TIDMBSIF
RNS Number : 9835F
Bluefield Solar Income Fund Limited
27 February 2018
27 February 2018
Bluefield Solar Income Fund Limited
('Bluefield Solar' or the 'Company')
Unaudited Condensed Interim Financial Statements for the Six
Months Ended 31 December 2017
Bluefield Solar (LON:BSIF), a sterling income fund that invests
in UK-based solar assets, is pleased to announce its Interim
Results for the Six Months Ended 31 December 2017.
Operational Highlights
-- The Company delivered underlying earnings(1) of GBP13.0m in
the period (31 December 2016: GBP11.7m).
-- NAV has increased to 112.40pps (30 June 2017: 110.49pps).
-- There has been a 0.25% reduction to the Company's WACC,
reflecting continued pricing pressure within the UK solar market,
from 6.15% as at 30 June 2017 to 5.90% as at 31 December 2017
-- The equity cash flows upon which the NAV is calculated imply
a return on equity over the 25 year life of the cash flows of 7.02%
(30 June 2017: 7.43%), with zero terminal value.
-- The Company completed one acquisition amounting to 5.0MWp,
taking the Company's total capacity to 446.5MWp.
-- Portfolio outperformed operational expectations by 2.7%,
delivering an aggregate PR of 82.4% versus budget of 80.3%.
-- As at 31 December 2017 the Company has now paid dividends of
25.75pps since listing in July 2013; 4.00pps in the period to June
14 and then above target dividends of 7.25pps for the full year
periods ended June 2015, 2016 and 2017. A further 1.80pps has been
paid in January 2018; this declaration and payment of the first
interim dividend in respect of the year ending 30 June 2018
reflects the Company's commitment to smoothing distributions.
-- The Company, through its holding company BSIFIL, has made
debt repayments of principal of GBP7.3m in the period (31 December
2016: GBP2.7m).
1. Underlying earnings is an alternative performance measure
employed by the Company to provide insight to the Shareholders by
definitively linking the underlying financial performance of the
operational projects to the dividends declared and paid by the
Company. Further detail is provided below.
Financial Highlights
Six months ended
31 December 2017
------------------------------------------------------------ -----------------
Total operating income GBP18,747,444
Total comprehensive income before tax GBP18,137,352
Underlying earnings GBP12,989,966
Earnings per share 4.90p
Underlying EPS available for distribution(2) 1.54p
Underlying EPS brought forward(3) 0.73p
Total underlying EPS available for distribution 2.27p
Total dividend for the six months ended 31 December 2017(4) 1.80p
NAV per share 112.40p
Share Price as at 31 December 2017 118.00p
Total Return(5) 4.4%
Total Return to shareholders(6) 5.2%
------------------------------------------------------------ -----------------
2. Underlying EPS available for distribution is calculated using
underlying earnings available for distribution (eg post debt
repayments) divided by the number of shares in issue at the end of
the period.
3. Underlying earnings brought forward is a combination of 0.30p
brought forward from 30 June 2017 and additional ROC recycle
relating to the year ended 30 June 2017 of 0.43p.
4. Dividends declared in January 2018 relating to the period 31
December 2017.
5. Total Return is based on NAV per share movement and dividends
paid in the period.
6. Total Return to shareholders is based on share price movement
and dividends paid in the period.
Chairman John Rennocks said:
"It has been another robust six months for the Company in which,
although a period in which irradiation levels were significantly
below our expectations, the portfolio has continued to perform well
and remains on track to meet its full year target dividend of 7.43
pence per share.
Our priority still lies in maximising revenues and income
efficiency from our existing portfolio. This has been possible
through strong operational management from Bluefield Services, the
Company's technical asset manager, who spent approximately 2,700
hours analysing plant performance during the period. Against a
backdrop of soft power prices, we continue to seek to further
enhance revenues from the portfolio to deliver reliable sterling
income for our shareholders."
A copy of the Interim Report and Unaudited Condensed Interim
Financial Statements has been submitted to the National Storage
Mechanism and will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM. The Interim Report and Unaudited
Condensed Interim Financial Statements will also shortly be
available on the Company's website at www.bluefieldsif.com where
further information on the Company can also be found.
Analyst Presentation
A meeting for analysts will be held at 09:30am today at the
offices of Buchanan, 107 Cheapside, London EC2V 6DN. A conference
call facility will be available and an audio webcast will be
available on the Company's website later today.
Conference UK Toll: 02034281542
call:
UK Toll Free: 08082370040
Participant PIN code: 40148990#
URL for international dial in numbers:
http://events.arkadin.com/ev/docs/FEL_Events_International_Access_List.pdf
For additional details and registration for the analyst
briefing, please contact Buchanan on 020 7466 5000 /
BSIF@buchanan.uk.com.
For further information:
Bluefield LLP (Company Investment Adviser) Tel: +44 (0) 20 7078 0020
James Armstrong / Mike Rand / Giovanni www.bluefieldllp.com
Terranova
Numis Securities Limited (Company Broker) Tel: +44 (0) 20 7260 1000
Tod Davis / David Benda www.numis.com
Estera International Fund Managers (Guernsey) Tel: +44 (0) 1481 742 742
Limited www.estera.com
(Company Secretary & Administrator)
Kevin Smith
Media enquiries: Tel: +44 (0) 20 7466 5000
Buchanan (PR Adviser) www.buchanan.uk.com
Henry Harrison-Topham / Vicky Hayns BSIF@buchanan.uk.com
/ Henry Wilson
Notes to Editors
About Bluefield Solar
Bluefield Solar is a sterling income fund focused on acquiring
and managing UK-based solar projects to generate stable renewable
energy for periods of typically 25 years or longer. The Company's
primary objective is to deliver its Shareholders stable, long term
sterling income via quarterly dividends, which are linked to RPI.
The majority of the Group's revenue streams are regulated and
non-correlated to traditional markets. Bluefield Solar owns and
operates one of the UK's largest, diversified portfolios of solar
assets with a combined installed power capacity in excess of
440MWp.
Further information can be viewed at www.bluefieldsif.com.
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 GBP500 million in the UK since December 2011.
Bluefield has led the acquisitions of, 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 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 LSE
following its IPO on 12 July 2013. The issued share capital during
the period 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 Group during the period was
Bluefield Partners LLP, which is authorised and regulated by the UK
FCA under the number 507508. In May 2015 BSL, a company with the
same ownership as the Investment Adviser, commenced providing asset
management services to the investment SPVs held by BSIFIL. In
August 2017 BOL, a company with the same ownership as the
Investment Adviser, commenced providing O&M services to three
of the investment SPVs held by BSIFIL.
Chairman's Statement
Introduction
I am pleased to announce a solid set of interim results.
Earnings were in line with expectations and the Company intends to
meet its full year target dividend of 7.43pps, reflecting the RPI
increase of 3.5% in July 2017.
The Company was set up with the primary objective of enabling
investors to earn stable, sterling income over the long term. With
this in mind, the period under review provides a good insight into
the activities undertaken by the Company and its advisers to
protect and enhance underlying earnings and dividends over the long
term.
As previously noted the combined effect of higher RPI inflation
and low electricity prices puts pressure on earnings. We have also
commenced paying back significantly higher amounts of debt, a
strategy in the long term interest of our shareholders.
Notwithstanding this, we expect to meet our dividend target for
2017/18 from earnings and undistributed reserves.
Acquisitions
The Company's investment Adviser has continued to actively
engage with market participators in the significant solar M&A
market which has emerged in the UK solar sector and yet the Company
made just one, small acquisition in the period. It is a theme with
which observers of the Company over the past year will be familiar.
Acquisitions must be accretive to NAV, but valuations in the UK
market currently remain at a level that does not justify further
asset gathering. Sometimes it is better to consolidate and optimise
what has already been acquired and we believe now is such a time.
However, when the market opens up again (most likely with new solar
projects which can be justified on a subsidy free basis), the
Company will be ready to recommence growing its asset base. In
consequence, there were no equity raises in the period.
Investment Mandate
The Board and the Investment Adviser elected not to propose a
widening of the geographical mandate of the Company outside the UK;
thus the Company's investment mandate remains focused on the UK
solar market only. We are yet to be convinced that there is another
solar market that delivers a sufficient and durable return premium
above our target return that justifies the currency, regulatory and
market risk. We also believe that there is a correlation between
the single country/single technology strategy adopted by the
Company and our consistent high performance.
Underlying Earnings and Dividends
The underlying earnings in the period were 3.51pps
(pre-amortisation of long term financing agreements). This was in
line with expectations and supports the Board's full year target
dividend of 7.43pps. We are also pleased to announce that the
Company received higher than expected ROC recycle revenues for the
financial year ending June 2017, meaning that the carried forward
retained earnings increased by GBP1.6m, or 0.43pps, to 0.73pps.
As we announced last year, it is the Board's intention to smooth
the profile of dividend payments, other than in the circumstances
where there are major equity raises. This process started with the
declaration in January 2018 of a first interim dividend relating to
the current financial year of 1.80pps and it is our intention to
pay three further dividends of similar magnitude.
Capital Structure and Financing
The Company's capital structure has relatively low levels of
overall leverage (c.32% to GAV, with most of this held at the UK
HoldCo level) and high levels of debt service cover (c.3 x
cover).
Our leverage strategy is to fully amortise the debt over the
term of the loan, an approach we feel maximises the value of having
long term secure cashflows.
A year ago I wrote that the Company has a capital structure in
place that works well in a lower inflationary environment and is
attractive in times of higher inflation. This remains true today as
the spectre of higher inflation is being seriously contemplated by
the markets for the first time since the Company was listed.
The reason the Company should be well placed in a higher
inflation environment is relatively straightforward. At present,
some 60% of our revenues come from subsidies which are linked
directly to RPI, whilst the majority of our debt is on a fixed
interest rate. With an operational cost base that has limited
exposure to inflationary pressure, increases in RPI should be
positive for the Company's underlying earnings.
Net Asset Value and Equity IRR
The NAV has risen from 110.49pps at 30 June 2017 to 112.40pps at
period end. Changes in the NAV are driven by three main factors:
the blended long term power forecast from the two leading
forecasters in the market, which caused a fall in our NAV, and
increases resulting from the combined impact of a slight reduction
to the Company's WACC by 0.25% as well as the incremental inclusion
of additional tax shield from a sub set of the Company's
inter-company loans, following the adoption of the BEPS legislation
in November 2017.
The Company's WACC discount rate varies with market conditions
and, as ever, we actively monitor any changes by reference to the
rates imputed from willing buyer/willing seller transactions for
solar assets in the UK solar market as well as those used by other
infrastructure companies.
Apart from this, all other material assumptions remain
unchanged.
The equity IRR is 7.02%, which is the equity return taking into
account the Company's actual cost of third party debt.
Power Prices
The Company continues to benefit from being able to target one
to three year power contracts for the majority of the portfolio,
thus maximising its exposure to the short end of the forward curve.
The average power price achieved was GBP45.41 per MWh per 31
December 2017 compared to GBP43.65 per MWh as per 31 December
2016.
