TIDMBSIF
RNS Number : 5981L
Bluefield Solar Income Fund Limited
04 October 2016
4 October 2016
BLUEFIELD SOLAR INCOME FUND LIMITED
Full Year Results
Annual Report and Consolidated Financial Statements for the year
from 1 July 2015 to 30 June 2016
Operational Highlights
-- Above target total dividends of 7.25 pence per share were
declared in respect of the period ended 30 June 2016 (2015: 7.25
pence per share). This level of dividend has been declared
following above target underlying earnings;
-- A successful Placement of new shares in December 2015 raised
gross proceeds of GBP32 million and the Company's market
capitalisation grew to GBP309 million at 30 June 2016;
-- During the year ended 30 June 2016, the Company announced 17
acquisitions, consisting of 44 additional plants, financed by total
commitments of GBP193.3 million with an estimated combined energy
capacity of 148.6 MWp;
-- As at 30 June 2016, the Company had a total of 73 solar
assets with an estimated combined energy capacity in excess of 400
MWp, all of which were operational;
-- NAV as at 30 June 2016 was GBP308 million (30 June 2015:
GBP288 million), equivalent to a NAV per share of 99.39 pence (30
June 2015: 103.58 pence);
-- During the year ended 30 June 2016, the Company announced the
agreement of an amended and restated credit facility, which
increased the funds available from GBP50 million under the original
Revolving Credit Facility ("RCF") up to a total of GBP200 million.
The credit facility was provided by RBS and Investec and has been
fully refinanced with long term debt post year end; and
-- In September, 2016, the Company announced a long-term
financing agreement with Aviva Investors. The GBP187 million
facility is fully amortising over 18 years and has two tranches:
GBP121.5 million is fixed at a cost of 2.875% and GBP65.5 million
has a cost 0.70% + RPI. The Aviva financing replaced the
pre-existing RCF. The Company also agreed a further amended and
restated GBP30 million RCF with RBS.
Financial Highlights
As at / year
ending
30 June 2016
Total Investment income earned GBP28,023,299
Total underlying earnings GBP20,968,312
Underlying Earnings Per Share 7.10p
Earnings per share bought forward 0.41p
Total declared dividends per share for
year 7.25p
Earnings per share carried forward 0.26p
Total comprehensive income before tax GBP8,666,144
Earnings per share 2.92p
NAV per share 99.39p
Share price 99.75p
Total return to shareholders (based on
share price movement and dividends paid
in year) (2.51)%
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Chairman John Rennocks said: " The Board is pleased to announce
a strong set of results with above target earnings for the second
full year of operations and an above target dividend of 7.25 pence
per share. The Company has established a strong platform to
continue to deliver solid underlying earnings and dividends over
the medium to long term' ".
A copy of the Annual Report and Audited 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
Annual Report and Audited 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.
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)1481 716000
Tom Karim
CNC
Tel: +44(0)20 3219 8820 / +44(0)7923 293 399
Note to editors
About Bluefield Solar Income Fund Limited
The Company is a Guernsey-registered investment company focusing
on large scale agricultural and industrial solar assets. It had an
initial public offering of shares on the main market of the London
Stock Exchange in July 2013 and currently has over 309 million
shares in issue.
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. The Company intends
to pay 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 GBP1.25 billion of solar
PV funds and/or transactions in both the UK and Europe since 2008,
including over GBP500m in the UK since December 2011.
Bluefield has led the acquisitions, and currently advises on
over 70 UK based solar PV 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.
Corporate Summary
Investment objective
The investment objective of the Company is to provide
shareholders with an attractive return, principally in the form of
regular income distributions, by investing in a portfolio of UK -
based solar energy infrastructure assets.
Structure
The Company is a non-cellular company limited by shares
incorporated in Guernsey under the Law on 29 May 2013. The
Company's registration number is 56708, and it has been registered
and is regulated by the GFSC as a registered closed-ended
collective investment scheme. The Company's Ordinary Shares were
admitted to the Premium Segment of the Official List and to trading
on the Main Market of the London Stock Exchange following its IPO
on 12 July 2013. The issued capital during the year comprises the
Company's Ordinary Shares denominated in Sterling.
The Company has the ability to use long-term and short-term debt
at the holding company level as well as having long-term,
non-recourse debt at the SPV level.
Investment Adviser
The Investment Adviser to the Company and its wholly owned
subsidiary, BSIFIL, (together the 'Group') during the year was
Bluefield Partners LLP which is authorised and regulated by the UK
FCA under the number 507508. Since May 2015 BSL, a company with the
same ownership as the Investment Adviser, has commenced providing
asset management services to the investment SPVs held by
BSIFIL.
Chairman's Statement
Introduction
I am pleased to announce a strong set of results with above
target earnings for the second full year of operations and an above
target dividend of 7.25 pence. These achievements of real cash
generation and continuing high levels of dividend income for our
shareholders are especially impressive in the context of a
challenging power price environment. By carefully and patiently
building a high quality portfolio, securing an attractive financing
agreement and running the business with one of the lowest total
expense ratios in the sector, I believe the Company has established
a strong platform to continue to deliver solid underlying earnings
and dividends over the medium to long term.
With this in mind, in this statement I will also take time to
look back over the three years since IPO to review why the Company
is performing in the way it is. The recent announcement of the
completion of our long term financing agreement, the final part of
our initial business plan articulated to shareholders in 2013,
neatly frames a successful three-year investment programme and is
an appropriate place to reflect on what has been built and what to
expect in the years ahead.
Key Events
The year to 30 June, 2016, has seen the Company's portfolio of
assets increase from GBP297 million to GBP484 million, measured at
fair value. The Company's generating capacity correspondingly
increased from 253 MWp to 401 MWp. The increase in GAV is derived
from a combination of the investment of a successful equity raise
of GBP32 million in December 2015 and the investment of the
Company's enlarged short term credit facility, which was increased
from GBP50m to GBP200 million and was close to fully committed to
new investments at the end of the financial year.
The NAV has fallen from 103.58 pence, at 30 June 2015, to 99.39
pence, largely through the adoption of progressively lower power
price assumptions from the Company's independent forecaster. As
before, full disclosure of the methodology and assumptions
underpinning this valuation are detailed below.
The landmark deal was the acquisition in January of the Primrose
assets, a 95MWp operating portfolio, which was funded by the short
term credit facility. In addition to this the Company also funded
the construction of a series of Solarcentury plants, continuing our
strategy since IPO of funding construction projects. The Company
also acquired, in two related party transactions, additional solar
farms on the sites of Thames Water processing plants and a 4.1MWp
Feed-in Tariff asset on the Toyota site in Derbyshire, increasing
the level of RPI-linked revenues in the Company.
A negative factor during the period has been the continued
downward pressure on short-term power prices and long-term
forecasts. That said, active management of our power contracts by
our Investment Adviser has mitigated this impact and, indeed, a
third party review of the power strategy adopted by the Investment
Adviser gave a strong independent verification of the strategy.
Key Post Results Events
The GBP187 million corporate level financing agreed with Aviva
Investors in September 2016 is a very important milestone for the
Company. It delivers both a highly attractive cost of finance
highly and supportive terms. Barring the legacy financing of GBP14m
on Durrant's Farm on the Isle of Wight (where break costs proved
too onerous), all debt is held at the Company level. This structure
is very transparent and enables comparison of individual plant
performance without the complexity of different funding
arrangements.
Further to this, July saw the publication of the latest long
term power price forecast from our independent forecaster. For the
first time in a couple of years, the forecast has improved,
reflecting what is being seen in the wholesale power markets.
Whilst neither of these positive developments has been adopted into
the valuation, they are two areas where there is potential future
value for our shareholders.
Underlying Earnings and Dividend Income
The full year has seen underlying earnings of 7.10 pence per
share (pps) after all financing costs and ahead of the on-target
dividend objective of 7.07 pps, delivering underlying earnings
ahead of target for the second year. This outperformance is one of
the most important measures of the health of your Company. There is
nowhere to hide with a full distribution business model. Whilst the
underlying earnings per share are slightly lower than the previous
financial year they have held up extremely well in the face of both
a very challenging power price market and a year which provided
markedly less sunshine than its predecessor, particularly at the
beginning and end of the financial year. It is pleasing to note
that irradiation in the first few months of the current year is
above our expectations.
The full year dividends total 7.25 pps (unchanged from 2014/15)
against a target of 7.07 pps (7.00 pps in the previous year). The
Board has decided to release some of the surplus retained from the
operating outperformance in the previous year, to offset the below
expectation irradiation in 2015/16.
Valuation - some key factors
Notwithstanding the significant power price challenges we have
experienced since flotation, the NAV per share has remained very
stable, indeed ahead of the NAV at IPO. This reaffirms the
acquisition methodology and pricing discipline exercised by the
Company, as well as the excellent operating performance of our
plants:
The valuation is based on an equity discount rate of 7.5%, and a
conservative view of our financing structure, which we believe to
be appropriate to reflect both the business risks we face and the
financial climate in which we operate. The uncertainties in the
financial and economic climate from the Brexit decision have
contributed to our decision to remain conservative in our approach
to discount rates and other valuation parameters, despite the
improvements that have been achieved in our business and our
financing structure;
Whilst the all-in cost of the long term financing achieved of
2.875% on the fixed tranche and 0.7% plus RPI on the indexed
tranche is very favourable compared to the 450bps assumed in the
year end valuation methodology, and the July 2016 power forecast
suggests an increase in prices in the long term, both were
confirmed after the year end. Your Board, therefore, considers it
inappropriate to reflect these recent events in the June, 2016
balance sheet.
We have again sought to provide shareholders with a detailed and
enhanced analysis of our projects and on how we have approached our
valuation at the year end.
Looking back over the past 3 years
Reflecting on the past three years shines a light on a number of
key events that have enabled the Company to deliver such strong,
consistent results. Being the first-mover in the listed solar space
gave your Company time to acquire assets methodically and prudently
and execute our chosen investment strategy, thus exploiting a less
competitive market in the early period, in terms of asset
pricing.
Your Company also benefitted from adopting an investment
strategy of funding primary assets as opposed to waiting for assets
in the smaller and more competitive secondary market. In doing so
we were able create a tailor-made portfolio from the best
contractors in the market with highly protective acquisition
contracts. The benefits of this will be seen, I am sure, over the
life of the portfolio but the patterns are already beginning to
emerge.
Likewise, when the Company announced its major secondary
acquisition of the Primrose portfolio in January, 2016, this
portfolio was carefully selected on the basis of asset quality and,
crucially, it came without the constraints of any embedded long
term debt. Being able to acquire the Primrose portfolio using its
short term credit facility enabled the Company to start the
conversations with the long term funders resulting in the recent
announcement in September 2016 of the facility provided by Aviva
Investors.
In reality, of course, the previous three years' diligence in
building the portfolio has laid the platform that enabled Aviva
Investors and the Company to work together in designing a highly
attractive, bespoke financing agreement. The all-in cost of
financing is clearly very beneficial but the terms, and the depth
of discussions between the Company and Aviva Investors to agree its
details, could not have been delivered without the Company having
one of the premier portfolios in the sector. The Investment Adviser
has delivered an exceptional group of assets and, now, an
exceptional financing package and is to be congratulated on such
strong delivery of the plans for the Company.
In the light of the excellent terms delivered for our long term
debt structure, a key area of focus for the Company is to review
our long term leverage position and the Board is working with the
Investment Adviser to consider the optimum structure for both short
term and longer term debt. We intend to remain conservative in both
the level of our gearing and our debt service cover ratio.
Market Growth
The UK solar market now stands at an installed capacity of c.11
GWp. When your Company floated the installed capacity of the market
was less than 500 MWp. What a three years the industry has
experienced, with the UK being the fastest growing primary market
in Europe in each of these three years!
What does the impending end of government support for new solar
projects mean for your Company? We have an excellent portfolio,
which is well financed and we expect to continue to deliver strong
performance for shareholders from those assets. We have no
obligation to grow by chasing assets and will continue our core
philosophy of only buying assets that contribute to the delivery of
our stated dividend objectives for our shareholders. We are clearly
identified as a highly credible buyer of solar assets and we will
continue to investigate opportunities within those well-established
disciplines. We do see further opportunities for consideration, but
further enhancement of the performance of our present assets will
also be an important contributor.
Performance of Your Portfolio
We have seen a combination of the plants performing above their
warranty level and, where there has been underperformance, the
Company has been able to claim damages through very protective
contracts. A further contributor, to my mind, is the asset
management activities of Bluefield Services Ltd, (BSL) the
Bristol-based business established by the owners of the Investment
Adviser as a separate entity to carry out comprehensive monitoring
activities.
I and my Board colleagues have spent time with the team in
Bristol over the summer and are very pleased with the team's
approach and expertise. BSL are already providing valuable services
to the Company, whether it be early intervention when there is an
issue with a particular plant, or preventative monitoring where the
experienced team is able to analyse operational data to optimise
generation and reduce costs.
In addition strong, ongoing contractual protections from our
acquisition agreements which are closely monitored by the BSL team,
enable the Board to be very comfortable with the operation of our
plants. We foresee opportunities for further added value from this
excellent team as they incrementally improve plant performance over
the medium term.
Long Term Financing
The all-in cost of the GBP121.5m fixed price loan at 2.875%
interest is well below our original expectations and the GBP65.5
million index linked element at 70bps plus RPI is also highly
attractive and appropriate for the Company where the majority of
our revenues are directly linked to RPI. But away from these
tremendously beneficial costs are some equally important but less
heralded elements.
The loans are for 18 years, fully amortising. This means that,
beyond the element driven by RPI, the Company does not have any
interest rate risks or bullet repayment issues on all of this
financing for the full 18 year term. In Aviva Investors, the
Company has one of the most experienced long term financing
partners. The agreement means that on the Company's base case
projections the long term debt service cover ratio (DSCR) is nearly
3 times covered by earnings.
At 3 times cover, this conservative position has been achieved
because the Company has relatively low levels of overall leverage
(c.40% to GAV), combined with the low interest rates. The approach
the Company has taken in getting the right portfolio in place has
also enabled the financing partnership with Aviva Investors to come
with sensible and supportive conditions in respect of the Company's
core strategies.
Outlook
Three years of patient, focused hard work has created the
Company you see reported in these results. It shows a Company
delivering on its promises to investors by offering stable,
attractive income on your investment. It also, in the Board's view,
shows a Company that offers a conservative valuation with this
report highlighting the basis upon which the valuation has been
arrived at with sector leading transparency and disclosure.
As previously mentioned, there is also potential value in the
Company not recognised in the end of year valuation. The Company
did not adopt the new power curve our consultant published in July,
2016 that shows an improvement in the long term power forecast and
we have not included any benefit for the lower than expected cost
of the long term finance. In addition, the plants are showing above
budget performance and, with the support of BSL, we are looking for
further enhanced energy generation.
And finally, as I write this statement bathed in sunshine in
September, it is worth repeating that it has been a very good start
to the new financial year in terms of irradiation!
John Rennocks
Chairman
3 October 2016
The Company's Investment Portfolio
The Company has a geographically diverse group of assets
containing a range of proven solar technology and
infrastructure.
[Chart]
Analysis of the Company's Investment Portfolio
The Company's investment portfolio, analysed by geography,
subsidy tariff, contractor and revenue as at 30 June 2016 is as
follows:
[Chart]
Strategic Report
Introduction
The Strategic report sets out:
STRATEGIC ISSUES
1. Company's Objectives and Strategy
2. Company's Operating Model
3. Investment Policy
4. Policies, approach and achievements adopted in respect of Corporate Social Responsibility
OPERATIONAL ISSUES
5. Operational & Financial Review for the period (including KPI)
6. Directors' Valuation of Group's Portfolio
7. Principal Risks and Uncertainties
STRATEGIC ISSUES
1. Company's Objectives and Strategy
The Company seeks to provide shareholders with an attractive
return, principally in the form of quarterly income distributions,
by investing in a portfolio of large scale UK based solar energy
infrastructure assets. The Company targeted a dividend of 7 pence
per Ordinary Share in relation to the financial year ended 30 June
2015 with the intention of this rising annually thereafter with the
RPI. Subject to maintaining a prudent level of reserves, the
Company aims to achieve this through optimisation of asset
performance, future acquisitions and use of gearing. The Company's
dividend target for the financial year ended 30 June 2016 was 7.07
pence per Ordinary Share. For the year to 30 June 2016, the Company
has declared dividends of 7.25 pence per Ordinary Share, a second
year of dividend outperformance. The Operational and Financial
Review section below provides further information relating to
performance during the year.
2. Company's Operating Model
Structure
The Company holds and manages its investments through a UK
limited company, BSIFIL, in which it is the sole shareholder.
[Chart]
Management
Board and Committees
The independent Board is responsible to shareholders for the
overall management of the Company. The Board has adopted a Schedule
of Matters Reserved for the Board which sets out the particular
duties of the Board. Such reserved powers include decisions
relating to the determination of investment policy, approval of new
investments, oversight of the Investment Adviser, approval of
changes in strategy, risk assessment, Board composition, capital
structure, statutory obligations and public disclosure, financial
reporting and entering into any material contracts by the
Company.
Through the Committees and the use of external independent
advisers, the Board manages risk and governance of the Company. The
Board consists of four independent non-executive Directors. See the
Corporate Governance Report for further details.
Investment Adviser
The Company has entered into an Investment Advisory Agreement
with the Investment Adviser. This sets out the Investment Adviser's
key responsibilities, which include identifying and recommending
suitable investments for the Company to enter into and negotiating
on behalf of the Company the terms on which such investments will
be made.
Through a Technical Services Agreement with BSIFIL the
Investment Adviser is also responsible for all issues relating to
the supervision and monitoring of existing investments (included
within the fee cap under the Investment Advisory Agreement). The
Company has appointed BSL, a company with the same ownership as the
Investment Adviser, to provide asset management services for the
Company's portfolio.
During the year the Investment Adviser has been paid a base fee
of 0.80% of NAV at 30 June 2016 and a variable fee, in respect of
2015, equating to 0.07% of NAV which was settled by issue of
Ordinary Shares.
Post year end, following the declaration of an above target
total dividend by the Company for 2016, the Investment Adviser is
also entitled to a variable fee which is only triggered when actual
dividends in relation to a full financial year exceed targets. In
the financial year the variable fee, which will be paid in shares,
equated to 0.05% of NAV.
A summary of the fees paid to the Investment Adviser is given in
Note 5 of the consolidated financial statements. The fee paid to
BSL, the solar asset management business with shared ownership with
the Investment Adviser are detailed in Note 19.
Administrator
The Board has delegated administration and company secretarial
services to the Administrator.
Further details on the responsibilities assigned to the
Investment Adviser and the Administrator can be found in the
Corporate Governance Report.
Employees and Officers of the Company
The Company does not have any employees and therefore policies
for employees are not required. The Directors of the Company are
listed below.
Investment Process
Through its record of investment in the UK solar energy market,
the Investment Adviser has developed a rigorous approach to
investment selection, appraisal and commitment.
Repeat transaction experience with specialist advisers
The Investment Adviser has worked with a range of legal,
technical, insurance and accounting advisers in each of the
transactions it has executed in the UK market. This direct
experience has enabled it to develop an understanding of key areas
of competence to address specific issues; for example, identifying
specific individuals who are expert in advising on specific
detailed technical aspects of a project. Through this direct
specialist experience, the Investment Adviser is able to source
relevant expertise to address project issues both during and
following a transaction.
Application of standardised terms developed from direct
experience
The Investment Adviser has developed standardised terms which
have been specifically tested by reference to real transaction and
project operational experience. Whilst contract terms are
specifically
negotiated and tailored for each individual project, solar
project contracts applied by the Investment Adviser typically have
specific protections from the construction contracts regarding
recovery of revenue
losses for underperformance and obligations for correction of
defects. Both such provisions have been specifically exercised by
the Investment Adviser giving it direct experience in activating
contractual protections.
Rigorous internal approval process
All investment recommendations issued to the Company, and all
investment recommendations made in relation to previous
transactions of the Investment Adviser are made following the
formalised review process described below:
(1) Investment origination and review by Managing Partners
Before incurring costs in relation to the preparation of a
transaction, a project is concept reviewed by the Investment
Adviser's Managing Partners, following which a letter of interest
or memorandum of understanding is issued and project exclusivity is
secured.
(2) Director Concept Approval
In the event that material costs are to be incurred in pursuing
a transaction, a concept paper is issued by the Investment Adviser
for review by the Directors of the Company. This concept review
fixes a project evaluation budget as well as confirming the project
proposal is in line with the Company's investment policy and
strategy.
(3) Due diligence
In addition to applying its direct commercial experience in
executing solar PV project acquisitions and managing operational
solar plants, the Investment Adviser engages legal, technical and,
where required, insurance and accounting advisers to undertake
independent due diligence in respect of a project. Where specialist
expertise is required due to project specifications, the Investment
Adviser has experience in identifying relevant experts.
(4) Bluefield Partners LLP Investment Committee
Investment recommendations issued by the Investment Adviser are
made following the submission of a detailed investment paper to the
Investment Committee. The Investment Committee operates on the
basis of unanimous consent and has a record of making detailed
evaluation of project risks. The investment paper submitted to the
Investment Committee discloses all interests which the Investment
Adviser and any of its affiliates may have in the proposed
transaction.
(5) Group Board approval
Following approval by the Investment Adviser Investment
Committee, investment recommendations are issued by the Investment
Adviser to the Group for review by the boards of the Company and
BSIFIL. Both the Company and the BSIFIL board undertake detailed
review meetings with the Investment Adviser to assess the project
prior to determining any approval. Both board approvals are
required in order for a transaction to be approved. If the boards
of the Company and BSIFIL approve the relevant transaction, the
Investment Adviser is authorised to execute the transaction in
accordance with the Investment Adviser's recommendation and any
condition stipulated in the boards' approval. The Board is
continuously aware of the overall pipeline of potential new
investments that can lead to choices between projects depending on
available funding facilities.
(6) Closing memorandum
Prior to executing the transaction, the Investment Adviser
completes a closing memorandum confirming that the final
transaction is in accordance with the terms presented in the
investment paper to the Investment Committee; detailing any
material variations and outlining how any conditions to the
approval of the Investment Committee and/or Board approval have
been addressed. This closing memorandum is countersigned by an
appointed member of the Investment Committee prior to completing
the transaction.
Managing conflicts of interest
The Investment Adviser and any of its members, directors,
officers, employees, agents and connected persons, and any person
or company with whom they are affiliated or by whom they are
employed may be involved in other financial, investment or other
professional activities which may cause potential conflicts of
interest with the Company and its investments.
The Directors have noted that the Investment Adviser has other
clients and have satisfied themselves that the Investment Adviser
has procedures in place to address potential conflicts of interest.
The potential conflicts of interest are disclosed in the investment
recommendation for each investment.
3. Investment Policy
The Group invests 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. The Group targets long life solar energy infrastructure,
expected to generate stable renewable energy output over a 25 year
asset life.
Individual solar assets or portfolios of solar assets are held
within SPVs into which the Group invests through equity and/or debt
instruments. The Group typically seeks legal and operational
control through direct or indirect stakes of up to 100% in such
SPVs, but may participate in joint ventures or minority interests
where this approach enables the Group to gain exposure to assets
within the Company's investment policy which the Group would not
otherwise be able to acquire on a wholly-owned basis.
The Group may, at holding company level, make use of both short
term debt finance and long term structural debt to facilitate the
acquisition of investments, but such holding company level debt
(when taken together with the SPV finance noted above) will also be
limited so as not to exceed 50% of the Gross Asset Value. The Group
may make use of non-recourse finance at the SPV level to provide
leverage for specific solar energy infrastructure assets or
portfolios provided that at the time of entering into (or
acquiring) any new financing, total non-recourse financing within
the portfolio will not exceed 50% of the prevailing Gross Asset
Value.
No single investment in a solar energy infrastructure asset
(excluding any third party funding or debt financing in such asset)
will represent, on acquisition, more than 25% of the Net Asset
Value.
The portfolio provides diversified exposure through the
investment in not less than five individual solar energy
infrastructure assets. Diversification is achieved across various
factors such as grid connection points, individual landowners and
leases, providers of key components (such as PV panels and
inverters) and assets being located across various geographical
locations within the United Kingdom.
The Group aims to derive a significant portion of its targeted
return through a combination of the sale of Renewables Obligation
Certificates and FiTs (or any such regulatory regimes that replace
them from time to time). Both such regimes are currently
underwritten by UK Government policy providing a level of
Renewables Obligation Certificates or FiTs fixed for 20 years for
accredited projects and each regime currently benefits from an
annual RPI escalation. The Group also intends, where appropriate,
to enter into power purchase agreements with appropriate
counterparties, such as co-located industrial energy consumers or
wholesale energy purchasers.
The Company's investment policy has the flexibility to commit to
assets during the construction phase or the operational phase.
During the period under review, the Investment Adviser has invested
in construction phase assets and has acquired a large secondary
portfolio in order to:
1. Maximise quality and scale of deal flow: the flexibility of
the strategy maximises the pool of assets available to the Company.
The majority of developers and contractors in the UK solar market
were (and are) unable to fund on their own balance sheets,
therefore construction funders such as Bluefield were able to
select their construction partners and assets from the widest
possible pool. The maturing of the UK solar market has resulted in
the Company being offered substantial operational asset portfolios
for the first time, during the period;
2. Optimise the Efficiency of the Acquisitions: funding through
the construction phase removes a layer of financing cost provided
by third party construction funders, typically passed on to the end
acquirer; likewise, when acquiring secondary assets, the Company
has selected assets based on quality, cost and attractiveness of
the financing attached to the acquisitions;
3. Minimise risk via appropriate contractual agreements: Risk
can be further minimised by appropriate contractual agreements. For
construction assets, these include making milestone payments
backed, typically, by bonds, security plant and equipment and
significant cash hold backs; and
4. Acquire assets using conservative assumptions: As can be seen
by the valuation contained in this report, the Company has acquired
assets based upon a cautious set of assumptions.
Listing Rule Investment Restrictions
The Company currently complies with the investment restrictions
set out below and will continue to do so for so long as they remain
requirements of the Financial Conduct Authority:
-- neither the Company nor any of its subsidiaries will conduct
any trading activity which is significant in the context of the
Group as a whole;
-- the Company must, at all times, invest and manage its assets
in a way which is consistent with its objective of spreading
investment risk and in accordance with the published investment
policy; and
-- not more than 10% of the Gross Asset Value at the time of
investment is made will be invested in other closed-ended
investment funds which are listed on the Official List.
As required by the Listing Rules, any material change to the
investment policy of the Company will be made only with the prior
approval of the Financial Conduct Authority and Shareholders.
4. Policies, approach and achievements adopted in respect of
CSR
The Directors and the Investment Adviser are focused on the
corporate objective of providing investors with an ethical,
socially responsible and transparently managed Company. The best
standards of governance and CSR are central to the Company's ethics
and important in ensuring the continued attractiveness of the
Company to the broad group of stakeholders with which it interacts.
The production of sustainable energy from the Company's portfolio
is expected to save the emission of millions of tonnes of CO2
throughout the life of the assets. In addition, the Company seeks
to increase biodiversity at its sites by appropriate planting and
landscaping of the land it manages, as detailed in the
Environmental Social Governance report below.
