London, UK, 11 August 2023
Edison issues flash on Foresight Solar Fund (FSFL)
Foresight Solar Fund (FSFL) released a strong operational trading update, with production 2.8% ahead of budget, cash receipts of £52.3m, 42% higher year on year, and forward power sales supporting a 1.5x dividend cover forecast by the company for the next three years. FSFL's Q2 NAV/share was down 4.3p (-3.4%) from Q1 at 119.9p, with 74% of this move due to 50bp rise in discount rate assumptions for UK assets to 7.5%. FSFL trades at an attractive 19% discount to NAV and 8% dividend yield, in our view.
FSFL's June 30 NAV/share was 119.9p, down 4.3p (3.4%) from March 30. 3.2p of this move (74%) was due to 50bp rise in discount rate assumptions (levered rate assumption for UK assets was raised from 7% to 7.5%, other regions remained unchanged) reflecting rises in interest rates. Lower forward power price forecasts reduced NAV/share by 1.4p, offset by 0.9/share positive impact of lower tax payments under the UK generators levy. FSFL is trading at a 19% discount to NAV, and we believe that a higher interest rate environment is already more than reflected in its share price. FSFL represents an 8% yield and management has confidence in 1.5x dividend cover in the next three years, underpinned by forward power sales.
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