Interim / Quarterly Report • Feb 28, 2024
Interim / Quarterly Report
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Bluefield Solar Income Fund Limited
FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
Company Registration Number: 56708
| General Information | 3 |
|---|---|
| Highlights | 4 |
| Corporate Summary | 6 |
| Chair's Statement | 7 |
| The Company's Investment Portfolio | 11 |
| Analysis of the Company's Investment Portfolio | 12 |
| Report of the Investment Adviser | 13 |
| Environmental, Social and Governance Report | 35 |
| Statement of Principal and Emerging Risks and Uncertainties for | |
| the Remaining Six Months of the year to 30 June 2024 | 39 |
| Directors' Statement of Responsibilities | 40 |
| Independent Review Report to Bluefield Solar Income Fund Limited | 41 |
| Unaudited Condensed Statement of Financial Position | 43 |
| Unaudited Condensed Statement of Comprehensive Income | 44 |
| Unaudited Condensed Statement of Changes in Equity | 45 |
| Unaudited Condensed Statement of Cash Flows | 46 |
| Notes to the Unaudited Condensed Interim Financial Statements | 47 |
| Glossary of Defined Terms | 62 |
| Alternative Performance Measures (Unaudited) | 67 |
John Scott (Chair and Chair of Nomination Committee) Elizabeth Burne (Chair of Audit and Risk Committee and Management Engagement and Service Providers Committee) Michael Gibbons CBE (Senior Independent Director and Chair of Remuneration Committee) Meriel Lenfestey (Chair of Environmental, Social and Governance Committee) Paul Le Page (retired 30 September 2023) Chris Waldron (appointed 1 December 2023)
PO Box 286 Floor 2, Trafalgar Court Les Banques, St Peter Port Guernsey, GY1 4LY
Ocorian Administration (Guernsey) Limited Floor 2, Trafalgar Court Les Banques, St Peter Port Guernsey, GY1 4LY
6 New Street Square London, EC4A 3BF
Deutsche Numis Securities Limited 45 Gresham Street London, EC2V 7BF
KPMG Channel Islands Limited Glategny Court, Glategny Esplanade St Peter Port Guernsey, GY1 1WR
Computershare Investor Services (Guernsey) Limited 13 Castle Street St Helier Jersey, JE1 1ES
NatWest International plc 35 High Street St Peter Port Guernsey, GY1 4BE
(as to English law) Norton Rose Fulbright LLP 3 More London Riverside London, SE1 2AQ
(as to Guernsey law) Carey Olsen PO Box 98, Carey House Les Banques, St Peter Port Guernsey, GY1 4BZ
£831.3m £854.2m 8.80pps 8.60pps (actual) NAV per share
135.95p 139.70p
Underlying Earnings1
£43.9m £51.4m
Underlying Earnings per share10.47% 4.38% (pre amortisation of debt)
Underlying Earnings per share available for
distribution1 (post amortisation of debt)
3.57p 6.26p
Total Shareholder Return2 (pre amortisation of debt) 2.50% 6.98%
Total Return in year3
7.19p 8.41p Total return to Shareholders since IPO 110.14% 101.59%
ESG KPIs
1.53 GW
(968 MW Solar, 563 MW battery)
declared and paid by the Company. Further detail is provided on page 24.
Total Shareholder Return is based on share price movement and dividends paid in the period. It is defined in the Alternative Performance Measure appendix.
Total Return is based on the NAV movement and dividends paid in the period. It is defined in the Alternative Performance Measure appendix.
For a year, based on forecasted annual generation.
During the 2023/24 financial year.
Total community benefit payments relating to the FY 22-23 were approximately £287,000, updated from £253,000 (as presented in the 2023 Annual Report & Financial Statements).
| Six months ended 31 December 2023 |
Six months ended 31 December 2022 |
|
|---|---|---|
| Total operating income | £5,077,465 | £38,845,159 |
| Total comprehensive income before tax | £3,991,019 | £37,642,084 |
| Total underlying earnings1 | £43,936,028 | £51,438,238 |
| Earnings per share (per page 58) | 0.65p | 6.16p |
| Underlying EPS available for distribution2 | 3.57p | 6.26p |
| Underlying EPS brought forward3 | 9.53p | 3.39p |
| Total underlying EPS available for distribution4 | 11.46p | 9.65p |
| 1 st interim dividend |
2.20p | 2.10p |
| NAV per share | 135.95p | 142.40p |
| Share Price as at 31 December | 118.6p | 136.0p |
| Total Return5 | 0.47% | 4.38% |
| Total Shareholder Return6 | 2.50% | 6.98% |
| Total Shareholder Return since inception7 | 110.14% | 101.59% |
| Dividends per share paid since inception | 74.19p | 65.59p |
1. Underlying earnings is an alternative performance measure employed by the Company to provide insight to the Shareholders by linking the underlying financial performance of the operational projects to the dividends declared and paid by the Company. Further detail is provided on page 24.
2. Underlying EPS is calculated using underlying earnings available for distribution divided by the weighted average number of shares in issue through the period.
3. Underlying EPS brought forward is calculated using the number of shares in issue.
4. Total underlying EPS available for distribution includes £10m of RCF repaid in the period to 31 December 2023.
5. Total Return is based on NAV per share movement and dividends paid in the period.
6. Total Shareholder Return is based on share price movement and dividends paid in the period.
7. Total Shareholder Return since inception is based on share price movement and dividends paid since the IPO.
The investment objective of the Company is to provide Shareholders with an attractive return, principally in the form of quarterly income distributions, by being invested primarily in solar energy assets located in the UK. The Company also has the ability to invest a minority of its share capital into wind, hydro and energy storage assets.
The Company is a non-cellular company limited by shares incorporated in Guernsey under the Law on 29 May 2013. The Company's registration number is 56708, and it is regulated by the GFSC as a registered closed-ended collective investment scheme and it is accredited as a Green Fund after successful application to the GFSC under the Guernsey Green Fund Rules on 16 April 2019. The Company's Ordinary Shares were admitted to the Premium Segment of the Official List and to trading on the Main Market of the LSE following its IPO on 12 July 2013. The issued capital during the year comprises the Company's Ordinary Shares denominated in Sterling.
The Company makes its investments via its wholly owned subsidiary Bluefield Renewables 1 Limited (BR1) and has the ability to use long term and short term debt at the holding company level, as well as having long term, non-recourse debt at the SPV level.
The Investment Adviser to the Company during the period was Bluefield Partners LLP which is authorised and regulated by the UK FCA under the number 507508. In May 2015 Bluefield Services Limited (BSL), a company with the same ownership as the Investment Adviser, commenced providing asset management services to the investment SPVs held by the UK limited company parent, which changed from Bluefield SIF Investments Limited (BSIFIL) to Bluefield Renewables 1 Limited (BR1) in May 2022 to facilitate arrangement of the new Revolving Credit Facility ("RCF"). In August 2017 Bluefield Operations Limited (BOL), a company with the same ownership as the Investment Adviser, commenced providing operation and maintenance services to the Company and provides services to approximately 80% of the capacity of the investment portfolio held by the Company as at period end.
In December 2020, Bluefield Renewables Development Limited (BRD), a company with the same ownership as the Investment Adviser, commenced providing BSIF with new build development opportunities in addition to arrangements in place with the Company's other development partners.
In October 2023, Bluefield Construction Management Limited (BCM), a company with the same ownership as the investment adviser, commenced providing BSIF with construction management services on the new build portfolio.
Please refer to page 15 for the details of Company's corporate structure.
The six months to 31 December 2023 ("H1 23/24", or the "Period") have seen a further half year of strong results for your Company. Although spot power prices have softened recently, BSIF was the beneficiary of our Investment Adviser's strategy of fixing prices up to 36 months in advance, with the result that, despite irradiation levels some 13% below those experienced in the second half of calendar 2022, our revenues for the Period grew as compared with the previous year. West Raynham (at 50MW our second largest generating asset) was unavailable for the first three months of the Period, resulting in an additional constraint on power production.
The Company continues to work on its extensive development programme; as at 31 December 2023 we had 660MW under active development and 778MW in pre-construction, comprising a mixture of solar PV and battery storage projects, as well as some wind projects. Our ability to convert this pipeline into electricity generating assets is significantly restricted by current conditions in the capital markets, which make it difficult for us – and most participants in the renewable energy sector – to raise additional equity. In response to this constraint, the Company has entered into a Strategic Partnership with GLIL Infrastructure ("GLIL"), covered in more detail below.
After the Period end, we saw a significant widening in the discount to Net Asset Value ("NAV") at which BSIF's shares trade and this prompted the Board to announce a share buyback programme, to which an initial £20 million has been allocated. This will commence once the Company is outside the current closed period, which ends with the publication of this Interim Report.
The main features of the Period under review are:
At the end of 2023, the Group's total outstanding debt stood at £577 million, and its leverage was 41% (31 December 2022: £531.1 million and leverage was 38%).
GLIL, a partnership of UK pension funds, invests into core UK infrastructure. It invests on behalf of Local Pensions Partnership Investments, Greater Manchester Pension Fund, Merseyside Pension Fund, West Yorkshire Pension Fund and Nest, and has a £3 billion portfolio of infrastructure assets.
In December 2023, BSIF and GLIL announced a Strategic Partnership, consisting of three phases. The first of these saw GLIL and BSIF acquire together a 247MW UK solar portfolio of Lightsource bp, with the transaction completing in January 2024. Phase 2 comprises a provisional agreement for GLIL to acquire a 50% stake in a portfolio of more than 100MW of BSIF's existing solar assets at a price which is in line with the Company's existing valuation. The proceeds of this partial sale will be used, in part, to fund BSIF's participation in the rollout of its development pipeline and, as appropriate, to reduce debt.
In phase 3, Bluefield Solar and GLIL intend via the Strategic Partnership to commit capital jointly to a selection of the Company's development pipeline, assuming market conditions are supportive. The identified development assets are expected to be grid connected over the next two to three years.
The Underlying Earnings for the Period, before amortisation of long-term finance, were £43.9m, or 7.19pps, and underlying earnings for distribution, post debt repayments of £22.1m (3.61pps), were £21.8m (3.57pps) (December 2022: £38.2m). Including carried forward earnings from June 2023 of 9.53pps, and the £10m of RCF repaid in the Period (-1.64pps), the total funds available for distribution as at 31 December 2023 were 11.46pps (December 2022: 9.65pps).
From an operational perspective, the Company's portfolio had a more difficult half year, with solar generation c.10% lower than in the second half of 2022, caused by a combination of significantly lower irradiation and shortages of key components, which reduced plant availability. The Company's strong financial performance reflected the favourable power sales contracts struck at a time of elevated UK wholesale power prices.
The political turmoil seen in the United Kingdom which came to a head in 2022 eased with the appointment of Rishi Sunak as Prime Minister at the end of the year and a more coherent series of measures relating to energy policy emerged. Inflation eased, but sterling interest rates remained at levels which seemed very high by comparison with the near zero environment of the previous decade; Base Rate stood at 5.25% at year end and the fifteen year Gilt rate was approximately 4%.
The Investment Adviser continues to see strong demand in the secondary market for operating solar portfolios. Recent prices seen in the market range between £1.20m and £1.45m/MW. The first weeks of 2024 have seen close to 1GW of UK solar capacity change hands at prices which imply valuation metrics comparable to or higher than those currently employed by BSIF.
Higher interest rates and the inclusion of onshore wind within BSIF's portfolio caused the Board to increase the portfolio discount rate from the 7.25% used in the December 2022 Directors' Valuation; this was raised to 8% for the valuations at the end of June, September and December 2023. As at 31 December 2023, the enterprise value of the Company's operational portfolio is £1,149m (c.£ 1.28m/MW for the solar assets vs. £1.35m/MW in June 2023).
In late 2023, inflation in the UK started to ease, though staying stubbornly at levels well above the UK's inflation target of 2%, with December 2023's number standing at 5.3%. At the first Monetary Policy Committee meeting of 2024 the Bank of England opted to maintain Base Rate at 5.25%, suggesting that the fight to tame price rises is not yet over. Since a large part of our income grows with inflation, resulting from the indexation provisions in our regulated revenues, increases in RPI have the effect of boosting both our earnings and the valuation of our assets.
Reflecting the latest economic forecasts, as well as the transition from RPI to CPIH post 2030, inflation assumptions supporting the Directors' Valuation are 3.5% in 2024 (unchanged from June 2023) and thereafter 3.0% until 2029, before dropping to 2.25%.
Russia's war in Ukraine continues to affect energy markets, but as this conflict continues the world adapts, seeking fresh sources of energy, new methods and routes for its transportation, as well as alternative suppliers. Israel's war in Gaza, which commenced on 7 October 2023, initially had limited direct effect on energy markets, but of late that conflict has led to the effective closure of the Suez Canal as Houthi rebels in Yemen demonstrate their Palestinian solidarity by attacking maritime traffic in the Red Sea, necessitating many lengthy detours via the Cape of Good Hope. All of this results in extra costs, longer journeys, pressure on shipping capacity and renewed uncertainty concerning energy supplies.
The company's PPA sales strategy is largely unchanged: approximately 90% of power sales prices are fixed for between 12 and 36 months ahead, and BSIF went into 2024 with more than 78% of its merchant revenue sold forward to March 2025. The Board is confident that, post debt amortisation, it will achieve a high level of dividend cover for the present and the 2025 financial years, taking into account both current and carried forward earnings.
The process of refreshing the BSIF Board continues. Following an exercise conducted by a Guernseybased executive search firm, I am delighted to welcome Chris Waldron as a non-executive Director; he joined the BSIF Board on 1 December 2023. Chris is a Guernsey resident and has extensive experience of financial markets and closed ended investment vehicles in particular. With effect from 1 January 2024, Chris chairs the Management Engagement and Service Providers Committee.