The impact of the most recent power curves from the two leading
independent forecasters used by the Company has been a GBP15.2m
reduction in valuation as long term forecasts have fallen however
the Company has price certainty over 87% of its power prices for
the period to June 2018, and 73% for the period to December
2018.
Asset Management
The Company's portfolio energy generation continues to perform
ahead of budget, offsetting lower than average irradiation for the
period. The reasons for this are a high quality portfolio that is
well managed and optimised by the BSL team in Bristol. To put this
latter statement into context, in the period under review, BSL, the
Company's technical asset manager, spent approximately 2,700 hours
analysing plant performance, 240 hours assessing performance
calculations at critical contractual milestones and spent in excess
of 800 hours at the solar farms inspecting the condition of the
equipment and general maintenance of the sites.
Outlook
The Company and its advisers are focusing on optimising revenues
and paying a dividend of 7.43pps to shareholders (after
amortisation of its debt and all costs) for the full year. And we
have a Company that has the potential to perform well in conditions
of higher inflation.
John Rennocks
Chairman
26 February 2018
The Company's Investment Portfolio
[Table]
[Map]
Analysis of the Company's Investment Portfolio
[Chart]
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
the selection, origination and execution of investment
opportunities for the Company, having delivered 46 SPV investments
to BSIF since flotation. Due to the strong expertise of the
Investment 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. Structure
The Company holds and manages its investments through a UK
limited company, BSIFIL, in which it is the sole shareholder.
[Chart]
3. Portfolio: Acquisitions, Performance and Value Enhancement
Portfolio
As at 31 December 2017, the Company held an operational
portfolio of 83 PV plants (consisting of 42 large scale sites, 40
micro sites and 1 roof top site) with a total capacity of 446.5MWp.
The portfolio displays strong diversity through; geographical
variety (as shown by the map above); a range of proven PV
technologies and infrastructure (arising from the solar PV farms
having been constructed by a number of experienced solar
contractors); and a blend of asset sizes with capacities ranging
from microsites to substantial, utility-scale solar farms
(including two plants just under 50MWp).
Acquisitions
During the reporting period, the Company completed a sole 5MWp
acquisition; Clapton Solar Farm ('Clapton'). Based in Somerset, the
plant was constructed by IB Vogt and is accredited under the 1.2ROC
Scheme.
The investment of GBP6.3m used the available funds (GBP1.9m)
remaining from the October 2016 fund raise (GBP60.6m) as well as
GBP4.4m from the Company's GBP30m RCF.
In keeping with the Investment Adviser's objective to deliver
value and return accretive acquisition opportunities to the
Company, securing this primary asset which was developed during the
last months of the RO scheme, was a success for the Company as it
enabled it to lock in the benefits of the 20 year RPI indexed
support mechanism, a scheme now closed to further business.
Looking forward, the Investment Adviser is currently negotiating
on behalf of the Company across a range of large and small scale
transactions as it looks to continue its policy of securing high
quality, return accretive acquisitions during the course of the
2017/18 financial year, though its strong pricing discipline means
that its primary focus is now increasingly on the optimisation of
performance of the excellent asset base already secured.
Performance
In the six months to 31 December 2017, the portfolio, totalling
446.5MWp, has continued to perform strongly, achieving a 'Net
Performance Ratio' (the ratio at which a PV plant converts
available irradiation to electrical output) of 82.4%, against a
forecasted 'Net Performance' Ratio of 80.3%, despite lower than
forecast levels of irradiation during the reporting period.
As the table below summarises, despite below average levels of
irradiation (-4.4%), the high performance levels of the portfolio
(at +2.7% to forecasts) led the Generation Yield (measured as the
energy yield per MWp of installed capacity) to be only -1.8% below
expectations.
Although the revenue per MWp of the portfolio capacity has been
below expectations, the total unit price achieved for each MWh
generated (calculated by combining component parts of ROC buyout,
PPA fixes and the recovery of minimal LDs) is still slightly above
expectations, at +0.2% higher than forecast.
Including c.GBP0.3m of LDs recovered in the reporting period,
the portfolio generated an average of GBP122.1k/MWh, resulting in
total revenue that was only -1.7% below forecast despite a 4.4%
irradiation shortfall.
Table 1. Summary of BSIF Portfolio (446.5MWp) Performance for
July 2017 to December 2017 (incl.):
Dec 17 Dec 16
--------------------------------- ----------
Actual Forecast % Change Actual
----------------------- ---------- ---------- --------- ----------
Irradiation (kWh/M(2)
) 524.4 548.7 -4.4% 570.6
----------------------- ---------- ---------- --------- ----------
Performance Ratio
(%) 82.4% 80.3% +2.7% 80.8%
----------------------- ---------- ---------- --------- ----------
Generation Yield
(MWh/MWp) 432.2 440.3 -1.8% 460.7
----------------------- ---------- ---------- --------- ----------
Total unit Price
- Power + ROCs
+LDs (GBP/MWh) 122.1 121.9 +0.2% 116.8
----------------------- ---------- ---------- --------- ----------
Total Revenue GBP52.8k GBP53.7k GBP53.8k
(GBP/MW) -1.7%
----------------------- ---------- ---------- --------- ----------
Figure 1. BSIF Portfolio Performance (Generation &
Irradiation) for July 2017 to December 2017, by month
[Graph]
Due to successful negotiations, the Company's asset manager was
able to minimise almost all DNO planned outages potentially
impacting the portfolio during the peak months of July and August
2017.
The only exceptions to this were The Grange, which experienced
DNO constraints from 29 June to 12 August 2017 (although due to
effective co-operation with the DNO it was agreed the plant would
operate at 10% capacity during this time, instead of being
completely curtailed) and Elms Solar Farm, which also suffered a
planned 7 day DNO led outage during July with a further planned 8
day outage during August 2017 successfully reduced to 1 day and
delayed until October 2017, achieving additional generation and
revenue savings of 663MWh and GBP66.2k respectively.
In addition, a planned 26 day outage for the 5MWp Durrants
project did not proceed this summer following consultation with the
DNO which resulted in generation and revenue savings of 545MWh and
GBP219k respectively.
During the financial year to date, the Company has once again
exercised the strength of its contractual protections, enabling the
recovery of GBP0.3m of LDs for underperformance, revenue losses and
the rectification of minor equipment defects.
The fact that these LDs represent only c.1.4% of the period's
revenues reflects the strong performance of almost all of the
assets within the portfolio.
The operational performance of the portfolio and the effective
recovery of LDs once again highlight the success of the Company's
dedicated portfolio function and effective working relationship
with the Company's asset manager, BSL, who provide daily monitoring
of the plants and regular contractor engagement.
BSL have allocated approximately 2,700 hours analysing plant
performance, 240 hours assessing performance calculations at
critical contractual milestones (performance acceptance testing and
1st, 2nd year and final performance tests) and spent in excess of
800 hours at the solar farms inspecting the condition of the
equipment and general maintenance of the sites during the reporting
period.
Whilst the portfolio is maturing, a significant portion remains
protected by performance warranties provided by the EPC contractors
(in addition to equipment manufacturers' warranties), backed by
retentions or warranty bank bonds, applicable from each asset's
provisional acceptance date. These warranties provide a contractual
entitlement to the recovery of damages as a result of operational
underperformance against a contracted level of performance, or as a
result of defects.
As assets pass their final acceptance dates, new availability
guarantees are provided by contracted O&M service providers in
addition to comprehensive insurance coverage. As at the period end,
BOL are now the O&M contractor to 3 of the Company's assets
with the expectation of gradually increasing this figure over time.
It is anticipated that by increasing the number of plants BOL
provides O&M services to, the portfolio will benefit from
increased maintenance and operational efficiencies.
The geographical and equipment diversity of BSIF's portfolio
allows the effects of both 'Outage Risk' (whereby a higher
proportion of large capacity assets would hold increased exposure
to material losses due to curtailments and periods of outage) and
'Defect Risk' (where over-reliance on limited equipment
manufacturers could lead to large proportions of the portfolio
suffering similar defects) to be mitigated.
Value Enhancement Initiatives
Following the closure of the RO Scheme in March 2017, and the UK
solar PV sector moving to a secondary market, the Investment
Adviser has launched a number of new initiatives which seek to
enhance and create additional value for the portfolio, through the
optimisation of both operations and revenues.
These initiatives include a wide-ranging asset life extension
programme, securing optionality for the addition of battery storage
facilities across the portfolio, and actively discussing
opportunities within the UK's burgeoning corporate and direct wire
PPA market, in order to provide predictable and reliable income
streams for the Company over the long term.
