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3D four star fund Foresight Solar Fund: the 3D Investing perspective

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During Good Money Week 2015 Blue & Green Tomorrow launched 3D Investing’s 5-Star rating system which allows advisers and investors to pick out the best of the best from the socially responsible investment universe. To find out more read the B&GT Guide to Sustainable Investment or visit 3Dinvesting.com. Today we take a look at Foresight Solar Fund.

This fund invests in large ground mounted Solar Assets in the UK, the majority of which are in the South of England.   Approximately 59% of the Company’s initial annual revenues are derived from green benefits such as Renewable Obligation Certificates, and these underpin an initial target yield of 6%.   Foresight has considerable experience in investing in solar infrastructure, through its VCTs, which have proved to be successful in generating the predicted dividend streams. Foresight has a dedicated Infrastructure team of 35 who have acquired over 65 solar PV assets globally equating to an installed capacity of over 650MW. The four star rating reflects the pure focus on the generation of solar energy and the transparent reporting.

Investment Strategy & Fund Composition


The Company seeks to provide investors with a sustainable and Retail Price Index (“RPI”) linked dividend together with the potential for capital growth over the long-term through investment in a diversified portfolio of UK ground based solar assets.

Investments outside the UK, and assets which are still under construction when acquired, will be limited to 25 per cent of the gross asset value of the Company, calculated at the time of investment.  The Company’s portfolio of 16 assets is fully operational.

Foresight Group have deliberately set out to execute a low risk strategy of avoiding construction and subsidy risk and have negotiated these terms accordingly with large and experienced contractors. This avoids unnecessary risk exposure for shareholders. In keeping with this strategy, 15 of the 16 assets within the portfolio were operational when acquired and subject to certain conditions having been achieved by the developer of the plant, including the assets being built to a specified performance standard and their successful connection to the Grid. Although construction risk can be managed depending on the balance sheet strength of the construction contractor, more difficult to manage is the risk of failing to meet the subsidy deadlines. The Company saw this as a particular risk ahead of the 31 March 2015 ROC deadline, which was a cliff edge deadline given the acceleration of the Contracts for Difference (“CfD”) mechanism for projects greater than 5MW after this date.

On 25 June 2015, the Company announced that it had signed a binding contract to acquire its first construction asset, the 30MW Copley asset in Nottinghamshire.  The Company believed that the enhanced returns from providing construction funding for Copley asset was justified given that the construction and connection timetable was significantly shorter than the “Grace Period” deadline of 31 March 2016. In November 2015, the Company confirmed that the construction of the asset had successfully completed and the asset had connected to the Grid.


Ethical Approach & Suitability

The investment company purely invests in solar PV power plants.

Suitable for most investors.

Social Impact

The portfolio is wholly invested in solar power plants, with a net generating capacity of 338 MW

SRI Capability & Management

There are no ethical criteria and no SRI research is conducted on the portfolio, but the current portfolio is totally invested in UK solar plants.

Risk Management

The fund is underpinned by predictable, index linked revenue streams and as such carries modest levels of risk.  There is a risk of retrospective Government policy changes that could very materially affect the share price, but this seems unlikely.  59% of the initial income is derived from Renewable Obligation Certificates, underpinning the target dividend levels.  The Company is able to gear the fund up to a level of 50% but the managers do not intend to borrow more than 40% of the gross asset value.  40% of the portfolio income is related to fixed price Power Purchase Agreements.  A discount rate of 7.5% is applied to future cash flows which is consistent with the sector.  The dividend is covered by a factor of 1.4.

Transparency

Full information is provided on each holding as shown in the example below.

Full profiles are provided on each holding

Financial Performance & Management

Foresight Group has proven expertise and now manages over £1 billion across nine solar funds.  This experience has enabled the company to source investments and to effectively manage the projects within tight timescales.  In total Foresight Group manages c. £1.6 billion, making it a substantial investor in infrastructural assets.

At IPO, the Fund targeted a 6 pence dividend which it achieved for its first full financial period ended 31 December 2014. The Company is now on track to deliver its first RPI linked dividend of 6.10 pence (6 pence inflated by RPI for 2014) for the period ended 31 December 2015.

A short-term acquisition facility of £150 million is currently in place and is being utilised to extend the gross asset value of the portfolio to around £435 million.   The current level of debt drawn down is around 24% of the gross asset value of the fund on which interest accrues at up to 2.25% over LIBOR.  Although the current portfolio is 100% invested in the UK, the Company can invest up to 25% outside Britain.

Thus far, operational performance has been ahead of expectations.

In accordance with the Financial Services and Markets Act 2000, Blue and Green Communications Limited does not provide regulated investment services of any kind, and is not authorised to do so. Nothing in this magazine and all parts herein constitutes or should be deemed to constitute advice, recommendation, invitation or inducement to buy, sell, subscribe for or underwrite any investment of any kind. Any specific investment-related queries or concerns should be directed to a fully qualified financial adviser.

Energy

Are the UK Governments Plans for the Energy Sector Smart?

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The revolution in the energy sector marches on, wind turbines and solar panels are harnessing more renewable energy than ever before – so where is it all leading?

The UK government have recently announced plans to modernise the way we produce, store and use electricity. And, if realised, the plans could be just the thing to bring the energy sector in line with 21st century technology and ideologies.