Paul le Page retired on 30 September 2023 and Libby Burne assumed his former role of chairing the Audit and Risk Committee from 1 October 2023. During the Period, a Remuneration Committee was established, chaired by Michael Gibbons.
Post Period end, on 15 February 2024 the Company announced its intention to commence a share buyback programme in response to the recent weakness in the Company's share price and the excessive discount that the share price represents to the value of the Company's assets. The Company has made an initial allocation of £2o million for buybacks and purchases will be accretive to NAV for continuing shareholders. It is intended that shares repurchased will be held in treasury.
The capital allocation policy of the Company undergoes regular review, evaluating the relative merits of further investment (into both new and existing assets), the management of debt and returning value to shareholders. Was promoted to the FTSE250 index.
The Board is encouraged by the continued progress made by your Company in the past six months. From an operational perspective, most aspects of our core business – namely the generation and sale of solar and wind power – performed well, but it seems that for the moment no matter how brightly the sun shines nor however hard the wind blows, our share price is becalmed at levels which are significantly below net asset value. While this has little if any effect on the dividends we can pay, it constrains our ability to raise the new equity capital needed to fund our further development. It also acts to the detriment of shareholders who wish to exit and who have been facing a discount of more than 25% to the underlying value of their investment. There is ample transactional evidence of asset values consistent with our latest Directors' Valuation of nearly 136pps, so to see the Company's shares trading at close to £1 per share suggests a serious disconnect between how BSIF is valued by public markets and the prices being paid by institutional investors for portfolios of solar PV and wind assets.
Your Board is delighted to have formed its Strategic Partnership with GLIL, for whom the arrangement provides access to an industry whose financial characteristics meet many of the criteria sought by pension providers, namely predictable long term cash flows with a high degree of indexation and government support. For BSIF, we see in GLIL a partner with whom we can co-invest for the long term, giving us the ability to spread our capital resources over a greater range of investments.
I remain confident that BSIF is as well placed as any market participant to play a significant role in the continuing development programme that is so clearly required to expand the UK's supplies of indigenously produced green electricity. For our shareholders, this offers the prospect of both capital growth and rising dividends. We have already declared our first quarterly dividend for the 2023/24 financial year, increasing this to 2.20pps (2022/23: 2.10pps) and reiterating our guidance of a full year dividend of not less than 8.80pps (2022/23: 8.60pps). At the share price on 26 February 2024, this equates to a yield of just under 9%.
John Scott Chair 27 February 2024
Bluefield Solar, and the listed renewables sector more generally, have experienced share prices remaining materially below NAV during this period under review and into 2024. The irony for the Company is that its numbers are as strong, on a range of measures, as they have been in its ten years' history. It has circa two times dividend cover, high levels of regulated indexed revenues, complemented by very high fixed power sales contracts, a large development pipeline, a defensive capital structure and a robust NAV. However, whilst the high performance of the Company remains the same, the prolonged discount to NAV posed a number of issues that have needed to be addressed by the Company.
The discount in the share price poses a multi-layered challenge to the Company. We need to keep progressing the extensive pipeline of development opportunities, otherwise there is the risk of a loss of value; we need to create liquidity to reduce our RCF; and we need to address the discount to NAV. Each of these challenges required a different strategy and as such our response has been multi-layered. In December we announced a Strategic Partnership with GLIL, the large infrastructure investor, which addressed liquidity, the potential of debt repayment and of progressing the development pipeline. The agreement announced the following:
In mid-February the Board announced a share buyback programme to commence on the release of the Interim Results in order to manage the discount to NAV. This announcement delivers the third targeted strategy designed to manage the short and long term challenges facing the Company. The long term is so important as the Company has spent a decade building a highly robust and durable financial model that has the ability to deliver outperformance over the next decade as we have delivered over the first ten years of the Company's life. The Company's five core strengths are summarised below:
A lot has been achieved in a challenging market and we believe that the actions taken can address the issues at hand whilst allowing the Company's long term ambitions to remain undimmed.
Bluefield was established in 2009 and is an investment adviser to companies and funds investing in renewable energy infrastructure. Our team has a proven record in the selection, acquisition and supervision of large scale energy and infrastructure assets in both the UK and Europe. The Bluefield team has been involved in over £6.7 billion of renewable funds and/or transactions in both the UK and Europe, including over £1.3 billion for BSIF in the UK since December 2011.
Bluefield was appointed Investment Adviser to the Company in June 2013. Based in its London office, Bluefield's partners are supported by a dedicated and highly experienced team of investment, legal and portfolio executives. As Investment Adviser, Bluefield is responsible for the origination and selection of investment opportunities, which are then proposed to the Board of BSIF. Bluefield has executed over 200 individual SPV acquisitions on behalf of BSIF and other European vehicles through geographically dedicated teams.
The Company's corporate structure is summarised below:
As at 31 December 2023, the Company held an operational solar portfolio of 129 PV plants (consisting of 87 large scale sites, 39 micro sites and 3 roof top sites), 6 wind farms and 109 small scale UK onshore wind turbines with a total capacity of 812.6MW.
During the period to 31 December 2023, the combined solar and wind portfolio generated an aggregated total of 376.05GWh (31 December 2022: 391.8GWh), representing a Generation Yield of 462.8 MWh/MW (31 December 2022: 511.4MWh/MW).
The Company has taken a disciplined approach to the deployment of capital since listing, investing only when there are projects of suitable quality at attractive returns to complement the existing portfolio. Rigorous adherence to restrained capital deployment inevitably means there can be periods where acquisition activity falls, even when sector activity appears in contrast, but this controlled approach is beneficial in driving long term, sustainable growth for Shareholders, as evidenced by Bluefield Solar's record of sector leading returns since listing over a decade ago.
Note: the chart shows the position as at period end, prior to investment into the Lightsource bp portfolio with GLIL
In December 2023, the Company announced a three phase strategic partnership with GLIL Infrastructure, which envisages both parties investing together into UK focused solar assets, from development through to operational plants. The partnership will also facilitate de-leveraging of the Company. Post period end, the Company announced the successful completion of the first phase of the partnership, with BSIF investing £20 million alongside £200 million from GLIL to acquire a 247MW portfolio of UK solar assets from Lightsource bp. BSIF's ownership stake in the portfolio is 9%.
The Company continues to progress phase 2 of the Strategic Partnership, where GLIL has provisionally agreed to acquire a 50% stake in a portfolio of more than 100MW of operational UK solar assets currently owned by the Company. The provisional acquisition price is in line with the Company's current valuation and completion of the sale is expected in the coming months.
In the six months to 31 December 2023, irradiation levels were 3.9% lower than the Company's forecasts and 13% lower than those recorded in the previous year. The lower levels of irradiation contributed to generation for the 6-month period being proportionately lower than expected, at 294.05GWh, equivalent to 390MWh for each MW of installed capacity.
The solar portfolio achieved a Net PR of 74.17% (FY 2022/23: 76.96%) against a forecast of 78.92%. This was caused by short-term availability issues, primarily ongoing supply chain challenges as seen across the industry. The Investment Adviser is undertaking a comprehensive programme to reduce reliance on certain supply chains through key inverter repowering projects and the purchase of strategic HV spares, more information on which can be found later in this report.
Table 1. Summary of Solar Portfolio Performance for H1 2023/24:
| H1 | H1 | Delta to | H1 | Delta H1 23/24 to |
|
|---|---|---|---|---|---|
| 2023/24 | 2023/24 | Forecast (% |
2022/23 | H1 22/23 Actual (% |
|
| Actual | Forecast | change) | Actual | change) | |
| Solar Portfolio Total Installed |
754.2 | - | - | 707.76 | +6.56% |
| Capacity (MW)1 | |||||
| Weighted Average Irradiation (Hrs)1,2 |
522.79 | 543.97 | -3.89% | 601.03 | -13.02% |
| Total Generation (MWh) |
294,048 | 323,769 | -9.18% | 327,377 | -10.18% |
| Generation Yield (MWh/MW) |
389.90 | 429.31 | -9.18% | 462.56 | -15.71% |
| Average Revenue (£/MWh)3 |
261.47 | 259.70 | +0.68% | 180.96 | +44.49% |
Notes to Table 1.
1. Periods of irradiation where irradiance exceeds the minimum level required for generation to occur (50W/m2)
2. Excluding grid outages and significant periods of constraint or curtailment that were outside the Company's control (for example, DNO-led outages and curtailments)
3. Average Revenue includes all income associated with the sale of power, all subsidy payments, liquidated damages and insurance claims amounts. ROC recycle revenue is included assuming a 10% recycle rate for both Actual and Forecast Revenue
Total Revenue for the Period was £76.92m, representing a 29.8% increase compared to the same period in FY 22/23 (£59.24m), largely due to the acquisition of a 46.4MW operational solar portfolio from Fengate Asset Management in December 2022, and PPAs with higher prices being secured in the intervening period. The Average Revenue received per MWh generated was £261.47, marginally above expectations, and 44.5% higher than that recorded for FY 2022/23.
Operational costs for the Period (incorporating all fixed, contracted costs such as lease payments, and O&M fees) totalled c.£14.3m, 2.9% lower than forecasted. Costs have increased from the same period in FY 2022/23 due to increased capital deployment for repowering and enhancement projects.
A core focus of the Investment Adviser's activities is protecting, optimising, and enhancing the value of the Company's operational portfolio.
Principally this is done through in-depth performance monitoring and carefully tailored preventative maintenance programmes, ensuring that improvement or repowering works requiring full or partial outages are completed during the months of low irradiation (being October to March).
A rolling capital investment programme is essential for optimising the long-term operational performance of the portfolio. The Investment Adviser, working in conjunction with the Asset Manager, has identified that one of the key causes of lower than expected availability is a long lead time for spare parts for major components, notably central inverters, due to industry demand from construction projects and other operators' repowering works. To rectify this impact on availability, the Investment Adviser has instigated multiple inverter repowering projects and accelerated the purchase of strategic spares for the entire portfolio.
Two significant string-inverter repowering projects and the replacement of three transformers at Hall Farm were completed during the period to improve both the current and future performance of the assets. Further inverter repowering and optimisation projects are planned for FY 23/24.
As at 31 December 2023, 494.6MW (being 65.6% of the solar PV portfolio), have leases that allow for remaining terms beyond 30 years, with 338.2MW benefitting from planning terms in excess of 30 years, with the Investment Adviser continuing to pursue lease extensions on the remaining assets in the portfolio.
As at 31 December 2023, the Company held an operational onshore wind portfolio of 135 installations, comprising 109 small scale turbines (55-250kW) and 26 wind farm turbines (850kW-2.3MW), with an aggregated capacity 58.4MW.
The onshore wind portfolio generated 82.0GWh during the reporting period, in line with the forecast. The fleet recorded a generation yield of 1,405MWh per MW of installed capacity, equivalent to a 27.4% increase from FY 2022/23. This was due to the Company's continued programme of improvement and re-powering works supporting greater availability, alongside slightly higher-than-expected wind resource.
Table 2. Aggregated Wind Portfolio Performance, H1 2023/24
| H1 | H1 | Delta to | H1 | Delta 23/24 to | |
|---|---|---|---|---|---|
| 2023/24 | 2023/24 | Forecast (% |
2022/23 | 22/23 Actual (% | |
| Actual | Forecast | Change | Actual | change) | |
| Portfolio Total Installed |
58.36 | N/A | N/A | 58.36 | 0.00% |
| Capacity (MW) | |||||
| Total Generation (MWh) |
82,008 | 82,629 | -0.75% | 64,392 | 27.36% |
| Generation Yield (MWh/MW) |
1405.21 | 1415.85 | -0.75% | 1,103.36 | 27.36% |
| Average Revenue | £184.40 | £186.28 | -1.01% | £203.59 | -9.43% |
| (£/MWh) |
Notes to Table 2.
Average Revenue includes all income associated with the sale of power, all subsidy payments, liquidated damages and insurance claims amounts. ROC recycle revenue is included assuming a 10% recycle rate for both Actual and Forecast Revenue
During the Period the fleet achieved a total revenue of £15.1m, -1.75% below forecast, largely due to those plants with PPAs which track the day-ahead market prices achieving slightly lower-than-expected floating power prices.
In Northern Ireland, 17 of the 29 small-scale turbines have been identified for repowering with replacement EWT 250kW turbines. These assets are being repowered to increase efficiency and output, whilst maintaining their respective NIRO accreditation status.
As at 31 December 2023, 11 turbines have been repowered and returned to operation, with a further three projects undergoing construction, with commissioning expected during H2, FY 2023/24. Planning applications for the remaining projects have been submitted to the relevant Local Planning Authorities.
A technical adviser has now completed a feasibility study for similar repowering opportunities across the GB portion of the fleet, which the Investment Adviser is currently assessing.
As part of the industry-wide audits of FiT and RO-accredited generating assets, the Investment Adviser and Asset Manager have been working closely with the regulator on those assets (randomly) selected for audit. All of the Company's assets that have completed Ofgem audits to date have been classified as 'satisfactory' and so are deemed by Ofgem as being compliant.
The Investment Adviser continues to ensure that health and safety awareness, policies, processes and procedures remain at the forefront of every activity around the portfolio. Health and safety policies and logs are reviewed at least annually. All main contractors (including asset management and O&M providers) are audited annually by a qualified third-party specialist consultant, with new retained contractors (associated with operational projects acquired by BSIF, for example) audited immediately following acquisition.
The Investment Adviser arranged penetration testing as part of a periodic cyber security review by a specialist external consultant. The testing covered approximately 50% of the solar portfolio, with all results satisfactory. Whilst cyber security across the portfolio is appropriate, the Investment Adviser has arranged for all the recommendations to further enhance cyber security to be undertaken, including both hardware and software upgrades, with works to commence shortly. The remainder of the PV portfolio and all wind farms are now undergoing penetration testing, expected to be complete by the end of the FY 23/24.
