AGM Information • Feb 8, 2021
AGM Information
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the action you should take, you should immediately consult your stockbroker, bank manager, solicitor, accountant or other appropriately qualified independent financial adviser, authorised under the Financial Services and Markets Act 2000 (as amended) ("FSMA"). All Shareholders are strongly advised to consult their professional advisers regarding their own tax position.
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If you have sold or otherwise transferred all of your Shares in Foresight Solar Fund Limited (the "Company") you should pass this document as soon as possible to the purchaser or transferee or to the person through whom the sale or transfer was effected for transmission to the purchaser or transferee.
(a company incorporated in Jersey, Channel Islands under the Companies (Jersey) Law 1991 (as amended) with registered number 113721)
and
Notice of a physical general meeting of the Company to be held at 28 Esplanade, St Helier, Jersey, JE2 3QA on 15 February 2021 at 4.00 p.m. is set out at the end of this document. Shareholders are requested to return the Form of Proxy accompanying this document for use at the General Meeting. This will ensure that your votes are registered. Given the risks posed by the spread of COVID 19 and in accordance with the provisions of the Company's articles of association and Government guidance, the Directors will impose entry restrictions on attendance at the General Meeting in order to ensure the health, wellbeing and safety of the Company's shareholders and officers as well as compliance with the venue's security requirements.
To be valid, the Form of Proxy must be completed, signed and returned in accordance with the instructions printed thereon to be received by the Registrars, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY as soon as possible and, in any event, by no later than 4.00 p.m. on 11 February 2021.
(a company incorporated in Jersey, Channel Islands under the Companies (Jersey) Law 1991 (as amended) with registered number 113721)
Directors:
Alexander Ohlsson (Chairman)Christopher Ambler Jersey Peter Dicks JE4 2QP Monique O'Keefe Ann Markey
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Registered Office: 28 Esplanade St Helier
29 January 2021
Dear Shareholder,
Foresight Solar Fund Limited (the "Company") was launched in October 2013 with the objective of providing Shareholders with a sustainable, progressive quarterly dividend and enhanced capital value by investing in ground-based solar power plants in the UK and internationally. Since IPO, the Company has acquired 58 ground based solar power plants, 50 of which are in the UK, and has paid all its target dividends to date.
Since the Company's launch, the renewable technology markets in which it operates have, experienced a continuous period of growth, supported by worldwide commitments to decarbonise and decreasing solar installation costs. This trend is expected to create an attractive environment for further investment in solar power plants in the UK and internationally, either through renewable energy support mechanisms or, increasingly, on a subsidy-free basis.
The continued growth in renewable energy generation is also expected to create a requirement for greater system flexibility as energy systems transition from a model of centralised generation and transmission to more flexible and decentralised systems. Battery storage systems ("BSS") are expected to have a significant role in the energy transition process, with the Company's existing portfolio of operational solar power plants offering utility scale BSS co-location opportunities subject to available grid connection capacity and existing land lease agreements.
In the light of this, the Board, together with the Investment Manager, is putting forward a proposal to amend the Company's current investment policy to allow for up to 10 per cent of the Company's Gross Asset Value ("GAV"), at the time of investment, to be invested into utility scale BSS (the majority of which are currently intended to be located adjacent to the Company's existing PV solar sites).
The purpose of this document is to set out the background to and reasons for the proposed change to the Company's investment policy, and to explain why the Board recommends you vote in favour of the requisite resolution to be proposed at the General Meeting.
The Company's existing investment policy and the New Investment Policy are set out in full in Part 2 of this document.
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To achieve its investment objective, the Company has acquired a diversified portfolio of groundbased, operational solar power plants predominantly located in the UK. This has supported the Company in successfully meeting every dividend target it has set since its launch in October 2013 and delivering an annual total shareholder return of 6.8% since IPO.
The government subsidy regime in the UK came to an end in March 2018. This combined with the ongoing consolidation of the UK solar market and the low interest rate environment has resulted in increasing valuations in the secondary market. Concurrently, the reduction in solar installation costs is creating the opportunity to invest in subsidy-free solar power plants at attractive rates of return on a risk-adjusted basis and the Company therefore continues to monitor investment opportunities in this sector. However, the current availability of long-term fixed-price power purchase agreements ("PPAs") is relatively limited in the UK. Against this market backdrop, investment opportunities within the broader renewable technologies sector and the international solar market in developed economies, in particular in Spain and Southern Europe, are becoming increasingly attractive considering the longer PPA tenors available.