The Company's operating portfolio as at 31 December 2017 and the
electricity generated in the first 6 months of the 2017/18
financial year is shown below:
Table 2. BSIF Portfolio Generation for H1 (1 July to 31 December
2017) by Asset:
Solar Farm Asset Total Investment MWp Generation to
Commitment (GBP) December 2017
(Actual, MW/h)
-------------------- ------------------ ----------- --------------------------------
Southwick 61.0 47.9 20,447.9
-------------------- ------------------ ----------- --------------------------------
West Raynham 55.9 50.0 22,279.3
-------------------- ------------------ ----------- --------------------------------
Elms 32.8 28.9 11,196.2
-------------------- ------------------ ----------- --------------------------------
Molehill 23.1 18.0 8,553.2
-------------------- ------------------ ----------- --------------------------------
Hardingham 22.7 20.1 8,826.6
-------------------- ------------------ ----------- --------------------------------
Littlebourne 22.0 17.0 7,496.8
-------------------- ------------------ ----------- --------------------------------
Pentylands 21.4 19.2 8,089.1
-------------------- ------------------ ----------- --------------------------------
Goose Willow 19.0 16.9 7,381.1
-------------------- ------------------ ----------- --------------------------------
Hoback 19.0 17.5 7,516.2
-------------------- ------------------ ----------- --------------------------------
Hill Farm 17.3 15.2 6,486.3
-------------------- ------------------ ----------- --------------------------------
Pashley 15.4 11.5 5,546.3
-------------------- ------------------ ----------- --------------------------------
Burnaston 14.4 4.1 1,588.2
-------------------- ------------------ ----------- --------------------------------
Roves 14.0 12.7 5,373.3
-------------------- ------------------ ----------- --------------------------------
Hall Farm 13.4 11.4 5,312.7
-------------------- ------------------ ----------- --------------------------------
Sheppey/South Lees 12.0 10.6 5,054.5
-------------------- ------------------ ----------- --------------------------------
Betingau 11.2 10.0 3,576.2
-------------------- ------------------ ----------- --------------------------------
North Beer 9.3 6.9 2,836.1
-------------------- ------------------ ----------- --------------------------------
Capelands 8.6 8.4 3,555.2
-------------------- ------------------ ----------- --------------------------------
Ashlawn 7.6 6.6 2,963.7
-------------------- ------------------ ----------- --------------------------------
Saxley 7.0 5.9 2,552.5
-------------------- ------------------ ----------- --------------------------------
Durrants 6.4 5.0 2,349.2
-------------------- ------------------ ----------- --------------------------------
Redlands 6.4 6.2 2,783.2
-------------------- ------------------ ----------- --------------------------------
Romsey 5.8 5.0 2,284.8
-------------------- ------------------ ----------- --------------------------------
Trethosa 5.8 4.8 1,805.8
-------------------- ------------------ ----------- --------------------------------
Old Stone 5.7 5.0 2,327.1
-------------------- ------------------ ----------- --------------------------------
Salhouse 5.6 5.0 2,233.7
-------------------- ------------------ ----------- --------------------------------
Frogs Loke 5.6 5.0 2,248.6
-------------------- ------------------ ----------- --------------------------------
Place Barton 5.5 5.0 2,281.1
-------------------- ------------------ ----------- --------------------------------
Court Farm 5.5 5.0 2,314.1
-------------------- ------------------ ----------- --------------------------------
The Grange 5.4 5.0 1,542.1
-------------------- ------------------ ----------- --------------------------------
Bunns Hill 5.3 5.0 2,227.2
-------------------- ------------------ ----------- --------------------------------
Folly Lane 5.3 4.8 2,051.3
-------------------- ------------------ ----------- --------------------------------
Oulton 5.3 5.0 2,181.2
-------------------- ------------------ ----------- --------------------------------
Rookery 5.2 5.0 2,152.7
-------------------- ------------------ ----------- --------------------------------
Kellingley 5.0 5.0 2,194.5
-------------------- ------------------ ----------- --------------------------------
Kislingbury 5.0 5.0 2,148.0
-------------------- ------------------ ----------- --------------------------------
Solar Farm Asset Total Investment MWp Generation to
Commitment (GBP) December 2017
(Actual, MW/h)
---------------------- ------------------ ----------- ----------------------------------
Tollgate Farm 4.6 4.3 1,784.9
---------------------- ------------------ ----------- ----------------------------------
Willows 4.6 5.0 2,057.3
---------------------- ------------------ ----------- ----------------------------------
Gypsum 4.4 4.5 1,855.4
---------------------- ------------------ ----------- ----------------------------------
Barvills 3.3 3.2 1,527.8
---------------------- ------------------ ----------- ----------------------------------
Langlands 3.1 2.1 943.5
---------------------- ------------------ ----------- ----------------------------------
Butteriss (20 micro
sites) 2.3 0.8 236.2
---------------------- ------------------ ----------- ----------------------------------
Corby 2.3 0.5 185.4
---------------------- ------------------ ----------- ----------------------------------
Goshawk 2.0 1.1 360.9
---------------------- ------------------ ----------- ----------------------------------
Promothames (9 micro
sites) 1.3 0.4 115.9
---------------------- ------------------ ----------- ----------------------------------
SUB-TOTAL 523.8 441.5 190,823.3
---------------------- ------------------ ----------- ----------------------------------
Assets becoming Operational / Acquired during the Reporting Period
-------------------------------------------------------------------------------------------
Acquired in Dec
Clapton 6.3 5.0 17
---------------------- ------------------ ----------- ----------------------------------
SUB-TOTAL 6.3 5.0 0.0
---------------------- ------------------ ----------- ----------------------------------
GRAND TOTAL 530.1 446.5 190,823.3
---------------------- ------------------ ----------- ----------------------------------
PPA Strategy
Over the year the Company maintained its strategy to fix the
price of power sale contracts for individual assets, not covered by
long term contracts, for periods between 12 and 36 months. The
majority of contracts are being struck for a minimum of 18 months,
which is the average duration required under the LTF agreement.
For c.75% of the portfolio capacity that is not tied to long
term contracts, the Company has also continued to implement the
approach of fixing power prices evenly throughout the year, in
order to mitigate exposure to seasonal fluctuations and short term
events which have the potential to increase volatility in the price
of electricity in the UK. The fixing period seeks to maximise
potential revenues for the Company, whilst spreading exposure to
short term seasonal power movements across the portfolio.
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 combination of the PPA renewal strategy applied during the
period, and c.95MWp of plants (c.22% of the portfolio) benefitting
from 15 year PPAs with attractive fixed power prices until Q1 2018,
means the Company is materially insulated from power price
fluctuations (both up and down) over the next 12 months.
Meanwhile the fact that 75% of the portfolio is contracted only
on short term (12 to 36 month PPAs) has meant that the Company has
been able to benefit from some of the rising power price trend in
recent months.
% of BSIF revenues fixed as at 31 December 2017
[Graph]
The graph above shows that the Company has a price confidence
level of c.87% to June 2018 and c.73% to December 2018 over its
power prices.
The Investment Adviser's strategy to secure leverage at the
portfolio rather than asset level has enabled the Company to retain
flexibility in implementing its short term PPA strategy following
the closing of the Company's LTF in September 2016.
This means the Company now has the flexibility to explore value
enhancing options such as negotiating corporate PPA offtakes,
flexibility which would not be available if it had been required by
lenders to enter 15 year offtake contracts. The Company also
remains able to maximise potential economies of scale by taking
advantage of opportunities available only to owners who can commit
significant volumes of generating capacity.
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 avoids
the greater discounts applied by offtakers when they are entering
long term contracts. For example, a tender of 4 x 5MWp is preferred
over 4 separate tenders of 5MWp in order to maximise value.
Revenues and Power Price
The portfolio's revenue streams in the reporting period,
excluding ROC recycle estimates, show that the sale of electricity
accounts for 39.8% of the Company's income. Regulated revenues from
the sale of FiTs and ROCs account for 60.2%.
Overall, wholesale power markets have shown improvement from the
lows experienced in Q2 2017 when concerns over supply in the UK
electricity market and uncertainty following the Brexit referendum
combined to lower PPA strike prices.
This upward movement has been reflected in PPA fixes completed
by the Company during the period, with 12 to 36 month fixed
contracts replaced in the period benefitting from an increase to
the average seasonal weighted power price previously achieved (from
GBP43.65 per MWh as per 31 December 2016, compared to GBP45.41 per
MWh per 31 December 2017).
The resulting blended contracted price was in line with the day
ahead market base load power prices over the equivalent period.
The impact of power prices on NAV is set out in the valuations
section.
4. Analysis of underlying earnings
The total generation and revenue earned in the 6 month period (1
July to 31 December 2017) by the Company's portfolio, split by
subsidy regime, is outlined below.
Subsidy Regime Generation PPA Revenue Regulated
(MWh) (GBPm) Revenue (GBPm)*
---------------- ----------- ------------ -----------------
FiT 6,642 0.2 1.8
---------------- ----------- ------------ -----------------
2.0 ROCs 3,780 0.2 0.4
---------------- ----------- ------------ -----------------
1.6 ROCs 39,941 1.8 3.1
---------------- ----------- ------------ -----------------
1.4 ROCs 105,049 4.8 7.0
---------------- ----------- ------------ -----------------
1.3 ROCs 18,706 0.9 1.2
---------------- ----------- ------------ -----------------
1.2 ROCs 16,705 0.8 0.9
---------------- ----------- ------------ -----------------
Total 190,823 8.7 14.4
---------------- ----------- ------------ -----------------
*ROC Recycle is not included in this figure.
The Company includes ROC recycle assumptions within its long
term forecasts and applies a market based approach on recognition
within any current financial period, including prudent estimates
within its accounts where there is clear evidence that participants
are attaching value to ROC recycle for the current accounting
period.
In October 2017, Ofgem announced that the final value for ROC
recycle for the period April 2016 to March 2017 (CP 15) was
GBP44.77 per MWh (equivalent to 11.4% of CP 15 ROC buyout prices).
The Company had recognised only a prudent estimate of ROC recycle
in its 30 June 2017 accounts and additional income of GBP1.6m was
received during the current reporting period.
The following table demonstrates that the portfolio generated
underlying earnings of GBP13.0m (3.51pps) and underlying earnings
for distribution, post debt repayments, of GBP5.7m (1.54pps)
In addition, its retained earnings from previous financial years
have been revalued following the October 2017 announcement of ROC
recycle for the period April 2016 to March 2017, which was higher
than the prudent estimate built into the 30 June 2017 year end
results.
As a result, brought forward earnings increased from GBP1.1m to
GBP2.7m (0.73pps) further bolstering the Company's ability to meet
2017/18's full year dividend target of 7.43pps.
Underlying Portfolio Earnings
Half year Half year Full year Full year
period to period to to to
31 Dec 17 31 Dec 16 30 Jun 17 30 Jun 16
(GBPm) (GBPm) (GBPm) (GBPm)
----------------------------- ----------- ----------- ----------- -----------
Portfolio Revenue 23.1 20.7 47.9 35.6
----------------------------- ----------- ----------- ----------- -----------
Liquidated damages 0.3 0.9 1.3 0.9
----------------------------- ----------- ----------- ----------- -----------
Portfolio Income 23.4 21.6 49.2 36.5
----------------------------- ----------- ----------- ----------- -----------
Portfolio Costs -5.8 -5.0 -11.4 -7.1
----------------------------- ----------- ----------- ----------- -----------
Project Finance Interest
Costs -0.4 -0.4 -0.7 -0.7
----------------------------- ----------- ----------- ----------- -----------
Total Portfolio Income
Earned 17.2 16.2 37.1 28.7
----------------------------- ----------- ----------- ----------- -----------
Group Operating Costs* -2.2 -1.9 -4.2 -3.9
----------------------------- ----------- ----------- ----------- -----------
Group Debt Costs -2.0 -2.3 -4.4 -3.2
----------------------------- ----------- ----------- ----------- -----------
Underlying Earnings 13.0 12.0 28.5 21.6
----------------------------- ----------- ----------- ----------- -----------
Group Debt Repayments -7.3 -2.7 -3.4 -0.7
----------------------------- ----------- ----------- ----------- -----------
Underlying Earnings
available for distribution 5.7 9.3 25.1 20.9
----------------------------- ----------- ----------- ----------- -----------
(Over)/under accrual
of ROC Recycle per
share 1.6 0.0 0.0 0.0
----------------------------- ----------- ----------- ----------- -----------
Brought forward funds 1.1 0.8 0.8 1.3
----------------------------- ----------- ----------- ----------- -----------
Total funds available
for distribution -1 8.4 10.1 25.9 22.2
----------------------------- ----------- ----------- ----------- -----------
Target Distribution N/A N/A 24.6 20.9
----------------------------- ----------- ----------- ----------- -----------
Actual Distribution
-2 6.7 10.1 24.8** 21.4**
----------------------------- ----------- ----------- ----------- -----------
Underlying Earnings
carried forward
(1-2) N/A N/A 1.1 0.8
----------------------------- ----------- ----------- ----------- -----------
*Excludes one off transaction costs and the release of upfront
fees related to the Company's debt facilities
**Actual distribution is based on funds required for total
dividend for each financial period. This has been above the target
dividend in each annual period shown.
