makes sense to just touch on that. One of the questions on the debt was how large is the RCF, what's its all-in cost? It's GBP 150 million, of which we have drawn GBP 115 million at the moment. The all-in cost for the first half of the year was about 4.13%, which is stated there. How much do you target to reduce it over the next 12 months? Well, I think that's -- we're going to come on to that in terms of a balanced approach here between what we're using capital for. I think it's fair to say we're already starting to look to pay that down a meaningful amount because it's a cost control mechanism. And another question there, just what we'll end picking these up as we go through also the current LTV, it's there. There's a proportion of long-term gearing that sort of locked in and are hedged down to just over 30% there and the total gearing including the RCF at just over 40%. I think whilst we're saying we're looking to pay these down in terms of the covenants, we're very comfortable and well within those due to the strong cash generation of the portfolio. Hopefully, that covers off a couple of those questions. So just -- yes, what we're going through and what we're trying to achieve in terms of these initiatives. So we do have the divestment program that's underway with 200 megawatts earmarked for this. I'm now going to take up another question here is we're working through at what sort of point do we recognize that the project is more mature in the point for recycling? We've gone through an exercise here and spend some time doing it. in terms of looking at which of the projects based on the values and also the amount that they contributing to dividend cover. So I think we have projects that are extremely valuable and also contribute very well to the dividend cover. I think we have others that offer maybe less towards that, but still have a high inherent value. So we'll be looking to select those that are lower in the scheme of things and actually providing comfortable dividend in terms of that. So that's how we're selecting assets to recycle. At the moment, we would be putting those into -- at the moment, looking to reduce gearing, some of the proceeds from that. But we've also been looking to recycle capital into those development stage assets. It will take time for a number of those to come through. And I think the point that we're making here is regardless of selling some of these assets, we still expect to have exceptionally strong dividend cover, well over 1x plus over the medium term at the moment. And that's why we see there's a potential there to take cash recycle it in it, hopefully, what we would expect to be above book value and put that to work in more returns accretive investments. We have the share buyback program in operation at the moment that was doubled to GBP 20 million. Again, that is looking to address the discount. But the major point here being that we think the markets are undervaluing the stock. And even though there could be some downside pressure still on the NAV, it's nowhere near the 20p per share levels that we're seeing at the moment or potentially you're going to 20p to 25p that we think is making the stock undervalued, and that's both ourselves and the board. In terms of capital recycling, the pains there at the moment, look to reduce the gearing as we're saying, and it will be the RCF that we're paying down as the cost control measure, recycling that capital also into early-stage investment projects where we see that is the ability to really drive the returns out of there as well. And final point on the RCF extension, we pushed that out to 2026 to remove the refinancing risk and at the same time allow us to reduce gearing. So the focus here is addressing the discounts paying down the -- reducing debt and recycling capital. And this diagram here on this page, trying to give a bit of an idea around where we're focused at the moment. You'll see the operational portfolio that's just over 1 gigawatt, where we are looking to sell 200 megawatts from it. So it's a material amount. It's about 1/5 of the overall operational portfolio at the moment. We do, at the bottom have further assets coming through in the construction pipeline. That's 3 batteries in that as well. And then we expect to have the projects coming out over the next year and several years from our development pipeline in Spain. I'd also say that area on the development side and the construction ready to build is where we'll be focusing the bulk of new investments for now. On the divestment side, the initial 200 megawatts is what we're starting with, but then we could get to a point where we feel that recycling could be a fundamental aspect of the strategy going forward. And just to explain on that in a little bit more detail. And hopefully, this will cover off -- I've seen another question here around how can the fund continue to grow while it's difficult to raise money at the moment. And I think that's a very valid point because at the moment, markets are effectively closed to the whole sector. It's no different from us to anybody else. But the ability to be able to put money recognize mature assets and then recycle that into the development pipelines. We think there'll be a decision point there as the project starts to come through and get to ready to build. And it may be that we are actually selling just as many projects to recycle capital and make some returns as we take forward to build as well. But the divestment of some of these projects will also go to help cover off and help construction costs elsewhere. So that is 1 thing we think it is going to be leaner times at the moment, and it's a case of, at the moment, maybe divesting of some projects and then shrinking to grow a little bit in the future. But we don't necessarily, because of everything that we talked about in terms of robustness of the NAV, I mean that, that means the NAV needs to grow, the portfolio may shrink initially in terms of the number of megawatts, but we want to see here we need to maybe sign a number of other development pipelines as well to give us -- we could happily get that up to several gigawatts to bring through and then a mix of divesting of some of those opportunities and also taking them through to build out. In terms of the money that's coming in there from both the operational cash flows and the divestment proceeds, they're both -- they come into cash available for distribution. Say, in terms of for shareholders, there's the dividends that are paid out, we will continue to review the dividends as at each year. It is a progressive dividend policy at the moment, which means it will be increasing every year. I think what we're looking to give we're getting a 6% uplift at the beginning of this year, we are looking to give an uplift on an annual basis that is both meaningful and sustainable in the long term. So that doesn't necessarily mean that we'll be chasing the highest potential payout, but looking to give an uplift year-on-year that is sustainable and also giving a good level of cover against inflation there. We're also looking to use the cash to pay down debt, which is probably going to be focused on the RCF. And then other capital recycling, some of this we've already been doing is using additional funds to actually fund some of the construction projects. So excess cash has been used to fund our first battery storage project to -- mean that we don't have to draw further on the RCF at the moment. There are portfolio enhancements such as extending leases on sites that have some cost towards them that can have a greater uplift on portfolio value and the NAV as well and then into putting things into development, funding and new acquisitions, too. I think the overall focus here is on prudent and focus on the returns-accretive acquisitions. At present, we don't see it, especially in the U.K. and the other mature markets that we're in as being profitable to chase operational projects, while the discount rates are increasing, we still don't think that a secondary market projects are changing hands at a point where it would be returns accretive and help us make the level of returns that we want the fund to deliver. Going to the next slide, Matheus. Toby, do you want to take this one up?

