REG - Foresight Envr - Half-year Report
21/11/2024 07:00
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RNS Number : 0535N Foresight Environmental Infrastruct 21 November 2024
21 November 2024
FORESIGHT ENVIRONMENTAL INFRASTRUCTURE LIMITED
("FGEN" or the "Company")
Half-year results for the period to 30 September 2024
FGEN, a leading listed investment company with a diversified portfolio of
environmental infrastructure assets across the UK and mainland Europe, is
pleased to announce the Company's half-year results to 30 September 2024.
Summary of results
Earnings and Net Asset Value ("NAV"):
· NAV per share of 109.8 pence following payment of dividends to
shareholders in line with targets; resulting in a flat NAV total return of
0.04% for the period
· On course to deliver annual dividend of 7.80 pence in line with
target, representing a yield of 10.1%¹ on the share price at the date of this
report
Another consecutive period of record cash receipts from investments:
· Operational assets delivered cash receipts of £46.6 million in
the period, beating the previous record for H1 of £46.2 million set last year
· Construction progress on track, with potential for further
capital growth
Clear and effective capital allocation strategy:
· £68.1 million raised from asset sales in the period
· Prioritising repayment of revolving credit facility ("RCF"), with
gearing reduced to 28.7%
· £20 million share buyback programme announced 15 August 2024, of
which £5.2 million returned to shareholders to 30 September 2024
Green hydrogen investment enters administration:
· The value (equivalent to 2.6% in NAV) of the Company's green
hydrogen investment (HH2E AG) has been written down in full after failing to
secure funding and entering administration, see Half-year Report 2024 for more
information
Summary of changes in NAV:
NAV per share
NAV at 31 March 2024 113.6p
Dividends paid in the period -3.8p
AD operating contracts 1.1p
HH2E impairment -2.9p
Share buyback uplift 0.2p
Other movements (including discount rate unwind and actual performance) 1.6p
NAV at 30 September 2024 109.8p
Key investment metrics
All amounts presented in £million (except as noted) Period ended Year ended
30 September 2024 31 March 2024
Net assets((2)) 720.1 751.2
Portfolio value((3)) 806.6 891.9
Operating income and gain/(loss) on fair value of investments 4.2 (3.8)
Net Asset Value per share((4)) 109.8p 113.6p
Distributions, repayments and fees from portfolio 46.6 87.0
(Loss) before tax (0.5) (13.9)
Gross asset value((4)) 1,010.5 1,091.8
NAV total return 0.04% (1.6%)
Annualised NAV total return((4)) 7.6% 8.0%
Total shareholder return((4)) 69.4% 68.4%
Annualised shareholder return((4)) 5.1% 5.4%
(1) Based on closing share price of 77.60p on 19/11/2024
(2) Also referred to as "NAV".
(3) Classified as investments at fair value through profit or loss on the
statement of financial position.
(4) See alternative performance measures ("APMs").on page 71 to 72 in the
Half-year Report 2024
Dividend timetable
Ex-dividend date: 5 December 2024
Record date: 6 December 2024
Payment date: 27 December 2024
Ed Warner, Chair of FGEN, said:
"FGEN's half-year results reflect both progress and challenges. While the full
write-down of our investment in HH2E impacted overall performance, outside of
this our diversified portfolio of sustainable infrastructure assets performed
well, delivering record cash distributions and solid dividend cover. During
the period, we were pleased to achieve the sale of a majority stake in six
anaerobic digestion facilities, to launch our first share buyback programme,
and to receive shareholder endorsement of a name change to Foresight
Environmental Infrastructure Limited. Additionally, early reductions in UK
interest rates provide cautious optimism for a more favourable macroeconomic
outlook.
"We remain committed to disciplined capital allocation in the near term,
progressing our construction stage assets and delivering other value
enhancements across the portfolio. Longer term we are well positioned to take
advantage of the significant investment opportunity presented by the
commitment to decarbonisation and sustainable development when the wider
environment supports it."
Half-year report
A copy of the half-year report has been submitted to the National Storage
Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The half-year report
will also be available on the Company's website at http://www.fgen.com
(http://www.fgen.com) where further information on FGEN can be found.
Details of the conference call for analysts and investors
A webinar and in-person event for the half-year results will be held at 10:00
am (UK time) today, 21 November 2024, hosted by Chris Tanner, Edward Mountney
and Charlie Wright, Investment Managers to FGEN. To register for the webinar,
please contact SEC Newgate by email at fgen@secnewgate.co.uk.
Retail Investor Webinar
On Monday 25 November 2024, Chris Tanner, Edward Mountney and Charlie Wright
will also be hosting a live presentation for retail investors relating to its
half-year results via Investor Meet Company at 12:00 pm BST. The presentation
is open to all existing and potential shareholders. Questions can be submitted
pre-event via your Investor Meet Company dashboard up until 9:00 am the day
before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet
Foresight Environmental Infrastructure Limited via:
https://www.investormeetcompany.com/foresight-environmental-infrastructure-ltd/register-investor
Investors who already follow FGEN on the Investor Meet Company platform will
automatically be invited.
For further information and enquiries, please contact:
Foresight Group +44(0)20 3667 8100
Chris Tanner institutionalir@foresightgroup.eu
Edward Mountney
Wilna de Villiers
Winterflood Securities Limited +44(0)20 3100 0000
Neil Langford
SEC Newgate +44 (0)20 3757 6882
Elisabeth Cowell fgen@secnewgate.co.uk
Alice Cho
Harry Handyside
Apex Fund and Corporate Services (Guernsey) Limited +44 (0)20 3530 3600
Matt Lihou fgen@apexgroup.com
Matt Falla
About FGEN
FGEN's investment policy is to invest in a diversified portfolio of
Environmental Infrastructure. Environmental Infrastructure is defined by the
Company as infrastructure assets, projects and asset-backed businesses that
utilise natural or waste resources or support more environmentally friendly
approaches to economic activity, support the transition to a low carbon
economy or which mitigate the effects of climate change. Such investments will
typically feature one or more of the following characteristics:
· long-term, predictable cash flows, which may be wholly or partially
inflation-linked cash flows;
· long-term contracts or stable and well-proven regulatory and legal
frameworks; or
· well-established technologies, and demonstrable operational performance.
FGEN's aim is to provide investors with a sustainable, progressive dividend
per share, paid quarterly and to preserve the capital value of the portfolio
over the long term on a real basis. The target dividend for the year to 31
March 2025 is 7.80 pence per share¹.
FGEN is an Article 9 fund under the EU Sustainable Finance Disclosure
Regulation and has a transparent and award winning approach to ESG.
Further details can be found on FGEN's website www.fgen.com and LinkedIn page.
LEI: 213800JWJN54TFBMBI68
(1) These are targets only and not profit forecasts. There can be no
assurance that these targets will be met or that the Company will make any
distributions at all.
Foresight Environmental Infrastructure Limited
Half-year Report for the six months ended 30 September 2024
( )
About FGEN
Foresight Environmental Infrastructure Limited ("FGEN" or the "Company") is an
environmental infrastructure investment company, investing in a diversified
portfolio of assets that support the drive towards decarbonisation, resource
efficiency and environmental sustainability whilst aiming to generate a
sustainable financial return.
The Company's portfolio includes 42 assets located across the UK and mainland
Europe.
FGEN is a Guernsey-registered company with a premium listing on the London
Stock Exchange and is a proud constituent of the FTSE 250 index. The Company
has an award-winning approach to environmental, social and governance ("ESG")
and sustainable investing.
View our half-year results highlights here:
vimeo.com/fiveminutepitchtv/review/1031607578/7c24e09e9e
fgen.com
Our value proposition
At FGEN we believe that investors shouldn't have to choose between attractive
returns and investments with real‑world environmental benefits.
We have carefully constructed a portfolio that aims to deliver sustainable
returns whilst also providing investors with access to otherwise hard-to-reach
environmental infrastructure assets.
Our diversified investment strategy goes beyond core renewable assets such as
wind farms and solar parks, to unlock a broader array of opportunities across
different technologies, sectors and geographies - all centred around driving
the transition to a low-carbon economy, mitigating the effects of climate
change and preserving resources.
As a result, we're able to create a balanced portfolio that's less exposed to
unpredictable weather patterns and that prioritises infrastructure-like
characteristics such as inflation protection and stable long-term cash flows,
primarily derived from government subsidies or long-term contracts.
Our track record
Dividend progression
2015 6.00p
2016 6.05p
2017 6.14p
2018 6.31p
2019 6.51p
2020 6.66p
2021 6.76p
2022 6.80p
2023 7.14p
2024 7.57p
2025 7.80p(1)
( )
1. This is a target only, there can be no guarantee this target will be
met.
2. Note: Past performance cannot be relied on as a guide to future
performance
Our investment case
Our aim is to enhance value for the long term.
01.
Sustainable financial return
Offering stable progressive dividends and a portfolio delivering annualised
NAV total return of 7.6% since our IPO.
02.
Diversified portfolio
Our broad mandate provides access to a diverse range of investments across
various technologies, sectors and geographies, minimising concentration risk
and maximising opportunities.
03
Expert investment management
Our experienced team brings deep industry knowledge and a proven track record
of generating attractive and accretive investment opportunities.
04
Award-winning approach to ESG
Sustainability is woven into every aspect of our business, ensuring
transparency and delivering measurable impacts, which have earned us industry
recognition.
Performance summary
For the period ended 30 September 2024.
£720.1m 109.8p 7.6% £806.6m
Net Asset Value ("NAV") NAV per share(1) Annualised NAV total return(1) Portfolio value
FY24: £751.2m FY24: 113.6p FY24: 8.0% FY24: £891.9m
28.7% £595.4m 3.90p 1.23x
Gearing Market capitalisation(1) Half-year dividend per share(3) Dividend cover(1,2)
FY24: 31.2% FY24: £619.9m HY23: 3.78p FY24: 1.30x
7.80p (+3% increase) 619GWh(5) 96,742 tCO(2)e 333,346
2025 dividend target(4) Renewable and low carbon GHG emissions avoided Tonnes of waste diverted from
energy generated landfill
FY24: 7.57p HY23: 660GWh HY23: 95,788 tCO(2)e HY23: 359,428
Commentary:
Earnings and NAV:
· NAV per share of 109.8 pence following payment of dividends to
shareholders in line with targets; resulting in a flat NAV total return of
0.04% for the period
· On course to deliver annual dividend of 7.80 pence in line with
target, representing a yield of 10.1%(6) on the share price at the date of
this report
Another consecutive period of record cash receipts from investments:
· Operational assets delivered cash receipts of £46.6 million in
the period, beating the previous record for H1 of £46.2 million set last year
· Construction progress on track, with potential for further
capital growth
Clear and effective capital allocation strategy:
· £68.1 million raised from asset sales in the period
· Prioritising repayment of revolving credit facility ("RCF"), with
gearing reduced to 28.7%
· £20 million share buyback programme announced 15 August 2024, of
which £5.2 million returned to shareholders to 30 September 2024
Green hydrogen investment enters administration:
· The value (equivalent to 2.6% in NAV) of the Company's green
hydrogen investment (HH2E AG) has been written down in full after failing to
secure funding and entering administration, see page 28 of the Half-year
Report 2024 for more information.
1. The market capitalisation, total shareholder return, Net Asset Value
per share and dividend cover are alternative performance measures ("APMs").
The APMs within the accounts are defined on pages 71 and 72 in the Half-year
Report 2024.
2. On a paid basis.
3. On a declared basis.
4. This is a target only, there can be no guarantee this target will be
met.
5. 619GWh reflects 100% of generation at sites in which FGEN owns an
interest. This is equivalent to 563GWh when pro-rating for FGEN's
proportionate ownership interest.
6. Based on closing share price of 77.60 pence on 19/11/2024.
Our portfolio at a glance
FGEN's portfolio comprises a carefully constructed and diversified mix of
environmental infrastructure assets.
Project locations
Split by portfolio value
UK 90%
Rest of Europe 10%
Operational status
Split by portfolio value
Operational 92%
Construction 8%
Sectors
Wind
Waste & bioenergy
Anaerobic digestion
Solar
Low carbon & sustainable solutions
Controlled environment
Hydro
Total assets
Split by sector
42 assets
Wind 11
Waste & bioenergy 6
Anaerobic digestion 9
Solar 6
Low carbon & sustainable solutions 6
Controlled environment 2
Hydro 2
See our website for more information: fgen.com/portfolio
Assets by location
Norway 1 asset
United Kingdom 39 assets
Germany 1 asset
Italy 1 asset
Does not include investment into FEIP.
Chair's statement
"We remain confident in our strategy. Our strong portfolio of assets
consistently delivers solid distributions and offers numerous opportunities,
including the delivery of our construction assets, other value enhancements
across the portfolio and additional targeted divestments."
Ed Warner
Chair
In the half year to 30 September 2024, a period of solid operating and
financial performance for FGEN was impacted by a full write-down of the value
of the Company's green hydrogen investment in Germany, HH2E AG ("HH2E"), which
entered administration after failing to secure the funding necessary for its
ongoing development. This is a disappointing outcome to me and the Board. Full
details are set out in the Investment Manager's report on pages 9 and 28 of
the Half-year Report 2024.
While this is clearly an unfortunate development, there were a number of
positives to reflect on during the period, including the sale of a majority
stake in six of FGEN's anaerobic digestion ("AD") facilities; strong cash flow
generation from the Company's investments; the commencement of our first ever
share buyback programme; and the renaming of the Company following
shareholders' endorsement of its continuation at the Annual General Meeting.
While we continue to operate within a challenging macroeconomic backdrop, it
has been pleasing to see the first reductions in UK interest rates since 2020
- albeit only two 0.25% cuts to date. The inflationary environment experienced
over the past two and a half years has been a major driver of the significant
share price discounts we have seen across the investment trust industry,
including for FGEN, and so this was a welcome development. We are not
complacent, especially given the uncertainty created by continuing
geopolitical tensions.
Results
During the six months, FGEN delivered a flat Net Asset Value ("NAV") per share
total return after the distribution of interim dividends totalling 3.84 pence
per share. A pre-HH2E NAV total return of 2.60% was reduced to 0.04% after
accounting for the write-down of the green hydrogen investment.
The Company remains on track to meet its full-year target dividend of 7.80
pence per share, with dividend cover expected to be in the range 1.2 to 1.3
times.
After taking account of the dividend, the Company's NAV per share reduced by
3.3% from 113.6 pence at 31 March 2024 to 109.8 pence at 30 September 2024.
HH2E aside, several successful value enhancement initiatives within FGEN's
portfolio were offset by a slight reduction in independent power price
forecasts.
Portfolio performance
Performance of FGEN's individual assets over the six-month period has
generally been pleasing. The portfolio delivered yet another consecutive
period of record cash distributions, above budget, resulting in dividend cover
of 1.23 times. We are also encouraged with the progress being made across our
key construction assets and in enhancement work within our core portfolio.
Several notable milestones have been achieved already this year, such as the
CE Glasshouse achieving its first sales and Sandridge completing construction
in preparation for connection to the grid. Further updates on which are
provided by our Investment Manager in their report.
Transaction activity, capital recycling and share buyback programme
Our capital allocation strategy remains a key priority for the Board and the
Investment Manager, and we were pleased to have finalised the sale of 51% of
our portfolio of AD assets for a total consideration of £68.1 million in
August. This deal was for cash consideration equivalent to NAV. As we remain a
minority owner, we will continue to benefit from the future growth and income
generated by this attractive AD portfolio which we expect to be value
accretive over the medium term.
This partial sale generated immediate liquidity to commence share buybacks and
to manage our credit facility. As a result, we have been able to reduce our
gearing to 28.7% and we remain committed to reducing debt further. Our share
buyback programme started on 30 August 2024. We bought back 5,485,089 shares
in the period for a total consideration of £5.2 million and have continued to
be active in the market buying back shares in the second half of the financial
year. At the time of publication of this report, the total number of shares
bought back stood at 10,398,680.
We have now completed two successful divestments since IPO and we are actively
engaged in further sales processes to recycle capital.
Corporate matters
As highlighted in our Annual Report for the year ended 31 March 2024, we have
also been laser-focused on ensuring that the Company is as attractive as
possible to current and potential shareholders. This culminated in a reduction
to the management fees paid to the Investment Manager, effective from 1
October, and a change in the Company's name to Foresight Environmental
Infrastructure Limited, approved at our AGM in September. This will better
position FGEN to capitalise on the clear commercial benefits available through
closer association with the Foresight brand.
Our AGM also saw our shareholders deliver a solid endorsement of the Company
and its business activities, with 93% of votes cast in favour of FGEN's
continuation in its present form. We would like to thank shareholders for
their support and look forward to maintaining engagement with you over the
coming months.
Outlook and conclusion
Looking ahead, we continue to be cautious given the challenges that remain on
a macro level, while also acknowledging that there is cause for considered
optimism that circumstances in the months ahead will create a more attractive
environment in which to invest. As well as the increased potential for further
interest rate cuts, we are confident that we can continue to deliver value to
shareholders.
We remain confident in our strategy. Our strong portfolio of assets
consistently delivers solid distributions and offers numerous opportunities,
including the delivery of our construction assets, other value enhancements
across the portfolio and additional targeted divestments. We are steadfast in
our commitment to maintaining a disciplined approach to capital allocation.
Surplus liquidity generated by the portfolio in excess of targeted dividends
will be prioritised towards existing commitments, planned follow-on
investments and asset enhancements within our current portfolio, alongside
continued management of the Company's credit facility to maintain a robust
balance sheet. The Directors will also consider extending the buyback
programme based on the liquidity position of the Company, the level of gearing
and the implied returns on offer from purchasing our own shares.