The table below presents the underlying earnings on a "per
share" basis:
Half year Half year Full year Full year
to to
period to period to 30 Jun 17 30 Jun 16
31 Dec 17 31 Dec 16 (GBPm (GBPm)
(GBPm) (GBPm)
-------------------------- ------------ ------------ ------------ ------------
Target Distribution N/A N/A 24.6 20.9
-------------------------- ------------ ------------ ------------ ------------
Total funds available
for distribution (inc
reserves) 8.4 10.1 25.9 22.2
-------------------------- ------------ ------------ ------------ ------------
Average Number of
shares in year* 369,811,281 309,631,765 342,735,213 295,282,786
-------------------------- ------------ ------------ ------------ ------------
Target Dividend (pps) N/A N/A 7.18 7.07
-------------------------- ------------ ------------ ------------ ------------
Total funds available
for distribution (pps)
- 1 2.27 3.25 7.55 7.55
-------------------------- ------------ ------------ ------------ ------------
Total Dividend Declared
& Paid (pps) - 2 1.80** 3.25 7.25 7.25
-------------------------- ------------ ------------ ------------ ------------
Reserves carried forward
(pps)- 1-2 *** N/A N/A 0.30 0.30
-------------------------- ------------ ------------ ------------ ------------
*Average number of shares is calculated based on shares in issue
at the time each dividend was declared and as at 31 December 2017
for the current reporting period.
**Dividend of 1.80pps was announced post 31 December 2017 and is
included in this table due to its payment deriving from earnings in
the period, confirming the Company's previously stated commitment
to smooth distributions over the reporting period.
***Carried forward amounts relate to full year end balances.
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, with the most recent review completed
by Ernst and Young 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 Invest Europe (formerly
known as 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 31 December
2017 was GBP576.3m, compared to GBP573.4m as at 30 June 2017 and
GBP531.1m as at 31 December 2016.
The table below shows a breakdown of the Directors' Valuations
over the last three 6 month periods:
Valuation Component Dec 17 Jun 17 Dec 16
(GBPm)
-------------------------- ------- ------- -------
Enterprise Value (Gross
Portfolio DCF value) 568.5 558.6 510.5
-------------------------- ------- ------- -------
Deduction of Project
Co debt -12.9 -13.2 -13.6
-------------------------- ------- ------- -------
Projects at cost (amount
invested) 6.3 5.0 25.0
-------------------------- ------- ------- -------
Project Net Current
Assets 14.4 23.0 9.2
-------------------------- ------- ------- -------
Directors' Valuation 576.3 573.4 531.1
-------------------------- ------- ------- -------
Further detail, as required, is outlined in the portfolio
valuation movement section.
Key features impacting Directors' Valuation methodology
During the period there have been a number of key developments
which have been considered in the Investment Adviser's
recommendation to the Directors' Valuation:
(i) A number of large scale operational portfolios have either
been sold or brought to market. Notable sales to 31 December 2017
include EFG Hermes' 45% stake in the 365MWp TerraForm Power
portfolio and Greencoat's 75MWp purchase of Baywa's remaining UK
portfolio, with additional sales in January 2018 including the
completion of Solarplicity's 135MWp portfolio to an undisclosed
buyer and Magnetar's 350MWp portfolio to Rockfire Capital. As
highlighted in previous reports, these acquirers are relatively new
entrants to the UK market and continue to represent the
availability of low cost capital, largely from pension fund
investors;
(ii) The Finance Bill received Royal Assent on 16 November 2017.
As Action 4 (Corporate Interest restrictions) of BEPS was passed
into law it confirmed, as of April 2017, that corporates would be
restricted to the higher of net interest deductions of GBP2m, 30%
of EBITDA, or its ratio of third party debt to EBITDA;
(iii) Inflation continued to rise, with RPI achieving a 7 year
peak in December 2017 of 4.1%, although predictions remain divided
over whether further rises will occur in 2018;
(iv) Notwithstanding some near term (1 to 2 year) upward
movements in energy price forecasts, the latest long term forecast
curves projected by our forecasters have fallen by c.7.8% compared
to June 2017; reflecting revisions to coal closure dates, the
volume of renewables and new interconnection capacity. To avoid
sensitivity to a single forecast in a volatile market, the
Investment Adviser averages data from two leading forecasters.
Discounting Methodology and Discount Rate
The Directors' Valuation is based upon referencing comparable
market transactions and discounting of the net, unlevered, project
cash flows of each investment held by the Company, through BSIFIL,
irrespective of whether the investment has project leverage or
not.
The discount rate applied on the project cash flows is therefore
the WACC.
This approach of discounting the unlevered cash flows with a
WACC is consistent 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 'EV',
project level debt (if any) is then deducted along with additions
of projects at cost and period end working capital to establish the
'Directors' Valuation' of the portfolio.
It is notable that of the 46 SPVs held by the Company, only one
(Project Durrants) has asset level debt (being GBP12.9m at the
financial period end).
In June 2017, as a result of increasing competition within the
UK solar market, the Board noted that a sustained trend had now
emerged with respect to the GBP/MWp for large scale portfolios, the
most notable example of which was EFG Hermes' purchase of
TerraForm's 365MW portfolio for an EV of GBP1.29m/MWp in December
2016.
Consequently, the Board deemed it necessary, under the 'willing
buyer-willing seller' methodology, that the valuation of the
Company's portfolio be prudently benchmarked on GBP/MWp basis
against these comparable portfolio transactions.
While the period to 31 December 2017 has continued to see high
levels of competition for large scale portfolios, the Board
believes it appropriate to maintain a prudent benchmarking
approach, on GBP/MWp basis, in respect of the interim valuation of
the BSIF portfolio.
By valuing the portfolio at an EV of GBP568.5m, and an effective
price of GBP1.29m/MWp, the Board has conservatively achieved this
aim. On this basis, the WACC discount rate of 6.15%, applied in
June 2017, has been reduced by 0.25% to 5.90%.
For completeness, following Royal Assent of the Finance Bill on
16 November 2017, this discount rate now incorporates a tax shield
based on interest deductions relating to both the Company's
external and, as permitted, inter-company loans (See section below
on Impact of Finance Bill 2017 for more detail.)
The equity discount rate implied by the Directors' Valuation is
7.02% (down from 7.43% in June 2017), and is derived only from
third party leverage of 32%, based on the Company's GAV as at 31
December 2017 of GBP612.4m*, and an increase in the tax shield
following inclusion of interest deductions with respect to the
Company's current balance of Eurobonds (c.GBP80m).
Applying this equity discount rate of 7.02% to the equity
forecast cashflows of the portfolio (after tax deductions) gives
rise to the same resulting NAV as the WACC methodology and is
intended to assist in the benchmarking of the Company's valuation
within the sector.
* GAV is the aggregation to the portfolio's DCF value, project
Durrants' outstanding debt and the working capital balances from
the portfolio and BSIFIL.
The equity discount rate implies that the future cash flows of
the Company, based upon the conservative assumption of a zero
terminal value after 25 years, are expected to deliver a c.7.0%
gross annualised return on today's NAV.
This attractive return level is indicative of the strong return
characteristics of the solar sector and highlights the strong
expected equity cash flow performance of the Company through its
high performing portfolio, attractively priced long term debt (as
set out in the section on Debt Financing below) and tax shield
assumptions based on prevailing legislation.
The DCF has been applied on an asset portfolio with an average
assumed operational life of 25 years from commissioning. The Board
has elected not to adopt a longer assumed life, even for assets
with extended lease or planning permission at this early stage in
the life of the portfolio.
Nevertheless, the Investment Adviser is carrying out an active
programme of asset life extension through planning and lease
amendments and this may justify use of a longer asset life in the
future.
Consistent with the previous financial year, the Board has
adopted an assumed RPI of 2.75% throughout the assumed asset life
(including from 2019 onwards). This inflation rate was increased in
December 2016 following a revision of market expectations.
Impact of Finance Bill 2017 - Base Erosion and Profit
Shifting
In September 2016 the Company secured an 18 year, fully
amortising finance facility of GBP187m (at a fixed rate of 2.875%
on GBP121.5m and 0.7% over RPI on GBP65.5m) from Aviva
Investors.
Directors' Valuations since this point have incorporated the
benefit of tax shielding from this long term debt profile and,
consistent with all valuations from previous periods, assumed tax
shield only from external third parties.
No net tax shielding has previously been assumed from
intercompany loans within the group.
The average EBITDA interest tax shield from this long term debt
equates to 7.2% over the life, being 15.0% in 2018 and falling
thereafter with amortisation of the debt.
However, with Royal Assent of the Finance Bill occurring in
November 2017, the Company has moved to include interest shielding
from c.GBP80m of intercompany loans (Eurobonds) between BSIF and
BSIFIL within its 31 December 2017 valuation.
The average EBITDA interest tax shield from this combination of
third party long term debt and inter-company debt equates to 18.5%
over the life, being 27.1% in 2018 and falling thereafter with
amortisation of the debt and remains conservative with respect to
the 30% level permitted under the fixed ratio test of the corporate
interest restriction rules.
Power Price
As with Directors' valuations since 31 December 2016, the
Directors have continued to adopt an equal blend of the forecasts
from the two leading independent forecasters for the period to 31
December 2017, with the table below outlining the valuation range
over the last three valuation cycles, resulting from applying each
forecaster individually.
Forecaster Portfolio Enterprise Value (GBPm)
--------------------------------------- --------------------------------------
Dec 17 Jun 17 Dec 16
--------------------------------------- ------------ ----------- -----------
Leading independent power forecaster
1* 566.1 553.9 500.5
--------------------------------------- ------------ ----------- -----------
Equal blending of leading independent
power forecasts 568.5 558.6 510.5
--------------------------------------- ------------ ----------- -----------
Leading independent power forecaster
2 570.9 563.7 520.4
--------------------------------------- ------------ ----------- -----------
* Forecaster used in all BSIF valuations to date
The blended forecast used within the latest Directors' Valuation
is based on forecasts released in November 2017 (forecaster 1) and
December 2017 (forecaster 2) and implies an annualised growth in
real power prices over the 25 year forecast of 1.10%.
The DCF 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 blended 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 was
considered to reflect the market without discount or premium.
Plant Performance
During the period a further 4 plants completed and passed FAC
testing. This process triggered the end of performance related EPC
warranties and, in the context of the valuation approach, marks the
first point at which long term performance can be adopted within
the future cash flows of the project.
The number of projects now being valued on an operational PR
basis is 11 (7 assets in June 2017) and whilst there has been a
slight reduction in value terms due to minor swings in operational
PRs over the reporting period, the Investment Adviser is pleased to
confirm that the average operational PR for these plants is
84.3%.
This represents an uplift of 0.9% over warranted levels
previously assumed within the Directors' Valuation as well as the
possibility of future valuation uplifts as more plants move through
the FAC process and switch to operational PRs.
Consistent with the valuation approach taken in previous
periods, the Directors' Valuation does not amend long term plant
performance forecasts based upon short term performance while the
plants remain within the warranty period and subject to outstanding
contractual testing obligations.
Other Cash flow Assumptions
No material changes have been made regarding regulatory revenue
or cost assumptions.
NAV movement
In the period, the Company paid total dividends of GBP11.1m,
being 3.00pps in total for the third and fourth interim dividends
in respect of the year ended 30 June 2017 (when combined with the
earlier interim dividends, these provided a total dividend in the
2016/17 financial year of 7.25pps).
