Bluefield Solar Income Fund (BSIF) [LON:BSIF], the FTSE250-listed closed-ended investment fund, focused primarily on utility-scale solar assets on greenfield, industrial or commercial sites, published its results for the six months ended 31st December 2022 today (28th February).
The investment objective of the company is to provide shareholders with an attractive return, principally in the form of quarterly income distributions, by being invested primarily in solar energy assets located in the UK. Bluefield Solar also has the ability to invest a minority of its share capital into wind, hydro and energy storage assets.
First solar investment company
BSIF was the first solar-photovoltaic (PV) focussed investment company listed on the London Stock Exchange, making its debut in July 2013. Initially, the investment focus was 100% UK solar and delivered sector-leading results. In July 2020 the mandate was widened to include onshore wind, hydro and storage technologies.
As at 31st December 2022, the fund had a Net Asset Value (NAV) of GBP870.7m up 1.4% from GBP858.4m six months previously, the NAV per share was 142.4p up from 140.4p NAV/share as at 30th June 2022. BSIF reported underlying earnings of GBP51.4m, up 140.2% from GBP21.4m at end of 2Q22. Underlying Earnings Per Share (EPS) was 8.41p up from 4.3p at the end of June with Underlying EPS available for distribution of 6.26p.
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The total shareholder return for the period was 6.98%, up from 5.68% for the corresponding six-months and a Total Return based on the NAV movement and dividends paid in the period was 4.4%. Since July 2013 shareholders have received Total Returns of 101.6%.
The fund has a market capitalisation of GBP840.75m. BSIF shares opened at 136.6p today but were past 137p in the first two hours of trading. The company has offered a 1.01% year-to-date return, a one-year return of 12.6% and its shares have ranged between 114.03p and 147p over a 52-week period. The company showed so much growth that it was promoted to the FTSE250 in the period.
The last year, since the Russian invasion of Ukraine, has seen national policy-makers in Europe forced to concentrate on decoupling their energy systems from reliance on cheap, imported natural gas from Russia for electricity production and heating.
Global decarbonisation drive
In tangent with the global push to decarbonise the energy system to deal with the problem of global warming and transition to more sustainable, less-damaging energy systems, the rise in interest for renewables has surged on the back of environmental and energy security concerns.
The Guernsey-based fund has been at the forefront of the transition for a decade, and in the last six months prevented 163,000 tonnes of Carbon Dioxide entering the atmosphere by powering approximately 292,000 homes with renewable energy.
The fund’s board seeks to adopt a progressive dividend strategy, although the ability to maintain or grow dividends is dependent upon a number of factors, including future power prices in the UK.
John Scott, chairman of Bluefield Solar said in a statement to the market this morning: “Bluefield Solar looks to the year ahead with great confidence and relishes the opportunity to play an increasing role in the UK’s transition to renewable and sustainable methods of electricity generation.”
Expanded generating capacity
The company expanded its generating capacity by some 25% in the six months to end-December. The fund’s results were undoubtedly helped by the crisis in Ukraine, with power prices reaching record highs during the year, and BSIF hopes to maintain its earnings in the near-to-mid-term through fixing the price it can charge for units of power generated for 18 months. However, the Electricity Generator Levy – the windfall tax imposed on renewable electricity producers by the UK government, did dampen enthusiasm a bit.
The company added 865MW of assets in the period, and had also entered pre-construction on 446MW of capacity by the calendar year’s end. BSIF bought a 47MW subsidized operating installation for GBP56m and committed a further GBP34m to the construction of its Yelvertoft installation, a Contracts-for-Difference-backed 49MW solar plant.
Storage was another are the company expanded into with a 424MW of battery storage assets under management.
Dividend targets for FY22/23 was uprated by 0.2p to 8.4p/share. BSIF’s initial dividend target/share was 8.12p for FY21/22 which it uprated by 0.08p last year.
Lower gearing than its peers
Debt was GBP531.1m with gearing at 38% of Gross Asset Value, at the lower end of the gearing range of 35% to 45% and lower than its peer, Greencoat Renewables [ISE:GREENCOAT, LON:GRP], the AIM- and Irish-listed investment manager focussed on primarily euro-denominated wind assets The Armchair Trader wrote about yesterday.
Greencoat had EUR945m (GBP830.1m), aggregate group debt at the close of 2022. This represented 42% gearing, against gearing cap of 60% for, albeit on a bigger EUR2.2bn GAV fund.
BSIF’s GAV as at 31st December 2022, was reported at fair value of GBP869.5m, plus its revolving credit facility (RCF) of GBP121m and third-party portfolio debt of GBP410.1m giving total debt of GBP531.1m.
Bluefield Solar completes acquisitions
During the period, BSIF completed the acquisition of a 1.4 ROC 46.4MWp solar portfolio located in Lincolnshire and Cumbria. This purchase grew the company’s generating portfolio to 812.6MW from 766.2MW in June 2022, and increases the proportion of solar 85%; to onshore wind 15%. The fund’s mandate allows for diversification of up to 25% of its GAV into non solar renewables.
The company’s Investment Adviser, Bluefield Partners LLP, is led by James Armstrong and Giovanni Terranova and supported by Neil Wood. Armstrong is the founder of the Bluefield Partners LLP along with Terranova and is one of the two managing partners. He has been involved in over EUR1.3bn of UK and European energy transactions and over EUR570m portfolio third-party financing. Both previously worked for the Foresight Group.
In the UK the government reported that the country’s solar-PV capacity was around 14.1GW, across 1.2 million installations. Of this amount, around 7.3GW (around 52% of the total solar capacity in the UK) and 5.1GWp (37%) is accredited under the Renewables Obligation and Feed-in-Tariff schemes, respectively, and about 1.7GW, or 12% is unaccredited. Onshore and offshore wind installed capacity stands at around 14.7GW and 13.9GW, respectively, with around 2.1GW of storage capacity, according to trade body, RenewableUK.
UK Government net zero target
However, the UK’s total renewable generation capacity is projected to continue to rise over the coming years as the government strives to meet its net zero targets. In July 2022, the UK government awarded support for 10.8GW of new build renewable generation capacity through its Contracts for Difference renewable subsidy scheme – with 7GW awarded for offshore wind projects, 2.2GW for solar and 888MW for onshore wind.
BSIF has over 120 assets under management. In the UK, primarily in southern England, the solar farms are typically large agriculturally sited installations, with a small number of industrial and commercial sites with lower generating capacity. The company also dabbles in complementary renewable technologies, such as onshore wind, hydro, and storage.
The fund is operating in a growth area, which will only expand as government and society demand more renewable capacity.
Scott said: “…the company is entering an exciting period, delivering on each of the three tenets of its development strategy: invest, construct and the selective recycling of capital.”
