TIDMBSIF
RNS Number : 0356G
Bluefield Solar Income Fund Limited
27 February 2015
BLUEFIELD SOLAR INCOME FUND LIMITED
Unaudited Condensed Consolidated Interim Financial Statements
for the Six Months Ended 31 December 2014
A copy of the Interim Report and Unaudited Condensed
Consolidated Interim Financial Statements has been submitted to the
National Storage Mechanism and will shortly be available for
inspection at www.morningstar.co.uk/uk/NSM. The Interim Report and
Unaudited Condensed Consolidated Interim Financial Statements will
also shortly be available on the Company's website at
www.bluefieldsif.com where further information on the Company can
also be found.
Operational Highlights
-- The Company was the first of the solar focused funds to list
on the Premium Segment of the London Stock Exchange on 12 July
2013;
-- The objective of the Company is to deliver long-term, stable
dividends growing in-line with the Retail Price Index ("RPI");
-- Successful placement ("Placement") of new shares in November
2014 raising gross proceeds of GBP131 million to give a market
capitalisation of GBP288 million at 31 December 2014;
-- As part of November 2014's Placement the Company announced 5
target acquisitions with an estimated combined energy capacity in
excess of 100 Megawatts Peak ("MWp"). When completed, this will
take the Company's combined energy capacity to approximately 250
MWp across 29 assets;
-- The Company funded two acquisitions, Redlands and Capelands
with a combined energy capacity of 15 MWp using part of the GBP50
million revolving credit facility ("Facility") arranged with The
Royal Bank of Scotland plc ("RBS"), which was repaid from proceeds
of the Placement before the end of the period;
-- During the six months ended 31 December 2014, the Company
made 17 acquisitions from total commitments of GBP51.5 million with
an estimated combined energy capacity of 45 MWp including 3 from
the target acquisitions announced by the Company as part of the
Placement. A portfolio of 12 asset acquisitions were mainly funded
through issue of consideration shares in the Company valued at
GBP7.7 million (see Note 16);
-- Net Asset Value ("NAV") as at 31 December 2014 of GBP282
million (30 June 2014: GBP148 million);
-- NAV per share as at 31 December 2014 of 101.34 pence per
share (30 June 2014: 102.96 pence per share);
-- The Company delivered an on-target dividend of 4 pence per
share in the first financial year ending 30 June 2014 and has paid
a further interim dividend of 3.25 pence per share and is on target
to deliver a sector leading 7 pence per share for the financial
year ending 30 June 2015;
-- Notwithstanding the reduction in power prices during the
period, the attractively priced portfolio and strong contractual
protections give the Directors confidence that the Company will
achieve the target return of 7 pence per share for the full
financial year, rising with RPI thereafter;
-- The Company announced a transition to a quarterly dividend
schedule; and
-- Since the end of the period, the Company has announced the
acquisition of a 29 MWp asset in Oxfordshire, which was one of the
assets disclosed in the Placement.
Financial Highlights
Six months ended
31 December 2014
------------------------------------------------------------------------------ -----------------
Total income GBP933,433
Total net gains on financial assets held at fair value through profit or loss GBP7,788,100
Total comprehensive income before tax GBP6,055,821
Earnings per share 3.48p
Second interim dividend in respect of the year ending 30 June 2014 2.00p
First interim dividend in respect of the year ending 30 June 2015 3.25p
NAV per share 101.34p
Total Return (based on NAV movement and dividends paid) 3.53%
Total Return to shareholders (based on share price and dividends paid) 5.85%
------------------------------------------------------------------------------ -----------------
A conference call presentation with Analysts will take place at
9:30am on Friday, 27 February 2015. The presentation will be hosted
by James Armstrong and Mike Rand of Bluefield Partners LLP, the
Investment Adviser to the Company. A PowerPoint presentation will
be provided separately in advance of the call.
To register for the call, please contact the Company's PR agent
CNC, by either email to tom.karim@cnc-communications.com or by
telephone on +44(0)20 3219 8820 / +44(0)7923 293 399.
Enquiries:
James Armstrong / Mike Rand / Giovanni Terranova
Bluefield Partners LLP - Company Investment Adviser
Tel: +44 (0)20 7078 0020
Tod Davis / David Benda
Numis Securities Limited - Company Broker
Tel: +44 (0)20 7260 1000
Kevin Smith
Heritage International Fund Managers Limited - Company Secretary
& Administrator
Tel: +44 (0)1481716000
Tom Karim
CNC
Tel: +44(0)20 3219 8820 / +44(0)7923 293 399
Note to editors
About Bluefield Solar Income Fund Limited (BSIF)
BSIF is a Guernsey-registered investment company focusing on
large scale agricultural and industrial solar assets. It raised
gross proceeds of GBP130 million in July 2013 through an initial
public offering of shares on the main market of the London Stock
Exchange. It raised a further GBP13 million in February 2014 in an
oversubscribed placement. Pursuant to a placing programme in
November 2014 the Company raised an additional GBP131 million. In
June 2014 it agreed a three-year revolving credit facility with
Royal Bank of Scotland, for up to GBP50 million.
BSIF seeks to provide shareholders with an attractive return,
principally in the form of income distributions, by investing in a
diversified portfolio of solar energy assets, each located within
the UK, with a focus on utility scale assets and portfolios on
greenfield, industrial and/or commercial sites. To date, dividends
have been paid semi-annually, but the Company has announced that in
2015 it intends to move to quarterly distributions.
About Bluefield Partners LLP (Bluefield)
Bluefield was established in 2009 and is an investment adviser
to companies and funds investing in solar energy infrastructure. It
has a proven record in the selection, acquisition and supervision
of large scale energy and infrastructure assets in the UK and
Europe. The team has been involved in over GBP600m of solar
photovoltaic ("PV") funds and/or transactions in both the UK and
Europe since 2008, including over GBP380m in the UK since December
2011.
Bluefield has led the acquisitions, and currently advises on
over 50 UK based solar assets that are agriculturally, commercially
or industrially situated. Based in its London office, Bluefield's
partners are supported by a dedicated and highly experienced team
of investment, legal and portfolio executives.
Bluefield was appointed Investment Adviser to the Company in
June 2013.
Chairman's Statement
Introduction
The period to 31 December 2014, has seen the Company consolidate
its position as the UK's leading premium listed solar investment
company with the largest market capitalisation, most diversified
portfolio, and on target to deliver sector leading returns.
In November 2014, we achieved a successful GBP131 million
fundraise and announced an agreed investment pipeline of GBP150
million. At the same time we announced a fully covered dividend of
3.25 pence per share in November 2014, laying a solid foundation
for a 7 pence per share dividend for the full financial year.
The Company's first annual report sought to deliver a clear and
transparent analysis of our activities with a particular focus on
the valuation methodology and underlying assumptions. I trust
shareholders will find this interim report continues in the same
vein. Transparency is especially pertinent today. Investors across
the renewable energy sector have been seeking to understand the
impact that lower power prices may have on the Company's ability to
make dividend distributions and what effect this might have on the
Company's valuation. I make reference to both dividends and
valuation below; I would however direct you to the Power Price
Sensitivity and Distributions section of the Report of the
Investment Adviser where there is a full description of the
Company's power price strategy and the potential impact on
dividends and their sensitivity to changes in power price. Apart
from being instructive, I hope it gives you as much comfort as it
has given the Board in reiterating the very robust nature of the
Company's revenue streams. As with the annual report, you will see
a detailed valuation analysis in the Report of the Investment
Adviser that highlights the Company's long-term view of power
prices in relation to the NAV.
Investment Strategy
The Company's strategy of funding assets through the
construction phase in an increasingly competitive market has
continued to give us a key competitive advantage over other groups
who have decided to acquire assets only at the operational stage.
As I have highlighted before, in a primary asset market such as the
UK solar market, funding through construction gives the Company
access to the widest pool of assets available and enables us to
acquire them in a cost effective way. The success of this is
demonstrable in the scale, pricing and quality of the pipeline
announced in this period. The Company made 17 acquisitions and
announced a pipeline that, when completed, will take the Company's
energy capacity to approximately 250 MWp.
Leverage
The Company has, currently, less than 5% long-term debt
financing which is below the level the Board and Investment Adviser
believe to be optimal. The Board has asked its Investment Adviser
to prepare an analysis of the project finance and bond markets with
the view to increase the level of structural debt in the medium
term.
Portfolio performance
The operational portfolio, whilst still in its early phase, is
performing ahead of expectations. As the Investment Adviser
highlights in its Portfolio analysis, part of the stability of the
portfolio's revenues is down to the strong contractual protections
the Company has negotiated with its contractors; the analysis of
Betingau is a good example of the level of protection afforded to
our shareholders.
Power Price
When analysing the core assumptions that go into a valuation of
a typical asset within the Company's portfolio the most volatile
element post acquisition is the assumption of price for the sale of
electricity through Power Purchase Agreements ("PPA"). This has
always been the case but has been put under particular scrutiny
with the recent reduction in power prices. The analysis delivered
by the Investment Adviser when faced with a significant drop in
power prices indicates how robust our investment model is proving
to be. It is worth considering that, since the inception of the
Company, power prices have dropped approximately 20% as at 31
December 2014, and at one point were down by 30%. Even in this
environment, the Company is still confident of delivering its
dividends in the medium term, which is a testament, ultimately, to
the acquisition pricing discipline shown. On a positive note,
should power prices track back to levels expected by the market
over the next couple of years, there should be upside for our
shareholders in terms of dividends.
Valuation
The unaudited valuation shows a small decrease in the NAV per
share since 30 June 2014, after payment in the half year of 5.25
pence of dividends. Other than power prices the other assumptions
have remained the same, however in the period under review we have
had two competing forces. We have seen power prices drop and we
have seen a reduction in the long term forecast, as per the view of
our independent power forecaster. Countering these downward forces
have been the unwinding of the discount rate (a reflection of the
reduction in the timing of cash flows discounted over the life of
the asset), and a modest increase in the valuation from assets that
have become operational and have been valued on a Discounted
Cash-Flow ("DCF") basis.
Market Growth
The final quarter of 2014 saw continued growth in the primary
base of solar assets as developers and contractors pushed to get
their assets grid connected before the end of the Renewable
Obligation Scheme (the "RO Scheme")(1) for larger solar assets
after March 2015. The UK remained the leading primary investment
market for solar in Europe. It is expected that the first quarter
of 2015 will see high installation levels for large scale assets.
The period after March 2015, will be interesting for the solar
industry as it transitions over to the new regime where the
industry will start to use Contracts for Difference ("CfD") for
large solar assets and growth in the commercial and industrial
market is expected. Experience of other solar markets indicates
that even in a changing regulatory landscape, solar markets are
highly adaptable.
(1) This excludes those assets that have qualified for the
'grace period'
Acquisitions, Cash Generation and Dividend
Following consultation with shareholders, the Board has now
adopted a quarterly dividend schedule under which dividends will be
distributed as four interim dividends, declared quarterly. The
first quarterly dividend, in respect of the three months to 31
March 2015, is expected to be declared in April 2015. During the
period we undertook a Related Party Transaction, which was approved
by shareholders, to acquire an investment asset (see Note 18). The
performance of these plants have exceeded expectations since
acquisition.