Over the period the Company's NAV has increased by GBP7.1m, from
GBP408.6m as at 30 June 2017 to GBP415.7m as at 31 December 2017.
Adjusting the 30 June 2017 NAV of GBP408.6m for the dividends paid
in the period (GBP11.1m), results in an uplift in the NAV of the
Company during the period of GBP18.2m, or 4.4% and 5.2% on a share
price basis.
A breakdown in the movement of the NAV (GBPm) 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.
In February 2018, the Company paid a first interim dividend for
2017/18 financial year of 1.80pps and is expecting to pay three
further dividends in respect of the current financial year of
similar magnitude with the fourth dividend inclusive of a small
balancing payment to meet the Company's 2017/18 dividend target of
7.43pps.
[Charts]
Directors' Valuation movement
(GBPm) (GBPm) As % of
rebased
valuation
------------------------------- ------- --------------- -----------
30 June 2017 Valuation 573.4
------------------------------- ------- --------------- -----------
New Investments (BSIF equity) 2.1
------------------------------- ------- --------------- -----------
Re-based Valuation 575.5
------------------------------- ------- --------------- -----------
Cash receipts from portfolio -24.6 -4.3%
Power Price Movement -15.2 -2.6%
Operational PR Update -3.7 -0.6%
Tax shield Update 10.8 1.9%
Decrease in discount rate 11.4 2.0%
Balance of portfolio return 22.1 3.8%
31 December 2017 Valuation 576.3 0.2%
------------------------------- ------- --------------- -----------
Each movement between the rebased valuation and the 30 June 2017
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 BSIFIL and the Company to enable
the companies to settle operating costs and distribution
commitments as they fall due within the period.
Power Price Movement
The Company's two independent forecasters released updated
forecasts in November and December 2017 and these have been applied
to the Directors' Valuation. The impact of adopting an equal blend
of two independent forecasters as well as the latest power price
fixes, against power price expectations applied in the 30 June 2017
valuation, results in a decrease of GBP15.2m.
Operational PR update
The slight decrease in value from 30 June 2017 reflects updates
to operational PRs for period to 31 December 2017 for plants that
have passed FAC.
Tax shield update
Following approval of the Finance Bill in November 2017, the
Company has increased the level of tax shielding by including
interest relief on a subset of its intercompany loans. This change
results in an average EBITDA shield of 18.5%, over the life of the
assets, compared to the permitted limit of 30% of EBITDA under the
fixed ratio test of the corporate interest restriction rules.
This is a change to prior valuations where the Company had been
factoring in only the tax shield from third party loans held with
Aviva Investors (c.GBP180m at portfolio level) and Bayern
Landesbank (c.GBP13m at project level).
The shielding on these third party loans equates to c.15% of
EBITDA for 2018, and c.7% across the life of the loans.
Decrease in discount rate
The reduction of the WACC from 6.15% as 30 Jun 2017 to 5.90% as
at 31 December 2017 reflects the continued pricing tension within
the UK solar market and results in an increase of GBP11.4m to the
31 December 2017 valuation.
Balance of Portfolio Return
The balance of portfolio return is the contribution from the
unwinding of the discount rate.
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 Directors' Valuation of 30 June 2017.
On the basis of these key assumptions, the Board believes there
remains further potential for NAV enhancement based upon long term
proof of plant performance and through the potential for future
extensions of asset life.
The assumptions set out in this section will remain subject to
review by the Investment Adviser and the Board and may give rise to
a revision of valuation approach in future reports.
Reconciliation of Directors' Valuation to Statement of Financial
Position
Balance at Period / Year End
-------------------------- -------------------------------------------
Category 31 December 30 June 31 December
2017 (GBPm) 2017 (GBPm) 2016 (GBPm)
-------------------------- ------------- ------------- -------------
Directors' Valuation 576.3 573.4 531.1
-------------------------- ------------- ------------- -------------
BSIFIL Working Capital 23.2 15.9 17.4
-------------------------- ------------- ------------- -------------
BSIFIL Third Party Debt (184.6) (186.0) (184.9)
-------------------------- ------------- ------------- -------------
Financial Assets at Fair
Value per Balance sheet 414.9 403.3 363.6
-------------------------- ------------- ------------- -------------
Following the adoption of IFRS 10 and the Company's move to
presenting its results on a non-consolidated basis, rather than
consolidating its immediate subsidiary BSIFIL, the above table
serves to aid the reader in reconciling the Directors' Valuation to
the relevant line on the Statement of Financial Position.
Directors' Valuation sensitivities
Valuation sensitivities are set out in tabular form in Note 7 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]
Furthermore, the chart below, which is based on the NAV as at 31
December 2017 of GBP415.7m, sets out the expected 25 year return
(with a zero terminal value) of the Company's equity cash flows and
indicates the robust nature of returns from solar cash flows, which
results from the high proportion of regulated, RPI indexed,
revenues.
[Chart]
Equity return upside may be achieved based on higher than base
case power prices or additional tax shield, while the real returns
remain robust in all inflation scenarios due to the carefully
designed debt package with indexed and fixed rate components and
RPI indexed revenues.
Apart from the energy yield, for which the portfolio has
delivered consistent operational outperformance year on year, the
greatest return sensitivity is to power prices.
Notwithstanding sensitivity to power prices, even in the
downside scenario the Company's returns continue to offer a
significant premium to gilt rates.
6. Financing
Aviva Investors Long Term Facility
The LTF is provided by Aviva Investors in two tranches. The
first is a GBP121.5m fixed-rate long term facility and the second
is a GBP65.5m index-linked long term facility.
Loan Amount Tenor No Refinancing Cost Weighted Interest
Risk average rate exposure
Loan Life during 18
at inception year tenor
(Sep 16)
------------- ---------- --------- ----------------- ---------- -------------- ---------------
Fixed GBP121.5m 18 years Fully amortising All in 10.6 Zero
and 3 over 18 years cost of
months sculpted 287.5bps
to cash flows
------------- ---------- --------- ----------------- ---------- -------------- ---------------
Index-Linked GBP65.5m 18 years Fully amortising RPI plus 11.3 Linked to
and 3 over 18 years 0.70% RPI
months sculpted
to cash flows
------------- ---------- --------- ----------------- ---------- -------------- ---------------
Both tranches are fully amortising over 18 years, providing
natural alignment with the average remaining life of the Company's
regulated revenues, eliminating refinancing risk as well as
insulating the Company's equity cash flows from significant
principal repayments in the final years of the facility when the
contribution of revenue from power is increased.
During the period principal repayments of GBP6.9m, combined with
indexation increases of GBP2.8m, resulted in a total outstanding
balance to Aviva Investors as at 31 December 2017 of GBP180.2m
(Fixed GBP115.3m, Index linked, GBP64.9m).
The LTF is held by the Company's wholly owned subsidiary,
BSIFIL, and is the result of a deliberate structuring approach to
maximise both transparency and portfolio management flexibility,
whilst also delivering the lowest cost of capital in our sector (as
at 31 December 2017, the blended debt cost of the facilities was
3.7%).
Thanks to the prudent leverage (32% of GAV as at 31 December
2017) on the Company's base case projections the average DSCR
remains close to 3 times, with the lowest point of coverage over
the entire tenor projected to be in excess of 2.5x.
RBS Revolving Credit Facility
The Company's RCF is provided by RBS to BSIFIL and has a current
maturity date of September 2019 and a constant margin of 2.0% over
LIBOR.
As at 31 December 2017 the Company had drawn down GBP4.4m,
leaving available capital of GBP25.6m.
Both the new RCF and the LTF are secured upon a selection of the
Company's investment portfolio and offer the ability to substitute
reference assets.
Project level debt
In addition to the LTF and the three year RCF, the Company also
has a small project finance loan of GBP12.9m secured against
project Durrants (a 5MWp FiT plant located on the Isle of
Wight).
This facility was provided by Bayern Landesbank and is fully
amortising with a final maturity of 2029.
7. Market Developments
The UK's total installed solar capacity reached 12.6GWp* as of
31 December 2017.
Capacity accredited under the RO Scheme stood at 7GWp,
representing more than 50% of total solar capacity, but only 2% of
the number of installations implying a high concentration of
generation in industrial scale sites. About 25% of all operational
capacity are projects sized 50kWp to 5MWp and circa one third are
larger than 5MWp but smaller than 25MWp.
Capacity accredited under the FiT was 4.7GWp, equivalent to
about 38% of total solar capacity and 86% of all installations.
The primary PV market in the UK has ended following the closure
of the RO scheme in April 2017. In the second half of 2017, about
175MWp of capacity was added to the grid, with new plants mainly
ranging from 50kWp to 25MWp. With 447MWp under management, the
Company continues to maintain its strong position within the UK
solar market as one of the largest solar asset owners by December
2017, operating about 5.7% of the country's total installed PV
capacity.
The booming secondary market from the first half of 2017
continued into the second half and showed a notable increase in
activity compared to 2016.
The Company's policy is that it will acquire only assets that it
believes are accretive to shareholders' returns.
8. Regulatory Environment
Closure of Renewables Obligation
As per the regulatory decision of the UK Department BEIS, the RO
scheme closed for new projects on 1 April 2017. The deadline caused
a rush to commission new projects in the first quarter of 2017 with
a total of 700MWp becoming operational in those three months alone.
Since then, the new build market has collapsed and only 90MWp of
new capacity has been installed since March 2017.
Update on Contracts for Differences
On 11 October 2017, the UK government announced new CfD rounds
to be scheduled in 2019. The total budget of up to GBP557m in
subsidies will again be restricted to offshore wind and other "less
mature technologies". This means there will be no new government
support for solar power until at least the end of the decade.
Subsidy free PV
The lack of supportive regulations means that any new projects
will have to be delivered on a subsidy free basis. The economics of
solar have improved significantly over the last few years as a
result of falling equipment prices, while at the same time being
hampered by weakening power prices. Although there are signs of
subsidy-free projects emerging, the Company believes grid parity
for the technology has not yet been reached, but it will continue
to monitor opportunities on the primary market.
*Source: BEIS
9. Environmental, Social and 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.
Responsible Investment
The Investment Adviser is committed to the United Nations
Principles for Responsible Investment. With this pledge our
commitment towards sustainable and ethical investment is
formalised.
Environmental Impact
Approximately 25 acres of land are required for every 5MWp of
installation, enough to power 1,515 homes based on average annual
consumption figures for a house of 3,300kWh of electricity (source
DECC, Ofgem). For every 5MWp installed, this is an annual saving of
2,150 tonnes of CO2.
Based on these figures, the portfolio capacity of 446.5MWp as at
31 December 2017 will power the equivalent of 135,288 homes and
save 191,995 tonnes of CO2 in a year.
Biodiversity
During the period the Investment Adviser completed a
benchmarking study of the biodiversity enhancement measures
implemented on the Company's large scale assets. Results showed
that across three major measures; wildflower meadow creation,
native tree and hedgerow planting and creation of habitat to
support local wildlife (eg bat boxes, bird boxes, beehives) the
majority of plants had benefited from enhancements in at least two
of these areas and that all plants had received enhancement in at
least one area.
