8 February 2023

Foresight Solar Fund Limited (the "Company" or "Foresight Solar")

Q4 2022 Net Asset Value and Trading Update

Foresight Solar Fund Limited, a fund investing in a diversified portfolio of ground-based solar PV and battery storage assets in the UK and internationally, announces that its unaudited net asset value (NAV) was £771.5 million on 31 December 2022 (30 September 2022: £771.2 million). This results in a NAV per Ordinary Share of 126.5 pence (30 September 2022: 126.4 pence per share).

Highlights:

Summary of NAV key drivers for Q4 2022:

In October, the 26MW Virgen del Carmen solar farm began exporting to the grid in Spain. Post construction, the valuation of the project moved to a discounted cash flow basis, at a discount rate of 7.50%, adding a further 0.8 pence per share to the NAV. This represents a project valuation, whilst the overall NAV factors in the additional costs of bringing the asset to commissioning following schedule delays. Following the Lorca portfolio energising in August, which added 1.1p to the Q3 NAV, the Spanish portfolio of 125MW is now fully operational and is expected to make a significant contribution to revenues in 2023. The country continues to be a strong focus for the Company with attractive opportunities.

The NAV has been rebased to also incorporate higher actual 2022 inflation, adding 0.9 pence per share, and the Investment Manager has updated its short-term UK inflation forecast to 6.5% for 2023, adding a further 3.2 pence per share. Together, this has resulted in a NAV increase of 4.2 pence per share. The medium and long-term inflation assumptions remain unchanged at 3.0% from 2024.

The final quarter of 2022 saw a moderation of UK power prices and, across the Company's core markets, Q4 power curves generally reflected a fall in short and medium-term pricing. Despite these changes, long-term forecasts remain unchanged.

The clarity the UK Government provided on its Electricity Generator Levy (EGL) allowed for a more reliable assessment of the tax's impact on forecast revenues. As a reminder, in the third quarter, the Company applied a 50% discount to baseload power price forecasts for FY 2023, stepping down to 10% in FY 2027. That initial view was a close estimate, as the revised assessment of the full effects of the EGL resulted in a downward adjustment of -0.2 pence per share once the discounts were unwound. The overall impact is lower than the Company initially assessed when it provided a specific update last November because it incorporates mitigating factors from the draft legislation, such as the introduction of inflation indexation to the benchmark energy price from 2024.

Whilst questions remain about the efficacy of the EGL, the effect of the proposed legislation on the Company's valuation is now fully priced in. Given the high proportion of contracted revenue, the Company has a strong degree of certainty on the level of additional tax that will need to be paid over the next three years. After that period, power forecasts trend down toward the £75/MWh benchmark price, thereby reducing the levy's impact.

Trading update

Electricity generated by the global portfolio was 2.3% above base case for the full year. UK production, representing 75% of total generation for the period, was 8.6% above budget due to a combination of strong irradiation and high levels of availability throughout the year. Those factors, combined with elevated power prices, resulted in revenues significantly above budget for the year.

Good operational performance in Australia was not sufficient to mitigate the lasting effects of La Niña, which continued to limit irradiation across the country and led to generation 12.5% below forecast.

Power price hedging and dividend cover

During the period, the Investment Manager continued to monitor the market for opportunities to forward-fix prices under power purchase agreements. The proportion of contracted revenue for the global portfolio now stands at 79% for 2023, 75% for 2024 and 66% for 2025.

Based on the strong operational performance and power price hedges, dividend cover for FY22 is 1.74x. With existing forward price fixes and budgeted production levels, dividend cover is expected to be at least 1.50x for FY23 and remain well above 1.0x until at least the end of FY25 - even after accounting for the effects of the EGL.

Pipeline

The Company has visibility of a strong pipeline of opportunities that are expected to be yield accretive and provide potential to organically grow the NAV. Alongside the more than 600MW of UK solar projects over which the Investment Manager has preferential rights, there is an extensive flow of BESS opportunities from trusted partners.

Foresight Solar is also in advanced discussions with several developers in Spain and in the UK to secure exclusive rights to pipelines of attractive development-stage projects. The potential to capture the full upside of this type of investment, allied to the Investment Manager's successful track record in development portfolios, makes this an appealing proposition to recycle capital.

Finally, the Company is currently in exclusive negotiations for the full project rights to a further 50MWp ready-to-build battery storage project, with a completion date targeted for Q1 2023. The Investment Manager is assessing the feasibility of constructing this asset as a longer duration project, as well as the potential for extending the duration of its other battery storage assets yet to commence construction.

Gearing update

The Gross Asset Value (GAV), including Company and subsidiaries, on 31 December 2022, was £1,296.3 million (30 September 2022: £1,299.7 million). The Company's total outstanding debt is £524.8 million, representing 40.5% of GAV (30 September 2022: 40.7%), well within the 50% limit.

The total outstanding long-term debt of £409.6 million represents approximately 31.6% of GAV of the Company and subsidiaries on 31 December 2022.

Dividend

The Company remains on target to deliver an annual dividend of 7.12 pence per share for the year ending 31 December 2022. The Board's intention is to declare the last interim dividend payment of 1.78 pence per share with the annual report next month.

2022 full-year results date

The Company intends to publish its 2022 full-year results on 15 March 2023. A Notice of Results announcement will be released in due course.