Finally, the global commitment to decarbonisation and sustainable development
continues to present significant prospects for FGEN. Whilst our immediate
focus in the short term is progressing the Company's construction stage assets
and delivering other value enhancement opportunities across the portfolio,
looking forward, we are well positioned to take advantage of the significant
investment opportunity when the wider environment supports it, leveraging our
expertise and strategic vision to drive continued growth and impact.
Ed Warner
Chair
20 November 2024
The Investment Manager's report
FGEN is managed by Foresight Group LLP ("Foresight" or "Foresight Group") as
its external Alternative Investment Fund Manager ("AIFM") with discretionary
investment management authority for the Company.
Chris Tanner
Investment Manager
Edward Mountney
Investment Manager
Charlie Wright
Investment Manager
For detailed biographies of the team, please see our website: fgen.com
ABOUT FORESIGHT GROUP
Founded in 1984, Foresight is a leading investment manager in real assets and
capital for growth, operating across the UK, Europe and Australia.
With decades of experience, Foresight offers investors access to attractive
investment opportunities at the forefront of change. Foresight actively builds
and grows investment solutions to support the energy transition, decarbonise
industry, enhance nature recovery and realise the economic potential of
ambitious companies.
A constituent of the FTSE 250 index, Foresight's diversified investment
strategies combine financial and operational skillsets to maximise asset value
and provide attractive returns to its investors. Its wide range of private and
public funds is complemented with a variety of investment solutions designed
for the retail market.
Foresight is united by a shared commitment to build a sustainable future and
grow thriving companies and economies.
£12.6bn 900+
Assets under management(1) Investment opportunities reviewed
8 438
Countries with operations Infrastructure assets
180+ 4.7GW
Dedicated professionals Renewable energy generation(2)
All figures as at 31 March 2024 (FY24) unless otherwise stated.
1. Unaudited AUM estimate, disclosed as part of the H1 FY25 trading
update.
2. As defined by the London Stock Exchange Green Economy Mark.
PORTFOLIO UPDATE
As highlighted by the Chair, a period of solid performance from FGEN's
diversified portfolio of sustainable infrastructure assets was offset by the
full write-down of value of the Company's investment in the HH2E hydrogen
development platform, following HH2E's decision to file for insolvency as a
result of the failure to secure the further funding necessary to meet its
ongoing commitments. FGEN has invested £19.3 million, equivalent to 2.6% of
the NAV prior to the write‑down, and we currently consider it unlikely that
there will be any recovery, given that FGEN's claim on the company is
subordinated to general creditors under German law.
This is clearly a very disappointing result. We remain of the belief that
hydrogen will play a key part in the energy transition globally as a versatile
and low-carbon energy carrier, and we felt that HH2E was a good opportunity to
gain access to the German hydrogen market, expected to be one of the most
attractive markets for energy infrastructure investors due to the government
support being proposed. However, the pace of development of the hydrogen
market has not been as quick as originally expected and this has led to many
projects around the world being delayed. The scale of the additional at-risk
funding required by HH2E was considered to be too great in the context of
slower than expected demand and wider regulatory delays and therefore FGEN
declined to provide further funding, particularly in consideration of our
approach to portfolio construction, risk and capital allocation in the
current market environment.
HH2E was the only development-stage investment in the FGEN portfolio, and so
the only asset in the portfolio that faced such a risk profile.
Over 90% of the portfolio by value is in operational assets that earn
revenues and have a proven track record of delivery, and our construction
assets are progressing well, with potential for capital growth as they
become operational.
See page 28 in Half-year Report 2024 in the operational review of the
Half-year Report 2024 for detailed information about FGEN's investment in HH2E
and the factors that led to the write-down of the investment.
PERFORMANCE SUMMARY
FGEN's diversification strategy continues to offer significant benefits to
investors. The portfolio gains from a substantial proportion of contracted
revenues, providing long-term predictable cash flows with a high degree of
inflation linkage, as well as revenues earned by non-energy generating assets.
NAV per ordinary share at 30 September 2024 fell to 109.8 pence (31 March
2024: 113.6 pence per share) after payment of interim dividends totalling 3.84
pence and the 2.9 pence negative impact of HH2E. The details on NAV movements
over the period are set out on pages 12 to 21 ofin the Half-year Report 2024.
The Company's portfolio valuation at 30 September 2024 was £806.6 million
(31 March 2024: £891.9 million).
The portfolio remains highly cash generative with record cash receipts from
the portfolio of £46.6 million by way of distributions, which includes
interest, loan repayments and dividends over the first six months of the year
(30 September 2023: £46.2 million). Divestments totalling £68.1 million
have been carried out in the period and proceeds primarily used to repay the
RCF, underscoring the Investment Manager's prudent approach to portfolio and
balance sheet management. Dividend cover stands at 1.23 times for the first
six months of the financial year, or 1.36 times before payment of the
Electricity Generator Levy ("EGL").
Overall, the Company has benefited from good operational performance across
the portfolio, despite wind speeds and solar irradiation being below average
during the period. The AD portfolio performed above budget and helped to
compensate, demonstrating the value of diversification across different asset
classes and energy resources. Whilst a material outage at Cramlington during
the period contributed to the waste & bioenergy segment underperforming,
this issue has now been repaired with the asset since outperforming. Other
variances to budget primarily arise from changes in power prices since the
start of the year or temporary working capital fluctuations which will be
recouped prior to the year end.
Whilst electricity and gas prices have decreased slightly during the period,
FGEN benefits from the Investment Manager's active mitigation of merchant
power and gas price risk which contributes to insulation from price
fluctuations via short-term price fixing arrangements and complemented further
by longer-term subsidy support. The portfolio is fixed 60% for winter 2024/25
and 43% for summer 2025.
FGEN's construction projects have also progressed well during the period. The
onsite construction of Sandridge, the 50MW battery project, has been completed
and is now awaiting grid connection with pre-construction activities at the
other battery sites proceeding against planning milestones. The Glasshouse
project and the Rjukan project are both progressing according to schedule,
with sales ramp-up now well underway at the Glasshouse on its licensed
pharmaceutical products and Rjukan on track to complete in time for first
sales by the end of 2025. The rollout of further CNG refuelling stations is
progressing well with a c.27% increase in fuel dispensed during the first half
of FY24.
Progressing these projects through construction and into steady state
operations is expected to result in positive capital appreciation whilst
providing diversification for the portfolio across different markets and
technologies. Detailed case studies for CNG Foresight, the Glasshouse and
Rjukan are included in the asset spotlight section on pages 30 to 36 ofin the
Half-year Report 2024.
MARKET AND OPPORTUNITIES
The investment thesis for environmental infrastructure remains strong. The
markets and opportunities remain largely unchanged from those discussed on
pages 21 to 24 in Half-year Report 2024.
The Investment Manager has a strong origination and investment acquisition
platform across offices in the UK, Italy and Spain, which over the last 12
months has sourced close to 900 prospective infrastructure investments. These
cover the value chain from operational assets providing immediate yield
through to development and construction-stage investments with an additional
focus on growth and capital appreciation, across asset classes which have been
and will continue to be of core focus to FGEN, covering energy transition and
renewables, the circular economy, and other low carbon and sustainable
solutions.
Investment into new projects are not expected in the short to medium term in
light of the wider market situation and ongoing focus on capital allocation.
However, we are optimistic that when macro conditions are more supportive,
FGEN will be well placed for further investment across a diversified range of
asset classes, continuing to prioritise the core aspects of thematic
infrastructure investing such as stable cash flows, inflation linkage and the
delivery of essential services, whilst contributing to a lower-carbon economy.
Read more about markets and opportunities on pages 21 to 24 in Half-year
Report 2024.
RISKS AND RISK MANAGEMENT
The Company's approach to risk governance and its risk review process, as well
as the principal risks to the achievement of the Company's objectives, remain
unchanged to those set out in the risks and risk management section on pages
53 to 59 of the Company's Half-year Report 2024.
Developments in relation to those principal risks, particularly those which
could potentially have a short to medium‑term impact during the period to 31
March 2025, are outlined below.
Energy prices
Following the period of extraordinarily high power prices during 2022 and
early 2023, prices have fallen back significantly and have been relatively
stable over the last six months, with slight reductions due to factors such as
reduced energy demand and increased renewable buildout expectations with the
associated impact on capture pricing. The Company continues to take a robust
mitigation approach to the valuation risks associated with forecast power
prices being different to the actual prices achieved by using short-term price
fixes and assumptions informed by market forward prices and a blend of three
different specialist forecasters where fixes are not in place. The
diversification of revenue sources across not just power but gas and other
commodities, and across different markets, is a further mitigant in reducing
exposure to power price fluctuations in single markets.
Whilst currently in a period of relative stability, the war in Ukraine and the
expanding Middle East crisis could create further volatility for oil and gas
prices with risks to the valuation related to power price assumptions both to
the upside and the downside.
Read more about risks and risk management on pages 53 to 59 in Half-year
Report 2024.
Risk associated with development or construction‑stage assets
Following the write-down of FGEN's only development‑stage investment, the
Company does not hold any investments in development-phase projects.
Currently, 8% of the portfolio is invested across construction‑stage assets,
which are generally targeting steady state operations within the next 12 - 24
months. Therefore, management of construction risk across those assets is a
key focus for the Investment Manager in order to maximise the potential for
capital appreciation and to deliver further dividend cover as the assets move
towards positive cash flow generation. Further detail on a selection of the
Company's larger construction-stage investments is included in the asset
spotlight section of the operational review on page 30 in the Company's
Half-year Report 2024.
Regulatory risk
In general, the regulatory environment across the UK and Europe remains
overwhelmingly supportive for the Company's wider mandate.
Focusing on the UK, there were certain consultations and potential reforms
underway under the previous Conservative government, such as the review of
electricity market arrangements ("REMA"), the consultation on Fixed Price
Certificates ("FPCs") into the Renewables Obligation regime in place of
Renewable Obligation Certificates ("ROCs"), that remain ongoing but which have
not progressed as swiftly as envisaged given the disruption of the general
election and the appointment of the new Labour government. We continue to
monitor developments here, given that some proposals still under consideration
could change the way in which revenues for FGEN's renewable electricity and
battery storage assets are determined.
However, for these more significant changes, such as locational pricing, it is
unlikely that the necessary adjustments to the regulatory regime will occur
before the late 2020s.
In general, the UK government's direction of travel for renewables and wider
decarbonisation efforts is increasingly positive under the Labour government,
as evidenced by the loosening of planning restrictions for onshore wind in
England and the increase in Contracts for Difference ("CfD") budgets. However,
some of the finer details of Labour's net zero strategies, for example the
exact role that GB Energy will have to play and how to manage grid capacity
queues and overall congestion as a major bottleneck to achieving a cleaner
energy transmission network, are not yet clear.
INFLATION, INTEREST RATES AND DISCOUNT RATES
As is generally the case for the wider infrastructure sector, the FGEN
portfolio carries a certain degree of sensitivity to changes in inflation and
interest rates. Whilst higher inflation in isolation is helpful for valuations
of FGEN assets given both the explicit and implicit inflation linkage across
its various revenue streams, the upward pressure that higher inflation has on
interest rates has a negative effect given the read across to higher discount
rates for valuing infrastructure assets.
Of relevance to this is the recent Budget announcement in October, since which
there has been an upwards movement in gilt rates, thereby increasing the
risk-free rate and resulting in share price reductions for alternative listed
investment companies such as FGEN. This could potentially call into question
future decisions on interest rate reductions, with the latest developments
suggesting that the "higher for longer" narrative could continue to persist.
However, the broader macroenvironment, with interest rate cuts throughout the
year and inflation now close to pre‑crisis levels across the UK, EU and the
US, would suggest that the longer-term direction of travel is positive.
INVESTMENT OUTLOOK
The energy transition and pursuit of net zero is resulting in a constantly
evolving opportunity set across an increasingly wide range of sectors and
asset classes that are still underpinned by infrastructure fundamentals,
albeit with varying degrees of risk, opportunity and market exposure. This is
illustrated by the ever-increasing number of opportunities being originated by
the Investment Manager across the spectrum of environmental infrastructure, as
the decarbonisation agenda continues to accelerate.
Therefore, despite the current challenges facing the listed renewable
infrastructure sector and the likelihood that equity markets will remain
inaccessible to FGEN and its peers in the near term, we remain optimistic
about the future. The fundamental story for the growth of the sector and for
FGEN is as strong as it has ever been, with the energy transition requiring
trillions of investment over the next couple of decades.
FGEN has a broad and diversified investment mandate which combined with the
Investment Manager's ability to originate in the UK and Europe gives great
scope to be highly selective about the opportunities it pursues compared to
any reliance on single markets and/or technologies.
However, in the shorter term and particularly over the next six to twelve
months, our capital allocation strategy will continue to lay the foundations
for future NAV growth by maximising cash flow from operating assets and by
focusing on the Company's construction-stage assets, and other enhancement
opportunities and follow‑on investments within the portfolio where
sufficiently value accretive.
While FGEN is not currently pursuing any new investment, looking further
forward, any future development-stage exposure will be limited, particularly
where it involves projects at a "pre-final investment decision" ("FID") stage.
The Investment Manager has always maintained an active asset management
approach with a large in-house portfolio management team of over 105 people,
consisting of engineers, commercial and financial managers, and technical
professionals. This contributes to a proactive approach to value enhancement
opportunities, with examples including AD expansions and resilience measures
across the portfolio.
Finally, following the successful disposal to Future Biogas, we are continuing
to consider further asset disposals across other parts of the portfolio where
considered strategically appropriate and value accretive, in order to recycle
capital and further reduce drawings on the Company's revolving credit
facility.
Overall, we remain steadfast in our commitment to maintaining a disciplined
approach to capital allocation. We are focused on managing the Company's
funding position and balance sheet to ensure that we are as well positioned as
possible to continue to exploit the significant investment opportunity when
the wider environment supports it, with strong belief and confidence in the
long-term investment case and our ability to continue to deliver attractive
risk-adjusted returns for shareholders.
INVESTMENT PORTFOLIO AND VALUATION
Investment portfolio
Diversification continues to play a key role for the Company, reducing
dependency on a single market, technology type or set of climatic conditions,
whilst allowing exposure to a wide opportunity set, as illustrated in the
analysis below at 30 September 2024, according to share of portfolio value:
Sector split
Wind 28%
Waste & bioenergy 26%
Anaerobic digestion 13%
Solar 15%
Low carbon & sustainable solutions 8%
Controlled environment 9%
Hydro 1%
Geography
UK 90%
Rest of Europe 10%
Remaining asset life
Up to 10 years 11%
11 to 20 years 61%
More than 20 years 28%
Weighted average remaining asset life of the portfolio is 16.5 years.
Operational status
Operational 92%
Construction 8%
Valuation method
Discounted cash flow ("DCF") 91%
Cost 9%
Operator exposure
SGRE 17%
BWSC 10%
Future Biogas 9%
Brighter Green Engineering 7%
Vestas 5%
Other 52%
Asset concentration
Largest asset 10%
2nd largest asset 5%
3rd largest asset 5%
4th largest asset 5%
5th largest asset 5%
Top 6-10 20%
Other 50%
Portfolio valuation
The Investment Manager is responsible for carrying out the fair market
valuation of the Company's investments, which is presented to the Directors
for their approval and adoption. The valuation is carried out on a quarterly
basis as at 30 June, 30 September, 31 December and 31 March each year.
The valuation is based on a discounted cash flow analysis of the future
expected equity and loan note cash flows accruing to the Group from each
operational portfolio investment. Assets under construction are valued at cost
until such time as the risks associated with construction have substantially
passed. For some technologies with more complex construction activities, this
will be when the asset reaches the start of commercial operations, while for
others this may be during late-stage construction.
This valuation uses key assumptions which are recommended by Foresight using
its experience and judgement, having considered available comparable market
transactions and financial market data in order to arrive at a fair market
value. An independent verification exercise of the methodology and assumptions
applied by Foresight is performed by a leading accountancy firm and an opinion
is provided to the Directors. The Directors have satisfied themselves as to
the methodology used and the assumptions adopted and have approved the
valuation.
The Directors' valuation of the portfolio at 30 September 2024 was £806.6
million, compared to £891.9 million at 31 March 2024. The decrease of £85.3
million is the net impact of follow-on investments, divestments, cash received
from investments, changes in foreign exchange rates, power price assumptions,
underlying growth in the portfolio and the impairment of FGEN's interests in
its green hydrogen development platform. A reconciliation of the factors
contributing to the change in the portfolio during the period is shown in the
chart in the Half-year Report 2024.
The movement in value of investments during the period ended 30 September 2024
is shown in the table below:
30 Sep 31 Mar
2024 2024
£m £m
Valuation of portfolio at opening balance 891.9 898.5
Acquisitions in the period (including follow-on investments) 15.9 69.2
Divestments (68.1) -
Cash distributions from portfolio (46.6) (87.0)
Rebased opening valuation of portfolio 793.1 880.7
Changes in forecast power prices 0.2 (36.0)
Changes in economic assumptions - 8.6
Changes in discount rates - (29.0)
Changes in exchange rates (0.3) (0.5)
Balance of portfolio return 13.6 68.1
Valuation of portfolio 806.6 891.9
Fair value of intermediate holding companies (84.4) (138.3)
Investments at fair value through profit or loss 722.2 753.6
Allowing for investments of £15.9 million (including payment of deferred
consideration), divestments of £68.1 million and cash receipts from
investments of £46.6 million, the rebased valuation is £793.1 million. The
portfolio valuation at 30 September 2024 is £806.6 million (31 March 2024:
£891.9 million), representing an increase over the rebased valuation of
1.7% during the period.