Shareholders
The Board is pleased with the successful Placement of 127.5
million shares to raise GBP128.5 million, net of expenses, in
November 2014 and I would like to take this opportunity to thank
our shareholders for their support. As a Board, we are hugely
encouraged by the continued and increasing support from our
shareholders, many of whom were with us at IPO. The success of the
Placement indicates a strong endorsement of the Company's strategy
and the Board is pleased with diversifying our shareholder base. We
are also delighted to welcome our new shareholders and we look
forward, with the Investment Adviser, to working hard on our
shareholders' behalf to repay the faith they have put in us.
Outlook
The prospects for the Company remain very good, as we seek to
build on the strong platform we have created in our first 18
months. In the immediate term, we will look to complete all the
acquisitions disclosed in the Placement. Beyond that we will work
with our trusted contractors to continue to build a high quality
energy investment company with sector leading returns.
John Rennocks
Chairman
26 February 2015
Report of the Investment Adviser
Introduction
Bluefield was established in 2009 and is an investment adviser
to companies and funds investing in solar energy infrastructure.
Our team has a proven record in the selection, acquisition and
supervision of large scale energy and infrastructure assets in the
UK and Europe. The team has been involved in over GBP600 million of
solar photovoltaic ("PV") funds and/or transactions in both the UK
and Europe since 2008 including over GBP380 million in the UK since
December 2011.
Bluefield has led the acquisition of, and currently advises on,
over 50 UK based solar assets that are agriculturally, commercially
or industrially situated. Bluefield was appointed Investment
Adviser to the Company in June 2013. Based in its London office,
Bluefield's partners are supported by a dedicated and highly
experienced team of investment, legal and portfolio executives.
Bluefield's Investment Committee has collective experience of
over GBP7 billion of energy and infrastructure transactions.
Portfolio Developments
1. Portfolio Performance
The Company's operating portfolio as at 31 December 2014 is
shown below:
Project Contractor Region ROC* banding/FiT** MWp
--------------------- --------------- ---------------------------- -------------------- ------
Hardingham Solar Century Norfolk 1.6 ROCs 14.8
Goosewillow Ikaros Solar Oxfordshire 1.6 ROCs 16.9
North Beer Parabel UK Cornwall 2.0 ROCs 6.9
Hill Farm Solar Century Oxfordshire 1.6 ROCs 15.2
Hall Farm Ikaros Solar Norfolk 1.6 ROCs 11.5
Saxley Solar Century Hampshire 1.6 ROCs 5.9
Betingau Prosolia Glamorgan 1.6 ROCs 9.9
Sheppey Solar Century Kent 1.4 ROCs 10.6
Pentylands Conergy Wiltshire 1.6 ROCs 19.2
Durrants REC Isle of Wight FiT 4.9
Goshawk (10x Thames
Water & 1x Adnams) British Gas Surrey/Oxfordshire/Suffolk FiT 1.2
Hoback Solar Century Hertfordshire 1.4 ROCs 17.5
--------------------- --------------- ---------------------------- -------------------- ------
Total 134.5
-------------------------------------------------- ------------------------------------ ------
*Renewable Obligation Certificates ("ROC")
**Feed-in Tariffs ("FiT")
As at 31 December 2014, the Company had an operational portfolio
of 21 commissioned investments committing GBP155.8 million and
delivering an energy capacity of 134.5 MWp(2) . Located across the
south of England and Wales, the investments are geographically
diverse, have been constructed by 7 experienced solar contractors
and contain a diverse range of proven solar technologies and
infrastructure.
Total electricity production from 1 July 2014 to 31 December
2014 was 52.2 Gigawatt Hours ("GWh") and was in line with budgeted
expectations for the whole portfolio although, within this the
strong performance of the majority of the plants has been offset by
a limited contribution from Project Betingau.
In September 2014, Project Betingau experienced a serial defect
in relation to the transformers and was shut down for safety
reasons until February 2015 when new replacement transformers were
installed. Due to the strength of contractual protections in place,
full recovery of all lost revenues from commissioning in March 2014
to the end of the period was secured under the terms of the
construction contract as well recovery of all the costs associated
with the defect.
Transformers from a new manufacturer (ABB) with five years'
warranty were successfully installed after the end of the reporting
period. In addition to these items a variation has also been signed
that grants a price reduction of 3.5% on the overall cost of the
project. When the defects arose the project company was holding
GBP2.7 million of retention against the contract price plus a
GBP1.7 million bond and as a result the strong protections to
revenue, price and costs were able to be enforced without dispute.
The project company will continue to hold a significant level of
(retention and/or bond) security until the project has proven
performance in line with warranty over its first two years of
operation.
In October 2014 the Company acquired 12 operational projects,
known as Project Durrants (1 asset) and Project Goshawk (11
assets), whilst in November 2014 Project Hoback also became
operational in line with expectations. While as at the financial
period end it is too early to make definitive statements regarding
meaningful performance indicators for these 3 projects the
irradiation and portfolio performance in the short period of
operation was overall ahead of expectations.
Notwithstanding the positive operational performance it is
notable that falling power prices in the period to 31 December 2014
have precipitated a fall in the pricing of PPAs between 30 June
2014 and the period end. The impact of the fall in power price and
the Company's exposure to the power market for revenue is discussed
in detail in the section below on Power Price Sensitivity and
Dividends.
2. Acquisitions
During the period the Company successfully completed the
acquisition of 17 additional projects for the total consideration
of GBP51.5 million as set out in the table below:
Project Contractor Region ROC banding/FiT MWp Status
--------------- --------------- --------------- ----------------- ----- -------------------
Capelands Juwi Devon 1.4 ROCs 8.4 Under construction
Redlands Juwi Somerset 1.4 ROCs 6.2 Under construction
Durrants REC Isle of Wight FiT 4.9 Operational
Goshawk (10x British Gas Surrey/ FiT 1.2 Operational
Thames Water Oxfordshire/
& 1x Adnams) Suffolk
Hardingham Solar Century Norfolk 1.4 ROCs 5.2 Under construction
extension
Ashlawn Parabel UK Somerset 1.4 ROCs 6.6 Under construction
Rove Wirsol Wiltshire 1.4 ROCs 12.7 Under construction
Total 45.2
---------------------------------- ------------------------------ ----- -------------------
This expands the portfolio to 26 projects with a combined
capacity of 173.6 MWp. Details of the acquisitions made, all of
which are 100% owned by BSIFIL, during the period are outlined
below:
Capelands & Redlands, Somerset/Devon
On 25 July 2014 terms were agreed with Juwi Renewables as
Engineering, Procurement & Construction ("EPC") contractor to
build two solar farms in Devon (8.4 MWp) and Somerset (6.2 MWp)
respectively. The projects are currently in the final stages of
construction and are expected to be accredited under the current
1.4 ROC regime. The plants will use S-Energy modules and SMA
inverters and were funded initially through the Company's GBP50
million acquisition Facility and then latterly with the proceeds of
the Placement completed in November 2014.
Durrants, Isle of Wight
The acquisition of the 4.9 MWp plant was agreed in October 2014
as part of the purchase of Bluefield L&P Solar Limited and
included the taking over of a finance facility from Bayern LB of
GBP14.5 million. The project was acquired as an operational asset
(with a 2 year performance record) under the FiT regime. The plant
was constructed by a German contractor, REC, and uses modules from
REC and inverters from SMA and Advanced Energy. The investment was
funded through the shareholder approved issue of shares pursuant to
an October 2014 shareholder circular.
Goshawk, Surrey, Oxfordshire, Suffolk
The acquisition of Project Goshawk, a 1.2 MWp portfolio
consisting of 11 operating projects, was agreed in October 2014 as
part of the purchase of Bluefield L&P Solar Limited. The
projects are all registered under the FiT regime and were
constructed by British Gas. The plants use modules from Trina and
Suntech with inverters from SMA. The investment was funded through
the shareholder approved issue of shares pursuant to an October
2014 shareholder circular.
Hardingham Extension, Norfolk
In November 2014 terms were agreed with Solar Century as EPC
contractor to build a 5.2 MWp extension to Project Hardingham in
Norfolk. The project remained under construction at reporting
period end and is expected to be accredited under the 1.4 ROC
regime. The plant will use Hanwha modules and Power One inverters
and was funded with the proceeds of the Placement completed in
November 2014.
Ashlawn, Somerset
On 3 December 2014 terms were agreed with Parabel UK as EPC
contractor to build a 6.6 MWp solar farm in Somerset. The project
remained under construction at reporting period end and is expected
to be accredited under the 1.4 ROC regime. The plant will use
Q-cell modules and Huawei inverters and was funded with the
proceeds of the Placement completed in November 2014.
Rove, Wiltshire
On 23 December 2014 terms were agreed with Wirsol Energy as EPC
contractor to build a 12.7 MWp solar farm in Wiltshire. The project
remained under construction at reporting period end and is expected
to be accredited under the 1.4 ROC regime. The plant will use
Astronergy modules and Advanced Energy inverters and was funded
with the proceeds of the Placement completed in November 2014.
Elms, Oxfordshire
Since the period end the Company has announced terms were agreed
with Wirsol Energy as EPC to build Project Elms, a 29.0 MWp solar
plant in Oxfordshire. The plant is under construction and is
expected to be accredited under the 1.4 ROC regime. The plant will
use Astronergy modules and Advanced Energy inverters and will be
funded with the proceeds of the Placement completed in November
2014.
(2) This includes Durrants and Goshawk as these were operational
when acquired in October 2014.
Power Price Sensitivity and Dividends
The Company has a mix of regulated revenues and revenues derived
from the sale of electricity, via PPAs.
1. Revenue Breakdown
The portfolio's revenue streams in the 2014/2015 financial year
show the sale of electricity accounts for 39% of the Company's
income. Regulated revenue from the sale of FiTs, ROCs and LECs
accounts for 61%.
2. Tenure
During this initial period of growth where the Company is
seeking to grow its asset base the Investment Adviser's strategy is
to fix the price of power sale contracts for individual assets for
periods of 12 to 18 months. Prices can be fixed up to 3 months in
advance of the commencement of the fixing period. The target is to
fix 25% of the portfolio within each quarter, in order to mitigate
against seasonality and short-term events which can have an impact
on the price of electricity in the UK. The fixing period seeks to
enable the Company to maximise potential revenues for the Company
during its current acquisition phase whilst spreading exposure to
short-term power movements across the portfolio to avoid
concentration of risk. The security of even longer term contracts
would, we believe, invariably result in the generator sacrificing
revenues for the comfort of longer term certainty, which, on
balance, the Investment Adviser believes is not the optimal
strategy for the Company at this stage. In addition, typical long
term power off-take contracts available in the energy market
provide floors but not fully fixed rates, such floors being
significantly below even the recent lower power price levels.
3. Current Status
As at 31 December 2014, 56% of the portfolio has fixed power
prices out to 30 June 2015 or beyond. The remaining 44% of the
portfolio is either undergoing construction with prices to be fixed
following commissioning in quarter 1 of 2015 or is operational and
will be fixed in quarter 1 of 2015 in accordance with the portfolio
quarterly fixing. As set out above, the projects being fixed will
be negotiated for different tenures in order to spread portfolio
fixing time evenly for future years.
4. Power Price Sensitivity
Analysis of the Company's portfolio and its exposure to power
price variations affirms the robust nature of the revenues and the
Company's ability to deliver its dividends in the coming years.
This is partly due to the majority of revenues being regulated
(61%) and also due to the Investment Adviser having applied a
prudent power price forecast when making acquisitions.