During the current calendar year, the Investment Adviser is
working towards ensuring all remaining plants benefit from
biodiversity enhancements covering at least two of the three major
measures listed above. It is important to note that these proposed
additional enhancement measures will be based on the individual
natural ecosystems and will be using indigenous species.
In addition to the above we are looking to collaborate with
local wildlife trusts to further enhance the presence of native
local species in and around the solar parks.
Sheep Grazing
Many sites within the portfolio support sheep grazing,
illustrating that solar farms can support farming and are also a
cost effective way of managing grassland in solar farms while
increasing its conservation value. Where possible the Investment
Adviser facilitates the introduction of sheep grazing on the
existing and newly acquired assets.
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. Over the period to
31 December 2017, the portfolio assets made donations of GBP101,600
to community benefit schemes for local councils and parishes for
charitable, educational, environmental, amenity or other
appropriate purposes within the areas of the community.
Bluefield Partners LLP
26 February 2018
Statement of Principal Risks and Uncertainties for the Remaining
Six Months of the year to 30 June 2018
As described in the Company's annual financial statements as at
30 June 2017, the Company's principal risks and uncertainties
include the following:
-- Portfolio acquisition risk;
-- Portfolio operational risk;
-- Valuation error;
-- Depreciation of NAV;
-- Unfavourable weather and climate conditions;
-- Unfavourable electricity market conditions;
-- Changes in tax regime;
-- Changes to government plans, and
-- Political risk.
The Board believes that these risks are unchanged in respect of
the remaining six months of the year to 30 June 2018.
Further information in relation to these principal risks and
uncertainties may be found on pages 24 to 28 of the Company's
annual financial statements as at 30 June 2017.
These inherent risks associated with investments in the solar
energy sector could result in a material adverse effect on the
Company's performance and value of Ordinary Shares.
Risks are mitigated and managed by the Board through continual
review, policy setting and regular reviews of the Company's risk
matrix by the Audit Committee to ensure that procedures are in
place with the intention of minimising the impact of the above
mentioned risks. The Board carried out a formal review of the risk
matrix at the Audit Committee meeting held on 20 February 2018. The
Board relies on periodic reports provided by the Investment Adviser
and Administrator regarding risks that the Company faces. When
required, experts will be employed to gather information, including
tax advisers, legal advisers, and environmental advisers.
Directors' Statement of Responsibilities
The Directors are responsible for preparing the Interim Report
and Unaudited Condensed Interim Financial Statements in accordance
with applicable regulations. The Board confirms that to the best of
their knowledge:
-- the Unaudited Condensed Interim Financial Statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union; and
-- the interim management report which includes the Chairman's
Statement, Report of the Investment Adviser and Statement of
Principal Risks and Uncertainties for the Remaining Six Months of
the year to 30 June 2018 include a fair review of the information
required by:
a. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
Unaudited Condensed Interim Financial Statements; and a description
of the principal risks and uncertainties for the remaining six
months of the financial year; and
b. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place during the
first six months of the financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
The Board is responsible for the maintenance and integrity of
the corporate and financial information included on the Company's
website, and for the preparation and dissemination of financial
statements. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
On behalf of the Board
John Rennocks
Chairman
26 February 2018
Independent Review Report to Bluefield Solar Income Fund
Limited
Conclusion
We have been engaged by Bluefield Solar Income Fund Limited (the
"Company") to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 31
December 2017 of the Company which comprises the unaudited
condensed statement of financial position, unaudited condensed
statement of comprehensive income, unaudited condensed statement of
changes in equity, unaudited condensed statement of cash flows and
the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
December 2017 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Rachid Frihmat
for and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
26 February 2018
Unaudited Condensed Statement of Financial Position
As at 31 December 2017
31 December 2017 30 June 2017
Unaudited Audited
Note GBP GBP
------------------------------------------------- ----- -------------------------------------- --------------------
ASSETS
Non-current assets
Financial assets held at fair value through
profit or loss 7 414,874,321 403,339,287
Total non-current assets 414,874,321 403,339,287
------------------------------------------------- ----- -------------------------------------- --------------------
Current assets
Trade and other receivables 8 981,225 625,717
Cash and cash equivalents 9 143,795 4,980,341
Total current assets 1,125,020 5,606,058
------------------------------------------------- ----- -------------------------------------- --------------------
TOTAL ASSETS 415,999,341 408,945,345
------------------------------------------------- ----- -------------------------------------- --------------------
LIABILITIES
Current liabilities
Other payables and accrued expenses 10 348,073 337,090
------------------------------------------------- ----- -------------------------------------- --------------------
Total current liabilities 348,073 337,090
------------------------------------------------- ----- -------------------------------------- --------------------
TOTAL LIABILITIES 348,073 337,090
------------------------------------------------- ----- -------------------------------------- --------------------
NET ASSETS 415,651,268 408,608,255
------------------------------------------------- ----- -------------------------------------- --------------------
EQUITY
Share capital 367,934,730 367,934,730
Other reserves 77,660 77,660
Retained earnings 47,638,878 40,595,865
TOTAL EQUITY 12 415,651,268 408,608,255
------------------------------------------------- ----- -------------------------------------- --------------------
Number of Ordinary Shares in issue
at period/year end 12 369,811,281 369,811,281
------------------------------------------------- ----- -------------------------------------- --------------------
Net Asset Value per Ordinary Share (pence) 6 112.40 110.49
------------------------------------------------- ----- -------------------------------------- --------------------
These unaudited condensed interim financial statements were
approved and authorised for issue by the Board of Directors on 26
February 2018 and signed on their behalf by:
John Rennocks
Chairman
26 February 2018
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
Unaudited Condensed Statement of Comprehensive Income
For the six months ended 31 December 2017
Six months ended Six months ended
31 December 2017 31 December 2016
Unaudited Unaudited
Note GBP GBP
----------------------------------------------------------- ----- ----------------- -------------------------------
Income
Income from investments 4 340,411 245,590
Interest income from cash and cash equivalents 2,600 8,928
----------------------------------------------------------- ----- ----------------- -------------------------------
343,011 254,518
Net gains on financial assets held at fair value through
profit or loss 7 18,404,433 40,649,305
----------------------------------------------------------- ----- ----------------- -------------------------------
Operating income 18,747,444 40,903,823
----------------------------------------------------------- ----- ----------------- -------------------------------
Expenses
Administrative expenses 5 610,092 561,185
Operating expenses 610,092 561,185
----------------------------------------------------------- ----- ----------------- -------------------------------
Operating profit 18,137,352 40,342,638
----------------------------------------------------------- ----- ----------------- -------------------------------
Total comprehensive income
for the period 18,137,352 40,342,638
----------------------------------------------------------- ----- ----------------- -------------------------------
Attributable to:
Owners of the Company 18,137,352 40,342,638
Earnings per share:
Basic and diluted (pence) 11 4.90 12.15
----------------------------------------------------------- ----- ----------------- -------------------------------
All items within the above statement have been derived from
continuing activities.
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
Unaudited Condensed Statement of Changes in Equity
For the six months ended 31 December 2017
Number of
Ordinary Other Retained
Note Shares Share capital reserves earnings Total equity
GBP GBP GBP GBP
----------------------------- ------------ -------------- ---------- ------------- -------------
Shareholders'
equity at 1
July 2017 369,811,281 367,934,730 77,660 40,595,865 408,608,255
---------------------- ------ ------------ -------------- ---------- ------------- -------------
Dividends paid 12,13 - - - (11,094,339) (11,094,339)
Total comprehensive
income for the
period - - - 18,137,352 18,137,352
Shareholders'
equity at 31
December 2017 369,811,281 367,934,730 77,660 47,638,878 415,651,268
---------------------- ------ ------------ -------------- ---------- ------------- -------------
For the six months ended 31 December 2016
Number of
Ordinary Retained
Shares Share capital Other reserves earnings Total equity
GBP GBP GBP GBP
----------------------- ------------ -------------- --------------- ------------- -------------
Shareholders'
equity at 1
July 2016 309,631,765 307,985,091 167,201 (399,754) 307,752,538
----------------------- ------------ -------------- --------------- ------------- -------------
Shares issued during the period:
60,000,000 Ordinary
Shares issued
via placing 60,000,000 60,600,000 - - 60,600,000
Ordinary Shares
issued in settlement
of variable
fee 179,516 167,201 (167,201) - -
Share issue
costs - (794,290) - - (794,290)
Dividends paid - - - (19,351,986) (19,351,986)
Total comprehensive
income for the
period - - - 40,342,638 40,342,638
Shareholders'
equity at 31
December 2016 369,811,281 367,958,002 - 20,590,898 388,548,900
----------------------- ------------ -------------- --------------- ------------- -------------
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
Unaudited Condensed Statement of Cash Flows
For the six months ended 31 December 2017
Six months ended Six months ended
31 December 2017 31 December 2016
Unaudited Unaudited
Note GBP GBP
------------------------------------------------------------------------ ------ ----------------- -----------------
Cash flows from operating activities
Total comprehensive income for the period 18,137,352 40,342,638
Adjustments:
(Increase) / decrease in trade and other receivables (355,508) 237,809
Increase / (decrease) in other payables and accrued expenses 10,983 (5,707)
Net gains on financial assets held at fair value through profit or loss 7 (18,404,433) (40,649,305)
Net cash used in operating activities (611,606) (74,565)
------------------------------------------------------------------------ ------ ----------------- -----------------
Cash flows from investing activities
Purchase of financial assets held at fair value through profit or loss 7 (4,320,601) (36,147,000)
Receipts from unconsolidated subsidiary 7 11,190,000 18,891,016
Net cash used in investing activities 6,869,399 (17,255,984)
------------------------------------------------------------------------ ------ ----------------- -----------------
Cash flow from financing activities
Proceeds from issue of Ordinary Shares 12 - 60,600,000
Issue costs paid 12 - (794,290)
Dividends paid 12,13 (11,094,339) (19,351,986)
Net cash generated from financing activities (11,094,339) 40,453,724
------------------------------------------------------------------------ ------ ----------------- -----------------
Net (decrease) / increase in cash and cash equivalents (4,836,546) 23,123,175
Cash and cash equivalents at the start of the period 4,980,341 1,780,681
Cash and cash equivalents at the end of the period 9 143,795 24,903,856
------------------------------------------------------------------------ ------ ----------------- -----------------
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
There were significant non cash transactions in the period ended
31 December 2017 which are disclosed in notes 7 and 15.
Notes to the Unaudited Condensed Interim Financial
Statements
For the six months ended 31 December 2017
1. General information
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 is regulated by the
GFSC as a registered closed-ended collective investment scheme.
The investment objective of the Company is to provide
shareholders with an attractive return, principally in the form of
dividends, by investing via SPVs in a portfolio of large scale UK
based solar energy infrastructure assets.
The Company has appointed Bluefield Partners LLP as its
Investment Adviser.