Valuation assumptions
Each movement between the rebased valuation and the 30 September 2024
valuation is considered below:
Forecast power prices
The project cash flows used in the portfolio valuation at 30 September 2024
reflect contractual fixed price arrangements under Power Purchase Agreements
("PPAs"), where they exist, and short-term market forward prices for the next
two years where they do not.
After the initial two-year period, the project cash flows assume future
electricity and gas prices in line with a blended curve informed by the
central forecasts from three established market consultants, adjusted by the
Investment Manager for project-specific arrangements and price
cannibalisation.
For the Italian investment, project cash flows assume future electricity
prices informed by a leading independent market consultant, based on local
long-term projections.
The overall change in forecasts for future electricity and gas prices compared
to forecasts at 31 March 2024 has increased the valuation of the portfolio by
£0.2 million.
The graph on the right represents the blended weighted power curve used by the
Company, reflecting the forecast of three leading market consultants, adjusted
by the Investment Manager to reflect its judgement of capture discounts and a
normalised view across the portfolio of expectations of future price
cannibalisation resulting from increased penetration of low marginal cost,
intermittent generators on the GB network. The solid line represents the
weighted average realised price forecast - including short-term price fixes
under PPAs - whereas the dotted line shows the equivalent merchant price for
unhedged generation.
Guarantees of origin certificates
As the portfolio includes a number of renewable energy generation projects, it
is able to generate revenue from the sale of Renewable Energy Certificates in
addition to income from the sale of gas and electricity. A certificate is
issued by Ofgem for each unit of renewable electricity generated, and by the
Green Gas Certification Scheme for gas generated, can be sold as part of, or
independently of, the offtake contracts in place for the wholesale electricity
and/or gas. The certificates received for UK projects are Renewable Energy
Guarantee of Origin ("REGO") and Renewable Gas Guarantee of Origin ("RGGO")
for electricity and gas, respectively. Being traded on the open market, the
price is variable and subject to typical demand and supply dynamics.
As with forecast power prices, valuations reflect contractual fixed price
arrangements where they exist, or the following assumptions informed by
forecasts provided from a range of independent market consultants where they
do not:
Year 2024 2025 2026-28 2029+
REGO £5/MWh £5/MWh £5/MWh £2/MWh
RGGO £8.5/MWh £7.5/MWh £7/MWh £7/MWh
These prices remain supported by those seen by the Investment Manager and as
such the modelled assumptions remain unchanged from the prior year.
Revenue analysis
The graph in the Half-year Report 2024 shows the way in which the revenue mix
of the portfolio changes over time for future financial years, given the
assumptions made regarding future power prices set out in the Half-year Report
2024. As expected, the proportion of merchant revenues increases in later
years as the subsidies that projects currently benefit from expire.
On a net present value ("NPV") basis (using the discount rate applicable to
each project), the relative significance of each revenue category illustrated
above is as follows:
Revenue NPV
Subsidy 46%
Merchant power 28%
Long-term contracts 11%
Flexible generation 2%
Other merchant revenues 13%
Energy generating portfolio
FGEN's energy generating portfolio includes wind, solar, anaerobic digestion,
biomass, energy-from-waste ("EfW") and hydropower investments. Revenues in
these projects typically consist of a combination of government-backed
inflation-linked subsidies, short-term price fixes contracted under a PPA,
merchant revenue or other revenues such as those earned from private wire
contracts.
Merchant prices have reduced materially from the elevated levels experienced
recently. The Company seeks to minimise the impact of power price volatility
by maintaining a programme of rolling price fixes for its energy generating
projects, typically having the majority of projects on fixed price
arrangements in the near term.
At 30 September 2024, 60% of the renewable energy portfolio's electricity and
gas price exposure was subject to fixed prices for the winter 2024/25 season
and 43% for the summer 2025 season. See the power price hedging section in the
operational review on page 25 of the Half-year Report 2024 for more detail
about the latest price fixes in place across the portfolio.
Taking the proportion of merchant revenues hedged under fixed price short-term
PPAs, along with subsidy revenues and revenues from long-term contracts
outside of the energy generating assets, 81% of total revenues are subject to
a fixed price for the financial year to 31 March 2025, showing that merchant
revenue remains a low proportion and reflects the broader diversification of
FGEN's portfolio.
Waste and wastewater treatment concessions
This category consists of availability-based assets structured under the
Private Finance Initiative ("PFI")/Public Private Partnership ("PPP")
procurement models, whereby revenue is derived from long-term contracts with
local authorities.
Non-energy generating portfolio
The desire to mitigate the effects of climate change stimulates not only
opportunities connected to the energy transition, but also in wider
environmental infrastructure that has improved sustainability credentials over
traditional infrastructure approaches in sectors such as waste management,
water treatment, transportation and food production.
This is reflected in FGEN's diversified portfolio, which includes both
grid-scale batteries and other non-energy generating assets such as low-carbon
transport (CNG Foresight) and controlled environment projects, CE Glasshouse
(sustainable agriculture) and CE Rjukan (sustainable aquaculture).
Low-carbon transport
In the case of FGEN's investment into CNG Foresight, a portfolio of CNG
refuelling stations for heavy goods vehicles located across the UK, the asset
generates revenue through a specified margin on CNG dispensed.
Per the terms of the fuel supply contracts, the asset reserves the right to
revise pricing to reflect changes in the wholesale price of natural gas and
fuel duty, and will annually adjust prices (upwards only) in line with CPI
inflation.
Batteries
FGEN's portfolio includes one operational and three c.50MW Battery Energy
Storage Systems ("BESS") at varying stages of construction at 30 September
2024, making up less than 4% of the total portfolio valuation of the Company.
Revenues for BESS assets can be generated in a variety of ways with
third-party consultants continuing to indicate the importance of prioritising
the capture of trading margins over the finite opportunity from revenues
generated by the provision of grid services. Therefore, merchant revenues are
likely to make up the largest part of the revenue model for these assets. As
such, these investments do not currently have long-term contractual inflation
linkage, although revenues are driven by a margin over costs which is expected
to be sustained regardless of inflation.
Controlled environment
Controlled environment projects typically face a different revenue model to
environmental infrastructure projects with subsidy support or with long-term
contracts, with a differing set of market risk characteristics.
Therefore, the Company has only invested in projects that enjoy a privileged
market position over competitors, for example due to physical location,
technology or product differentiation.
In the case of FGEN's glasshouse, the investment is primarily built around the
debt service on its senior secured shareholder loan, with some equity
participation over time from growth of the underlying horticultural products.
The glasshouse is co-located with an existing FGEN anaerobic digestion
facility, which itself will receive an additional source of revenue via a
private wire supplying low-carbon heat and power to the glasshouse. Wastage
from the glasshouse produce may also be returned to the AD digester, creating
a circular ecosystem.
In the case of CE Rjukan, revenues will primarily be generated from the
production of approximately 8,000 tonnes of trout annually, once the site is
fully ramped up in 2025. This will be sold to European and international
salmonid markets through a sales and marketing agreement with a globally
established Norwegian seafood distribution company.
The Rjukan investment case is built on the premise of achieving average
historic prices evidenced by the Fish Pool Index; however, our experienced
operational partner is targeting sales at levels between c.5% and 50% higher
than this, underpinned by the higher quality of fish production at Rjukan
versus the typical fish sold in commodity-based markets.
Whilst these investments do not currently have long-term contractual inflation
linkage, the projects retain pricing power and are able to increase prices to
maintain margins as the underlying cost base inflates.
The degree of contractual inflation linkage of each category illustrated can
be found in the Half-year Report 2024.
The Company's diversification strategy ensures the portfolio benefits from a
significant proportion of contracted revenues and revenues earned by
non-energy generating assets. Under current forecasts, dividend cover is
expected to be healthily covered for the years ahead.
Useful economic lives
Useful economic lives ("UELs") of assets are based on the Investment Manager's
estimates of the period over which the assets will generate revenue and are
periodically reviewed for continued appropriateness. The assumption used for
the useful life of investments is the lower of lease duration and 35 years for
solar assets, 30 years for wind farms and 20 years for anaerobic digestion
facilities - being the life of the RHI subsidy, after which point the
Investment Manager conservatively assumes that facilities will cease to
operate.
As signalled previously, the Board and the Investment Manager remain
optimistic about the prospects to extend the lives of the Company's AD
facilities and are currently working with partners to progress these
initiatives.
Economic assumptions
The valuation reflects an update in inflation assumptions based on a
combination of actual historic inflation and recent independent economic
forecasts.
Valuation assumptions for operational assets are set out below:
Economic assumptions used in the portfolio valuation (31 March 2024 figures
shown in brackets)
2024 2025-2030 2031+
UK
RPI 3.5% 3.0% 2.25%
(3.5%) (3.0%) (2.25%)
CPI 2.5% 2.25% 2.25%
(2.5%) (2.25%) (2.25%)
Deposit rates 2.0% 2.0% 2.0%
(2.0%) (2.0%) (2.0%)
Corporation tax 25.0% 25.0% 25.0%
(25.0%) (25.0%) (25.0%)
Italy
Inflation 2.0% 2.0% 2.0%
(2.0%) (2.0%) (2.0%)
Deposit rates -% -% -%
(-%) (-%) (-%)
Corporation tax (IRES) 24.0% 24.0% 24.0%
(24.0%) (24.0%) (24.0%)
Regional tax (IRAP) 4.8% 4.8% 4.8%
(4.8%) (4.8%) (4.8%)
The euro/sterling exchange rate used to value euro-denominated investments was
€1.20/£1 and the rate for Norwegian krone-denominated investments was
NOK13.96/£1 at 30 September 2024 (€1.17/£1 and NOK13.66/£1 at 31 March
2024).
Actual inflation to date continues to track in line with the Company's
modelled assumptions and therefore no changes have been reflected since the
start of the year.
The overall change in value resulting from changes to foreign exchange rates
in the year is £0.3 million.
Discount rates
The discount rates used in the valuation exercise represent the Investment
Manager's and the Board's assessment of the rate of return in the market for
assets with similar characteristics and risk profile. The discount rates are
reviewed on a regular basis and updated to reflect changes in the market and
in the project risk characteristics.
UK gilt yields have remained at elevated levels consistent to those prevalent
at the start of the year and transactional activity continues to indicate
support for the Company's valuation assumptions, therefore no changes have
been made to discount rates at either 30 June 2024 or 30 September 2024 in
relation to the macroeconomic backdrop.
In addition to macro-driven changes, the Investment Manager also considers
project-specific changes - such as the completion of major milestones on
construction phase investments. Whilst progress continues at these projects,
no changes have been made to discount rates this period.
Taking the above into account and including an increase in the value of assets
in construction, the overall weighted average discount rate ("WADR") of the
portfolio is 9.5% at 30 September 2024 (31 March 2024: 9.4%).
The WADR applied to each of the principal operational sectors within the
portfolio is displayed in the table below, noting this represents a blend of
levered and unlevered investments and therefore the relevant gearing of each
sector is also shown.
Sector WADRs Gearing
Wind 8.7% 35%
Waste & bioenergy 9.8% 9%
Anaerobic digestion 8.6% -
Solar 7.6% 15%
Batteries 10.0% -
Hydropower 8.0% 38%
Weighted average 9.5% 18.0%
Sectors in which the Investment Manager retains proprietary information, such
as controlled environment and low-carbon transport, are not disclosed in the
table above, although discount rates used in these sectors feed into the
portfolio WADR of 9.5%.
As in previous valuations, the discount rate used for energy generating asset
cash flows which have received lease extensions beyond the initial investment
period of 25 years retains a premium of 1% for subsequent years, reflecting
the merchant risk of the expected cash flows beyond the initial 25-year
period.
No changes have been made to discount rates during this period, therefore the
overall change in value resulting from changes to discount rates in the year
is £nil.
Balance of portfolio return
This represents the balance of valuation movements in the year, excluding the
factors noted above. The balance of the portfolio return mostly reflects the
impact on the rebased portfolio value, all other measures remaining constant,
of the effect of the discount rate unwinding and additional valuation
adjustments from updates to individual project assumptions. The total
represents an uplift of £13.6 million.
Of this, the key individual items include an uplift of £31.2 million from
discount rate unwind, an £8.0 million reduction from operational
under-performance (see page 24 in the Half-year Report 2024 for further
commentary within the operational review), offset by a £7.1 million uplift
from revision to anaerobic digestion operating contracts following the partial
disposal completed during the period, a £19.3 million write-down to the value
of FGEN's investment in HH2E and a £2.6 million uplift from a number of other
lower-value cost adjustments and other commercial assumptions following the
normal course of ongoing reassessment throughout the period.
In addition to these items, the Company also benefited from a 0.2 pence
increase in NAV per share, arising from the purchase of 5,485,089 shares for
£5.2 million, as part of the Company's ongoing share buyback programme.
Valuation sensitivities
The NAV of the Company is the sum of the discounted value of the future cash
flows of the underlying asset financial models, construction and development
spend, the cash balances of the Company and UK HoldCo, and the other assets
and liabilities of the Group less Group debt.
The portfolio valuation is the largest component of the NAV and the key
sensitivities are considered to be the discount rate applied in the valuation
of future cash flows and the principal assumptions used in respect of future
revenues and costs.
A broad range of assumptions is used in our valuation models. These
assumptions are based on long-term forecasts and are not affected by
short-term fluctuations in inputs, whether economic or technical. The
Investment Manager exercises its judgement in assessing both the expected
future cash flows from each investment based on the project's life and the
financial models produced by each project company and the appropriate discount
rate to apply.
The following sensitivities include the impact of the EGL.
The key assumptions are as follows:
Discount rate
The WADR of the portfolio at 30 September 2024 was 9.5% (31 March 2024: 9.4%).
A variance of plus or minus 0.5% is considered to be a reasonable range of
alternative assumptions for discount rates.
An increase in the discount rate of 0.5% would result in a downward movement
in the portfolio valuation of £18.1 million (2.8 pence per share) compared to
an uplift in value of £18.2 million (2.8 pence per share) if discount rates
were reduced by the same amount.
Volumes
Base case forecasts for intermittent renewable energy projects assume a "P50"
level of electricity output based on reports by technical consultants. The P50
output is the estimated annual amount of electricity generation (in MWh) that
has a 50% probability of being exceeded - both in any single year and over the
long term - and a 50% probability of being underachieved. Hence the P50 is the
expected level of generation over the long term.
The P90 (90% probability of exceedance over a 10-year period) and P10 (10%
probability of exceedance over a 10-year period) sensitivities reflect the
future variability of wind, hydropower and solar irradiation and the
uncertainty associated with the long-term data source being representative of
the long-term mean.
Separate P10 and P90 sensitivities are determined for each asset and
historically the results are presented on the basis that they are applied in
full to all wind, hydro and solar assets. This implies individual project
uncertainties are completely dependent on one another; however, a portfolio
uncertainty benefit analysis performed by a third-party technical adviser
identified a positive portfolio effect from investing in a diversified asset
base.
That is to say that the lack of correlation between wind, hydro and solar
variability means P10 and P90 sensitivity results should be considered
independent. Therefore, whilst the overall P90 sensitivity decreases NAV by
5.7 pence, the impact from wind, solar and hydro separately is only 4.2 pence
per share, 1.3 pence per share and 0.2 pence per share respectively, as shown
in the chart on page 21 in the Half-year Report 2024.
Agricultural anaerobic digestion facilities do not suffer from similar
deviations as their feedstock input volumes (and consequently biogas
production) are controlled by the site operator.
For the waste & bioenergy projects, forecasts are based on projections of
future input volumes and are informed by both forecasts and independent
studies where appropriate. Revenues in the PPP projects are generally not very
sensitive to changes in volumes due to the nature of their payment mechanisms.
Electricity and gas prices
Electricity and gas price assumptions are based on the following: for the
first two years, cash flows for each project use forward electricity and gas
prices based on market rates unless a contractual fixed price exists, in which
case the model reflects the fixed price followed by the forward price for the
remainder of the two-year period. For the remainder of the project life, a
long-term blend of central case forecasts from three established market
consultants and other relevant information is used, and adjusted by the
Investment Manager for project-specific arrangements and price
cannibalisation.
The sensitivity assumes a 10% increase or decrease in power prices relative to
the base case for each year of the asset life after the first two-year period.
While power markets can experience movements in excess of +/-10% on a
short-term basis, as has been the case recently, the sensitivity is intended
to provide insight into the effect on the NAV of persistently higher or lower
power prices over the whole life of the portfolio. The Directors feel that
+/-10% remains a realistic range of outcomes over this very long time horizon,
notwithstanding that significant movements will occur from time to time.
An increase in electricity and gas prices of 10% would result in an uplift in
the portfolio valuation of £41.1 million (6.3 pence per share) compared to a
downward movement in value of £39.0 million (5.9 pence per share) if prices
were reduced by the same amount.
Should electricity prices fall to £50/MWh, and gas prices also fall by a
corresponding amount, the Company would maintain a resilient dividend cover
for the next three financial years. Alternatively, should prices fall to
£40/MWh, the Company would still expect to cover the dividend, albeit with
reduced headroom by year three.
Uncontracted revenues on non-energy generating portfolio
Non-energy generating assets, such as batteries and controlled environment
agriculture and aquaculture, are not materially affected by either scarcity of
natural resource or power price markets. Therefore, the Investment Manager has
presented a sensitivity illustrating an assumed 10% increase or decrease on
all uncontracted revenues for each year of the asset lives.
An increase in uncontracted revenues of 10% would result in an upward movement
in the portfolio valuation of £18.3 million (2.8 pence per share) compared to
a decrease in value of £14.2 million (2.2 pence per share) if those revenues
were reduced by the same amount.