The Investment Adviser continues to employ its strategy of fixing short-term power price agreements for periods of between 12 and 36 months. As at 31 December 2023, the average term of the fixed-price PPAs across the portfolio is 27.8 months (FY 22/23: 28.4 months).
The Investment Adviser actively monitors power market conditions, ensuring contract renewals are spread evenly throughout any 12-month period, with competitive tender processes involving several offtakers running for each PPA renewal in the 3-month period prior to the commencement of a new fixing period. This method acts as a natural hedging strategy against wholesale market fluctuations. The predominantly fixed price approach allows for high levels of confidence in the Company's revenue forecasting and limits exposure to market volatility, but the short-term nature of the contracts also allows for some flexibility to 'pull forward' batches to fix, should market dynamics present a compelling case.
In addition, up to 10% of PPAs (of the aggregated portfolio capacity) are executed on a 'floating' mechanism, whereby prices move in line with the day-ahead (N2EX) market. This allows a portion of the portfolio to capture short-term volatile price spikes in the wholesale market. PPA counterparties are selected on a competitive basis, but with a clear focus on achieving value and diversification of counterparty risk. Flexibility within the Company's capital structure enables PPA counterparties to be selected on a competitive basis and not be influenced by lenders requiring long term contracts with one offtaker. Evidence of this is reflected in the BSIF's fixed average seasonal weighted power price, which for the 12 months ended 31 December 2023 increased by 97.2% compared to the same period in FY 22/23, rising to £169.2/MWh from £85.8/MWh in the previous calendar year.
As at 31 December 2023, the Company has a price confidence level of 90%, reducing to 78% to June 2024 (including subsidy revenues), representing the percentage of the portfolio that already has a fixed price in place for the sale of power, and thus no exposure to power market uncertainty. Looking ahead, the strategy has secured power price fixes at levels that are materially in excess of the latest industry forecaster expectations as highlighted in the chart below:
| Price as at: | Jan 24 | Jul 24 | Jan 25 | Jul 25 |
|---|---|---|---|---|
| 170.98 | 147.13 | 158.41 | 136.81 | |
| BSIF Portfolio Weighted Averaged Fixed | (707.03M | (496.83M | (466.03 | (308.51 |
| Contract Price (£/MWh) | W) | W) | MW) | MW) |
| BSIF Blended Curve (nominal terms) as at Dec 23 |
104.97 | 104.97 | 98.06 | 98.06 |
Chart 1. PPA Fixed Power Prices (Average for Fixes completed during period)
Footnote: MW stated in the BSIF Portfolio Weighted Average Contract price refers to the total amount of the portfolio fixed for that period.
Despite the Company's average weighted fixed price remaining strong, wholesale power prices continued to fall from the levels of H1 2023 and the spikes seen during 2022 (as demonstrated in Chart 2 below).
However, despite the general decline, October and November 2023 saw the day-ahead (N2EX) prices increase to £86.2/MWh and £91.3MWh respectively from September's average of £82.4/MWh due to low renewable generation during these months. The average power price in December was £66.6/MWh, a 27% decrease from November and a 72.6% decrease compared to December 2022. The fall in the average N2EX price during December was largely due to lower gas and carbon prices, as well as significantly higher-than-expected onshore and offshore wind generation.
Chart 2. UK Natural Gas & Wholesale Day-ahead (N2EX) Power Prices (1 June 2021 – December 2023)
Source data: Bloomberg
Over the Company's ten year history, building a proprietary development pipeline and then funding the construction of new projects has been at the heart of its success. Entering earlier in the value chain brings some additional risk but, if managed appropriately, we believe it also allows us to control the quality of projects far better, which ultimately brings enhanced risk-adjusted returns to Shareholders.
Over the past four years, the Company has continued to implement its new build strategy across the solar value chain to ensure that BSIF continues to build its market share amongst UK solar power producers. We have also expanded our strategy to battery storage, which in time will provide some diversification of BSIF's revenues by enabling it to benefit from the expected increase in power price volatility as the capacity of renewables increases.
This focus on development activities has enabled the Company to accumulate a significant pipeline of assets which can be built over the next five years. As our projects progress, we are working with selected construction contractors to ensure that projects are designed and built to a high specification for long term performance.
We are pleased to report that the new build strategy has delivered well on its objectives thus far: the development pipeline now stands at over 1.5 GW and the first development to be funded, Yelvertoft, is progressing well through construction. This 49MW project is set to be connected to the grid in the first quarter of 2024 and it has entered into a Contract for Difference ("CfD") for its output.
The following sections provide a more detailed update on both our construction and development programmes.
As at the end of the Period, BSIF had 93 MW of solar assets under construction. These are Yelvertoft Solar Farm, a 49MW solar PV park in Northamptonshire, and Mauxhall Farm Energy Park, a 44MW solar PV project in North East Lincolnshire. Yelvertoft signed a fixed price EPC contract with Bouygues in September 2022 and is targeting connection to the grid in Q1 2024, while Mauxhall Farm signed a fixed price EPC contract with EQUANS in March 2023 and is expected to be operational in Q2 2024. Mauxhall Farm is planned to be a co-located project and construction of a 25MW battery energy storage scheme is expected to commence shortly after the solar plant has been commissioned.
As the EPC agreements require contractors to provide full procurement activity and to supply all materials, the Investment Adviser completes a full assessment of each contractor's procurement and supply chain management processes to ensure compliance with the Company's ESG policies and standards.
In addition to projects in construction, BSIF had solar assets with a capacity of 545MW and battery storage assets with 233MW capacity that are fully consented and are in the pre-construction phase. The projects have expected connection dates between 2024 and 2030.
In July 2022, the Investment Adviser successfully secured CfDs on 65MW of ready to build PV plants (Yelvertoft 49MW, Romsey 8MW and Oulton 8MW). By securing a CfD contract, the plants will benefit from CPI-linked revenues for 15 years at the AR4 solar PV strike price of £45.99/MWh (in 2012 equivalent prices), equating to £61.51 /MWh in today's prices. The contracts commence from 31 March 2025 and the strike prices will be adjusted appropriately for CPI.
In September 2023, BSIF achieved allocations of CfDs on all four of its projects submitted to AR5. The combined capacity of these sites is expected to be c.212MW. The projects received a strike price of £47.00/MWh (in 2012 prices), or £62.86/MWh in today's equivalent prices.
The Investment Adviser has been pursuing its development strategy since 2019 to enable BSIF to continue to be a key player in the UK renewable energy market. Since that time, a portfolio of approximately 960MW of solar and over 560MW of batteries has been built up across 28 projects (in the Period, consent was received for three projects, totalling 147MW solar and 90MW battery, while post Period end one project of 50MW solar received consent). BSIF has a 5% investment limit in preconstruction development stage activities, of which less than 1% is currently committed.
Currently, no value is attributed to projects without planning consent. Once developments receive planning consent and move from the development stage to pre-construction, the Investment Adviser believes it is appropriate to reflect this change in the Company valuation. At this point in their lifecycle the projects will have received all the necessary planning consents, land rights and valid grid connection offers and so have discernible value beyond the direct costs of development.
The current pipeline status and valuation is summarised in the graphic below.
The total generation and revenue earned in the period by the Company's portfolio, split by subsidy regime, is outlined below:
| Subsidy Regime | Generation (MWh) |
PPA Revenue (£m) |
Regulated Revenue (£m) |
|---|---|---|---|
| FiT | 28,743 | 2.4 | 5.9 |
| 4.0 ROC | 8,134 | 0.6 | 2.0 |
| 2.0 ROC | 8,696 | 0.7 | 1.1 |
| 1.6 ROC | 48,766 | 6.4 | 5.0 |
| 1.4 ROC | 126,553 | 24.5 | 11.2 |
| 1.3 ROC | 30,185 | 3.9 | 2.5 |
| 1.2 ROC | 59,005 | 11.1 | 4.9 |
| 1.0 ROC | 23,388 | 2.0 | 1.4 |
| 0.9 ROC | 42,584 | 3.7 | 2.3 |
| Total | 376,054 | 55.3 | 36.3 |
The Company includes ROC Recycle assumptions within its long term forecasts and applies a market based approach on recognition within any current financial period, including prudent estimates within its accounts where there is clear evidence that participants are attaching value to ROC Recycle for the current accounting period.
In November 2023, Ofgem announced the value for ROC Recycle for the period April 2022 to March 2023 (CP21) was £6.81/ROC (equivalent to 12.9% of CP21 ROC buyout prices). This was slightly ahead of the 12.5% ROC Recycle estimate the Company had recognised in its 30 June 2023 Financial Statements.
The key drivers behind the changes in underlying earnings between H1 2022/23 and H1 2023/24 are the combined effects of the Dec 2022 acquisition, PPA fixes and increased REGO pricing from a revenue perspective, and the addition of the Electricity Generator Levy (EGL) increasing group operating costs.
Underlying Portfolio Earnings
| Half year period to 31 Dec 23 |
Half year period to 31 Dec 22 |
Full year to 30 June 23 (£m) |
Full year to 30 June 22 (£m) |
|
|---|---|---|---|---|
| (£m) | (£m) | |||
| Portfolio Revenue | 91.6 | 78.6 | 184.4 | 111.4 |
| Liquidated damages and Other Revenue* |
3.7 | 0.8 | 5.4 | 1.6 |
| Portfolio Income | 95.3 | 79.4 | 189.8 | 113.0 |
| Portfolio Costs | -21.2 | -16.1 | -36.3 | -27.8 |
| Project Finance Interest Costs | -6.4 | -5.5 | -13.6 | -4.7 |
| Total Portfolio Income Earned |
67.7 | 57.8 | 139.9 | 80.5 |
| Group Operating Costs#** | -17.7 | -4.6 | -25.4 | -8.3 |
| Group Debt Costs | -6.1 | -1.8 | -6.1 | -5.4 |
| Underlying Earnings | 43.9 | 51.4 | 108.4 | 66.8 |
| Group Debt Repayments | -22.1 | -13.2 | -18.3 | -13.8 |
| Underlying Earnings available for distribution |
21.8 | 38.2 | 90.1 | 53.0 |
| Brought forward reserves*** | 48.4 | 20.9 | 20.9 | 13.4 |
| Total funds available for distribution |
70.2 | 59.1 | 111.0 | 66.4 |
| Target distribution**** | N/A | N/A | 51.4 | 45.2 |
| Actual Distribution | 13.5 | 12.8 | 52.6 | 45.5 |
|---|---|---|---|---|
| Underlying Earnings | ||||
| carried forward | N/A | N/A | 58.4 | 20.9 |
*Other Revenue includes insurance proceeds, ROC Recycle late payment and Mutualisation, REGOs, O&M settlement agreements and rebates received.
**Excludes one-off transaction costs and the release of up-front fees related to the Company's debt facilities
***FY23 carried forward reserves of £58.4 less RCF Repayment of £10m in the Period
****Target distribution is based on funds required for total target dividend for each financial period.
| Half year to 31 Dec 23 (£m) |
Half year to 31 Dec 22 (£m) |
Full year to 30 June 23 (£m) |
Full year to 30 June 22 (£m) |
|
|---|---|---|---|---|
| Target Distribution - £m | N/A | N/A | 52.6 | 45.2 |
| Total funds available for distribution (inc. reserves) - £m |
70.2 | 59.1 | 111.0 | 66.4 |
| Average number of shares in the period* |
611,452,217 | 611,452,217 | 611,452,217 | 554,042,715 |
| Target Dividend (pps) | N/A | N/A | 8.40 | 8.16 |
| Total funds available for distribution (pps) |
11.46 | 9.65 | 18.13 | 12.22 |
| Total Dividend Declared for the period (pps)** |
2.20 | 2.10 | 8.60 | 8.20 |
| Reserves carried forward (pps) *** |
N/A | N/A | 9.53 | 3.39 |
The table below presents the underlying earnings on a per share basis.
*Average number of shares is calculated based on shares in issue at the time each dividend was declared.
**First interim dividend for FY 23/24 of 2.20pps declared 26 January 2024, with a payment date on or around 9 March 2024.
***Reserves carried forward are based on the shares in issue at the point of Annual Accounts publication (being c.611m shares for both 30 June 2023 and 30 June 2022).
The Investment Adviser is responsible for advising the Board in determining the Directors' Valuation and, when required, carrying out the fair market valuation of the Company's investments.
Valuations are carried out on a quarterly basis at 30 September, 31 December, 31 March and 30 June each year, with the Company committed to conducting independent reviews as and when the Board believes it benefits Shareholders.
As the portfolio comprises only non-market traded investments, the Investment Adviser has adopted valuation guidelines based upon the IPEV Valuation Guidelines published by the BVCA (the British Venture Capital Association). The application of these guidelines is considered consistent with the requirements of compliance with IFRS 9 and IFRS 13.
Following consultation with the Investment Adviser, the Directors' Valuation adopted for the portfolio as at 31 December 2023 was £1,001.1m (30 June 2023, £1,018.4m).
The table below shows a breakdown of the Directors' Valuations over the last four interim and annual reporting periods:
| Valuation Component (£m) |
Dec 2023 | June 2023 | Dec 2022 | June 2022 |
|---|---|---|---|---|
| Enterprise Portfolio DCF value (EV) |
1,149.1 | 1,195.2 | 1,222.2 | 1,180.6 |
| Construction and Consented Solar and Battery Storage Development rights* |
103.7 | 67.5 | 30.4 | 13.8 |
| Deduction of Project Co debt | -410.1 | -430.8 | -410.1 | -390.3 |
| Project Net Current Assets | 158.4 | 186.5 | 145.1 | 135.8 |
| Directors' Valuation | 1,001.1 | 1,018.4 | 987.6 | 939.9 |
| Portfolio Size (MW) | 812.6 | 812.6 | 812.6 | 766.2 |
*Includes £64.4m in construction, £31.3m consented and £8.0m of Gladiator repowering awaiting accreditation
The Directors' Valuation is based on the discounting of post-tax, projected cash flows of each investment, based on the Company's current capital structure, with the result then benchmarked against comparable market multiples, if relevant. The discount rate applied on the project cash flows is the weighted average discount rate. In addition, the Board continues to adopt the approach under the 'willing buyer/willing seller' methodology, that the valuation of the Company's portfolio be appropriately benchmarked to pricing against comparable portfolio transactions.