OPERATIONAL ISSUES
5. Operational & Financial Review for the period
Key Performance Indicators
The Board has identified the following indicators for assessing
the Company's annual performance in meeting its objectives:
As at 30 June As at 30 June
2016 2015
------------------------------------- -------------- --------------
Market Capitalisation GBP308,857,686 GBP305,562,903
Share price 99.75p 109.75p
Total dividends declared in relation
to the year 7.25p 7.25p
NAV GBP307,752,538 GBP288,390,867
NAV per share 99.39p 103.58p
Total Return to shareholders (based
on share price and dividends paid
in the year) (2.5)% 13.0%
------------------------------------- -------------- --------------
Acquisitions
During the period, the Company completed 17 acquisitions,
consisting of 44 additional plants for a total committed
consideration of GBP193.3 million (2015: GBP138.6 million). Each
investment has been carefully selected to ensure the portfolio is
well balanced geographically, with appropriate levels of
diversification of construction and operation contractors and key
equipment.
Portfolio Performance
Of the 17 investments made during the financial year, 10 were
contracted at or during the construction phase with 7 purchased
with a record of operation. As at 30 June 2016, however, all of
these 17 investments were operational. All acquisitions of projects
under construction successfully entered operation during the year
and achieved accreditation within the targeted 1.4 and 1.3 ROC
bands, or FiT accreditation. Although a number of projects
commenced operation after the contracted construction deadlines,
contractual protections enabled the Group to benefit from
contractor delay liquidated damages which fully compensated the
applicable investment vehicle for delays in generation, keeping
revenues in line with budget.
During the year to 30 June 2016, operationally the portfolio has
performed strongly, being 1.8% ahead of its forecast ability to
convert irradiation into energy output. Lower than expected
irradiation (-3.7% against long term estimates) resulted in a fall
in expected generation (2.5% below budget) which, when combined
with falling power prices (5.9% drop in the period), has meant
revenue from energy generated was 5.9% below expectation. However,
when the additional revenues from liquidated damages and insurance
proceeds of GBP0.9 million are accounted for, the total revenue in
the period was only 3.5% below forecast. The Directors are
particularly pleased with this performance in light of the
considerable headwinds of low irradiation levels and the continuing
decline in power prices over the last 12 months. The performance of
the portfolio is analysed in greater detail within the Investment
Adviser's report.
The Company's PPA strategy is to enter into short term contracts
with contracting periods staggered quarterly across the portfolio
in order to minimise the portfolio's sensitivity to short-term
price volatility. In addition, the Company has acquired, through
its secondary investments, long term (15 year) contracts on c. 25%
of its portfolio, these contracts benefitting from floor
prices.
Portfolio performance and power price movements are discussed in
more detail within the Investment Adviser's report.
Summary Consolidated Statement of Comprehensive Income
Year ended Year ended
30 June 2016 30 June 2015
GBP million GBP million
------------------------------------ -------------- -------------
Total Distributed Investment Income
(Note 4 & 10) 27.3 11.0
Change in fair value of assets
(Note 10) -9.7 8.6
Administrative expenses (Note
5) -3.8 -3.0
Transaction costs (Note 6) -1.9 -0.6
Finance costs (Note 7) -3.2 -0.8
------------------------------------ -------------- -------------
Total comprehensive income before
tax 8.7 15.2
Tax - -
------------------------------------ -------------- -------------
Total comprehensive income 8.7 15.2
------------------------------------ -------------- -------------
Earnings per share 2.92p 6.71p
Distributed Investment Income for the period represents interest
income and consultancy services fees paid by the SPV investment
companies to BSIFIL. The Total Investment Income earned of GBP28.0m
is the Distributed Investment Income of GBP27.3m (See Notes 4 and
10), combined with the Undistributed Investment Income of GBP0.7m,
being the increase in accrued earnings in the period which is makes
up part of the 'Change in fair value of assets'.
The total comprehensive income before tax of GBP8.7 million
reflects the performance of the Group when valuation movements and
operating costs are included. Further detail on valuation movements
is given in the Report of the Investment Adviser.
Group debt facility
On 21 January 2016 the Group entered into a revised credit
facility with RBS and Investec which increased the funds available
from GBP50 million under the original facility to GBP200 million
(see Note 7 of the consolidated financial statements). The facility
was divided into three tranches, the details of which are shown
below:
Tranche A Tranche B Tranche C
------------- ---------------- ------------- -------------------
Amount GBP50m GBP100m GBP50m
------------- ---------------- ------------- -------------------
Type Term Loan Term Loan Revolving Facility
------------- ---------------- ------------- -------------------
Margin (over 190 bps 210 bps 210 bps
LIBOR)
------------- ---------------- ------------- -------------------
Tenor 20 January 2017 30 September 30 September
2017 2017
------------- ---------------- ------------- -------------------
As at the period end GBP180.4 million had been drawn down on the
revised Facility. At 30 June 2015 GBP18.9 million had been drawn
down on the original facility.
Post year end the Facility has been refinanced with GBP187
million long term financing provided by Aviva Investors. This is
held at the Company level in two tranches, a GBP121.5 million fixed
price loan at 2.875% interest and a GBP65.5 million index linked
loan priced at 0.70% over RPI. The loans are for 18 years and are
fully amortising.
6. Directors' Valuation of Group's portfolio
The Investment Adviser or an independent external valuer is
responsible for preparing the fair market valuation recommendations
for the Company's investments for review and approval by the
Directors.
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. Such an external valuation was undertaken by
EY for the year ended 30 June 2015 and considered by the Directors
in determining the portfolio fair value at that date.
The Directors' Valuation adopted for the portfolio as at 30 June
2016 was GBP483.7 million, representing a cumulative 1.6% uplift on
investment cost, derived from a combination of income generated
within the investments and revaluation uplift under discounted
cash-flow methodology. The Board reviews and considers the
recommendations of the Investment Adviser to form an opinion of the
fair value of the Group's investments.
A detailed analysis of the Directors' Valuation is presented in
the Report of the Investment Adviser.
7. Principal Risks and Uncertainties
Under the FCA's Disclosure and Transparency Rules, the Directors
are required to identify those material risks to which the Group is
exposed and take appropriate steps to mitigate those risks.
These inherent risks associated with investments in the solar
energy sector could result in a material adverse effect on the
Group's performance and value of Ordinary Shares.
Bluefield Solar Income Fund Limited's risk register covers four
main areas of risk:
-- Portfolio Management;
-- Operational;
-- Regulatory; and
-- External.
Each of these areas, together with the principal risks with that
category, are summarised in the table below and include commentary
on the mitigating factors.
PORTFOLIO MANAGEMENT
Risk Potential Impact Mitigation
------------------------- ------------------------------------ -----------------------------
1. Portfolio Operational There may be underperformance Bluefield Services
Risk of solar plant versus expectations Limited as Asset Manager
at acquisition. prepares quarterly
operational summaries
for the Board that
evaluates the performance
of each plant against
budget and highlights
any issues to be addressed.
------------------------- ------------------------------------ -----------------------------
OPERATIONAL
Risk Potential impact Mitigation
------------------- ---------------------------------- ------------------------------
2. Financing risk Use of inappropriate financing The Investment Adviser
could reduce the Group's has arranged a long-term
ability to pay future dividends financing facility
in the event of an increase for the Group's portfolio
in interest rates. that will match the
maturity of the underlying
assets and minimise
interest rate risk.
------------------- ---------------------------------- ------------------------------
3. Valuation error Valuations of the SPV investments The discount factor
are reliant on large and applied to the cash-flows
detailed financial models is reviewed by the
based on discounted cash-flows. Investment Adviser
Significant inputs such to ensure that it is
as the discount rate, rate set at the appropriate
of inflation and the amount level. All papers supporting
of electricity the solar the Gross Asset Value
assets are expected to calculation and the
produce are subjective methodology used are
and certain assumptions presented to the Board
or methodologies applied for approval and adoption.
may prove to be inaccurate.
This is particularly so Ongoing quarterly
in periods of volatility reconciliations are
or when there is limited performed between the
transactional data for SPVs and BSIF.
solar PV generation against
which the investment valuation The Board has committed
can be benchmarked. Other to obtaining independent
inputs such as the price 3rd party valuations
at which electricity and at least every three
associated benefits can years. The first valuation
be sold are subject to was completed in June
government policies and 2015.
support. An additional and detailed
independent review
of the portfolio cash
flow model was carried
out as part of the
long-term debt financing
procurement process.
------------------- ---------------------------------- ------------------------------
REGULATORY
Risk Potential impact Mitigation
----------------------- ----------------------------------- --------------------------------
4. Changes to taxation There may be unfavourable In October 2015 the
regime tax related changes including final proposals for
restrictions on renewables, the 15 Base Erosion
or no relief on debt structuring. and Profit Shifting
Actions were delivered
to the G20 Finance
Ministers. This included
a timetable for implementation
and for which Europe
is expected to be
a forerunner. An independent
taxation review of
the Company was carried
out as part of the
long-term debt financing
procurement process.
The Board continues
to monitor the situation
and take advice from
the Group's Tax Advisers
as necessary.
----------------------- ----------------------------------- --------------------------------
EXTERNAL
Risk Potential impact Mitigation
-------------------- ----------------------------------- -----------------------------
5. Unfavourable Annual income generation The Group uses on
Weather Conditions of the Group is sensitive site measurement of
to weather conditions and irradiation in order
in particular to the level to measure performance
of irradiation across the against budget, and
investment locations. Variability its portfolio is relatively
in weather could result dispersed across the
in greater than 10% variability south of the United
in revenue generation year Kingdom. The use of
on year. solar photovoltaic
technology at the
sites means generation
is not dependent only
on direct irradiation
but also on predictable
daylight limiting
short-term volatility
when compared to other
weather dependent
electricity generation.
The Group has diversified
the locations of its
plants across the
UK.
-------------------- ----------------------------------- -----------------------------
Risk Potential impact Mitigation
-------------------- --------------------------------- -------------------------------
6. Unfavourable Annual income generation The Investment Adviser
Electricity Market of the Group is sensitive regularly updates the
Conditions to future power market portfolio cash-flow
pricing. A major structural model to reflect future
shift in power demand or power market forecasts
supply will impact the and applies additional
Group's ability to meet discounts to the forecasts.
its dividend target. New projects are always
The reduction of all energy assessed using the
prices may also have a most recent power market
negative effect on the forecast data available.
price of all sources of A rolling programme
energy. of PPA contract expiries
has been implemented
to minimise risk. Protection
against a sustained
period of low energy
prices can only be
achieved by maximising
exposure to regulatory
revenues through acquisition
of more legacy FIT
and ROC plants. Some
recent acquisitions
have included fixed
power contracts for
a longer period, reducing
exposure to short term
volatility. Long term
power prices are however
beyond the control
of the Group. A third
party review of the
power strategy adopted
by the Investment Adviser
has also given a strong
independent verification
of the strategy.
-------------------- --------------------------------- -------------------------------
7. Political Risk The decision by the UK Since announcement
to exit the EU has elevated of the EU referendum
levels of political uncertainty result there has been
and may have an adverse a weakening of Sterling's
impact on the Group. exchange rate against
a number of major currencies,
a downgrade of the
UK's credit rating
and a cut in interest
rates. The Company
has been favourably
impacted by these changes
to date. The Company
has negligible foreign
currency exposure and
the reduction in yield
on gilts has materially
reduced the cost of
the long-term debt
issue. There are however
other unknown risks
which may or may not
occur in the medium
and longer term and
which the Board will
monitor closely should
they arise.
-------------------- --------------------------------- -------------------------------
Longer term viability statement
Assessing the prospects of the Group
The corporate planning process is underpinned by scenarios that
encompass a wide spectrum of potential outcomes. These scenarios
are designed to explore the resilience of the Group to the
potential impact of significant risks set out below.
The scenarios are designed to be severe but plausible and take
full account of the availability and likely effectiveness of the
mitigating actions that could be taken to avoid or reduce the
impact or occurrence of the underlying risks and which would
realistically be open to management in the circumstances. In
considering the likely effectiveness of such actions, the
conclusions of the Board's regular monitoring and review of risk
and internal control systems, as discussed in the Report of the
Directors, is taken into account.
The Directors reviewed the impact of stress testing the
quantifiable risks to the Company's cash flows in the above tables
as detailed in risk factors 1-7 and concluded that the Company,
assuming current leverage levels, would be able to continue to
produce distributable income in the event of the following
scenarios:
Risk Factor
------------ -------------------------------
1. Plant performance degradation
of 0.8% per annum versus 0.4%
per annum
------------ -------------------------------
2. Interest rates increased by
2%
------------ -------------------------------
5. P90 irradiation
------------ -------------------------------
6. Power price set to zero
------------ -------------------------------
We consider that this stress testing based assessment of the
Group's prospects is reasonable in the circumstances of the
inherent uncertainty involved.
The period over which we confirm longer-term viability
Within the context of the corporate planning framework discussed
above, the Directors have assessed the prospects of the Group over
a three year period ending 30 June 2019. Whilst the Directors have
no reason to believe the Group will not be viable over a longer
period, given the inherent uncertainty involved, the period over
which the Directors consider it possible to form a reasonable
expectation as to the Group's longer-term viability, based on the
stress testing scenario planning discussed above, is the three year
period to June 2019. This period, essentially the period used for
our mid-term business plans, has been selected because it presents
the Board and therefore readers of the annual report with a
reasonable degree of confidence whilst still providing an
appropriate longer-term outlook.
Confirmation of longer-term viability
The Directors confirm that their assessment of the principal
risks facing the Group was robust.
Based upon the robust assessment of the principal risks facing
the Group and their stress-testing based assessment of the Group's
prospects, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period to June
2019.
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.
The Group's risks are mitigated and managed by the Board through
continual review, policy setting and half-yearly review of the
Group'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 its formal
review of the risk matrix at the Audit Committee meeting held on 19
May 2016. 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.
Paul Le Page Laurence McNairn
Director Director
3 October 2016 3 October 2016
Report of the Investment Adviser
1. About Bluefield Partners LLP
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 GBP1 billion of
solar PV funds and/or transactions since 2008.
Bluefield was appointed Investment Adviser to the Company in
June 2013. Based in its London office, Bluefield's partners are
supported by a dedicated and highly experienced team of investment,
legal and portfolio executives. As Investment Adviser Bluefield
takes responsibility, fully inclusive within its advisory fees, for
selection, origination, execution of investment opportunities for
the Company, having delivered 35 SPV investments to BSIF since
flotation. Due to the strong expertise of the Adviser no additional
transaction arrangement or origination service providers are
employed by the Company and no investment transaction arrangement
fees have been paid either to the Investment Adviser or any third
parties.
Bluefield's Investment Committee has collective experience of
over GBP15 billion of energy and infrastructure transactions.
2. Analysis of underlying earnings
Analysis of portfolio income
The total generation and revenue earned in the period by the
Company's portfolio, split by subsidy regime, is outlined
below.
Subsidy Regime Generation PPA Revenue Regulated
(MWh) (GBPm) Revenue (GBPm)
---------------- ----------- ------------ ----------------
FiT 10,778 0.4 2.8
---------------- ----------- ------------ ----------------
2.0 ROCs 6,890 0.3 0.6
---------------- ----------- ------------ ----------------
1.6 ROCs 89,897 4.0 6.2
---------------- ----------- ------------ ----------------
1.4 ROCs 183,902 8.6 11.1
---------------- ----------- ------------ ----------------
1.3 ROCs 17,594 0.6 1.0
---------------- ----------- ------------ ----------------
Total 309,061 13.9 21.7
---------------- ----------- ------------ ----------------
Whilst power prices have fallen over the period, due to the
Company's PPA fixing strategy and contribution of assets acquired
in the period, the proportion of regulated revenue (61%) has
remained in line with the period to 30 June 15.
The Company includes ROC recycle assumptions within its long
term forecasts and applies a prudent approach on recognition. In
the period to 30 June 2016 it has not recognised any potential
benefit for the 9 months of ROC recycle in relation to the period
April 2015- March 2016. Only when the recycle fund has been
determined, in October 2016, will the Company recognise any actual
revenue due.
The following tables break down how the investment earnings have
facilitated the dividend outperformance against targets achieved in
the year.
Underlying Portfolio Earnings
FY15/16 GBPm
-------------------------------- -----
Revenue 35.6
-------------------------------- -----
Liquidated damages 0.9
-------------------------------- -----
Portfolio Income 36.5
-------------------------------- -----
Portfolio Costs 7.1
-------------------------------- -----
Portfolio EBITDA 29.4
-------------------------------- -----
Project level debt service 1.4
-------------------------------- -----
Total Investment Income Earned 28.0
-------------------------------- -----
Total Investment Income earned comprises Distributed Investment
Income of GBP27.3m and Undistributed (but accrued) Investment
Income of GBP0.7m as set out in the table below.
Analysis of Investment Income Generation
The table below highlights the underlying Earnings Per Share for
the last two financial years.
FY2015/16 (GBPm) FY2014/15 (GBPm)
---------------------------------- ---------------------------- ----------------------------
Distributed Investment Income 27.3 11.0
Undistributed Investment Income* 0.7 10.1
---------------------------------- ---------------------------- ----------------------------
Total Investment Income Earned 28.0 21.1
---------------------------------- ---------------------------- ----------------------------
Group level Operating Costs 3.9 3.0
Group level Finance Costs 3.1 0.8
---------------------------------- ---------------------------- ----------------------------
Total Underlying Earnings 21.0 17.3
---------------------------------- ---------------------------- ----------------------------
Average Number of shares in
year** 295,282,786 224,583,921
Underlying Earnings (pps) 7.10 7.71
---------------------------------- ---------------------------- ----------------------------
Target Dividend (pps) 7.07 7.00
Target Dividend Distribution
(GBPm) 20.9 15.3
Full Year Dividend Declared/Paid
(pps) 7.25 7.25
Full Year Distribution (GBPm) 21.4 16.0
Reserves carried forward (GBPm) 0.8 1.3
---------------------------------- ---------------------------- ----------------------------
Total Distributable Income 22.2 17.3
---------------------------------- ---------------------------- ----------------------------
*Undistributed portfolio earnings reflect undistributed earnings
retained within the SPVs as at 30 June 2016 less undistributed
earnings as at 30 June 2015. The reduction from GBP10.1m in June
2015 to GBP0.7m in June 2016 reflects the portfolio's evolution to
distributing its income evenly over a 12 month rolling basis.
**Average number of shares is calculated based on shares in
issue at the time each dividend was declared.
Dividends declared in FY2015/16
Dividends Date paid/to Pence per Number of shares FY 2015/16
be paid share (GBP million)
------------- -------------- ---------- ----------------- ---------------
15 Dec
1st Interim 15 3.25 278,417,224 9.1
------------- -------------- ---------- ----------------- ---------------
20 May
2nd Interim 16 1.00 309,631,765 3.1
------------- -------------- ---------- ----------------- ---------------
9 Sep
3rd Interim 16 1.50 309,631,765 4.6
------------- -------------- ---------- ----------------- ---------------
4 Nov
4th Interim 16 1.50 309,631,765 4.6
------------- -------------- ---------- ----------------- ---------------
Total 7.25 309,631,765 21.4
----------------------------- ---------- ----------------- ---------------
The Group has reserves of GBP0.8 million (0.26 pence per share),
GBP1.3m (0.41 pence per share) as at 30 June 2015, which are
available for future distributions.
3. Cost Analysis
A breakdown of the administrative expenses paid is provided
below. Further details of the administrative expenses can be found
in Note 5 of the consolidated financial statements.
Administrative expenses Year ended % of NAV Year ended % of NAV
30 June as at 30 June as at
2016 30 June 2015 30 June
GBP 2016 GBP 2015
----------------------------- ----------- --------- ----------- ---------
Fees to Investment
Adviser 2,456,218 0.80% 2,007,666 0.70%
Legal and professional
fees 75,806 0.02% 46,674 0.02%
Administration fees 268,144 0.09% 287,424 0.10%
Directors' remuneration 169,733 0.05% 145,599 0.05%
Audit fees 109,925 0.04% 61,398 0.02%
Other expenses 293,988 0.10% 208,543 0.07%
----------------------------- ----------- --------- ----------- ---------
Total recurring 3,373,814 1.10% 2,757,304 0.96%
Variable fees to Investment
Adviser 376,014 0.12% - -
Legal and professional
fees 78,165 0.03% 229,260 0.08%
Administration fees 18,172 0.01% - -
Non-audit fees 12,938 0.00% 10,661 0.00%
Listing fees - - 8,307 0.00%
Other expenses - - 16,553 0.01%
----------------------------- ----------- --------- ----------- ---------
Total non-recurring 485,289 0.16% 264,781 0.09%
----------------------------- ----------- --------- ----------- ---------
Non-audit fees exclude GBP46,575 (2015: GBP62,100) in relation
to the placing and offer in December 2015 which was deducted from
placing proceeds (see Note 5).
Ongoing charges
Ongoing charges is a measure of the day-to-day costs of managing
the Group. It is expressed in terms of a percentage reduction in
shareholder returns assuming markets remain static and the
investment portfolio is not traded.
The fees the Investment Adviser receives are based on the NAV,
at an effective rate of 0.80% over the year, and are in line with
the growth in the investment portfolio and do not contain any
variable fee element.
The table below reflects all costs the Company has incurred.
Year ended Year ended
30 June 2016 30 June 2015
GBP GBP
---------------------------- -------------- --------------
Annualised ongoing charges 3,373,814 2,764,879
----------------------------- -------------- --------------
Average NAV 302,619,714 217,442,315
----------------------------- -------------- --------------
Ongoing charges 1.11% 1.27 %
----------------------------- -------------- --------------
The ongoing charges ratio is calculated in accordance with the
AIC recommended methodology, which excludes non-recurring costs
and, unlike the recurring expenses of 1.10% of 30 June 2016 NAV
reported in the Administrative Expenses table, uses the average
rather than year end NAV.
The classification of recurring and non-recurring costs in this
section is in accordance with the recommendations of the
Association of Investment Companies (AIC). A more detailed analysis
of the Group's financial performance can be found below in the
consolidated financial statements.
4. Portfolio of Assets
The Company's operating portfolio as at 30 June 2016 is shown
below:
Plant Total Investment MWp FY 2015/2016 No. Months
Commitment (GBPm) Generation Generation
(MWh)
-------------- ------------------- ------ ------------- ------------
Hardingham 22.75 20.1 18,789 12
-------------- ------------------- ------ ------------- ------------
Goosewillow 19.01 16.9 15,851 12
-------------- ------------------- ------ ------------- ------------
North Beer 9.35 6.9 6,890 12
-------------- ------------------- ------ ------------- ------------
Hill Farm 17.30 15.2 13,265 12
-------------- ------------------- ------ ------------- ------------
Hall Farm 13.37 11.4 11,692 12
-------------- ------------------- ------ ------------- ------------
Saxley 7.00 5.9 5,575 12
-------------- ------------------- ------ ------------- ------------
Betingau 11.21 10.0 8,051 12
-------------- ------------------- ------ ------------- ------------
Sheppey 12.00 10.6 10,262 12
-------------- ------------------- ------ ------------- ------------
Pentylands 21.40 19.2 16,673 12
-------------- ------------------- ------ ------------- ------------
Durrants 6.45 5.0 4,704 12
-------------- ------------------- ------ ------------- ------------
Goshawk 2.01 1.1 1,042 12
-------------- ------------------- ------ ------------- ------------
Hoback 19.00 17.5 15,946 12
-------------- ------------------- ------ ------------- ------------
Capelands 8.62 8.4 8,133 12
-------------- ------------------- ------ ------------- ------------
Redlands 6.37 6.2 5,871 12
-------------- ------------------- ------ ------------- ------------
Ashlawn 7.60 6.6 6,583 12
-------------- ------------------- ------ ------------- ------------
Roves 14.00 12.7 11,606 12
-------------- ------------------- ------ ------------- ------------
Elms 32.75 28.9 25,505 12
-------------- ------------------- ------ ------------- ------------
West Raynham 55.87 50.0 49,222 12
-------------- ------------------- ------ ------------- ------------
Butteriss 2.40 0.8 591 11
-------------- ------------------- ------ ------------- ------------
Promothames 1.32 0.4 262 11
-------------- ------------------- ------ ------------- ------------
Salhouse 5.61 5.0 2,830 9
-------------- ------------------- ------ ------------- ------------
Trethosa 5.78 4.8 2,746 9
-------------- ------------------- ------ ------------- ------------
Southwick 61.04 47.9 24,907 6
-------------- ------------------- ------ ------------- ------------
Littlebourne 21.97 17.0 9,159 6
-------------- ------------------- ------ ------------- ------------
Pashley 15.39 11.5 6,635 6
-------------- ------------------- ------ ------------- ------------
Molehill 23.10 18.0 10,072 6
-------------- ------------------- ------ ------------- ------------
Frogs Loke 5.61 5.0 1,743 6
-------------- ------------------- ------ ------------- ------------
Bunns Hill 5.34 5.0 1,877 5
-------------- ------------------- ------ ------------- ------------
Folly Lane 5.28 4.8 2,279 4
-------------- ------------------- ------ ------------- ------------
Grange 5.40 5.0 1,839 4
-------------- ------------------- ------ ------------- ------------
Rookery 5.15 5.0 1,690 4
-------------- ------------------- ------ ------------- ------------
Tollgate 4.63 4.3 1,518 4
-------------- ------------------- ------ ------------- ------------
Romsey 5.81 5.0 1,726 4
-------------- ------------------- ------ ------------- ------------
Oulton 5.27 5.0 2,093 4
-------------- ------------------- ------ ------------- ------------
Burnaston 14.38 4.1 1,434 3
-------------- ------------------- ------ ------------- ------------
Total 479.5 401.2 309,061
-------------- ------------------- ------ ------------- ------------
As at 30 June 2016, the Company had an operational portfolio of
73 PV plants, with a total capacity of 401.2 MWp.
Located across the south of England and Wales, the investments
are geographically diverse, have been constructed by 11 experienced
solar contractors and contain a diverse range of proven solar
technologies and infrastructure.
Despite irradiation being 3.7% below expectations and
availability being 0.6% below annual estimates (unplanned
electricity grid and plants' outages in the period equated to a
loss in generation of 5.1 GWh versus assumed allowance of 3.2 GWh)
portfolio generation was only 2.5% below forecast (309.1 GWh versus
317.0 GWh), resulting from the assets performing above expectations
(by 1.8%) in converting irradiation to electricity output (the
'operational performance').
Of the aforementioned availability losses (5.1 GWh) a number
have triggered the opportunity for insurance or damages recovery
through the strong performance protections built into the project
contractual structures. In total during the financial year the
Company recovered performance liquidated damages of GBP0.8m and
insurance claims of GBP0.1m.
The Company remains protected by two-year performance
warranties, applicable from each asset's provisional acceptance
date, which provide contractual entitlement to recovery of damages
as a result of operational under-performance against the
contractual performance warranty.
The robust operational performance of the portfolio and the
effective recovery of damages due from contractual protections
highlight the success of our proactive approach to portfolio
management and our effective engagement with the Company's asset
manager, BSL, who through daily monitoring of the plants and
constant contractor engagement have over the course of the year
spent in excess of 5,800 hours analysing plant performance, 52 days
assessing performance calculations at critical contractual
milestones (PAC, 1(st /) 2(nd) year performance tests), and 21
weeks visiting and inspecting the condition of the equipment and
maintenance of the sites.
In addition to the operational outperformance and recovery of
liquidated damages mentioned above, BSL have achieved notable
successes in relation to the Company's portfolio throughout the
last 12 months, such as the recovery of 'missing' generation and
the reduction of the duration of grid outages through active
engagement with DNOs.