In order to meet UK "net zero" targets by 2050 there has been (and will continue to be) an increasing proportion of renewable energy generation capacity versus other forms of generation. The intermittent nature of renewable energy generation (particularly solar and wind) increases the risk of demand and supply variability of energy on the grid, leading to greater price volatility. BSS will help rebalance the grid and improve grid stability for the system operator. In return, BSS presents a number of financial incentives as well as potential arbitrage opportunities relating to the wholesale market price itself.
The wider Foresight Group was an early investor in the UK battery storage market, acquiring 45MW of battery storage facilities in 2018 and since investing in two BSS co-located with hydro assets. Foresight Group is also monitoring the landscape for BSS across other countries, including those in which the Company holds (or may hold) investments, such as Australia and Spain. Based on this experience, the Investment Manager has identified at least 21 of the Company's current UK portfolio of 50 ground based solar power plant sites as potentially suitable for co-located BSS development. Two of these sites are suitable for immediate development and the Company is currently in exclusivity regarding the acquisition of a fully developed BSS asset of 50 MW adjacent to one of the Company's operational portfolio assets in the UK.
The New Investment Policy would permit the Company to invest in BSS assets without them having to necessarily be co-located however co-located opportunities within the Company's solar power plants portfolio represent a more immediately accessible opportunity-base. Co-locating BSS with solar power plant sites is expected to ensure a lower installation cost for BSS development versus investing in a standalone storage assets. This is achieved by sharing existing infrastructure with the solar power plant site, most importantly the grid connection, but also the land, access tracks and security arrangements. Accordingly, the Company expects that the majority of BSS assets will be colocated alongside solar assets, either on the Company's existing portfolio or on future solar power plant acquisitions.
In addition to delivering higher diversification of cash flows for distribution, the co-location of BSS, when retrofitted onto an existing portfolio solar power plant site, is not expected to impact the value of the solar power plant investment, as the batteries will operate within the excess grid capacity outside of the solar generation profile.
Investments in BSS are expected to present a different investment risk profile compared to the Company existing solar investments considering the higher cash flow volatility associated with the anticipated revenue streams of a BSS. This can include, amongst other revenue streams, wholesale energy trading revenues, balancing services and frequency response services. The investment return for such investments will reflect the risk profile of each opportunity and is expected to be higher when compared to the existing solar investments in the relevant geography.
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The Board believes that the proposed change to the Company's current investment policy will have the following benefits for Shareholders:
The Listing Rules require any proposed material changes to the Company's published investment policy to be submitted to the FCA for prior approval. The FCA has approved the New Investment Policy. The Listing Rules also require the approval of Shareholders prior to any material changes being made to the Company's published investment policy.
A notice convening the General Meeting which is to be held at 28 Esplanade, St Helier, Jersey, JE2 3QA on 15 February 2021 at 4.00 p.m. is set out at the end of this document. At this meeting an ordinary resolution will be proposed in respect of the New Investment Policy.
In order to be passed, it will require the approval of Shareholders representing at least 50 per cent. of the votes cast at the meeting. The Company's articles of association provide that at the General Meeting each Shareholder present in person or by proxy or who (being a corporation) is present by a representative shall, on a show of hands, have one vote and on a poll, shall have one vote for each Share of which he/she is a holder.
Given the risks posed by the spread of COVID 19 and in accordance with the provisions of the Company's articles of association and Government guidance, the Directors will impose entry restrictions on attendance at the General Meeting in order to ensure the health, wellbeing and safety of the Company's shareholders and officers as well as compliance with the venue's security requirements. It should be noted that, in the light of these current circumstances, it is anticipated that only duly appointed repesentatives of the Company will be present in person to ensure that the quorum requirement under the Company's articles of association is met. However, Shareholders may and are strongly encouraged to participate in the business of the General Meeting by exercising their votes in advance of the General Meeting by completing and returning the Form of Proxy.
You are requested to complete and return the accompanying Form of Proxy in accordance with the instructions printed thereon so as to be received by the Registrars as soon as possible but in any event by no later than 4.00 p.m. on 11 February 2021. The completion and return of the Form of Proxy will ensure your vote is registered despite you being precluded from attending the General Meeting and voting in person.