In quantifying the impact of changes in the wholesale power
price market, the Company's portfolio has been analysed based upon
the base case power price the Company would need to generate the
target dividend of 7 pence in the financial year ending 30 June
2015, rising with RPI thereafter, all other assumptions being
unchanged. Based upon a steady state for all other assumptions the
Company would expect to meet its dividend target, based upon
earnings within its asset portfolio, at a power off-take rate of
GBP48 per Megawatt hour ("MWh").
This level is equivalent to the low point for 12 month forward
PPA pricing during the accounting period which was reached in
December 2014. If this low point was maintained at a constant level
in real terms until financial year ending 30 June 2016 the Company
would still expect to meet its RPI linked dividend target
throughout this period.
The table below sets out the sensitivity of the earnings over
the period to financial year ending 30 June 2016 to changes in
power prices and illustrates the favourable dividends expected even
in an environment of significantly falling power prices.
Dividend Target sensitivity (based upon Investment Adviser
forecasts):
FYE June 2015 2016
----------------------------------- ----- -----
Target, pence per share* 3.75 7.18
----------------------------------- ----- -----
31 December 2014 price plus 20%:
Power price at GBP57.60
(2015 real) 3.75 7.88
----------------------------------- ----- -----
31 December 2014 price plus 10%:
Power price at GBP52.80
(2015 real) 3.75 7.54
----------------------------------- ----- -----
31 December 2014 price:
Power price at GBP48.00
(2015 real) 3.75 7.19
----------------------------------- ----- -----
31 December 2014 price minus 10%:
Power price at GBP43.20
(2015 real) 3.75 6.84
----------------------------------- ----- -----
31 December 2014 price minus 20%:
Power price at GBP38.40
(2015 real) 3.75 6.49
----------------------------------- ----- -----
* The 2015 dividend target is adjusted to reflect the 3.25 pence
per share interim dividend that has already been paid. The 2016
dividend target reflects a 2.5% RPI uplift assumption.
The impact of power prices on NAV is set out below in the
valuations section.
NAV and valuation of the Portfolio
The Investment Adviser is responsible for carrying out the fair
market valuation of the Company's investments.
Valuations are carried out on a six monthly basis as at 31
December and 30 June each year and the Company has committed to
procure a review of valuations by an independent expert not less
than once every three years.
As the portfolio comprises only non-market traded investments,
the Investment Adviser has adopted valuation guidelines based upon
the International Private Equity and Venture Capital Valuation
Guidelines 2012, ("IPEV Valuation Guidelines") as adopted by the
European Venture Capital Association; application of which is
considered consistent with the requirements of compliance with IAS
39 and IFRS 13.
In accordance with these guidelines the Investment Adviser has
prepared its valuations either on the basis of cost for investments
made shortly before the valuation date, or on the basis of DCF
methodology, exercising its judgement in assessing the expected
future cash-flows, project life, financial model and discount
rate.
Following the recommendation of the Investment Adviser, the
Directors' Valuation adopted for the portfolio as at 31 December
2014 was GBP187.1 million compared to GBP136.1 million as at 30
June 2014. The Company raised GBP138 million of new equity in the
period and released a GBP7.8 million dividend (being 2 pence per
share as second interim dividend in respect to the financial year
ending 30 June 2014 and 3.25 pence per share as a first interim
dividend in respect to the current reporting period). Excluding
these adjustment factors the uplift in valuation during the period
was GBP8.8 million or 4.9%, of which GBP6.1 million resulted from
creation of working capital balances and GBP2.7 million from
changes in the DCF valuation. This movement is analysed further in
the section on Valuation movements below.
A breakdown in the movement of the NAV (GBP million) of the
company over the period is set out in the table below.
(GBPmillion)
30 June 2014 NAV 147.7
---------------------------------- ------ --------------
2nd Interim Dividend (FY 13/14) -2.9
Further issue of shares 138.4
Raising costs for Placement -2.2
---------------------------------- ------ --------------
Adjusted starting position 281.0
---------------------------------- ------ --------------
DCF Valuation uplift 2.1
Investment income released to
Group 6.6
Movement in working capital 0.1
Net Operational costs -2.8
Cash distributions in the period -4.9
------
31 December 2014 NAV 282.1
---------------------------------- ------ --------------
Whilst the movements in the table above represent the impact of
activity in the period with respect to the overall NAV of the
Company, within this are items that contribute to the movement in
the Directors' valuation of the portfolio set out below.
These items are the DCF uplift, Investment Income released to
Group and the Movement in working capital.
Portfolio valuation movements
A breakdown of the movement in the Directors' valuation of the
portfolio in the period is set out in the table below.
Valuation movement during the period to 31 December 2014
(GBPmillion) As % of
rebased
valuation
30 June 2014 Valuation 136.1
--------------------------------- ----- -------------- -----------
New Investments 48.3
Cash receipts from portfolio -6.1
Rebased Valuation 178.3
--------------------------------- ----- -------------- -----------
Working capital contribution 6.1 3.4%
Unwinding of discount rate 6.2 3.5%
DCF uplift from new investments 1.1 0.6%
Power Price Movement -4.6 -2.6%
31 December 2014 Valuation 187.1 4.9%
--------------------------------- ----- -------------- -----------
Net cash and working capital of GBP95.0 million and the
Directors' valuation of the investments of GBP187.1 million equates
to the total NAV value of GBP282.1 million.
After taking into account cash commitments and portfolio cash
distributions in the period of GBP48.3 million and -GBP6.1 million
respectively, the growth over the re-based valuation of GBP178.3
million at 30 June 2014 is 4.9%.
Each movement between the re-based valuation and the 31 December
2014 valuation is considered in turn below:
Working Capital Contribution
This increase is driven by the income built up but not
distributed to the group as at 31 December 2014.
Unwinding of discount rate
An increase in the period of GBP6.2 million is due to the
unwinding of the discount rate in the period from 1 July 2014 to 31
December 2014.
DCF uplift
Within the period there has been a positive contribution of
GBP1.1 million from new acquisitions being valued on a DCF basis
for the first time.
Power Prices
The DCF analysis has been adapted to take account of a material
change in energy price forecasts between the June 2014 and December
2014 valuations. In June 2014, the Group's portfolio was valued
using a 5% discount to the most recent leading forecasters' energy
curve (released in April 2014). The basis for this discount was
that the Investment Adviser had witnessed a fall in PPA prices
achieved between the forecast date of April 2014 and the date of
the financial statements in June 2014.
In December 2014 the energy forecast used by the Investment
Adviser was updated (with an additional reduction). The short-term
pricing within the energy price forecast was compared by the
Investment Adviser to PPA prices achievable in the market for its
solar assets and considered to accurately reflect the market
without discount or premium.
The significant reduction in power price forecast during the
period resulted in a reduction to the portfolio value equivalent to
GBP4.6 million, resulting from the fall in power price curve as
well as a reduced growth expectation over the 25 year asset
life.
Discount rate
While investments with different proportions of regulatory
income, or different capital structures, may justify differentials
in discount rates to reflect different cash-flow certainty, the
assets currently held by the Group were considered to be
substantially similar in revenue profile and capital structure,
therefore not meriting any differential in discount rate.
The discount rate has been determined based on a risk free rate
of 1.80% (10 year UK gilts as at 31 December 2014) plus a market
risk premium of 6.0% calculated by the Investment Adviser based
upon its judgement of market pricing within the UK solar PV sector.
The Investment Adviser prepared a detailed analysis of precedent
transactions as well as capital asset pricing theory, which was
presented to the Board as part of the valuation proposal for the
portfolio.
Whilst it was noted UK gilt yields had fallen in the period, the
Board concluded that with increased volatility in the energy
markets potentially impacting the risk premium attached to the
asset class it was appropriate at this time to maintain the
discount rate at an unchanged level.
As such, after reviewing the analysis presented by the
Investment Adviser, the Board confirmed and have adopted the
discount rate of 7.8%, representing the same discount rate as
applied in the period to 30 June 2014.
The principal factors taken into consideration in determining a
discount rate of 7.8% were: (i) comparative analysis of transaction
pricing for pre- and post-construction solar assets; (ii) review of
published return targets of the listed renewable energy funds;
(iii) review of the conclusions of independent valuations of solar
assets; and (iv) the Investment Adviser's market experience in
bidding for UK solar assets under tender. In accordance with the
capital asset pricing model, the selected rate has been applied to
discount the unleveraged project cash-flows net of taxation
(exclusive of any tax shield). It is also important to note that
this discount rate has been applied on the basis of the Investment
Adviser's long term inflation assumption of 2.5%.
The discount rate used for valuing the projects as at 31
December 2014 and 30 June 2014 is shown below.
Period Ending Government Bond yield Risk Premium Discount Rate
------------------ ---------------------- ------------- --------------
30 June 2014 2.8% 5.0% 7.8%
------------------ ---------------------- ------------- --------------
31 December 2014 1.8% 6.0% 7.8%
------------------ ---------------------- ------------- --------------
Valuation Sensitivities
Discount Rate
At 31 December 2014, all of the operational investments within
the portfolio have been valued with DCF methodology on the basis of
a discount rate of 7.8%, whilst those that remain under
construction have been valued on a cost less impairment basis.
The analysis below shows the impact on valuation of increasing
or decreasing this rate by 0.5%.
Discount Rate -0.5% Base: 7.8% +0.5%
----------------------------- ---------------- ----------------- ----------------
Impact change on Directors' +GBP7.4 million GBP187.1 million -GBP6.9 million
valuation
----------------------------- ---------------- ----------------- ----------------
Implied change in NAV per
Ordinary Share +2.6p 101.3p -2.5p
----------------------------- ---------------- ----------------- ----------------
Inflation Rate
Consistent with the Investment Adviser's financial analysis
presented to investors at IPO, the Company has assumed an RPI
inflation rate of 2.5% per annum flat for the full 25 year life of
the DCF.
The sensitivity table below illustrates the impact an increase
and decrease of 0.25% from the assumed annual inflation rates has
on the valuation of the portfolio.
Inflation Rate -0.25% Base: 2.5% +0.25%
----------------------------- ---------------- ----------------- ----------------
Impact change on Directors' -GBP3.9 million GBP187.1 million +GBP4.0 million
valuation
----------------------------- ---------------- ----------------- ----------------
Implied change in NAV per
Ordinary Share -1.4p 101.3p +1.4p
----------------------------- ---------------- ----------------- ----------------
Power Price
The DCF valuation is based upon a power price forecast prepared
by a leading forecaster. The Investment Adviser reviewed a number
of power price forecast options including valuing on the basis of
zero real energy price inflation or applying forecasts provided by
alternative forecast providers.
It is notable that the forecast builds in a 'solar capture' rate
reflecting the higher proportion of solar generation in peak hours,
as well as a balancing cost discount which rises over the life of
the forecast. The compound annual growth rate ("CAGR") implied by
the power price forecast over the 25 year assumed asset life is
1.19% in real terms. When evaluating the power forecast impact on
NAV however the real annual increase in power price on a straight
line basis which would give rise to an equivalent NAV impact is
2.15%. This compares to a rate of 2.68% implied in June 2014. The
higher result when taking into account the present value impact
results from the fact that the assumed CAGR is higher in the early
years but lower in later years. Applying the June 2014 power
forecast the Directors' Valuation of the portfolio would have been
GBP191.7 million.