Acquisitions in period
During the 12 month period to June 2016, the Company has
completed a significant GBP193.3 million phase of acquisitions,
funded through a combination of equity raised in December 2015 and
use of its Revolving Credit Facility.
The acquisitions made covered ten construction assets (eight
contracted with Solarcentury for a total of 38.9 MWp and two with
Wirsol for a total of 9.8 MWp) as well as seven operational assets
(for a total of 99.8 MWp). These acquisitions have enabled the
Company to achieve a number of its original IPO objectives:
(i) a scale of operations which has given it the ability to
secure market leading buying power and the potential for economies
of scale. A prime example of this is the sector leading achievement
post period end in securing of low cost long term structural debt
which is the result of a strategy to focus on acquisition of
unlevered assets to give maximum flexibility in structuring long
term debt. The Company expects to further exploit this market scale
advantage through future contracting of Operation & Maintenance
and Power Purchase Agreements;
(ii) the leverage within the Company, which was achieved through
a two step process, which commenced with the closing of
acquisitions utilising a short term facility, which post period end
has been replaced by long term structural debt. This leverage goal
was set at launch to enable the Company to achieve its long term
distribution and return objectives;
(iii) the diversification of the portfolio by location and
equipment. To illustrate this, the largest single asset exposure at
June 30 2015 was 19.7% of GAV (by capacity), this has been reduced
to 12.5% of GAV at the year end by the addition of new assets.
The acquisitions have resulted in a material increase in scale
of the Company's portfolio from 252.7 MWp at 3o June 2015 to 401.2
MWp as at 30 June 2016 with this increase in scale expected to be
beneficial for the Company in facilitating economies of scale
across future costs and potential PPA aggregation.
Details of the acquisitions made in the period are outlined
below, all of which are 100% owned by BSIFL.
Salhouse, Norfolk
On 24 July 2015 terms were agreed with Wirsol Energy as EPC
contractor to build a 5.0 MWp solar farm in Norfolk. The project
became operational in October 2015 and has been accredited under
the 1.3 ROC regime. The plant uses REC modules and Huawei
inverters.
Trethosa, Cornwall
On 24 July 2015 terms were agreed with Wirsol Energy as EPC
contractor to build a 4.8 MWp solar farm in Cornwall. The project
became operational in October 2015 and has been accredited under
the FiT regime, achieving a tariff of GBP61.6/MWh. The plant uses
REC modules and Huawei inverters.
Butteriss Downs, Oxfordshire; and Promothames, Berkshire &
Hampshire
On 21 August 2015 terms were agreed with private shareholders
for a 100% subsidiary of BSIFIL to acquire two solar PV portfolio
holding companies, projects Butteriss Downs, and Promothames. The
two project holding companies hold a total of 29 operational solar
PV plants located on, and connected to, industrial sites in the UK
owned by Thames Water Utilities. The total installed capacity is
1.2 MWp, and the projects benefit from the FiT and PPA agreements
with Thames Water where the power produced by the PV system is
consumed by the site. Purchase of 100% of projects Butteriss Downs
and Promothames completed on 21 August 2015. As Bluefield acted as
the Investment Adviser to the seller as well as to the Company in
the transaction, and Members or employees of Bluefield were both
directors of BSIFIL, the purchaser vehicle and the target
companies, the transaction was treated as a smaller related party
transaction under UKLA Listing Rules. On this basis a Fair and
Reasonable Opinion was sought and received from Numis Securities
Limited before signing of the transaction (see Note 19). A third
acquisition within this portfolio was contracted under a Sale &
Purchase Agreement at the same time as the above transactions
(Solar Photovoltaic SPV1 Ltd, the owner of a rooftop installation
in Northants benefitting from the attractive 2011 FiT). This
acquisition was not completed in the period due to the failure of
the vendor to fulfil a condition precedent to the purchase but the
transaction remains under review.
Frogs Loke, Norfolk
On 17 December 2015 terms were agreed with Solarcentury as EPC
contractor to build a 5.0 MWp solar farm in Norfolk. The project is
operational and has been accredited under the 1.3 ROC regime. The
plant uses Canadian Solar modules and SMA inverters.
Bunns Hill, Norfolk
On 18 December 2015 terms were agreed with Solarcentury as EPC
contractor to build a 5.0 MWp solar farm in Norfolk. The project is
operational and has been accredited under the 1.3 ROC regime. The
plant uses Neo Solar Europe modules and SMA inverters.
Folly Lane, Lincolnshire
On 17 December 2015 terms were agreed with Solarcentury as EPC
contractor to build a 4.8 MWp solar farm in Lincolnshire. The
project is operational and has been accredited under the 1.3 ROC
regime. The plant uses Canadian Solar modules and Huawei
inverters.
Rookery, Norfolk
On 18 January 2016 terms were agreed with Solarcentury as EPC
contractor to build a 5.0 MWp solar farm in Norfolk. The project is
operational and has been accredited under the 1.3 ROC regime. The
plant uses Canadian Solar modules and SMA inverters.
Grange, Gloucestershire
On 21 January 2016 terms were agreed with Solarcentury as EPC
contractor to build a 5.0 MWp solar farm in Gloucestershire. The
project is operational and has been accredited under the 1.3 ROC
regime. The plant uses Canadian Solar modules and Huawei
inverters.
Southwick, Hampshire
On 22 January 2016 terms were agreed with Primrose Solar to
purchase a 47.9 MWp solar farm in Hampshire. The project became
operational on 9 March 2015 and is accredited under the 1.4 ROC
regime and benefits from attractively priced power purchase
agreements with fixed offtake prices until early 2018. The EPC
contractor is Solarcentury. The plant uses JA Solar modules and
Power One and ABB inverters.
Littlebourne, Kent
On 22 January 2016 terms were agreed with Primrose Solar to
purchase a 17.0 MWp solar farm in Kent. The project became
operational on 20 October 2014 and is accredited under the 1.4 ROC
regime and benefits from attractively priced power purchase
agreements with fixed offtake prices until early 2018. The EPC
contractor is Vogt Solar. The plant uses Hanwha modules and
Schneider and Conext inverters.
Pashley, Sussex
On 22 January 2016 terms were agreed with Primrose Solar to
purchase an 11.5 MWp solar farm in Sussex. The project became
operational on 13 February 2015 and is accredited under the 1.4 ROC
regime and benefits from attractively priced power purchase
agreements with fixed offtake prices until early 2018. The EPC
contractor is Vogt Solar. The plant uses Hanwha modules and
Schneider and Conext inverters
Molehill, Kent
On 22 January 2016 terms were agreed with Primrose Solar to
purchase an 18.0 MWp solar farm in Kent. The project became
operational on 24 March 2015 and is accredited under the 1.4 ROC
regime and benefits from attractively priced power purchase
agreements with fixed offtake prices until early 2018. The EPC
contractor is Vogt Solar. The plant uses Hanwha modules and
Schneider and Conext inverters.
Tollgate, Warwickshire
On 27 January 2016 terms were agreed with Solarcentury as EPC
contractor to build a 4.3 MWp solar farm in Warwickshire. The
project became operational in March 2016 and has been accredited
under the 1.3 ROC regime. The plant uses Canadian Solar modules and
Huawei inverters.
Romsey, Hampshire
On 10 February 2016 terms were agreed with Solarcentury as EPC
contractor to build a 5.0 MWp solar farm in Hampshire. The project
is operational and has been accredited under the 1.3 ROC regime.
The plant uses Canadian Solar modules and Huawei inverters.
Oulton, Norfolk
On 10 February 2016 terms were agreed with Solarcentury as EPC
contractor to build a 5.0 MWp solar farm in Norfolk. The project is
operational and has been accredited under the 1.3 ROC regime. The
plant uses Canadian Solar modules and SMA inverters.
Burnaston, Derbyshire
On 15 April 2016 terms were agreed with private shareholders to
purchase a 4.1 MWp solar farm in Derbyshire. The project became
operational in July 2011 and is accredited under the FiT regime,
achieving a tariff of GBP35.07/MWh. The EPC contractor is British
Gas New Heating. The plant uses Sharp modules and SMA
inverters.
There have been no acquisitions post 30 June 2016.
5. Power Prices and Strategy
PPA strategy
Over the period the Company maintained its strategy to fix the
price of power sale contracts for individual assets for periods of
12 to 24 months.
Prices can be fixed up to 3 months in advance of the
commencement of the fixing period and PPA counterparties are
selected on a competitive basis but with a clear focus on achieving
diversification of counterparty risk.
The Company has also continued to implement the approach of
fixing 12 month power prices for 25% of the portfolio each quarter,
in order to mitigate the Company's exposure to seasonality
fluctuations and short-term events which have the potential to
increase volatility on the price of electricity in the UK. The
fixing period seeks to maximise potential revenues for the Company
during its current acquisition phase, whilst spreading exposure to
short-term power movements across the portfolio.
The combination of the PPA renewal strategy applied during the
period and the acquisition in January 2016 of c. 95 MWp of
operational plants (c.25% of the portfolio) with 15 year PPAs with
attractive fixed power prices until Q1 2018 means the Company is
materially insulated from power price fluctuations over the next 12
months. The graph below shows that the Company has a price
confidence level of respectively c. 91% to December 2016 and c. 79%
to June 2017 over its revenue streams.
[CHART]
Following the successful re-financing of the Company's Revolving
Credit Facility in September 2016, the Company is pleased to
confirm that it has retained the flexibility to continue to procure
short term PPA contracts between 12 and 24 months for the
proportion of the portfolio not currently contracted under 15 year
PPAs, as well as to remain able to take advantage of opportunities
only available to owners who can commit significant tranches of
capacity in order to maximise potential economies of scale.
Furthermore, retaining this flexibility means that the Company
has the opportunity to regularly tender out a large portion of its
power to ensure it always achieves the most competitive pricing and
also avoids the greater discounts applied by offtakers when they
are entering long term contracts.
Revenues and Power Price
The portfolio's revenue streams in the period show that the sale
of electricity accounts for 39% of the Company's income. Regulated
revenues from the sale of FiTs, ROCs and LECs accounted for 61%,
although the contribution from LECs in the period only extended to
August 2015, after which the government terminated the subsidy.
Despite a drop of 5.9% in market peak power prices over the
period to 30 June 2016, the average power price achieved through
the quarterly fixing across the portfolio, accounting for
seasonality weighting, was GBP45.8 per MWh (2014/15: GBP47.7 per
MWh).
Seasonally weighted average power Peak Load Base Load PPA
price
----------------------------------- ---------- ---------- ------
July-14 to June-15 44.5 40.5 47.7
----------------------------------- ---------- ---------- ------
July-15 to June-16 41.8 38.0 45.8
----------------------------------- ---------- ---------- ------
Delta -5.9% -6.1% -4.0%
----------------------------------- ---------- ---------- ------
The graph below highlights the fluctuation of both Peak load
(average GBP41.8/MWh) and Base load pricing (average GBP38.0/MWh)
over the past 12 months against the Company's GBP45.8/MWh average
fixed power price illustrating the positive result of the Company's
strategy.
[GRAPH]
The Board appointed Cornwall Energy, a leading independent
market intelligence adviser, to review existing PPA contracts and
power sale strategies to provide feedback and insight. The findings
of the review were positive across both the ROC capture rates and
the prices achieved for the sale of power.
5. NAV and valuation of the Portfolio
The Investment Adviser is responsible for advising the Directors
in determining the Directors' Valuation and, when required,
carrying out the fair market valuation of the Company's
investments.
Valuations are carried out on a 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, most recently by EY for the year
ending 30 June 2015.
As the portfolio comprises only non-market traded investments,
the Investment Adviser has adopted valuation guidelines based upon
the 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.
Following consultation with the Investment Adviser, the
Directors' Valuation adopted for the portfolio as at 30 June 2016
was GBP483.7 million, compared to GBP324.2 million as at 31
December 2015 and GBP296.8 million as at 30 June 2015.
A breakdown of the two key components of the Directors'
valuations over the last 3 consecutive 6-month periods is shown
below:
Valuation Component Jun 16 Dec 15 Jun 15
(GBPm)
-------------------------- ------- ------- -------
Portfolio DCF value 465.8 308.5 282.3
-------------------------- ------- ------- -------
Projects at cost (amount
invested) 0.0 10.2 0.0
-------------------------- ------- ------- -------
Project Net Current
Assets 17.9 5.5 14.5
-------------------------- ------- ------- -------
Directors' Valuation 483.7 324.2 296.8
-------------------------- ------- ------- -------
These items are outlined below in the Portfolio valuation
movement section.
Changes to Portfolio valuation methodology
During the financial year there have been significant
developments in both the Company and in the UK solar energy sector
which have in particular included the following:
i) introduction of long term leverage within valuation
methodology and resulting impact on net equity cash flows or
discount rates;
ii) amendments to long term inflation assumptions;
iii) significant movements in power price forecasts and
differing approaches to adoption of those forecasts;
iv) shift from investment in new build assets to assets with
some operational record and adoption of different approaches to
performance forecasting;
v) evolution of operational costs giving rise to some cash flow enhancement;
vi) consideration of extension of the operating life of assets beyond 25 years.
These developments have been reflected in the wider UK solar
market with a number of major solar PV market participants
announcing the closing of long term financing at relatively high
levels of leverage as declines in gilt rates have reduced the cost
of debt. In addition, regulatory changes ending ROC support for new
build solar projects from April 2017 have reduced the availability
of new build opportunities.
The significant and wide-ranging impacts of these factors both
on cost of capital and cash flow expectations have created some
uncertainties in the valuation approach taken by different market
participants leading to difficulties in benchmarking valuation
approaches. On this basis the Investment Adviser and the Directors
have, in determining the Portfolio Valuation, sought to take full
consideration of both the public and private sector developments as
well as considering precedent market transactions and set out in
the following paragraphs an explanation of our portfolio valuation
assumptions.
Discounting Methodology
The Directors' Valuation is based upon the discounting of the
net unlevered, project cash flows of each investment held by the
Company irrespective of whether the investment has project leverage
or not. This approach of discounting the unlevered cash flows has
been applied, consistently with the approach taken in every
previous Directors' Valuation, and is intended to avoid asset
valuations being distorted by different debt sizing or amortisation
profiles. Having discounted the unlevered project cash flows, to
establish a 'willing buyer - willing seller' enterprise valuation
or 'gross asset value' the project level debt (if any) is deducted
to establish the 'equity value'.
Understanding whether the cash flow being discounted is the
unlevered project cash flow, or only the after-debt service, equity
cash flow is critical in making any comparison between discount
rates, since unlevered project cash flows are normally discounted
using a WACC while equity cash flows should be discounted at an
equity discount rate, including an appropriate risk premium.
Discounting unlevered cash flows using a WACC avoids changes to
discount rates for different projects based on actual leverage and
facilitates valuation comparisons across projects within a
portfolio and with peer group projects. When discounting an equity
cash flow it is critical when using leveraged cash flows to also
take account of the level of leverage in the project with higher
equity discount rates being applied to highly levered projects. In
practice it is notable that only one of the Company's investments
has any project level financing.
Discount Rate
The Directors' Valuation applies a WACC discount rate of 6.6%,
unchanged from the discount rate applied in the December 2015
Interim Statements. This discount rate does not incorporate any tax
shield from leverage (which is instead adjusted within the forecast
portfolio cash flow) and is based upon an assumed 'optimal'
leverage for a solar asset portfolio of 30%, which is consistent
with the Company's stated long term leverage target of 25-35%. The
discount rate is derived from an assumed market cost of equity of
7.5% and an assumed market cost of debt of 4.5%. For clarity, as
set out above, the cash flows to which this WACC discount rate is
applied are unlevered and therefore do not build in any debt
profiling assumptions.
The assumed 'optimal' leverage implied by the discount rate of
6.6% should be considered to impact upon the determination of the
equity discount rate. It is the Investment Adviser's experience
that net equity return requirements of investors in operational
solar projects on an unlevered basis are in the range of 6.5-7.0%,
based upon comparable transactions in the market. Notably this is a
lower unlevered equity discount rate than in previous years,
reflecting both a drop in risk free rates and increased investor
appetite for operational solar assets at lower return levels. At
the other end of the spectrum it is the Investment Adviser's
experience that the net equity return requirements of investors in
operational projects for solar projects which have market standard
levels of project financing (60-80% leverage) would be higher at a
rate of return of 8-9%. On a market basis the Investment Adviser
therefore considers that an equity discount rate of 7.5% is
consistent with an assumed 'optimal leverage' of 30%. The equity
discount rate of 7.5% implies a risk premium over the 10 year gilt
rate of 6.6% which is 1.1% higher than the implied risk premium
applied in the Interim Statements.
The 4.5% assumed cost of debt utilised in part to determine the
WACC discount rate of 6.6% is also unchanged from the level applied
in the December 2015 Interim Statements. In practice this cost of
debt (pre-tax shield) now appears conservative given recently
announced rates for higher levels of leverage seen in both the
public and private markets for UK solar assets, which have been 4%
and below. The Company's recently announced refinancing has secured
funds for the Company for 18 years at a cost of finance on GBP121.5
million fixed component at all in 2.875%. The Directors expect to
consider the application of a possible alternative cost of debt for
the Company in future valuations but have not applied it to the 30
June 2016 valuation on the basis that long term debt was not in
place at the time and debt markets remain unpredictable pending the
agreed terms for the UK's exit from the European Community.
Terminal Value
As a result of some moves within the sector to extend the
assumed asset life of solar assets beyond 25 years the Investment
Adviser and Directors considered whether extending the assumed
asset life was appropriate for the Directors' Valuation. The ROC
and FiT support from which the Company's portfolio benefits lasts
for 20 years from the commissioning of a plant and planning
permission by standard is granted for 25 years. While we believe
that there will be opportunities to extend asset life, and lease
contracts within the portfolio largely provide for this, it is
considered too early within the asset life to incorporate
extensions beyond the currently assumed 25 years.
Irradiation and Plant Performance
The valuation of solar assets is normally made based upon either
warranted performance ratios (the level of efficiency with which a
solar plant converts irradiation into exported kWh, against which
the contractor pays damages during the first 2 years if the plant
underperforms) or on the 'expected' or 'design' performance ratio
determined by an independent technical adviser. Technical advisers
determine these performance ratios based upon the specific design
tolerances and standards of equipment utilised within a site, as
well as applying loss factors for more uncertain impacts such as
soiling of modules or shading. Actual plant performance can vary
year-on-year as a result of ambient temperatures and seasonality
and in the Investment Adviser's opinion such actual performance
ratios, if higher than the independent adviser level, should not be
adopted until proven over a number of years. The Company's plant
performance has indeed exceeded expectations during the financial
year, but we believe it is premature to include this outperformance
in the portfolio valuation. In cases of underperformance it may be
appropriate to adopt these levels earlier if the underperformance
results from a design factor which cannot be remedied. As a result
of this position, the Directors' Valuation applies only the
independent technical adviser performance
ratios. In the case of the portfolio these average 83.2% on a
weighted average basis by MWp installed, in line with those
recommended by the Lender's technical adviser.
Consistent with the application of technical adviser determined
performance forecasts, the Portfolio Valuation also applies
irradiation forecasts determined by an independent technical
adviser using a number of historical databases. This data is
collected by the database providers through different sources, both
satellite and ground based, and according to varying methodologies.
In the Investment Adviser's experience the typical deviation
between the highest and lowest irradiation measure for a site is
approximately 10%, meaning that a valuation adopting the highest
irradiation database only could derive a revenue forecast up to 10%
ahead of those which applied other databases. In accordance with
industry standard practice, the technical adviser projection for
irradiation for each site is based upon a blended average of these,
thus avoiding distortion of a single database. Notably the forecast
applied in the Directors' Valuation is also the forecast adopted by
lenders to the Company in order to size their debt and calculate
covenant compliance. In no circumstances would the Company adopt
higher irradiation expectations based on short term weather
patterns.
Power Price
The Directors' Valuations have consistently been based on the
forecast power curve, without adjustments or uplifts, from one
leading independent power price forecaster. The Investment Adviser
believes this is the purist way to apply future power prices within
its valuations and that this prevents any valuation movement
distortion (positive or negative) that could arise if a blended or
adjusted approach to forecast curves was applied. The forecast used
within the latest Directors' Valuation was released in April 2016
and implies a capture rate of GBP37.0/MWh in 2016 (compared to
achieved average rate of GBP45.5/MWh in the financial year) and a
CAGR over the 25 year forecast of 2.3%.
The impact of the April 2016 power curve, compared to the April
2015 curve used in the Directors' Valuation in June 2015, was a
reduction in the value of the portfolio by GBP35.4 million. The
discounted cash flow for each project applies the contractually
fixed power price applicable to each solar PV asset until the end
of the fixed period, and thereafter the independent forecast price.
As in previous valuation cycles the short-term pricing within the
energy price forecast used 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 updated power forecast released in July 2016 indicates an
uplift to the PPA rate of 7.0% for 2016 and a CAGR over the 25 year
forecast of 2.3%. but in line with valuation policy the Company has
not yet adopted this curve.
Regulated Revenues
The contracted regulatory regime applicable for each plant is
subject to an annual RPI indexation from 1st April each year. On
ROC assets, as the ROCs must be sold in order to monetise the
revenues (as opposed to FiT which is received in full), a 'capture
rate' must be discounted from the regulated ROC value.
In addition to the base value (buyout value) of ROCs, ROC value
is also derived from the so-called 'recycle'. This is assumed to be
10% of the buyout value for the purposes of valuation, based upon a
regulatory stated objective to create a 10% shortfall in supply of
ROCs.
Whilst over the last two years the Company has received no
benefit from ROC recycle (due to the short term over supply of ROCs
the recycle value has been zero) from 2017 no new ROC assets can be
accredited. As a result it is our expectation that the level of
available ROCs should fall in line with regulators' stated targets.
As such, while our forecast cash flow assumption is ahead of the
level seen in the financial year due to recent oversupply, meaning
the regulator's target shortfall was not achieved, our forecast
cash flow assumes that the regulator will over the life achieve
their target.
Operating Costs
The Company assumes that all costs increase annually in line
with RPI, with the exception of O&M where, following the expiry
of the current contracts, pricing levels are benchmarked to the
most up to date expectation of market rates. The forecast cash flow
also allows for equipment replacement reserves in accordance with
the recommendation of the Lenders' technical adviser. The costs
assumed in the forecast are in line with the lenders financial
forecast.
NAV movement
The Company issued shares to the value of GBP32.0 million
(gross) and paid total dividends of GBP20.5 million in the year to
30 June 2016. These dividends represent a total of 3 pence per
share for the third and fourth interim dividends in respect to the
period ending 30 June 2015 (which when combined with earlier
interim dividends provide a total of dividend for the 2014/15
financial year of 7.25 pence per share), and a total of 4.25 pence
per share as a first and second interim dividend in respect of the
current reporting period.
Adjusting the 30 June 2015 NAV of GBP288.4 million for the net
contribution of shares raised in the period (GBP32.0 million) and
the dividends paid in the period (GBP20.5 million), the uplift in
the NAV of the Company during the year was GBP8.0 million, or
2.60%.
A breakdown in the movement of the NAV (GBP million) of the
Company over the period and how this interacts with the movement in
the valuation of the portfolio is illustrated in the charts
below.
[CHART]
Portfolio Valuation movement
(GBPmillion) As % of
rebased
valuation
30 June 2015 Valuation 296.8
------------------------------ ------ -------------- -----------
New Investments 196.6
Rebased Valuation 493.4
------------------------------ ------ -------------- -----------
Cash receipts from portfolio -26.7 -5.4%
Impact of Summer Budget
2015 -0.5 -0.1%
Power Price Movement -35.4 -7.2%
Impact of leverage - Cost
of debt 21.9 4.4%
Impact of leverage - Tax
shield 4.1 0.8%
Balance of portfolio return 26.9 5.4%
30 June 2016 Valuation 483.7 -2.1%
------------------------------ ------ -------------- -----------
Each movement between the re-based valuation and the 30 June
2016 valuation is considered in turn below:
Cash receipts from the Portfolio
This movement reflects the cash payments made from the
underlying project companies up to BSIFL and BSIF to enable the
companies to settle operating costs and distribution commitments as
they fall due.
Impact of Summer Budget 2015
On 8 July 2015, the UK Government announced the removal of the
Climate Change Levy exemption for renewably sourced electricity
from August 2015 and a reduction in future corporation tax rates to
19% from April 2017 and 18% from April 2020.
The impact of these changes on the valuation of the portfolio as
at 30 June 2016 is a reduction of GBP0.5 million to the portfolio
value. The minimal impact is due to the fact the Directors'
Valuation as at 30 June 2015 assumed LECs would apply for only a
further 5 years. As a result, the impact of the loss of LECs on the
Directors' Valuation is limited to a GBP4.1 million reduction. In
the same Summer Budget the Chancellor announced a reduction in
corporation tax to 18%, to apply from 2020 which has partially
offset the impact of loss of LECs.
Power Price Movement
During the period power prices have continued to fall, with a
number of power forecasters reducing their wholesale power price
projections. The Company's independent forecaster released an
updated forecast in April 2016 and this updated forecast has been
applied to the Directors' Valuation. The impact of the application
of the new forecast power prices, against those applied in the 30
June 2015 valuation, was a reduction of GBP35.4 million.
The discounted cash flow for each project applies the
contractually fixed power price applicable to each solar PV asset
until the end of the fixed period, and thereafter the independent
forecast price.
Impact of Leverage
As discussed in the Changes to Portfolio Methodology section
above, during the period a number of announcements of large UK
solar portfolio transactions funded materially by debt occurred. In
addition, there has been an increase in the number of solar market
participants accessing acquisition finance and in the size of
facilities that are being secured. The recent increase of the
Company's own RCF to GBP200 million, and subsequent refinancing
with Aviva Investors is a good example. In addition the independent
portfolio valuation obtained by the Company in 2015 incorporated at
blended WACC to reflect global market practice. It is the
Directors' view that to reflect UK market activity accurately the
unlevered cash flows of the Company's portfolio should be valued on
the basis of a WACC incorporating the cost of both equity and debt,
calculated on a modest level of long-term leverage, consistent with
the stated Company strategy and market activity.
The WACC applied to the project cash flows applies an assumed
cost of debt of 4.5% at an assumed leverage of 30%. Combined with
the assumed 7.5% cost of equity this gives rise to a 6.6% discount
rate.
The impact of the shift from the 30 June 2015 valuation basis of
zero leverage to 30% assumed leverage, applied through a reduction
in discount rate to 6.6%, is an uplift to the portfolio valuation
of GBP21.9 million with the impact of the tax shield adding a
further uplift of GBP4.1 million.
Balance of Portfolio Return
The balance of portfolio return is comprised of the contribution
from the unwinding of the discount rate and changes to the
long-term level of asset management costs and revaluation of assets
purchased in the period from cost to DCF.
Other Assumptions
Consistent with previous Directors' Valuations, the valuation
assumes a terminal value of zero for all projects within the
portfolio 25 years after their commencement of operation. There
have been no material changes to assumptions regarding the future
performance or cost optimisation of the portfolio when compared to
the EY valuation and Directors' 30 June 2015 Valuation. On the
basis of these key assumptions the Directors believe there remains
further potential for NAV enhancement based upon long-term proof of
plant performance and through potential for future extension of
asset life.
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.
