Foresight Solar Fund Ltd (LSE:FSFL) (Q4 2024) Earnings Call Highlights: Resilient Dividend and ...

GuruFocus News

Fri, Mar 21, 2025, 1:01 AM 4 min read

Revenue: 7% below budget on production.
Dividend: 8p per share target dividend, confirmed with a 1.4 times cash cover for the year.
Capital Returns: GBP67 million returned to investors during 2024, including buybacks of around GBP23 million and dividends of about GBP44 million.
Dividend Target Increase: 1.25% increase to 8.1p for 2025, with an expected 1.3 times dividend cover.
UK Portfolio Valuation: GBP1.10 million per megawatt (EV number).
Global Production: In excess of 1 terawatt hour, powering more than 360,000 UK homes.
Realized Prices in UK: GBP91 per megawatt hour versus GBP72 per megawatt hour average.
Interest Costs: Lower-interest costs on RCF due to euro translation, with Euribor at 2.4% versus SONIA at 4.5%.
Debt Amortization: Regular amortization of portfolio level debt, slight decrease in RCF balance due to FX movements.
Buyback Program: Added 1.1p to NAV per share for the year, 2.2p since inception.
Dividend Payout: GBP44.7 million paid out in the year, with a 1.25% increase by 2025.
Share Repurchase: 24.5 million shares repurchased during the year.

Warning! GuruFocus has detected 2 Warning Sign with LSE:FSFL.
High Yield Dividend Stocks in Gurus' Portfolio
This Powerful Chart Made Peter Lynch 29% A Year For 13 Years
How to calculate the intrinsic value of a stock?

Release Date: March 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Foresight Solar Fund Ltd (LSE:FSFL) demonstrated resilience by delivering an 8p per share target dividend with a 1.4 times cash cover despite experiencing the lowest number of sun hours in the UK on record.
The company returned GBP67 million to investors in 2024 through buybacks and dividends, emphasizing a focus on capital returns.
A revised fee structure was introduced, aligning the manager's interests with investors and aiming to reduce the fund's discount.
Foresight Solar Fund Ltd (LSE:FSFL) is actively expanding its development pipeline, with a focus on 400 megawatts of BESS in Spain, enhancing future growth prospects.
The company has a proactive approach to capital allocation, with plans to divest further assets and return capital to investors, enhancing liquidity and shareholder value.

Negative Points

2024 was a challenging year for solar resource, with all geographies experiencing lower-than-budgeted irradiation, impacting production.
The divestment program in Australia faced delays due to technical assumptions and market complexities, pushing the expected deal closure to Q3 2025.
There is uncertainty regarding the valuation of Australian assets, with potential write-downs depending on market conditions and bids received.
The power price outlook has softened, with speculative traders impacting market stability, posing challenges for future revenue projections.
Grid connection challenges in Spain and the UK, along with competitive markets, may impact the timely execution of development projects.

Q & A Highlights

Q: Can you provide clarity on capital allocation, specifically regarding debt reduction, shareholder returns, and development pipeline investments? A: Ross Driver, Managing Director, explained that the capital allocation strategy focuses on debt reduction and returning capital to investors. Investments in the development pipeline are modest, with small-digit millions expected over the next year. The goal is to materially reduce the revolving credit facility (RCF) by the end of the year, while also addressing shareholder feedback for capital returns.

Q: Why is there a decline in PPA revenues in 2026, and what is the strategy for managing power price exposure? A: Toby Virno, Senior Investment Manager, noted that the decline is due to a return to normalized market power prices post-Ukraine invasion. The strategy involves targeting 75% contracted revenues, including subsidies and long-term PPAs, and using financial hedge counterparties to manage power price exposure more proactively.

Q: Are there any potential write-downs expected for the Australian assets, and is there strong demand for these assets? A: Ross Driver stated it's too early to determine potential write-downs for Australian assets, as it depends on market pricing and assumptions. There is confidence in receiving bids, but the pricing will be asset-specific, unlike more generic UK or Spanish assets.

Q: What is the status of the Spanish battery storage development pipeline, and how speculative is it? A: The 400 MW Spanish battery storage pipeline is currently speculative, with bids submitted to capacity markets. The outcome will depend on securing capacity, and updates are expected in the next quarter.

Q: How are lifecycle savings being achieved, and what impact does this have on financials? A: Conor Cowden, Portfolio Manager, explained that savings are achieved through enhanced repair and replacement strategies for key components like inverters. This approach allows for more targeted repowering and repair programs, optimizing lifecycle costs and potentially releasing contingency reserves.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice

More Info