Stock market listed Foresight Solar Fund is in retrenchment mode. It’s selling assets – some of its solar farm sites – and buying back shares from shareholders.
In just two weeks it faces a discontinuation vote at its annual general meeting, although the special resolution is unlikely to garner sufficient support. Two thirds of shareholders would have to back it to go through – a similar vote last year was not supported.
The trust’s board also recently confirmed that it had been in ‘discussions’ with other parties about the future of the fund.
Although Foresight remains schtum about the nature of these talks, they are likely to have involved a merger with a similar trust – or going private.
It all represents a massive state of flux which will deter many investors from going anywhere near it. Yet Foresight has one big attraction, in the shape of the income it derives from the energy its solar panel farms generate.
Since launching in late 2013 the trust has increased the dividends it pays to shareholders every year. For the 2024 financial year it handed out quarterly dividends totalling 8p a share. This year the intention is to tickle up the annual payment to 8.1p.
For new investors this income is made all the more compelling by the fact that the trust’s shares sit at a massive 30 per cent discount to the value of underlying assets. The result is a share price of 77p, compared to the £1 price that shares were issued at in October 2013 – and an annual dividend equivalent to 10.6 per cent.
Foresight is not alone. Double-digit share price discounts are currently common within the renewable energy infrastructure trust sector – and, for that matter, across infrastructure funds generally. They are a reflection of higher gilt yields, making these income-focused trusts comparatively less attractive.
Concerns over persistent inflation, weak economic growth and sticky interest rates have also dampened institutional interest.
Over the past year the average renewable energy infrastructure trust has delivered investors a total loss of 6.7 per cent, while Foresight’s losses are less at 1.5 per cent. To contextualise, Foresight has generated a ten-year return of 46 per cent.
Ross Driver, manager of Foresight Solar, says they are doing all they can to improve matters. The solar sites it owns in Australia are being disposed of, as are selected operations in Spain and the UK. In total, it has sites in 58 locations.
The proceeds of any sales, says Driver, will be part used to pay down borrowings and return cash to investors. He adds: ‘We’re selling assets and pulling all the levers while paddling with as many oars as possible in a tsunami.’
Driver insists that if sentiment within the asset class improves
his trust offers investors a good income, with the potential for share price growth.
It’s a view shared by some analysts. In a note last month, investment bank Peel Hunt said that Foresight Solar’s shares offered ‘an attractive tactical opportunity’ while Rachel May, research
analyst at investment group Shore Capital, says that the trust’s board is trying hard to narrow the share price discount.
While some people are unhappy about the impact of solar farms blighting the countryside, Driver says it’s a trade-off. ‘We need to decouple the country off a volatile gas price,’ he adds.
The trust’s annual charges total 1.2 per cent and the stock market identification code is BD3QJR5. Its market ticker is FSFL.
In total, investment house Foresight manages assets of £12 billion, primarily in infrastructure.
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