There have been a number of key factors that have been considered in the Investment Adviser's recommendation to the Directors' Valuation (and which are quantified in the Directors' Valuation and NAV movement chart on page 29):
By reflecting the core factors above within the Directors' Valuation for 31 December 2023, the EV of the portfolio is £1,149m (June 2023: £1,195.2m) with the effective price for the solar component being c.£1.28m/MW (June 2023: £1.35m/MW).
These metrics sit within the pricing range of precedent market transactions and the 'willing buyerwilling seller' methodology upon which the Directors' Valuation is based.
The blended forecast of three leading consultants used within the latest Directors' Valuation, as shown in the graph below, is based on forecasts released in the quarter to December 2023. For illustration purposes, the graph below also includes the blended curve used in the Company's June 2023 Annual accounts.
The curves used in the 31 December 2023 Directors' Valuation reflect the following key updates:
Please note, the blended forecast varies depending on whether the asset is a solar or a wind project, reflecting different forecasts for technology specific capture rates. The solar forecast is shown in the chart on this page. BSIF consistently outperforms these figures so the Company considers them conservative.
Directors' Valuation and NAV Movement (£m)
| (£million) | As % of valuation |
||
|---|---|---|---|
| 30 June 2023 Valuation | 1,018.4 | ||
| New investments acquired | 0 | ||
| Rebased Valuation | 1,018.4 | ||
| Development uplift | 36.2 | 3.6% | |
| Cash receipts from portfolio | (27.7) | (2.7)% | |
| Date change and degradation | (62.0) | (6.1)% | |
| Power curve updates (incl. PPAs) | 2.3 | 0.2% | |
| ROC inflation | 12.0 | 1.2% | |
| Operational cost update | (6.4) | (0.6)% | |
| Include REGOs | 5.6 | 0.5% | |
| Balance of portfolio return | 22.7 | 2.2% | |
| 31 December 2023 Valuation | 1,001.1 | (1.7)% |
There have been no material changes to assumptions regarding the future performance or cost optimisation of the portfolio when compared to the Directors' Valuation of 30 June 2023.
The assumptions set out in this section remain subject to continuous review by the Investment Adviser and the Board.
Reconciliation of Directors' Valuation to Balance sheet
| Balance at Period End | ||||
|---|---|---|---|---|
| Category | 31 December 2023 | 30 June 2023 | 31 December 2022 | 30 June |
| (£m) | (£m) | (£m) | 2022 (£m) | |
| Directors' Valuation | 1,001.1 | 1,018.4 | 987.6 | 939.9 |
| Portfolio Holding |
(3.3) | (12.5) | 2.9 | (13.6) |
| Company Working |
||||
| Capital | ||||
| Portfolio Holding |
(167.0) | (153.0) | (121.0) | (70.0) |
| Company Debt | ||||
| Financial Assets at | ||||
| Fair Value per |
830.3 | 852.9 | 869.5 | 856.3 |
| Balance sheet | ||||
| Gross Asset Value | 1,407.3 | 1,438.0 | 1,400.6 | 1,316.7 |
| Gearing (% GAV*) | 41% | 41% | 38% | 35% |
*GAV is the Financial Assets, as at 31 December 2023, at Fair Value of £830.3m plus RCF of £167m and third party portfolio debt of £410m (giving total debt of £577m).
Valuation sensitivities are set out in tabular form in note 7 of the financial statements. The following diagram reviews the sensitivity of the EV of the portfolio to the key underlying assumptions within the discounted cash flow valuation.
Since its IPO the Company has focused on a simple and defensive approach to debt. This means having debt agreements that have, primarily, fixed interest rates and are amortising. Debt split into (1) longterm asset-level debt, and (2) revolving credit facility at fund-level for short-term funding. Debt in the portfolio is generally not subject to stringent lender requirements on PPAs, allowing BSIF to take advantage of more competitive PPA pricing.
The Company's weighted average cost of long-term debt is 3.5% and is largely locked-in via fixed interest rates. Whilst BSIF has a modest amount of index-linked debt, it also has significant levels of RPI linked revenues, leaving the Company a net beneficiary of inflation.
The fund's revolving credit facility (RCF) is the only non amortising debt instrument in the portfolio and represents 29% of the total debt balance. 70% of asset-level debt has a fixed interest rate. 30% of principal for long-term debt is inflation-linked.
On 22 June 2023, the Group agreed a £110 million increase to its existing committed £100 million revolving credit facility ('RCF'), bringing the total committed amount to £210 million. The facility also has an uncommitted accordion feature allowing it to be increased by up to a further £30 million. As part of the increase, the Group has sought to broaden the lender group through the introduction of Lloyds Bank Plc, alongside the existing lenders RBS International and Santander UK. The term of the facility has been extended to May 2025 and the facility's margin remains unchanged at 1.9%.
As at 31 December 2023, the Company's subsidiary BR1 had drawn £167m from its RCF.
Excluding the Group's RCF, total outstanding loans to third party lenders as at 31 December is £410m, with each loan secured against a portfolio of assets and fully amortising within the life of the respective assets' subsidies.
The average interest cost, excluding the Group's RCF, across the external debt facilities in the table below is 3.55%.
| Debt | Principal Outstanding (£m) |
Maturity | % of Interest Fixed(1) | All-in Interest Rate |
|---|---|---|---|---|
| Syndicate – Fund RCF | 167 | May-25 | 0% | 6.34% |
| Bayern LB – Project Finance | 7 | Sep-29 | 100% | 5.50% |
| Syndicate – Project Finance | 68 | Dec-33 | 100% | 3.50% |
| Aviva (fixed) Project Finance |
83 | Sep-34 | 100% | 2.88% |
| Aviva (index-linked) Project Finance |
64 | Sep-34 | 100% | 3.70% |
| Macquarie (fixed) Project Finance |
7 | Mar-35 | 100% | 4.60% |
| Macquarie (indexed-linked) Project Finance |
20 | Mar-35 | 100% | 4.70% |
| Gravis (index-linked) Project Finance |
37 | Jun-35 | 100% | 6.48% |
| NatWest – Project Finance | 123 | Dec-39 | 85% | 2.70% |
| Total/Wtd Avg | 577 | 68% | 4.36% | |
| Total/Wtd Avg excl. RCF | 410 | 96% | 3.55% |
Note: Index-linked debt treated as fixed for the purposes of this table as proportion fixed represents interest rate risk only
NatWest 3 year term loan maturity and refinancing
On 2 May 2023, the Group announced the re-financing of its £110 million three-year term loan with NatWest.
The original loan, with minimum 75% hedged with a swap at circa 0.35% over a notional 18-year period, had a maturity of September 2023 and has been increased to £130 million and extended in maturity to December 2039.
Hedging has been put in place for the tenor of the loan on £110 million, at an effective all-in cost of c.2.7% (being margin and swap rate).
The financing is secured against the UK-based portfolio of 31 operational PV plants with a total installed capacity of 139MW and benefitting from attractive subsidies; 29 of the assets are accredited under the ROC regime with tariffs ranging from 1.2 – 2.0 ROCs, while two are accredited under the FiT scheme.
The additional debt of £20 million is being used to provide financing for the construction of Yelvertoft, the Company's 49MW CfD-backed solar PV project in Northamptonshire. Once construction is complete, expected in Q2 2024, the Company will review whether to enter hedging arrangements on this tranche.
The Group's total outstanding debt, as at 31 December 2023, was c.£577 million and its leverage stands at c.41% of GAV (41% as at 30 June 2023) within the 35% - 45% range the Directors have previously outlined as desirable for the Group.
Latest Government data shows that UK solar photovoltaic (PV) capacity stands at over 15.5GW, across c.1.4 million installations. Of this amount, around 7.3GW (c.48% of the total solar capacity in the UK) and 5.1GW (33%) is accredited under the RO and FiT schemes respectively, and c.3GW (19%) is unaccredited. Onshore and offshore wind installed capacity stands at around 15.5GW and 14.8GW, respectively. The UK has 3.5GW of operational battery storage capacity, according to data from energy association, Renewable UK.
The UK's total renewable generation capacity is projected to continue to grow over the coming years as the Government strives to meet its net zero targets and meet power demand from the electrification of the domestic heat, transport and industrial sectors. Deployment is expected to be supported by policies such as the CfD scheme, which is described in more detail in the next section of this report.
The UK Government aims to increase solar capacity to 70GW by 2035 and has signalled its support for ground and rooftop solar technologies on brownfield, industrial and low/medium grade agricultural land. The Government also aims to develop up to 50GW of offshore wind by 2030.
The chart below illustrates the distribution of total installed capacity across different renewable generation technologies at the end of the third quarter of 2023 (the latest data available at the time of this report), compared with a year earlier.
Source: UK government Department for Business, Energy & Industrial Strategy *Anaerobic Digestion includes sewage sludge digestion, animal biomass
Transactional activity in the UK renewables market has eased to some extent, as inflation and higher interest rates have kept investor uncertainty elevated.
Acquisitions of new build and operational renewable energy projects across established technologies have totalled c.190MW in solar, c.660MW in offshore wind (across several shares of sites) and c.45MW onshore wind in the period1 .
Activity in the UK development market has continued to be driven by factors such as ambitious decarbonisation targets, increasing preferences by customers for clean energy, demand for ESG investments and the inclusion of solar PV in upcoming CfD auction rounds. Development activity has been particularly noticeable in the battery storage area as developers seek to provide solutions to help manage the grid as larger quantities of intermittent renewables are added to the system. Solar development activity has, however, slowed recently, primarily due to grid constraints.
Moderate construction activity has also been observed in the UK solar and battery storage area, although this is against a backdrop of challenges with equipment lead times and relatively high interest rates. Converting the UK's significant development pipeline into operational solar projects over the next five years will require developers to adopt an innovative approach to overcome current macroeconomic challenges, as well as challenges surrounding higher construction costs and grid connection lead times.
The regulatory environment remains under the spotlight as the Government seeks to support renewable energy deployment under particularly tough macroeconomic conditions. Key themes are outlined below.
In September 2023, the UK Government announced support for c.3.7GW of new build renewable generation capacity through its CfD scheme, allocation round 5 (AR5) with expected deliveries in 2025- 28 and with strike prices at or close to the administrative strike price (ASP) caps set by the Government. Around 1.9GW was awarded for solar projects, c.1.5MW for onshore wind and c. 289MW across the less established remote island wind, tidal stream and geothermal projects. The overall budget for AR5 – across pot 1 and 2 technologies – was £227 million per year (£68m lower than AR4's budget).
1 According to Bloomberg New Energy Finance and Bluefield internal data
In November 2023, the UK Government published the draft Allocation Framework for AR6. The ASPs for all technologies were raised from AR5 levels following extensive lobbying from industry participants for more competitive strike prices given the current high inflationary and cost of capital environment. AR6 application window is due to open on 27 March 2024 and the accompanying Budget notice is scheduled to be released on 13 March, according to the latest Government timeline. The upcoming auction will have a three-technology pot structure, with offshore wind returning to its own pot, having been included in pot 1, alongside solar PV and onshore wind in AR5.
The Government is exploring new ways to ensure the CfD scheme remains fit for purpose, especially as the electricity system evolves overtime. A consultation on scheme changes applicable to AR7 (scheduled to open in 2025) as well as longer-term schemes considerations, such as changes to the inflation indexation methodology, is underway and scheduled to close on 7 March 2024.
In November's Autumn Statement 2023, the Chancellor of the Exchequer Jeremy Hunt announced several energy focused measures to incentivise public and private sector investment. These included a commitment to improving grid connection queue times, reforming the UK's planning system process, developing supply chains and manufacturing in low-carbon industries, indefinitely extending the 100% full expensing of capital investment in plant and machinery, as well the introduction of a new investment exemption for the Electricity Generator Levy (EGL). The EGL is scheduled to end on 31 March 2028.
The Government's second planned consultation on the UK's Review of Electricity Market Arrangements (REMA) is expected to open shortly. REMA aims to identify necessary reforms needed to transition to a cost effective, lower carbon and secure electricity system. Several wholesale energy market reforms are still under consideration, including zonal and nodal market pricing.
Bluefield Partners LLP 27 February 2024
Decarbonisation remains at the forefront of the political and economic agenda. Climate finance was a key focus at COP28; commitments were made totalling \$57 billion, including private and blended climate-related funds, climate finance pledges, and climate adaptation packages2. COP28 also saw the UAE Consensus advocate for a tripling of global renewable energy capacity by 20303; an ambition that the Company is well positioned to support.
In addition to climate finance, the ESG regulatory and reporting landscape has also continued to evolve, with the FCA publishing its Sustainability Disclosure Requirements (SDR) and investment labels policy statement4, launch of the UK's Transition Plan Taskforce (TPT) disclosure framework5, and the recent consultation from the European Supervisory Authorities (ESAs) on the Sustainable Finance Disclosure Regulation6. The Company will continue to review the applicability of emerging ESG regulation and reporting frameworks to maintain compliance and ensure its ESG achievements and challenges are reported transparently to stakeholders.
The Company plays a key role in providing low carbon energy to a decarbonising UK economy. Through the continued integration of sustainability considerations into its investment approach, the Company aims to achieve its purpose of delivering renewable energy, responsibly.