Valuation sensitivities
Valuation sensitivities are set out in tabular form in Note 10
of the financial statements. The following diagram reviews the
sensitivity of the closing valuation to the key assumptions
underlying the discounted cash-flow valuation
[CHART]
6. Financing
As at 30 June 2016
On 11 June 2014, the Group entered into an agreement with RBS
for the provision of a floating rate acquisition facility of up to
GBP50 million. This Revolving Credit Facility (RCF) had a margin of
2.25% over LIBOR and was due to expire on 10 June 2017. Under the
RCF terms, the interest rate was required to be fixed for each 3 or
6 month period based on the prevailing LIBOR rate.
The Facility was drawn to the extent of GBP32.8 million in the
year and repaid with part of the proceeds from the Placement in
December 2015.
On 25 January 2016 the Company announced that an amended and
restated facility agreement related to the RCF, provided by RBS and
Investec, had been agreed, which increased the funds available from
GBP50 million under the original acquisition facility up to a total
of GBP200 million.
The restated facility agreement was provided in three tranches;
Tranche A GBP50 million, Tranche B GBP100 million and Tranche C
GBP50 million with an overall blended rate of 2.05% over LIBOR and
are due to expire as described in Note 7.
As at 30 June 2016 the restated facility balance drawn was
GBP180.4m.
Post period end re-financing
In September 2016 the Company completed the financial close of a
GBP187 million long-term debt facility (the "Long-Term Facility")
and a GBP30 million short-term revolving credit facility (the
"RCF"). The facilities fully refinance the short-term GBP200
million amended and restated facility agreement with RBS and
Investec.
Aviva Investors Long-Term Facility
The Long-Term Facility will be provided by Aviva Investors in
two tranches. The first is a GBP121.5 million fixed-rate long-term
facility and second is a GBP65.5 million index-linked long-term
facility. Both are fully amortising over 18 years, which matches
the average remaining life of the Company's regulated revenues.
The Long-Term Facility is held by the Company's wholly-owned
subsidiary, Bluefield SIF Investments Ltd, which maximises
transparency, offers improved portfolio management flexibility and
reduces costs compared to using project-level debt.
Loan Amount Tenor Amortisation/ Cost Interest Bullet Inflation-linkage
Bullet rate exposure repayment
during 18-year exposure
tenor during
18-year
tenor
------------- --------- ---------- ----------------- ---------- ---------------- ----------- ------------------
Fixed GBP121.5 18 years Fully amortising All in Zero Zero N/A
million and over 18 years cost of
3 months 287.5bps
------------- --------- ---------- ----------------- ---------- ---------------- ----------- ------------------
Index-Linked GBP65.5 18 years Fully amortising RPI plus Zero Zero Retail
million and over 18 years 70bps Price
3 months Index
------------- --------- ---------- ----------------- ---------- ---------------- ----------- ------------------
The Company has elected to structure its Long-Term Facility as
fully amortising over the 18-year tenor with no short-term or
bullet maturity components.
RBS Revolving Credit Facility
The new RCF will be provided by RBS to Bluefield SIF Investments
Ltd and has a three-year term on a constant margin of 2.00% over
LIBOR.
Both the new RCF and the Long-Term Facility are secured upon a
selection of the Company's investment portfolio.
7. Market Developments
- Total UK solar capacity as of 30 June 2016 stood at 11
GWp.
- Approximately 2.2 GWp was commissioned between July 2015 and
June 2016, a 25% rise in the period.
- The UK led growth in Europe in 2016, for the third year in a
row.
- 51% of UK commissioned utility-scale solar plants fall in the
range 1-5 MWp, and make up 23% of total utility-scale solar project
by capacity.
- The top 10 PV asset owners accounted for 4.1 GWp at the end of
March 2016.
- The Company continues to maintain its strong position within
the UK solar market, rising from 6th to the 4th largest solar asset
owner.
Capacity accredited under the Renewables Obligation stood at 5.2
GWp, representing 50% of total solar capacity and 2% of all
installations. Capacity accredited under the Feed in Tariff stood
at 3.6 GWp representing 34.5% of total solar capacity and 84% of
all installations.
8. Regulatory Environment
Closure of Renewables Obligation
Solar PV projects, grid connected after 31 March, 2017, will not
be eligible for subsidy under the RO Scheme. DECC released a
consultation dated 22 July 2015 in respect of the closure of the RO
scheme for solar PV projects having a capacity of 5 MWp or less.
Following the consultation period, DECC released a response which
confirms the changes proposed in the consultation. The changes
confirmed by the response are set out below:
- The RO scheme, as proposed on 22 July 2015, closed for
ground-mounted solar PV projects having a capacity of 5MWp or less
from 1 April 2016.
- A grace period arrangement is in place for developers who have
made a significant financial commitment on or before 22 July 2015
and those that experience grid delay beyond their control. Projects
that meet at least one of the grace period criteria (as set out
below) will be protected from the early closure of the RO scheme
and given until 31 March 2017 to accredit.
No further accreditation was possible for new solar PV projects
irrespective of the capacity from 1 April 2016, unless they qualify
for grace period, in which case they have until 31 March 2017 to
accredit.
UK European Union membership referendum ("Brexit")
The electorate of the UK voted to leave the European Union at a
referendum on the 23rd June 2016. The Investment Adviser believes
in the medium to longer term this will not result in any material
impact on the UK solar market, nor the Company. Rather than the EU
shaping energy policy, the opposite has been historically true. For
instance, the EU directive on unbundling the electricity sector
originated from the UK. Although the result frees the UK government
from its EU-set renewable obligations, the UK is still bound by
national and international renewable obligations, including the
2008 Climate Change Act. As such, we believe that a low carbon and
renewable energy agenda will remain a key part of UK policy.
July 2016 saw the DECC being dissolved and its roles merged with
the Department of Business, Innovation and Skills into a new
Department for Business, Energy & Industrial Strategy (BEIS).
The Investment Adviser will continue to monitor any policy changes
resultant from the BEIS.
9. Environmental Social Governance
As a solar energy infrastructure investor the Investment Adviser
is conscious of the Company's environmental and social impact. The
production of renewable energy equates to a significant amount of
CO2 emissions saved, representing a sustainable and ethical
investment; however the Investment Adviser also considers its
impact on the biodiversity and the local community surrounding its
assets.
Environmental Impact
Approximately 25 acres of land are required for every 5
megawatts (MW) of installation, enough to power 1,515 homes based
on average annual consumption figures for a house of 3,300 kWh of
electricity (source DECC, Ofgem). For every 5MW installed, this is
a saving of 2,150 tonnes of CO2. Based on these figures the
portfolio capacity of 401.2MW as at 30 June 2016 will power the
equivalent of 121,561 homes for a year and save 172,512 tonnes of
CO2.
Biodiversity
During the year to 30 June 2017 the Investment Adviser plans to
identify a strategy to develop biodiversity across all locations of
the portfolio. For many assets this is already in action due to
contractual obligations to support the natural habitat of the asset
sites. This can include planting wild flowers naturally found in
the area to ensuring there is a presence of bird boxes across the
site.
The Investment Adviser intends to implement this approach across
all its sites, which requires an evaluation of each site. In
evaluating the sites the Investment Adviser expects to establish a
standard of biodiversity across the portfolio, whilst still
considering the individual natural ecosystems at each asset
site.
The Investment Adviser has also been approached by a UK listed
global real estate services provider, in collaboration with one of
the UK's leading universities, to take part in a research project
which aims to determine and quantify the link between solar park
pollinators/biodiversity and the benefits to agriculture and food
production on the surrounding land through novel DNA sequencing of
collected bee pollen.
A Proof of Concept study was carried out in June 2016 at three
sites within the portfolio. The first two sites have benefited from
a wild flower meadow seed mix whilst the third represented a solar
park with a standard grass mix. The project is proposed to be
carried out during the 2017 pollination season which runs from
April to June. The core sites are likely to be the same sites, plus
one other non-wild flower meadow site. It is envisaged that the
results of this work would be published in a reputable journal. It
is hoped that this work will help wild flower meadows to become the
de-facto standard for new solar schemes and retroactively applied
to existing schemes.
Sheep Grazing
Many sites within the portfolio support sheep grazing,
illustrating that solar farms can support profitable farming and
are also a cost-effective way of managing grassland in solar farms
while increasing its conservation value.
Community Benefits
The Investment Adviser supports community benefit schemes across
its portfolio, assisting in the support and development of the
local communities surrounding the asset sites.
The portfolio assets made donations of GBP63,000 per annum to
community benefit schemes for local councils and parishes to use
for charitable, educational, environmental, amenity or other
appropriate purposes within the areas of the community.
An additional donation was also made during the year by our
subsidiary, Hardingham, donating GBP10,000 to the Hardingham
Memorial Hall Fund for a children's play area.
Bluefield Partners LLP
3 October 2016
Report of the Directors
The Directors hereby submit the annual report and consolidated
financial statements of the Group for the year ended 30 June
2016.
General Information
The Company is a non-cellular company limited by shares
incorporated in Guernsey under the Companies (Guernsey) Law, 2008
on 29 May 2013. The Company's registration number is 56708, and it
has been registered and is regulated by the GFSC as a registered
closed-ended collective investment scheme. The Company's Ordinary
Shares were admitted to the Premium Segment of the Official List
and to trading on the Main Market of the London Stock Exchange as
part of its initial public offering which completed on 12 July
2013.
Principal Activities
The principal activity of the Group is to invest in a portfolio
of large scale UK based solar energy infrastructure assets.
The Company's objective was to target a dividend of 7 pence per
Ordinary Share in respect of its second financial year ended 30
June 2015, with the intention of the dividend rising annually in
line with UK RPI thereafter. The dividend target for its third
financial year ended 30 June 2016 is 7.07 pence per Ordinary
Share.
Business Review
A review of the Group's business and its likely future
development is provided in the Chairman's Statement, Strategic
Report, and in the Report of the Investment Adviser.
Listing Requirements
The Company has complied with the applicable Listing Rules
throughout the year.
Results and Dividends
The results for the year are set out in the consolidated
financial statements.
On 28 July 2015, the Board declared a third interim dividend of
GBP4,176,258, in respect of year ending 30 June 2015, equating to
1.50 pence per Ordinary Share (third interim dividend in respect of
the year ending 30 June 2014: Nil), which was paid on 21 August
2015 to shareholders on the register on 7 August 2015.
On 1 October 2015, the Board declared a fourth and final
dividend of GBP4,176,258, in respect of year ending 30 June 2015,
equating to 1.50 pence per Ordinary Share (fourth and final
dividend in respect of the year ending 30 June 2014: Nil), which
was paid on 30 October 2015 to shareholders on the register on 9
October 2015.
On 26 October 2015, the Board declared a first interim dividend
of GBP9,048,562, in respect of year ending 30 June 2016, equating
to 3.25 pence per Ordinary Share (first interim dividend in respect
of the year ending 30 June 2015: GBP4,904,809), which was paid on
15 December 2015 to shareholders on the register as at 13 November
2015.
On 26 April 2016, the Board declared a second interim dividend
of GBP3,096,318, in respect of year ending 30 June 2016, equating
to 1.00 penny per Ordinary Share (second interim dividend in
respect of the year ending 30 June 2015: GBP2,784,172), which was
paid on 20 May 2016 to shareholders on the register as at 6 May
2016.
Share Capital
On 4 December 2015, the Company issued 31,000,000 new Ordinary
Shares following a placing and offer subsequent to the authority
granted by the shareholders at the EGM held on 17 November 2015.
These shares were issued at a price of GBP1.02 per Ordinary Share,
raising gross proceeds of GBP31,620,000.
On 29 February 2016, the Company issued 214,541 new Ordinary
Shares to the Investment Adviser in respect of the variable fee for
the financial year ended 30 June 2015.
The Company has one class of Ordinary Shares. The issued nominal
value of the Ordinary Shares represents 100% of the total issued
nominal value of all share capital. Under the Company's Articles,
on a show of hands, each Shareholder present in person or by proxy
has the right to one vote at general meetings. On a poll, each
Shareholder is entitled to one vote for every share held.
Shareholders are entitled to all dividends paid by the Company
and, on a winding up, providing the Company has satisfied all of
its liabilities, the shareholders are entitled to all of the
surplus assets of the Company. The Ordinary Shares have no right to
fixed income.
Shareholdings of the Directors
The Directors of the Company and their beneficial interests in
the shares of the Company as at 30 June 2016 are detailed
below:
Director Ordinary Shares Ordinary Shares
of GBP1 each of GBP1 each
held 30 June % holding held 30 June % holding
2016 at 2015 at
30 June 2016 30 June 2015
------------------ ---------------- --------------- -------------------- ---------------
John Rennocks* 356,713 0.12 255,805 0.09
John Scott 276,176 0.09 276,176 0.10
Paul Le Page 70,000 0.02 70,000 0.03
Laurence McNairn 441,764 0.14 441,764 0.16
------------------ ---------------- --------------- -------------------- ---------------
*including shares held by spouse and adult children
Directors' Authority to Buy Back Shares
The Directors believe that the most effective means of
minimising any discount to NAV which may arise on the Company's
share price is to deliver strong, consistent performance from the
Company's investment portfolio in both absolute and relative terms.
However, the Board recognises that wider market conditions and
other considerations will affect the rating of the Ordinary Shares
in the short term and the Board may seek to limit the level and
volatility of any discount to NAV at which the Ordinary Shares may
trade. The means by which this might be done could include the
Company repurchasing its Ordinary Shares. Therefore, subject to the
requirements of the Listing Rules, the Law, the Articles and other
applicable legislation, the Company may purchase Ordinary Shares in
the market in order to address any imbalance between the supply of
and demand for Ordinary Shares or to enhance the NAV of Ordinary
Shares.
In deciding whether to make any such purchases the Directors
will have regard to what they believe to be in the best interests
of shareholders and to the applicable Guernsey legal requirements
which require the Directors to be satisfied on reasonable grounds
that the Company will, immediately after any such repurchase,
satisfy a solvency test prescribed by the Law and any other
requirements in its Articles. The making and timing of any buybacks
will be at the absolute discretion of the Board and not at the
option of the shareholders. Any such repurchases would only be made
through the market for cash at a discount to NAV.
On incorporation the Company passed a written resolution
granting the Directors general authority to purchase in the market
up to 14.99% of the Ordinary Shares in issue immediately following
Admission. A resolution to renew such authority was passed by
shareholders at the AGM held on 17 November 2015. Therefore,
authority was granted to the Directors to purchase in the market up
to 14.99% of the Ordinary Shares in issue immediately following the
AGM held on 17 November 2015 at a price not exceeding the higher of
(i) 5% above the average mid-market values of Ordinary Shares for
the five Business Days before the purchase is made or (ii) the
higher of the last independent trade or the highest current
independent bid for Ordinary Shares. The Directors intend to seek
renewal of this authority from the shareholders at the next AGM
scheduled to be held on 17 November 2016.
Pursuant to this authority, and subject to the Law and the
discretion of the Directors, the Company may purchase Ordinary
Shares in the market on an ongoing basis with a view to addressing
any imbalance between the supply of and demand for Ordinary
Shares.
Ordinary Shares purchased by the Company may be cancelled or
held as treasury shares. The Company may borrow and/or realise
investments in order to finance such Ordinary Share purchases.
The Company did not purchase any Ordinary Shares for treasury or
cancellation during the period.
Directors' and Officers' Liability Insurance
The Company maintains insurance in respect of directors' and
officers' liability in relation to their acts on behalf of the
Company. Insurance is in place, having been renewed on 12 July
2016.
Substantial Shareholdings
As at 28 September 2016, the Company had been notified, in
accordance with chapter 5 of the Disclosure and Transparency Rules,
of the following substantial voting rights over 3% as shareholders
of the Company.
Shareholder Shareholding % Holding
------------------------------------- ------------- ----------
The Bank of New York (Nominees)
Limited 48,844,986 15.78
BNY (OCS) Nominees Limited 25,368,176 8.19
Nortrust Nominees Limited TDS Acct 23,232,402 7.50
Nutraco Nominees UKREITS Acct 16,616,868 5.37
Aurum Nominees Limited C012471 Acct 16,092,098 5.20
BNY (OCS) Nominees Limited UKREITS
Acct 9,991,010 3.23
HSBC Global Custody Nominee (UK)
Limited 813764 Acct 9,705,983 3.13
The Directors confirm that there are no securities in issue that
carry special rights with regards to the control of the Company.
There have been no changes that have been notified to the Company
with respect to the substantial shareholdings since 30 June
2016.
Independent Auditor
KPMG has been the Company's external Auditor since the Company's
incorporation. A resolution will be proposed at the forthcoming AGM
to re-appoint them as Auditor and authorise the Directors to
determine the Auditor's remuneration for the ensuing year.
The Audit Committee will periodically review the appointment of
KPMG and the Board recommends their appointment. Further
information on the work of the Auditor is set out in the Report of
the Audit Committee.
Articles of Incorporation
The Company's Articles may be amended only by special resolution
of the shareholders.
Going Concern
At 30 June 2016, the Company had invested in 73 solar plants,
committing GBP478.1 million. During the year, the Company entered
into a revised credit facility increasing the funds available from
GBP50 million under the original revolving loan facility to GBP200
million. As at 30 June 2016 GBP180.4 million was drawn down,
leaving GBP19.6 million available. In accordance with the terms of
this facility GBP50.0 million is to be repaid on 20 January 2017.
Post year-end, this facility has been replaced by a long term
financing arrangement and new RCF, as described particularly in the
Chairman's Statement and in the report of the Investment Adviser.
These resources, together with the net income generated by the
acquired projects are expected to allow the Company to meet its
liquidity needs for the payment of operational expenses, dividends
and acquisition of new solar assets. The Company expects to comply
with the covenants of its long-term loan and revolving credit
facility.
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
performance of the current solar plants in operation and, at the
time of approving the consolidated 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 the consolidated financial statements.
Internal controls review
Taking into account the information on principal risks and
uncertainties provided in the strategic report and the ongoing work
of the Audit Committee in monitoring the risk management and
internal control systems on behalf of the Board, the Directors
- are satisfied that they have carried out a robust assessment
of the principal risks facing the Company, including those that
would threaten its business model, future performance, solvency or
liquidity; and
- have reviewed the effectiveness of the risk management and
internal control systems and no significant failings or weaknesses
were identified
Fair, Balanced and Understandable
The Board has considered whether the Annual Report is fair,
balanced and understandable, taking into account the commentary and
tone and whether it includes the requisite information needed for
shareholders to assess the Company's business model, performance
and strategy. In addition the Board also questioned the Investment
Adviser on information included and excluded from the Annual
Report, and considered whether the narrative at the front of the
report is consistent with the financial statements. As a result of
this work, each of the Board members considers that the Annual
Report is fair, balanced and understandable and includes the
requisite information needed for shareholders to assess the
Company's business model, performance and strategy.
Financial Risks Management Policies and Procedures
Financial Risks Management Policies and Procedures are disclosed
in Note 18.
Principal Risk and Uncertainties
Principal Risk and Uncertainties are discussed in the Strategic
Report.
Subsequent Events
Post year-end, on 11 August 2016, the Board declared a third
interim dividend of GBP4,644,476, in respect of the year ending 30
June 2016, equating to 1.50 pence per Ordinary Share (third interim
dividend in respect of the period ending 30 June 2015:
GBP4,176,258), which was paid on 9 September 2016 to shareholders
on the register on 19 August 2016.
Post year end, on 30 September 2016, the Board approved a fourth
interim dividend, in respect of year ending 30 June 2016, of 1.50
pence per Ordinary Share (fourth interim dividend in respect of the
period ending 30 June 2015: 1.5 pence per Ordinary Share), which
will be payable on 4 November 2016 with an associated ex-dividend
date of 13 October 2016.
Declaration of the fourth dividend brings total dividends in
respect of 2016 to 7.5 p which exceeds the target for the year and
triggers payment of a variable fee to the Investment Adviser. This
is reflected in administrative expenses and other reserves.
Post year end, on 27 September 2016, GBP187 million long term
financing was agreed with Aviva Investors. This is held at the
Company level in two tranches, a GBP121.5 million fixed price loan
at 2.875% interest and a GBP65.5 million index linked element at 70
basis points linked to RPI. The loans are for 18 years and are
fully amortising. A new RCF was arranged at the same time. This is
discussed further in the Chairman's Statement and the Investment
Adviser's Report.
Annual General Meeting
The AGM of the Company will be held on 17 November 2016 at
Lefebvre Place, Lefebvre Street, St Peter Port, Guernsey. Details
of the resolutions to be proposed at the AGM, together with
explanations, will appear in the Notice of Meeting to be
distributed to shareholders together with this Annual Report.
Members of the Board will be in attendance at the AGM and will
be available to answer shareholder questions.
By order of the Board
John Rennocks
Chairman
3 October 2016
Board of Directors
John Rennocks (Chairman)
John Rennocks is a non-executive director of Greenko Group plc,
a developer and operator of hydro and wind power plants in India,
that has recently sold all its operating assets, and Chairman of
Utilco Emerging Markets, an investor in infrastructure and related
assets in emerging markets. He has broad experience in emerging
energy sources, support services and manufacturing. Mr Rennocks
previously served as a non-executive deputy chairman of Inmarsat
plc, a non-executive director of Foreign & Colonial Investment
Trust plc, as well as several other public and private companies,
and as Executive Director-Finance for Smith & Nephew plc,
Powergen plc and British Steel plc/Corus Group plc. Mr Rennocks is
a Fellow of the Institute of Chartered Accountants of England and
Wales.
John Scott (Senior Independent Director)
John Scott is a former investment banker who spent 20 years with
Lazard and is currently a director of several investment trusts. Mr
Scott has been Chairman of Scottish Mortgage Investment Trust PLC
since December 2009 and Chairman of Impax Environmental Markets plc
since May 2014; he has also been Chairman of Alpha Insurance
Analysts since April 2013. Until the company's sale in March 2013,
he was Deputy Chairman of Endace Ltd. of New Zealand and in
November 2012 he retired after 12 years as a non-executive director
of Miller Insurance. He has an MA in Economics from Cambridge
University and an MBA from INSEAD; he is also a Fellow of the CII
and of the CISI.
Paul Le Page (Chairman of the Audit Committee)
Paul Le Page is a director of FRM Investment Management Guernsey
Limited, Man Fund Management Guernsey Limited and Man Group Japan
Limited which are subsidiaries of Man Group Plc. He is responsible
for managing hedge fund portfolios, and is a director of a number
of group funds. Mr Le Page is currently Audit Committee Chairman
for UK Mortgages Limited and was formerly a Director of, and Audit
Committee Chairman for, Cazenove Absolute Equity Limited and Thames
River Multi Hedge PCC Limited. He has extensive knowledge of, and
experience in, the fund management and the hedge fund industry.
Prior to joining FRM, he was an Associate Director at Collins
Stewart Asset Management from January 1999 to July 2005, where he
was responsible for managing the firm's hedge fund portfolios and
reviewing fund managers. He joined Collins Stewart in January 1999
where he completed his MBA in July 1999. He originally qualified as
a Chartered Electrical Engineer after a 12-year career in
industrial research and development, latterly as the Research and
Development Director for Dynex Technologies (Guernsey) Limited,
having graduated from University College London in Electrical and
Electronic Engineering in 1987.
Laurence McNairn
Laurence McNairn was appointed as a non-executive director of
the Company on 1 July 2013 and is a member of The Institute of
Chartered Accountants of Scotland. He is an executive director of
Heritage International Fund Managers Limited, the Company's
Administrator and Secretary. He joined the Heritage Group in 2006
and prior to this worked for the Baring Financial Services Group in
Guernsey from 1990.
Directors' Statement of Responsibilities
The Directors are responsible for preparing the annual report
and consolidated financial statements in accordance with applicable
law and regulations.
The Law requires the Directors to prepare financial statements
for each financial year. Under the Listing Rules, the Directors
have elected to prepare the financial statements in accordance with
IFRS. Under the Law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of the profit or loss
of the Group for that period. In preparing these consolidated
financial statements, the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgments and estimates that are reasonable and
prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on a going concern basis
unless it is inappropriate to presume
that the Group will continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the consolidated financial
statements.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time, the
financial position of the Group and enable them to ensure that the
consolidated financial statements comply with the Law. They are
also responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention
and detection of fraud, error and non-compliance with law and
regulations.
So far as each Director is aware, there is no relevant audit
information of which the Company's Auditor is unaware, and each
Director has taken all the steps that he ought to have taken as a
Director in order to make himself aware of any relevant audit
information and to establish that the Company's Auditor is aware of
that information. This confirmation is given and should be
interpreted in accordance with the provisions of section 249 of the
Law (as amended).
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
By order of the Board
Paul Le Page Laurence McNairn
Director Director
3 October 2016 3 October 2016
Responsibility Statement of the Directors in Respect of the
Annual Report
Each of the Directors, whose names are set out in the Board of
Directors section of the annual report, confirms that to the best
of their knowledge that:
- the consolidated financial statements, prepared in accordance
with IFRS, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and its
subsidiary included in the consolidation taken as a whole;
- the Management Report (comprising Chairman's Statement,
Strategic Report, Report of the Directors and Report of the
Investment Adviser) includes a fair review of the development and
performance of the business and the position of the Company and its
subsidiary included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties faced
in the Strategic Report; and
- the Directors are responsible for preparing the annual report
in accordance with applicable law and regulations.
Having taken advice from the Audit Committee, the Directors
consider the annual report and consolidated financial statements,
taken as a whole, as fair, balanced and understandable and that it
provides the information necessary for shareholders to assess the
Group's performance, business model and strategy.
By order of the Board
Paul Le Page Laurence McNairn
Director Director
3 October 2016 3 October 2016
Corporate Governance Report
The Directors recognise the importance of sound corporate
governance, particularly the requirements of the AIC Code.
The Company has been a member of the AIC since 15 July 2013. The
Directors have considered the principles and recommendations of the
AIC Code by reference to the AIC Guide. The AIC Code, as explained
by the AIC Guide, provides a 'comply or explain' code of corporate
governance and addresses all the principles set out in the UK Code
as well as setting out additional principles and recommendations on
issues that are of specific relevance to investment companies such
as the Company. The Board considers that reporting against the
principles and recommendations of the AIC Code, and by reference to
the AIC Guide (which incorporates the UK Code), provides better
information to shareholders.
The GFSC issued a Guernsey Code which came into effect on 1
January 2012. The introduction to the Guernsey Code states that
"Companies which report against the UK Code or the AIC Code of
Corporate Governance are also deemed to meet this Code". Therefore,
AIC members which are Guernsey-domiciled and which report against
the AIC Code are not required to report separately against the
Guernsey Code.
The AIC Code and AIC Guide are available on the AIC's website
(www.theaic.co.uk). The UK Code is available from the FRC's website
(www.frc.org.uk).
Throughout the year ended 30 June 2016, the Company has complied
with the recommendations of the AIC Code and the provisions of the
UK Code, except to the extent highlighted below.
Provision A.2.1 of the UK Code requires a chief executive to be
appointed, however, as an investment company, the Company has no
employees and therefore has no requirement for a chief executive.
As all the Directors including the Chairman are non-executive and
independent of the Investment Adviser, the Company has not
established a nomination committee, remuneration committee or a
management engagement committee, which is not in accordance with
provisions B.2.1 and D.2.1 of the UK Code, and Principle 5 of the
AIC Code respectively. The Board is satisfied that as a whole, any
relevant issues can be properly considered by the Board. The
absence of an internal audit function is discussed in the Report of
the Audit Committee.