Yes, sure thing. So looking at the investment strategy of the fund moving forwards and picking up on some of the points that Ross just made. There's a very strong origination focus on earlier projects that are at an earlier stage in their life cycle, so those are both development stage pipelines and also projects that are at the ready-to-build stage that could be taken through construction. We continue to focus across both core technologies for the fund, solar and battery storage. And again, primarily in the core geographies where we already have a presence but also looking at potential new markets that could offer similar kind of strong fundamentals underpinning those 2 sectors. Recycling capital via divestments, key life cycle stages will continue to be a focus of the funds. And it will be an opportunity to crystallize value as projects are brought through from development through construction and into operations. In terms of the construction pipeline, we have 3 -- shares in 3 battery storage projects in the U.K. that's currently at ready to build or in construction. The first of those, Sandridge Battery Storage facility is due to come online next year. There have been some delays in construction driven by grid connection, primarily trunk reinforcement, largely outside the control of the project, but we're very pleased to see that the successful commissioning of that project is set to take place in the first half of next year. The other 2 battery storage projects have framework agreements in place. However, the -- there is still optionality and flexibility as to the timing of the construction of those projects. And that optionality is particularly valuable for the fund at the moment as it consists to take advantage of some of the tailwinds in the construction space for batteries and also more nimbly address some of the urgent -- more pressing capital allocation decisions. Finally, in terms of general pipeline, the fund continues to benefit from an extremely strong pipeline of opportunities in its core target sectors as brought to it by the investment manager. It continues to benefit from the preferential rights to over 600 megawatts of U.K. subsidy-free projects that are currently in development with some of its sister funds under the management for 4 sites. The Spanish development portfolio that holds as proprietary pipeline and then a significant volume of opportunities, both ready-to-build battery and solar projects in the U.K. and in some of our overseas geographies and also development stage pipelines, again, covering solar and battery storage in the U.K. and in overseas territories. Move on to the next slide, and I'll hand over to Ross for the summary.

