Foresight Solar (LON:FSFL) reported first-half EBITDA in line with budget despite generation falling below plan, as higher power prices helped offset weaker irradiance during the period.
Will Morgan, managing director and fund lead, said the fund was pleased by a recent recovery in its share price but remained frustrated by broader market conditions. He said management would focus on its investment objective and factors within its control, including portfolio performance, enhancements, divestments and refinancing.
However, management said its U.K. portfolio valuation was relatively stable. An independent review concluded that the fund’s holding value was within a reasonable range of market fair values, according to Toby Virno, investment director. The review, together with information from live transaction processes, gave the company confidence in the valuation of its U.K. assets, he said.
Generation Miss Offset by Power Prices
Global generation was 5.6% below budget in the first half, reflecting below-budget irradiance during the spring. The comparison followed a rebasing of U.K. production targets, which management said set a higher performance bar for the portfolio.
U.K. generation outperformed in the second quarter, and stronger sunshine in the early part of the second half has supported production. Virno said elevated power prices following conflict in the Middle East were also beneficial. Wholesale prices averaged £107 per megawatt-hour in July and £128 per megawatt-hour in August, although the fund captures prices only during daylight generation periods.
Foresight Solar said its U.K. assets accounted for 95% of EBITDA despite comprising 68% of portfolio generation. Higher electricity prices were a key contributor to EBITDA meeting budget despite the production shortfall.
The company said approximately half of its revenue comes from long-term, inflation-linked subsidy streams, primarily U.K. Renewable Obligation Certificate-backed assets. The balance is mainly electricity sales managed through the fund’s hedging policy. Management said contracted revenue is expected to provide one-times dividend cover in 2026 and that it has already established a hedged position for 2027.
Morgan said the fund has met its dividend for the past 12 years and increased it by 2.5% annually over that period. In the question-and-answer session, he said projected dividend cover was 1.1 times and management remained confident of achieving that level, supported by trends entering the second half.
Enhancements and Battery Strategy
The company commissioned Sandridge BESS, its first battery-storage asset, during the period. It also completed enhancement work at the Abbeyfields and Pen Y Cae solar sites, which management said is already increasing yield and cash-flow contribution.
Phase I of the broader enhancement program is targeting up to £2.5 million of additional revenue and approximately 14 gigawatt-hours of incremental generation. Morgan said that would represent a production uplift of more than 10% at the assets involved.
Management is also assessing battery co-location and hybridization opportunities, including at Spanish and Australian sites. In Spain, the company said it sees storage as a way to mitigate curtailment and future-proof assets ahead of the eventual expiry of existing power-purchase agreements. No investment decisions have yet been made, Virno said.
In Australia, management said solar assets continue to face economic and technical curtailment, stemming from continued coal generation, growth in rooftop solar and grid constraints. The company is working with its local team and financial advisers to test buyer appetite while considering batteries as a means of improving the portfolio’s longer-term position.
Divestments, Refinancing and Capital Allocation
A U.K. disposal process launched in the third quarter has progressed to the preferred-bidder stage, Morgan said. Earlier discussions regarding a portfolio sale were terminated because of bilateral terms and engagement rather than the underlying process or price achieved, he added.
Management said divestments are central to its plans to benchmark values, recycle capital and renew the portfolio. It is also evaluating potential disposals in the U.K. and Spain, while building a U.K. pipeline of solar projects backed by contracts for difference.
The fund’s development pipeline has been revised following a detailed review, with approximately 250 megawatts expected to reach ready-to-build stage over the medium term. Management said this capacity could provide optionality to invest or sell projects.
Foresight Solar is exploring refinancing options, including potentially replacing part of its revolving credit facility with longer-term debt. Morgan said the intention is not to materially increase leverage, but rather to improve the debt structure, reduce refinancing risk and align liabilities with the portfolio’s asset profile.
Virno said the fund’s investment policy sets a 50% gearing limit, with a long-term target below 40%, and that the company remains comfortably below both thresholds. Any initial refinancing proceeds would be directed toward paying down the revolving credit facility, he said.
Tax Liabilities and Shareholder Consultation
Management said payments of historic tax liabilities affected liquidity during the first half. Virno said these payments relate to tax matters disclosed in the third and fourth quarters previously, rather than a new tax impact. The company is contesting certain interest and penalties that could otherwise apply and said it would provide an update once the outcome is clear.
Morgan also acknowledged the continuing discount between the share price and NAV. He said the board’s shareholder consultation was intended to consider available options, while stressing that there was no predetermined outcome. Management expects that progress on divestments, portfolio valuation evidence and broader investor demand could help address the discount over time.
About Foresight Solar (LON:FSFL)
Foresight Solar Fund Limited (“FSFL”) is a Jersey-registered, closed-end investment company investing in a diversified portfolio of ground-based solar PV and battery storage assets in the UK and internationally. The Company aims to deliver sustainable investment returns alongside strong environmental, social and governance (“ESG”) benefits.