The Board monitors developments in corporate governance to
ensure the Board remains aligned with best practice, especially
with respect to the increased focus on diversity. The Board
acknowledges the importance of diversity, including gender (as
stated in Principle 6 of the AIC Code), for the effective
functioning of the Board and commits to supporting diversity in the
boardroom. It is the Board's ongoing aspiration to have a
well-diversified representation. The Board also values diversity of
business skills and experience because Directors with diverse skill
sets, capabilities and experience gained from different
geographical and professional backgrounds enhance the Board by
bringing a wide range of perspectives to the Company. The Board is
satisfied with the current composition and functioning of its
members.
The Board
The Directors' details are listed in the Board of Directors
section which set out the range of investment, financial and
business skills and experience represented.
John Rennocks, John Scott and Paul Le Page were appointed on 12
June 2013 and Laurence McNairn was appointed 1 July 2013. The Board
appointed John Scott as Senior Independent Director effective from
10 December 2013 to fulfil any function that is deemed
inappropriate for the Chairman to perform.
All Directors shall retire and submit themselves for election at
the next AGM of the Company, due to take place on 17 November 2016.
The Company's Articles specify that each Director shall retire and
seek re-election at each subsequent AGM of the Company at least
every three years. However, in accordance with corporate governance
best practice, all Directors are to be re-elected annually.
Any Director who is elected or re-elected at that meeting is
treated as continuing in office throughout. If he is not elected or
re-elected, he shall retain office until the end of the meeting or
(if earlier) when a resolution is passed to appoint someone in his
place or when a resolution to elect or re-elect the Director is put
to the meeting and lost.
The Board are of the opinion that members should be re-elected
because they believe that they have the right skills and experience
to continue to serve the Company. As recommended in Principle 4 of
the AIC Code, the Board has considered the need for a policy
regarding tenure of service. However, the Board believes that any
decisions regarding tenure should consider the need for maintaining
knowledge, experience and independence, and to balance this against
the need to periodically freshen the Board composition in order to
have the appropriate mix of skills, experience, age and length of
service.
The Board intends to meet at least four times a year in Guernsey
with unscheduled meetings held where required to consider
investment related or other issues. In addition, there is regular
contact between the Board, the Investment Adviser and the
Administrator. Furthermore, the Board requires to be supplied in a
timely manner with information by the Investment Adviser, the
Company Secretary and other advisers in a form and of a quality
appropriate to enable it to discharge its duties.
The Company has adopted a share dealing code for the Board and
will seek to ensure compliance by the Board and relevant personnel
of the Investment Adviser with the terms of the share dealing code
and the recently updated EU Market Abuse Regulations.
Directors' Remuneration
The Chairman is entitled to an annual remuneration of GBP55,000,
with effect from 12 June 2015 (2015: GBP50,000). The other
Directors are entitled to an annual remuneration of GBP33,000, with
effect from 12 June 2015 for Paul Le Page and John Scott and with
effect from 1 July 2015 for Laurence McNairn (2015: GBP30,000).
Paul Le Page receives an additional annual fee of GBP5,500, with
effect from 12 June 2015 (2015: GBP5,000) for acting as Chairman of
the Audit Committee. The Board will review all Directors'
remuneration annually.
The remuneration earned by each Director in the past two
financial years was as follows:
Director 2016 2015
GBP GBP
------------------ ------- -------
John Rennocks 55,083 50,260
John Scott 33,052 30,157
Paul Le Page 38,553 35,182
Laurence McNairn 33,045 30,000
------------------ ------- -------
The total Directors' fees expense for the year amounted to
GBP159,733 (2015: GBP145,599). As disclosed in Note 19, John Scott
and John Rennocks are Directors of, and have received remuneration
in respect of, BSIFIL.
On 12 July 2013, 290,000 Ordinary Shares were issued to the
Directors in lieu of a cash payment for Directors' fees for the
first two years. The release of this prepayment completed in June
2015 and Directors are now paid in cash.
All of the Directors are non-executive and each is considered
independent for the purposes of Chapter 15 of the Listing
Rules.
In accordance with Article 22 of AIFMD, the Company shall
disclose the total amount of remuneration for the financial year,
split into fixed and variable remuneration, paid by the AIFM to its
staff, and number of beneficiaries, and, where relevant, carried
interest paid by the AIF. As the Company is categorised as an
internally managed Non-EU AIFM for the purposes of the AIFMD,
Directors' remuneration reflects this amount.
Duties and Responsibilities
The Board has overall responsibility for optimising the
Company's success by directing and supervising the affairs of the
business and meeting the appropriate interests of shareholders and
relevant stakeholders, while enhancing the value of the Company and
also ensuring the protection of investors. A summary of the Board's
responsibilities is as follows:
- statutory obligations and public disclosure;
- strategic matters and financial reporting;
- investment strategy and management;
- risk assessment and management including reporting,
compliance, governance, monitoring and control; and
- other matters having a material effect on the Company.
The Directors have access to the advice and services of the
Administrator, who is responsible to the Board for ensuring that
Board procedures are followed and that it complies with the Law and
applicable rules and regulations of the GFSC and the LSE. Where
necessary, in carrying out their duties, the Directors may seek
independent professional advice and services at the expense of the
Company.
The Company maintains appropriate Directors' and Officers'
liability insurance in respect of legal action against its
Directors on an ongoing basis.
The Board's responsibilities for the annual report are set out
in the Directors' Responsibilities Statement. The Board is also
responsible for issuing appropriate half-yearly financial reports
and other price-sensitive public reports.
The attendance record of the Directors for the year to 30 June
2016 is set out below:
Scheduled Ad-hoc Audit Committee
Board Meetings Board Meetings Meetings
Director (max 4) (max 12) (max 6)
------------------ ---------------- ---------------- ----------------
John Rennocks 3 - 3
John Scott 4 1 5
Paul Le Page 4 12 6
Laurence McNairn 4 11 6
------------------ ---------------- ---------------- ----------------
Twelve ad-hoc Board Meetings were held during the period to
formally review and authorise each investment made by the Company,
to discuss placing of Ordinary Shares and to consider interim
dividends, amongst other items.
It should be noted that Mr Rennocks and Mr Scott are ordinarily
resident in the United Kingdom and as a result are not permitted to
participate in Board Meetings from the United Kingdom in accordance
with the Article 29.2 of the Company's Articles of Incorporation.
Mr Rennocks and Mr Scott have participated in all, or the majority,
of formally scheduled meetings in Guernsey, but not in the ad-hoc
meetings where in other circumstances they might have expected to
join by telephone. It should be noted that Mr Rennocks and Mr Scott
actively communicate their views on any matters to be discussed at
ad-hoc Board Meetings to their fellow Directors, Mr Le Page and Mr
McNairn, ahead of such meetings.
The Board believes that, as a whole, it comprises an appropriate
balance of skills, experience, age, knowledge and length of
service. The Board also believes that diversity of experience and
approach, including gender diversity, amongst Board members is of
great importance and it is the Company's policy to give careful
consideration to issues of Board balance when making new
appointments. With any new Director appointment to the Board,
induction training will be provided by an independent service
provider at the expense of the Company.
Performance Evaluation
In accordance with Principle 7 of the AIC Code, the Board is
required to undertake a formal and rigorous evaluation of its
performance on an annual basis. A formal evaluation of the
performance of the Board as a whole, and the Chairman, is in
progress as at the date of this report. The evaluation is
undertaken utilising self-appraisal questionnaires and is followed
by a detailed discussion of the outcomes which include assessment
of the Directors' continued independence.
Committees of the Board
Audit Committee
The Board established an Audit Committee in 2013. It is chaired
by Paul Le Page and at the date of this report comprised all of the
Directors. The report of the role and activities of this committee
and its relationship with the Auditor is contained in the Report of
the Audit Committee. The Committee operates within clearly defined
terms of reference which are available on the Company's website
(www.bluefieldsif.com).
Internal Control and Financial Reporting
The Directors acknowledge that they are responsible for
establishing and maintaining the Group and Company's system of
internal control and reviewing its effectiveness. Internal control
systems are designed to manage rather than eliminate the failure to
achieve business objectives and can only provide reasonable but not
absolute assurance against material misstatements or loss. The
Directors review all controls including operations, compliance and
risk management. The key procedures which have been established to
provide internal control are:
- the Board has delegated the day-to-day operations of the Group
and Company to the Administrator and Investment Adviser; however,
it remains accountable for all of the functions it delegates;
- the Board clearly defines the duties and responsibilities of
the Group and Company's agents and advisers and appointments are
made by the Board after due and careful consideration. The Board
monitors the ongoing performance of such agents and advisers;
- the Board monitors the actions of the Investment Adviser at
regular Board meetings and is also given frequent updates on
developments arising from the operations and strategic direction of
the underlying investee companies; and
- the Administrator provides administration and company secretarial services to the Company.
The Administrator maintains a system of internal control on
which it reports to the Board.
The Board has reviewed the need for an internal audit function
and has decided that the systems and procedures employed by the
Administrator and Investment Adviser, including their own internal
controls and procedures, provide sufficient assurance that a sound
system of risk management and internal control, which safeguards
shareholders' investment and the Company's assets, is maintained.
An internal audit function specific to the Company is therefore
considered unnecessary, as explained in the Report of the Audit
Committee.
The systems of control referred to above are designed to ensure
effectiveness and efficient operation, internal control and
compliance with laws and regulations. In establishing the systems
of internal control, regard is paid to the materiality of relevant
risks, the likelihood of costs being incurred and costs of control.
It follows therefore that the systems of internal control can only
provide reasonable but not absolute assurance against the risk of
material misstatement or loss.
The Company has delegated the provision of all services to
external service providers whose work is overseen by the Board at
its quarterly meetings. Each year a detailed review of performance
pursuant to their terms of engagement will be undertaken by the
Board.
Investment Advisory Agreement
In accordance with Listing Rule 15.6.2(2)R, the Directors
formally appraise the performance and resources of the Investment
Adviser.
The Investment Adviser is led by its managing partners, James
Armstrong, Mike Rand and Giovanni Terranova, who founded the
Bluefield business in 2009 following their prior work together in
European solar energy. The Investment Adviser's team have a
combined record, prior to and including Bluefield Partners LLP, of
investing more than GBP1 billion in solar PV projects. The managing
partners have been involved in over GBP479 million of solar PV
deals in the UK since December 2011 and over GBP1 billion of solar
PV transactions in the UK and Europe since 2008. The Investment
Adviser's non-executive team includes William Doughty, the founding
CEO of Semperian; Dr. Anthony Williams, the former chair of the
Risk Committee for the Fixed Income, Currencies & Commodities
Division, and Partner at Goldman Sachs & Co; and Jon Moulton,
the current chairman of Better Capital and former managing partner
and founder of Alchemy Partners.
In view of the resources of the Investment Adviser and the
Group's investment performance for the period, in the opinion of
the Directors the continuing appointment of the Investment Adviser
is in the interests of the shareholders as a whole.
Dealings with Shareholders
The Board welcomes shareholders' views and places great
importance on communication with its shareholders. The Company's
AGM will provide a forum for shareholders to meet and discuss
issues with the Directors of the Company. Members of the Board will
also be available to meet with shareholders at other times, if
required. In addition, the Company maintains a website which
contains comprehensive information, including regulatory
announcements, share price information, financial reports,
investment objectives and strategy and information on the
Board.
Principal Risks and Uncertainties
Each Director is aware of the risks inherent in the Company's
business and understands the importance of identifying, evaluating
and monitoring these risks. The Board has adopted procedures and
controls that enable it to manage these risks within acceptable
limits and to meet all of its legal and regulatory obligations.
The Board considers the process for identifying, evaluating and
managing any significant risks faced by the Company on an ongoing
basis and these risks are reported and discussed at Board meetings.
It ensures that effective controls are in place to mitigate these
risks and that a satisfactory compliance regime exists to ensure
all applicable local and international laws and regulations are
upheld.
The Company's principal risks and uncertainties are discussed in
detail in the Strategic Report. The Company's financial instrument
risks are discussed in Note 18 to the consolidated financial
statements.
The Company's principal risk factors are fully discussed in the
Company's Prospectus, available on the Company's website
(www.bluefieldsif.com) and should be reviewed by shareholders.
Changes in Regulation
The Board monitors and responds to changes in regulation as it
affects the Group and its policies. A number of changes to
regulation occurred during the period.
Alternative Investment Fund Management Directive
The AIFMD, which was implemented across the EU 22 July 2013 with
the transition period ending 22 July 2014, aims to harmonise the
regulation of AIFMs and imposes obligations on managers who manage
or distribute AIFs in the EU or who market shares in such funds to
EU investors.
After seeking professional regulatory and legal advice, the
Company was established in Guernsey as a self-managed Non-EU AIF.
Additionally, the Company has taken advice on and implemented
sufficient and appropriate policies and procedures that enable the
Board to fulfil its role in relation to portfolio management and
the management of risk. The Company is therefore categorised as an
internally managed Non-EU AIFM for the purposes of the AIFMD and as
such neither it nor the Investment Adviser is required to seek
authorisation under the AIFMD.
The marketing of shares in AIFs that are established outside the
EU (such as the Company) to investors in that EU member state is
prohibited unless certain conditions are met. Certain of these
conditions are outside the Company's control as they are dependent
on the regulators of the relevant third country (in this case
Guernsey) and the relevant EU member state entering into regulatory
co-operation agreements with one another.
Currently, the NPPR provides a mechanism to market Non-EU AIFs
that are not allowed to be marketed under the AIFMD domestic
marketing regimes. The Board is utilising NPPR in order to market
the Company, specifically in the UK pursuant to regulations 57, 58
and 59 of the UK Alternative Investment Fund Managers Regulations
2013. The Board is working with the Company's advisers to ensure
the necessary conditions are met, and all required notices and
disclosures are made under NPPR. Eligible AIFMs will be able to
continue to use NPPR until at least 2018, and during 2016 NPPR will
be the sole regime available to market in the EEA.
Any regulatory changes arising from implementation of AIFMD (or
otherwise) that limit the Company's ability to market future issues
of its shares may materially adversely affect the Company's ability
to carry out its investment policy successfully and to achieve its
investment objective, which in turn may adversely affect the
Company's business, financial condition, results of operations, NAV
and/or the market price of the Ordinary Shares.
The Board, in conjunction with the Company's advisers, will
continue to monitor the development of AIFMD and its impact on the
Company.
Foreign Account Tax Compliance Act and Common Reporting
Standard
The Company is registered under FATCA and continues to comply
with FATCA and the Common Reporting Standard's requirements to the
extent relevant to the Company.
Non-Mainstream Pooled Investment
On 1 January 2014 FCA rules relating to the restrictions on the
retail distribution of unregulated collective investment schemes
and close substitutes came into effect.
The Board has been advised that the Company would qualify as an
investment trust if it was resident in the UK, and therefore the
Board believes that the retail distribution of its shares should be
unaffected by the changes. It is the Board's intention that the
Company will make all reasonable efforts to conduct its affairs in
such a manner that its shares can be recommended by independent
financial advisers to ordinary retail investors in accordance with
the FCA's rules relating to non-mainstream investment products.
By order of the Board
Paul Le Page Laurence McNairn
Director Director
3 October 2016 3 October 2016
Report of the Audit Committee
The Audit Committee, chaired by Paul Le Page and comprising all
of the Directors set out on page 3, operates within clearly defined
terms of reference (which are available from the Company's website)
and includes all matters indicated by Disclosure and Transparency
Rule 7.1 and the AIC Code. Appointments to the Audit Committee
shall be for a period of up to three years, extendable for one or
further three-year periods. It is also the formal forum through
which the Auditor will report to the Board of Directors.
The Audit Committee will meet no less than twice a year, and at
such other times as the Audit Committee shall require, and will
meet the Auditor at least twice a year. Any member of the Audit
Committee may request that a meeting be convened by the Company
Secretary. The Auditor may request that a meeting be convened if
they deem it necessary. Any Director who is not a member of the
Audit Committee, the Administrator and representatives of the
Investment Adviser shall be invited to attend the meetings as the
Directors deem appropriate.
The Board has taken note of the requirement that at least one
member of the Committee should have recent and relevant financial
experience and is satisfied that the Committee is properly
constituted in that respect, with two of its members who are
chartered accountants and two members with an investment
background.
Responsibilities
The main duties of the Audit Committee are:
- monitoring the integrity of the financial statements of the
Group and any formal announcements relating to the Company's
financial performance, reviewing significant financial reporting
judgements contained in them;
- reporting to the Board on the appropriateness of the Board's
accounting policies and practices including critical judgement
areas;
- reviewing the valuation of the Group's investments prepared by
the Investment Adviser or independent valuation agents, and making
a recommendation to the Board on the valuation of the Group's
investments;
- meeting regularly with the Auditor to review their proposed
audit plan and the subsequent audit report and assess the
effectiveness of the audit process and the levels of fees paid in
respect of both audit and non-audit work;
- making recommendations to the Board in relation to the
appointment, re-appointment or removal of the Auditor and approving
their remuneration and the terms of their engagement;
- monitoring and reviewing annually the Auditor's independence,
objectivity, expertise, resources, qualification and non-audit
work;
- considering annually whether there is a need for the Company
to have its own internal audit function;
- keeping under review the effectiveness of the accounting and
internal control systems of the Company;
- reviewing and considering the UK Code, the AIC Code, the FRC
Guidance on Audit Committees and the Company's institutional
investors' commitment to the UK Stewardship code; and
- reviewing the risks facing the Company and monitoring the risk matrix.
The Audit Committee is required to report formally to the Board
on its findings after each meeting on all matters within its duties
and responsibilities.
The Auditor is invited to attend the Audit Committee meetings as
the Directors deem appropriate and at which they have the
opportunity to meet with the Committee without representatives of
the Investment Adviser or the Administrator being present at least
once per year.
Financial Reporting
The primary role of the Audit Committee in relation to the
financial reporting is to review with the Administrator, Investment
Adviser and the Auditor the appropriateness of the interim and
annual consolidated financial statements, concentrating on, amongst
other matters:
- the quality and acceptability of accounting policies and practices;
- the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements;
- material areas in which significant judgements have been
applied or there has been discussion with the Auditor;
- whether the annual report and consolidated financial
statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group's performance, business model and strategy; and
- any correspondence from regulators in relation to the Group's financial reporting.
To aid its review, the Audit Committee considers reports from
the Administrator and Investment Adviser and also reports from the
Auditor on the outcomes of their half-year review and annual audit.
Like the Auditor, the Audit Committee seeks to display the
necessary professional scepticism their role requires.
Meetings
The Committee has met formally on six occasions in the year
covered by this report. The matters discussed at those meetings
were:
- consideration and agreement of the terms of reference of the
Audit Committee for approval by the Board;
- review of the Group's risk matrix;
- review of the accounting policies and format of the financial statements;
- review and approval of the audit plan of the Auditor and
timetable for the interim and annual consolidated financial
statements;
- review the valuation policy and methodology of the Group's
investments applied in the interim and annual consolidated
financial statements;
- detailed review of the interim and annual report and consolidated financial statements;
- assessment of the effectiveness of the external audit process as described below; and
- a review of the process used to determine the viability of the company.
The Audit Committee chairman or other members of the Audit
Committee appointed for the purpose, shall attend each AGM of the
Company, prepared to respond to any shareholder questions on the
Audit Committee's activities.
Primary Area of Judgement
The Audit Committee determined that the key risk of misstatement
of the Group's consolidated financial statements is the fair value
of the SPV investments, in the context of the high degree of
judgement involved in the assumptions and estimates underlying the
discounted cash-flow calculations.
As outlined in Note 10 of the consolidated financial statements,
the fair value of investments as at 30 June 2016 was GBP483,730,343
(2015: GBP296,827,336). Market quotations are not available for
these investments so their valuation is undertaken using a
discounted cash-flow methodology. The Directors have also
considered transactions in similar assets but as these are few in
number they have relied primarily on DCF methodology for these
valuations. 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 include certain assumptions.
As a result, this requires a series of judgements to be made as
explained in Note 3 in the consolidated financial statements.
The valuation of the Company's portfolio of solar assets as at
30 June 2016 has been determined by the Board of Directors based on
information provided by the Investment Adviser.
The Audit Committee also reviewed and suggested factors that
could impact the Company's portfolio valuation and its related
sensitivities to the carrying value of the investments as required
in accordance with IPEV Valuation Guidelines.
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS
27)
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
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.
Monies transferred to BSIFIL from the underlying SPVs, which are
not consolidated, are accounted for on a cash basis. The current
assets and liabilities of the SPVs make up part of their overall
fair value.
On 18 December 2014, the IASB issued further amendments to IFRS
10 (Investment Entities: Applying 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 expects BSIFIL to be classified
as an Investment Entity and the presentation of the financial
statements will change. The implication of this change is that
BSIFIL, the Company's single, direct subsidiary through which
investments are purchased, which is currently consolidated on a
line-by-line basis into the Company's financial statements, would
no longer be consolidated but rather measured at fair value. Whilst
this change does not affect the Group's Net Assets, BSIFIL's cash,
debt and working capital balances would now be included in the fair
value of investments as opposed to their respective category in the
Statement of Financial Position.
Risk Management
The Company's risk assessment process and the way in which
significant business risks are managed is a key area of focus for
the Committee. The work of the Audit Committee is driven primarily
by the Group's assessment of its principal risks and uncertainties
as set out in the Strategic Report, and it receives reports from
the Investment Adviser and Administrator on the Group's risk
evaluation process and reviews changes to significant risks
identified.
Internal Audit
The Audit Committee considers at least once a year whether or
not there is a need for an internal audit function. Currently it
does not consider there to be a need for an internal audit
function, given that there are no employees in the Company and all
outsourced functions are with parties who have their own internal
controls and procedures.
External Audit
KPMG has been the Company's external Auditor since the Company's
inception.
The Auditor is required to rotate the audit partner every five
years. The current partner is in his third year of tenure. There
are no contractual obligations restricting the choice of external
auditor and the Company will put the audit services contract out to
tender at least every ten years. In line with the FRC's
recommendations on audit tendering, this will be considered further
when the audit partner rotates every five years. Under the
Companies Law the reappointment of the external Auditor is subject
to shareholder approval at the AGM.
The objectivity of the Auditor is reviewed by the Audit
Committee which also reviews the terms under which the external
Auditor may be appointed to perform non-audit services. The Audit
Committee reviews the scope and results of the audit, its cost
effectiveness and the independence and objectivity of the Auditor,
with particular regard to any non-audit work that the Auditor may
undertake. In order to safeguard Auditor independence and
objectivity, the Audit Committee ensures that any other advisory
and/or consulting services provided by the external Auditor does
not conflict with its statutory audit responsibilities. Advisory
and/or consulting services will generally only cover reviews of
interim financial statements, tax compliance and capital raising
work. Any non-audit services conducted by the Auditor outside of
these areas will require the consent of the Audit Committee before
being initiated.
The external Auditor may not undertake any work for the Group in
respect of the following matters: preparation of the financial
statements, provision of investment advice, taking management
decisions or advocacy work in adversarial situations.
The Committee reviews the scope and results of the audit, its
cost effectiveness and the independence and objectivity of the
Auditor, with particular regard to the level of non-audit fees.
During the year, KPMG was engaged to provide reporting accountant
services in relation to the second prospectus and a review of the
Group's interim information. Total fees paid amounted to GBP145,437
for the year ended 30 June 2016 (30 June 2015: GBP134,159) of which
GBP98,862 related to audit and audit related services to the Group
(30 June 2015: GBP61,398) and GBP46,575 in respect of non-audit
services (30 June 2015: GBP72,761).
Notwithstanding such services, most of which have arisen in
connection with the Company's share placings in November 2014 and
December 2015, the Audit Committee considers KPMG to be independent
of the Company and that the provision of such non-audit services is
not a threat to the objectivity and independence of the conduct of
the audit as appropriate safeguards are in place.
To fulfil its responsibility regarding the independence of the
Auditor, the Audit Committee has considered:
-- discussions with or reports from the Auditor describing its
arrangements to identify, report and manage any conflicts of
interest; and
-- the extent of non-audit services provided by the Auditor and
arrangements for ensuring the independence and objectivity and
robustness and perceptiveness of the Auditor and their handling of
key accounting and audit judgements.
To assess the effectiveness of the Auditor, the Committee has
reviewed:
-- the Auditor's fulfilment of the agreed audit plan and variations from it;
-- discussions or reports highlighting the major issues that
arose during the course of the audit;
-- feedback from other service providers evaluating the performance of the audit team;
-- arrangements for ensuring independence and objectivity; and
-- robustness of the Auditor in handling key accounting and audit judgements.
The Audit Committee is satisfied with KPMG's effectiveness and
independence as Auditor, having considered the degree of diligence
and professional scepticism demonstrated by them. Having carried
out the review described above and having satisfied itself that the
Auditor remains independent and effective, the Audit Committee has
recommended to the Board that KPMG be reappointed as Auditor for
the year ending 30 June 2017.
The Chairman of the Audit Committee will be available at the AGM
to answer any questions about the work of the Committee.
On behalf of the Audit Committee
Paul Le Page
Chairman of the Audit Committee
3 October 2016
Independent Auditor's Report
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF BLUEFIELD SOLAR
INCOME FUND LIMITED
Opinions and conclusions arising from our audit
Opinion on financial statements
We have audited the consolidated financial statements (the
"financial statements") of Bluefield Solar Income Limited (the
"Company") and its subsidiary (together, the 'Group') for the year
ended 30 June 2016 which comprise the consolidated statement of
financial position, the consolidated statement of comprehensive
income, the consolidated statement of changes in equity, the
consolidated statement of cash flows and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards as adopted by the European Union ('EU'). In our opinion,
the financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 30 June 2016 and of its return for the year ended 30 June
2016;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the EU; and
-- comply with the Companies (Guernsey) Law, 2008.
Our assessment of risks of material misstatement
The risks of material misstatement detailed in this section of
this report are those risks that we have deemed, in our
professional judgment, to have had the greatest effect on: the
overall audit strategy; the allocation of resources in our audit;
and directing the efforts of the engagement team. Our audit
procedures relating to these risks were designed in the context of
our audit of the financial statements as a whole. Our opinion on
the financial statements is not modified with respect to any of
these risks, and we do not express an opinion on these individual
risks.
In arriving at our audit opinion above on the financial
statements, the risk of material misstatement that had the greatest
effect on our audit was as follows:
Valuation of the Special Purpose Vehicle ("SPV") Investments
(GBP483,730,343)
Refer to the Report of the Audit Committee, Note 2(k)(i)
accounting policies and Note 10 disclosures
-- The risk - The Group measures its SPV investments at fair
value based on unleveraged cash flows of the underlying solar
projects discounted using a portfolio weighted average cost of
capital. The valuations are performed using forecast cash flows
generated by each solar project over a long-term period and by
selecting key assumptions such as discount rates, base energy yield
assumptions, electricity price forecasts, operating costs, leverage
and macroeconomic assumptions such as inflation and tax rates. The
valuations are adjusted for other specific assets and liabilities
of the SPVs.
The assessment of long-term term forecasts and the selection of
appropriate assumptions surrounding uncertain future events, as set
out in the key judgments and estimates section of the financial
statements, are key judgments made by the Directors. There is a
risk that changes to forecast cash flows and the selection of
different assumptions may result in a materially different
valuation.
