REG - Foresight Envr - Strategy and performance update

Foresight Environmental InfrastructureAnnouncement

03/06/2025 07:00

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RNS Number : 1142L  Foresight Environmental Infrastruct  03 June 2025

FORESIGHT ENVIRONMENTAL INFRASTRUCTURE LIMITED

 

("FGEN" or the "Company")

 

Strategy and performance update

 

·    Re-focused investment strategy following an evaluation of strategic
options

·    Strategy prioritising core environmental infrastructure assets

·    No material disposals in the near term, sales of growth assets
planned in the mid-term

·    New adjusted fee structure agreed with the investment manager

·    Resilient NAV, record cash generation and increased dividend target

·    Publication of Annual Report in June to include a full update on
strategic priorities

 

The Board of FGEN, a leading investor in private environmental infrastructure
assets across the UK and mainland Europe, today provides an update on the
Company's unaudited March 2025 Net Asset Value ("NAV"), dividend and strategy.

 

Performance highlights

 

·   NAV total return of 1.0% in the three months to 31 March 2025, and 0.6%
in the financial year to 31 March 2025.

·   NAV of £678.7 million as of 31 March 2025 (£695.4 million as of 31
December 2024). NAV per share of 106.5 pence down from 107.4 pence in December
2024 (-0.8%).

·   Delivering on dividend commitment: Final quarterly dividend of 1.95
pence in line with the Company's target.

·   Record cash generation from the portfolio, supporting sustainable
dividend coverage of 1.32x.

·   Targeting an 11(th) consecutive annual increase in the dividend:
dividend target of 7.96 pence per share for the year to 31 March 2026, a 2%
uplift on FY 2025.

·   Active discount control through the repurchase of 9,746,891 shares in
the quarter ended 31 March 2025. Total buybacks since 15 August 2024 of £19.2
million and the extension of the programme to £30 million announced in March
2025.

 

Ed Warner, Chair of FGEN, said:

 

"FGEN's portfolio continues to perform to plan, delivering record cash
generation, a resilient NAV and a well-covered and growing dividend. This
robust foundation confirms that the operational part of the portfolio delivers
significant value in the near-term, while growth assets carry meaningful
upside potential in the future. The ongoing reduction in gearing, share
buybacks and recent asset disposals alongside an adjusted fee structure
announced today strengthen FGEN's position for the future.

 

"As part of the Board's determination to do everything to maximise shareholder
value, it has considered a full range of strategic options with independent
advisors.  The Board concluded that the long-term prospects of the Company
and shareholder interests are best served through the proactive management of
the existing portfolio. The Company will follow a re-focused investment
strategy, prioritising a core portfolio of environmental infrastructure assets
with long-term stable cash flows delivering predictable income alongside
opportunities for growth.

 

"In the medium term, the Company is seeking to deliver capital appreciation
through the disposals of its growth assets and as such, no material asset
disposals are expected in the near-term. We look forward to presenting our
strategic priorities at the full year results in June where we will set out
the substantial, long-term investment opportunity for environmental
infrastructure."

 

Re-focused investment strategy

 

With the support of independent advisors, the Board rigorously evaluated a
full range of strategic alternatives for the Company, including a managed
wind-down, a targeted divestment approach, the continuation of the current
investment strategy, and potential mergers and acquisitions.

 

Following this review, the Board has concluded that the long-term prospects of
the Company and shareholder interests are best served through the proactive
management of the existing portfolio, and a refocused investment strategy that
reflects the structural changes in macro-economic conditions since 2022,
characterised by increased levels of market volatility and higher return
expectations in an elevated rate environment.

 

Given this context, future investment activity will be disciplined, seeking to
maintain a balanced risk-return profile and prioritising core infrastructure
assets and businesses that offer long term stable cash flows, secured revenues
and inflation linkage. FGEN will focus on renewable energy generation - solar,
wind, anaerobic digestion, biomass and hydro - alongside other energy
infrastructure including long and short duration storage, low-carbon heat,
cleaner transportation, and sustainable resource management across the waste
and water sectors.