Feedstock prices
Feedstock accounts for over half of the operating costs of running an AD
plant. As feedstocks used for AD are predominantly crops grown within existing
farming rotation, they are exposed to the same growing risks as any
agricultural product. The sensitivity assumes a 10% increase or decrease in
feedstock prices relative to the base case for each year of the asset life.
An increase in the feedstock prices of 10% would result in a downward movement
in the portfolio valuation of £7.0 million (1.1 pence per share) compared to
an uplift in value of £7.0 million (1.1 pence per share) if prices were
reduced by the same amount.
No such sensitivity is applicable to FGEN's biomass investment, where fuel
costs are tied under long-term contracts.
Inflation
Most projects in the portfolio receive a revenue stream which is either fully
or partially inflation linked. The inflation assumptions are described in the
macroeconomic section on page 17 in the Half-year Report 2024.
The sensitivity assumes a 0.5% increase or decrease in inflation relative to
the base case for each year of the asset life.
An increase in the inflation rates of 0.5% would result in an uplift in the
portfolio valuation of £21.6 million (3.3 pence per share) compared to a
decrease in value of £21.9 million (3.3 pence per share) if rates were
reduced by the same amount.
Foreign exchange rates
As the proportion of the portfolio assets with cash flows denominated in
non-GBP currencies represents a small proportion of the portfolio value at 30
September 2024, the Directors consider the sensitivity to changes in exchange
rates to be insignificant.
Corporation tax
The UK corporation tax assumptions applied in the portfolio valuation are
outlined in the notes to the accounts on page 64 in the Half-year Report 2024.
The sensitivity in the chart in the Half-year Report 2024 assumes a 2%
increase or decrease in the rate of UK corporation tax relative to the base
case for each year of the asset life.
An increase in the UK corporation tax rate of 2% would result in a downward
movement in the portfolio valuation of £12.7 million (1.9 pence per share)
compared to an uplift in value of £13.4 million (2.0 pence per share) if
rates were reduced by the same amount.
Sensitivities - impact on NAV at 30 September 2024
The chart in the Half-year Report 2024 shows the impact of the key
sensitivities on NAV per share, with the £ labels indicating the impact of
the sensitivities on portfolio value.
Investment portfolio
At 30 September 2024, the Group's investment portfolio comprised interests in
42 projects, as well as investments into several European opportunities
through its investment in FEIP.
Capacity Commercial
(MW) operations date
Asset Location Ownership
Wind
Bilsthorpe England 100% 10.2 Mar 2013
Burton Wold Extension England 100% 14.4 Sep 2014
Carscreugh Scotland 100% 15.3 Jun 2014
Castle Pill Wales 100% 3.2 Oct 2009
Dungavel Scotland 100% 26.0 Oct 2015
Ferndale Wales 100% 6.4 Sep 2011
Hall Farm England 100% 24.6 Apr 2013
Llynfi Afan Wales 100% 24.0 Mar 2017
Moel Moelogan Wales 100% 14.3 Jan 2003 & Sep 2008
New Albion England 100% 14.4 Jan 2016
Wear Point Wales 100% 8.2 Jun 2014
Total 161.0
Waste & bioenergy
Bio Collectors waste management England 100% 11.7(1) Dec 2013
Codford Biogas waste management England 100% 3.8(2) 2014
ELWA waste management England 80% n/a 2006
Cramlington biomass combined heat and power England 100% 32.0(3) 2018
Energie Tecnologie Ambiente ("ETA") energy-from-waste Italy 45%(4) 16.8 2012
Tay wastewater treatment Scotland 33% n/a Nov 2001
Total 64.3
Location Ownership Capacity Commercial
(MW) operations date
Asset
Anaerobic digestion
Biogas Meden England 49% 5.0(5) Mar 2016
Egmere Energy England 49% 5.0(6) Nov 2014
Grange Farm England 49% 5.0(6) Sep 2014
Icknield Farm England 53% 5.0(5) Dec 2014
Merlin England 49% 5.0(6) Dec 2013
Renewables
Peacehill Farm Scotland 49% 5.0(7) Dec 2015
Rainworth Energy England 100% 2.2(2) Sep 2016
Vulcan Renewables England 49% 13.0(6) Oct 2013
Warren Energy England 49% 5.0(6) Dec 2015
Total 50.2
Solar
Amber England 100% 9.8 Jul 2012
Branden England 100% 14.7 Jul 2013
CSGH England 100% 33.5 Mar 2014 & Mar 2015
Monksham England 100% 10.7 Mar 2014
Panther England 100% 6.5 2011-2014
Pylle Southern England 100% 5.0 Dec 2015
Total 80.2
Asset Location Ownership Capacity Commercial
(MW) operations date
Low carbon & sustainable solutions
West Gourdie battery storage Scotland 100% n/a May 2023
Clayfords battery storage Scotland 50% n/a Ready to build
Lunanhead battery storage Scotland 50% n/a Ready to build
Sandridge battery storage England 50% n/a Under construction
CNG Foresight low-carbon transport England 25%8 n/a Various
HH2E green hydrogen Germany n/a n/a Development phase
Total n/a
Controlled environment
Glasshouse England Minority stake n/a Partially operating
Rjukan aquaculture system Norway Minority stake n/a Under construction
Total n/a
Hydro
Northern Hydropower England 100% 2.09 Oct 2011 & Oct 2017
Yorkshire Hydropower England 100% 1.89 Oct 2015 & Nov 2016
Total 3.8
Asset Location Ownership Capacity Commercial
(MW) operations date
FEIP(10) FGEN has committed €25 million to FEIP
Avalon solar and green hydrogen Spain n/a n/a Development
Carna pumped storage hydro and co-located wind Scotland n/a n/a Under construction
Inca pumped storage hydro Ireland n/a n/a Development
Kölvallen wind Sweden n/a n/a Under construction
MaresConnect interconnector Republic of Ireland n/a n/a Development and under construction
Puskakorpi wind Finland n/a n/a Dec 2022
Quartz battery storage England n/a n/a Development
Skaftåsen Vindkraft AB wind Sweden n/a n/a June 2023
Torozos wind Spain n/a n/a Dec 2019
85 Degrees geothermal heat Netherlands n/a n/a Operational/under construction
Beleolico offshore wind Italy n/a n/a July 2022
Blue Jay battery storage Scotland n/a n/a Development and under construction
Juwi solar Greece n/a n/a Development
Total n/a
Total portfolio
Total 359.5
1. 10MWth and an additional 1.7MWe capacity through two CHP engines.
2. Electrical exporting plant measured as MWe.
3. 26MWe (electrical) and 6MWth (thermal).
4. Not including FEIP's 45% ownership.
5. MWth (thermal) and an additional 0.4MWe CHP engine for on-site power
provision.
6. MWth (thermal) and an additional 0.5MWe CHP engine for on-site power
provision.
7. MWth (thermal) and an additional 0.25MWe CHP engine for on-site power
provision.
8. FGEN holds 25% of the "A" shares. "A" shares have a different
economic entitlement than "B" shares, including a priority return.
9. Includes a 1.2MW battery storage.
10. Look-through investments into Foresight Energy Infrastructure Partners
("FEIP").
OPERATIONAL REVIEW
Company performance overview
The NAV per share at 30 September 2024 was 109.8 pence, down from 113.6
pence at 31 March 2024, with the largest drivers being a combination of
dividends paid in the period and the full write-down of the Company's
investment in the HH2E development platform as discussed in detail on page 28
in the Company's Half-year Report 2024.
FGEN has announced an interim dividend of 1.95 pence per share for the quarter
ended 30 September 2024, payable on 27 December 2024, in line with the
full‑year target of 7.80 pence per share for the year ending 31 March 2025
as set out in the Annual Report 2024.
Financial performance
The Company's operating assets outperformed budgeted yields to deliver strong
cash earnings of £46.6 million (30 September 2023: £46.2 million) making
this another record period of earnings for the first six months of the year -
driving a dividend cover of 1.23x.
As the portfolio diversifies and the proportion of non-energy generating
assets increases, the Investment Manager has presented detailed information to
better illustrate the financial performance of all sectors within the
portfolio.
The chart in the Half-year Report 2024 shows the budgeted proportion of cash
distributions forecast to be received from underlying investments at the start
of the financial year, versus the relative over or under-performance during
the period under review.
The equivalent chart in the Half-year Report 2024 is showing generation
performance of the energy generating assets versus budget.
Across the portfolio companies, total revenue generated was £137.8 million
and total EBITDA was £60.5 million. The Company operates a diversified
portfolio of assets across multiple sectors which supports diversification of
the operating risk profile across the portfolio - with both revenues and
corresponding margins varying based on the underlying operations of each.
For example, wind and solar assets generate electricity through the use of a
free natural resource and therefore typically have a lower cost base than an
anaerobic digestion facility, which requires a feedstock as part of its energy
generation process. To compensate, these facilities will also typically have a
higher revenue base - as can be seen by the average all-in energy price table
below. More information on sector-level performance and relative margins will
be provided within the Annual Report 2025.
The average all-in price received by the differing technology classes in the
UK for their energy volumes generated in the six months ended 30 September
2024 is shown in the table below:
Half year ended Year ended
Average all‑in energy price 30 Sep 2024 31 Mar 2024
Wind £213 per MWhe £148 per MWhe
AD electric £265 per MWhe £317 per MWhe
AD gas-to-grid £149 per MWhth £148 per MWhth
Biomass £183 per MWhe £205 per MWhe
Energy-from-waste €134 per MWhe €109 per MWhe
Solar £310 per MWhe £217 per MWhe
Hydro £197 per MWhe £308 per MWhe
Power price hedging
FGEN's exposure to wholesale power prices is mitigated by the practice of
having a substantial proportion of generation for both electricity and gas on
fixed price arrangements for durations ranging from six months out to three
years. The extent of generation subject to fixes at 30 September 2024 is as
follows:
Winter 2024 Summer 2025 Winter 2025
Wind 75% 58% 36%
Solar 100% 54% 54%
Biomass - - -
Energy-from-waste 41% - -
AD - electric 100% 36% 32%
AD - gas 74% 58% 56%
Weighted average 60% 43% 35%
The Investment Manager continues to monitor the PPA and Gas Purchase Agreement
("GPA") market for opportunities to fix prices and mitigate risk across the
portfolio. Typically FGEN expects to have greater volumes of electricity and
gas under fixed price arrangements for closer seasons.
Renewable energy generating assets
The chart in the Half-year Report 2024 shows the forecast generation target
expected to be achieved at the start of the financial year, versus the
relative sector-level over or under-performance against this target during the
period under review.
Over this half-year period the renewables segment of the portfolio produced
619GWh1 (six months to 30 September 2023: 660GWh) of energy, 5.9% below
target. The negative variance against the target can be primarily attributed
to a six-week outage at Cramlington required to address issues in the flue gas
treatment line. This issue has since been resolved and the plant has since
been operating above budget. Offsetting that, the agri‑AD portfolio recorded
another strong performance, which was 2% above the sector target.
Anaerobic digestion
The AD portfolio is the largest producer of energy on a GWh basis and
generated 39% of the GWh energy produced by the FGEN portfolio to 30 September
2024. Generation (measured in GWh thermal generated) was 239GWh, 2% ahead of
the sector target, continuing the trend of outperformance that has been seen
since the Company started to acquire AD assets in 2017.
Notable strong performers were Grange Farm, Rainworth Energy, Warren Energy
and Icknield, which outperformed their generation targets by more than 5%. All
other sites, with the exception of Peacehill Gas and Merlin Renewables (both
sites undertook planned degritting works), exceeded their generation targets.
The strong maize harvest in late 2023 meant the portfolio has had access to
healthy volumes of this feedstock throughout the reporting period.
Due to the wet winter experienced across the UK in early 2024, drilling of rye
was extremely difficult, resulting in low yields of this crop when harvesting
took place in July 2024. The operators have compensated for this deficit by
increasing the amount of maize grown in 2024.
Wind
Electricity generation from the wind assets of 157GWh (representing 25% of the
portfolio's energy generation for the period) was 4% below its sector target
due to below-average wind resource during the period. Total gross availability
for the portfolio was 2.9% below the anticipated levels due to unrelated
mechanical issues experienced at six of the wind assets. Assuming performance
remains on budget for the remainder of the year, payments to compensate for
events of unavailability are estimated to bring the wind portfolio in line
with the sector's generation target for the period.
Solar
The solar portfolio generated 50GWh (representing 8% of the portfolio's energy
generation for the period) and was 8% below its sector generation target.
The deficit is explained by irradiance levels being 4% below expected for the
period, inverter issues at Branden Victoria (June to September) and grid
issues at CSGH Shoals Hook (three grid constraints) and Monksham (distribution
network operator ("DNO") outage for most of August).
Waste & bioenergy
The renewable energy generating segment of the waste & bioenergy portfolio
is the second largest producer of energy on a GWh basis and generated 28% of
the GWh energy produced by the FGEN portfolio to 30 September 2024. The waste
& bioenergy portfolio generated 171GWh over the period to 30 September
2024, 15% below its sector target.
Though Codford Biogas (14% above budget) and ETA Manfredonia performed well
throughout the period, the sector was below budget for the reporting period
primarily due to a six-week outage at Cramlington in June 2024. The outage was
required to allow the operator to address issues within the flue gas treatment
line. A long-term and effective resolution was implemented and arrangements
were made to address the downtime. Since this issue, Cramlington has
outperformed its budget by 6%.
Hydro
The hydro portfolio generated 1.6GWh (which represents less than 1% of the
portfolio's energy generation for the period) and saw an 18% negative variance
against its sector target. The under-performance was due to rainfall in May
through to August being 20% below the long-term average in the Yorkshire
catchment area.
Assets which support the transition to a lower‑carbon economy
Waste & bioenergy concessions
Waste tonnages processed at the ELWA waste project have continued at levels
above target. Operational performance targets are consistently exceeded with
diversion from landfill at 99.97%, substantially ahead of the 67% contract
target. Recycling, at 31.7%, is ahead of the 22% target.
Renewi (the operating counterparty) announced to the market on 4 October 2023
that it planned to exit the UK municipal waste business by mid 2024. Renewi
has confirmed that the sale of their UK business is proceeding, with BIFFA as
the proposed new owner, and it is anticipated that the sale will be completed
by the end of 2024. The Investment Manager continues to monitor this situation
and ensure any contractual risks are monitored.
Tay wastewater plant in Scotland performed well, with no operational or
performance issues in the half‑year period.
Both projects continue to perform well financially.
Low carbon & sustainable solutions
Low-carbon transport - CNG Foresight
The CNG refuelling stations achieved a 27% increase in total fuel dispensed
for the reporting period when compared to the first half of FY24. Truck
deliveries saw an uptick over the period, and sales reports remain robust.
The CNG refuelling station at Aylesford has been successfully commissioned and
has begun operation. The construction of the Doncaster station is progressing
as planned, with completion expected by the end of 2024. Additionally,
construction has commenced on a new station in Livingston.
As at 30 September 2024, the portfolio held 15 natural gas refuelling
stations, including the sites in construction phase. FGEN has invested a total
of £29.3 million as at the balance sheet date.
A detailed description of the CNG Foresight investment is included on page 31
in the Company's Half-year Report 2024.
Battery energy storage ("BESS")
West Gourdie, FGEN's operational 50MW battery asset in Dundee, Scotland,
achieved an availability of 95.14% over the half‑year period, falling short
of budget by 2.9%. The availability losses were mainly due to a grid outage
in May, minor technical issues experienced in June and August, and an annual
maintenance-related outage in August. The events, assessed on a case-by-case
basis during the annual performance warranty review, will determine which ones
are eligible for compensation under the performance mechanism outlined in the
EPC and O&M contracts.
The route-to-market provider for the two small batteries co‑located at the
Company's hydro assets continues to pursue hardware changes, allowing
participation in new grid services.
Construction‑stage projects
BESS construction assets
FGEN currently owns three construction-stage battery storage projects in the
UK with a combined capacity of 50MW. The Sandridge project construction is
complete and securely paused while awaiting connection works by the
subcontractor appointed by the DNO. This project is expected to be energised
in late FY25. Meanwhile, the Investment Manager's pre-construction BESS
projects, Lunanhead and Clayfords, remain under active review. The holding
value for these projects continues to be closely benchmarked to market value
for this essential grid infrastructure.
Glasshouse project
Following the initial sales in May 2024, Glass Pharms has continued to secure
and commit to sales for the remainder of 2024 and early 2025. These sales are
part of an agreement signed between Glass Pharms and Releaf on 22 October
2024. Releaf, the UK's fastest-growing medical cannabis provider, and Glass
Pharms, the leading domestic producer, have formed a historic
multi-million-pound partnership, making it the largest collaboration in the
UK's medical cannabis sector to date.
Rjukan project
Construction is advancing well on this project, with significant progress
being made on the main facility building. Although certain areas of the
facility experienced known delays affecting the latter stages of the
programme, a thorough replanning exercise has helped realign these areas.
There maintains a buffer leading up to harvest, albeit with a reduced margin.
Development‑stage projects
Green hydrogen - HH2E administration
FGEN made its initial investment into HH2E in January 2023, investing €5.7
million to acquire 33% of Foresight Hydrogen HoldCo GmbH ("FHHG") alongside
other Foresight funds. FHHG is the investment vehicle for FGEN's investment in
HH2E AG, a developer of green hydrogen production projects in Germany, and its
pipeline of potential sites.