If the Directors' Valuation of the Portfolio had assumed zero
real energy price inflation the resulting valuation of the Company
would be GBP171.0 million.
The sensitivity below considers a flat 10% movement in power
prices across the life of the projects.
Power Price -10% Base: 0% +10%
----------------------------- ---------------- ----------------- ----------------
Impact change on Directors' -GBP8.6 million GBP187.1 million +GBP8.6 million
valuation
----------------------------- ---------------- ----------------- ----------------
Implied change in NAV per
Ordinary Share -3.1p 101.3p +3.1p
----------------------------- ---------------- ----------------- ----------------
Energy Yield
The energy yield of a solar PV asset is derived from three
factors: (i) the irradiation captured by the power plant; (ii) the
ratio at which the power plant converts irradiation to energy, the
so called 'Performance Ratio'; and (iii) the availability of the
power plant (% days per year).
The Investment Adviser has relied upon independent technical
advice provided by one of the leading solar PV technical advisers
in the UK market as a basis for its assumptions, or where
applicable, the Performance Ratio warranted by the contractor
(against which the Contractor has penalty obligations and make good
obligations if the plant does not perform).
The technical adviser determines its irradiation forecasts on
the basis of a number of long term irradiation databases utilising
both ground and satellite based measurements. These sources are
applied on a weighted average basis according to the quality of the
dataset and outliers are excluded.
In addition to analysing the base case energy yield (P50), the
technical adviser provides an energy yield estimate based upon a
90% probability of exceedance, the so called "P90" (downside case),
or in other words, the energy yield which there is a 10%
probability of not being reached, as well as the "P10" (upside
case) scenario, in which there is a 10% probability of base case
being exceeded.
It is notable that solar energy yields have relatively low
energy yield probability variance compared to other sectors, such
as wind, due to the proportionately lower volatility of irradiation
which is based on largely predictable daylight hours, rather than
variable weather patterns.
The sensitivity below applies the impact of the P90/P10
scenarios on the valuation of the portfolio and movement in NAV per
share.
Energy Yield P90 (10 year) Base: (P50)
P10 (10 year)
----------------------------- ----------------- ------------ -----------------
Impact change on Directors' -GBP15.0 million GBP187.1 +GBP15.0 million
valuation million
----------------------------- ----------------- ------------ -----------------
Implied change in NAV per
Ordinary Share -5.4p 101.3p +5.4p
----------------------------- ----------------- ------------ -----------------
Operating costs at project company level
The sensitivity illustrates the effect of a 10% increase and a
10% decrease in annual operating costs for the portfolio, assuming
in each case that the change occurs from 1 January 2015 and remains
constant over the life of the project.
Operating Costs -10% Base +10%
----------------------------- ---------------- --------- ----------------
Impact change on Directors' +GBP3.7 million GBP187.1 -GBP3.7 million
valuation million
----------------------------- ---------------- --------- ----------------
Implied change in NAV per
Ordinary Share +1.3p 101.3p -1.3p
----------------------------- ---------------- --------- ----------------
Other Assumptions
A number of other assumptions, while not separately analysed
here, should be taken into consideration:
- Investment cash-flows are for 25 years with a zero terminal
value. Planning permission for projects is typically granted for an
initial 25 years subject to re-application at the end of the
period, but leases typically benefit from extension options, giving
rise to the potential for a longer operational life, which has not
been taken into account in the Directors' Valuation; and
- Although in June 2014 the Company secured debt financing to
fund further build-out of the Group's portfolio, the Investment
Adviser has not taken into account any potential valuation benefits
which may be derived from financial structuring in the future of
the Company.
The assumptions set out in this section will remain subject to
review by the Investment Adviser and the Directors and may give
rise to a revision of valuation approach in future reports.
Financing
On 11 June 2014, the Group entered into an agreement with RBS
for the provision of an acquisition facility of up to GBP50
million. The Facility has a margin of 2.25% over LIBOR and is due
to expire on 10 June 2017.
The Facility was drawn in the period (GBP19.5 million) but fully
repaid with part of the proceeds from the Placement in November
2014 and as at the period end the Facility was undrawn.
Market Developments
The regulatory outlook for the industry remains positive, albeit
the industry will transition over to the new regulatory regime for
newly built projects from April 2015, which naturally creates some
uncertainty. It is the view of the Investment Adviser that even
with this transition, the UK solar market is viewed as highly
attractive by developers, contractors and funders and that the
market will see continued growth throughout 2015. The shape of the
market may be slightly different with an expectation to see an
increase in the number of sub-5 MWp assets due to an ongoing RO
Scheme eligibility and fewer large scale (>5 MWp capacity
plants) until the next CfD auction at the end of the calendar
year.
Regulation
The UK solar market is unique in relation to established solar
markets in that the UK government has explicitly outlined an
ambitious plan for growth in the sector, through the publication of
the Solar PV Strategy: Part 2 (the "Strategy"). In tandem with the
Strategy, the outcome of the consultation into large scale solar
was delivered in quarter 4, 2014 (the "Consultation").
The Consultation sought to achieve a market that has balanced
growth across all the major investment sectors, domestic,
commercial and industrial and agriculturally situated.
Under the Consultation, the RO Scheme for solar will close for
installations that are greater than 5 MWp in capacity and are grid
connected after 31 March 2015 (except in the case where they
qualify for a 'Grace Period'). For assets that are greater than 5
MWp in capacity, they are to be replaced by the new support, the
CfD, which is proposed to give fully-indexed revenues for 15 years
with no exposure to wholesale energy prices. There is no change to
support for projects connected prior to April 2015.
Contracts for Difference
The inaugural CfD bid process was delayed from December 2014 to
February 2015. Contracts were originally expected to be awarded in
January 2015, however the sealed bid window only closed on 4
February 2015.
Rooftop
In July 2014, the Department of Energy and Climate Change
("DECC") announced its ambition to see the rooftop solar market
grow from the current low installed capacity to 11-12 GWp by 2020,
creating a potential major new investment market. The single
biggest part of this market is expected to be the industrial and
commercial market, an investment area pioneered by the Investment
Adviser in the early days of the UK market. In respect of unlocking
this huge potential, DECC launched a consultation on 25 November
2014, seeking views on whether medium and large rooftop solar
installations could be moved without the loss of FiT payments. The
consultation closed on 5 January 2015, and the results are yet to
be announced. DECC also announced an amendment to the definition of
building-mounted solar under the FiT to require that the building
must use 10% of the electricity generated. The Investment Adviser
is actively supporting this initiative and engaging with DECC.
Grace Period
At the same time as the launch of the rooftop consultation, DECC
released the results of a previous consultation on the introduction
of a grid delay grace period for projects qualifying for the RO
Scheme Obligation, with DECC deciding in favour of the introduction
of a 12 month grace period for projects greater than 5 MWp which
have a Distribution Network Operator ("DNO") confirmed connection
date before 31 March 2016.
Bluefield Partners LLP
26 February 2015
Analysis of Financial Results
Summary Unaudited Condensed Consolidated Statement of
Comprehensive Income
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
Unaudited Unaudited
GBP GBP
------------------------------------ ----------------------------- -----------------------------------
Operating income 8,721,533 304,033
Administrative expenses (1,770,169) (809,462)
Transaction costs (471,561) (459,850)
Finance costs (423,982) -
------------------------------------ ----------------------------- -----------------------------------
Total comprehensive income /(loss)
for the period 6,055,821 (965,279)
------------------------------------ ----------------------------- -----------------------------------
Earnings per share:
Basic and diluted (pence) 3.48 (0.74)
------------------------------------ ----------------------------- -----------------------------------
Operating income increased during the period to GBP8,721,533.
This includes net gains on assets held at fair value through profit
or loss of GBP2,098,359 (31 December 2013: GBPNil) reflecting the
change in valuation from 30 June 2014 to 31 December 2014 as
further detailed in the Investment Adviser's report, receipts from
investments held at fair value through profit or loss of
GBP5,689,741 (31 December 2013: GBPNil) and investment income of
GBP864,341 (31 December 2013: GBPNil). Interest Income has fallen
to GBP69,092 (31 December 2013: GBP304,033) reflecting the lower
cash balance over the period to 31 December 2014.
Administrative expenses increased to GBP1,770,169 compared with
GBP809,462 for the period to 31 December 2013 and are discussed in
more detail in the Cost Analysis table below and in Note 5 of the
consolidated financial statements.
Transaction costs increased to GBP471,561 (31 December
2013:GBP459,850). The costs for completed acquisitions decreased to
GBP168,032 (31 December 2013: GBP335,865) and the costs for
projects under review at the period end increased to GBP303,529 (31
December 2013: GBP123,985).
The finance costs for the period of GBP423,982 (31 December
2013: GBPNil) represent the expenses (including interest and fees)
associated with the Company's GBP50m Facility with RBS (completed
on 11 June 2014).
The tax charge for the period shown in the unaudited condensed
consolidated statement of comprehensive income is GBPNil (31
December 2013: GBPNil) due to the expectation that any taxable
profits within the Group (BSIFIL had taxable profits of
GBP4,708,214 (31 December 2013: GBP1,238,282)) will be offset
against the taxable losses of the underlying SPVs through group
relief.
As a result of the activity in the period Total Comprehensive
Income has risen to GBP6,055,821 (31 December 2013: GBP(965,279))
and earnings per share to 3.48p from (0.74)p in the period to 31
December 2013.
Cost Analysis
Administrative expenses Six months ended 29 May 2013
31 December 2014 to
GBP 31 December
2013
GBP
------------------------------- ------------------ -------------
Investment advisory fees 872,286 575,665
Legal and professional fees 259,911 -
Provision for VAT 215,840 -
Administration fees 121,607 62,544
Directors' remuneration 73,096 72,699
Audit & non-audit fees 42,493 42,500
Other expenses 184,936 56,054
-------------------------------- ------------------ -------------
Total administrative expenses 1,770,169 809,462
-------------------------------- ------------------ -------------
Administrative expenses increased to GBP1,770,169 compared with
GBP809,462 for the period to 31 December 2013. This increase is
mainly a result of the costs associated with the successful
completion of the Placement executed in November 2014 that raised a
further GBP128,452,005 (after issues costs) for the Company.
The movement in expenses related to the placing programme are;
Investment advisory fees (31 December 2014: GBP872,286; 31 December
2013: GBP575,665); legal and professional fees (31 December 2014:
GBP259,911; 31 December 2013: GBPNil), administration fees (31
December 2014: GBP121,607; 31 December 2013: GBP62,544) and listing
fees (31 December 2014: GBP81,801; 31 December 2013: GBP4,391).
A more detailed analysis of the Group's financial performance
can be found in the unaudited condensed consolidated statement of
financial position, unaudited condensed consolidated statement of
comprehensive income, unaudited condensed consolidated statement of
changes in equity, unaudited condensed consolidated statement of
cash flows and the related explanatory notes.
Summary Unaudited Condensed Consolidated Statement of Financial
Position
31 December 2014 30 June 2014
Unaudited Audited
GBP GBP
Portfolio value 187,132,114 136,120,317
Cash and cash equivalents 95,585,124 11,287,130
Other working capital (580,780) 268,572
Total net assets 282,136,458 147,676,019
-------------------------------------------------- ----------------- ---------------
Number of Ordinary Shares in issue at period end 278,417,224 143,426,684
-------------------------------------------------- ----------------- ---------------
Net Asset Value per Ordinary Share (pence) 101. 34 102.96
-------------------------------------------------- ----------------- ---------------
The portfolio value grew by GBP51,011,797 in the period to
GBP187,132,114 as a result of new acquisitions (Hoback, Capelands,
Redlands, Durrants, Goshawk, Ashlawn, and Rove), the extension of
an existing investment (Hardingham), and the uplift in the fair
value of the portfolio following the period end valuation process.