-- Our response - Our audit procedures with respect to the
valuation of the SPV investments included, but were not limited to,
meeting with the Investment Adviser and Directors to observe the
design and implementation of the Board's challenge and approval
process of the key assumptions made within the valuation models
which were prepared by the Investment Adviser.
With the assistance of our own valuation specialist, we
challenged the key assumptions for the discount rate, base energy
yield assumptions, electricity price forecasts, leverage and
operating costs, which included analyzing macroeconomic data
(including inflation and tax forecasts) and observable market data
and performed benchmarking to listed peers.
We assessed the key project specific inputs into the cash flow
projections, focusing on the significant changes for existing
projects since the previous reporting period or from the date of
acquisition for
newly acquired projects, to corroborate key contracted revenues
and costs with reference to underlying contracts, agreements,
management information and, if available, historical data.
We have considered the adequacy of the Group's disclosures in
accordance with IFRS 13 (see note 10) including the use of
estimates and judgments in arriving at fair value. We also
considered the disclosure of the degree of sensitivity when a
reasonably possible change in a key assumption gives rise to a
change in the fair value of the SPV investments.
Our application of materiality and an overview of the scope of
our audit
Materiality is a term used to describe the acceptable level of
precision in financial statements. Auditing standards describe a
misstatement or an omission as "material" if it could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements. The auditor has to apply
judgment in identifying whether a misstatement or omission is
material and to do so the auditor identifies a monetary amount as
"materiality for the financial statements as a whole".
The materiality for the financial statements as a whole was set
at GBP4,925,000. This has been calculated using a benchmark of the
Group's total assets (of which it represents approximately 1%)
which we believe is the most appropriate benchmark as total assets
are considered to be one of the principal considerations for
members of the Company in assessing the financial performance of
the Group.
We agreed with the audit committee to report to it all corrected
and uncorrected misstatements we identified through our audit with
a value in excess of GBP246,000, in addition to other audit
misstatements below that threshold that we believe warranted
reporting on qualitative grounds.
The Group audit team performed the audit of the Group as if it
was a single operating entity based on the aggregated set of
financial information for the Group. The audit was performed using
the materiality levels set out above and covered 100% of total
Group income, 100% of Group total comprehensive income before
taxation and 100% of total Group assets and liabilities.
Our assessment of materiality has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Whilst the audit process is designed to provide reasonable
assurance of identifying material misstatements or omissions it is
not guaranteed to do so. Rather we plan the audit to determine the
extent of testing needed to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements does not exceed materiality for the financial
statements as a whole. This testing requires us to conduct
significant depth of work on a broad range of assets, liabilities,
income and expense as well as devoting significant time of the most
experienced members of the audit team, in particular the
Responsible Individual, to subjective areas of the accounting and
reporting process.
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Board of Directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Disclosures of principal risks
Based on the knowledge we acquired during our audit, we have
nothing material to add or draw attention to in relation to:
-- the directors' longer term viability statement, concerning
the principal risks, their management, and, based on that, the
directors' assessment and expectations of the company's continuing
in operation over the three year period ending 30 June 2019; or
-- the disclosures in note 2b of the financial statements
concerning the use of the going concern basis of accounting.
Matters on which we are required to report by exception
Under International Standards on Auditing [ISAs] (UK and
Ireland) we are required to report to you if, based on the
knowledge we acquired during our audit, we have identified other
information in the Annual Report that contains a material
inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise
misleading.
In particular, we are required to report to you if:
-- we have identified material inconsistencies between the
knowledge we acquired during our audit and the Directors' statement
that they consider that the Annual Report and financial statements
taken as a whole is fair, balanced and understandable and provides
the information necessary for members to assess the Group's
performance, business model and strategy; or
-- the Report of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee.
Under the Companies (Guernsey) Law, 2008, we are required to
report to you if, in our opinion:
-- the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Under the Listing Rules we are required to review the part of
the Corporate Governance Statement relating to the Company's
compliance with the eleven provisions of the UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope of report and responsibilities
The purpose of this report and restrictions on its use by
persons other than the Company's members as a body
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008 and, in respect of any further matters on which we have agreed
to report, on terms we have agreed with the Company. Our audit work
has been undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditor's
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 and the Company's members, as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit, and express
an opinion on, the financial statements in accordance with
applicable law and ISAs (UK and Ireland). Those standards require
us to comply with the UK Ethical Standards for Auditors.
Neale D Jehan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
3 October 2016
The maintenance and integrity of the Bluefield Solar Income Fund
Limited website is the responsibility of the directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the financial statements or
audit report since they were initially presented on the
website.
Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Consolidated Statement of Financial Position
As at 30 June 2016
30 June 2016 30 June 2015
Note GBP GBP
------------------------------------------------------ ------ ------------------------------- ---------------------
ASSETS
Non-current assets
Financial assets held at fair value through profit or
loss 10 483,730,343 296,827,336
Trade and other receivables 12 1,137,255 244,444
Total non-current assets 484,867,598 297,071,780
------------------------------------------------------ ------ ------------------------------- ---------------------
Current assets
Trade and other receivables 12 2,558,646 2,880,513
Cash and cash equivalents 13 2,774,930 13,273,472
Total current assets 5,333,576 16,153,985
------------------------------------------------------ ------ ------------------------------- ---------------------
TOTAL ASSETS 490,201,174 313,225,765
------------------------------------------------------ ------ ------------------------------- ---------------------
LIABILITIES
Non-current liabilities
Interest bearing borrowings 7, 14 130,380,000 18,900,000
------------------------------------------------------ ------ ------------------------------- ---------------------
Total non-current liabilities 130,380,000 18,900,000
------------------------------------------------------ ------ ------------------------------- ---------------------
Current liabilities
Interest bearing borrowings 14 50,000,000 -
Other payables and accrued expenses 14 2,068,636 5,934,898
Total current liabilities 52,068,636 5,934,898
------------------------------------------------------ ------ ------------------------------- ---------------------
TOTAL LIABILITIES 182,448,636 24,834,898
------------------------------------------------------ ------ ------------------------------- ---------------------
NET ASSETS 307,752,538 288,390,867
------------------------------------------------------ ------ ------------------------------- ---------------------
EQUITY
Share capital 307,985,091 276,959,370
Other reserves 167,201 -
Retained earnings (399,754) 11,431,497
------ ------------------------------- ---------------------
TOTAL EQUITY 16 307,752,538 288,390,867
------------------------------------------------------ ------ ------------------------------- ---------------------
Ordinary Shares in issue at year end 16 309,631,765 278,417,224
------------------------------------------------------ ------ ------------------------------- ---------------------
Net asset value per Ordinary Share (pence) 9 99.39 103.58
------------------------------------------------------ ------ ------------------------------- ---------------------
These consolidated financial statements were approved and
authorised for issue by the Board of Directors on 3 October 2016
and signed on their behalf by:
Paul Le Page Laurence McNairn
Director Director
3 October 2016 3 October 2016
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2016
Year ended Year ended
30 June 2016 30 June 2015
Note GBP GBP
---------------------------------------------------------- ----- ------------------------------------ -------------
Income
Investment income 4 3,658,088 1,901,662
Interest income from cash and cash equivalents 10,899 165,413
---------------------------------------------------------- ----- ------------------------------------ -------------
3,668,987 2,067,075
Net gains and losses on financial assets held at fair
value through profit or loss 10 13,924,317 17,472,883
Operating income 17,593,304 19,539,958
---------------------------------------------------------- ----- ------------------------------------ -------------
Expenses
Administrative expenses 5 3,859,103 3,022,085
Transaction costs 6 1,882,950 571,576
------------------------------------ -------------
Operating expenses 5,742,053 3,593,661
---------------------------------------------------------- ----- ------------------------------------ -------------
Operating profit 11,851,251 15,946,297
---------------------------------------------------------- ----- ------------------------------------ -------------
Finance costs 7 3,185,107 795,538
---------------------------------------------------------- ----- ------------------------------------ -------------
Total comprehensive income before tax 8,666,144 15,150,759
Taxation 8 - -
---------------------------------------------------------- ----- ------------------------------------ -------------
Profit and total comprehensive income for the year 8,666,144 15,150,759
---------------------------------------------------------- ----- ------------------------------------ -------------
Attributable to:
Owners of the Company 8,666,144 15,150,759
Earnings per share:
Basic and diluted (pence) 15 2.92 6.71
---------------------------------------------------------- ----- ------------------------------------ -------------
All items within the above statement have been derived from
continuing activities.
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
Note Number of Share capital Other reserves Retained earnings Total equity
Ordinary Shares
GBP GBP GBP GBP
----------------------- ------ ----------------- -------------- --------------- ------------------ -------------
Shareholders' equity
at
1 July 2015 278,417,224 276,959,370 - 11,431,497 288,390,867
----------------------- ------ ----------------- -------------- --------------- ------------------ -------------
Shares issued during
the period:
30,098,639 Ordinary
Shares issued via
placing 16 30,098,639 30,700,612 - - 30,700,612
901,361 Ordinary
Shares issued via
offer 16 901,361 919,388 - - 919,388
Share issue costs 16 - (803,092) - - (803,092)
214,541 Ordinary
Shares issued in
settlement of
variable fee 16 214,541 208,813 - - 208,813
Ordinary shares to be
issued in settlement
of variable fee 16 - - 167,201 - 167,201
Dividends paid 16,17 - - - (20,497,395) (20,497,395)
Total comprehensive
income for the period - - - 8,666,144 8,666,144
Shareholders' equity
at
30 June 2016 309,631,765 307,985,091 167,201 (399,754) 307,752,538
----------------------- ------ ----------------- -------------- --------------- ------------------ -------------
For the year ended 30 June 2015
Note Number of Share capital Other reserves Retained earnings Total equity
Ordinary Shares
GBP 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 - (2,291,852) - - (2,291,852)
Shares issued as
consideration for SPV
investment 16 7,490,540 7,725,956 - - 7,725,956
Dividends paid 16,17 - - - (10,557,515) (10,557,515)
Total comprehensive
income for the period - - - 15,150,759 15,150,759
Shareholders' equity
at
30 June 2015 278,417,224 276,959,370 - 11,431,497 288,390,867
----------------------- ------ ----------------- -------------- --------------- ------------------ -------------
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 30 June 2016
Year ended Year ended
30 June 2016 30 June 2015
Note GBP GBP
------------------------------------------------------------------------- ----- -------------- ------------------
Cash flows from operating activities
Total comprehensive income for the year 8,666,144 15,150,759
Adjustments:
Increase in trade and other receivables (570,944) (2,005,316)
Increase in other payables and accrued expenses 1,148,338 69,230
Performance fee settled by issuance of shares 16 208,813 -
Movement in other reserves relating to Investment Adviser shares 16 167,201 -
Net gains on financial assets held at fair value through profit or loss 10 (13,924,317) (17,472,883)
Finance expense on revolving loan facility 7 2,287,032 96,592
Net cash outflow generated from operating activities (2,017,733) (4,161,618)
------------------------------------------------------------------------- --------------------- ------------------
Cash flows from investing activities
Purchase of financial assets held at fair value through profit or loss 10 (201,650,408) (140,101,912)
Cancellation of loan by SPV - 670,000
Receipts from SPV investments held at fair value through
profit or loss 10 23,657,118 8,938,331
Net cash used in investing activities (177,993,290) (130,493,581)
------------------------------------------------------------------------- ----- -------------- ------------------
Cash flow from financing activities
Proceeds from issue of Ordinary Shares 16 31,620,000 130,687,500
Issue costs paid 16 (803,092) (2,291,852)
Dividends paid 17 (20,497,395) (10,557,515)
Drawdown on revolving loan facility 14 193,580,000 38,400,000
Repayment of revolving loan facility - Capital 14 (32,100,000) (19,500,000)
Repayment of revolving loan facility - Interest 7 (2,287,032) (96,592)
Net cash generated from financing activities 169,512,481 136,641,541
------------------------------------------------------------------------- ----- -------------- ------------------
Net (decrease)/ increase in cash and cash equivalents (10,498,542) 1,986,342
Cash and cash equivalents at the start of the year 13,273,472 11,287,130
Cash and cash equivalents at the end of the year 13 2,774,930 13,273,472
------------------------------------------------------------------------- ----- -------------- ------------------
At 30 June 2015 purchase of financial assets at fair value
through profit and loss excludes an accrued amount of GBP5,014,599
and GBP7,725,956 where consideration for a SPV investment was
settled in shares.
At 30 June 2015 proceeds from issue of Ordinary Shares excludes
GBP7,725,956 in respect of shares issued as consideration for a SPV
investment.
The accompanying notes form an integral part of these
consolidated financial statements.
Notes to the Consolidated Financial Statements for the year
ended 30 June 2016
1. General information
The Company is a non-cellular company limited by shares and was
incorporated in Guernsey under the Law on 29 May 2013 with
registered number 56708 as a closed-ended investment company. It is
regulated by the GFSC.
The consolidated financial statements for the year ended 30 June
2016 comprise the financial statements of the Company and its
wholly owned subsidiary, BSIFIL, as at 30 June 2016.
The investment objective of the Group is to provide shareholders
with an attractive return, principally in the form of income
distributions, by investing via SPVs into a portfolio of large
scale UK based solar energy infrastructure assets.
The Group has appointed Bluefield Partners LLP as its Investment
Adviser.
2. Accounting policies
a) Basis of preparation
The consolidated financial statements included in this annual
report have been prepared in accordance with IFRS and the DTRs of
the UK FCA.
These consolidated financial statements have been prepared under
the historical cost convention with the exception of financial
assets measured at fair value through profit or loss, and in
accordance with the provisions of the Companies Law.
The principal accounting policies adopted are set out below.
Standards and Interpretations in issue and not yet
effective:
New Standards Effective
date
-------------- ------------------------------------------------ ----------
IFRS 9 Financial Instruments 1 January
2018
Revised and amended standards
---------------------------------------------------------------- ----------
IFRS 10 Investment Entities: Applying the Consolidation 1 January
Exception 2016
The Group has not early adopted these standards. The Board is
considering the impact of IFRS 9. In respect of the IFRS 10
amendments it is expected that future financial statements will be
prepared on an unconsolidated basis (See Note 3.).
b) Going concern
At 30 June 2016, the Company had invested in 73 solar plants,
committing GBP478.1 million. During the year, the Company entered
into a revised credit facility increasing the funds available from
GBP50 million under the original revolving loan facility to GBP200
million. As at 30 June 2016 GBP180.4 million was drawn down leaving
GBP19.6 million available. In accordance with the terms of this
facility GBP50.0 million is to be repaid on 20 January 2017. Post
year-end, this facility has been replaced by a long term financing
arrangement and new RCF as described particularly in the Chairman's
Statement and in the report of the Investment Adviser. These
resources, together with the net income generated by the acquired
projects, are expected to allow the Company to meet its liquidity
needs for the payment of operational expenses, dividends and
acquisition of new solar assets. The Company expects to comply with
the covenants of its long term loan and its revolving credit
facility.
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 the consolidated 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 the consolidated financial statements.
c) Accounting for subsidiaries
The Board has determined that the Company has all the elements
of control as prescribed by IFRS 10 in relation to all its
subsidiaries as the Company is effectively the sole shareholder in
all the subsidiaries, is exposed and has rights to the returns of
all subsidiaries and has the ability either directly or through the
Investment Adviser to affect the amount of its returns from all
subsidiaries.
The amendments to IFRS 10, IFRS 12 and IAS 27 were endorsed by
the EU on 20 November 2013, and had an effective date of 1 January
2014 with early adoption permitted. The Amendments introduced an
exception to the principle that controlled subsidiaries should be
consolidated. It defined an investment entity and required a parent
that is an investment entity to measure its subsidiaries at fair
value through profit or loss in accordance with IAS 39 'Financial
Instruments: Recognition and Measurement', rather than consolidate
the results of the subsidiaries on a line by line basis.
The Directors have assessed the position of the Group and are of
the opinion that the Group has all the typical characteristics of
an investment entity and the three essential criteria specified in
the standard.
The three essential criteria are such that the entity must:
-- obtain funds from one or more investors for the purpose of
providing these investors with professional investment management
services;
-- commit to its investors that its business purpose is to
invest its funds solely for returns from capital appreciation,
investment income or both; and
-- measure and evaluate the performance of substantially all of
its investments on a fair value basis.
In respect of the first essential criterion, typically an
investment entity would have several investors who pool their funds
to gain access to investment management services and investment
opportunities that they might not have had access to individually.
In accordance with the Company's Prospectus, typical investors of
the Company are generally institutional and sophisticated investors
due to the high capital costs, potential risk of capital loss,
limited liquidity of the underlying solar assets, long-term nature
of these assets and regulatory issues. The Company, being listed on
the Main Market of the London Stock Exchange, attracts investment
from a diverse group of external shareholders.
In respect of the second criterion, consideration is also given
to the time horizon of an investment. An investment entity should
not hold its investments indefinitely but should have an exit
strategy for their realisation. As the Group invests in underlying
solar assets that have an expected life of 25 years and as the
solar assets are expected to have no residual value after their 25
year life, the Directors consider that this demonstrates a clear
exit strategy from these investments.
In respect of the third criterion, the Group measures and
evaluates the performance of all of its investments on a fair value
basis. Subsidiaries are consolidated into the consolidated
financial statements when they provide investment management
services to the Company while all other subsidiaries and
investments are held at fair value through profit or loss (see Note
2 (k)(i)).
As such, the Directors have concluded that the Group satisfies
the criteria as disclosed above to be regarded as an investment
entity for the year ended 30 June 2016.
Consolidated subsidiary
The Company makes its investments in the SPVs through its
subsidiary, BSIFIL, in which it is the sole shareholder. The
Amendments require a subsidiary of an investment entity that
provides services that relate to the investment entity's activities
to be consolidated. The Board assessed the function of BSIFIL and
maintains that it provides investment related services because such
services are an extension of the operations of the Company. As such
at 30 June 2016, the Company consolidates the results of BSIFIL
which leads to BSIFIL's investments in the SPVs being represented
as financial assets held at fair value through profit or loss on
the consolidated statement of financial position date.
Where necessary, adjustments have been made to the financial
statements of BSIFIL to bring the accounting policies used into
line with those used by the Group. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
The results of BSIFIL during the year are included in the
consolidated statement of comprehensive income for the year. BSIFIL
results for the year ended 30 June 2016 have been included by
reference to management accounts drawn in line with the Group's
reporting period.
On 18 December 2014, the IASB issued further amendments to IFRS
10 (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
have been issued and are effective for annual periods beginning on
or after 1 January 2016. The Board's expectation is that these
amendments will apply to its financial statements in future, which
will be prepared on a non-consolidated basis.
Unconsolidated subsidiaries
The Group has not consolidated its equity interests in the SPVs
that invest in the solar projects. Accordingly, the Group's equity
interests in the SPVs are held for investment purposes and not as
operating vehicles and therefore it is the Group's interest in the
SPVs which constitute its investment assets, rather than each SPV's
investment in the solar project itself.
Note 11 discloses the financial support provided by the Group to
the unconsolidated SPV investments.
d) Functional and presentation currency
These consolidated financial statements are presented in
Sterling, which is the functional currency of the Company as well
as the presentation currency. The Group's funding, investments and
transactions are all denominated in Sterling.
e) Income
Consultancy services fee and monitoring fee income is recognised
on an accruals basis.
Interest income on cash and cash equivalents is recognised on an
accruals basis using the effective interest rate method.
f) Expenses
Operating expenses are the Group's costs incurred in connection
with the ongoing administrative costs and management of the Group's
investments. Operating expenses are accounted for on an accruals
basis.
Transaction costs arising from the acquisition of the Group's
investments that are recurring in nature and that would not be
recovered on the subsequent sale of the investment in an orderly
transaction (such as legal fees relating to due diligence and
technical reviews of the solar farms) are expensed in the
consolidated statement of comprehensive income. Transaction costs
that are intrinsically linked to the value of the investments (such
as legal fees relating to the contracts on the construction and
maintenance of solar assets, stamp duty fees relating to the leases
on the solar farms, insurance during construction and technical due
diligence on construction) are included in the cost of the
financial assets held at fair value through profit or loss at the
period end. All transaction costs relating to uncompleted
investment projects are expensed to the consolidated statement of
comprehensive income.
g) Finance costs
Finance costs are recognised in the consolidated statement of
comprehensive income in the period to which they relate on an
accruals basis using the effective interest rate method.
Arrangement fees for finance facilities are amortised over the
expected life of the facility.
h) Dividends
Dividends declared and approved are charged against equity. A
corresponding liability is recognised for any unpaid dividends
prior to year end. Dividends approved but not declared will be
disclosed in the notes to the consolidated financial
statements.
i) Segmental reporting
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 has considered the requirements of IFRS 8 'Operating
Segments', and is of the view that 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, and therefore the Group has only a single operating
segment.
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 consolidated financial statements.
The Board of Directors has overall management and control of the
Group and will always act in accordance with the investment policy
and investment restrictions set out in the Company's latest
Prospectus, which cannot be radically changed without the approval
of shareholders. The Board of Directors has delegated the
day-to-day implementation of the investment strategy to its
Investment Adviser but retains responsibility to ensure that
adequate resources of the Group are directed in accordance with
their decisions. Although the Board obtains advice from the
Investment Adviser, it remains responsible for making final
decisions in line with the Company's policies and the Board's legal
responsibilities.
j) Taxation
Current tax is the expected tax payable on the taxable income
for the period, using tax rates that have been enacted or
substantively enacted by the date of the consolidated statement of
financial position.
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements, except
for deferred income tax assets which are recognised only to the
extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward
tax credit or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an
undiscounted "in use" basis at the tax rates that are expected to
apply when the related asset is realised or liability is settled,
based on tax rates and laws enacted or substantively enacted at the
reporting date and the tax system elected by the Company.
BSIFIL is registered for UK VAT purposes with HM Revenue &
Customs. Recoverable VAT is included within receivables at year
end.
k) Financial instruments
Financial assets and financial liabilities are recognised in the
Group's consolidated statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
The Group offsets financial assets and financial liabilities if the
Group has a legally enforceable legal right to offset the
recognised amounts and interests and intends to settle on a net
basis or realise the asset and liability simultaneously.
Financial assets
The classification of financial assets depends on the nature and
purpose of the financial assets and is determined at the time of
initial recognition. All financial assets are initially measured at
fair value.
The Group has not classified any of its financial assets as
'held to maturity' or as 'available for sale'. The Group's
financial assets comprise of only financial assets held at fair
value through profit or loss, cash and loans and receivables.
i) Financial assets held at fair value through profit or loss
-- Classification
The Group has been classified as an investment entity and as
such its investments in the SPVs are held at fair value through
profit or loss and measured in accordance with the requirements of
IAS 39 (see Note 2 (c)).
-- Recognition
Investments made by the Group in the SPVs are initially
recognised at transaction price on the day the loan commitment is
drawn down. Transaction costs arising from the acquisition of the
investments in the SPVs that are recurring in nature and that would
not be expected to be recovered on a subsequent sale of the
investment are expensed to the consolidated statement of
comprehensive income. However, 'one-off' transaction costs that are
incurred by or on behalf of the SPVs in order to create future
cash-flows are intrinsically linked to the value of the investments
and as such are included in the cost of the financial assets held
at fair value through profit or loss (see Note 2 (f)).
-- Measurement
Subsequent to initial recognition, the investments in the SPVs
are measured at each subsequent reporting date at fair value. Gains
and losses resulting from the revaluation of investments in the
SPVs are recognised in the consolidated statement of comprehensive
income (see Note 10). The Group has elected to recognise all gains
and losses from financial assets held at fair value through profit
or loss as a single line in profit and loss. Fair value is
determined on an unleveraged, discounted cash-flow basis in
accordance with the IPEV Valuation Guidelines recognising any other
assets and liabilities of the SPV.
ii) Derecognition of financial assets
A financial asset (in whole or in part) is derecognised
either:
-- when the Group has transferred substantially all the risks and rewards of ownership; or
-- when it has neither transferred nor retained substantially
all the risks and rewards and when it no longer has control over
the assets or a portion of the asset; or
-- when the contractual right to receive cash-flow has expired.
iii) Cash and cash equivalents and trade and other
receivables
Cash and cash equivalents comprise cash on hand and short-term
deposits with an original maturity of three months or less that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value. Other receivables including
VAT recoverable are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
These financial assets are included in current assets, except for
maturities greater than twelve months after the reporting date,
which are classified as non-current assets. They are initially
recognised at fair value plus transaction costs that are directly
attributable to the acquisition, and subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
Financial liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics.
All financial liabilities are initially recognised at fair value
net of transaction costs incurred. All purchases of financial
liabilities are recorded on trade date, being the date on which the
Group becomes party to the contractual requirements of the
financial liability. Unless otherwise indicated the carrying
amounts of the Group's financial liabilities approximate to their
fair values.
The Group's financial liabilities consist of only financial
liabilities measured at amortised cost.
i) Financial liabilities measured at amortised cost
These include trade payables, borrowings and other short-term
monetary liabilities, which are initially recognised at fair value
and subsequently carried at amortised cost using the effective
interest rate method.
ii) Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Group has extinguished its contractual obligations, it expires
or is cancelled. Any gain or loss on derecognition is taken to
profit and loss.
l) Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised as the proceeds received, net of direct issue costs.
Direct issue costs include those incurred in connection with the
placing and admission which include fees payable under the Placing
Agreement, legal costs and any other applicable expenses.
m) Share based payments
Directors' fees
As disclosed in Note 19, the Directors elected to receive their
Directors' fees for the first two years, from the date of their
appointment, through an issue of Ordinary Shares, which were
allotted and issued at the initial issue price. For all Directors
this two year period had completed by 30 June 2015 and Directors
are now remunerated for their services in cash.
Investment Adviser's variable fee
The Group recognises the variable fee for the services received
in a share-based payment transaction as the Group becomes liable to
the variable fee on an accruals basis. The variable fee will be
accrued in the accounting period in which the Company exceeds its
target distribution as per the Investment Advisory Agreement (see
Note 5). A corresponding increase in equity is recognised when
payment for the variable fee is made in an equity settled share
based payment transaction based on the fair value of the services
provided.
3. Critical accounting judgements, estimates and assumptions in
applying the Group's accounting policies
The preparation of the consolidated 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
consolidated financial statements has been identified as the risk
of misstatement of the valuation of the SPV investments (see Note
10). Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future period
affected.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future period
if the revision affects both current and future periods.
Following the adoption of the Amendments, the Board has
determined, and continues to hold the view, that the Company
satisfies the criteria to be regarded as an investment entity and
that the Company, together with BSIFIL, which also serves as a
holding company for the Group's investments in the SPVs, provides
investment related services. This determination involves a degree
of judgement due to the complexity within the wider structure of
the Group and the investments in the SPVs (see Note 2 (c)). As
disclosed in Note 2 (c), the Board has determined the unit of
account to be the Group's interest in the SPV rather than the SPV's
investments in the solar projects. Additionally, as the investments
in the SPVs consist of both debt and equity investments, judgement
has been applied to the unit of account for the measurement of
these investments.
On 18 December 2014, the IASB issued further amendments to IFRS
10 (Investment Entities: Applying the Consolidation Exception)
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 Company continues to consolidate its
results with BSIFIL in these financial statements. The Board
however expects BSIFIL to be classified as an Investment Entity. In
this case the presentation of the financial statements will change.
The implication of this change is that BSIFIL, the Company's
single, direct subsidiary through which investments are purchased,
which is currently consolidated on a line-by-line basis into the
Company's financial statements, would no longer be consolidated but
rather measured at fair value. Whilst this change does not affect
the Group's Net Assets, BSIFIL's cash, debt and working capital
balances would now be included in the fair value of investments as
opposed to their respective category in the Statement of Financial
Position.