Thanks, Toby. Just going through this and then spotted a number of questions, so we'll try and answer a number of those and cover off as many as possible at the end. So just in summary, the Q2 NAV itself, it was power price hedges and inflation higher than forecast offset the downward pressure there from lower power prices and revised discount rates. I think we said that there could be some further pressure from the discount rates. Power prices now look more in line with what we're seeing in the forward rates in the market. So don't expect another significant downside there. And even on the discount rates, if there was pressure to increase those, we think that they are -- they can be the downside from that is possible to offset from the -- what we feel are quite conservative cash flows as well underpinning the current NAV. The foremost, we're happy with the portfolio as it's performing. It was 3% above base case during the year. It was a really strong operational performance in the U.K. that has now done very well for many, many years. and Australia was doing well after it had a couple of years of El Nino events down there that have been affecting the radiation. Spain was a little bit behind performance, but that was primarily driven by some very bad storms in March and April, but otherwise apart from that, we are very satisfied with how the new portfolio there is operating. And therefore, as Toby touched on earlier, it is the fixing of the revenues that we've done out power prices now that are significantly above what we can see in the market that has underpinned the strong cash flow there and helped revenue and EBITDA for the period be between 11% and 12% up on next year. On capital allocation, yes, we're away with the divestment process for the 200 megawatts. Just to try to answer a question on that. It's a phased investment program. So we're doing it in several chunks that we expected to commence this year with the first sales and move forward into this year in terms of those processes that we have started in at the moment, yes, we have had strong interest in the projects. I think that was part of the time that we've spent in terms of looking for bilateral deals as well, in terms of also going out to test the market the -- what we would hope is that next announcement -- one of the next announcements we have is that we've actually sold something and above book value as well. So there is strong appetite out there, particularly in the markets that we're looking to transact in. We're also conscious that there are quite a few other processes going on in the market. So we're not looking to go head-to-head with some of those either. And again, we've also doubled the share buyback program there. Another question I just see coming in on the chat is, will you continue or look to extend the share buyback program. Well, we will continue it. We are moving forward. We've spent about GBP 10 million of the GBP 20 million allocated at the moment. I'd say there is the potential to expand that further. It's predominantly driven by as we're getting additional cash flows in what we see as the best use of cash in that period. And I think just to be absolutely clear, what we see is a balance here and starting to pay down the RCF, it is getting more expensive at the moment. Maybe looking to put some more into the share buyback program to obviously narrow the discount there. And also probably what we're looking at is single-digit millions at the moment into the development stage pipelines. So sort of the pipeline in Spain, that 470 megawatts that we acquired there, we note to acquire the initial rights of single-digit million euros. There will be stage payments if they get through to the ready-to-build status and get planning consent but we don't make those payments until they go ahead if they do so it derisks those projects significantly for us. And that's why we see the traction of that and we would really like to put growing that development stage pipeline to several gigawatts across multiple different jurisdictions. And then just looking at the outlook, yes, we're well on track to deliver our target dividend for this year. And again, we'll be looking to offer a strong growth into 2024 and beyond. and we're already factoring that into the 1.5x dividend cover that we're stating there. We've got a really strong pipeline of accretive investment opportunities, probably actually ironically the strongest pipeline of opportunities we've seen. In many years at the times when cash is tight and we're having to make these decisions. So I think any further investments that we are going ahead with, you can be assured that we see as highly return accretive and building the portfolio for the future. I do see that looking at the question there, and particularly those ones focused on how does the fund intend to grow more in the long term. It may be that we're at all point in terms of the actual generating capacity in a fund that has to drop a little bit in the short term, we don't see that as impacting like I said, dividend cover and the ability to continue to generate cash. And we see this as a good opportunity now to invest in the future in those -- in the medium term to build out that pipeline of proprietary investments on both the U.K. solar and storage but also probably more European as well. I saw a question there is saying, is it more U.K. or more overseas. We absolutely -- look, U.K. is the home market. We've got the majority of the portfolio in the U.K. We'd love to keep building up the U.K. portfolio, see that as more battery projects coming through and solar through the development stage pipelines equally across other jurisdictions in Europe, we have capacity there. Spain, other European central markets as well, we're looking at that. We do think that the development stage pipeline is a good opportunity to move into other markets, particularly those that haven't necessarily been opened because of reserves, say Germany, for example. That's a good market that we see previously because it was heavily funded by pension funds with very low cost of capital. If you look at it on a development stage pipeline now, you can get there with the level of returns that it is a very effective market to invest in, but there's a number of others around Europe as well. So I think in summary, what we are looking to do here is address the discount, doing that by a number of actions, including the sales that also look to prove the valuations. So I think that's an important point that we must remember here is, part of it is recycling capital, but part of it is I think the number of funds we're doing now is looking to divest to prove the valuations of what these projects are worth, and we are comfortable with our valuations from those discussions that we've had. The share buyback program as well, looking to address the discount and narrow it there, looking to reduce gearing, but that's a cost control mechanism of the underlying cost of that RCF is increasing because it's only related to the one bit of debt that isn't swapped out. And then looking to reach cycle capital, as we've explained for more mature assets into some of the development stage and ready to build projects here. Okay. Hopefully, that's given a good summary. I have attested there to cover off a number of questions as we've been going through. I hope that came across clear, but I'm happy to hand over to my colleagues and anyone if they take the specific questions we haven't covered off yet.