Further detail on the movement in the valuation of the portfolio is
given in the Valuation section of the Report of the Investment
Adviser.
Net assets increased by GBP134,460,439 to GBP282,136,458 as a
result of raising new equity in the period (net proceeds of
GBP128,452,005 through the issue of Ordinary Shares) and earnings
in the period of GBP6,055,821 (31 December 2013; GBP(965,279)). The
un-invested proceeds of the Placement contributed towards the
increase in cash and cash equivalents during the period of
GBP84,297,994 to GBP95,585,124.
Summary Unaudited Condensed Consolidated Statement of Cash
Flows
Six months ended
31 December 2014 29 May 2013 to
Unaudited 31 December 2013 Unaudited
GBP GBP
------------------------------------------- ------------------------------------------- ----------------------------
Operating and investment cashflows 6,623,174 304,033
Operating and finance costs (1,741,911) (668,694)
------------------------------------------- ------------------------------------------- ----------------------------
Net cash flow before acquisition and
finance set up costs 4,881,263 (364,661)
------------------------------------------- ------------------------------------------- ----------------------------
Debt financing costs (74,449) -
Issue of share capital (net of costs) 136,177,961 127,460,594
Purchase of new investments (including
acquisition costs) (48,913,438) (56,076,759)
Dividends paid (7,773,343) -
Cash movement in period 84,297,994 71,019,174
------------------------------------------- ------------------------------------------- ----------------------------
Opening cash balance 11,287,130 -
------------------------------------------- ------------------------------------------- ----------------------------
Net cash at end of period 95,585,124 71,019,174
------------------------------------------- ------------------------------------------- ----------------------------
Cash received from the portfolio increased to GBP6,623,174 (31
December 2013: GBP304,033) as a result of income contributions from
the projects of GBP6,554,082 (31 December 2013: GBPNil) and
interest income of GBP69,092 (31 December 2013: GBP304,033). This
overall increase reflects the fact in the period to 31 December
2013 there was only 1 operational project in the portfolio where as
in the period to 31 December 2014 there were 21 fully operational
projects.
It is also important to note that 5 of investments made in the
six months ended 31 December 2014 were still under construction and
had not begun to contribute to the cash received by the end of 31
December 2014.
The GBP7,773,343 dividends paid in the period reflect the second
interim dividend for the year ending 30 June 2014 of GBP2,868,534
(2.0 pence per share) and a payment of the first interim dividend
in respect of the year to 30 June 2015 of GBP4,904,809 (3.25 pence
per share).
Group debt facility
On 11 June 2014, the Group entered into an agreement with RBS
for the provision of an acquisition facility of up to GBP50
million. The Facility has a margin of 2.25% over LIBOR and is due
to expire on 10 June 2017.
The Facility was drawn in the period (GBP19.5 million) but fully
repaid with part of the proceeds from the Placement in November
2014. As at the period end the Facility was undrawn.
Statement of Principal Risks and Uncertainties for the Remaining
Six Months of the year to 30 June 2015
The full list of risks and uncertainties are disclosed in the
annual financial statements as at 30 June 2014. The Company
assesses the following as the principal risks and uncertainties as
the most likely to affect the Group for the remaining six months of
the year to 30 June 2015:
Risks relating to the Group's commercial investment
decisions
The Group may acquire or dispose of an investment at a price
that is not in the best interest of shareholders. To mitigate this
risk, the Board reviews market pricing comparisons where relevant
prior to approving transactions.
The Group's Special Purpose Vehicle ("SPV") investments may be
subject to underperformance versus the expectations at acquisition.
To mitigate this risk, the Investment Adviser prepares a quarterly
operational summary for the Board that evaluates the performance of
each SPV investment against budget and highlights any issues to be
addressed.
Risks relating to the valuation of SPV investments
Valuations of the SPV investments are reliant on large and
detailed financial models based on discounted cash-flows.
Significant inputs such as the discount rate, rate of inflation and
the amount of electricity the solar assets are expected to produce
are subjective and certain assumptions or methodologies applied may
prove to be inaccurate. This is particularly so in periods of
volatility or when there is limited transactional data for solar PV
generation against which the investment valuation can be
benchmarked. Other inputs such as the price at which electricity
and associated benefits can be sold are subject to Government
policies and support. To mitigate this risk, the discount factor
applied to the cash-flows is reviewed by the Investment Adviser to
ensure that it is set at the appropriate level. All papers
supporting the Gross Asset Value calculation and methodology used
are presented to the Audit Committee and to the Board for
challenge, approval and adoption. Additionally, the Investment
Adviser actively monitors the output from each project on an
ongoing basis and actions are taken to mitigate any shortfalls
relating to the operations.
Risks relating to unfavourable electricity market conditions
Annual income generation of the Group is sensitive to future
power-market pricing, with approximately 39% of the Company's
revenue being derived from the sale of electricity. A major
structural shift in power demand or supply will impact the
Company's ability to meet its dividend target. To mitigate this
risk, the Investment Adviser regularly updates the portfolio
cash-flow model to reflect future power-market forecasts and
applies additional discounts to the forecasts. New projects are
always assessed using the most recent power-market forecast data
available.
These inherent risks associated with investments in the solar
energy sector could result in a material adverse effect on the
Company's performance and value of Ordinary Shares.
Risks are mitigated and managed by the Board through continual
review, policy setting and half-yearly review of the Company's risk
matrix by the Audit Committee to ensure that procedures are in
place with the intention of minimising the impact of the above
mentioned risks. The Board carried out a formal review of the risk
matrix at the Audit Committee meeting held on 19 November 2014. The
Board relies on periodic reports provided by the Investment Adviser
and Administrator regarding risks that the Group faces. When
required, experts will be employed to gather information, including
tax advisers, legal advisers, and environmental advisers.
Directors' Statement of Responsibilities
The Directors are responsible for preparing the Interim Report
and Unaudited Condensed Consolidated Interim Financial Statements
in accordance with applicable law and regulations. The Directors
confirm that to the best of their knowledge:
-- the Unaudited Condensed Consolidated Interim Financial
Statements have been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union; and
-- the Chairman's Statement, Report of the Investment Adviser
and Statement of Principal Risks and Uncertainties for the
Remaining Six Months of the year to 30 June 2015 meet the
requirements of an interim management report, and include a fair
review of the information required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the Unaudited
Condensed Consolidated Interim Financial Statements; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party 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 Group during that
period; and any changes in the related party transactions described
in the last annual report that could do so.
On behalf of the Board
Paul Le Page
Director
26 February 2015
Independent Review Report to Bluefield Solar Income Fund
Limited
Introduction
We have been engaged by Bluefield Solar Income Fund Limited (the
"Company") to review the condensed set of consolidated financial
statements in the interim financial report for the six months ended
31 December 2014 which comprises the unaudited condensed
consolidated statement of financial position, unaudited condensed
consolidated statement of comprehensive income, unaudited condensed
consolidated statement of changes in equity, unaudited condensed
consolidated statement of cash flows and the related explanatory
notes. We have read the other information contained in the interim
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of consolidated financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("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.
Directors' responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with the DTR
of the UK FCA.
As disclosed in Note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union
(""EU"). The condensed set of consolidated financial statements
included in this interim financial report have been prepared in
accordance with IAS 34 Interim Financial Reporting, adopted by the
EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of consolidated financial statements in the
interim financial report based on our review.
Scope of review
We conducted our review in accordance with the International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board 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. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the interim financial report for the six
months ended 31 December 2014 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the
DTR of the UK FCA.
Neale D. Jehan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Glategny Court, Glategny Esplanade
St. Peter Port,
Guernsey, GY1 1WR
26 February 2015
Unaudited Condensed Consolidated Statement of Financial
Position
As at 31 December 2014
31 December 2014 30 June 2014
Unaudited Audited
Note GBP GBP
------------------------------------------------------------ ----- ---------------------------- -------------
ASSETS
Non-current assets
Financial assets held at fair value through profit or loss 10 187,132,114 136,120,317
Trade and other receivables 12 377,778 511,111
Total non-current assets 187,509,892 136,631,428
------------------------------------------------------------ ----- ---------------------------- -------------
Current assets
Trade and other receivables 12 967,956 608,530
Cash and cash equivalents 13 95,585,124 11,287,130
Total current assets 96,553,080 11,895,660
------------------------------------------------------------ ----- ---------------------------- -------------
TOTAL ASSETS 284,062,972 148,527,088
------------------------------------------------------------ ----- ---------------------------- -------------
LIABILITIES
Current liabilities
Other payables and accrued expenses 14 1,926,514 851,069
------------------------------------------------------------ ----- ---------------------------- -------------
Total current liabilities 1,926,514 851,069
------------------------------------------------------------ ----- ---------------------------- -------------
TOTAL LIABILITIES 1,926,514 851,069
------------------------------------------------------------ ----- ---------------------------- -------------
NET ASSETS 282,136,458 147,676,019
------------------------------------------------------------ ----- ---------------------------- -------------
EQUITY
Share capital 277,015,727 140,837,766
Retained earnings 5,120,731 6,838,253
TOTAL EQUITY 16 282,136,458 147,676,019
------------------------------------------------------------ ----- ---------------------------- -------------
Number of Ordinary Shares in issue
at period end 16 278,417,224 143,426,684
------------------------------------------------------------ ----- ---------------------------- -------------
Net Asset Value per Ordinary Share (pence) 9 101.34 102.96
------------------------------------------------------------ ----- ---------------------------- -------------
These unaudited condensed consolidated interim financial
statements were approved and authorised for issue by a committee of
the Board of Directors on 26 February 2015 and signed on their
behalf by:
John Rennocks Paul Le Page
Director Director
26 February 2015
The accompanying notes form an integral part of these unaudited
condensed consolidated interim financial statements.
Unaudited Condensed Consolidated Statement of Comprehensive
Income
For the six months ended 31 December 2014
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
Unaudited Unaudited
Note GBP GBP
------------------------------------------ ----- ------------------------------------ -----------------------------
Income
Income from investments 4 864,341 -
Interest income from cash and cash
equivalents 69,092 304,033
------------------------------------------ ----- ------------------------------------ -----------------------------
933,433 304,033
Net gains on financial assets held at
fair value through profit or loss 10 7,788,100 -
------------------------------------------ ----- ------------------------------------ -----------------------------
Operating income 8,721,533 304,033
------------------------------------------ ----- ------------------------------------ -----------------------------
Expenses
Administrative expenses 5 1,770,169 809,462
Transaction costs 6 471,561 459,850
Operating expenses 2,241,730 1,269,312
------------------------------------------ ----- ------------------------------------ -----------------------------
Operating profit/(loss) 6,479,803 (965,279)
------------------------------------------ ----- ------------------------------------ -----------------------------
Finance costs 7 423,982 -
------------------------------------------ ----- ------------------------------------ -----------------------------
Total comprehensive income/(loss)
before tax 6,055,821 (965,279)
Taxation 8 - -
Total comprehensive income/(loss)
for the period 6,055,821 (965,279)
------------------------------------------ ----- ------------------------------------ -----------------------------
Attributable to:
Owners of the Company 6,055,821 (965,279)
Earnings per share:
Basic and diluted (pence) 15 3.48 (0.74)
------------------------------------------ ----- ------------------------------------ -----------------------------
All items within the above statement have been derived from
continuing activities.
