Solar Income Fund Limited
AnnUAL REPORT And FInAnCIAL STATEmEnTS
FOR ThE YEAR EndEd 30 JUnE 2018
ANNuAl REPoRT AND CoNSolIDATED FINANCIAl STATEmENTS
Table of Contents
General Information
Highlights
Corporate Summary
Chairman’s Statement
p.3
p.4
p.7
p.9
The Company’s Investment Portfolio
p.12
Analysis of the Company’s Investment Portfolio
p.14
Strategic Report
Report of the Investment Adviser
Report of the Directors
Board of Directors
Directors’ Statement of Responsibilities
Responsibility Statement of the Directors
in Respect of the Annual Report
Corporate Governance Report
Report of the Audit Committee
Independent Auditor’s Report
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
for the year ended 30 June 2018
p.17
p.31
p.67
p.72
p.73
p.74
p.75
p.81
p.85
p.89
p.90
p.91
p.92
p.93
Glossary of Defined Terms
p.113
1
John Rennocks
John scott
Paul le Page
lauRence McnaiRn
2
Solar Income Fund | General InFormatIon General
Information
Board of Directors (all non-executive)
John Rennocks (chairman)
John Scott (senior independent Director)
Paul le Page (chairman of audit committee)
laurence mcNairn
Investment Adviser
Bluefield Partners LLP
6 New Street Square
London, EC4A 3BF 4h
Administrator, Company Secretary &
Designated manager
Estera International Fund managers
(Guernsey) limited
Heritage Hall, PO Box 225
Le Marchant Street, St Peter Port
Guernsey, GY1 4HY
Registered Office
Heritage Hall
PO Box 225, Le Marchant Street
St Peter Port, Guernsey, GY1 4HY
Sponsor, Broker & Financial Adviser
Numis Securities limited
The London Stock Exchange Building
10 Paternoster Square
London, EC4M 7LT
Independent Auditor & Reporting Accountants
KPmG Channel Islands limited
Glategny Court, Glategny Esplanade
St Peter Port, Guernsey, GY1 1WR
legal Advisers to the Company (as to English law)
Norton Rose Fulbright llP
3 More London Riverside
London, SE1 2AQ
Registrar
link market Services (Guernsey) limited
Mont Crevelt House
Bulwer Avenue, St Sampson
Guernsey, GY2 4LH
legal Advisers to the Company (as to Guernsey law)
Carey olsen
PO Box 98, Carey House
Les Banques, St Peter Port
Guernsey, GY1 4BZ
Receiving Agent & uK Transfer Agent
link Asset Services limited
The Registry
34 Beckenham Road
Beckenham, Kent, BR3 4TU
Principal Bankers
Royal Bank of Scotland International limited
Royal Bank Place
1 Glategny Esplanade
St Peter Port, Guernsey, GY1 4BQ
3
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Highlights
Introduction
• The Company delivered underlying
earnings1, pre-debt amortisation,
of 9.67pps and, after debt service
obligations (2.24pps), and including
brought forward dividend reserves
(0.30pps) has total funds available
for distribution, for the period to 30
June 2018, of 7.73pps.
• the company has declared total dividends of 7.43pps,
in line with its target of 7.43pps (2017: 7.25pps vs
target of 7.18pps). the dividends declared are covered
by earnings in the year.
• the company announced 4 acquisitions, amounting
to 18.8MWp, taking the company’s total capacity to
460.3MWp.
• as at 30 June 2018, the company had a total of 45
large solar assets, 39 micro solar assets and 2 roof top
assets, all of which were operational.
• the Board has continued to value the company’s
portfolio at £1.29m/MWp, conservatively in line with
market transactions, which have continued to be
reported at prices between £1.29m/MWp and £1.35m/
MWp.
• the ‘weighted average cost of capital’ discount rate
has been reduced to 5.65% as at 30 June 2018, from
5.90% as at 31 December 2017 (30 June 2017: 6.15%).
this equates to a cost of equity of 7.26% (December
2017: 7.54%, June 17: 8.07%).
• naV as at 30 June 2018 was £419m (30 June 2017:
£409m), equivalent to a naV per share of 113.28 pence
(30 June 2017: 110.49 pence).