Central to the plans is an initiative that will see smart meters installed in homes and businesses the length and breadth of the country – and their aim? To create an environment where electricity can be managed more efficiently.

The news has prompted some speculation about how energy suppliers will react and many are predicting a price war. This could benefit consumers of electricity and investors, many of whom may be looking to make a profit by trading energy company shares online using platforms such as Oanda – but the potential for good news doesn’t end there.

Introducing New Technology

The plan, titled Smart Systems and Flexibility is being rolled out in the hope that it will have a positive impact in three core areas.

  • To offer consumers greater control by making smart meters available for all homes and businesses by 2020. Energy users will be able to monitor, control and record the amount of energy they use.
  • Incentivise energy suppliers to change the manner in which they buy electricity, to offer more smart tariffs and more off-peak periods for energy consumption.
  • Introduce new standards for electrical appliances – it is hoped that the new wave of appliances will recognise when electricity is at its cheapest and at its most expensive and respond accordingly.

How the Plans Will Affect Solar Energy

Around 7 million houses in the UK have solar panels and the government say that their plan will benefit them as they will be able to store electricity on batteries. The stored energy can then be used by the household and excess energy can be exported to the national grid – in this instance lower tariffs or even payment for the excess energy will bring down annual costs significantly.


The rate of return on energy exported to the national grid is currently between 6% and 10%, but there are many variables to take into account, such as, the cost of battery storage and light levels. Still, those with state-of-the-art solar electricity systems could end up with an annual profit after selling their excess energy.

The Internet of Things

Much of what the plans set out to achieve are linked to the now ubiquitous “internet of things” – where, for example, appliances and heating systems are connected to the internet in order to make them function more smartly.

Companies like Hive have already made great inroads into this type of technology, but the road that the government plans are heading down, will, potentially, go much further -blockchain technology looms and has already proved to be a game changer in the world of currency.

Blockchain Technology

It has already been suggested that the peer to peer selling of energy and exporting it to the national grid may eventually be done using blockchain technology.

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

Don and Alex Tapscott, Blockchain Revolution (2016)

The upshot of the government’s plans for the revolution of the energy sector, is that technology will play an indelible role in making it more efficient, more flexible and ultimately more sustainable.

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Energy

4 Case Studies on the Benefits of Solar Energy

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Demand for solar energy is growing at a surprising rate. New figures from SolarPower Europe show that solar energy production has risen 50% since the summer of 2016.

However, many people are still skeptical of the benefits of solar energy.Does it actually make a significant reduction in our carbon footprint? Is it actually cost-effective for the company over the long-run?


A number of case studies have been conducted, which indicate solar energy can be enormously beneficial. Here are some of the most compelling studies on the subject.

1.     Boulder Nissan

When you think of companies that leverage solar power, car dealerships probably aren’t the first ones that come to mind. However, Boulder Nissan is highly committed to promoting green energy. They worked with Independent Power Systems to setup a number of solar cells. Here were the results:

  • Boulder Nissan has reduced coal generated electricity by 65%.
  • They are on track to run on 100% renewable energy within the next 13 years.
  • Boulder Nissan reduced CO2 emissions by 416,000 lbs. within the first year after installing their solar panels.

This is one of the most impressive solar energy case studies a small business has published in recent years. It shows that even small companies in rural communities can make a major difference by adapting solar energy.

2.     Valley Electric Association

In 2015, the Valley Electric Association (VEA) created an 80-acre solar garden. Before retiring from the legislature, U.S. Senate Minority Leader Harry Reid praised the new project as a way to make the state more energy dependent and reduce our carbon footprint.


“This facility will provide its customers with the opportunity to purchase 100 percent of their electricity from clean energy produced in Nevada,” Reid told reporters with the Pahrump Valley Times. “That’s a step forward for the Silver State, but it also proves that utilities can work with customers to provide clean renewable energy that they demand.”

The solar energy that VEA produced was drastically higher than anyone would have predicted. SolarWorld estimates that the solar garden created 32,680,000 kwh every year, which was enough to power nearly 4,000 homes.

This was a major undertaking for a purple state, which may inspire their peers throughout the Midwest to develop solar gardens of their own. It will reduce dependency on the electric grid, which is a problem for many remote states in the central part of the country.

3.     Las Vegas Casinos

A number of Las Vegas casinos have started investing in solar panels over the last couple of years. The Guardian reports that many of these casinos have cut costs considerably. Some of them are even selling the energy back to the grid.

“It’s no accident that we put the array on top of a conference center. This is good business for us,” Cindy Ortega, chief sustainability officer at MGM Resorts told Guardian reporters. “We are looking at leaving the power system, and one of the reasons for that is we can procure more renewable energy on the open market.”

There have been many benefits for casinos using solar energy. They are some of the most energy-intensive institutions in the world, so this has helped them become much more cost-effective. It also helps minimize disruptions to their customers learning online keno strategies in the event of any problems with the electric grid.

4.     Boston College

Boston College has been committed to many green initiatives over the years. A group of researchers experimented with solar cells on different parts of the campus to see where they could produce the most electricity. They discovered that the best locationwas at St. Clement’sHall. The solar cells there dramatically. It would also reduce CO2 emissions by 521,702 lbs. a year and be enough to save 10,869 trees.

Boston College is exploring new ways to expand their usage of solar cells. They may be able to invest in more effective solar panels that can generate far more solar energy.

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