The accompanying notes form an integral part of these unaudited
condensed consolidated interim financial statements.
Unaudited Condensed Consolidated Statement of Changes in
Equity
For the six months ended 31 December 2014 (unaudited)
Number of
Note Ordinary Shares Share capital Retained earnings Total equity
GBP GBP GBP
-------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shareholders' equity at
1 July 2014 143,426,684 140,837,766 6,838,253 147,676,019
-------------------------------------- ------ ----------------- -------------- ------------------ -------------
Shares issued during the period:
120,000,000 Ordinary Shares issued
via placing 16 120,000,000 123,000,000 - 123,000,000
7,500,000 Ordinary Shares issued via
placing 16 7,500,000 7,687,500 - 7,687,500
Share issue costs 16 - (2,235,495) - (2,235,495)
Shares issued as consideration for
SPV investment 16,18 7,490,540 7,725,956 - 7,725,956
Dividends paid 16,17 - - (7,773,343) (7,773,343)
Total comprehensive income for the
period - - 6,055,821 6,055,821
Shareholders' equity at
31 December 2014 278,417,224 277,015,727 5,120,731 282,136,458
-------------------------------------- ------ ----------------- -------------- ------------------ -------------
For the period from incorporation on 29 May 2013 to 31 December
2013 (unaudited)
Number of
Ordinary Shares Share capital Retained earnings Total equity
GBP GBP GBP
Shareholders' equity at
29 May 2013 - - - -
-------------------------------------------- ---------------- -------------- ------------------ -------------
Shares issued during the period:
130,000,000 Ordinary Shares issued at IPO 130,000,000 130,000,000 - 130,000,000
290,000 Ordinary Shares issued at IPO in
lieu of Directors' fees 290,000 290,000 - 290,000
Share issue costs - (2,539,406) - (2,539,406)
Total comprehensive loss for the period - - (965,279) (965,279)
Shareholders' equity at
31 December 2013 130,290,000 127,750,594 (965,279) 126,785,315
--------------------------------------------- ---------------- -------------- ------------------ -------------
The accompanying notes form an integral part of these unaudited
condensed consolidated interim financial statements.
Unaudited Condensed Consolidated Statement of Cash Flows
For the six months ended 31 December 2014
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
Unaudited Unaudited
Note GBP GBP
-------------------------------------------------- ------ --------------------------- -----------------------------
Cash flows from operating activities
Total comprehensive income/(loss) for the period 6,055,821 (965,279)
Adjustments:
Increase in trade and other receivables (226,093) (81,724)
Increase in other payables and accrued expenses 1,075,445 682,342
Net gains on financial assets held as fair value
through profit or loss 10 (7,788,100) -
Finance expense on revolving loan facility 7 74,449 -
Net cash used in operating activities (808,478) (364,661)
-------------------------------------------------- ------ --------------------------- -----------------------------
Cash flows from investing activities
Purchase of financial assets held at fair value
through profit or loss 10 (48,913,438) (56,076,759)
Receipts from SPV investments held at fair value
through profit or loss 10 5,689,741 -
Net cash used in investing activities (43,223,697) (56,076,759)
-------------------------------------------------- ------ --------------------------- -----------------------------
Cash flow from financing activities
Proceeds from issue of Ordinary Shares 16 138,413,456 130,000,000
Issue costs paid 16 (2,235,495) (2,539,406)
Dividends paid 16,17 (7,773,343) -
Drawdown on revolving loan facility 7 19,500,000 -
Repayment of revolving loan facility 7 (19,574,449) -
Net cash generated from financing activities 128,330,169 127,460,594
-------------------------------------------------- ------ --------------------------- -----------------------------
Net increase in cash and cash equivalents 84,297,994 71,019,174
Cash and cash equivalents at the start of the
period 11,287,130 -
Cash and cash equivalents at the end of the
period 13 95,585,124 71,019,174
-------------------------------------------------- ------ --------------------------- -----------------------------
The accompanying notes form an integral part of these unaudited
condensed consolidated interim financial statements.
Notes to the Unaudited Condensed Consolidated Interim Financial
Statements
For the six months ended 31 December 2014
1. General information
Bluefield Solar Income Fund Limited (the "Company") is a
non-cellular company limited by shares and was incorporated in
Guernsey under the Companies (Guernsey) Law, 2008 (the "Law") on 29
May 2013 with registered number 56708 as a closed-ended investment
company. It is regulated by the Guernsey Financial Services
Commission.
The unaudited condensed consolidated interim financial
statements (the "financial statements") for the six months ended 31
December 2014 comprise the financial statements of the Company and
its wholly owned subsidiary, Bluefield SIF Investments Limited
("BSIFIL"), (together the "Group") as at 31 December 2014.
The investment objective of the Group is to provide shareholders
with an attractive return, principally in the form of dividends, by
investing via Special Purpose Vehicles ("SPV") in a portfolio of
large scale United Kingdom ("UK") based solar energy infrastructure
assets. The Board adopted quarterly dividends with effect from the
first quarter of 2015.
The Group has appointed Bluefield Partners LLP as its Investment
Adviser ("Investment Adviser").
2. Accounting policies
a) Basis of preparation
The financial statements, included in this interim report, have
been prepared in accordance with IAS 34 'Interim Financial
Reporting', as adopted by the EU and the Disclosure and
Transparency Rules of the Financial Conduct Authority. The same
accounting policies, presentation and methods of computation are
followed in these financial statements as were applied in the
preparation of the Group's consolidated financial statements for
the period from 29 May 2013 to 30 June 2014.
These financial statements have been prepared under the
historical cost convention with the exception of financial assets
held at fair value through profit or loss and in accordance with
the provisions of the Law.
These financial statements do not include all information and
disclosures required in the annual financial statements and should
be read in conjunction with the Group's consolidated financial
statements for the period from 29 May 2013 to 30 June 2014.
Functional and presentation currency
These financial statements are presented in pounds sterling
("Sterling"), which is the functional currency of the Group as well
as the presentation currency. The Group's funding, investments and
transactions are all denominated in Sterling.
Seasonal and cyclical variations
The Group's results do not vary significantly during reporting
periods as a result of seasonal activity.
b) Going concern
The Directors in their consideration of going concern, have
reviewed comprehensive cash-flow forecasts prepared by the
Investment Adviser, future projects in the pipeline and the
performances of the current solar plants in operation and, at the
time of approving these financial statements, have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future and
do not consider there to be any threat to the going concern status
of the Group. The Directors have concluded that it is appropriate
to adopt the going concern basis of accounting in preparing these
financial statements.
c) Segmental reporting
International Financial Reporting Standards ("IFRS") 8
'Operating Segments' requires a 'management approach', under which
segment information is presented on the same basis as that used for
internal reporting purposes.
The Board, as a whole, has been determined as constituting the
chief operating decision maker of the Group. The key measure of
performance used by the Board to assess the Group's performance and
to allocate resources is the total return on the Group's NAV, as
calculated under IFRS, and therefore no reconciliation is required
between the measure of profit or loss used by the Board and that
contained in these financial statements.
For management purposes, the Group is engaged in a single
segment of business, being investment mainly in UK solar energy
infrastructure assets via SPVs, and mainly in one geographical
area, the UK.
d) Acquisitions settled through share consideration
Where an acquisition of an investment asset by BSIFIL is settled
by consideration of shares in the Company, the number of shares
issued is determined using the fair value of each share at the time
of the acquisition (see Note 16).
3. Critical accounting judgements, estimates and assumptions in
applying the Group's accounting policies
The preparation of these financial statements under IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates.
The area involving a high degree of judgement or complexity or
area where assumptions and estimates are significant to the
financial statements has been identified as the risk of
misstatement of the valuation of the SPV investments (see Note
10).
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future period
if the revision affects both current and future periods.
Accounting for subsidiaries
As noted in the Group's consolidated financial statements for
the period from 29 May 2013 to 30 June 2014, the Group had early
adopted IFRS 10 'Consolidated Financial Statements' including the
Investment Entities Amendments to IFRS 10, IFRS 12 and IAS 27 (the
"Amendments") and the Company consolidates its results with BSIFIL.
This treatment is based on an exception to the requirement for
mandatory non-consolidation under IFRS 10 for Investment Entities.
As the Company is an investment entity and BSIFIL is a subsidiary
providing investment services to the Company, consolidation is
required.
On 18 December 2014, the International Accounting Standards
Board issued further amendments to IFRS 10 (Investment Entities:
Applying the Consolidation Exception (Amendments to IFRS 10, IFRS
12 and IAS 28) (the "Consolidation Exception Amendments") which may
have a material impact on the preparation and presentation of the
Group accounts as they have clarified the scope of the exceptions
to mandatory non-consolidation. The Consolidation Exception
Amendments are mandatory for annual periods beginning on or after 1
January 2016. The Board is currently assessing the full impact of
these and the Company continues to consolidate its results with
BSIFIL in these financial statements.
4. Income from investments
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
GBP GBP
Consultancy services fee income 864,341 -
864,341 -
================= =================
BSIFIL has entered into consultancy agreements with each SPV for
the provision of on-going ad-hoc advisory services in the
management, administration and operation of each SPV. The
consultancy services fee income is charged according to hourly
rates and agreed from time to time between BSIFIL and each SPV.
5. Administrative expenses
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
GBP GBP
Investment advisory fees (including technical services fee) (see Note 18) 872,286 575,665
Legal and professional fees 259,911 -
Provision for VAT (see Note 12) 215,840 -
Administration fees (see Note 18) 121,607 62,544
Directors' remuneration (see Note 18) 73,096 72,699
Audit fees 21,643 17,500
Non-audit fees 20,850 25,000
Broker fees 25,745 23,378
Regulatory Fees 13,048 6,235
Registrar fees 15,302 6,023
Insurance 20,581 4,503
Listing fees 81,801 4,391
Other expenses 28,459 11,524
1,770,169 809,462
================= =================
6. Transaction costs
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
GBP GBP
Completed investment acquisitions 168,032 335,865
Other investment acquisitions 303,529 123,985
471,561 459,850
================= =================
7. Finance costs
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
GBP GBP
Arrangement fees 133,333 -
Loan facility fees 216,200 -
Loan interest 74,449 -
423,982 -
================= =================
On 11 June 2014, the Group entered into a three-year revolving
acquisition facility for up to GBP50m with The Royal Bank of
Scotland plc, which expires on 10 June 2017. During the first six
months of the financial year, the Group had drawn down amounts of
GBP19.5 million from this facility. The facility is subject to an
interest rate of margin over LIBOR of 2.25% and arrangement fee of
1.6% over total commitment, secured against the Group's assets. The
arrangement fee is to be amortised over the three year term of the
loan facility. Interest charged for the six months ended 31
December 2014 amounted to GBP74,449 (31 December 2013: GBPNil). The
drawn down amount plus interest was repaid in November 2014. The
balance of the loan at 31 December 2014 was GBPNil (30 June 2014:
GBPNil).
As at 31 December 2014, GBP112.3 million (30 June 2014: GBP111.8
million) of the Group's assets have been pledged as security
against the Group's revolving loan facility.