John Scott, Chair
Estimated annual figures based on actual and forecasted generation data for the period 1 July 2023 – 30 June 2024:7
In recognition of its positive environmental contribution, the Company has been awarded the following accreditations:
2 COP28: Climate finance (mckinsey.com)
3 Global Renewables and Energy Efficiency Pledge (europa.eu)
4 PS23/16: Sustainability Disclosure Requirements (SDR) and investment labels (fca.org.uk)
5 Transition Plan Taskforce's Final Disclosure Framework | Deloitte UK
6 JC 2023 55 - Final Report SFDR Delegated Regulation amending RTS (europa.eu)
7 Based on actual generation for the period 1 July 2023 – 31 December 2023, and forecasted generation for the period 1 January 2024 – 30 June 2024.
8 Based on generation data aligned with the appropriate Government CO2e conversion factor
9 Based on Ofgem's Typical Domestic Consumption Values
10 https://www.gfsc.gg/industry-sectors/investment/guernsey-green-fund
11 https://tisegroup.com/sustainable
12 https://www.londonstockexchange.com/raise-finance/equity/green-economy-mark
The Company is an Article 8 classified fund under the Sustainable Finance Disclosure Regulation (SFDR) and as at 30 June 2023, had a proportion of 97.39% sustainable investments. Please refer to the Company's Periodic Annex IV, appended to its 2023 Annual Report and Financial Statements, and the Company's website for further information regarding its ongoing compliance with the SFDR and EU Taxonomy.
The Company is currently preparing its annual Principal Adverse Impact (PAI) statement relating to the 2023 calendar year, which will be available on its website before 30 June 2024.
The FCA's Sustainability Disclosure Requirements (SDR) aim to promote transparency and accountability within financial markets regarding a product's sustainability-related characteristics, ensuring that products are marketed correctly and have an evidence-base to their sustainability claims13.
As a non-UK AIF, the Company is not currently in scope of this regime. However, the applicability of the framework to overseas funds is currently pending, and it is likely that it will be expanded to cover overseas funds in some capacity in due course. As such, the Company is currently reviewing its alignment with the SDR framework.
As a UK authorised firm, the Company's Investment Adviser is within scope of the SDR's antigreenwashing rule and is currently reviewing the implications of this new rule to ensure the firm's compliance. The Investment Adviser is continuing to follow progress of the UK Green Taxonomy.
In June 2023 the ISSB published two IFRS sustainability disclosure standards, IFRS S1 and S2, which will form the basis of the UK's Sustainability Disclosure Standards (SDS), expected to be finalised later this year14. During the interim period, the Company has undertaken a review of its alignment with the requirements of the IFRS sustainability disclosure standards, which will help to inform the Company's sustainability reporting approach moving forward.
The Company has aligned on a voluntary basis with the recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD), and its second TCFD report was presented within the Company's 2023 Annual Report and Financial Statements.
The Company is currently developing a Nature Strategy, aligned with the recommendations of the Task Force on Nature-related Financial Disclosures (TNFD) to build a framework through which the Company can manage its material nature-related risks and opportunities.
13 PS23/16: Sustainability Disclosure Requirements (SDR) and investment labels (fca.org.uk)
14 UK Sustainability Disclosure Standards - GOV.UK (www.gov.uk)
The Company's ESG strategy reflects stakeholder expectations and has been developed to deliver positive value across the Company's portfolio of investments. Material ESG topics are defined within each of the Company's key pillars:
The Board of the Company has ultimate responsibility and oversight of ESG risks and opportunities, and ESG is considered by the Directors as part of every Board meeting, as well as investment decisions and risk management. Daily management of ESG is outsourced to the Investment Adviser, with the Board regularly updated on ESG activity through investment committee papers, Board meetings, ESG Committee meetings, ad hoc calls, and written updates.
ESG risks are considered as part of the Company's risk management processes, and are identified, assessed, and discussed by the Audit and Risk Committee and included as part of the Company's risk matrix. The Company also discloses potential impacts relating to physical and transitional climaterelated risks within its TCFD reports, which are included within the Company's Annual Report and Financial Statements.
Please refer to the Company's 2023 Annual Report and Financial Statements for its ESG commitments and KPIs for the current financial year.
Key progress during the interim period includes:
The Company is currently finalising its GHG inventory relating to the 2023 calendar year, calculated in line with the GHG Protocol Corporate Accounting Standard, which will be disclosed as part of the Company's upcoming SFDR PAI report.
The Company is also in the process of modelling potential Net Zero targets to serve as the foundation of its decarbonisation pathway, which is currently in development. As part of this process, the Company will assess the feasibility of validating its chosen targets and will develop roadmaps to help ensure delivery of its decarbonisation goals.
Given the Company's role in the Net Zero transition, it is cognisant of the need to select a Net Zero target which both supports its ambition to grow the portfolio and build out its development pipeline, while also ensuring it is being transparent and taking accountability for emissions both within its operations and supply chain.
The Company is finalising its second physical scenario analysis, following the "extreme heat" scenario analysis published within the Company's 2023 Annual Report and Financial Statements, which focused on its solar PV portfolio. The purpose of the current assessment is to investigate the potential impact of changing wind patterns, associated with different climate scenarios, upon the Company's wind portfolio.
Results of both physical scenario analyses will be consolidated and used to inform the development of a climate change adaptation plan for the Company's portfolio, and to enrich the Company's risk management processes, strategic and investment-related decision-making, and financial planning. Findings will be presented within the Company's 2024 TCFD disclosure.
Bluefield Partners LLP 27 February 2024
As described in the Company's annual financial statements as at 30 June 2023, the Company's principal and emerging risks and uncertainties include the following:
The Board believes that these risks are unchanged in respect of the remaining six months of the year to 30 June 2024.
Further information in relation to these principal risks and uncertainties may be found on pages 55 to 58 of the Company's annual financial statements as at 30 June 2023.
These inherent risks associated with investments in the renewable energy sector could result in a material adverse effect on the Company's performance and value of Ordinary Shares.
Risks including emerging risks are mitigated and managed by the Board through continual review, policy setting and regular reviews of the Company's risk matrix by the Audit and Risk Committee to ensure that procedures are in place with the intention of minimising the impact of the above mentioned risks. The Board carried out a formal review of the risk matrix at the Audit and Risk Committee meeting held on 27 November 2023. The Board relies on periodic reports provided by the Investment Adviser and Administrator regarding risks that the Company faces. When required, experts will be employed to gather information, including tax advisers, legal advisers, and environmental advisers.
The Directors are responsible for preparing the Interim Report and Unaudited Condensed Interim Financial Statements in accordance with applicable regulations. The Directors confirm that to the best of their knowledge:
The Board is responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, and for the preparation and dissemination of financial statements. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
Elizabeth Burne Chris Waldron Director Director 27 February 2024 27 February 2024
We have been engaged by Bluefield Solar Income Fund Limited (the "Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2023 of the Company, which comprises the unaudited condensed statement of financial position, the unaudited condensed statement of comprehensive income, the unaudited condensed statement of changes in equity, the unaudited condensed statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2023 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE (UK) 2410") issued by the Financial Reporting Council for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review procedures, which are less extensive than those performed in an audit as described in the Scope of review section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However future events or conditions may cause the Company to cease to continue as a going concern, and the above conclusions are not a guarantee that the Company will continue in operation.
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
In preparing the half-yearly financial report, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the scope of review paragraph of this report.
This report is made solely to the Company in accordance with the terms of our engagement letter to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Barry Ryan for and on behalf of KPMG Channel Islands Limited Chartered Accountants, Guernsey 27 February 2024
As at 31 December 2023
| Note | 31 December 2023 Unaudited £'000 |
30 June 2023 Audited £'000 |
|
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Financial assets held at fair value through | |||
| profit or loss | 7 | 830,253 | 852,844 |
| Total non-current assets | 830,253 | 852,844 | |
| Current assets | |||
| Trade and other receivables | 8 | 467 | 910 |
| Cash and cash equivalents | 9 | 1,033 | 969 |
| Total current assets | 1,500 | 1,879 | |
| TOTAL ASSETS | 831,753 | 854,723 | |
| LIABILITIES | |||
| Current liabilities | |||
| Other payables and accrued expenses | 10 | 477 | 534 |
| Total current liabilities | 477 | 534 | |
| TOTAL LIABILITIES | 477 | 534 | |
| NET ASSETS | 831,276 | 854,189 | |
| EQUITY | |||
| Share capital | 663,809 | 663,809 | |
| Retained earnings | 167,467 | 190,380 | |
| TOTAL EQUITY | 12 | 831,276 | 854,189 |
| Number of Ordinary Shares in issue | |||
| at period/year end | 12 | 611,452,217 | 611,452,217 |
| Net Asset Value per Ordinary Share (pence) |
6 | 135.95 | 139.70 |
These unaudited condensed interim financial statements were approved and authorised for issue by the Board of Directors on 27 February 2024 and signed on their behalf by:
Elizabeth Burne Chris Waldron Director Director 27 February 2024 27 February 2024
The accompanying notes form an integral part of these unaudited condensed interim financial statements.
For the six months ended 31 December 2023
| Six months ended 31 December 2023 |
Six months ended 31 December 2022 |
||
|---|---|---|---|
| Unaudited | Unaudited | ||
| Note | £'000 | £'000 | |
| Income | |||
| Income from investments | 4 | 450 | 437 |
| Bank interest | 13 | - | |
| 463 | 437 | ||
| Net gains on financial assets held at fair | |||
| value through profit or loss | 7 | 4,614 | 38,408 |
| Operating income | 5,077 | 38,845 | |
| Expenses | |||
| Administrative expenses | 5 | 1,086 | 1,203 |
| Operating expenses | 1,086 | 1,203 | |
| Operating profit | 3,991 | 37,642 | |
| Total comprehensive income | |||
| for the period | 3,991 | 37,642 | |
| Attributable to: | |||
| Owners of the Company | 3,991 | 37,642 | |
| Earnings per share: | |||
| Basic and diluted (pence) | 11 | 0.65 | 6.16 |
All items within the above statement have been derived from continuing activities.
The accompanying notes form an integral part of these unaudited condensed interim financial statements.
For the six months ended 31 December 2023
| Note | Number of Ordinary Shares |
Share capital £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
|---|---|---|---|---|---|
| Shareholders' equity at 1 July 2023 |
611,452,217 | 663,809 | 190,380 | 854,189 | |
| Dividends paid | 12,13 | - | - | (26,904) | (26,904) |
| Total comprehensive income for the period |
- | - | 3,991 | 3,991 | |
| Shareholders' equity at 31 December 2023 |
611,452,217 | 663,809 | 167,467 | 831,276 |
For the six months ended 31 December 2022
| Note | Number of Ordinary Shares |
Share capital £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
|---|---|---|---|---|---|
| Shareholders' equity at 1 July 2022 |
611,452,217 | 663,809 | 194,582 | 858,391 | |
| Dividends paid | 12,13 | - | - | (25,314) | (25,314) |
| Total comprehensive income for the period |
- | - | 37,642 | 37,642 | |
| Shareholders' equity at 31 December 2022 |
611,452,217 | 663,809 | 206,910 | 870,719 |
The accompanying notes form an integral part of these unaudited condensed interim financial statements.
For the six months ended 31 December 2023
| Six months ended 31 December 2023 Unaudited |
Six months ended 31 December 2022 Unaudited |
||
|---|---|---|---|
| Note | £'000 | £'000 | |
| Cash flows from operating activities Total comprehensive income for the period Adjustments: |
3,991 | 37,642 | |
| Decrease/(increase) in trade and other receivables |
443 | (393) | |
| (Decrease)/increase in other payables and accrued expenses Net gains on financial assets held at fair |
(57) | 185 | |
| value through profit or loss | 7 | (4,614) | (38,408) |
| Net cash used in operating activities* | (237) | (974) | |
| Cash flows from investing activities Receipts from unconsolidated subsidiary** |
7 | 27,205 | 25,300 |
| Net cash generated from investing activities |
27,205 | 25,300 | |
| Cash flows from financing activities | |||
| Dividends paid | 12,13 | (26,904) | (25,314) |
| Net cash used in financing activities | (26,904) | (25,314) | |
| Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the start of the period |
64 969 |
(988) 1,619 |
|
| Cash and cash equivalents at the end of the period |
9 | 1,033 | 631 |
The accompanying notes form an integral part of these unaudited condensed interim financial statements.
*Net cash used in operating activities includes £450,000 (31 December 2022: £437,500) of investment income.
**Receipts from unconsolidated subsidiary includes £14.1 million (31 December 2022: £6.2 million) of interest.
For the six months ended 31 December 2023
The Company is a non-cellular company limited by shares, incorporated in Guernsey under the Law on 29 May 2013. The Company's registration number is 56708, and it is regulated by the GFSC as a registered closed-ended collective investment scheme.
The investment objective of the Company is to provide Shareholders with an attractive return, principally in the form of quarterly income distributions, by being invested primarily in solar energy assets located in the UK. The Company also has the ability to invest a minority of its share capital into wind, hydro and energy storage assets.
The Company has appointed Bluefield Partners LLP as its Investment Adviser.
The financial statements, included in this interim report, have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the EU and the DTR. These financial statements comprise only the results of the Company as all of its subsidiaries are measured at fair value as explained in Note 2.c. The financial statements have been prepared on a basis that is consistent with accounting policies applied in the preparation of the Company's annual financial statements for the year ended 30 June 2023, approved for issue on 27 September 2023.
These financial statements have been prepared under the historical cost convention with the exception of financial assets held at fair value through profit or loss and in accordance with the provisions of the DTR.
These financial statements do not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Company's audited financial statements for the year ended 30 June 2023, which were prepared under full IFRS requirements and the DTRs of the UK FCA.
Although the bulk of the Company's electricity generation occurs during the summer months when the days are longer, the Company's results do not vary significantly during reporting periods as a result of seasonal activity.
The Directors, in their consideration of going concern, have reviewed cash flow forecasts prepared by the Investment Adviser, future projects in the pipeline and the performances of the current solar and wind plants in operation.
