UK’s Foresight Solar plans SA listing
A UK-based renewable energy investor, the Foresight Solar Fund, is showing a vote of confidence in SA’s economy and renewable energy sector by taking a secondary listing on the JSE on April 3.
SA has a world-class renewable energy programme but Eskom has caused concern by refusing to sign new offtake agreements, citing costs and a surplus. The energy department has reiterated its support for more renewable energy.
Selling completed projects with offtake agreements to an investment fund allows developers to realise capital for new projects and long-term conservative investors to make a steady, predictable return.
Last year Hulisani, which has an interest in Kouga Wind Farm, became the JSE’s first listed green energy fund.
Since its income is derived from UK power plants, the Foresight Solar Fund will also offer a rand hedge.
The fund is managed and advised by Foresight Group, which launched its first fund in 2008 and now holds assets in Australia, the UK, Italy and the
US. Foresight Group’s head of UK solar, Ricardo Piñeiro, said on Friday the fund could invest up to 25% of its gross asset value outside the UK.
Foresight believes SA’s renewable energy programme offers interesting opportunities, although it has no immediate investment targets.
The firm will accompany its secondary listing on the JSE with the issue of at least £50m of shares in the UK and SA to selected investors making a minimum R1m investment. Once the shares are listed, there will be no restrictions. The new funds will be used to pay down debt Foresight Solar incurred on two recent transactions.
The fund, which was launched in 2013, owns 18 solar power assets in the UK with generating capacity of 470 megawatts. Its market capitalisation of about R5.9bn represents a slight premium to its net asset value of R5.78bn.
The aggregate dividend paid last year was 6.17p, giving it a yield of about 5.7% on its share price, and it is targeting a distribution of 6.32p a share this year. Dividends are paid quarterly and increase in line with UK inflation.
Although the UK is notoriously cloudy and damp (and its solar irradiation is about onethird of the Western Cape’s), Piñeiro said there were several reasons to justify a UK solar energy fund. It provides a relatively predictable, low-risk revenue stream. The plants in which it is invested generate energy from irradiation, not direct sunlight, and although they generate 75% of their energy between April and September each year, long-term data show the annual irradiation level in the regions where these plants are operating has not varied by more than 4% from the average.
Solar energy plants in the UK are not economically viable on their own, but because the UK government’s policy is to diversify its energy sources, it provides 20-year subsidies for solar plants, which rise in line with inflation each year.