Over time, FGEN increased its investment in HH2E and associated projects to
€22.3 million. The most advanced of the sites, Lubmin on the Baltic coast,
completed much of the work necessary for a final investment decision ("FID")
to be taken in 2024, with the main outstanding item being the conclusion of an
offtake agreement in a form considered "bankable" by project finance banks
required to finance the construction of the project in conjunction with
further equity investors. HH2E also made commitments to purchase items of
critical equipment that are on long lead times. At the time, these commitments
were considered necessary to secure equipment and a grid connection that would
otherwise have led to delays, in some cases of several years, that would have
caused issues with the delivery timetables being discussed with potential
offtakers.
A process to bring in senior lenders and an equity investor was run over the
summer of 2024 and concluded in October 2024. While there was significant
interest in HH2E and the Lubmin project, with several lenders and
institutional investors engaging extensively in due diligence, ultimately no
party was prepared to invest prior to a bankable offtake agreement being in
place.
This delay in bringing in additional funding created a liquidity issue within
HH2E and the Lubmin project in light of the commitments already in place.
FGEN and the other Foresight funds invested in HH2E considered providing the
company with sufficient funding to enable it to meet all of its payment
obligations and demonstrate its ability to continue as a going concern but
ultimately the quantum of funding required at risk was too great and the
investment was declined.
With no other option for funding to meet outstanding obligations, HH2E filed
for insolvency on 11 November 2024. FGEN notified the market that this was
the expected outcome on 8 November 2024, also noting that no recovery of the
investment was anticipated through the insolvency process, given the extent of
commitments outstanding and German insolvency law that places shareholder
loans behind general creditors in an insolvency. The company is currently
going through an administration process with a view to achieving an
accelerated sale on a going concern basis in the best interests of creditors.
A key contributor to the failure of the HH2E investment is the scale of
commitments to equipment suppliers ahead of the Lubmin project being in a
position to take a FID with a bankable offtake agreement to anchor the revenue
case from the sale of green hydrogen. This is symptomatic of the experience
across hydrogen markets, with projects being cancelled and delayed as the pace
of supporting regulation and the establishment of an offtake market lags the
expectation of project developers. As evidence of this, the Hydrogen Council
noted in their September 2024 survey of the market that announced production
capacity in 2028 and 2029 was more than 1 Mt p.a. lower than stated in the
previous year's publication.
While at the time the company felt that making such commitments was justified
in keeping the Lubmin project to timetable, offtakers have subsequently not
felt in a position to sign up to offtake agreements while expected supporting
regulation has not yet been passed into law.
German political instability and the proximity of federal elections in 2025
may also have contributed to this reluctance.
The Investment Manager expects green hydrogen to be a part of the energy mix
in the coming years as a means to decarbonise hard-to-abate sectors such as
industrial heat and some heavy transport. It will be of increasing interest to
infrastructure investors as regulatory regimes become established and the
market matures, but at the moment the pace is lagging. FGEN's current focus is
not on new investment in any case given market conditions and its emphasis on
appropriate capital allocation.
Investment into new projects are not expected in the short to medium term in
any sector in light of the wider market situation and ongoing focus on capital
allocation. When new investment activity can commence, any development-stage
exposure will be limited, particularly where it involves projects at a
"pre-FID" stage.
Disposals
Disposal of 51% of six AD facilities
In August 2024, the Company announced the sale of 51% of a portfolio of six
gas‑to‑grid AD facilities to Future Biogas, for a total consideration of
£68.1 million. FGEN will continue to own 49% of the AD portfolio, which has a
combined generating capacity of 38MW, as well as its interests in three
further agri-AD assets which are not operated by Future Biogas and
consequently not part of the agreement.
Other investments
FEIP
FGEN has committed to investing €25 million into Foresight Energy
Infrastructure Partners SCSp ("FEIP"), a Luxembourg limited partnership
investment vehicle that targets investments that support the transformational
change underway in global energy markets.
FEIP invests in energy infrastructure across the following sub‑sectors:
· renewable generation;
· renewable enabling infrastructure (e.g. energy storage); and
· transmission and distribution.
At 30 September 2024, €20 million had been drawn on this commitment.
Financing
On 13 June 2024, FGEN completed the refinancing of its fund-level debt
facility - securing a committed three-year multi-currency RCF of £200
million, with an uncommitted accordion facility of up to £30 million and an
uncommitted option to extend for a further year.
The RCF provides an increased source of flexible funding with both sterling
and euro drawdowns available on attractive terms. The facility will
principally be used to fund the build of existing construction commitments and
to make future acquisitions of environmental infrastructure to add to the
current portfolio, as well as covering any working capital requirements.
The interest charged in respect of the renewed RCF continues to be linked to
the Company's ESG performance, with FGEN incurring a 5 bps premium or discount
to its margin based on performance against defined targets. Those targets
include:
· environmental: increase coverage of independent biodiversity
assessments and implement initiatives to enhance biodiversity net gain across
the portfolio;
· social: increased volume of contributions to local communities; and
· governance: maintaining a low number of work-related accidents, as
defined under the Reporting of Injuries, Diseases and Dangerous Occurrences
("RIDDOR") by the Health and Safety Executive.
Performance against these targets will be measured annually, with the cost of
the RCF being amended in the following financial year. Lenders to the facility
include HSBC, ING, Clydesdale Bank, National Australia Bank and Royal Bank of
Scotland International. The margin can vary between 205 bps and 215 bps over
SONIA (Sterling Overnight Index Average) for sterling drawings and Euribor
(Euro Interbank Offered Rate) for euro drawings, depending on performance
against the ESG targets.
In addition to the RCF, several of the projects have underlying project-level
debt. There is an additional gearing limit in respect of such debt of 85% of
the aggregate gross project value (being the fair market value of such
portfolio companies increased by the amount of any financing held within the
projects) for PFI/PPP projects and 65% for renewable energy generation
projects.
As at 30 September 2024, drawings under the RCF were £113.7 million. Under
its investment policy, FGEN may borrow up to 30% of its NAV.
The project-level gearing at 30 September 2024 across the portfolio was 18.0%
(31 March 2024: 16.9%). Taking into account the amount drawn down under the
RCF of £113.7 million, the overall fund gearing at 30 September 2024 was
28.7% - down from 31.2% at 31 March 2024; reflecting the repayment towards the
RCF out of cash proceeds raised from asset sales in the period.
At the half-year mark, the weighted average cost of project‑level debt was
4.2%, and the weighted average cost of debt after including the RCF was 5.0%.
As at 30 September 2024, the Group, which comprises the Company and the
intermediate holding companies, had cash balances of £21.3 million (31 March
2024: £18.1 million).
FINANCIAL REVIEW
Analysis of financial results
The financial statements of the Company for the six‑month period ended 30
September 2024 are set out on pages 48 to 70 in Half-year Report 2024.
The Company prepared the condensed unaudited financial statements for the
six‑month period to 30 September 2024 in accordance with UK-adopted
international accounting standards as applicable to companies reporting under
those standards. In order to continue providing useful and relevant
information to its investors, the financial statements also refer to the
"Group", which comprises the Company, its wholly owned subsidiary Foresight
Environmental Infrastructure (UK) Ltd ("HoldCo") (formerly known as JLEN
Environmental Assets Group (UK) Limited) and the indirectly held wholly owned
subsidiary HWT Limited (which holds the investment interest in the Tay
project).
Key investment metrics
Period ended Period ended Year ended
All amounts presented in £million (except as noted) 30 Sep 2024 30 Sep 2023 31 Mar 2024
Net assets(1) 720.1 792.1 751.2
Portfolio value(2) 806.6 898.9 891.9
Operating income and (loss)/gain on fair value of investments 4.2 6.9 (3.8)
Net Asset Value per share(3) 109.8p 119.7p 113.6p
Distributions, repayments and fees from portfolio 46.6 46.2 87.0
Loss/profit before tax (0.5) 1.9 (13.9)
Gross Asset Value(3) 1,010.5 1,109.8 1,091.8
Market capitalisation(3) 595.4 653.6 619.9
Share price(3) 90.8p 98.8p 93.7p
Total shareholder return(3) 69.4% 70.1% 68.4%
Annualised total shareholder return(3) 5.1% 5.7% 5.4%
1. Also referred to as "NAV".
2. Classified as investments at fair value through profit or loss on the
statement of financial position.
3. Net Asset Value per share, share price, market capitalisation and
Gross Asset Value are alternative performance measures ("APMs"). The APMs
within the accounts are defined on pages 71 and 72 in Half-year Report 2024.
Net assets
Net assets decreased from £751.2 million at 31 March 2024 to £720.1 million
at 30 September 2024.
The net assets of £720.1 million comprise £806.6 million portfolio value of
environmental infrastructure investments and the Company's cash balances of
£0.2 million, partially offset by £84.4 million of intermediate holding
companies' net liabilities and other net liabilities of £2.3 million.
The intermediate holding companies' net liabilities of £84.4 million comprise
a £113.7 million credit facility loan, partially offset by cash balances of
£21.3 million and other net assets of £8.0 million.
Analysis of the Group's net assets at 30 September 2024
At At
All amounts presented in £million (except as noted) 30 Sep 2024 31 Mar 2024
Portfolio value 806.6 891.9
Intermediate holding companies' cash 21.3 17.8
Intermediate holding companies' revolving credit facility (113.7) (159.3)
Intermediate holding companies' other assets 8.0 3.1
Fair value of the Company's investment in UK HoldCo 722.2 753.5
Company's cash 0.2 0.3
Company's other net liabilities (excluding cash) (2.3) (2.6)
Net Asset Value 720.1 751.2
Number of shares 656,046,140 661,531,229
Net Asset Value per share 109.8p 113.6p
At 30 September 2024, the Group (the Company plus intermediate holding
companies) had a total cash balance of £21.5 million (31 March 2024: £18.1
million), including £0.2 million in the Company's statement of financial
position (31 March 2024: £0.3 million) and £21.3 million in the intermediate
holding companies (31 March 2024: £17.8 million), which is included in the
Company's statement of financial position within "Investments at fair value
through profit or loss".
At 30 September 2024, UK HoldCo had drawn £113.7 million of its revolving
credit facility (31 March 2024: £159.3 million) which is included in the
Company's statement of financial position within "Investments at fair value
through profit or loss".
The movement in the portfolio value from 31 March 2024 to 30 September 2024 is
summarised as follows:
Period ended Year ended
All amounts presented in £million 30 Sep 2024 31 Mar 2024
Portfolio value at start of the period/year 891.9 898.5
Acquisitions/further investments (net of post‑acquisition price adjustments) 15.9 69.2
Disposals in investment assets (68.5) -
Distributions received from investments (46.6) (87.0)
Growth in value of portfolio 13.9 11.2
Portfolio value 806.6 891.9
Further details on the portfolio valuation and an analysis of movements during
the period are provided in the investment portfolio and valuation section on
pages 12 to 23 in the Company's Half-year Report 2024.
Financing at 30 September 2024
£113.7m
Drawn on RCF
28.7%
Fund gearing(1)
1. Gearing is an alternative performance measure ("APM"). The APMs
within the accounts are defined on pages 71 and 72 in the Company's Half-year
Report 2024.
Income
The Company's loss before tax for the six‑month period was £0.5 million
(six‑month period ended 30 September 2023: profit of £1.9 million), a loss
of 0.1 pence per share (six‑month period ended 30 September 2023: gain of
0.3 pence per share).
Six months Six months
ended ended
All amounts presented in £million (except as noted) 30 Sep 2024 30 Sep 2023
Interest received on UK HoldCo loan notes 15.7 15.7
Dividend received from UK HoldCo 19.8 13.8
Net loss on investments at fair value (31.3) (22.6)
Operating income and gains on fair value of investments 4.2 6.9
Operating expenses (4.7) (5.0)
(Loss)/profit before tax (0.5) 1.9
(Losses)/earnings per share (0.1)p 0.3p
In the six months to 30 September 2024, the operating income and losses on
fair value of investments was £4.2 million, including the receipt of £15.7
million of interest on the UK HoldCo loan notes, £19.8 million of dividends
also received from UK HoldCo and a net loss on investments at fair value of
£31.3 million.
The operating expenses included in the income statement for the period were
£4.7 million, in line with expectations. These comprise £4.0 million of
Investment Manager fees and £0.7 million operating expenses. The details on
how the Investment Manager fees are charged are set out in note 14 to the
condensed unaudited financial statements.
Ongoing charges
The "ongoing charges"(1) ratio is an indicator of the costs incurred in the
day-to-day management of the Fund. FGEN uses the Association of Investment
Companies ("AIC") recommended methodology for calculating this ratio, which is
an annual figure.
For the period ended 30 September 2024, the ongoing charges ratio was 1.26%(1)
(31 March 2024: 1.24%), based on an annualised six-month cost and reflecting
the decrease in the NAV. The ratio is calculated on a consolidated basis,
considering both the UK HoldCo and the Company's expenses. The expected
ongoing charge ratio for the full financial year ending 31 March 2025 is
1.19%, which incorporates a reduction in the Investment Management fee over
the remaining six months, assuming no change in NAV. For the financial year
ending 31 March 2026, the expected ongoing charge ratio is 1.12%, factoring
in the full benefit of the Investment Management fee reduction and assuming no
change in NAV.
Cash flow
The Company had a total cash balance at 30 September 2024 of £0.2 million (31
March 2024: £0.3 million). The breakdown of the movements in cash during the
period is shown below.
Cash flows of the Company for the period (£million):
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
Cash balance at 1 April 0.3 0.1
Interest on loan notes received from UK HoldCo 15.7 15.7
Dividends received from UK HoldCo 19.8 13.8
Directors' fees and expenses (0.2) (0.2)
Investment Manager fees (4.2) (4.1)
Administrative expenses (0.6) (0.6)
Dividends paid in cash to shareholders (25.4) (24.3)
Share buybacks (5.2) -
Company cash balance at 30 September 0.2 0.4
The Group had a total cash balance at 30 September 2024 of £21.5 million (31
March 2024: £18.1 million) and borrowings under the revolving credit facility
of £113.7 million (31 March 2024: £159.3 million). The breakdown of the
movements in cash during the period is shown in the following table.
Cash flows of the Group for the period (£million):
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
Cash distributions from environmental infrastructure investments 46.6 46.2
Administrative expenses (0.8) (0.7)
Directors' fees and expenses (0.2) (0.2)
Investment Manager fees (4.2) (4.1)
Financing costs (6.8) (3.8)
Electricity Generator Levy (3.3) (5.2)
Cash flow from operations(2) 31.3 32.2
Acquisition of investment assets and further investments (15.9) (30.0)
Disposal of asset 68.1 -
Acquisition costs (including stamp duty) (0.6) (0.3)
Short-term projects debtors (2.1) (0.7)
Purchase of treasury shares (5.2) -
Debt arrangement fee cost (2.3) (1.0)
Repayment/drawdown under the revolving credit facility (44.4) 22.0
Dividends paid in cash to shareholders (25.4) (24.3)
Cash movement in the period 3.5 (2.1)
Opening cash balance 18.0 18.0
Group cash balance at 30 September 21.5 15.9
1. The ongoing charges ratio is an alternative performance measure
("APM"). The APMs within the accounts are defined on pages 71 and 72 in the
Company's Half-year Report 2024.
2. "Cash flow from operations" is an alternative performance measure
("APM"). The APMs within the accounts are defined on pages 71 and 72 in the
Company's Half-year Report 2024.
During the period, the Group received cash distributions of £46.6 million
from its environmental infrastructure investments.
Cash received from investments in the period covered the operating and
administrative expenses and financing costs, as well as the dividends declared
to shareholders in respect of the six‑month period ended 30 September 2024.
Cash flow from operations of the Group of £31.3 million covered dividends
paid in the six‑month period to 30 September 2024 of £25.4 million by
1.23x.
The Group anticipates that future revenues from its environmental
infrastructure investments will continue to be in line with expectations and
therefore will continue to cover future costs as well as planned dividends
payable to its shareholders.
Dividends
During the period, the Company paid a final interim dividend of 1.89 pence per
share in June 2024 (£12.5 million) in respect of the quarter to 31 March
2024. Interim dividends of 1.95 pence per share were paid in September 2024
(£12.9 million) in respect of the quarter to 30 June 2024.
On 20 November 2024, the Board approved an interim dividend of 1.95 pence per
share in respect of the quarter ended 30 September 2024. The dividend is
payable on 27 December 2024 to all voting shares, excluding shares kept in
treasury.
In line with the announcement in the 2024 Annual Report, the target dividend
for the year to 31 March 2025 is 7.80 pence per share(1).
1. These are targets only and not profit forecasts. There can be no
assurance that these targets will be met.
RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half-year Report and condensed
unaudited interim financial statements in accordance with applicable
regulations.
We confirm that to the best of our knowledge:
· the condensed unaudited interim financial statements have been
prepared in accordance with United Kingdom adopted International Accounting
Standard 34 Interim Financial Reporting and in accordance with the accounting
policies set out in the audited Annual Report to 31 March 2024; and
· the Chair's statement and Investment Manager's report meet the
requirements of an interim management report and include a fair review of the
information required by:
(a) DTR 4.2.7R, being an indication of important events during the first six
months of the financial year and their impact on the condensed unaudited
interim financial statements and a description of principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R, being the disclosure of related parties' transactions that
have taken place during the first six months of the financial year and that
have materially affected the financial position or performance of the Company
during that period; and any changes in the related party transactions
described in the last Annual Report that could do so.
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.
This responsibility statement was approved by the Board of Directors on 20
November 2024 and is signed on its behalf by:
Ed Warner
Chair
20 November 2024
INDEPENDENT REVIEW REPORT
to Foresight Environmental Infrastructure Limited
Conclusion
We have been engaged by Foresight Environmental Infrastructure Limited
(formerly known as JLEN Environmental Assets Group Limited) (the "Company") to
review the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2024 of the Company, which
comprises the condensed unaudited statement of financial position, the
condensed unaudited income statement, the condensed unaudited statement
of changes in equity, the condensed unaudited cash flow statement 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 30 September 2024 is not prepared,
in all material respects, in accordance with IAS 34 Interim Financial
Reporting and the Disclosure Guidance and Transparency Rules ("the DTR") of
the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
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.