The Board has considered the Directors' Valuation, which uses a blend of power price forecasts from leading industry consultants. These forecasts are based on updated analysis on European fuels and carbon forward prices as well as the expected evolution of the UK's overall power supply and demand position in the longer term. Electricity prices continued to fall during the Period, with UK day-ahead base load priced pricing falling to £85.92/MWh on average in the six months to 31 December 2023, down from £110.75/MWh the previous six-month period to 30 June 2023.
For the six months ended 31 December 2023
The Company's PPA sales strategy is largely unchanged: power sales prices are fixed for between 12 and 36 months ahead and went into 2024 with more than 78% of its merchant revenue sold forward to March 2025, and is therefore not impacted by the current fall in power prices. The Group continues to generate a significant cash surplus and has been able to move cash up the structure to comfortably meet the dividend requirements of its parent. The Board is confident that, post debt amortisation, it will achieve a high level of dividend cover for the present and the 2025 financial years, taking into account both current and carried forward earnings.
On 22 June 2023, the Group agreed a £110 million increase to its existing committed £100 million RCF, bringing the total committed amount to £210 million. The facility also has an uncommitted accordion feature allowing it to be increased by up to a further £30 million. As at 31 December 2023, the Group had drawn £167 million from its RCF and has £410 million of project level debt. Discussions are constantly held with lenders to ensure extensions are secured comfortably ahead of maturity. Given the strong cash generation, the Board is satisfied that debt repayments will be met and confirms that no covenant breaches have occurred in the period.
At the AGM held on 28 November 2023, BSIF's shareholders voted overwhelmingly in favour of the continuation of the Company for a further five years. Whilst there has been volatility in the share price of the Company recently, this is consistent with other funds in the sector. The portfolio continues to benefit from high energy prices and strong cash generation even when the impact of the Electricity Generator Levy is considered.
On 15 February 2024 BSIF announced its intention to commence a share buyback programme in response to the recent weakness in BSIF's share price and the significant discount that the share price represents to the value of BSIF's assets. The capital allocation policy of BSIF undergoes regular review, evaluating the relative merits of further investment (into both new and existing assets), the management of debt and returning value to shareholders. This review, and in the context of addressing what the Board views as the excessive discount at which BSIF's shares currently trade relative to the underlying NAV, led to the Board's announcement of the share buyback programme. The initial cash allocation has been set at £20 million for the purchase of its own shares from existing cash reserves.
The Directors have concluded that it is appropriate to adopt the going concern basis of accounting in preparing these financial statements.
The Board considers that the Company is an investment entity. In accordance with IFRS 10, all subsidiaries are recognised at fair value through profit and loss.
For the six months ended 31 December 2023
IFRS 8 'Operating Segments' requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes.
The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. One of the key measures of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's NAV, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these financial statements.
For management purposes, the Company is engaged in a single segment of business, being investment in renewable energy infrastructure assets via SPVs, and in one geographical area, the UK.
The Company holds all of the shares in the subsidiary, BR1, which is a holding vehicle used to hold the Company's investments. The Directors believe it is appropriate to value this entity based on the fair value of its portfolio of SPV investment assets held plus its other assets and liabilities. The SPV investment assets held by the subsidiary, inclusive of their intermediary holding companies, are valued semi-annually as described in Note 7 based on referencing comparable transactions supported by discounted cash flow analysis and are referred to as the Directors' Valuation.
The preparation of these financial statements under IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The area involving a high degree of judgement or complexity or area where assumptions and estimates are significant to the financial statements has been identified as the valuation of the portfolio of investments held by BR1 (see Note 7).
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future period if the revision affects both current and future periods.
As disclosed in Note 7, the Board believes it is appropriate for the Company's portfolio to be benchmarked on a £m / MW basis against comparable portfolio transactions and on this basis the weighted average discount rate remains 8.00% (8.00% in June 2023), which reflects the return hurdles in the market for lowly levered assets with high levels of regulated income.
For the six months ended 31 December 2023
| Six months ended 31 December 2023 |
Six months ended 31 December 2022 |
|
|---|---|---|
| £'000 | £'000 | |
| Monitoring fee in relation to loans supplied (note 14) |
450 | 437 |
| 450 | 437 |
The Company provides monitoring and loan administration services to BR1 for which an annual fee is charged and is payable in arrears.
| Six months ended 31 December 2023 |
Six months ended 31 December 2022 |
|
|---|---|---|
| £'000 | £'000 | |
| Investment advisory base fee (see Note 14) | 335 | 397 |
| Administration fees | 252 | 289 |
| Legal and professional fees | 152 | 140 |
| Directors' remuneration (see Note 14) | 120 | 137 |
| Audit fees | 59 | 53 |
| Regulatory Fees | 58 | 50 |
| Non-audit fees (interim review) | 48 | 45 |
| Broker fees | 25 | 25 |
| Registrar fees | 12 | 35 |
| Insurance | 7 | 12 |
| Listing fees | 3 | 3 |
| Other expenses | 15 | 17 |
| 1,086 | 1,203 |
The calculation of NAV per Ordinary Share is arrived at by dividing the total net assets of the Company as at the unaudited condensed statement of financial position date by the number of Ordinary Shares of the Company at that date.
For the six months ended 31 December 2023
| Six months ended | Twelve months ended | |
|---|---|---|
| 31 December 2023 Total |
30 June 2023 Total |
|
| £'000 | £'000 | |
| Opening balance (Level 3) | 852,844 | 856,380 |
| Change in fair value | (22,591) | (3,536) |
| Closing balance (Level 3) | 830,253 | 852,844 |
Investments at fair value through profit or loss comprise the fair value of the investment portfolio, which the Investment Adviser recommends on a quarterly basis, including a complete review of all valuation assumptions on a semi-annual basis, subject to the Board's approval, and the fair value of BR1, the Company's single, direct subsidiary being its cash, working capital and debt balances. A reconciliation of the investment portfolio value to financial assets at fair value through profit and loss in the Unaudited Condensed Statement of Financial Position is shown below.
| 31 December 2023 Total £'000 |
30 June 2023 Total £'000 |
|
|---|---|---|
| Investment portfolio, Directors' Valuation | 1,001,053 | 1,018,350 |
| Immediate Holding Company | ||
| Cash | 24,952 | 26,407 |
| Working capital | (28,752) | (38,913) |
| Debt | (167,000) | (153,000) |
| (170,800) | (165,506) | |
| Financial assets at fair value through profit or loss |
830,253 | 852,844 |
Analysis of net gains on financial assets held at fair value through profit or loss (per unaudited condensed statement of comprehensive income)
| Six months ended 31 December 2023 |
Six months ended 31 December 2022 |
|
|---|---|---|
| £'000 | £'000 | |
| Unrealised change in fair value of financial assets held at fair value through profit or loss |
(22,591) | 13,108 |
| Cash receipts from unconsolidated subsidiary* |
27,205 | 25,300 |
| Net gains on financial assets held at fair value through profit and loss |
4,614 | 38,408 |
*Comprising of repayment of loans and Eurobond interest
For the six months ended 31 December 2023
Financial assets and financial liabilities are classified in their entirety into only one of the following three levels:
The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The only financial instruments carried at fair value are the investments held by the Company, through BR1, which are fair valued at each reporting date. The Company's investments have been classified within Level 3 as BR1's investments are not traded and are valued using unobservable inputs.
There have been no transfers between levels during the six month period ended 31 December 2023. Any transfers between the levels will be accounted for on the last day of each financial period. Due to the nature of investments, these are always expected to be classified as Level 3.
The same valuation methodology and process for operational assets is followed in these financial statements as was applied in the preparation of the Company's financial statements for the year ended 30 June 2023.
Before planning has been achieved, no value is attributed to the Company's development pipeline.
However, once the projects receive planning permission they are then valued according to the following criteria:
During the construction stages assets continue to be valued at investment cost (deemed to be approximate fair value). The Investment Adviser intends for newly built projects to be valued on a DCF basis shortly after they become operational.
Investments that are operational are valued on a DCF basis over the life of the asset (typically more than 25 years) and, under the 'willing buyer-willing seller' methodology, prudently benchmarked on a £/MW basis against comparable transactions for large scale portfolios.
Each investment is subject to full UK corporate taxation at the prevailing rate with the tax shield being limited to the applicable capital allowances from the Company's SPV investments.
For the six months ended 31 December 2023
The Investment Adviser recommends the fair value on a quarterly basis, which includes a complete review of all valuation assumptions on a semi-annual basis, subject to the Board's approval. The key inputs, as listed below, are derived from various internal and external sources. The key inputs to a DCF based approach are: the equity discount rate, the cost of debt (influenced by interest rates, gearing level and length of debt), power price forecasts, long term inflation rates, irradiation forecasts, average wind speeds, operational costs, asset life and taxation. Given discount rates are a product of not only the factors listed previously but also regulatory support, perceived sector risk and competitive tensions, it is not unusual for discount rates to change over time. Evidence of this is shown by way of the revisions to the original discount rates applied between the first renewable acquisitions and those witnessed in the past twelve months.
The Electricity Generator Levy ("EGL") on excess profits produced by electricity generators was announced by the Chancellor of the Exchequer in the Autumn Statement in November 2022 is a temporary 45% tax on the extraordinary returns made by electricity generators last year while European energy prices soared in the wake of Russia's 2022 invasion of Ukraine. The EGL will be in place from 1 January 2023 until 31 March 2028, with the benchmark price linked to UK Consumer Price Inflation. The Investment Adviser previously sought external advice from its legal and tax advisers on how to model the EGL within the valuation methodology.
Given the fact discount rates are subjective, there is sensitivity within these to the interpretation of factors outlined above.
Judgement is used by the Board in determining the weighted average discount rate of 8.00% (8.00% as at 30 June 2023), with four key factors that have impacted the adoption of this rate outlined below:
In order to smooth the sensitivity of the valuation to forecast timing or the opinion taken by a single forecast, the Board continues to adopt the application of a blended power curve from three leading forecasters.
The fair value of operational SPVs is calculated on a discounted cash flow basis in accordance with the IPEV Valuation Guidelines. The Investment Adviser recommends the fair value on a quarterly basis, which includes a complete review of all valuation assumptions on a semi-annual basis, subject to the Board's approval as at 30 June and 31 December each year.
For the six months ended 31 December 2023
The table below analyses the sensitivity of the fair value of the Directors' Valuation to an individual input, while all other variables remain constant.
The Board considers the changes in inputs to be within a reasonable expected range based on its understanding of market transactions. This is not intended to imply that the likelihood of change or that possible changes in value would be restricted to this range.
| 31 December 2023 | 30 June 2023 | ||||
|---|---|---|---|---|---|
| Input | Change in input |
Change in fair value of Directors' Valuation £m |
Change in NAV per share (pence) |
Change in fair value of Directors' Valuation £m |
Change in NAV per share (pence) |
| Discount rate | + 0.5% | (18.5) | (3.03) | (18.8) | (3.07) |
| - 0.5% | 19.1 | 3.12 | 19.4 | 3.17 | |
| Power prices | +10% | 58.2 | 9.52 | 54.2 | 8.86 |
| -10% | (59.9) | (9.80) | (56.9) | (9.31) | |
| Inflation rate | + 0.5% | 42.7 | 6.98 | 31.7 | 5.19 |
| - 0.5% | (40.4) | (6.61) | (30.2) | (4.94) | |
| Energy yield | 10 year P90 | (101.7) | (16.63) | (105.0) | (17.17) |
| 10 year P10 | 108.4 | 17.73 | 111.9 | 18.30 | |
| Operational costs | +10% | (9.2) | (1.50) | (9.1) | (1.49) |
| -10% | 9.2 | 1.50 | 9.1 | 1.49 |
The Company holds investments through subsidiary companies which have not been consolidated as a result of the adoption of IFRS 10: Investment entities exemption to consolidation. Below is the legal entity name and ownership percentage for the SPVs which are all incorporated in the UK except for Bluefield Durrants GmBH which is incorporated in Germany.