The Board considers that the proposed changes to the Company's investment policy as set out in this document and the resolution to be proposed at the General Meeting are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the resolution to be proposed at the General Meeting.
The Board intends to vote in favour, or procure votes in favour, of the resolution at the General Meeting in respect of the Directors' own beneficial holdings of Shares, which in aggregate amount to 134,346 Shares (representing approximately 0.0002 per cent, of the issued Share capital (excluding Shares held in treasury) of the Company as at the date of this document).
Yours faithfully,
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Alexander Ohlsson Chairman
The full text of the Company's current investment objective and policy and proposed new investment objective and policy are set out below
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The Company's objective is to provide investors with a sustainable, progressive quarterly dividend and enhanced capital value, through investment in ground-based solar assets predominantly located in the UK.
The Company pursues its investment objective by acquiring ground-based, operational solar power plants predominantly located in the UK. Investments outside the UK and assets which are, when acquired, still under construction will be limited to 25 per cent. of the GAV of the Company and subsidiaries, calculated at the time of investment.
The Company will seek to acquire majority or minority stakes in individual ground-based solar assets. When investing in a stake of less than 100 per cent. in a solar power plant SPV, the Company will secure its shareholder rights through shareholders' agreements and other legal transaction documents.
Power Purchase Agreements ("PPAs") will be entered into between each of the individual solar power plant SPVs in the portfolio and creditworthy offtakers. Under the PPAs, the SPVs will sell solar generated electricity and green benefits to the designated offtaker. The Company may retain exposure to power prices through PPAs that do not include mechanisms such as fixed prices or price floors.
Investment may be made in equity, debt or intermediate instruments but not in instruments traded on any investment exchange.
The Company is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.
The Company's objective is to provide investors with a sustainable, progressive quarterly dividend and enhanced capital value, through investment in a diversified portfolio of predominantly ground-based solar assets.
The Company pursues its investment objective by acquiring ground-based, operational solar power plants predominantly located in the UK.
The Company is also permitted to invest in utility scale battery storage systems up to a limit of 10 per cent. of the GAV of the Company, calculated at the time of investment.
Investments outside the UK and in assets which are, when acquired, still under construction will be limited to 25 per cent. of the GAV of the Company and subsidiaries, calculated at the time of investment.
The Company will seek to acquire majority or minority stakes in individual ground-based solar assets. When investing in a stake of less than 100 per cent. in a solar power plant special purpose vehicle ("SPV"), the Company will secure its shareholder rights through shareholders' agreements and other legal transaction documents.
Power Purchase Agreements ("PPAs") will be entered into between each of the individual solar power plant SPVs in the portfolio and creditworthy offtakers. Under the PPAs, the SPVs will sell solar generated electricity and, if applicable, green benefits to the designated offtaker. The Company may retain exposure to power prices through PPAs that do not include mechanisms such as fixed prices or price floors.
Investment may be made in equity, debt or intermediate instruments but not in instruments traded on any investment exchange.
The Company is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.
In order to spread risk and diversify its portfolio, at the time of investment no single asset shall exceed 30 per cent. of the Company's GAV postacquisition. If the investment is an additional stake in an existing investment, the combined value of both the existing stake and the additional stake acquired should also not exceed 30 per cent. The GAV of the Company will be calculated based on the last published gross investment valuation of the Company's portfolio, including cash, plus acquisitions made since the date of such valuation at their cost of acquisition. The Company's portfolio will provide diversified exposure through the inclusion of not less than five individual solar power plants and the Company will also seek to diversify risk by ensuring that a significant proportion of its expected income stream is derived from regulatory support (which will consist of, for example, without limitation, ROCs and FiTs for UK assets). Diversification will also be achieved by the Company using a number of different third-party providers such as developers, engineering, procurement and construction ("EPC") contractors, operations and maintenance ("O&M") contractors, panel manufacturers, landlords and distribution network operators.
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The Articles provide that gearing, calculated as Group Borrowing (including any asset level gearing) as a percentage of the Company's GAV, will not exceed 50 per cent. at the time of drawdown. It is the Board's current intention that long-term gearing (including long-term, asset level gearing), calculated as Group borrowings (excluding intra-group borrowings (i.e. borrowings between members of the Group) and revolving credit facilities) as a percentage of the Company's GAV will not exceed 40 per cent. at the time of drawdown.