Conclusions relating to going concern
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.
Directors' responsibilities
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(a), the annual financial statements of the Company are
prepared in accordance with UK-adopted international accounting standards. 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.
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
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.
The purpose of our review work and to whom we owe our responsibilities
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
20 November 2024
CONDENSED UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2024
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
(unaudited) (unaudited)
Notes £'000s £'000s
Operating income and (loss)/gains on fair value of investments 3 4,213 6,884
Operating expenses 4 (4,750) (5,018)
Operating (loss)/profit (537) 1,866
(Loss)/profit before tax (537) 1,866
Tax 5 - -
(Loss)/profit for the period (537) 1,866
(Losses)/earnings per share
Basic and diluted (pence) 7 (0.1) 0.3
The accompanying notes form an integral part of the condensed set of unaudited
financial statements.
All results are derived from continuing operations.
There are no items of other comprehensive income in either the current or
preceding period, other than the loss for the period, and therefore no
separate condensed unaudited statement of comprehensive income has been
presented.
CONDENSED UNAUDITED STATEMENT OF FINANCIAL POSITION
as at 30 September 2024
30 Sep 2024 31 Mar 2024
(unaudited) (audited)
Notes £'000s £'000s
Non-current assets
Investments at fair value through profit or loss 8 722,241 753,572
Total non-current assets 722,241 753,572
Current assets
Trade and other receivables 9 38 25
Cash and cash equivalents 193 271
Total current assets 231 296
Total assets 722,472 753,868
Current liabilities
Trade and other payables 10 (2,335) (2,654)
Total current liabilities (2,335) (2,654)
Total liabilities (2,335) (2,654)
Net assets 720,137 751,214
Equity
Share capital account 12 664,401 664,401
Treasury shares (5,179) -
Retained earnings 13 60,915 86,813
Equity attributable to owners of the Company 720,137 751,214
Net assets per share (pence per share) 109.8 113.6
The accompanying notes form an integral part of the condensed set of unaudited
financial statements.
The condensed set of unaudited financial statements were approved by the Board
of Directors and authorised for issue on 20 November 2024.
They were signed on its behalf by:
Ed Warner
Chair
Stephanie Coxon
Director
CONDENSED UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2024
Six months ended 30 Sep 2024 (unaudited)
Share capital Treasury Retained
account shares earnings Total
Notes £'000s £'000s £'000s £'000s
Balance at 1 April 2024 664,401 - 86,813 751,214
Loss and total comprehensive income for the period 13 - - (537) (537)
Purchase of treasury shares - (5,179) - (5,179)
Dividends paid 6 - - (25,361) (25,361)
Balance at 30 September 2024 664,401 (5,179) 60,915 720,137
12 months ended 31 Mar 2024 (audited)
Share capital Treasury Retained
account shares earnings Total
Notes £'000s £'000s £'000s £'000s
Balance at 1 April 2023 664,401 - 150,167 814,568
Loss and total comprehensive income for the period - - (13,937) (13,937)
Dividends paid - - (49,417) (49,417)
Balance at 31 March 2024 664,401 - 86,813 751,214
Six months ended 30 Sep 2023 (unaudited)
Share capital Treasury Retained
account shares earnings Total
Notes £'000s £'000s £'000s £'000s
Balance at 1 April 2023 664,401 - 150,167 814,568
Profit and total comprehensive income for the period 13 - - 1,866 1,866
Dividends paid 6 - - (24,345) (24,345)
Balance at 30 September 2023 664,401 - 127,688 792,089
The accompanying notes form an integral part of the condensed set of unaudited
financial statements.
CONDENSED UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 September 2024
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
(unaudited) (unaudited)
Notes £'000s £'000s
(Loss)/profit for the period (537) 1,866
Adjustments for:
Interest received (15,744) (15,701)
Dividends received (19,800) (13,800)
Net loss on investments at fair value through profit or loss 31,331 22,617
Operating cash flows before movements in working capital (4,750) (5,018)
(Increase)/decrease in receivables (13) 38
(Decrease)/increase in payables (319) 82
Net cash outflow from operating activities (5,082) (4,898)
Investing activities
Interest received 15,744 15,701
Dividends received 19,800 13,800
Net cash generated from investing activities 35,544 29,501
Financing activities
Purchase of treasury shares 12 (5,179) -
Dividends paid 6 (25,361) (24,345)
Net cash outflow from financing activities (30,540) (24,345)
Net (decrease)/increase in cash and cash equivalents (78) 258
Cash and cash equivalents at beginning of period 271 143
Cash and cash equivalents at end of period 193 401
The accompanying notes form an integral part of the condensed set of unaudited
financial statements.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
for the six months ended 30 September 2024
1. General information
Foresight Environmental Infrastructure Limited (the "Company" or "FGEN",
formerly known as JLEN Environmental Assets Group Limited, "JLEN") is a
closed‑ended investment company domiciled and incorporated in Guernsey,
Channel Islands, under Section 20 of the Companies (Guernsey) Law, 2008. The
shares are publicly traded on the London Stock Exchange under a premium
listing. The condensed unaudited interim financial statements of the Company
are for the six‑month period ended 30 September 2024 and have been prepared
on the basis of the accounting policies set out below. The financial
statements comprise only the results of the Company as its investment in
Foresight Environmental Infrastructure (UK) Limited ("UK HoldCo", formerly
known as JLEN Environmental Assets Group (UK) Limited) is measured at fair
value as detailed in the significant accounting policies below. The Company
and its subsidiaries invest in environmental infrastructure that utilises
natural or waste resources or supports more environmentally friendly
approaches to economic activity.
2. Material accounting policies
(a) Basis of preparation
The condensed unaudited interim financial statements, which give a true and
fair view, were approved and authorised for issue by the Board of Directors on
20 November 2024. The condensed unaudited interim financial statements
included in this Half‑year Report have been prepared in accordance with
UK-adopted International Accounting Standard 34 "Interim Financial
Reporting".
As a result of adopting the amendments to IFRS 10, IFRS 12 and IAS 28 first
adopted in the Company's Annual Report to 31 March 2015, the Company is
required to hold its subsidiaries that provide investment services at fair
value, in accordance with IFRS 9 Financial Instruments Recognition and
Measurement, and IFRS 13 Fair Value Measurement.
The Company accounts for its investment in its wholly owned direct subsidiary
UK HoldCo at fair value. The Company, together with its wholly owned direct
subsidiary UK HoldCo and the intermediate holding subsidiary HWT Limited,
comprise the Group (the "Group") investing in environmental infrastructure
assets.
The net assets of the intermediate holding companies (comprising UK HoldCo and
HWT Limited), which at 30 September 2024 principally comprise working capital
balances, the revolving credit facility ("RCF") and investments in projects,
are required to be included at fair value in the carrying value of
investments.
Consequently, the Company does not consolidate its subsidiaries or apply IFRS
3 Business Combinations when it obtains control of another entity as it is
considered to be an investment entity under UK-adopted international
accounting standards. Instead, the Company measures its investment in its
subsidiary at fair value through profit or loss.
The condensed unaudited interim financial statements incorporate the financial
statements of the Company only.
The accounting policies and significant judgements are consistent with those
used in the latest audited financial statements to 31 March 2024 and should be
read in conjunction with the Company's annual audited financial statements for
the year ended 31 March 2024.
Key sources of estimation uncertainty
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 periods if the revision affects both current and
future periods.
The valuation is based on a discounted cash flow analysis of the future
expected equity and loan note cash flows accruing to the Group from each
operational portfolio investment. Assets under construction are valued at cost
until such time as the risks associated with construction have substantially
passed. For some technologies with more complex construction activities, this
will be when the asset reaches the start of commercial operations, while for
others this may be during late-stage construction.
Estimates such as the cash flows are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about
the fair value of assets not readily available from other sources. Actual
results may differ from these estimates.
The project cash flows used in the portfolio valuation at 30 September 2024
reflect contractual fixed price arrangements under PPAs, where they exist, and
short‑term market forward prices for the next two years where they do not.
After the initial two-year period, the project cash flows assume future
electricity and gas prices in line with a blended curve informed by the
central forecasts from three established market consultants, adjusted by the
Investment Manager for project-specific arrangements and price
cannibalisation.
For the Italian investment, project cash flows assume future electricity
prices informed by a leading independent market consultant's long‑term
projections.
The power price assumptions, including the discount to the near-term power
price assumptions, are a key source of estimation and uncertainty. Information
on the sensitivity of the portfolio to movement in power price is disclosed in
note 15.
Discount rates used in the valuation exercise represent the Investment
Manager's and the Board's assessment of the rate of return in the market for
assets with similar characteristics and risk profile. The discount rate is
deemed to be one of the most significant unobservable inputs and any change
could have a material impact on the fair value of investments. Underlying
assumptions and discount rates are disclosed in note 8 and sensitivity
analysis is disclosed in note 15.
Due to the current economic environment, the Investment Manager and the Board
believe that the rate of inflation should also be considered a key source of
estimation uncertainty. Information on the sensitivity of the portfolio
valuation to movements in the inflation rate is disclosed in note 15.
(b) Going concern
The Directors, in their assessment of the Company's going concern, have
reviewed comprehensive cash flow forecasts prepared by the Company's
Investment Manager, Foresight Group. These forecasts, based on prudent market
data and a reasonable worst-case scenario, form the basis of the Directors'
belief that it is appropriate to prepare the interim financial statements on a
going concern basis. This conclusion is further supported by an evaluation of
the Company's subsidiary banking facilities.
In reaching their decision, the Directors considered several key risks,
including the volatility of energy prices, the potential impact of the
principal risks (as outlined in the Annual Report 2024), and the possibility
of another discontinuation vote in 2025.
Additionally, the Directors have assessed sustainability-related risks,
including environmental, social and governance ("ESG") factors, with a
particular focus on climate change. In line with the recommendations of the
Task Force on Climate-related Financial Disclosures ("TCFD"), outlined in the
financial disclosures in the Annual Report 2024, the Investment Manager has
reviewed the portfolio's exposure to these risks. The conclusion is that such
risks are not currently material to the Fund, although they continue to be
monitored closely.
The Board considers the going concern assessment period of 18 months to 31
March 2026 to be appropriate. A longer period than the typical requirement of
12 months has been adopted to factor in the full payment of the September
2025 dividend.
The Directors also considered that the Company has adequate financial
resources, and were mindful that the Group had unrestricted cash of £21.5
million as at 30 September 2024 and a revolving credit facility ("RCF") and
uncommitted accordion facility (available until June 2027 with an uncommitted
option to extend for a further year, for investment in new or existing
projects and working capital) of £230 million. As at 30 September 2024, the
Company's wholly owned subsidiary UK HoldCo had borrowed £113.7 million under
the facility, leaving £86.3 million undrawn under the current committed
amount. All key financial covenants under this facility are forecast to
continue to be complied with for the duration of the going concern assessment
period.
The RCF provides the Company with the flexibility to meet its existing funding
commitments to portfolio assets. Additionally, the Company has sufficient
headroom in its RCF to finance its hard commitments related to construction
assets within the portfolio.
The RCF covenants have been stress-tested under downside risk scenarios. These
scenarios include a 10% reduction in power price projections relative to the
base case, lower generation levels assuming a P90, a portion of the portfolio
not yielding, and combinations of these factors. In all scenarios, including
the combined downside case, the Company remained compliant with its key
covenants.
At the September 2024 Annual General Meeting ("AGM"), shareholders were
presented with a vote on the potential discontinuation of the Company,
triggered by its share price trading at a discount of more than 10% to the Net
Asset Value ("NAV") per share during the financial year. The vote from
shareholders was in support for the Company to continue operations. However,
the Directors noted that the share price has continued to trade at a discount
to NAV since the start of the current financial year and will continue to
monitor the situation, with the possibility of a future discontinuation vote
remaining under consideration.
However, following the recent vote, both the Investment Manager and the
Directors are confident that FGEN's discount to NAV is not directly
attributable to the individual performance of FGEN, its Investment Manager, or
its Board of Directors.
In light of this, the Directors are satisfied that the Company has sufficient
resources to continue operating for the foreseeable future, defined as a
period of no less than 12 months from the date of this report. Accordingly,
they have continued to adopt the going concern basis in the preparation of
these condensed interim unaudited financial statements.
(c) Segmental reporting
The Board is of the opinion that the Company is engaged in a single segment of
business, being investment in environmental infrastructure to generate
investment returns while preserving capital. The financial information used by
the Board to allocate resources and manage the Company presents the business
as a single segment comprising a homogeneous portfolio.
(d) Statement of compliance
Pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 2020 the
Company is a registered closed-ended investment scheme. As a registered
scheme, the Company is subject to certain ongoing obligations to the Guernsey
Financial Services Commission, and is governed by the Companies (Guernsey)
Law, 2008 as amended.
(e) Seasonality
Neither operating income nor profit are impacted significantly by seasonality.
While meteorological conditions resulting in fluctuation in the levels of wind
and sunlight can affect revenues of the Company's environmental infrastructure
projects, due to the diversified mix of projects, these fluctuations do not
materially affect the Company's operating income or profit.
3. Operating income and loss on fair value of investments
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
(unaudited) (unaudited)
£'000s £'000s
Interest income 15,744 15,701
Dividend income 19,800 13,800
Net loss on investments at fair value through profit or loss (31,331) (22,617)
4,213 6,884
4. Operating expenses
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
(unaudited) (unaudited)
£'000s £'000s
Investment management fees 3,974 4,227
Directors' fees and expenses 175 172
Administration fee 66 56
Other expenses 535 563
4,750 5,018
5. Tax
Income tax expense
The Company has obtained exempt status from income tax in Guernsey under the
Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. FGEN is charged an
annual exemption fee of £1,600.
The income from its investments is therefore not subject to any further tax in
Guernsey, although the investments provide for and pay taxation at the
appropriate rates in the jurisdictions in which they operate. The underlying
tax within the subsidiaries and environmental infrastructure assets, which are
held as investments at fair value through profit or loss, is included in the
estimate of the fair value of these investments.
6. Dividends
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
(unaudited) (unaudited)
£'000s £'000s
Amounts recognised as distributions to equity holders during the period (pence
per share):
Final dividend for the year ended 31 March 2024 of 1.89 (31 March 2023: 1.79) 12,503 11,842
Interim dividend for the quarter ended 30 June 2024 of 1.95 (30 June 2023: 12,858 12,503
1.89)
25,361 24,345
A dividend for the quarter to 30 September 2024 of 1.95 pence per share was
approved by the Board on 20 November 2024 and is payable on 27 December 2024.
The dividend has not been included as a liability at 30 September 2024.
7. (Loss)/earnings per share
Earnings per share is calculated by dividing the profit attributable to equity
shareholders of the Company by the weighted average number of ordinary shares
in issue during the period:
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
(unaudited) (unaudited)
£'000s £'000s
(Loss)/earnings
(Loss)/earnings for the purposes of basic and diluted earnings per share, (537) 1,866
being net profit attributable to owners of the Company
Number of shares
Time weighted average number of ordinary shares for the purposes of basic and 660,905,560 661,531,229
diluted earnings per share
The denominator for the purposes of calculating both basic and diluted
earnings per share is the same, as the Company has not issued any share
options or other instruments that would cause dilution. Shares held in
treasury are excluded from the calculation.
Six months Six months
ended ended
30 Sep 2024 30 Sep 2023
(unaudited) (unaudited)
£'000s £'000s
Basic and diluted (loss)/earnings per share (pence) (0.1) 0.3
8. Investments at fair value through profit or loss
As set out in note 1, the Company accounts for its interest in its 100% owned
subsidiary UK HoldCo as an investment at fair value through profit or loss. UK
HoldCo in turn owns investments in intermediate holding companies and
environmental infrastructure projects.
The table below shows the movement in the Company's investment in UK HoldCo as
recorded on the Company's statement of financial position:
30 Sep 2024 31 Mar 2024
(unaudited) (audited)
£'000s £'000s
Fair value of environmental infrastructure investments 806,646 891,927
Fair value of intermediate holding companies (84,405) (138,355)
Total fair value of investments 722,241 753,572
Reconciliation of movement in fair value of portfolio of assets
The table below shows the movement in the fair value of the Company's
portfolio of environmental infrastructure assets. These assets are held
through other intermediate holding companies. The table below also presents a
reconciliation of the fair value of the asset portfolio to the Company's
condensed unaudited statement of financial position as at 30 September 2024,
by incorporating the fair value of these intermediate holding companies.