2. Accounting policies
a) Basis of preparation
The financial statements, included in this interim report, have
been prepared in accordance with IAS 34 'Interim Financial
Reporting', as adopted by the EU and the DTR. These financial
statements comprise only the results of the Company as all of its
subsidiaries are measured at fair value as explained in Note 2.c.
The accounts have been prepared on a basis that is consistent with
accounting policies applied in the preparation of the Company's
annual financial statements for 30 June 2017.
These financial statements have been prepared under the
historical cost convention with the exception of financial assets
held at fair value through profit or loss and in accordance with
the provisions of the DTR.
These financial statements do not include all information and
disclosures required in the annual financial statements and should
be read in conjunction with the Company's audited financial
statements for the year ended 30 June 2017, which were prepared
under full IFRS requirements as adopted by the EU and the DTRs of
the UK FCA.
Seasonal and cyclical variations
Although the bulk of the Company's generation occurs during the
summer months when the days are longer, the Company's results do
not vary significantly during reporting periods as a result of
seasonal activity.
b) Going concern
The Directors in their consideration of going concern, have
reviewed comprehensive cash flow forecasts prepared by the
Investment Adviser, future projects in the pipeline and the
performances of the current solar plants in operation and, at the
time of approving these financial statements, have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for at least 12 months and do not consider
there to be any threat to the going concern status of the
Company.
An additional factor which the Board has considered is the
discontinuation vote which will be put to shareholders at the AGM
to be held in November 2018. The Board cannot predict what the
outcome of the discontinuation vote will be but have no present
indication that the vote will not be positive given the Company's
performance, feedback from shareholders and dividend payment
history. In making the going concern disclosure, the Board has
assumed that the Company will continue to operate beyond the
discontinuation vote in its present form until at least the end of
March 2019 as this is the most likely date at which, given the
illiquid nature of the Company's assets, any restructuring proposal
would be put to shareholders in the unlikely event that the
discontinuation vote was passed.
The Directors have concluded that it is appropriate to adopt the
going concern basis of accounting in preparing these financial
statements.
c) Accounting for subsidiaries
The Board considers that both the Company and BSIFIL are
investment entities. In accordance with IFRS 10, all subsidiaries
are recognised at fair value through profit and loss.
d) 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, as a whole, has been determined as constituting the
chief operating decision maker of the Company. The key measure of
performance used by the Board to assess the Company's performance
and to allocate resources is the total return on the Company's NAV,
as calculated under IFRS, and therefore no reconciliation is
required between the measure of profit or loss used by the Board
and that contained in these financial statements.
For management purposes, the Company is engaged in a single
segment of business, being investment in UK solar energy
infrastructure assets via SPVs, and in one geographical area, the
UK.
e) Fair value of subsidiary
The Company holds all of the shares in the subsidiary, BSIFIL,
which is a holding vehicle used to hold the Company's investments.
The Directors believe it is appropriate to value this entity based
on the fair value of its portfolio of SPV investment assets held
plus its other assets and liabilities. The SPV investment assets
held by the subsidiary, inclusive of their intermediary holding
companies, are valued semi-annually as described in Note 7 are
based on referencing comparable transactions supported by
discounted cash flow analysis and are referred to as the Directors'
Valuation.
3. Critical accounting judgements, estimates and assumptions in
applying the Company's accounting policies
The preparation of these financial statements under IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates.
The area involving a high degree of judgement or complexity or
area where assumptions and estimates are significant to the
financial statements has been identified as the valuation of the
portfolio of investments held by BSIFIL (see Note 7).
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.
As disclosed in Note 7, the Board believes it is appropriate for
the Company's portfolio to be benchmarked on a GBPm / MWp basis
against comparable portfolio transactions and on this basis the
WACC discount rate of 6.15% (as applied in June 2017) has been
lowered to 5.90%.
Additionally, with Royal Assent of the Finance Bill occurring in
November 2017, the Company has moved to include interest shielding
from c.GBP80m of intercompany loans (Eurobonds) between BSIF and
BSIFIL within its 31 December 2017 valuation. The average EBITDA
interest tax shield from a combination of third party long term
debt and inter-company Eurobond debt equates to 18.5%.
4. Income from investments
Six months ended Six months ended
31 December 2017 31 December 2016
GBP GBP
Monitoring fee in relation to loans supplied 340,411 245,590
340,411 245,590
================= =================
The Company provides monitoring and loan administration services
to BSIFIL for which an annual fee is charged and is payable in
arrears.
5. Administrative expenses
Six months ended Six months ended
31 December 2017 31 December 2016
GBP GBP
Investment advisory base fee (see Note 14) 152,362 131,395
Legal and professional fees 57,438 53,455
Administration fees (see Note 14) 148,886 118,720
Directors' remuneration (see Note 14) 82,800 80,213
Audit fees 43,460 50,466
Non-audit fees 15,500 15,000
Broker fees 25,147 26,392
Regulatory Fees 20,443 18,724
Registrar fees 21,016 16,471
Insurance 4,376 4,021
Listing fees 6,638 5,820
Other expenses 32,026 40,508
610,092 561,185
================= =================
6. Net Asset Value per Ordinary Share
The calculation of NAV per Ordinary Share is arrived at by
dividing the total net assets of the Company as at the unaudited
condensed statement of financial position date by the number of
Ordinary Shares of the Company at that date.
7. Financial assets held at fair value through profit or
loss
31 December 2017 30 June 2017
Total Total
GBP GBP
Opening balance (Level 3) 403,339,287 305,722,500
Addition - funds passed to BSIFIL 4,320,601 55,500,000
Addition - acquisition of Eurobonds 76,565,712 -
Disposal - de-recognition of loans (76,565,712) -
Change in fair value 7,214,433 42,116,787
Closing balance (Level 3) 414,874,321 403,339,287
================= =============
Investments at fair value through profit or loss comprise the
fair value of the investment portfolio, which is valued
semi-annually by the Directors, and the fair value of BSIFIL, the
Company's single, direct subsidiary being its cash, working capital
and debt balances. A reconciliation of the investment portfolio
value to financial assets at fair value through profit and loss
shown on the Statement of Financial Position is shown below.
31 December
2017 30 June 2017
Total Total
GBP GBP
Investment portfolio, Directors'
Valuation 576,334,070 573,361,486
BSIFIL
Cash 19,628,255 14,121,967
Working capital 3,538,950 1,848,655
Debt (184,626,953) (185,992,821)
-------------- --------------------------
(161,459,749) (170,022,199)
Financial assets at fair value through
profit or loss 414,874,321 403,339,287
============== ==========================
Analysis of net gains on financial assets held at fair value through profit or loss (per unaudited
condensed statement of comprehensive income)
Six months ended Six months ended
31 December 2017 31 December 2016
GBP GBP
Unrealised change in fair value of financial assets held at fair
value through profit or loss 7,214,433 21,758,289
Cash receipts from unconsolidated subsidiary 11,190,000 18,891,016
Net gains on financial assets held at fair value through profit
and loss 18,404,433 40,649,305
================= ==========================
Fair value measurements
Financial assets and financial liabilities are classified in
their entirety into only one of the following three levels:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the assets or liabilities, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices);
-- Level 3 - inputs for assets or liabilities that are not based on observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The only financial instruments carried at fair value are the
investments held by the Company, through BSIFIL, which are fair
valued at each reporting date. The Company's investments have been
classified within Level 3 as BSIFIL's investments are not traded
and are valued using unobservable inputs.
Transfers during the period
There have been no transfers between levels during the six
months ended 31 December 2017.
Directors' Valuation methodology and process
The same valuation methodology and process for operational solar
plants is followed in these financial statements as was applied in
the preparation of the Company's financial statements for the year
ended 30 June 2017. Solar plants under construction and not yet
operational are valued at cost and exclude acquisition costs which
are expensed in the period in which they are incurred.
The Directors have based the fair value of the investments in
the SPVs held by BSIFIL on information received from the Investment
Adviser. It is only the SPVs of BSIFIL, inclusive of their
intermediary holding companies, that the Directors fair value (see
Note 2.e). Fair value of operational SPVs is based on referencing
comparable transaction basis supported by unleveraged, discounted
cash flow analysis 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 EY for the year ended 30
June 2015 and considered by the Board in determining the portfolio
fair value at that date.
The Board has satisfied itself as to the Company's valuation
policy, valuation methodology, discount rates and key assumptions
applied.
The Board reviews and considers the recommendations of the
Investment Adviser and/or an independent valuer to form an opinion
of the fair value of the investments adopted by the Company. The
discounted cash flow technique is applied in appraising each SPV's
solar project when the underlying solar plants are fully
operational. The key inputs to the discounted cash flow analysis
are: the equity discount rate, interest rate, gearing level, length
of debt, power price forecasts, inflation rate, irradiation
forecasts and taxation. Original discount rates applied when the
solar assets were first purchased could change due to factors such
as a material change in long term inflation expectations or
risk-free rates or a change in risk perception of solar assets or
the regulation supporting 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 Company and is based upon referencing comparable
market transactions on a GBPm / MWp basis and discounting of the
net, unlevered, project cash flows of each investment held by the
Company, through BSIFIL, irrespective of whether the investment has
project leverage or not. On this basis the WACC discount rate of
6.15% (as applied in June 2017) has been lowered to 5.90%.
Additionally, with Royal Assent of the Finance Bill occurring in
November 2017, the Company has moved to include interest shielding
from c.GBP80m of intercompany loans (Eurobonds) between BSIF and
BSIFIL within its 31 December 2017 valuation. The average EBITDA
interest tax shield from a combination of third party long term
debt and inter-company Eurobond debt equates to 18.5%.
Related revenue (for associated FiT and ROC benefits) and costs
(for the construction and maintenance of the solar assets) may not
stay constant in real terms over the life of the solar assets, due
to inflation rates. The Company assumes an inflation rate of 2.75%
(30 June 2017: 2.75%).
Consistent with the 30 June 2017 valuation, at 31 December 2017,
the Board has adopted an equal blend of the forecasts of the two
leading independent forecasters in order to smooth sensitivity of
valuation to forecast timing or opinion taken by a single
forecast.
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 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 exceedance) (30 June 2017: P50).
Sensitivity analysis
The table below analyses the sensitivity of the fair value of
the Directors' Valuation to an individual input, while all other
variables remain constant.
The Board considers the changes in inputs to be within a
reasonable expected range based on their understanding of market
transactions. This is not intended to imply that the likelihood of
change or that possible changes in value would be restricted to
this range.