For the six months ended 31 December 2023
| Name | Ownership percentage |
Name | Ownership percentage |
|---|---|---|---|
| Bluefield Renewables 1 Limited | 100 | Holly Farm Solar Park Limited | 100 |
| Bluefield Renewables 2 Limited | 100 | Kellingley Solar Farm Limited | 100 |
| Bluefield SIF Investments Limited | 100 | Little Bear Solar Limited | 100 |
| Bunns Hill Solar Limited | 100 | Place Barton Farm Solar Park Limited | 100 |
| HF Solar Limited | 100 | Willows Farm Solar Limited | 100 |
| Hoback Solar Limited | 100 | Southwick Solar Farm Limited | 100 |
| Littlebourne Solar Farm Limited | 100 | Butteriss Down Solar Farm Limited | 100 |
| Molehill PV Farm Limited | 100 | Goshawk Solar Limited | 100 |
| Pashley Solar Farm Limited | 100 | Kite Solar Limited | 100 |
| ISP (UK) 1 Limited | 100 | Peregrine Solar Limited | 100 |
| Solar Power Surge Limited | 100 | Promothames 1 Limited | 100 |
| West Raynham Solar Limited | 100 | Rookery Solar Limited | 100 |
| Sheppey Solar Limited | 100 | Mikado Solar Projects (2) Limited | 100 |
| Capelands Solar Farm Limited | 100 | Mikado Solar Projects (1) Limited | 100 |
| North Beer Solar Limited | 100 | KS SPV 5 Limited | 100 |
| WEL Solar Park 2 Limited | 100 | Eagle Solar Limited | 100 |
| Hardingham Solar Limited | 100 | Kislingbury M1 Solar Limited | 100 |
| Redlands Solar Farm Limited | 100 | Thornton Lane Solar Farm Limited | 100 |
| WEL Solar Park 1 Limited | 100 | Gretton Solar Farm Limited | 100 |
| Saxley Solar Limited | 100 | Wormit Solar Farm Limited | 100 |
| Frogs Lake Solar Limited | 100 | Langlands Solar Limited | 100 |
| Old Stone Farm Solar Park Limited | 100 | Bluefield Merlin Limited | 100 |
| Bradenstoke Solar Park Limited | 100 | Harrier Solar Limited | 100 |
| GPP Langstone LLP | 100 | Rhydy Pandy Solar Limited | 100 |
| Ashlawn Solar Limited | 100 | New Energy Business Solar Limited | 100 |
| Betingau Solar Limited | 100 | Corby Solar Limited | 100 |
| Grange Solar Limited | 100 | Falcon Solar Farm Limited | 100 |
| Hall Solar Limited | 100 | Folly Lane Solar Limited | 100 |
| Oulton Solar Limited | 100 | New Road Solar Limited | 100 |
| Romsey Solar Limited | 100 | Blossom 1 Solar Limited | 100 |
| Salhouse Solar Limited | 100 | Blossom 2 Solar Limited | 100 |
| Tollgate Solar Limited | 100 | New Road 2 Solar Limited | 100 |
| Trethosa Solar Limited | 100 | GPP Eastcott LLP | 100 |
| Welborne Energy LLP | 100 | GPP Blackbush LLP | 100 |
| Barvills Solar Limited | 100 | GPP Big Field LLP | 100 |
| Clapton Farm Solar Park Limited | 100 | Oak Renewables 2 Limited | 100 |
| Court Farm Solar Park Limited | 100 | Oak Renewables Limited | 100 |
| East Farm Solar Park Limited | 100 | Creathorne Farm Solar Park Limited (formerly Good Energy Creathorne Farm Solar Park (003) Limited) |
100 |
| Gypsum Solar Farm Limited | 100 | Lower End Farm Solar Park Limited (formerly Good Energy Lower End Farm Solar Park (026) Limited) |
100 |
For the six months ended 31 December 2023
| Name | Ownership percentage |
Name | Ownership percentage |
|---|---|---|---|
| Woolbridge Solar Park Limited (formerly Good Energy Woolbridge Solar Park (010) Limited) |
100 | Wind Energy Holdings Limited | 100 |
| Rook Wood Solar Park Limited (formerly Good Energy Rook Wood Solar Park (057) Limited) |
100 | Wind Energy 1 Hold Co Limited | 100 |
| Carloggas Solar Park Limited (formerly Good Energy Carloggas Solar Park (009) Limited) |
100 | Crockbaravally Wind Holdco Limited | 100 |
| Cross Road Plantation Solar Park Limited (formerly Good Energy Cross Road Plantation Solar Park Limited) |
100 | Crockbaravally Wind Farm Limited | 100 |
| Delabole Windfarm Limited (formerly Good Energy Delabole Windfarm Limited) |
100 | Dayfields Solar Limited | 100 |
| Hampole Windfarm Limited (formerly Good Energy Hampole Windfarm Limited) |
100 | Farm Power Apollo Limited | 100 |
| Renewable Energy Assets Limited (formerly Good Energy Generation Assets No. 1 Limited) |
100 | Freathy Solar Park Limited | 100 |
| Aisling Renewables Limited | 100 | IREEL FIT TopCo Limited | 100 |
| Wind Energy 3 Hold Co Limited | 100 | IREEL FIT HoldCo Limited | 100 |
| Wind Energy (NI) Limited | 100 | IREEL Wind TopCo Limited | 100 |
| Ash Renewables No 3 Limited | 100 | IREEL Solar HoldCo Limited | 100 |
| Ash Renewables No 4 Limited | 100 | IREL Solar HoldCo Limited | 100 |
| Ash Renewables No 5 Limited | 100 | Ladyhole Solar Limited | 100 |
| Ash Renewables No 6 Limited | 100 | Morton Wood Solar Limited | 100 |
| Wind Beragh Limited | 100 | Nanteague Solar Limited | 100 |
| Wind Camlough Limited | 100 | Newton Down Wind HoldCo Limited | 100 |
| Wind Cullybackey Limited | 100 | Newton Down Windfarm Limited | 100 |
| Wind Dungorman Limited | 100 | Padley Wood Solar Limited | 100 |
| Wind Killeenan Limited | 100 | Peel Wind Farm (Sheerness) Limited | 100 |
| Wind Mowhan Limited | 100 | Port of Sheerness Wind Farm Limited | 100 |
| Wind Mullanmore Limited | 100 | Sandys Moor Solar Limited | 100 |
| Carmoney Energy Limited | 100 | St Johns Hill Wind Holdco Limited | 100 |
| Errigal Energy Limited | 100 | St Johns Hill Wind Limited | 100 |
| Galley Energy Limited | 100 | Trickey Warren Solar Limited | 100 |
| S&E Wind Energy Limited | 100 | Whitton Solar Limited | 100 |
| Wind Energy 2 Hold Co Limited | 100 | LPF UK Equityco Limited | 100 |
| Boston RE Limited | 100 | LPF UK Solar Limited | 100 |
| DC21 Earth SPV Limited | 100 | LPF Kinetica UK Limited | 100 |
| E5 Energy Limited | 100 | Wind Energy Scotland (Fourteen Arce Fields) Limited |
100 |
| E6 Energy Limited | 100 | Wind Energy Scotland (Birkwood Mains) Limited Wind Energy Scotland (Holmhead) |
100 |
| E7 Energy Limited | 100 | Limited | 100 |
| Hallmark Powergen 3 Limited | 100 | Mosscliff Power 5 Limited | 100 |
| Warren Wind Limited | 100 | Mosscliff Power 10 Limited | 100 |
| Wind Energy Three Limited | 100 | Mosscliff Power 2 Limited | 100 |
For the six months ended 31 December 2023
| Name | Ownership percentage |
Name | Ownership percentage |
|---|---|---|---|
| Mosscliff Power 3 Limited | 100 | BF33C LHF Solar Limited | 60 |
| Mosscliff Power 4 Limited | 100 | AR006 GF Solar Limited | 100 |
| Mosscliff Power 6 Limited | 100 | Mauxhall Farm Energy Park Limited |
100 |
| Mosscliff Power 7 Limited | 100 | BF16D BHF Solar Limited | 100 |
| Mosscliff Power Limited | 100 | BF33E BHF Solar Limited | 60 |
| E2 Energy PLC | 100 | WSE Hartford Wood Limited | 60 |
| Wind Energy One Limited | 100 | BF58 Hunts Airfield Solar Limited | 60 |
| Wind Energy Two Limited | 100 | Twineham Energy Limited | 60 |
| New Road Wind Limited | 100 | Sheepwash Lane Energy Barn Limited |
100 |
| Yelvertoft Solar Farm Limited | 100 | Whitehouse Farm Energy Barn Limited |
100 |
| Peradon Solar Farm Limited | 100 | Bluefield Durrants GmBH | 100 |
| Lower Tean Leys Solar Farm Limited | 60 | Lightning 1 Energy Park Limited | 100 |
| Lower Mays Solar Farm Limited | 100 | Abbots Ann Farm Solar Park Limited |
100 |
| Longpasture Solar Farm Limited | 60 | Canada Farm Solar Park Limited | 100 |
| Leeming Solar Farm Limited | 60 | Kinetica 846 Limited | 100 |
| Wallace Wood Solar Farm Limited | 60 | Kinetica 868 Limited | 100 |
| LEO1B Energy Park Limited | 60 | New Road Solar 3 Limited | 100 |
| LH DNO Grid Services Limited | 60 | New Road Solar 4 Limited | 100 |
| Sweet Briar Solar Farm Limited | 60 | Galton Manor Solar Park Limited | 100 |
| BF31 WHF Solar Farm Limited | 60 | Renewable Energy Hold Co Limited' |
100 |
| BF27 BF Solar Limited | 60 | Westover Gridco Limited | 50 |
| BF13A TF Solar Limited | 60 | Lyceum Solar Limited | 9 |
| HW Solar Farm Limited | 100 | ||
| AR108 Bolt Solar Farm Limited | 100 |
| 31 December 2023 £'000 |
30 June 2023 £'000 |
|
|---|---|---|
| Current assets | ||
| Monitoring fees receivable | 450 | 900 |
| Other receivables | 17 | 10 |
| 467 | 910 |
There are no material past due or impaired receivable balances outstanding at the period end. The probability of default of BSIFIL and BR1 was considered low and so no allowance has been recognised based on 12-month expected credit loss as any impairment would be insignificant.
The Board considers that the carrying amount of all receivables approximates to their fair value.
For the six months ended 31 December 2023
Cash and cash equivalents comprise cash held by the Company and short term bank deposits held with maturities of up to three months. The carrying amounts of these assets approximate their fair value.
| 31 December 2023 £'000 |
30 June 2023 £'000 |
|
|---|---|---|
| Current liabilities | ||
| Investment advisory fees (see Note 14) | 163 | 164 |
| Administration fees | 134 | 136 |
| Directors' Fees (see Note 14) | 61 | 72 |
| Audit fees | 55 | 109 |
| Other payables | 64 | 53 |
| 477 | 534 |
The Company has financial risk management policies in place to ensure that all payables are paid within the agreed credit period. The Directors consider that the carrying amount of all payables approximates to their fair value.
| Six months ended 31 December 2023 |
Six months ended 31 December 2022 |
|---|---|
| £3,991,019 | £37,642,084 |
| 611,452,217 | |
| 0.65 | 6.16 |
| 611,452,217 |
For the six months ended 31 December 2023
The authorised share capital of the Company is represented by an unlimited number of Ordinary Shares of no par value which, upon issue, the Directors may designate into such classes and denominate in such currencies as they may determine.
| Number of Ordinary Shares | Six months ended 31 December 2023 Number of Ordinary Shares |
Year ended 30 June 2023 Number of Ordinary Shares |
|---|---|---|
| Opening balance | 611,452,217 | 611,452,217 |
| Shares issued for cash | - | - |
| Closing balance | 611,452,217 | 611,452,217 |
| Shareholders' equity | Six months ended 31 December 2023 £'000 |
Year ended 30 June 2023 £'000 |
| Opening balance | 854,189 | 858,391 |
| Dividends paid | (26,904) | (50,995) |
| Total comprehensive income | 3,991 | 46,793 |
| Closing balance | 831,276 | 854,189 |
The Company has a single class of Ordinary Shares which are entitled to dividends declared by the Company. At any General Meeting of the Company each ordinary Shareholder is entitled to have one vote for each share held. The Ordinary Shares also have the right to receive all income attributable to those shares and participate in dividends made and such income shall be divided pari passu among the holders of Ordinary Shares in proportion to the number of Ordinary Shares held by them.
Retained earnings comprise of accumulated retained earnings as detailed in the unaudited condensed statement of changes in equity.
On 7 August 2023, the Board declared a third interim dividend of £12,840,497, in respect of the year ended 30 June 2023, equating to 2.10pps (third interim dividend in respect of the year ended 30 June 2022: 2.05pps), which was paid on 1 September 2023 to Shareholders on the register on 18 August 2023.
On 28 September 2023, the Board declared a fourth interim dividend of £14,063,401 in respect of the year ended 30 June 2023, equating to 2.30pps (fourth interim dividend in respect of the year ended 30 June 2022: 2.09pps), which was paid on 6 November 2023 to Shareholders on the register on 6 October 2023.
For the six months ended 31 December 2023
In the opinion of the Directors, the Company has no immediate or ultimate controlling party.
The total Directors' fees expense for the Period amounted to £120,376 (31 December 2022: £136,965) of which £61,220 was outstanding at 31 December 2023 (30 June 2023: £71,517).
Remuneration paid to each Director is as follows:
| 31 December 2023 | 31 December 2022 | |
|---|---|---|
| £'000 | £'000 | |
| John Scott | 34 | 24 |
| Elizabeth Burne | 25 | 22 |
| Michael Gibbons (appointed 7 October 2022) | 20 | 10 |
| Meriel Lenfestey | 24 | 23 |
| Paul Le Page (retired 30 September 2023) | 13 | 26 |
| John Rennocks (retired 22 February 2023) | N/A | 32 |
| Chris Waldron (appointed 1 December 2023) | 4 | N/A |
| 120 | 137 |
The number of Ordinary Shares held by each Director is as follows:
| 31 December 2023 | 31 December 2022 | |
|---|---|---|
| John Scott* | 643,929 | 625,619 |
| Elizabeth Burne | 15,000 | 15,000 |
| Michael Gibbons (appointed 7 October 2022) | 17,800 | - |
| Meriel Lenfestey | 7,693 | 7,693 |
| Paul Le Page (retired 30 September 2023) | N/A | 35,000 |
| John Rennocks* (retired 22 February 2023) | N/A | 320,388 |
| Chris Waldron (appointed 1 December 2023) | 30,000 | N/A |
| 714,422 | 1,003,700 |
*Includes shares held by PCAs.
John Scott and Michael Gibbons are Directors of BR1. Neil Wood and James Armstrong, who are partners of the Investment Adviser, are also Directors of BSIFIL and BR1.
Fees paid during the period by SPVs to BSL, a company which has the same ownership as that of the Investment Adviser, totalled £2,681,775 (31 December 2022: £1,971,264).
Fees paid during the period by SPVs to BOL, a company which has the same ownership as that of the Investment Adviser, totalled £ 5,834,327 (31 December 2022: £3,706,826).
Fees paid during the period by SPVs to BRD, a company which has the same ownership as that of the Investment Adviser, totalled £386,197 (31 December 2022: £379,295).
For the six months ended 31 December 2023
Under the terms of the Investment Advisory Agreement, the Investment Adviser is entitled to a base fee. The base fee is payable quarterly in arrears in cash, at a rate equivalent to 0.80% per annum of the NAV up to and including £750,000,000, 0.75% per annum of the NAV above £750,000,000 and up to and including £1,000,000,000 and 0.65% per annum of the NAV above £1,000,000,000. The base fee will be calculated on the NAV reported in the most recent quarterly NAV calculation as at the date of payment. During the period an updated Investment Advisory Agreement was approved with an amendment to the base fee taking effect on 21 December 2023; at a rate equivalent to 0.80% per annum of the NAV up to and including £750,000,000, 0.75% per annum of the NAV above £750,000,000 and up to and including £900,000,000 and 0.65% per annum of the NAV above £900,000,000.