• the portfolio outperformed operational expectations
by 0.7%, delivering an aggregate Performance Ratio of
82.1% versus budget of 81.5%.
1. underlying earnings is an alternative performance measure employed by the company to provide insight to the shareholders
by definitively linking the underlying financial performance of the operational projects to the dividends declared and paid by the
company. Further detail is provided on page 53.
4
Solar Income Fund | HIgHlIgHtS Results Summary:
total operating income
total comprehensive income
total underlying earnings (see footnote 1 on previous page)
earnings per share
underlying ePs2
total debt amortization (pps)
underlying ePs available for distribution
total declared dividends per share for year
earnings per share brought and carried forward (see Page 55)
naV per share
share price at 30 June 2018
naV total return3
total return to shareholders4
as at / year ended
30 June 2018
£35,996,640
£34,796,075
£35,784,332
9.41p
9.67p
(2.24p)
7.43p
7.43p
0.30p
113.28p
121.00p
9.25%
11.68%
2. underlying ePs is calculated using underlying earnings divided by the average number of shares calculated as described on page 54.
3. total return is based on naV per share movement and dividends declared in the year.
4. total return to shareholders is based on share price movement and dividends declared in the year.
5
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 6
Solar Income Fund | corporate Summary Corporate Summary
Investment objective
The investment objective of the Company is to provide
shareholders with an attractive return, principally in the form of
regular income distributions, by investing in a portfolio of uk
based solar energy infrastructure assets.
Structure
the company is a non-cellular company limited by shares
incorporated in guernsey under the law on 29 May 2013. the
company’s registration number is 56708, and is regulated by the
gFsc as a registered closed ended collective investment scheme.
the company’s ordinary shares were admitted to the Premium
Segment of the Official List and to trading on the Main Market of
the london stock exchange following its iPo on 12 July 2013. the
issued capital during the year comprises the company’s ordinary
shares denominated in sterling.
the company has the ability to use long term and short term debt
at the holding company level as well as having long term, non
recourse debt at the sPV level.
Investment Adviser
the investment adviser to the company during the year was
Bluefield Partners llP which is authorised and regulated by the
uk Fca under the number 507508. in May 2015 Bsl, a company
with the same ownership as the investment adviser, commenced
providing asset management services to the investment sPVs
held by BsiFil. in august 2017 Bol, a company with the same
ownership as the investment adviser, commenced providing
o&M services to seven of the investment sPVs held by BsiFil.
7
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 8
Solar Income Fund | chaIrman’S Statement Chairman’s Statement
Introduction
the company has had another good year.
We have delivered an on target dividend of 7.43pps. the dividend
was covered by earnings and is net of debt amortisation. We have
also carried forward surplus earnings of 0.30pps enabling us to
start the 2018/19 financial year with healthy distributable reserves,
and we have also experienced a good start to the new financial
year in respect of irradiation.
Our dividend target for the financial year ending June, 2019 is
to increase the dividend by the June 2018 RPi number of 3.38%,
giving a full year target dividend of 7.68pps.
at the year end the company’s naV was 113.28pps; naV total
Return for the period was 9.25% and shareholder total Return
was 11.68%.
Key Events
the company’s primary focus has been on maximising revenues
in the existing portfolio through the combined activities of our
Investment Adviser, Bluefield Partners LLP, and our technical asset
management service provider, Bluefield Services Limited. The
portfolio has again delivered an above budget performance.
We have also started to significantly amortise our Aviva long term
financing, a process that goes largely unseen and unheralded but is
a prudent strategy whilst the company has high levels of regulated
revenues. We will continue to do this in the coming years, a process
that not only lowers leverage as assets are utilised but also
enhances and protects the company’s naV.
9
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements The year is also noteworthy in respect of what we have not
done. We elected not to expand our asset base through
significant purchases in the market due to high valuations
and/or poor quality portfolios coming onto the market,
and thus had no need to raise new equity. We made very
selective acquisitions that support the Company’s return
targets totalling 18.8MWp or 4% of the Company’s total
portfolio by energy capacity. These acquisitions have
been funded, in the main, by our short term credit facility
(RCF). In the absence of subsidies for new build projects,
we again decided to avoid primary investments.