That's great. Ross, Toby. Thank you very much indeed for updating investors. [Operator Instructions] Ross, as you said, you've addressed pretty much most of the questions that have come through from investors. And firstly, thank you to everybody for engagement. But if I may just hand back to Matheus, if there are any further questions you have to address that would be great, and I'll pick up from you at the end.

Yes. Ross, there are a couple of questions actually on battery storage. One of them asking about the projects in their existing portfolio if they're standalone or if they connect to our solar projects, if they're co-located with our solar project. And the other one is more about the revenues back, because it says that with the duck curve and with solar radiation, there are kind of pricing peaks during the day. And with the growth of batteries, are we expecting to see something similar in that market as well?

Yes. I think I saw both of those. They're a little bit more extended. The first one is quite straightforward in terms of they are stand-alone projects. The first project we've got in Sandridge is absolutely located in a field next to one of our existing projects, but it's only co-located in the sense that it's next door. They're all stand-alone projects. I think it's fair to say we have been looking at co-located projects, but it's easier to achieve those on a new build asset. And also, you've got to factor in that it will constrain one or the other to an extent. Whilst that is the theory behind it is getting more efficient, you will not be able to maximize the output of both the solar and the storage at the same time for quite obvious reasons because they may need to treat at different times. So all the projects we have at the moment that we're taking forward are stand-alone and therefore, able to operate unconstrained in the battery storage markets that we talked about. And then, yes, in terms of the actual -- the revenue stack. I saw the question here that I'm seeing is sort of as battery storage in terms of the new game in town, what's the problem of happening to this sort of cannibalization of revenues in terms of similar to water potentially could happen with solar anyway. Well, just to touch on that, I think the point around solar is as more and more solar and generation is rolled out, that there can be a cannibalization of the pricing itself, we have our own assumptions around what the impact is on the solar capture rate. within our models. I think we have a large portfolio that we're well able to get a steer from in terms of how the rollout of more and more solar is impacting the prices there. Point being that at the peak times of the day sort of around now, I'm looking out, and it's quite bright outside the lunchtime. It's not a peak time for energy generation as well. So if you have a large amount of energy flooding the grid at that time, the demand is going to be lower than the supply, therefore, pushing prices down. We have a view of that, that is starting to pick up an increase we're factoring that into our revenues going forward, but we're still in sort of single-digit percent at the moment? And also one of the factors that you think is the rollout of renewables itself will probably not be as quick as a lot of people are thinking. We see that in the terms of the stalled offshore wind process and the fact I think a lot of the consultants are assuming that we're going to be deploying around 2 gigawatts of solar a year. It was about 0.6 gigawatts for 2022 as a whole. We're seeing positive headwinds in that area. We're not quite getting to the levels of build-out that are predictive to get us to net zero. And then just saying on the point around the battery storage market. I think one thing is having to be on top of that, those markets and the revenues as well. We've said we've got -- our first project has been built on a 1-hour process and into that, where a lot of the revenue themes that make up the revenue stack. So there's fast frequency sponsor and dynamic containment in other areas but we knew we're going to get bid up and already sort of saturated in those markets. So it is more of an arbitrage and volume