The Company and BR1's investment advisory fees for the period amounted to £3,342,456 (31 December 2022: £3,650,104) of which £545,719 (30 June 2023: £554,919) was outstanding at the period end and is to be settled in cash. The investment advisory fees for the period attributable to the Company amounted to £334,859 (31 December 2022: £397,329) of which £162,673 (30 June 2023: £163,984) was outstanding at the period end.
The Company's loan monitoring fee income for the period, due from its subsidiary BR1, amounted to £450,000 (31 December 2022: £437,500) of which £450,257 was outstanding at the period end (30 June 2023: £900,257).
As at 31 December 2023 there has been no change to financial instruments risk to those described in note 15 of the financial statements to 30 June 2023.
On 25 January 2024, the Company announced the successful completion of the first phase of the partnership with GLIL, with £20 million invested in equity alongside £200 million from GLIL to acquire a 247 MW portfolio of UK solar assets from Lightsource bp. BSIF's ownership stake in the portfolio is 9%. The Company funded the acquisition using earnings which arose in the financial year ended 30 June 2023, after the payment of dividends, debt amortisation and the EGL.
On 26 January 2024, the Board declared its first interim dividend of £13,451,949, in respect of the year ending 30 June 2024, equating to 2.20pps (first interim dividend in respect of the year ended 30 June 2023: 2.10pps), which will be paid on or around 9 March 2024 to Shareholders on the register on 9 February 2024.
On 15 February 2024, the Company announced a share buyback programme in which it has allocated £20 million to purchase its own shares post closed period. This announcement was made in response to recent weakness in the Company's share price. This buy back will be funded from a combination of available liquidity, excess operating cash flows from the portfolio and the proceeds from any asset sales as already announced.
Post period end, in early January one solar project of 50MW received planning permission located in Durham.
Administrator means Ocorian Administration (Guernsey) Limited
AGM means the Annual General Meeting
AIC means the Association of Investment Companies
AIC Code means the Association of Investment Companies Code of Corporate Governance
AIF means Alternative Investment Fund
AIFM means Alternative Investment Fund Manager
AIFMD means the Alternative Investment Fund Management Directive
Articles means the Memorandum of 29 May 2013 as amended and the Articles of Incorporation as adopted by special resolution on 7 November 2016.
Auditor means KPMG Channel Islands Limited (see KPMG)
Aviva Investors means Aviva Investors Limited
BEIS means the Department for Business, Energy & Industrial Strategy
BEPS means Base erosion and profit shifting
Bluefield means Bluefield Partners LLP
Bluefield Group means Bluefield Partners LLP and Bluefield Companies
BOL means Bluefield Operations Limited
Board means the Directors of the Company
BR1 means Bluefield Renewables 1 Ltd being the only direct subsidiary of the Company
BRD means Bluefield Renewable Developments Limited
BSIF means Bluefield Solar Income Fund Limited
BSIFIL means Bluefield SIF Investments Limited
BSL means Bluefield Asset Management Services Limited
BSUoS means Balancing Services Use of System charges: costs set to ensure that network companies can recover their allowed revenue under Ofgem price controls
Business days means every official working day of the week, generally Monday to Friday excluding public holidays
CAGR means compound annual growth rate
Calculation Time means the Calculation Time as set out in the Articles of Incorporation
CCC means Committee on Climate Change
CfD means Contract for Difference
Company means Bluefield Solar Income Fund Limited (see BSIF)
Companies Law means the Companies (Guernsey) Law 2008, as amended (see Law)
Cost of debt means the blended cost of debt reflecting fixed and index-linked elements
CO2e means Carbon Dioxide equivalent
CSR means Corporate Social Responsibility
CPIH means Consumer Price Index including owner occupiers' housing costs
DCF means Discounted Cash Flow
DECC means the Department of Energy and Climate Change
Defect Risk means that there is an over-reliance on limited equipment manufacturers which could lead to large proportions of the portfolio suffering similar defects
Directors' Valuation means the gross value of the SPV investments held by BR1, including their holding companies
DNO means Distribution Network Operator
DSCR means Long Term Debt Service Cover Ratio calculated as net operating income as a multiple of debt obligations due within one year
DTR means the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority
EBITDA means earnings before interest, tax, depreciation and amortisation
EGL means Electricity Generator Levy
EGM means Extraordinary General Meeting
EIS means Enterprise Investment Scheme
EPC means Engineering, Procurement & Construction
EPS means Earning per share
ESG means Environmental, Social and Governance
EU means the European Union
EV means enterprise valuation
FAC means Final Acceptance Certificate
FATCA means the Foreign Account Tax Compliance Act
Financial Statements means the unaudited condensed interim financial statements
FiT means Feed-in Tariff
GAV means Gross Asset Value on investment basis including debt held at SPV level
GDPR means General Data Protection Regulation
GFSC means the Guernsey Financial Services Commission
GHG means greenhouse gas
GHG Protocol supplies the world's most widely used greenhouse gas accounting standards
Group means Bluefield Solar Income Fund Limited, Bluefield Renewables 1 Limited and its subsidiaries
Guernsey Code means the Guernsey Financial Services Commission Finance Sector Code of Corporate Governance
GWh means Gigawatt hour
GW means Gigawatt
IAS means International Accounting Standard
IASB means the International Accounting Standards Board
IFRS means International Financial Reporting Standards as adopted by the EU
Investment Adviser means Bluefield Partners LLP
IPEV Valuation Guidelines means the International Private Equity and Venture Capital Valuation Guidelines
IPO means initial public offering
IRR means Internal Rate of Return
IVSC means The International Valuation Standards Council
KID mans Key Information Document
KPI means Key Performance Indicators
KPMG means KPMG Channel Islands Limited (see Auditor)
kWh means Kilowatt hour
kW means Kilowatt
Law means Companies (Guernsey) Law, 2008 as amended (see Companies Law)
LD means liquidated damages
Listing Rules means the set of FCA rules which must be followed by all companies listed in the UK
Lloyds means Lloyds Bank Group plc
LSE means London Stock Exchange plc
LTF means long term facility provided by Aviva Investors limited
Macquarie means Macquarie Bank Limited
Main Market means the main securities market of the LSE
MW means Megawatt (a unit of power equal to one million watts)
MWh means Megawatt hour
NatWest means NatWest International plc
NAV means Net Asset Value as defined in the prospectus
NMPI means Non-mainstream Pooled Investments and Special Purpose Vehicles and the rules around their financial promotion
NPPR means the AIFMD National Private Placement Regime
O&M means Operation and Maintenance
OECD means The Organisation for Economic Cooperation and Development
Official List means the Premium Segment of the UK Listing Authority's Official List
Ofgem means Office of Gas and Electricity Markets
Ordinary Shares means the issued ordinary share capital of the Company, of which there is only one class
Outage Risk means that a higher proportion of large capacity assets hold increased exposure to material losses due to curtailments and periods of outage
P10 means Irradiation estimate exceeded with 10% probability
P90 means Irradiation estimate exceeded with 90% probability
PCA means Persons Closely Associated
PPA means Power Purchase Agreement
pps means pence per Ordinary Share
PR means Performance Ratio (the ratio of the actual and theoretically possible energy outputs)
PRIIPS means Packaged Retail and Insurance – Based Investment Products
PV means Photovoltaic
RBSI means Royal Bank of Scotland International plc
RCF means Revolving Credit Facility
REGO means Renewable Energy Guarantees of Origin
REMA means Review of Electricity Market Arrangements
RO Scheme means the Renewable Obligation Scheme which is the financial mechanism by which the UK government incentivises the deployment of large-scale renewable electricity generation by placing a mandatory requirement on licensed UK electricity suppliers to source a specified and annually increasing proportion of electricity they supply to customers from eligible renewable sources or pay a penalty
ROC means Renewable Obligation Certificates
ROC recycle means the payment received by generators from the redistribution of the buy-out fund. Payments are made into the buy-out fund when suppliers do not have sufficient ROCs to cover their obligation
RPI means the Retail Price Index
Santander UK means Santander UK plc
SASB means Sustainability Accounting Standards Board
SDG means the United Nations Sustainable Development Goals
SFDR means Sustainable Finance Disclosure Regulation
SONIA means Sterling Over Night Indexed Average
SPA means Share Purchase Agreement
SPVs means a Special Purpose Vehicle which hold the Company's investment portfolio of underlying operating assets
Sterling means the Great British pound currency
TISE means The International Stock Exchange (based in the Channel Islands)
UK means the United Kingdom of Great Britain and Northern Ireland
UK Code means the UK Corporate Governance Code
UK FCA means the UK Financial Conduct Authority
UNGC means the United Nations Global Compact
United Nations Principles for Responsible Investment means an approach to investing that aims to incorporate environmental, social and governance factors into investment decisions, to better manage risk and generate sustainable, long term returns.
| APM | Definition | Purpose | Calculation |
|---|---|---|---|
| Total return | The percentage increase/(decrease) in NAV, inclusive of dividends paid, in the reporting period. |
A key measure of the success of the Investment Adviser's investment strategy. |
The change in NAV for the period plus any dividends paid divided by the initial NAV. (135.95- 139.70+2.10+2.30)/139.70 =0.47% |
| Total Shareholder Return |
The percentage increase/(decrease) in share price, inclusive of dividends paid, in the reporting period. |
A measure of the return that could have been obtained by holding a share over the reporting period. |
The change in share price for the period plus any dividends paid divided by the initial share price. (118.6- 120.0+2.10+2.30)/120.0= 2.50% The measure excludes transaction costs. |
| Total Dividends Declared in Period |
This is the sum of the dividends that the Board has declared relating to the reporting period. |
A measure of the income that the company has paid to shareholders that can be compared to the Company's target dividend. |
The linear sum of each dividend declared in the reporting period. |
| Underlying Earnings |
Total net income of the Company's investment portfolio. |
A measure to link the underlying financial performance of the operational projects to the dividends declared and paid by the Company. |
Total income of the Company's portfolio minus Group operating costs minus Group debt costs. |
| Market Capitalisation |
The total value of the Company's issued share capital. |
This is a key indicator of the Company's liquidity. |
The price per share multiplied by the number of shares in issue. |
| NAV per Ordinary Share |
The Company's closing NAV per share at the period end. |
A measure of the value of one Ordinary Share. |
The net assets attributable to Ordinary Shares on the statement of financial position (£831.3m) divided by the number of ordinary shares in issue (611,452,217) as at the calculation date. |
| Sale of Electricity |
The total proportion of revenue generated by the Company's portfolio that is attributable to electricity sales. |
A measure to understand the proportion of revenue attributable to sales of electricity. |
The amount of revenue attributable to electricity sales divided by the total revenue generated by the Company's portfolio, expressed as a percentage. |
| Total Revenue | Total net income of the Company's investment portfolio. |
A measure to outline the total revenue of the portfolio on per MW basis. |
Total income of the Company's portfolio owned for the period. |
| PPA Revenue | Revenue generated through PPAs. |
A measure to outline the revenue earned by the portfolio from power sales. |
Total revenue from all power price sales during the period from the Company's portfolio. |
| Regulated Revenue |
Revenue generated from the sale of FiTs and ROCs. |
A measure to outline the revenue earned by the portfolio from government subsidies. |
Total revenue from all subsidy income earned during the period from the Company's portfolio. |
| Ongoing charges ratio |
The recurring costs that the Company and BR1 has incurred during the period excluding performance fees and one off legal and professional fees expressed as a percentage of the Company's average NAV for the period. |
A measure of the minimum gross profit that the Company needs to produce to make a positive return for Shareholders. |
Calculated in accordance with the AIC methodology detailed in the table below. |
|---|---|---|---|
| Weighted Average ROC |
A relative indicator of the regulatory revenues within a renewable portfolio. |
A measure of the Company's portfolio earnings as a proportion of its assets. |
Total Regulated Revenue received by the portfolio divided by the product of the current market value of a ROC and the annual generation capacity of the portfolio. |
| Weighted Average Life |
The average operational life of the Company's portfolio. |
A measure of the Company's progress in extending the life of its portfolio beyond the end of the subsidy regime in 2036. |
The sum of the product of each plant's operational capacity in MW and the plant's expected life divided by the total portfolio capacity in MW. |
| Directors' Valuation |
The gross value of the SPV Investments held by BR1, including their holding companies minus Project level debt. |
An estimate of the sum that would be realised if the Company's portfolio was sold on a willing buyer, willing seller basis. |
A reconciliation of the Directors' Valuation to Financial assets at fair value through profit and loss is shown in Note 7 of the financial statements. |
| Gross Asset Value |
The Market Value of all Assets within the Company. |
A measure of the total value of the Company's Assets. |
The total assets attributable to Ordinary Shares on the Statement of Financial Position. |
| Total Outstanding Debt |
The total outstanding balances of all debt held within the Company and its subsidiaries. |
A measure that is used to establish the Company's level of gearing. |
The sum of the Sterling equivalent values of all loans held within the Company. |
| The Company £'000 |
BR1 £'000 |
Total £'000 |
|
|---|---|---|---|
| Fees to Investment Adviser | 335 | 3,008 | 3,343 |
| Legal and professional fees* | 84 | 24 | 108 |
| Administration fees | 252 | - | 252 |
| Directors' remuneration | 120 | 7 | 127 |
| Audit fees | 59 | 9 | 68 |
| Other ongoing expenses | 119 | 103 | 222 |
| Total ongoing expenses | 969 | 3,151 | 4,120 |
| Average NAV | 839,798 | ||
| Annualised Ongoing Charges (using AIC methodology) | 0.98% | ||
* Includes non-audit fee (interim review)
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