Change in fair value Change in NAV
of the Directors' Valuation per share
Input Change in input GBP (pence)
-------------------------------- ---------------- ----------------------------- --------------
WACC (5.90%) +0.5% (22,400,000) (6.06)
-0.5% 23,800,000 6.44
-------------------------------- ---------------- ----------------------------- --------------
Power prices +10% 27,600,000 7.46
(blended curve parallel shift) -10% (27,700,000) (7.49)
-------------------------------- ---------------- ----------------------------- --------------
Inflation rate (2.75%) + 0.25% 12,500,000 3.38
- 0.25% (12,200,000) (3.30)
-------------------------------- ---------------- ----------------------------- --------------
Energy yield (P50) 10 year P90 (45,700,000) (12.36)
10 year P10 45,500,000 12.30
-------------------------------- ---------------- ----------------------------- --------------
Interest shield (18.5%) +50% 8,800,000 2.38
-50% (9,100,000) (2.46)
-------------------------------- ---------------- ----------------------------- --------------
Operational costs +10% (11,500,000) (3.11)
-10% 11,200,000 3.03
-------------------------------- ---------------- ----------------------------- --------------
8. Trade and other receivables
31 December 2017 30 June 2017
GBP GBP
Current assets
Income from investments (see Note 4) 917,876 577,465
Interest receivable 149 842
Other receivables 15,000 10,000
Prepayments 48,200 37,410
981,225 625,717
================= =============
There are no other material past due or impaired receivable
balances outstanding at the period end.
The Board considers that the carrying amount of all receivables
approximates to their fair value.
9. Cash and cash equivalents
Cash and cash equivalents comprises cash held by the Company and
short term bank deposits held with maturities of up to three
months. The carrying amounts of these assets approximate their fair
value.
10. Other payables and accrued expenses
31 December 2017 30 June 2017
GBP GBP
Current liabilities
Investment advisory fees 75,443 72,634
Administration fees 69,171 66,761
Audit fees 44,500 90,000
Other payables 158,959 107,695
348,073 337,090
======== =============
The Company has financial risk management policies in place to
ensure that all payables are paid within the agreed credit period.
The Board considers that the carrying amount of all payables
approximates to their fair value.
11. Earnings per share
Six months ended Six months ended
31 December 2017 31 December 2016
Profit attributable to shareholders of the Company GBP18,137,352 GBP40,342,638
Weighted average number of Ordinary Shares in issue 369,811,281 331,958,238
Basic and diluted earnings from continuing operations and profit for the period
(pence) 4.90 12.15
----------------- -----------------
12. Share capital and Other reserves
The authorised share capital of the Company is represented by an
unlimited number of Ordinary Shares of no par value which, upon
issue, the Directors may designate into such classes and
denominated in such currencies as they may determine.
Six months ended Year ended
Share capital 31 December 2017 30 June 2017
Number of Number of
Ordinary Shares Ordinary Shares
Opening balance 369,811,281 309,631,765
Shares issued for cash - 60,000,000
Shares issued in respect of IA Variable fee - 179,516
Closing balance 369,811,281 369,811,281
================== =================
Six months ended Year ended
Shareholders equity 31 December 2017 30 June 2017
GBP GBP
Opening balance 408,608,255 307,752,538
Shares issued for cash - 60,600,000
Shares to be issued in settlement of variable fee - 77,660
Share issue costs - (817,562)
Dividends paid (11,094,339) (23,050,099)
Total comprehensive income 18,137,352 64,045,718
Closing balance 415,651,268 408,608,255
================== ==============
Dividends declared and paid in the period are disclosed in Note
13.
Rights attaching to shares
The Company has a single class of Ordinary Shares which are
entitled to dividends declared by the Company. At any General
Meeting of the Company each ordinary shareholder is entitled to
have one vote for each share held. The Ordinary Shares also have
the right to receive all income attributable to those shares and
participate in dividends made and such income shall be divided pari
passu among the holders of Ordinary Shares in proportion to the
number of Ordinary Shares held by them.
Retained earnings
Retained earnings comprise of accumulated retained earnings as
detailed in the statement of changes in equity.
Other reserves
Other reserves comprise of the variable element of the
Investment Adviser's fee (GBP77,660) to be settled as equity. See
Note 16.
13. Dividends
On 8 August 2017, the Directors declared a third interim
dividend of GBP5,547,169, in respect of year ending 30 June 2017,
equating to 1.50 pence per Ordinary Share (third interim dividend
in respect of the year ending 30 June 2016: 1.50 pence), which was
paid on 8 September 2017 to shareholders on the register on 18
August 2017.
On 18 September 2017, the Directors declared a fourth interim
dividend of GBP5,547,170, in respect of year ending 30 June 2017,
equating to 1.50 pence per Ordinary Share (fourth interim dividend
in respect of the year ending 30 June 2016: 1.50 pence), which was
paid on 27 October 2017 to shareholders on the register on 29
September 2017.
14. Related Party Transactions and Directors' Remuneration
In the opinion of the Directors, the Company has no immediate or
ultimate controlling party.
Total administration fees incurred during the period amounted to
GBP148,886 (31 December 2016: GBP118,720), of which GBP69,171 (30
June 2017: GBP66,761) was outstanding at the period end.
The total Directors' fees expense for the period amounted to
GBP82,800 (31 December 2016: GBP80,213).
Remuneration paid to each Director is as follows:
31 December 2017 31 December 2016
John Rennocks 28,550 27,664
Paul Le Page 19,950 19,355
Laurence McNairn 17,100 16,590
John Scott 17,200 16,604
----------------- ------------------------------
82,800 80,213
================= ==============================
The number of Ordinary Shares held by each Director is as
follows:
31 December 2017 30 June 2017
John Rennocks* 316,011 446,713
Paul Le Page* 137,839 137,839
Laurence McNairn 441,764 441,764
John Scott 452,436 367,506
----------------- -------------
1,348,050 1,393,822
================= =============
*Includes shares held by PCAs.
John Scott and John Rennocks are Directors of BSIFIL. Mike Rand
and James Armstrong, who are partners of the Investment Adviser,
are also Directors of BSIFIL.
The Company and BSIFIL's investment advisory fees for the period
amounted to GBP1,554,421 (31 December 2016: GBP1,413,633) of which
GBP254,211 (30 June 2017: GBP259,047) was outstanding at the period
end and is to be settled in cash. The payment of the investment
advisory fee is split between the Company (10%) and the Company's
immediate subsidiary, BSIFIL, (90%). The variable element of
investment advisory fees of GBP77,660 earned in respect of the year
ended 30 June 2017 was settled, post period end, through the
issuance of shares on 9 January 2018 (see Note 16).
Fees paid during the period by SPVs to BSL, a company which has
the same ownership as that of the Investment Adviser totalled
GBP1,235,628 (31 December 2016: GBP759,636).
Fees paid during the period by SPVs to BOL, a company which has
the same ownership as that of the Investment Adviser totalled
GBP87,269 (31 December 2016: GBPNil).
The Company's shareholder loan monitoring fee income for the
period, due from its direct holding company BSIFIL, amounted to
GBP340,411 (31 December 2016: GBP245,590) of which GBP917,876 was
outstanding at the period end (30 June 2017: GBP577,466).
15. Risk Management Policies and Procedures
As at 31 December 2017 there has been no change to financial
instruments risk to those described in the financial statements of
30 June 2017 other than the replacement of loan facilities,
totalling GBP76.6m, between the Company and BSIFIL with a Eurobond
instrument listed on TISE on 12 July 2017. Further Eurobond
certificates were issued by BSIFIL on 22 November 2017 for GBP2.4m
and 20 December 2017 for GBP1.9m. The Eurobonds attract fixed
interest of 6.75% and mature in 2041.
16. Subsequent events
Post period end, on 8 January 2018, the Board declared its first
interim dividend, in respect of year ending 30 June 2018, of
1.80pps (first interim dividend in respect of the period ended 30
June 2017: 3.25pps), which was paid on 9 February 2018 to
shareholders on the register on 19 January 2018.
On 9 January 2018, the Company issued 72,249 new Ordinary Shares
in settlement of the Investment Adviser's variable fee in respect
of the year ended 30 June 2017.
Glossary of Defined Terms
Administrator means Estera International Fund Managers
(Guernsey) Limited (formerly Heritage International Fund Managers
Limited)
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 Manager
AIFMD means the Alternative Investment Fund Management
Directive
Articles means the Memorandum of 29 May 2013 as amended and the
Articles of Incorporation as adopted by special resolution on 7
November 2016.
Auditor means KPMG Channel Islands Limited (see KPMG)
Aviva Investors means Aviva Investors Limited
BEIS means the Department for Business, Energy & Industrial
Strategy
BEPS means Base erosion and profit shifting
Brexit means departure of the UK from the EU
Bluefield means Bluefield Partners LLP
BOL means Bluefield Operations Limited
BSL means Bluefield Asset Management Services Limited
Board means the Directors of the Company
BSIF means Bluefield Solar Income Fund Limited
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
Company means Bluefield Solar Income Fund Limited (see BSIF)
Companies Law means the Companies (Guernsey) Law 2008, as
amended (see Law)
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
Directors' Valuation means the gross value of the SPV
investments held by BSIFIL, including their holding companies
DNO means Distribution Network Operator
DSCR means Long Term Debt Service Cover Ratio calculated as net
operating income as a multiple of debt obligations due within one
year
DTR means the Disclosure Guidance and Transparency Rules of the
UK's Financial Conduct Authority
EBITDA means earnings before interest, tax, depreciation and
amortisation
EGM means Extraordinary General Meeting
EPC means Engineering, Procurement & Construction
EU means the European Union
EY means Ernst & Young LLP
FATCA means the Foreign Account Tax Compliance Act
FAC means Final Acceptance Certificate
Financial Statements means the unaudited condensed interim
financial statements
FiT means Feed-in Tariff
GAV means Gross Asset Value on Investment Basis including debt
held at SPV level
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
Investment Adviser means Bluefield Partners LLP
IPEV Valuation Guidelines means the International Private Equity
and Venture Capital Valuation Guidelines
IPO means initial public offering
IRR means Internal Rate of Return
IVSC means the International Valuation Standards Council
KPI means Key Performance Indicators
KPMG means KPMG Channel Islands Limited (see Auditor)
KWh means Kilowatt hour
KWp means Kilowatt peak
Law means Companies (Guernsey) Law, 2008 as amended (see
Companies Law)
LD means liquidated damages
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
LTF agreement means Long Term Financing agreement with Aviva
Investors
Main Market means the main securities market of the London Stock
Exchange
MW means Megawatt (a unit of power equal to one million
watts)
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
O&M means Operation and Maintenance
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
PCA means Persons Closely Associated
PPA means Power Purchase Agreement
pps means pence per share
PR means Performance Ratio (the ratio of the actual and
theoretically possible energy outputs)
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
ROC recycle means the payment received by generators from the
redistribution of the buy-out fund. Payments are made into the
buy-out fund when suppliers do not have sufficient ROCs to cover
their obligation
RPI means the Retail Price Index
SPA means Share Purchase Agreement
SPV means a Special Purpose Vehicle which hold the Company's
investment portfolio of underlying operating assets
Sterling means the Great British pound currency
TISE means The International Stock Exchange (based in the
Channel Islands)
UK means the United Kingdom of Great Britain and Northern
Ireland
UK Code means the UK Corporate Governance Code
UK FCA means the UK Financial Conduct Authority
United Nations Principles for Responsible Investment means an
approach to investing that aims to incorporate environmental,
social and governance factors into investment decisions, to better
manage risk and generate sustainable, long term returns.
WACC means Weighted Average Cost of Capital
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KQLFLVLFEBBD
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