 

Within that, the Company will invest in growth assets in mature, lower-risk
sectors which provide opportunities for capital growth, including
construction-stage and late-stage development projects.

 

As part of the Company's objective to strike a careful balance between
generating income to support a growing dividend and delivering medium-term
value creation, the Company will not target further material disposals of its
well-established assets in the near-term. FGEN intends to exit from the
existing growth assets in the portfolio in the medium-term once they have
fully ramped up, with good progress being made on those assets in line with
expectations. Rjukan is now in the final stages of construction with first
harvest targeted for July, further offtake agreements have been signed at the
Glasshouse facility as operations continue to ramp up, and the restructuring
across the CNG platform better positions the overall venture for growth as the
rollout of stations continues and volumes of gas dispensed increase.

 

In line with strict return criteria, the Company will continue to monitor
market conditions and assess opportunities as they arise.

 

Further detail on strategic priorities will be provided at the FY 2025 results
webinar in June.

 

Investment manager fee structure update

 

The Board is very conscious of the need to deliver excellent value for
shareholders as well as excellent returns over the long term. To that end,
last year both the basis for calculation of investment management fees was
changed to net asset value, and the fee rate charged was also reduced. Now, we
can announce that the basis of calculating fees is further adjusted to better
align the interests of the investment manager, Foresight Group LLP, with those
of shareholders.

 

From a proposed date of 1 October 2025, fees will be calculated 50% based on
net asset value and 50% on market capitalisation (the latter element capped at
net asset value). This is estimated to provide an annualised saving of over
£800k on the current NAV-based fee arrangement, a c. 13% reduction. Since
30th September 2024, prior to the previous change, this 50:50 blended fee
arrangement will result in FGEN reducing investment management fees by c.
34%.

 

While the Board is pleased to deliver this change, which represents a material
reduction in operating costs, it is strongly committed to exploring all
possible ways in which the cost of managing FGEN can be lowered further in the
future to the benefit of the Company's shareholders.

 

NAV performance

                                                                       NAV per share
 NAV at 31 December 2024                                               107.4p
 Dividends paid in the period                                          -2.0p
 Power price forecasts                                                 -0.1p
 Portfolio performance                                                 -0.6p
 Review of maintenance expenditure                                     -0.7p
 Uplift from share buy-back programme                                  0.5p
 Other movements (including discount rate unwind less fund overheads)  2.0p
 NAV at 31 March 2025                                                  106.5p

 

Valuation factors

 

Power price forecasts

 

The Company's high degree of contracted revenues and controlled exposure to
merchant power prices through selective asset diversification provides a low
exposure to fluctuations in market pricing. As a result, the Company
experienced a low NAV per share impact of -0.1 pence in the period to 31 March
2025.

 

Portfolio performance

 

Portfolio performance was below forecast for the three-month period ended 31
March 2025, primarily due to a period of lower-than-expected solar irradiance
and wind speeds, as well as downtime due to an unplanned outage at the
Company's Italian energy-from-waste investment.

 

FGEN's diversification strategy means the fund is resilient against
unpredictable weather patterns, with a 10(th) consecutive year of record cash
distributions received from the portfolio - driving a full year 2025 dividend
cover of 1.32x, marginally exceeding guidance issued in the 30 September 2024
report ("above 1.20x").

 

Review of maintenance expenditure

 

As part of the regular review of maintenance requirements across the
portfolio, budgets have been increased across the foodwaste anaerobic
digestion facilities at Bio Collectors and Codford Biogas, leading to a
reduction in NAV per share of -0.7 pence.

 

Capital allocation and discount management

 

The board remains acutely aware of the challenging backdrop that affects the
Renewable Infrastructure sector and the Company, with the sector continuing to
trade at a material discount to NAV. An active discount management strategy
has been implemented during the period, supported by disciplined capital
allocation measures incorporating asset disposals, repayment of debt and share
buybacks.