Six months to 30 Sep 2024 (unaudited) Year to 31 Mar 2024 (audited)
Cash, working
capital and Cash, working
debt in capital and debt
intermediate in intermediate
holding holding
Portfolio value companies Total Portfolio value companies Total
£'000s £'000s £'000s £'000s £'000s £'000s
Opening balance 891,927 (138,355) 753,572 898,539 (81,739) 816,800
Acquisitions
Portfolio of assets acquired/further investment 15,933 - 15,933 69,221 - 69,221
Disposal of assets (68,496) - (68,496) - - -
(52,563) - (52,563) 69,221 - 69,221
Growth in portfolio(1) 13,905 - 13,905 11,181 - 11,181
Cash yields from portfolio to intermediate holding companies (46,623) 46,623 - (87,014) 87,014 -
Yields from intermediate holding companies
Interest on loan notes(1) - (15,744) (15,744) - (31,401) (31,401)
Dividends from UK HoldCo to the Company(1) - (19,800) (19,800) - (28,000) (28,000)
- (35,544) (35,544) - (59,401) (59,401)
Other movements
Investment in working capital in UK HoldCo - 7,010 7,010 - (13,425) (13,425)
Administrative expenses borne by intermediate holding companies(1,2) - (9,692) (9,692) - (15,008) (15,008)
Drawdown of UK HoldCo revolving credit facility borrowings - 45,553 45,553 - (55,796) (55,796)
Fair value of the Company's investment in UK HoldCo 806,646 (84,405) 722,241 891,927 (138,355) 753,572
1. The net loss on investments at fair value through profit or loss for
the period ended 30 September 2024 is £31,331,000 (year ended 31 March 2024:
loss of £63,228,000). This, together with interest received on loan notes of
£15,744,000 (year ended 31 March 2024: £31,401,000) and dividend income of
£19,800,000 (year ended 31 March 2024: £28,000,000) comprises operating
income in the condensed unaudited income statement.
2. Administrative expenses borne by intermediate holding companies
includes the payment of the Electricity Generator Levy.
The balances in the table above represent the total net movement in the fair
value of the Company's investment. The "cash, working capital and debt in
intermediate holding companies" balances reflect investment in, distributions
from or movements in working capital and are not value generating.
Fair value of portfolio of assets
The Investment Manager has carried out fair market valuations of the
investments as at 30 September 2024. The Directors have satisfied themselves
as to the methodology used and the discount rates applied for the valuation.
Investments are all investments in environmental infrastructure projects and
are valued using a discounted cash flow methodology, being the most relevant
and most commonly used method in the market to value similar assets to the
Company's. The Company's holding of its investment in UK HoldCo represents its
interest in both the equity and debt instruments. The equity and debt
instruments are valued as a whole using a blended discount rate and the value
attributed to the equity instruments represents the fair value of future
dividends and equity redemptions in addition to any value enhancements arising
from the timing of loan principal and interest receipts from the debt
instruments, while the value attributed to the debt instruments represents the
principal outstanding and interest due on the loan at the valuation date.
Assets under construction are valued at cost (which is deemed to approximate
fair value) until such time as the risks associated with construction have
substantially passed. For some technologies with more complex construction
activities, this will be when the asset reaches the start of commercial
operations, while for others this may be during late-stage construction.
The valuation techniques and methodology have been applied consistently with
the valuation performed in the Company's latest annual audited financial
statements.
Discount rates applied to the operating portfolio of assets range from 7.0% to
18.3% (weighted average 9.5%) (at 31 March 2024: from 7.0% to 17.7% - weighted
average 9.4%).
The following economic assumptions were used in the discounted cash flow
valuations:
30 Sep 2024 (unaudited) 31 Mar 2024 (audited)
UK - RPI inflation rates 3.5% for 2024, 3% to 2030 and 2.25% thereafter 3.5% for 2024, decreasing to 3% until 2030, decreasing to 2.25% from 2031
Italy - inflation rates 2% flat rate 2.0% from 2024 onwards
UK - deposit interest rates 2.0% for the life of each asset 2.0% from 2024 onwards
Italy - deposit rates 0% 0%
UK - corporation tax rates 25% 25% from April 2024 onwards
Italy - corporation tax rates National rate of 24%, plus applicable regional premiums National rate of 24%, plus applicable regional premiums
Euro/sterling exchange rate 1.20 1.17
Refer to note 15 for details of the sensitivity of the portfolio to movements
in the discount rate and economic assumptions.
The assets in the intermediate holding companies substantially comprise
working capital, cash balances and the outstanding revolving credit facility
debt; therefore, the Directors consider the fair value to be equal to the book
values.
Details of investments made during the period
During the period, £0.9 million was invested in CNG Foresight Limited. The
portfolio holds 13 natural gas refuelling stations in operation and two in
construction phase.
The Group also invested £7.2 million into the Rjukan project, £2.9 million
into Cramlington, £1.1 million into Vulcan gas, £1.2 million into the CE
Glasshouse project, €2.9 million into FEIP and £0.6 million to other
projects.
In August 2024, the Company announced the successful completion of the sale of
51% of its 45.9MW portfolio across six anaerobic digestion ("AD") sites in the
UK to Future Biogas, for a total consideration of £68.1 million (the amount
includes £0.2 million in stamp duty). FGEN will retain a 49% ownership stake
in the AD portfolio, along with its interests in three additional AD assets
that were not included in the transaction.
9. Trade and other receivables
30 Sep 2024 31 Mar 2024
(unaudited) (audited)
£'000s £'000s
Prepayments 38 25
Closing balance 38 25
10. Trade and other payables
30 Sep 2024 31 Mar 2024
(unaudited) (audited)
£'000s £'000s
Accruals 2,335 2,654
Closing balance 2,335 2,654
The accruals balance for the period ended 30 September 2024 includes an amount
of £1,955,000 for the investment management fee for the quarter to 30
September 2024, payable to Foresight Group LLP.
11. Loans and borrowings
The Company had no outstanding loans or borrowings at 30 September 2024 (31
March 2024: none), as shown in the Company's condensed unaudited statement of
financial position.
As at 30 September 2024, the Company held loan notes of £348.9 million which
were issued by UK HoldCo (31 March 2024: outstanding amount of £348.9
million).
As at 30 September 2024, UK HoldCo had an outstanding balance of £113.7
million under a revolving credit facility (31 March 2024: £159.3 million).
The loan bears interest between 205 bps and 215 bps over SONIA (Sterling
Overnight Index Average) for sterling drawings and Euribor (Euro Interbank
Offered Rate) for euro drawings. £44.4 million of the revolving credit
facility balance was repaid during the period with the intention for the
balance to be reduced further using available proceeds from asset disposals or
future capital raises.
There were no other outstanding loans or borrowings in either the Company, UK
HoldCo or HWT at 30 September 2024.
12. Share capital account
30 Sep 2024 (unaudited)
Ordinary Treasury
shares shares £'000s
Opening balance 661,531,229 - 664,401
Purchase of treasury shares - (5,485,089) (5,179)
Closing balance 661,531,229 (5,485,089) 659,222
31 Mar 2024 (audited)
Ordinary Treasury
shares shares £'000s
Opening balance 661,531,229 - 664,401
Purchase of treasury shares - - -
Closing balance 661,531,229 - 664,401
The number of voting shares at 30 September 2024 was 656,046,140 (total shares
in issue 661,531,229 less 5,485,089 shares kept in treasury as a result of the
share buyback programme that started on 30 August 2024).
13. Retained earnings
30 Sep 2024 31 Mar 2024
(unaudited) (audited)
£'000s £'000s
Opening balance 86,813 150,167
Loss for the period/year (537) (13,937)
Dividends paid (25,361) (49,417)
Closing balance 60,915 86,813
14. Transactions with the Investment Manager and related parties
Transactions between the Company and its subsidiaries, which are related
parties of the Company, are fair valued and are disclosed within note 8.
Details of transactions between the Company and related parties are disclosed
below.
This note also details the terms of the Company's engagement with Foresight
Group as Investment Manager.
Transactions with the Investment Manager
Foresight Group is the Company's Investment Manager. Foresight's appointment
as Investment Manager is governed by an Investment Management Agreement.
For the period under review, Foresight Group was entitled to a base fee equal
to:
a) 1.0% per annum of the Adjusted Portfolio Value(1) of the Fund(2) up to
and including £500 million; and
b) 0.8% per annum of the Adjusted Portfolio Value of the Fund in excess of
£500 million.
The total Investment Manager fee charged to the condensed unaudited income
statement for the six months ended 30 September 2024 was £3,974,000
(six-month period ended 30 September 2023: £4,227,000) of which £1,955,000
remained payable as at 30 September 2024 (31 March 2024: £2,147,000).
1. Adjusted Portfolio Value is defined in the Investment Management
Agreement as:
a. the fair value of the investment portfolio; plus
b. any cash owned by or held to the order of the Fund; plus
c. the aggregate amount of payments made to shareholders by way of
dividend in the quarterly period ending on the relevant valuation day, less
i. any other liabilities of the Fund (excluding borrowings); and
ii. any uninvested cash.
2. Fund means the Company and Foresight Environmental Infrastructure
(UK) Limited together with their wholly owned subsidiaries or subsidiary
undertakings (including companies or other entities wholly owned by them
together, individually or in any combination, as appropriate) but excluding
project entities.
The Board has approved a reduction in the management fee payable to Foresight
Group LLP by changing the basis of calculating the fee from adjusted NAV to
NAV. With effect from 1 October 2024 the management fee will be calculated as
follows:
a) 0.95% per annum of the portfolio Net Asset Value of the Fund(2) up to
and including £500 million;
b) 0.80% per annum of the portfolio Net Asset Value of the Fund on the
balance above £500 million up to and including £1 billion; and
c) 0.75% per annum of the portfolio Net Asset Value of the Fund in excess
of £1 billion.
Other transactions with related parties
The Directors of the Company, who are considered to be key management,
received fees for their services for the six‑month period of £173,085
(six-month period ended 30 September 2023: £167,250). The Directors were paid
expenses of £1,947 in the six‑month period (six‑month period ended 30
September 2023: £4,907).
The Directors held the following shares:
Total number Total number
of shares held of shares held
at 30 Sep 2024 at 31 Mar 2024
(unaudited) (audited)
Ed Warner 75,000 60,000
Alan Bates 12,500 12,500
Stephanie Coxon 15,000 15,000
Jo Harrison 8,066 8,066
Hans Joern Rieks - 95,000
Nadia Sood - -
All of the above transactions were undertaken on an arm's length basis. Hans
Joern Rieks retired from the Board on 13 September 2024.
The Directors were paid dividends in the period of £5,465 (six-month period
ended 30 September 2023: £7,013).
15. Financial instruments
Financial instruments by category
The Company held the following financial instruments at 30 September 2024.
There have been no transfers of financial instruments between levels of the
fair value hierarchy. There are no non‑recurring fair value measurements.
30 Sep 2024 (unaudited)
Financial Financial
assets assets Financial
held at at fair value liabilities at
Cash and cash amortised through profit amortised
balances cost or loss cost Total
£'000s £'000s £'000s £'000s £'000s
Non-current assets
Investments at fair value through profit or loss (Level 3) - - 722,241 - 722,241
Current assets
Trade and other receivables - 38 - - 38
Cash and cash equivalents 193 - - - 193
Total financial assets 193 38 722,241 - 722,472
Current liabilities
Trade and other payables - - - (2,335) (2,335)
Total financial liabilities - - - (2,335) (2,335)
Net financial instruments 193 38 722,241 (2,335) 720,137
31 Mar 2024 (audited)
Financial
Financial assets Financial
assets at fair value liabilities
Cash and held at through profit at amortised
cash balances amortised cost or loss cost Total
£'000s £'000s £'000s £'000s £'000s
Non-current assets
Investments at fair value through profit or loss (Level 3) - - 753,572 - 753,572
Current assets
Trade and other receivables - 25 - - 25
Cash and cash equivalents 271 - - - 271
Total financial assets 271 25 753,572 - 753,868
Current liabilities
Trade and other payables - - - (2,654) (2,654)
Total financial liabilities - - - (2,654) (2,654)
Net financial instruments 271 25 753,572 (2,654) 751,214
The Company's investments at fair value through profit or loss are classified
at Level 3 within the IFRS fair value hierarchy.
The Level 3 fair value measurements derive from valuation techniques that
include inputs to the asset or liability that are not based on observable
market data (unobservable inputs).
In the tables above, financial instruments are held at carrying value as an
approximation to fair value unless stated otherwise.
Reconciliation of Level 3 fair value measurement of financial assets and
liabilities
An analysis of the movement between opening to closing balances of the
investments at fair value through profit or loss is given in note 8.
The fair value of the investments at fair value through profit or loss
includes the use of Level 3 inputs. Please refer to note 8 for details on the
valuation methodology.
Sensitivity analysis of the portfolio
The sensitivity of the portfolio to movements in the discount rate is as
follows:
30 Sep 2024 (unaudited)
Discount rate Minus 0.5% Base 9.5% Plus 0.5%
Change in portfolio valuation Increases £18.2m £806.6m Decreases £18.1m
Change in NAV per share Increases 2.8p 109.8p Decreases 2.8p
31 Mar 2024 (audited)
Discount rate Minus 0.5% Base 9.4% Plus 0.5%
Change in portfolio valuation Increases £20.7m £891.9m Decreases £19.8m
Change in NAV per share Increases 3.1p 113.6p Decreases 3.0p
The sensitivity of the portfolio to movements in inflation rates is as
follows:
30 Sep 2024 (unaudited)
Inflation rates Minus 0.5% Base 3.5% (2024), 3% (to 2030), then 2.25% thereafter Plus 0.5%
Change in portfolio valuation Decreases £21.9m £806.6m Increases £21.6m
Change in NAV per share Decreases 3.3p 109.8p Increases 3.3p
31 Mar 2024 (audited)
Inflation rates Minus 0.5% Base 3.5% (2024), then 3% to 2030, then 2.25% Plus 0.5%
Change in portfolio valuation Decreases £18.9m £891.9m Increases £19.3m
Change in NAV per share Decreases 2.9p 113.6p Increases 2.9p
The fair value of the investments is based on a "P50" level of electricity
generation for the renewable energy assets, being the expected level of
generation over the long term.
Wind, solar and hydro assets are subject to electricity generation risks.
The sensitivity of the portfolio to movements in energy yields based on an
assumed "P90" level of electricity generation (i.e. a level of generation that
is below the "P50", with a 90% probability of being exceeded) and an assumed
"P10" level of electricity generation (i.e. a level of generation that is
above the "P50", with a 10% probability of being achieved) is as follows:
30 Sep 2024 (unaudited)
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £27.7m £806.6m Increases £26.8m
Change in NAV per share Decreases 4.2p 109.8p Increases 4.1p
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £8.3m £806.6m Increases £8.2m
Change in NAV per share Decreases 1.3p 109.8p Increases 1.3p
Energy yield: hydro P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £1.3m £806.6m Increases £1.4m
Change in NAV per share Decreases 0.2p 109.8p Increases 0.2p
31 Mar 2024 (audited)
Energy yield: wind P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £28.3m £891.9m Increases £27.0m
Change in NAV per share Decreases 4.3p 113.6p Increases 4.1p
Energy yield: solar P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £9.3m £891.9m Increases £9.5m
Change in NAV per share Decreases 1.4p 113.6p Increases 1.4p
Energy yield: hydro P90 (10 year) Base P50 P10 (10 year)
Change in portfolio valuation Decreases £1.3m £891.9m Increases £1.4m
Change in NAV per share Decreases 0.2p 113.6p Increases 0.2p
Electricity and gas price assumptions are based on the following: for the
first two years, cash flows for each project use forward electricity and gas
prices based on market rates unless a contractual fixed price exists, in which
case the model reflects the fixed price followed by the forward price for the
remainder of the two‑year period. For the remainder of the project life, a
long‑term blend of central case forecasts from three established market
consultants and other relevant information is used, and adjusted by the
Investment Manager for project‑specific arrangements and price
cannibalisation.
The sensitivity assumes a 10% increase or decrease in power prices relative to
the base case for each year of the asset life. While power markets can
experience movements in excess of +/-10% on a short‑term basis, as has been
the case recently, the sensitivity is intended to provide insight into the
effect on the NAV of persistently higher or lower power prices over the whole
life of the portfolio. The Directors feel that +/-10% remains a realistic
range of outcomes over this very long time horizon, notwithstanding that
significant movements will occur from time to time.
The sensitivity of the portfolio to movements in electricity and gas prices is
as follows:
30 Sep 2024 (unaudited)
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases £39.0m £806.6m Increases £41.1m
Change in NAV per share Decreases 5.9p 109.8p Increases 6.3p
31 Mar 2024 (audited)
Energy prices Minus 10% Base Plus 10%
Change in portfolio valuation Decreases £37.4m £891.9m Increases £37.0m
Change in NAV per share Decreases 5.7p 113.6p Increases 5.6p
Waste & bioenergy assets (excluding Bio Collectors) do not have
significant volume and price risks and therefore are not included in the above
volume and price sensitivities.
In line with FGEN's original investment case for anaerobic digestion, the
Company continues to apply the conservative valuation assumption that
facilities will simply cease to operate beyond the life of their RHI tariff.
The Investment Manager has seen a growing case of evidence, including several
transactional datapoints, pointing towards a positive change in market
sentiment for valuing these assets - including the potential to run anaerobic
digestion facilities on an unsubsidised basis.
In light of this change, the Investment Manager has provided a sensitivity
extending the useful economic lives of its AD portfolio by up to five years -
capped at the duration of land rights already in place. Such an extension
would result in an uplift in the portfolio valuation of £21.9 million (3.3
pence per share).
The sensitivity of the portfolio to movements in AD feedstock prices is as
follows:
30 Sep 2024 (unaudited)
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases £7.0m £806.6m Decreases £7.0m
Change in NAV per share Increases 1.1p 109.8p Decreases 1.1p
31 Mar 2024 (audited)
Feedstock prices Minus 10% Base Plus 10%
Change in portfolio valuation Increases £8.7m £891.9m Decreases £8.9m
Change in NAV per share Increases 1.3p 113.6p Decreases 1.3p
The sensitivity of the portfolio to movements in corporation tax rates is as
follows:
30 Sep 2024 (unaudited)
Corporation tax Minus 2% Base 25% Plus 2%
Change in portfolio valuation Increases £13.4m £806.6m Decreases £12.7m
Change in NAV per share Increases 2.0p 109.8p Decreases 1.9p
31 Mar 2024 (audited)
Corporation tax Minus 2% Base 25% Plus 2%
Change in portfolio valuation Increases £13.6m £891.9m Decreases £13.9m
Change in NAV per share Increases 2.1p 113.6p Decreases 2.1p
Euro/sterling exchange rate sensitivity
As the proportion of the portfolio assets with cash flows denominated in euros
represents a small proportion of the portfolio value at 30 September 2024, the
Directors consider the sensitivity to changes in euro/sterling exchange rates
to be insignificant.
The Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
are approximately equal to their fair values.
Uncontracted revenues on non-energy generating portfolio sensitivity
Non-energy generating assets, such as batteries and controlled environment
agriculture and aquaculture, are not materially affected by either scarcity of
natural resource or power price markets. Therefore, the Investment Manager has
presented a sensitivity illustrating an assumed 10% change in all uncontracted
revenues for each year of the asset lives. An increase in uncontracted
revenues of 10% would result in an upward movement in the portfolio valuation
of £18.3 million (2.8 pence per share) compared to a decrease in value of
£14.2 million (2.2 pence per share) if those revenues were reduced by the
same amount.
16. Guarantees and other commitments
As at 30 September 2024, the Company has provided a guarantee over the
Company's wholly owned subsidiary UK HoldCo's obligations under the £200
million revolving credit facility refinanced on 13 June 2024 with a three-year
agreement with ING, HSBC, National Australia Bank, Royal Bank of Scotland
International and Clydesdale Bank. The contract includes an uncommitted
accordion facility of up to £30 million and an uncommitted option to extend
for a further year.
As at 30 September 2024, the Group has the following future investment
obligations over a 12-month horizon: €4.5 million (equivalent to £3.8
million) to FEIP, £1.6 million to the CNG Foresight project, £4.1 million to
the CE Rjukan project, £2.7 million to the Cramlington capex programme, £3.9
million to Sandridge battery storage, £1.2 million to Vulcan gas shipping,
£0.3 million into Vulcan D2 feeder value enhancements, £0.7 million in
working capital loans for AD assets and £0.7 million in various small
projects.
The Company had no other commitments or guarantees.
17. Subsidiaries and associates
The following subsidiaries and associates have not been consolidated in these
financial statements as a result of applying the requirements of "Investment
Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12
and IAS 27)":
Place of Registered Ownership
Subsidiaries Category business office interest Voting rights
Foresight Environmental Infrastructure (UK) Limited(1) Intermediate holding UK A 100% 100%
HWT Limited Intermediate holding UK B 100% 100%
JLEAG Solar 1 Limited Operating subsidiary UK C 100% 100%
Easton PV Limited Project holding company UK A 100% 100%
Pylle Solar Limited Project holding company UK A 100% 100%
Second Energy Limited Operating subsidiary UK A 100% 100%
JLEAG Wind Holdings Limited Project holding company UK A 100% 100%
JLEAG Wind Limited Project holding company UK A 100% 100%
Amber Solar Parks (Holdings) Limited Project holding company UK D 100% 100%
Amber Solar Park Limited Operating subsidiary UK D 100% 100%
Bilsthorpe Wind Farm Limited Operating subsidiary UK E 100% 100%
Ferndale Wind Limited Project holding company UK L 100% 100%
Castle Pill Wind Limited Project holding company UK L 100% 100%
Wind Assets LLP Operating subsidiary UK E 100% 100%
Hall Farm Wind Farm Limited Operating subsidiary UK E 100% 100%
Branden Solar Parks (Holdings) Limited Project holding company UK A 100% 100%
Branden Solar Parks Limited Operating subsidiary UK A 100% 100%
KS SPV 3 Limited Operating subsidiary UK A 100% 100%
KS SPV 4 Limited Operating subsidiary UK A 100% 100%
Carscreugh Renewable Energy Park Limited Operating subsidiary UK E 100% 100%
Wear Point Wind Limited Operating subsidiary UK E 100% 100%
Monksham Power Ltd Project holding company UK A 100% 100%
Frome Solar Limited Operating subsidiary UK A 100% 100%
BL Wind Limited Operating subsidiary UK E 100% 100%
New Albion Wind Limited Operating subsidiary UK E 100% 100%
Dreachmhor Wind Farm Limited Operating subsidiary UK E 100% 100%
France Wind GP Germany GmbH(2) Project holding company DE F 100% 100%
France Wind Germany GmbH & Co. KG(2) Project holding company DE F 100% 100%
CSGH Solar Limited Project holding company UK A 100% 100%
CSGH Solar (1) Limited Project holding company UK A 100% 100%
sPower Holdco 1 (UK) Limited Project holding company UK D 100% 100%
sPower Finco 1 (UK) Limited Project holding company UK D 100% 100%
Higher Tregarne Solar (UK) Limited Operating subsidiary UK A 100% 100%
Crug Mawr Solar Farm Limited Operating subsidiary UK A 100% 100%
Golden Hill Solar (UK) Limited Project holding company UK D 100% 100%
Golden Hill Solar Limited Operating subsidiary UK A 100% 100%
Shoals Hook Solar (UK) Limited Operating subsidiary UK A 100% 100%
CGT Investment Limited Project holding company UK G 100% 100%
CWMNI GWYNT TEG CYF Operating subsidiary UK G 100% 100%
Moelogan 2 (Holdings) Cyfyngedig Project holding company UK G 100% 100%
Moelogan 2 C.C.C. Operating subsidiary UK G 100% 100%
Llynfi Afan Renewable Energy Park Limited Operating subsidiary UK E 100% 100%
Bio Collectors Holdings Limited Project holding company UK J 100% 100%
Bio Collectors Limited Operating subsidiary UK J 100% 100%
Riverside Bio Limited Operating subsidiary UK J 100% 100%
Riverside AD Limited Operating subsidiary UK J 100% 100%
Yorkshire Hydropower Holdings Limited Project holding company UK E 100% 100%
Yorkshire Hydropower Limited Operating subsidiary UK E 100% 100%
Northern Hydropower Holdings Limited Project holding company UK E 100% 100%
Northern Hydropower Limited Operating subsidiary UK E 100% 100%
Codford Biogas Limited Operating subsidiary UK M 100% 100%
Rainworth Energy Limited Operating subsidiary UK K 100% 100%
FS West Gourdie Limited Operating subsidiary UK A 100% 100%
Spruce Bioenergy Limited Project holding company UK A 100% 100%
Cramlington Renewable Energy Developments Limited Operating subsidiary UK L 100% 100%
Fryingdown Solar Park Limited Non-trading entity UK D 100% 100%
Five Oaks Solar Park Limited Non-trading entity UK D 100% 100%
Warren Power Limited Project holding company UK H 100% 100%
ELWA Holdings Limited Project holding company UK L 80% 80%
ELWA Limited(3) Operating subsidiary UK L 80% 81%(3)
Green Gas Oxon Limited Project holding company UK I 52.6% 52.6%
Icknield Gas Limited Operating subsidiary UK I 52.6% 52.6%
Cross Solar PV Limited Operating subsidiary (dormant) UK C 100% 100%
Domestic Solar Limited Operating subsidiary (dormant) UK C 100% 100%
Residential PV Trading Limited Operating subsidiary (dormant) UK C 100% 100%
1. Foresight Environmental Infrastructure (UK) Limited ("UK HoldCo",
formerly known as JLEN Environmental Assets Group (UK) Limited).
2. Underlying French wind assets were disposed of in January 2022.
3. ELWA Holdings Limited holds 81% of the voting rights and a 100% share
of the economic benefits in ELWA Limited.
Place of Registered Ownership
Associates Category business office interest Voting rights
Foresight Biomass Holding Italy S.r.l. Project holding company IT N 45% 45%
Energie Tecnologie Ambiente S.r.l. Operating associate IT N 45% 45%
Foresight Rjukan Holding Limited Project holding company UK A 43% 43%
Catchment Tay Holdings Limited Project holding company UK O 33.3% 33.3%
Catchment Tay Limited Operating associate UK O 33.3% 33.3%
Foresight Hydrogen HoldCo GmbH Project holding company DE P 40.1% 40.1%
Hima Seafood Rjukan AS Operating associate NO Q 25% 25%
HH2E Werk Thierbach GmbH Operating associate DE R 23% 23%
HH2E Werk Lubmin GmbH Operating associate DE R 23% 23%
HH2E AG Project holding company DE R 23% 23%
Sandridge Battery Storage Limited Operating associate UK A 50% 50%
Clayfords Energy Storage Limited Operating associate UK S 50% 50%
AD Holdco 1 Limited Project holding company UK H 49% 49%
Egmere Energy Limited Operating associate UK H 49% 49%
Warren Energy Limited Operating associate UK H 49% 49%
Vulcan Renewables Limited Operating associate UK H 49% 49%
Grange Farm Energy Limited Operating associate UK H 49% 49%
Merlin Renewables Limited Operating associate UK H 49% 49%
Biogas Meden Limited Operating associate UK H 49% 49%
Foresight Battery Storage Holdings Limited Project holding company UK A 50% 50%
Lunanhead Energy Storage Limited Operating associate UK A 50% 50%
JLEAG AD Limited Project holding company UK A 49% 49%
Peacehill Gas Limited Operating associate UK T 49% 49%
CNG Foresight Holdings Limited Project holding company UK A 25% 25%
CNG Foresight Limited Operating associate UK U 25% 25%
CNG Newton Aycliffe Limited Operating associate UK U 25% 25%
CNG Eurocentral Limited Operating associate UK U 25% 25%
CNG Avonmouth North Limited Operating associate UK U 25% 25%
CNG Corby Limited Operating associate UK U 25% 25%
CNG Doncaster Limited Operating associate UK U 25% 25%
CNG Bracknell Limited Operating associate UK U 25% 25%
CNG Bangor Limited Operating associate UK U 25% 25%
CNG Aylesford Limited Operating associate UK U 25% 25%
CNG Station Holdings Limited Operating associate UK U 25% 25%
CNG Leyland Limited Operating associate UK U 25% 25%
CNG Knowsley Limited Operating associate UK U 25% 25%
CNG Castleford Limited Operating associate UK U 25% 25%
Lavant Down Northampton Limited Operating associate UK U 25% 25%
Oxford Erdington Limited Operating associate UK U 25% 25%
Hams Warrington Limited Operating associate UK U 25% 25%
Nexus Newark Limited Operating associate UK U 25% 25%
Registered offices
A) The Shard, C/O Foresight Group Llp, 32 London Bridge Street, London,
SE1 9SG
B) 50 Lothian Road, Festival Square, Edinburgh, Midlothian, EH3 9WJ
C) 1 Filament Walk, Suite 203, Wandsworth, London, SW18 4GQ
D) The Long Barn, Manor Courtyard, Stratton-On-The-Fosse, Radstock, BA3 4QF
E) C/O RES White Limited, Beaufort Court, Egg Farm Lane, Kings Langley,
Hertfordshire, WD4 8LR
F) Steinweg 3-5, Frankfurt Am Main, 60313, Germany
G) Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy, LL28 5UN
H) 10-12 Frederick Sanger Road, Guildford, Surrey, GU2 7YD
I) Friars Ford, Manor Road, Goring, Reading, RG8 9EL
J) 10 Osier Way, Mitcham, Surrey, CR4 4NF
K) C/O Material Change, The Amphenol Building, 46-50 Rutherford Drive,
Park Farm Industrial Estate, Wellingborough, NN8 6AX
L) 8 White Oak Square, London Road, Swanley, BR8 7AG
M) C/O External Services Limited, 20 Central Avenue, St Andrews Business
Park, Norwich, NR7 0HR
N) Piazza Barberini 52, 00187, Rome, Italy
O) C/O Infrastructure Managers Limited, 2nd Floor Drum Suite, Saltire Court,
20 Castle Terrace, Edinburgh, EH1 2EN
P) C/O Intertrust (Deutschland) GmbH, Eschersheimer Landstraße 14, 60322
Frankfurt am Main
Q) Skriugata 26, 3660, Rjukan
R) Kaiser-Wilhelm-Straße 93, 20355 Hamburg
S) Foresight Group LLP, Clarence House, 133 George Street, Edinburgh, EH2
4JS
T) Peacehill Farm, Wormit, Fife, DD6 8PJ
U) C/O Flb Accountants Llp, 1010 Eskdale Road, Winnersh Triangle, Wokingham,
RG41 5TS
18. Events after statement of financial position
A dividend for the quarter ended 30 September 2024 of 1.95 pence per share was
approved by the Board on 20 November 2024. Please refer to note 6 for further
details.
The interim dividend will be paid on 27 December 2024.
Since the date of the condensed unaudited statement of financial position,
4,913,591 of the Company's shares were bought back for the total consideration
of £4.2 million and average price paid of 84.92 pence per share.
ALTERNATIVE PERFORMANCE MEASURES ("APMS")
APM Purpose Calculation APM value Reconciliation to IFRS
Total shareholder return (since IPO and annualised) Measure of financial performance, indicating the amount an investor reaps from Since IPO: closing share price as at 30 September 2024 plus all dividends 69.4% Calculation for total shareholder return since IPO: closing share price as at
investing since IPO and expressed as a percentage (annualised or total since since IPO assumed reinvested, divided by the share price at IPO, expressed as
30 September 2024 as per key investments metrics on page 42 in the Company's
IPO of the Company) a percentage (HY23: 70.1%) Half-year Report 2024, plus all dividends since IPO assumed reinvested,
divided by the share price at IPO, expressed as a percentage
Annualised: closing share price as at 30 September 2024 plus all dividends 5.1% annualised Calculation for annualised total shareholder return: closing share price as at
since IPO assumed reinvested, divided by the share price at IPO, to the power
30 September 2024 as per key investment metrics on page 42 in Half-year Report
of one over the number of years since IPO, expressed as a percentage (HY23: 5.7%) 2024 plus all dividends since IPO assumed reinvested, divided by the share
price at IPO, to the power of one over the number of years since IPO,
expressed as a percentage
Net Asset Value per share Allows investors to gauge whether shares are trading at a premium or a The net assets divided by the number of ordinary shares in issuance 109.8 pence The calculation divides the net assets as per the statement of financial
discount by comparing the Net Asset Value per share with the share price
position on page 49 in Half-year Report 2024 by the closing number of ordinary
(FY24: 113.6 pence) shares in issue as per note 12 on page 58 in Half-year Report 2024
Market capitalisation Provides an indication of the size of the Company Closing share price as at 30 September 2024 multiplied by the closing number £595.4 million The calculation uses the closing share price as at 30 September 2024 as per
of ordinary shares in issuance
the key investment metric table on page 42 in Half-year Report 2024 and the
(FY24: £619.9 million) closing number of ordinary shares as per note 12 of the financial statements
on page 58 in Half-year Report 2024
Gross Asset Value ("GAV") A measure of the value of the Company's total assets The sum of total assets of the Company as shown on the statement of financial £1,010.5 million This is the total debt (RCF drawn: £113.7 million plus project level debt:
position and the total debt of the Group and underlying investments
£176.6 million) plus the Net Asset Value as per the statement of financial
(FY24: £1,091.8 million) position on page 49 in Half-year Report 2024
Gross Asset Value on investment basis including debt held at SPV level
Gearing Ascertain financial risk in the Group's balance sheet Total debt of the Group and underlying investments as a percentage of GAV 28.7% The calculation uses the total debt (RCF drawn: £113.7 million plus project
level debt: £176.6 million) and shows this as a percentage of the GAV
(HY23: 28.7%)
Distributions, repayments and fees from portfolio A measure of performance from the underlying portfolio Total cash received from investments in the period £46.6 million As per "Cash flows of the Group for the period", also titled "Cash
distributions from environmental infrastructure investments" on page 44 in
(HY23: £46.2 million) Half-year Report 2024
Cash flow from operations of the Group Gauges operating revenues and expenses of the Group As per the "Cash flows of the Group for the period" table on page 44 in £31.3 million Detailed breakdown as per page 44 in Half-year Report 2024 in the "Cash flows
Half-year Report 2024, the calculation takes the cash distributions from
of the Group for the period"
environmental infrastructure investments and subtracts the following: (HY23: £32.2 million)
administrative expenses, Directors' fees and expenses, Investment Manager
fees, financing costs (net of interest income)
Cash dividend cover Investors can gauge the ability of the Group to generate cash surplus after Cash flow from operations of the Group divided by dividend paid within the 1.23x The calculation uses the cash flows from operations as per "Cash flows of the
payment of dividend reporting period
Group for the period" on page 44 in Half-year Report 2024 and the dividends
(HY23: 1.32x) paid in cash to shareholders as per the cash flow statement on page 51 in
Half-year Report 2024
Ongoing charges ratio A measure of the annual reduction in shareholder returns due to operational The ongoing charges have been calculated, in accordance with AIC guidance, as 1.26% Annualised ongoing charges for the period ended 30 September 2024 have been
expenses, based on historical data annualised ongoing charges (i.e. excluding acquisition costs and other
calculated as £9.3 million. The ongoing charges ratio divides this by the
non-recurring items) divided by the average published undiluted Net Asset (FY24: 1.24%) published average Net Asset Value over the last two quarters to the
Value in the period. Total annualised ongoing charges include Investment calculation date (including 30 September 2024)
Manager fees, legal and professional fees, administration fees and Directors'
fees
NAV total return since IPO Measure of financial performance (annualised), which indicates the movement of Closing NAV per ordinary share as at 30 September 2024 plus all dividends 7.6% Calculated as the closing NAV per ordinary share as per the statement of
the value of the Company since IPO since IPO assumed reinvested, divided by the NAV at IPO, to the power of 1,
financial position on page 49 in Half-year Report 2024
over the number of years since IPO (HY23: 8.7%)
ENDS
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