load shifting strategy that we're looking at even for the 1 hour project that we're going to -- the plan would be to build out our later batteries at a greater either 2-hour plus duration that would make them better placed to trade in the arbitrage markets balancing effectively charging up when prices are low and then selling out when they're higher. So I'd just say in terms of that, we benefit from Foresight Group by having a significant team, not just Foresight Solar but other funds under management, we have about 0.5 gigawatt is about 10 projects that we're taking forward at the moment and a team of about 10 people looking at battery storage. So it's a constant debate at the moment in terms of optimizing and looking to how we best build out those projects as well. Just the major component of that, we're actually seeing is CapEx prices starting to come down significantly at the moment, too. Demand is dropping off in China and other places that is really helping the investment case. So I always been biding our time before pressing the button on those. And it's a very valid question. Revenues for battery storage have dropped as being seen by the listed funds as well. I think the only other point I'd add to that is, we've always been quite conservative in the cash flows and the revenues we are assuming for battery storage. So I don't think we've been surprised but revenues have come down or hit in our investment cases as much. I think the only thing I'd just say to that at the moment is we're still monitoring. We do have these capital allocation decisions at the moment, and we would need to see the battery storage projects offering a significant and meaningful premium to solar projects if you're getting to 7.5% discount rate because it is more of a merchant strategy and more of a trading strategy. And then we also have to weigh that up about the benefits of being able to buy back our own shares in what's the presumably operating business for a 20% discount. So you look at those and need to think through what is the best and clearest investment decision at the moment. It's a bit of a long answer to that one, but I do think it's a bit more of an involved question. Hopefully, that's covered off those, Matheus.

No. That covers it all.

Okay. Fantastic.

That's great. That's great. Thank you very much indeed, Ross, Matheus, and Toby for updating investors. If any more questions, do make their way through to the platform. Of course, we'll make those available to you guys post today's call. Ross, Toby, I know investor feedback will be particularly important to you all, and I'll shortly redirect those on the call to give you their thoughts and expectations. But before doing so, I wonder if I may just come back to you, Ross, just for a couple of closing comments, and then as I say, I'll redirect investors to give you their feedback.

Yes. And apologies for the sound issues at the beginning there. I think we've got a very well worn-out headset for the last few years. It means quite a bit of life cycle there. But look, we do think we acknowledge here that it's challenging times. I'd say that what's in the macroeconomic environment, what we're doing is looking to take proactive action here, and we're doing that with investors front of mind in terms of looking to narrow this discount that the shares are trading at reduced gearing. It's really about setting the scene for the future here. And yes, maybe we do need to get rid of -- sell off a bit of the portfolio to then rebase ourselves and establish for the future and for future growth, but we feel there's a lot of opportunities here in the U.K. and across Europe and other markets that we're investigating as well. So we're very positive on the outlook.

That's great. Ross, Toby, Matheus, thank you very much indeed for updating investors this morning. I please ask the investors not to close this session as we'll now automatically redirect you to the opportunity to provide your feedback in order that the company can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of Foresight Solar Fund Limited, we'd like to thank you for attending today's presentation and I wish you an enjoyable rest of your day.