8. Taxation
The Company has obtained exempt status under the Income Tax
(Exempt Bodies) (Guernsey) Ordinance 1989 for which it pays an
annual fee of GBP600 (included within regulatory fees). With effect
from 1 January 2015, this annual fee will increase to GBP1,200. The
income from the Company's investments is not subject to any further
tax in Guernsey although the subsidiary and underlying SPVs, as UK
based entities, are subject to the current prevailing UK
corporation tax rate. The standard rate of UK corporation tax to 31
December 2014 is 21%.
At the period end, BSIFIL had taxable profits of GBP4,708,214
(31 December 2013: GBP1,238,282) which are expected to be offset
against the taxable losses of the underlying SPVs through group
relief. As a result, the tax charge for the period shown in the
unaudited condensed consolidated statement of comprehensive income
is GBPNil (31 December 2013: GBPNil).
9. Net Asset Value per Ordinary Share
The calculation of NAV per Ordinary Share is arrived at by
dividing the total net assets of the Group as at the unaudited
condensed consolidated statement of financial position date by the
number of Ordinary Shares of the Group at that date.
10. Financial assets held at fair value through profit or
loss
31 December 2014 30 June 2014
Total Total
GBP GBP
Opening balance (Level 3) 136,120,317 -
Additions* 48,913,438 127,313,722
Change in fair value of financial assets held at fair
value through profit or loss 2,098,359 8,806,595
Closing balance (Level 3) 187,132,114 136,120,317
============================== =======================
Analysis of net gains on financial assets held at fair value through profit or loss
(per unaudited condensed consolidated statement of comprehensive income)
Six months ended 29 May 2013 to
31 December 2014 31 December 2013
GBP GBP
Change in fair value of financial assets held
at fair value through profit or loss 2,098,359 -
Receipt from SPV investments held
at fair value through profit or loss 5,689,741 -
--------------------------- -----------------
7,788,100 -
=========================== =================
*As at 31 December 2014, additions include equity in SPV
investments of GBP3,285,862 (30 June 2014: GBP1,317,617).
Fair value measurements
Financial assets and financial liabilities are classified in
their entirety into only one of the following three levels:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the assets or liabilities, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices);
-- Level 3 - inputs for assets or liabilities that are not based
on observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires
significant judgement by the Group. The Group considers observable
data to be market data that is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary,
and provided by independent sources that are actively involved in
the relevant market.
The only financial instruments carried at fair value are the
investments held by the Group, through the SPVs, which are fair
valued at each reporting date. The Group's investments have been
classified within Level 3 as the SPV investments are not traded and
contain unobservable inputs.
Transfers during the period
There have been no transfers between levels during the six
months ended 31 December 2014. Due to the nature of the
investments, these will be classified as Level 3.
Valuation methodology and process
The same valuation methodology and process is followed in these
financial statements as was applied in the preparation of the
Group's consolidated financial statements for the period from 29
May 2013 to 30 June 2014.
The Directors base the fair value of the investments in the SPVs
held by the Group on information received from the Investment
Adviser. Fair value is calculated on an unleveraged, discounted
cash-flow basis in accordance with the IPEV Valuation Guidelines.
The Investment Adviser produces fair value calculations on a
semi-annual basis as at 30 June and 31 December each year.
The Directors have satisfied themselves as to the Group's
valuation policy, valuation methodology, discount rates and key
assumptions applied.
The key inputs to the valuation are the discount rate, power
price forecasts, inflation rate, irradiation forecasts and
taxation. Original discount rates applied when the solar assets
were first purchased could change due to factors such as a material
change in long term inflation expectations or risk-free rates; a
change in risk perception of solar assets or the regulation
supporting solar assets; or a change in the nature of capital
available within the industry (for example, large scale
institutional investors with a low cost of capital may drive the
reduction in the cost of capital for solar assets). As a result,
the discount rates are subjective and an alternative assumption may
result in a different rate. Judgement is used by the Investment
Adviser in arriving at the appropriate discount rate used by the
Group, which has been determined at 7.8% (30 June 2014: 7.8%). This
is based on the Investment Adviser's knowledge of the market,
taking into account pricing levels applied on recent bidding
activity on operational assets and third party valuations of the
Investment Adviser's other unlisted funds.
Long term power price forecasts are obtained from a leading
power forecaster, which are reviewed and adjusted, where
appropriate, by the Investment Adviser by applying an adjustment on
the leading forecaster's price power curve in order to align these
with the fixed power prices which would currently be achieved on
the power purchasing agreements that the SPVs have entered into. No
adjustment was applied in respect of this valuation as the
forecasting power curve was the most up to date datapoint at 31
December 2014 (30 June 2014: 5% discount). The compound annual
growth rate ("CAGR") implied by the power price forecast over the
25 year assumed asset life is 1.19% in real terms. When evaluating
the power forecast impact on NAV however, the real annual increase
in power price on a straight line basis which would give rise to an
equivalent NAV impact is 2.15%. This compares to a rate of 2.68%
implied in June 2014. The higher result when taking into account
the present value impact results from the fact that the assumed
CAGR is higher in the early years but lower in later years.
Related revenue (for associated Feed-in Tariffs ("FiT") and
Renewable Obligation Certificates ("ROC") benefits) and costs (for
the construction and maintenance of the solar assets) may not stay
constant in real terms over the life of the solar assets due to
inflation rates. The Group assumes an inflation rate of 2.5% (30
June 2014: 2.5%).
Long term irradiation forecasts based on a number of long term
irradiation databases utilising both ground and satellite based
measurements have been provided by a leading solar photovoltaic
("PV") technical adviser in the UK market. The Investment Adviser
has relied on this data and where applicable, the performance ratio
warranted by the contractors. Base energy yield assumptions are P50
(50% probability of exceedence) (30 June 2014: P50).
Each investment is subject to full UK corporate taxation at the
prevailing rate with the tax shield being limited to the applicable
capital allowances from the Group's SPV investments.
Sensitivity analysis
The table below analyses the sensitivity of the fair value of
investments to an individual input, while all other variables
remain constant. The Board considers the changes in inputs to be
within a reasonable expected range based on their understanding of
market transactions. This is not intended to imply that the
likelihood of change or that possible changes in value would be
restricted to this range.
Change in fair value Change in NAV
of investments per share
Input Change in input GBP (pence)
------------------- ---------------- --------------------------------------- -------------------------------------
Discount rate +0.5% (6,899,682) (2.48)
-0.5% 7,360,605 2.64
------------------- ---------------- --------------------------------------- -------------------------------------
Power prices +10% 8,610,916 3.09
-10% (8,616,609) (3.09)
------------------- ---------------- --------------------------------------- -------------------------------------
Inflation rate + 0.25% 4,011,353 1.44
- 0.25% (3,888,796) (1.40)
------------------- ---------------- --------------------------------------- -------------------------------------
Energy yield 10 year P90 (14,964,581) (5.37)
10 year P10 14,940,597 5.37
------------------- ---------------- --------------------------------------- -------------------------------------
Operational costs +10% (3,700,521) (1.33)
-10% 3,698,638 1.33
------------------- ---------------- --------------------------------------- -------------------------------------
11. Financial support to unconsolidated SPV investments
The following table shows the SPV investments of the Group. As
the Group is considered to be an investment entity under IFRS 10,
these SPV investments have not been consolidated in the preparation
of these financial statements:
Ownership
Project SPV investment Date of investment Site location Interest
Hill Farm HF Solar Limited 21 October 2013 Oxfordshire 100%
Hardingham Hardingham Solar Limited 30 August 2013 Norfolk 100%
Betingau Betingau Solar Limited 23 December 2013 Glamorgan 100%
Goosewillow ISP (UK) 1 Limited 5 August 2013 Oxfordshire 100%
Hall Farm Hall Solar Limited 24 December 2013 Norfolk 100%
North Beer North Beer Solar Limited 10 October 2013 Cornwall 100%
Saxley Saxley Solar Limited 19 December 2013 Hampshire 100%
Sheppey Sheppey Solar Limited 18 February 2014 Kent 100%
Pentylands Solar Power Surge Limited 4 March 2014 Wiltshire 100%
Hoback Hoback Solar Limited 17 June 2014 Hertfordshire 100%
L&P Solar
(see Notes 16 and 18) Bluefield L&P Solar Limited* 9 October 2014 Various 100%
Capelands Capelands Solar Farm Limited 25 July 2014 Devon 100%
Redlands Redlands Solar Farm Limited 25 July 2014 Somerset 100%
Ashlawn Ashlawn Farm Limited 3 December 2014 Somerset 100%
Rove Wel Solar Farm Limited 23 December 2014 Wiltshire 100%
*Bluefield L&P Solar Limited includes underlying SPVs; KS
SPV5 Limited and Bluefield Goshawk Limited.
The Group has advanced the following shareholder loans to the
SPVs, the loans are subject to an interest rate of 7% per annum,
are unsecured and repayable no later than 25 years from the date
the respective loan agreements were entered into:
Total Drawn down Outstanding
loan by SPVs at loan commitment
Project SPV investment commitment 31 December 2014 31 December 2014
GBP GBP GBP
HF Solar
Hill Farm Limited 17,249,999 17,259,434 -
Hardingham
Hardingham Solar Limited 22,649,999 17,794,057 4,855,942
Betingau Solar
Betingau Limited 11,154,999 11,154,727 272
ISP (UK) 1
Goosewillow Limited 18,909,990 18,883,577 26,413
Hall Solar
Hall Farm Limited 12,003,479 11,997,592 5,887
North Beer
North Beer Solar Limited 9,299,000 9,292,586 6,414
Saxley Solar
Saxley Limited 6,949,999 6,967,792 -
Sheppey Solar
Sheppey Limited 11,949,999 11,967,345 -
Solar Power
Pentylands Surge Limited 21,349,990 21,349,857 133
Hoback Solar
Hoback Limited 18,949,999 14,048,311 4,901,688
L&P Solar
(see Notes 16 Bluefield L&P
and 18) Solar Limited 7,725,957 7,725,957 -
Capelands
Solar Farm
Capelands Limited 8,569,900 5,845,684 2,724,216
Redlands Solar
Redlands Farm Limited 6,319,900 4,650,501 1,669,399
Ashlawn Farm
Ashlawn Limited 7,549,999 3,522,349 4,027,650
Wel Solar Farm
Rove Limited 13,949,999 10,481,529 3,468,470
As at 31 December 2014 194,583,208 172,941,298 21,686,484
================= ============================== =================================
The Group's SPVs are committed to pay amounts equal to the loan
commitment and equity to meet working capital requirements and
payments for the turnkey EPC contracts entered into with the
contractors for the design and construction of the solar
plants.
12. Trade and other receivables
31 December 2014 30 June 2014
GBP GBP
Non-current assets
Prepayments:
- Arrangement fees (Note 7) 377,778 511,111
377,778 511,111
================= =============
Current assets
Income receivable from consultancy services fee (see Note 4) 477,756 148,243
VAT receivable 215,840 16,728
Provision for VAT (215,840) -
Interest receivable 50,701 5,274
Other receivables 2,681 23,887
Prepayments:
- Arrangement fees (Note 7) 266,667 266,667
- Directors' remuneration (Note 18) 65,918 139,014
- Insurance 77,669 286
- Other 26,564 8,431
967,956 608,530
================= =============
BSIFIL is currently engaged with HM Revenue and Customs
regarding the recovery of VAT. Pending resolution of this matter,
the VAT receivable balance has been provided for in full. There are
no other material past due or impaired receivable balances
outstanding at the period end.