The Group continues to consolidate BSIFIL and holds all SPV
investments at fair value. The net assets of BSIFIL, which at 30
June 2016 principally comprise cash and working capital balances in
addition to the SPV investments, would be required to be included
in the carrying value of the financial assets held at fair value
through profit or loss. This change would not materially affect the
Group's net assets. At 30 June 2016, BSIFIL's cash and working
capital balances are not included in the fair value of the
financial assets held at fair value through profit or loss and are
presented within the Group's net assets.
4. Investment income
Year ended Year ended
30 June 2016 30 June 2015
GBP GBP
Consultancy services fee income (Note 19) 2,564,937 1,901,662
Monitoring fee in relation to loans supplied (Note 19) 1,093,151 -
------------- -------------
3,658,088 1,901,662
============= =============
BSIFIL has entered into consultancy agreements with each SPV for
the provision of ongoing 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.
BSIFIL also provided monitoring and loan administration services
to SPVs, for which an annual fee is charged, payable in arrears.
The fee recorded in 2016 also reflects fees in respect of 2014 and
2015 due to amendments to some contracts. Fees in respect of 2014
and 2015 have been paid.
Generation income earned by the solar plants within each SPV is
included in the fair value calculation of each SPV entity as
described in Note 10.
5. Administrative expenses
Year ended Year ended
30 June 2016 30 June 2015
GBP GBP
--------------------------------------------------------------------------- ------------- -------------
Investment advisory fees (including technical services fee - see Note 19) 2,832,232 2,007,666
Legal and professional fees 153,971 275,934
Administration fees 286,316 287,424
Directors' remuneration 169,733 145,599
Audit fees 109,925 61,398
Non-audit fees* 12,938 10,661
Broker fees 50,009 52,032
Regulatory Fees 37,809 25,511
Registrar fees 29,719 25,177
Insurance 62,368 56,891
Listing fees 18,068 18,004
Other expenses 96,015 55,788
3,859,103 3,022,085
============= =============
*Note: 2016 excludes GBP46,575 of non-audit fees in relation to
the placing and offer in December 2015 which were deducted from the
placing proceeds. 2015 excluded GBP62,100 of non-audit fees in
relation to the placing in November 2014, which likewise were
deducted from the placing proceeds.
Investment Advisory Agreement
The Group and the Investment Adviser have entered into an
Investment Advisory Agreement, dated 24 June 2013, pursuant to
which the Investment Adviser has been given overall responsibility
for the non-discretionary management of the Group's (and any of the
Group's SPVs) assets (including uninvested cash) in accordance with
the Group's investment policies, restrictions and guidelines. Under
the terms of the Investment Advisory Agreement, the Investment
Adviser is entitled to a combination of a base fee and variable
fee. The base fee is payable quarterly in arrears in cash, at a
rate equivalent to 1% per annum of
the NAV up to and including GBP100,000,000, 0.80% per annum of
the NAV above GBP100,000,000 and up to and including GBP200,000,000
and 0.60% per annum of the NAV above GBP200,000,000. The base fee
will be calculated on the NAV reported in the most recent quarterly
NAV calculation as at the date of payment. The variable fee is
based on the following:
(i) if in any year (excluding the Company's first financial
year), the Company exceeds its distribution target of 7 pence per
Ordinary Share per year which will rise with the annual RPI in 2016
and onwards, the Investment Adviser will be entitled to a variable
fee equal to 30% of the excess, subject to a maximum variable fee
in any year equal to 1% of the NAV as at the end of the relevant
financial year. The variable fee shall be satisfied either by the
issue of Ordinary Shares to the Investment Adviser at an issue
price equal to the prevailing NAV per Ordinary Share; acquisition
of Ordinary Shares held in treasury; or purchase of
Ordinary Shares in the market. The Ordinary Shares issued to the
Investment Adviser will be subject to a three year lock-up period,
with one-third of the relevant shares becoming free from the
lock-up on each anniversary of their issue.
(ii) if in any year (excluding the Company's first financial
year), the Company fails to achieve its distribution target of 7
pence per Ordinary Share per year which will rise with the annual
RPI in the third year, the Investment Adviser will repay its base
fee in proportion by which the actual annual distribution per
Ordinary Share is less than the target distribution, subject to a
maximum repayment in any year equal to 35% of the base fee
calculated prior to any deduction being made. The repayment will be
split equally across the four quarters in the following financial
year and will be set off against the quarterly management fees
payable to the Investment Adviser in that following financial
year.
On 11 June 2014, BSIFIL entered into a Technical Services
Agreement with the Investment Adviser, with a retrospective
effective date of 25 June 2013 in order to delegate the provision
of the consultancy services to the Investment Adviser in its
capacity as technical adviser to the SPVs. On the same date, 11
June 2014, the Group entered into a base fee offset arrangement
agreement, whereby the aggregate technical services fee and base
fee payable (under the Investment Advisory Agreement) shall not
exceed the base fee that would otherwise have been payable to the
Investment Adviser in accordance with the Investment Advisory
Agreement had no fees been payable under Technical Services
Agreement.
In the event that the Investment Adviser becomes liable to pay
the variable fee repayment amount, the Investment Adviser shall be
liable to pay such amount regardless of whether or not the base fee
previously paid to it under the Investment Advisory Agreement had
been reduced by virtue of the application of the set off
arrangements as outlined on the base fee offset arrangement
agreement dated 11 June 2014.
The fees incurred for the period and the amount outstanding at
the period end have been disclosed in Note 19.
Administration Agreement
The Administrator has been appointed to provide day-to-day
administration and company secretarial services to the Company, as
set out in the Administration Agreement dated 24 June 2013.
Under the terms of the Administration Agreement, the
Administrator is entitled to an annual fee, at a rate equivalent to
10 basis points of NAV up to and including GBP100,000,000, 7.5
basis points of NAV above GBP100,000,000 and up to and including
GBP200,000,000 and 5 basis points of the NAV above GBP200,000,000,
subject to a minimum fee of GBP100,000 per annum. The fees are for
the administration, accounting, corporate secretarial services,
corporate governance, regulatory compliance and stock exchange
continuing obligations provided to the Company. In addition, the
Administrator will receive an annual fee of GBP5,000 and GBP2,500
for the provision of a compliance officer and money laundering
reporting officer respectively.
The Administrator will also be entitled to an investment related
transaction fee charged on a time spent basis, which is capped at a
total of GBP5,000 per investment related transaction. All
reasonable costs and expenses incurred by the Administrator in
accordance with this agreement are reimbursed to the Administrator
quarterly in arrears.
The fees incurred for the period and the amount outstanding at
the period end have been disclosed in Note 19.
6. Transaction costs
Year ended Year ended
30 June 2016 30 June 2015
GBP GBP
----------------------------------- ------------- -------------
Completed investment acquisitions 1,869,214 614,546
Other investment acquisitions 13,736 (42,970)
------------- -------------
1,882,950 571,576
============= =============
7. Finance costs
Year ended Year ended
30 June 2016 30 June 2015
GBP GBP
-------------------- ------------- -------------
Arrangement fees 659,524 266,667
Loan facility fees 238,551 432,279
Loan interest 2,287,032 96,592
------------- -------------
3,185,107 795,538
============= =============
On 11 June 2014, the Group entered into a three-year revolving
acquisition facility for up to GBP50 million with RBS, which
expires on 10 June 2017. This facility has been secured against the
Group's assets through a debenture agreement entered into as part
of the facility. This facility includes a working capital element
and will provide the Group with a flexible source of funding to
make additional acquisitions of solar energy assets in the UK. The
facility is subject to an interest rate margin over LIBOR of 2.25%
and an arrangement fee of 1.6% over the total commitment, secured
against the Group's existing assets (see Note 10). The arrangement
fee is to be amortised over the three year term of the loan
facility. The Group is required to meet certain financial
covenants, the most significant of which is maintaining a forecast
and historic interest cover ratio above 3.5:1 and a leverage ratio
of not greater than 0.35:1.
On 21 January 2016 the original three-year revolving acquisition
facility detailed above was amended and restated. The revised
credit facility increases the funds available from GBP50 million to
GBP200 million and is being provided by RBS and Investec. At 30
June 2016, the Group had drawn down an amount totalling GBP180.4
million on this facility (2015: GBP18.9 million on the original
facility). The facility is divided into three tranches, the details
of which are shown below:
Tranche A Tranche B Tranche C
------------- ---------------- ------------- -------------------
Amount GBP50m GBP100m GBP50m
------------- ---------------- ------------- -------------------
Type Term Loan Term Loan Revolving Facility
------------- ---------------- ------------- -------------------
Margin (over 190 bps 210 bps 210 bps
LIBOR)
------------- ---------------- ------------- -------------------
Tenor 20 January 2017 30 September 30 September
2017 2017
------------- ---------------- ------------- -------------------
As at 30 June 2016 GBP272.6 million of the Group's assets have
been pledged as security against the Group's revised credit
facility. At 30 June 2015 GBP111.8 million of the Group's assets
had been pledged as security against the Group's original
three-year revolving acquisition facility.
Leverage as at 30 June 2016 is 37.17% (2015: 6.15%) calculated
by the commitment method and 37.38% (2015: 6.43%) calculated by the
gross method.
Post year end, on 27 September 2016, GBP187 million long term
financing was agreed with Aviva Investors. This is held at the
Company level in two tranches, a GBP121.5 million fixed price loan
at 2.875% interest and a GBP65.5 million index linked element at 70
basis points linked to RPI. The loans are for 18 years and are
fully amortising.
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 GBP1,200 (2015: GBP1,200) (included within regulatory
fees).
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 is
20%. This is due to decrease to 19% in 2017 and to 18% by 2020.
At the year end, BSIFIL had taxable profits of GBP23,297,344
(2015: GBP12,944,738) 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 consolidated
statement of comprehensive income is nil.
9. Net asset value per Ordinary Share
The calculation of NAV per Ordinary Share is based on NAV of
GBP307,752,538 (2015: GBP288,390,867) and the number of shares in
issue at 30 June 2016 of 309,631,765 (2015: 278,417,224) Ordinary
Shares.
10. Financial assets held at fair value through profit or
loss
The Group's accounting policy on the measurement of these
financial assets is discussed in Note 2 (k) and below.
30 June 2016 30 June 2015
Total Total
GBP GBP
----------------------------------------------------------------------------- --------------------- ----------------
Opening balance (Level 3) 296,827,336 136,120,317
Additions 196,635,808 152,842,467
Cancellation of loan by SPV - (670,000)
Change in fair value of financial assets held at fair value through profit
or loss (9,732,801) 8,534,552
--------------------- ----------------
Closing balance (Level 3) 483,730,343 296,827,336
===================== ================
Analysis of net gains and losses on financial assets held at fair value through profit or
loss
(per consolidated statement of comprehensive income)
----------------------------------------------------------------------------------------------------------------------
Change in fair value of financial assets held at fair value
through profit or loss
Total unrealised gain in fair value of financial assets held at fair value
through profit
or loss 6,505,412 9,124,540
Total unrealised loss in fair value of financial assets held at fair value
through profit
or loss (16,238,213) (589,988)
---------------------------- -----------
(9,732,801) 8,534,552
Receipts from SPV investments held at fair value through profit or loss 23,657,118 8,938,331
---------------------------- -----------
13,924,317 17,472,883
============================ ===========
As at 30 June 2016 GBP272.6 million of the Group's assets have
been pledged as security against the Group's revised credit
facility. At 30 June 2015 GBP111.8 million of the Group's assets
had been pledged as security against the Group's original
three-year revolving acquisition facility (see Note 7).
Fair value measurements
IFRS 13 'Fair Value Measurement' requires disclosure of fair
value measurement by level. The level of fair value hierarchy
within the financial assets or financial liabilities is determined
on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities
are classified in their entirety into only one of the three
levels.
The fair value hierarchy has the following 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 SPV
investments held by the Group, 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 (see Note 2 (k)).
Transfers during the period
There have been no transfers between levels during the year
ended 30 June 2016. Any transfers between the levels will be
accounted for on the last day of each financial period. Due to the
nature of the investments, these are always expected to be
classified as Level 3.
Valuation methodology and process
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. However,
in every third year the Board will have an external valuation
performed by an experienced independent third party. Such an
external valuation was undertaken by an independent valuer for the
year ended 30 June 2015.
The Board reviews and considers the fair value arrived at by the
valuer before incorporating into the fair value of the investments
adopted by the Group. As all the underlying solar plants are fully
operational, the discounted cash-flow technique was applied in
appraising each SPV's solar project. This method identifies the
inputs that have the most significant impact on the carrying value
of the investments which include the discount rate, electricity
price forecasts, the amount of electricity the solar assets are
expected to produce and inflation rate on related costs.
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, level of leverage and inflation rate. 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 Board in arriving at the appropriate
WACC used by the Group.
The Board's selection of an equity discount rate reflects the
fact that during the period, whilst power prices have decreased the
acquisition prices of income generating assets have remained stable
in the experience of the Investment Adviser. The Directors,
therefore, do not consider there to be a significant change in the
sector and have chosen to apply the same equity discount rate as at
30 June 2015 and 31 December 2015 of 7.5%.
The Company's business plan at the time of the IPO, and recent
prospectus of 26 October 2015, noted that the Company intends to
use long-term structured debt as well as equity with a target
long-term leverage of 25-35% of GAV. Accordingly, the Group has
assumed 30% debt with an interest rate of 4.5% - this is based on
taking a prudent view of current market conditions. A 18 year
maturity is assumed for debt. These together give a WACC of 6.60%.
The inclusion of debt in the generation of a WACC was first applied
to the valuation for the Company's Interim financial statements at
31 December 2015.
Long term power price forecasts are obtained from a leading
power forecaster, which are reviewed and adjusted by the valuer, as
required, 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.
Related revenue (for associated FiTs and ROCs 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 2015: 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 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 2015: 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.
30 June 2016 30 June 2015
--------------------------------------------- ---------------------------------
Change in fair
Change in fair value Change in NAV value Change in NAV
of investments per share of investments per share
Input Change in input GBP (pence) GBP (pence)
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
Discount rate + 0.5% (13,800,000) (4.48) (11,800,000) (4.20)
------------------
- 0.5% 13,900,000 4.52 12,100,00 4.30
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
Cost of debt +1.5% (17,600,000) (5.72) - -
------------------
-1.5% 18,600,000 6.04 - -
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
Power prices +10% 22,500,000 7.31 15,300,000 5.50
------------------
-10% (22,600,000) (7.34) (15,300,00) (5.50)
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
Inflation rate + 0.25% 9,400,000 3.05 6,000,000 2.20
------------------
- 0.25% (9,200,000) (2.99) (5,900,000) (2.11)
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
Energy yield 10 year P90 (38,700,000) (12.58) (26,100,00) (9.40)
------------------
10 year P10 36,200,000 11.76 26,000,000 9.40
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
Operational costs +10% (7,800,000) (2.53) (6,700,000) (2.40)
-10% 7,800,000 2.53 6,700,000 2.40
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
Tax Rate +25% (11,100,000) (3.61) (9,700,000) (3.50)
-25% 11,100,000 3.61 9,700,000 3.50
------------------ ---------------- ----------------------- -------------------- ----------------- --------------
11. Financial support to unconsolidated SPV investments
The following table shows the SPV investments of the Group which
have not been consolidated in the preparation of these consolidated
financial statements as the Group has adopted the investment entity
exemption referred to Note 2 (c):
Project SPV Investments Date of investment Site location Ownership Interest
--------------------------- --------------------------- -------------------- ----------------- -------------------
Goosewillow ISP (UK) 1 Limited 5 August 2013 Oxfordshire 100%
=========================== =========================== ==================== ================= ===================
30 August 2013 /
Hardingham Hardingham Solar Limited 19 November 2014 Norfolk 100%
=========================== =========================== ==================== ================= ===================
North Beer North Beer Solar Limited 10 October 2013 Cornwall 100%
=========================== =========================== ==================== ================= ===================
Hill Farm HF Solar Limited 21 October 2013 Oxfordshire 100%
=========================== =========================== ==================== ================= ===================
Saxley Saxley Solar Limited 19 December 2013 Hampshire 100%
=========================== =========================== ==================== ================= ===================
Betingau Betingau Solar Limited 23 December 2013 Glamorgan 100%
=========================== =========================== ==================== ================= ===================
Hall Farm Hall Solar Limited 24 December 2013 Norfolk 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 Cambridgeshire 100%
=========================== =========================== ==================== ================= ===================
Capelands Solar Farm
Capelands Limited 25 July 2014 Devon 100%
=========================== =========================== ==================== ================= ===================
Redlands Solar Farm
Redlands Limited 25 July 2014 Somerset 100%
=========================== =========================== ==================== ================= ===================
Bluefield L&P Solar
L&P Solar Limited* 9 October 2014 Various 100%
=========================== =========================== ==================== ================= ===================
Ashlawn Ashlawn Farm Limited 3 December 2014 Somerset 100%
=========================== =========================== ==================== ================= ===================
Rove WEL Solar Park 1 Limited 23 December 2014 Wiltshire 100%
=========================== =========================== ==================== ================= ===================
Elms WEL Solar Park 2 Limited 11 February 2015 Oxfordshire 100%
=========================== =========================== ==================== ================= ===================
West Raynham West Raynham Solar Limited 26 March 2015 Norfolk 100%
=========================== =========================== ==================== ================= ===================
Trethosa Trethosa Solar Limited 24 July 2015 Cornwall 100%
=========================== =========================== ==================== ================= ===================
Salhouse Salhouse Solar Limited 24 July 2015 Norfolk 100%
=========================== =========================== ==================== ================= ===================
Bluefield Peregrine
Limited and Bluefield
Rhydy Pandy (see Note 19) Kite Limited 21 August 2015 Various 100%
=========================== =========================== ==================== ================= ===================
Frogs Loke Frogs Loke Solar Limited 17 December 2015 Norfolk 100%
=========================== =========================== ==================== ================= ===================
Folly Lane Folly Lane Solar Limited 17 December 2015 Lincolnshire 100%
=========================== =========================== ==================== ================= ===================
Bunns Hill Bunns Hill Solar Limited 18 December 2015 Norfolk 100%
=========================== =========================== ==================== ================= ===================
Rookery Rookery Solar Limited 18 January 2016 Norfolk 100%
=========================== =========================== ==================== ================= ===================
Grange Grange Solar Limited 31 January 2016 Gloucestershire 100%
=========================== =========================== ==================== ================= ===================
Tollgate Tollgate Solar Limited 27 January 2016 Warwickshire 100%
=========================== =========================== ==================== ================= ===================
Southwick Solar Farm
Mikado 1 Limited** 22 January 2016 Hampshire 100%
=========================== =========================== ==================== ================= ===================
Littlebourne Solar Farm
Limited, Pashley Solar
Farm Limited, Molehill PV
Mikado 2 Farm Limited 22 January 2016 Kent and Sussex 100%
=========================== =========================== ==================== ================= ===================
Romsey Romsey Solar Limited 10 February 2016 Hampshire 100%
=========================== =========================== ==================== ================= ===================
Oulton Oulton Solar Limited 10 February 2016 Norfolk 100%
=========================== =========================== ==================== ================= ===================
Bluefield Harrier
Burnaston (see Note 19) Limited*** 15 April 2016 Derby 100%
--------------------------- --------------------------- -------------------- ----------------- -------------------
*Bluefield L&P Solar includes underlying SPVs; KS SPV5
Limited and Bluefield Goshawk Limited.
** Southwick Solar Farm Limited is the corporate member of
Welborne Energy LLP.
***Bluefield Harrier Limited includes the underlying SPV New
Energy Business Solar 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:
As at 30 June 2016 Shareholder loan Project Outstanding commitment 30
investment June 2016
Equity commitment
Project SPV GBP GBP GBP GBP
HF Solar
Hill Farm Limited 1 17,249,999 17,250,000 -
Hardingham
Hardingham Solar Limited 1 22,649,999 22,650,000 -
Betingau Solar
Betingau Limited 1 11,154,999 11,155,000 12,555
ISP (UK) 1
Goosewillow Limited 10 18,909,990 18,910,000 -
Hall Solar
Hall Farm Limited 1,316,592 12,003,479 13,320,071 4,008
North Beer
North Beer Solar Limited 1,000 9,299,000 9,300,000 -
Saxley Solar
Saxley Limited 1 6,949,999 6,950,000 -
Sheppey Solar
Sheppey Limited 1 11,949,999 11,950,000 -
Solar Power
Pentylands Surge Limited 780,143 20,569,990 21,350,133 -
Hoback Solar
Hoback Limited 1,731,800 17,218,200 18,950,000 -
Bluefield L&P
L&P * Solar Limited 3,653,624 4,591,313 8,244,937 -
Capelands
Solar Farm
Capelands Limited 100 8,569,900 8,570,000 -
Redlands Solar
Redlands Farm Limited 100 6,319,900 6,320,000 -
Ashlawn Farm
Ashlawn Limited 1 7,549,999 7,550,000 -
WEL Solar Park
Rove 1 Limited 1 13,949,999 13,950,000 -
WEL Solar Park
Elms 2 Limited 2 32,699,999 32,700,001 -
West Raynham
West Raynham Solar Limited 7,012,275 47,332,744 55,545,019 -
Trethosa Solar
Trethosa Limited 3 5,724,997 5,725,000 -
Salhouse Solar
Salhouse Limited 100 5,557,900 5,558,000 -
Bluefield
Peregrine
Limited and
Rhydy Pandy Bluefield
(see Note 19) Kite Limited 1 4,199,999 4,200,000 -
Frogs Loke
Frogs Loke Solar Limited 748,210 4,813,790 5,562,000 74,650
Bunns Hill
Bunns Hill Solar Limited 1 5,290,999 5,291,000 207,312
Folly Lane
Folly Lane Solar Limited 1 5,233,999 5,234,000 164,290
Rookery
Rookery Limited 1 5,103,252 5,103,253 202,150
Grange Grange Limited 495,001 4,864,280 5,359,282 96,574
Tollgate Solar
Tollgate Limited 1 4,584,344 4,584,345 172,818
Southwick
Solar Farm
Mikado 1 Limited 3,026,254 57,433,562 60,459,816 -
Littlebourne
Solar Farm
Limited,
Pashley Solar
Farm Limited,
Molehill PV
Mikado 2 Farm Limited 2,906,292 57,017,853 59,924,145 -
Romsey Romsey Limited 1 5,761,372 5,761,373 227,455
Oulton Solar
Oulton Limited 1 5,218,098 5,218,099 -
Bluefield
Burnaston (see Harrier
Note 19) Limited 6,230,308 8,019,693 14,250,001 22,092
27,901,828 447,793,647 476,895,475 1,183,904
-------------------------------- -------------- ------------------- ------------------ --------------------------
*See Notes 16 and 19
Project Investment Commitment excludes transaction costs
incurred by Bluefield SIF Investments Limited
As at 30 June 2015 Shareholder loan Project Outstanding commitment 30
investment June 2015
Equity commitment
Project SPV GBP GBP GBP GBP
Hill Farm HF Solar Limited 1 17,249,999 17,250,000 -
Hardingham Solar
Hardingham Limited 1 22,649,999 22,650,000 -
Betingau Solar
Betingau Limited 1 11,154,999 11,155,000 12,434
ISP (UK) 1
Goosewillow Limited 10 18,909,990 18,910,000 -
Hall Solar
Hall Farm Limited 1,316,592 12,003,479 13,320,071 -
North Beer Solar
North Beer Limited 1,000 9,299,000 9,300,000 -
Saxley Solar
Saxley Limited 1 6,949,999 6,950,000 -
Sheppey Solar
Sheppey Limited 1 11,949,999 11,950,000 -
Solar Power
Pentylands Surge Limited 780,143 20,569,990 21,350,133 133
Hoback Solar
Hoback Limited 1,731,800 17,218,200 18,950,000 1,688
Bluefield L&P
L&P Solar Limited 3,653,624 4,591,313 8,244,937 -
Capelands Solar
Capelands Farm Limited 100 8,569,900 8,570,000 -
Redlands Solar
Redlands Farm Limited 100 6,319,900 6,320,000 -
Ashlawn Farm
Ashlawn Limited 1 7,549,999 7,550,000 -
WEL Solar Park 1
Rove Limited 1 13,949,999 13,950,000 -
WEL Solar Park 2
Elms Limited 2 32,699,998 32,700,000 -
West Raynham
West Raynham Solar Limited 5,014,600 45,228,599 50,243,199 5,285,454
12,497,978 266,865,362 279,363,340 5,299,709
-------------------------------- -------------- ------------------- ------------------ --------------------------
The Group's SPVs are committed to pay amounts equal to the loan
commitment 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. At 30 June 2016, the
amounts drawn down by the SPVs are not equal to the loan commitment
due to timing differences, which will be settled in due course.
12. Trade and other receivables
30 June 2016 30 June 2015
GBP GBP
------------------------------------------------------------------------------ ------------- -------------
Non-current assets
Prepayments:
- Arrangement fees (Note 7) 196,429 244,444
- Arrangement costs (Note 7) 35,957 -
- Costs associated with long-term debt financing (Note 7) 904,869 -
------------- -------------
1,137,255 244,444
============= =============
Current assets
------------------------------------------------------------------------------ ------------- -------------
Income receivable from consultancy services and monitoring fees (see Note 4) 1,157,034 541,893
Short term loan to SPV - 1,656,105
VAT receivable 64,678 300,057
Interest receivable 109 100
Trade debtors 28,599 40,175
Other receivables 24,135 2,681
Prepayments:
- Arrangement fees on loan facilities (Note 7) 1,030,159 266,667
- Arrangement costs on loan facilities (Note 7) 188,136 -
- Costs associated with long-term debt financing 48,693 -
- Insurance 241 54,609
- Other 16,862 18,226
------------- -------------
2,558,646 2,880,513
============= =============
The short term loan to SPV in 2015 related to a payment of VAT
by BSIFL on behalf of the West Raynham project was payable on
demand and has been repaid in the current year.
BSIFIL had been engaged with HM Revenue and Customs regarding
the recovery of VAT however on 16 July 2015 HMRC confirmed that
they no longer wished to challenge BSIFIL's VAT recovery
status.
There are no material past due or impaired receivable balances
outstanding at the year end.
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.
30 June 2016 30 June 2015
GBP GBP
--------------------------- ------------- -------------
Cash and cash equivalent:
* Committed 2,383,904 10,300,054
- Uncommitted 391,026 2,973,418
------------- -------------
2,774,930 13,273,472
============= =============
Committed cash and cash equivalents consist of amounts expected
to be utilised to meet the Group's commitments.
14. Interest bearing borrowings, other payables and accrued
expenses
30 June 2016 30 June 2015
GBP GBP
----------------------------------------------------------------- ----------------- -----------------
Non-current liabilities
Interest bearing borrowings
Opening balance 18,900,000 -
Drawdown during the period 143,580,000 38,400,000
Repaid during the period (32,100,000) (19,500,000)
130,380,000 18,900,000
================= =================
As disclosed in Note 7, on 21 January 2016 the Group entered into a revised credit facility
for up to GBP200 million, of which GBP180.4 million had been drawn down at the year end. GBP50.0
million is repayable within 12 months and is reflected within current liabilities.