In order to spread risk and diversify its portfolio, at the time of investment no single asset shall exceed 30 per cent. of the Company's GAV postacquisition. If the investment is an additional stake in an existing investment, the combined value of both the existing stake and the additional stake acquired should also not exceed 30 per cent. The GAV of the Company will be calculated based on the last published gross investment valuation of the Company's portfolio, including cash, plus acquisitions made since the date of such valuation at their cost of acquisition. The Company's portfolio will provide diversified exposure through the inclusion of not less than five individual solar power plants and the Company will also seek to diversify risk by ensuring that a significant proportion of its expected income stream is derived from regulatory support (which will consist of, for example, without limitation, ROCs and FiTs for UK assets). Diversification will also be achieved by the Company using a number of different third-party providers such as developers, engineering, procurement and construction ("EPC") contractors, operations and maintenance ("O&M") contractors, panel manufacturers, landlords and distribution network operators.
The Articles provide that gearing, calculated as Group Borrowing (including any asset level gearing) as a percentage of the Company's GAV, will not exceed 50 per cent. at the time of drawdown. It is the Board's current intention that long-term gearing (including long-term, asset level gearing), calculated as Group borrowings (excluding intra-group borrowings (i.e. borrowings between members of the Group) and revolving credit facilities) as a percentage of the Company's GAV will not exceed 40 per cent. at the time of drawdown.
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Unless the context otherwise requires, the following words and expressions have the following meanings in this document:
| Articles | the articles of association of the Company |
|---|---|
| Board or Directors |
the board of directors of the Company |
| Company | Foresight Solar Fund Limited incorporated in Jersey, Channel Islands with registered number 113721 |
| FCA | the Financial Conduct Authority of the United Kingdom including any replacement or substitute thereof, and any regulatory body or person succeeding, in whole or in part, to the functions thereof |
| Form of Proxy |
the form of proxy for use by Shareholders at the General Meeting, which accompanies this document |
| FSMA | Financial Services and Markets Act 2000, as amended |
| General Meeting |
The general meeting of the Company convened for 4.00 p.m. on 15 February 2021 (or any adjournment thereof) notice of which is set out on page 9 of this document |
| GAV or Gross Asset Value |
the aggregate of: (i) the fair value of the Group's underlying investment (whether or not subsidiaries); (ii) the Group's consolidated cash balances and cash equivalents; and (iii) the Group's consolidated share of other relevant assets or liabilities |
| Group | the Company and each of its direct and indirect subsidiaries from time to time or any one or more of them, as the context may require |
| Investment Manager or Foresight Group |
Foresight Group LLP, a limited liability partnership incorporated in England and Wales with registered number OC300878 |
| Listing Rules |
the listing rules made by the Financial Conduct Authority under Part VI of the Financial Services and Markets Act 2000 as amended from time to time |
| NAV or Net Asset Value |
the net asset value of the Company which shall be the total value of all of the assets of the Company less its liabilities as determined by the Board and calculated in accordance with the Company's accounting policies (for the avoidance of doubt, this includes accumulated revenue reserves and current period revenue and is after the deduction of any borrowings at their fair value) |
| New Investment Policy |
the proposed new investment policy of the Company set out in full in Part 2 of this document |
| Shareholders or Ordinary Shareholders |
holders of Ordinary Shares in the Company |
| Ordinary Share Share or |
ordinary shares of no par value in the capital of the Company |
| United Kingdom or UK |
the United Kingdom of Great Britain and Northern Ireland |
(a company incorporated in Jersey, Channel Islands under the Companies (Jersey) Law 1991 (as amended) with registered number 113721)
Notice is hereby given that a physical general meeting of Foresight Solar Fund Limited (the "Company") will be held at 28 Esplanade, St Helier, Jersey, JE2 3QA on 15 February 2021 4.00 p.m. to consider and, if thought fit, pass the following ordinary resolution.
That the proposed amendment to the investment policy set out in Part 2 of the circular to shareholders of the Company dated 29 January 2021, a copy of which has been produced to the meeting and signed by the chairman for the purpose of identification, be and is hereby approved.
By order of the Board Company Secretary
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Registered office JTC (Jersey) Limited JTC House 28 Esplanade St. Helier Jersey JE4 2QP
Dated: 29 January 2021
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual and by logging on to the website www.euroclear.com. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST Sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
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