The Directors' remuneration prepayment totalling GBP65,918 (30
June 2014: GBP139,014) relates to the cost of 290,000 Ordinary
Shares that were issued to the Directors on 12 July 2013 in lieu of
a cash payment for Directors' fees for the first two years (see
Note 18).
The Directors consider that the carrying amount of all
receivables approximates to their fair value.
13. Cash and cash equivalents
Cash and cash equivalents comprises cash held by the Group and
short-term bank deposits held with maturities of up to three
months. The carrying amounts of these assets approximate their fair
value.
31 December 2014 30 June 2014
Cash and cash equivalent: GBP GBP
- Committed 21,686,484 5,035,375
- Uncommitted 73,898,640 6,251,755
95,585,124 11,287,130
============================== =============
Committed cash and cash equivalents consist of amounts expected
to be utilised to meet the Group's commitments.
14. Other payables and accrued expenses
31 December 2014 30 June 2014
GBP GBP
Loan from SPV investment 780,000 -
Investment advisory fees 537,267 322,758
Transaction costs 302,235 -
Legal and professional fees 25,380 313,164
Administration fees 38,621 33,688
Audit fees 18,500 35,000
Non-audit fees 10,500 -
Other payables 214,011 146,459
1,926,514 851,069
================= =============
The Group has financial risk management policies in place to
ensure that all payables are paid within the agreed credit period.
The Board of Directors considers that the carrying amount of all
payables approximates to their fair value.
15. Earnings per share
Six months ended 29 May 2013
31 December 2014 31 December 2013
Profit/(loss) attributable to shareholders of the Company GBP6,055,821 GBP(965,279)
Weighted average number of Ordinary shares in issue 174,243,151 130,290,000
Basic and diluted earnings from continuing operations and profit/(loss) for the
period (pence) 3.48 (0.74)
================= =================
There was no income earned or shares issued between 29 May 2013
and 11 July 2013, therefore this period has not been included for
the purpose of calculating the weighted average number of shares
above.
There are no potentially dilutive shares in issue.
16. Share capital
The authorised share capital of the Company is represented by an
unlimited number of Ordinary Shares of no par value which, upon
issue, the Directors may designate into such classes and
denominated in such currencies as they may determine.
Six months ended 29 May 2013 to
31 December 2014 30 June 2014
Number of Number of
Ordinary Shares Ordinary Shares
Opening balance 143,426,684 -
Shares issued as consideration for SPV investment
(Note 18) 7,490,540 -
Shares issued for cash 127,500,000 143,028,999
Shares issued in lieu of Directors' fees - 290,000
Shares issued as a scrip dividend alternative - 107,685
Closing balance 278,417,224 143,426,684
================== =================
Six months ended 29 May 2013 to
Shareholders equity 31 December 2014 30 June 2014
GBP GBP
Opening balance 147,676,019 -
Shares issued as consideration for SPV investment
(Note 18) 7,725,956 -
Shares issued for cash 130,687,500 143,159,289
Shares issued in lieu of Directors' fees - 290,000
Share issued as a scrip dividend alternative - 109,812
Share issue costs (2,235,495) (2,721,335)
Dividends paid (7,773,343) (2,605,792)
Retained earnings 6,055,821 9,444,045
Closing balance 282,136,458 147,676,019
================== ===============
Dividends declared and paid in the period are disclosed in Note
17.
Amendment to the Articles of Incorporation (the "Articles")
At an Extraordinary General Meeting ("EGM") of the Company on 1
October 2014, the Directors of the Company were approved to issue
new Ordinary Shares and/as redeemable convertible shares of no par
value in the Company ("C Shares") to related parties of the
Company, pursuant to the placing programme.
As described in the circular to shareholders dated 9 September
2014, the Board believe that it is in the interests of shareholders
that the Board has greater discretion, with regard to the date on
which the conversion ratio should be calculated, with a view to
ensuring that the conversion of C Shares into new Ordinary Shares
is not earnings dilutive as far as the existing Ordinary Shares are
concerned. Giving the Board this discretion required an amendment
to the Articles.
Accordingly, at the EGM of the Company on 1 October 2014, it was
proposed and passed, that the definition of Calculation Time as set
out in the Articles ("Calculation Time") be amended to remove the
requirement that at least 80% (or such other percentage) of the
assets attributable to the relevant C Shares must have been
invested in accordance with the investment policy and instead that
the Board be given absolute discretion to determine the Calculation
Time with a view to achieving the objective that the conversion of
the C Shares should not be earnings dilutive as far as the existing
Ordinary Shares is concerned, provided however that the Calculation
Time cannot fall later than a longstop date falling six months
after admission of the relevant class of C Shares.
During the period and as at 31 December 2014, no C shares were
in issue.
Shares issued during the period
On 9 October 2014, the Company issued 7,490,540 new Ordinary
Shares as partial consideration for the acquisition of Bluefield
L&P Solar Limited. These shares were issued at a price of
GBP1.03143 per Ordinary Share, raising total gross proceeds of
GBP7,725,956 (see Notes 11 and 18). The issue price for each
consideration share equalled the average mid-market price of the
Ordinary Shares during the seven dealing days up to and including
the third dealing day prior to completion of the acquisition
agreement. The issuance of the consideration shares is reflected as
an increase in equity and a corresponding increase in financial
assets held at fair value through profit or loss. This transaction
had no impact on the unaudited condensed consolidated statement of
comprehensive income.
On 14 November 2014, the Company issued 120,000,000 new Ordinary
Shares following a placing subsequent to the authority granted by
the shareholders at the EGM held on 1 October 2014. These shares
were issued at a price of GBP1.025 per Ordinary Share, raising
gross proceeds of GBP123,000,000.
On 25 November 2014, the Company issued 7,500,000 new Ordinary
Shares following a placing subsequent to the authority granted by
the shareholders at the EGM held on 1 October 2014. These shares
were issued at a price of GBP1.025 per Ordinary Share, raising
gross proceeds of GBP7,687,500.
Rights attaching to shares
The Company has a single class of Ordinary Shares which are
entitled to dividends declared by the Company. At any General
Meeting of the Company each ordinary shareholder is entitled to
have one vote for each share held. The Ordinary Shares also have
the right to receive all income attributable to those shares and
participate in dividends made and such income shall be divided pari
passu among the holders of Ordinary Shares in proportion to the
number of Ordinary Shares held by them.
Retained reserves
Retained reserves comprise of retained earnings as detailed in
the consolidated statement of changes in equity.
17. Dividends
On 8 September 2014, the Board declared a second interim
dividend of GBP2,868,534, in respect of the year ending 30 June
2014, equating to 2 pence per Ordinary Share, which was paid on 31
October 2014 to shareholders on the register on 19 September
2014.
In conjunction with the placings, as disclosed in Note 16, the
Board had considered the timing of the Company's dividends with the
objective of ensuring that any issue of new shares would not be
dilutive to the dividend attributable to existing ordinary
shareholders. As such, the Board decided to bring forward the
declaration and payment dates of the first interim dividend in
respect of the year to 30 June 2015. As a result, on 3 November
2014 the Board declared the first interim dividend of GBP4,904,809,
equating to 3.25 pence per Ordinary Share (first interim dividend
in respect of the year ending 30 June 2014: 2.0 pence per Ordinary
Share), which was paid on 5 December 2014 to shareholders on the
register on 14 November 2014.
18. Related Party Transactions and Directors' Remuneration
In the opinion of the Directors, the Company has no immediate or
ultimate controlling party.
Laurence McNairn, Director of the Company, is also a Director of
the Company's Administrator, Heritage International Fund Managers
Limited. From the total administration fees incurred during the
period, GBP71,736 (31 December 2013: GBP56,918) relates to the fees
of the Administrator, of which GBP38,621 (30 June 2014: GBP33,688)
was outstanding at the period end.
The total Directors' fees expense for the period amounted to
GBP73,096 (31 December 2013: GBP72,699); therefore, at 31 December
2014, the prepaid element of the shares issued is GBP65,918 (30
June 2014: GBP139,014). Of this, Laurence McNairn received a
Director's fee of GBP15,123 (31 December 2013: GBP15,041) with
GBP14,877 (30 June 2014: GBP30,000) prepaid at the period end.
As at 31 December 2014, the number of Ordinary Shares held by
each Director is as follows:
31 December 2014 30 June 2014
John Rennocks 255,805 155,000
Paul Le Page 70,000 70,000
Laurence McNairn 241,764 91,764
John Scott 251,176 201,176
--------------------------------
818,745 517,940
================================ ==============================
John Scott and John Rennocks are Directors of BSIFIL. Mike Rand
and James Armstrong, who are partners of the Investment Adviser,
are also Directors of BSIFIL. None of these Directors receives any
fees for their services as Directors of this subsidiary.
The Group's investment advisory fees (including technical
services fee) for the period amounted to GBP872,286 (31 December
2013: GBP575,665) of which GBP537,267 (30 June 2014: GBP322,758)
was outstanding at the period end.
The Group's consultancy services fee income for the period
amounted to GBP864,341 (31 December 2013: GBPNil) of which
GBP477,756 (30 June 2014: GBP148,243) was outstanding at the period
end.
On 9 October 2014, BSIFIL acquired Bluefield L&P Solar
Limited. As three members of the Investment Adviser, are also
Directors of BSIFIL or its subsidiaries, are indirectly key
management personnel of the Company and owned B shares in Bluefield
L&P Solar Limited, they are considered related parties, and the
transaction a related party transaction, under UK FCA Listing Rule
11 'Related Party Transactions' and IAS 24 'Related Party
Disclosures'. The three members of the Investment Adviser received
GBP1,548 cash consideration for their B shares. As holders of B
shares, they were also entitled to receive 20% of the profit
generated by the sale of Bluefield L&P Solar Limited. Their
share of this amounted to GBP353,965. In reviewing the purchase
price paid by the Company for the acquisition of Bluefield L&P
Solar Limited, the Board obtained a valuation report from BDO LLP
to confirm that the purchase price was determined on a fair and
reasonable basis.
19. Guarantees and other commitments
As at 31 December 2014, the Group had provided guarantees
amounting to GBP184.63 million (30 June 2014: GBP125.04 million) to
the SPVs in relation to the funding of EPC contracts entered into
by the SPVs, of which GBP36.8 million (30 June 2014: GBP100.83
million) was paid during the period and GBP47.01 million (30 June
2014: GBP24.21 million) held by the SPVs in escrow.
As at 31 December 2014, the Company had provided guarantees
amounting to GBP112.3 million (30 June 2014: GBP111.8 million) to
BSIFIL in relation to the revolving loan facility entered into the
by Group (see Note 10).
At the reporting date, the Group had loan commitments of
GBP21,686,484 (30 June 2014: GBP18,985,375) relating to the
shareholder loans extended to its SPVs (see Note 11).
20. Subsequent events
Since 31 December 2014, further amounts totalling GBP3.99
million were transferred from the Group to the SPVs on the existing
loan commitments at period end.
On 13 February 2015, the Company entered into a conditional
contract for a total commitment of GBP32.8 million to acquire a 29
MWp solar plant in Oxfordshire. Since 13 February 2015, GBP22.46
million has been transferred from the Group to the SPV.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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