Current liabilities
Interest bearing borrowings
Opening balance - -
Drawdown during the period 50,000,000 -
Repaid during the period - -
----------------- -----------------
50,000,000 -
================= =================
Other payables and accrued expenses
Deferred consideration - SPV investment - 5,014,599
Investment advisory fees 201,601 573,432
Legal and professional fees - 14,688
Administration fees 66,130 56,707
Audit fees 96,000 55,000
Other payables 242,768 220,472
Costs associated with long-term debt financing 900,840 -
Acquisition expenses 561,297 -
2,068,636 5,934,898
================= =================
The deferred consideration for SPV investment payable at 30 June
2015 related to the West Raynham project. This was paid on 3 July
2015.
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
Year ended Year ended
30 June 2016 30 June 2015
-------------------------------------------------------------------------------------- -------------- --------------
Profit attributable to shareholders of the Company GBP8,666,144 GBP15,150,759
Weighted average number of Ordinary shares in issue 296,449,672 225,817,646
Basic and diluted earnings from continuing operations and profit for the year (pence) 2.92 6.71
============== ==============
For the calculation of Earnings per Share at 30 June 2016 the
shares earned by the Investment Adviser but not yet issued have
been included in the calculation of the weighted average number of
shares based upon them being issued at the end of the year in which
they were earned.
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.
Year ended Year ended
Number of Ordinary Shares 30 June 2016 30 June 2015
Number Number
------------------------------------------------------------------ -------------- --------------
Opening balance 278,417,224 143,426,684
Shares issued as consideration for SPV investment (Notes 11, 19) - 7,490,540
Shares issued for cash 31,000,000 127,500,000
Shares issued as settlement of variable fee 214,541 -
Closing balance 309,631,765 278,417,224
============== ==============
Year ended Year ended
Shareholders' Equity 30 June 2016 30 June 2015
GBP GBP
----------------------------------------------------------------- -------------- --------------
Opening balance 288,390,867 147,676,019
Shares issued as consideration for SPV investment (Notes 11,19) - 7,725,956
Shares issued for cash 31,620,000 130,687,500
Share issue costs (803,092) (2,291,852)
Shares issued as settlement of variable fee 208,813 -
Shares to be issued as settlement of variable 167,201 -
Dividends paid (20,497,395) (10,557,515)
Retained earnings 8,666,144 15,150,759
Closing balance 307,752,538 288,390,867
============== ==============
On 4 December 2015, the Company issued 31,000,000 new Ordinary
Shares following a placing and offer subsequent to the authority
granted by the shareholders at the EGM held on 17 November 2015.
These shares were issued at a price of GBP1.02 per Ordinary Share,
raising gross proceeds of GBP31,620,000.
On 29 February 2016, the Company issued 214,541 new Ordinary
Shares to the Investment Adviser in respect of their variable fee
for the financial year ended 30 June 2015 at a price of 97.3 pence
per share.
At year end, an amount of GBP167,201 is reflected in Other
reserves in respect of shares due to the Investment Adviser in
settlement of their variable fee for 2016. This totals 173,463
shares, not yet issued.
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 distributions 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.
17. Dividends
On 28 July 2015, the Board declared a third interim dividend of
GBP4,176,258, in respect of year ending 30 June 2015, equating to
1.50 pence per Ordinary Share (third interim dividend in respect of
the year ending 30 June 2014: Nil), which was paid on 21 August
2015 to shareholders on the register on 6 August 2015.
On 1 October 2015, the Board declared a fourth and final
dividend of GBP4,176,258, in respect of year ending 30 June 2015,
equating to 1.50 pence per Ordinary Share (fourth and final
dividend in respect of the year ending 30 June 2014: Nil), which
was paid on 30 October 2015 to shareholders on the register on 9
October 2015.
On 26 October 2015, the Board declared a first interim dividend
of GBP9,048,562, in respect of year ending 30 June 2016, equating
to 3.25 pence per Ordinary Share (first interim dividend in respect
of the year ending 30 June 2015: GBP4,904,809), which was paid on
15 December 2015 to shareholders on the register as at 13 November
2015.
On 26 April 2016, the Board declared a second interim dividend
of GBP3,096,318, in respect of year ending 30 June 2016, equating
to 1.00 penny per Ordinary Share (second interim dividend in
respect of the year ending 30 June 2015: GBP2,868,534), which was
paid on 20 May 2016 to shareholders on the register as at 6 May
2016.
Post year end, on 11 August 2016, the Board declared a third
interim dividend of GBP4,644,476, in respect of year ending 30 June
2016, equating to 1.5 pence per Ordinary Share (third interim
dividend in respect of the period ending 30 June 2015:
GBP4,176,258), which was paid on 9 September 2016 to shareholders
on the register on 19 August 2016.
Post year end, on 30 September 2016, the Board approved a fourth
interim dividend, in respect of year ending 30 June 2016, of 1.5
pence per Ordinary Share (fourth interim dividend in respect of the
period ending 30 June 2015: 1.5 pence per Ordinary Share), which
will be payable on 4 November 2016 with an associated ex-dividend
date of 13 October 2016.
Declaration of the fourth dividend brings total dividends in
respect of 2016 to 7.5 p which exceeds the target for the year and
triggers payment of a variable fee to the Investment Adviser that
has been reflected in administrative expenses and other
reserves.
18. Risk management policies and procedures
The Group is exposed to a variety of financial risks, including
market risk (including price risk, currency risk and interest rate
risk), credit risk and liquidity risk. The Investment Adviser and
the Administrator report to the Board on a quarterly basis and
provide information to the Group which allows it to monitor and
manage financial risks relating to its operations.
The Group's overall risk management programme focuses on the
unpredictability of financial markets and government energy policy
and seeks to minimise potential adverse effects on the Group's
financial performance, as referenced in the Principal Risks and
Uncertainties section in the Strategic Report.
The Board of Directors is ultimately responsible for the overall
risk management approach within the Group. The Board of Directors
has established procedures for monitoring and controlling risk. The
Group has investment guidelines that set out its overall business
strategies, its tolerance for risk and its general risk management
philosophy.
In addition, the Investment Adviser monitors and measures the
overall risk bearing capacity in relation to the aggregate risk
exposure across all risk types and activities. Further details
regarding these policies are set out below:
Market price risk
Market price risk is defined as the risk that the fair value of
future cash flows of a financial instrument held by the Group will
fluctuate because of changes in market prices.
Market price risk will arise from changes in the inflation rate
as the electricity prices generated by the Group, although fixed
through the FiTs and ROC regimes, will be subject to annual
inflationary changes.
The Group's future SPV investments are subject to fluctuations
in the price of new solar PV equipment. The price of solar
equipment can be influenced by a number of factors, including the
price and availability of raw materials, demand for PV equipment
and any import duties that may be imposed on PV equipment. Changes
in the cost of solar PV equipment could have a material adverse
effect on the Group's
ability to source projects that meet its investment criteria and
consequently its business, financial position, results of
operations and business prospects.
The valuation of future investments will be subject to the risk
that these will not achieve the expected ROC banding if a new
accreditation comes into effect in future. In order to mitigate
this risk, if the expected ROC banding is not achieved, the EPC
contract price will be reduced in order for the Company to maintain
the same internal rate of return on each project.
The Group's overall market position is monitored by the
Investment Adviser and is reviewed by the Board of Directors on an
ongoing basis.
Currency risk
The Group does not have any direct currency risk exposure as all
its investments and transactions are in Sterling. The Group is
however indirectly exposed to currency risk on future investments
that will require importation of equipment.
Interest rate risk
Interest rate risk is the risk that the value of financial
instruments, related income from the cash and cash equivalents and
interest income from the loan commitments to the SPVs will
fluctuate due to changes in market interest rates. The Company is
also exposed to interest rate risk via its floating rate credit
facility. As disclosed in Notes 7 and 14, the drawn down amount at
the year end is GBP180.4 million. If the LIBOR rate were to
increase by 1% the interest due on the amount drawn down as at 30
June 2016 would increase by GBP1.58 million over the term of the
facility to June 2017.
The Group's interest bearing financial assets consist of cash
and cash equivalents and the loan commitments to the SPVs. The
Group's interest rate risk is limited to interest earned on cash
balances and from the loan commitments to the SPVs. The interest
rates on the short-term bank deposits are fixed and do not
fluctuate significantly with changes in market interest rates. The
interest rate of 7% per annum applied to the shareholder loans to
the SPVs is also fixed in nature and is therefore not expected to
fluctuate significantly with changes in market interest rates (see
Note 11). Accordingly, the fair value of the financial assets held
at fair value through profit or loss as determined on an
unleveraged, discounted cash-flow basis is not expected to
fluctuate significantly with changes in market interest rates.
The following table shows the portfolio profile of the financial
assets at year end:
Total as at
30 June 2016
Interest rate GBP
---------------------- -------------- ---------------------------
Floating rate
RBSI 0.00% 384,671
RBS 0.10% 971,008
Fixed rate
Lloyds International 0. 10% 23,241
Lloyds 0.10% 1,396,010
2,774,930
===========================
Total as at
30 June 2015
Interest rate GBP
---------------------- -------------- ---------------------------
Floating rate
RBSI 0.00% 204,658
RBS 0.10% 12,640,777
Fixed rate
Lloyds International 0. 25% 23,241
Lloyds 0.30% 404,796
13,273,472
===========================
The valuation of the SPV investments is subject to variation in
the discount rate, which are themselves subject to changes in
interest rate risk due to the discount rates applied to the
discounted cash-flow technique when valuing the investments. The
Investment Adviser reviews the discount rates bi-annually and takes
into consideration market activity to ensure appropriate discount
rates are recommended to the Board. Total exposure to interest rate
risk on the financial assets held at fair value through profit or
loss at the year end is GBP483,730,343 (2015: GBP296,827,336) (see
Note 10).
Credit risk
Credit risk is the risk that a counterparty will be unable to
pay amounts in full when due. The Group's SPVs have entered into
turnkey EPC contracts with contractors for the design and
construction of the solar plants. Payments advanced to the
contractors in accordance with the terms of the EPC contracts are
protected through performance bonds or titles to assets for amounts
greater than any payment made. At the reporting date the Group's
SPVs held performance bonds totalling GBP34,103,466 (2015:
GBP18,017,385) with banks that have credit rating which is of
investment grade.
The Group's credit risk exposure is due to a portion of the
Group's assets being held as cash and cash equivalents and accrued
interest. The Group maintains its cash and cash equivalents and
borrowings across two different banking groups to diversify credit
risk which have all been group rated A by Fitch, and this is
subject to the Group's credit risk monitoring policies, as
mentioned above. The total exposure to credit risk arises from
default of the counterparty and the carrying amounts of financial
assets best represent the maximum credit risk exposure at the
period end date. As at 30 June 2016, the maximum credit risk
exposure in relation to cash and cash equivalents was GBP2,774,930
(2015: GBP13,273,472).
Total as at
Cash Fixed deposit Interest accrued 30 June 2016
GBP GBP GBP GBP
--------------------- -------------------------- --------------------------- -------------------- ---------------------
RBSI 384,671 - - 384,671
RBS 971,008 - - 971,008
Lloyds International - 23,241 - 23,241
Lloyds - 1,396,010 109 1,396,119
--------------------- -------------------------- --------------------------- -------------------- ---------------------
1,355,679 1,419,251 109 2,775,039
========================== =========================== ==================== =====================
Total as at
Cash Fixed deposit Interest accrued 30 June 2015
GBP GBP GBP GBP
--------------------- -------------------------- --------------------------- -------------------- ---------------------
RBSI 204,658 - - 204,658
RBS 12,640,777 - - 12,640,777
Lloyds International - 23,241 - 23,241
Lloyds - 404,796 100 404,896
--------------------- -------------------------- --------------------------- -------------------- ---------------------
12,845,435 428,037 100 13,273,572
========================== =========================== ==================== =====================
The carrying amount of these assets approximates their fair
value.
The Group also faces credit risk with the construction of solar
PV assets, as it is likely to result in reliance upon services
being delivered by one or more contractors. Whilst the performance
of contractor services will usually be guaranteed with penalties
linked to underperformance, and potentially in some cases backed by
guarantees, any such guarantees are expected to be limited in their
scope and quantum and may not always cover the full loss of profit
incurred by a project. Failure of a contractor or a change in a
contractor's financial circumstances may, among other things,
result in the relevant asset underperforming or becoming impaired
in value and there can be no assurance that such underperformance
or impairment will be fully or partially compensated by any
contractor warranty or bank guarantee.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its liabilities as they fall due. The Investment Adviser and
the Board continuously monitor forecasted and actual cash-flows
from operating, financing and investing activities.
As the Group's investments are in the SPVs, which are private
companies that are not publicly listed, the return from these
investments is dependent on the income generated or the disposal of
solar assets by the SPVs and will take time to realise.
The following table details the Group's expected maturity for
its financials assets and liabilities. These are undiscounted
contractual cash-flows:
Total as at
Less than one year Between one and five years After five years 30 June 2016
GBP GBP GBP GBP
-------------- ------------------------ --------------------------------- ------------------------------ ---------------------
Assets
Financial
assets held
at fair
value
through
profit or
loss 31,429,555 125,718,221 585,103,445 742,251,221
Trade and
other
receivables* 1,274,555 - - 1,274,555
Cash and cash
equivalents 2,774,930 - - 2,774,930
Liabilities
Other
payables and
accrued
expenses (2,068,636) - - (2,068,636)
Interest
bearing
loans (54,024,150) (131,226,877) - (185,251,027)
(20,613,746) (5,508,656) 585,103,445 558,981,043
======================== ================================= ============================== =====================
* excluding
prepayments
The net undiscounted contractual negative cash-flows in the
periods of 'Less than one year' and 'Between one and five years'
arise as a result of repayment of interest and principal on the RCF
in place as at 30 June 2016 (see Note 7.). Post year end, the
revised and amended RCF, with maturity dates of 20 January 2017 and
30 September 2017, has been replaced by a long term financing
arrangement, also described in Note 7, and will therefore no longer
fall due on those dates.
Total as at
Less than one year Between one and five years After five years 30 June 2015
GBP GBP GBP GBP
-------------- --------------------- --------------------------- ------------------------------ --------------------
Assets
Financial
assets held
at fair
value
through
profit or
loss 27,843,142 75,647,462 359,317,158 462,807,762
Trade and
other
receivables* 2,541,011 - - 2,541,011
Cash and cash
equivalents 13,273,472 - - 13,273,472
Liabilities
Other
payables and
accrued
expenses (5,934,898) - - (5,934,898)
Interest
bearing
loans (267,750) (19,628,438) - (19,896,188)
37,454,977 56,019,024 359,317,158 452,791,159
===================== =========================== ============================== ====================
* excluding
prepayments
Capital management policies and procedures
The Group's capital management objectives are to ensure that the
Group will be able to continue as a going concern while maximising
the capital return to equity shareholders.
In accordance with the Group's investment policy, the Group's
principal use of cash (including the proceeds of the IPO, placings
and the loan facility) is to fund the Group's projects, as well as
expenses related to the issues during the year, ongoing operational
expenses and payment of dividends and other distributions to
shareholders in accordance with the Company's dividend policy.
The Board, with the assistance of the Investment Adviser,
monitors and reviews the broad structure of the Company's capital
on an ongoing basis.
The Company has no imposed capital requirements except for the
financial covenants as disclosed in
Note 7.
The capital structure of the Company consists of issued share
capital and retained earnings.
19. 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
and indirect shareholder of the Company's Administrator, Heritage
International Fund Managers Limited. Within the total
administration fees incurred during the period of GBP286,316,
GBP248,274 (2015: GBP278,555) relates to the fees of the
Administrator, of which GBP66,130 (2015: GBP56,707) was outstanding
at the year end.
The Chairman is entitled to an annual remuneration of GBP55,000,
with effect from 12 June 2015 (2015: GBP50,000). The other
Directors are entitled to an annual remuneration of GBP33,000, with
effect from 12 June 2015 for Paul Le Page and John Scott and with
effect from 1 July 2015 for Laurence McNairn (2015: GBP30,000).
Paul Le Page receives an additional annual fee of GBP5,500, with
effect from 12 June 2015 (2015: GBP5,000) for acting as Chairman of
the Audit Committee.
The total Directors' fees expense for the period amounted to
GBP169,733 (2015: GBP145,599) of which GBP42,143 was outstanding at
30 June 2016 (2015: GBP6,585). On 12 July 2013, 290,000 Ordinary
Shares were issued to Directors in lieu of a cash payment for
Directors' fees for the first two years. The release of this
prepayment completed in June 2015 and Directors are now paid in
cash. All of the Directors' fees in 2016 are cash payments (2015:
GBP6,585).
At 30 June 2016, the number of Ordinary Shares held by each
Director is as follows:
2016 2015
Number of Number of
Ordinary Shares Ordinary Shares
John Rennocks 356,713 255,805
Paul Le Page 70,000 70,000
Laurence McNairn 441,764 441,764
John Scott 276,176 276,176
----------------- -----------------
1,144,653 1,043,745
================= =================
John Scott and John Rennocks are Directors of BSIFIL. Since 1
July 2015 they have received an annual fee of GBP5,000 each for
their services to this company. Mike Rand and James Armstrong, who
are partners of the Investment Adviser, are also Directors of
BSIFIL.
The Group's investment advisory fees for the period amounted to
GBP2,832,232 (2015: GBP2,007,666) of which GBP201,601 (2015:
GBP573,432) was outstanding at the year end. Included within the
investment advisory fee expense is GBP208,813 earned in respect of
performance fees for the year ended 30 June 2015. The Investment
Adviser received the variable element of their fees through the
issue of 214,541 Ordinary Shares on 29 February 2016 (see Note 16).
An amount of GBP167,201 has been accrued in respect of 2016
also.
The Group's consultancy services fee income for the period
amounted to GBP2,564,937 (2015: GBP1,901,662) of which GBP642,856
(2015: GBP582,069) was outstanding at the year end.
The Group's shareholder loan monitoring fee income for the
period amounted to GBP1,093,151 (2015: GBPNil) of which GBP514,178
was outstanding at the year end (2015: GBPNil). The fee recorded in
2016 also reflects fees in respect of 2014 and 2013.
Fees paid to BSL during the period, a company which has the same
ownership as that of the Investment Adviser totalled GBP737,879
(2015: GBP58,748).
On 24 August 2015, BSIFIL completed the acquisition of Bluefield
Kite Limited and Bluefield Peregrine Limited. As two 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 Kite Limited and Bluefield
Peregrine 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 two members of the Investment Adviser received
GBP8,680 cash consideration for their ordinary shares. As holders
of B shares, they were also entitled to a carried interest in the
sale of the Ordinary shares. Their share of this amounted to
GBP83,014. A Fair and Reasonable Opinion was sought and received
from Numis Securities Limited before signing of the
transaction.
On 15 April 2016, BSIFIL completed the acquisition of Bluefield
Harrier 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 Ordinary Shares and B
shares in Bluefield Harrier 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 GBP275,770 cash consideration for their ordinary
shares. As holders of B shares, they were also entitled to a
carried interest in the sale of the Ordinary shares. Their share of
this amounted to GBP616,000. A Fair and Reasonable Opinion was
sought and received from Numis Securities Limited before signing of
the transaction.
Fees paid to BeRenewables during the period, a company which has
the same ownership as that of two members of the Investment Adviser
totalled GBP103,002 (2015: GBP62,684).
20. Guarantees and other commitments
As at 30 June 2016, the Group had provided guarantees amounting
to GBP409,470,449 (2015: GBP265,326,000) to the SPVs in relation to
the funding of EPC contracts entered into by the SPVs, of which
GBP153,351,766 (2015: GBP148,468,000) was paid during the period
and GBPNil(2015: GBP Nil) held by the SPVs in escrow.
As at 30 June 2016, the Company had provided guarantees
amounting to GBP272,644,000 to BSIFIL in relation to the restated
loan facility entered into by the Group (see Notes 7 and 14). At 30
June 2015, the Company had provided guarantees amounting to
GBP111,822,000 to BSIFIL in relation to the original RCF.
At the reporting date, the Group had investment commitments of
GBP2,383,904 (2015: GBP10,314,309) relating to equity and the
shareholder loans extended to its SPVs (see Note 11).
21. Contingent liabilities
On 30 June 2015 the Company acquired 90% of the share capital of
West Raynham Solar Limited, with the remaining 10% purchased the
following month. As part of the acquisition of West Raynham Solar
Limited the share purchase agreement provides for a conditional
deferred equity consideration which may become payable subject to
the achievement of specified events up to a maximum of five years
from acquisition. The nature of the events that could lead to
payment of the deferred equity consideration are deemed to be
outside of the Company's control. The maximum consideration
payable, should the specific conditions for payment be met, is
GBP2.74m however the Group have estimated this as zero at the
balance sheet date. Future estimates of the potential deferred
consideration due will be revised as further and more certain
information becomes available.
22. Subsequent events
Post year end, on 11 August 2016, the Board declared a third
interim dividend of GBP4,644,476, in respect of year ending 30 June
2016, equating to 1.5 pence per Ordinary Share (third interim
dividend in respect of the period ending 30 June 2015:
GBP4,176,258), which was paid on 9 September 2016 to shareholders
on the register on 19 August 2016.
Post year end, on 21 September 2016, BSIFIL repaid GBP0.38m and
drew down a further GBP8.00m on the restated and amended RCF.
Post year end, on 27 September 2016, GBP187 million long term
financing was agreed with Aviva Investors. This is held at the
Company level in two tranches, a GBP121.5 million fixed price loan
at 2.875% interest and a GBP65.5 million index linked element at 70
basis points linked to RPI. The loans are for 18 years and are
fully amortising. A new RCF was arranged at the same time. This is
discussed further in the Chairman's Statement and the Investment
Adviser's Report.
Post year end, on 30 September 2016, the Board approved a fourth
interim dividend, in respect of year ending 30 June 2016, of 1.5
pence per Ordinary Share (fourth interim dividend in respect of the
period ending 30 June 2015: 1.5 pence per Ordinary Share), which
will be payable on 4 November 2016 with an associated ex-dividend
date of 13 October 2016.
Declaration of the fourth dividend brings total dividends in
respect of 2016 to 7.25 pence per Ordinary Share which exceeds the
target for the year and triggers payment of a variable fee to the
Investment Adviser. This is reflected in administrative expenses
and other reserves.
Glossary of Defined Terms
AGM means the Annual General Meeting
AIC means the Association of Investment Companies
AIC Code means the Association of Investment Companies Code of
Corporate Governance
AIC Guide means the Association of Investment Companies
Corporate Governance Guide for Investment Companies
AIF means Alternative Investment Fund
AIFM means Alternative Investment Fund Management
AIFMD means the Alternative Investment Fund Management
Directive
Articles means the Memorandum and Articles of Incorporation
registered 29 May 2013 as amended
Auditor means KPMG Channel Islands Limited (see KPMG)
Bluefield means Bluefield Partners LLP
BSL means Bluefield Asset Management Services Limited
Board means the Directors of the Company
BSIFIL means Bluefield SIF Investments Limited being the only
direct subsidiary of the Company
Business days means every official working day of the week,
generally Monday to Friday excluding public holidays
CAGR means compound annual growth rate
Calculation Time means the Calculation Time as set out in the
Articles of Incorporation
CfD means Contract for Difference
CISE means Channel Islands Securities Exchange
Company means Bluefield Solar Income Fund Limited
Companies Law means the Companies (Guernsey) Law 2008, as
amended (see Law)
Consolidation Exception Amendments means the 18 December 2014
further amendments to IFRS 10 Investment Entities: Applying the
Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS
28)
Consultation means the Department of Energy & Climate Change
consultation into changes to financial support for large scale
solar delivered in quarter 4, 2014
C Shares means Ordinary Shares approved for issue at no par
value in the Company
CSR means Corporate Social Responsibility
DCF means Discounted Cash Flow
DECC means the Department of Energy and Climate Change
DNO means Distribution Network Operator
DTR means the Disclosure and Transparency Rules of the UK's
FCA
EGM means Extraordinary General Meeting
EPC means Engineering, Procurement & Construction
EU means the European Union
EY means Ernst & Young LLP
Facility means from 21 January 2016 the GBP200 million facility
arranged with RBS and Investec. Previously referred to the GBP50
million original revolving credit facility arranged with RBS
FATCA means the Foreign Account Tax Compliance Act
Financial Statements means the unaudited condensed consolidated
interim financial statements
FiT means Feed-in Tariff
GAV means Gross Asset Value
GFSC means the Guernsey Financial Services Commission
Group means Bluefield Solar Income Fund Limited and Bluefield
SIF Investments Limited
Guernsey Code means the Guernsey Financial Services Commission
Finance Sector Code of Corporate Governance
GWh means Gigawatt hour
GWp means Gigawatt peak
IAS means International Accounting Standard
IASB means the International Accounting Standards Board
IFRS means International Financial Reporting Standards as
adopted by the EU
Investec means Investec Bank Plc
Investment Adviser means Bluefield Partners LLP
IPEV Valuation Guidelines means the International Private Equity
and Venture Capital Valuation Guidelines
IPO means initial public offering
IVSC means the International Valuation Standards Council
KPI means Key Performance Indicators
KPMG means KPMG Channel Islands Limited (see Auditor)
KWp means Kilowatt peak
Law means Companies (Guernsey) Law, 2008 as amended (see
Companies Law)
LD means liquidated damages
LEC means Levy Exemption Certificate, the certificates awarded
to renewable energy projects in relation to their clean energy
production which were typically monetised under PPA contracts to
offset levies due under the Climate Change Levy to energy
suppliers.
Lender means Aviva Investors
LIBOR means London Interbank Offered Rate
Listing Rules means the set of FCA rules which must be followed
by all companies listed in the UK
Lloyds means Lloyds Bank Group PLC
Lloyds International means Lloyds Bank International Limited
LSE means London Stock Exchange PLC
Main Market means the main securities market of the London Stock
Exchange
MWh means Megawatt hour
MWp means Megawatt peak
NAV means Net Asset Value as defined in the prospectus
NMPI means Non-mainstream Pooled Investments and Special Purpose
Vehicles and the rules around their financial promotion
NPPR means the AIFMD National Private Placement Regime
Official List means the Premium Segment of the UK Listing
Authority's Official List
Ordinary Shares means the issued ordinary share capital of the
Company, of which there is only one class
Placement means the placement of new shares in December 2015
Placing Agreement means the agreement relating to the placement
defined above
PPA means Power Purchase Agreements
PV means Photovoltaic
RBS means The Royal Bank of Scotland plc
RBSI means Royal Bank of Scotland International plc
RCF means Revolving Credit Facility
RO Scheme means the Renewable Obligation Scheme which is the
financial mechanism by which the UK Government incentivises the
deployment of large-scale renewable electricity generation by
placing a mandatory requirement on licensed UK electricity
suppliers to source a specified and annually increasing proportion
of electricity they supply to customers from eligible renewable
sources or pay a penalty
ROC means Renewable Obligation Certificates
RPI means the Retail Price Index
SPA means Share Purchase Agreement
SPVs means the Special Purpose Vehicles which hold the Company's
investment portfolio of underlying operating assets
Sterling means the Great British pound currency
Strategy means the Department of Energy & Climate Change
Solar PV Strategy: Part 2
UK means the United Kingdom of Great Britain and Northern
Ireland
UK Code means the United Kingdom Corporate Governance Code
UK FCA means the UK Financial Conduct Authority
WACC means Weighted Average Cost of Capital
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSZMMGGKDLGVZG
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