 

Gearing

 

In line with the Company's stated approach to capital allocation, FGEN
continues to maintain one of the lowest levels of gearing in the sector. As at
31 March 2025 total gearing was 28.7%, with the Company's Revolving Credit
Facility ("RCF") £99.3 million drawn.

 

Post year end, the Company reduced the size of its RCF from £200 million to
£150 million, providing an annual cost saving of £0.4 million. The remaining
RCF continues to provide ample headroom to cover outstanding portfolio
commitments and value enhancement projects as well as the remaining payments
for the Company's well progressed construction and early-stage operational
investments.

 

Share buyback programme

 

As part of the ongoing share buyback programme, the Company purchased
9,746,891 shares in the quarter, increasing the NAV per share by 0.5 pence.
Since its inception on 15 August 2024, the initial buyback programme has
returned a total of £19.2 million to shareholders by 31 March 2025. The
Company also announced on 31 March 2025 its intention to extend the buyback
programme to a total maximum aggregate consideration of £30 million, via a
further £10 million being allocated to the buyback programme funded from the
Company's own resources in accordance with its stated approach to capital
allocation.

 

Dividend

 

Following the earlier announcement of a final quarterly interim dividend of
1.95 pence per share for the period from 1 January 2025 to 31 March 2025, the
Company will have paid a total of 7.80 pence per share in respect of the year
ended 31 March 2025, in line with the dividend target set out at the start of
the year.

 

Financial performance of the portfolio continues to be strong, with dividend
cover of 1.32x for the year to 31 March 2025, and the Board is pleased to
announce an 11th consecutive annual increase in the dividend target to 7.96
pence per share for the year to 31 March 2026, a 2% uplift on FY 2025. This
dividend represents a yield of 10.4% on the closing share price at 2 June
2025.

 

Dividend Timetable

 

Ex-dividend date         5 June 2025

Record date                6 June 2025

Payment date              27 June 2025

 

FY 2025 audited results

 

The Company will publish its audited results for the full year ended 31 March
2025 on Tuesday 24 June 2025. Chris Tanner, Edward Mountney and Charlie Wright
will host a presentation with Q&A for equity analysts at 10:00 am UK time
on the same day.

 

Retail Investor Webinar

 

On 26 June 2025, Chris Tanner, Edward Mountney and Charlie Wright will also
provide a live presentation via Investor Meet Company at 12:00 p.m. BST.

Investors can sign up to Investor Meet Company for free, follow FGEN and gain
access to the meeting via:
https://www.investormeetcompany.com/foresight-environmental-infrastructure-limited/register-investor

 

This announcement contains information that is inside information for the
purposes of the Market Abuse Regulation (EU) No.596/2014.

 

Contacts

 

For further information, please visit www.fgen.com or contact:

 

Foresight
Group
      +44(0)20 3667 8100

Chris Tanner
 
fgenir@foresightgroup.eu

Edward Mountney

Charlie Wright

Wilna de
Villiers

 

Winterflood Securities Limited
                       +44(0)20 3100 0000

Neil Langford

 

SEC Newgate
 
+44 (0)20 3757 6882

Clotilde Gros
 
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

 

 

About FGEN

 

FGEN invests into environmental infrastructure to deliver stable returns, long
term predictable income and opportunities for growth, whilst driving
decarbonisation and sustainability.

 

Investing across renewable generation, other energy infrastructure and
sustainable resource management, it targets projects and businesses with an
emphasis on long term stable cash flows, secured revenues, inflation linkage
and the delivery of essential services. FGEN's aim is to provide investors
with a sustainable, progressive dividend per share, paid quarterly, alongside
the potential for capital growth.

 

The target dividend for the year to 31 March 2026 is 7.96 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.

 

 

(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.

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