We also decided to keep the investment mandate
unchanged and continue with a UK only focus. This is for
no other reason than we could not see returns that would
justify taking the currency, regulatory and/or country risk
for our shareholders who have supported the growth of
the Company based on its ability to deliver stable, sterling
income. This decision is always under review but there
would need to be a compelling reason to justify capital
allocations outside the UK.
underlying Earnings and Dividend Income
The Company is a sterling income fund and, as such,
we continue to focus on annual earnings and dividends.
Indeed, we believe these tangible, quantifiable measures
should be prioritised ahead of more subjective measures
that drive long term valuation.
The underlying earnings for the year were £35.8m or 9.67pps.
After amortising our long term leverage, the available profits,
including brought forward reserves, were £28.6m or 7.73pps.
The board elected to pay out the on target dividend of
7.43pps and carry forward 0.30pps into 2018/19.
Valuation and Equity IRR
Valuation methodology remains consistent with previous
reporting periods, with the Board receiving a valuation
recommendation from the Investment Adviser, the
product of a comprehensive DCF model. This valuation
is then benchmarked, on a per MegaWatt Peak (MWp)
basis, against comparable transactional activity for basis
for UK based solar assets.
In the Board’s view, this is the most effective and
transparent way in which to measure the value of
the Company’s portfolio because of the consistent
characteristics seen in solar farms.
the cost base for a solar farm is similar across different
assets. As the vast majority of the installed solar capacity
is in the southern half of England and Wales even the
irradiation assumptions are broadly consistent.
All of this combines to enable the Board to look across
public and private data sets and, with support from the
Investment Adviser, to accurately benchmark the valuation
of the Company’s portfolio against market activity.
Following this combination of both market and DCF
approach, the Board has been able to extrapolate an
average price of £1.29m per MWp from transactions over
the last 18 months.
Benchmarking the Company’s portfolio to this £m per
MWp results (using our actual cost of debt) in a cost of
equity discount rate of 7.26% (7.54% in December 2017
and 8.07% in June 2017) and a WACC discount rate of
5.65% (5.90% in December 2017 and 6.15% in June 2017).
The two main changes in valuation are a reduction in the
long term power forecast, offset by a small reduction in
the discount rate.
Investment Strategy
The investment strategy for the Company is
straightforward in its objective: to buy high quality UK-
based solar assets that are accretive to the Company’s
NAV and dividend paying capacity. In the past financial
year we acquired capacity of 18.8MWp which met
these objectives. This relative lack of acquisitions is the
strongest indictor you can have that our Investment
Adviser is not seeing assets that are priced at a level that
delivers the returns required, or are not of the requisite
quality (or, increasingly, both). It is not that there has been
a lack of activity in the UK solar market - close to 10% of
the total installed capacity of large scale solar portfolios
changed hands in the year under review and the
Investment Adviser bid on in excess of 500MWp, largely
unsuccessfully. However, pricing discipline has remained
and that will benefit our Shareholders in the long term.
Non-Subsidised Solar
On the back of falling equipment costs and forecasts of
rising power prices, the unsubsidised solar PV market
may be about to arrive in the UK, as indeed it has in
countries which lie further south.
Whilst the proportion of regulated revenues differ
depending on the vintage of solar farm, the variance
between buyers and sellers with respect to core
assumptions is often within a relatively limited band
of tolerance. Power revenue predictions are generally
provided by one or two of the leading forecasters, the
technology and infrastructure used by solar farms is
homogenous (making energy generation predictable) and
Our Investment Adviser has observed a number of times
that the solar PV industry has the ability to surprise at
the speed in which it adjusts to the prevailing market
conditions. The last subsidy for new build UK solar was
granted at the end of March 2017. Since then there has
been a hiatus as the market waits for installation costs to
fall to a level where unsubsidised solar power becomes
economic in the UK (logically, in the south of England).
10
Solar Income Fund | chaIrman’S Statement
This is now an imminent reality, British Solar Renewables
has announced that it has won the EPC deal for the first
non-subsidy industrial solar park in the UK. The facility
will have a capacity of 15MWp and will be installed in
Buckinghamshire. Our Investment Adviser is preparing
for the next wave of new capacity that we expect to see
in the short to medium term, where we can pursue our
preferred strategy of investing in solar assets through
the construction phase. But it must be stressed that the
subsidy free market is not quite there yet.
Debt Strategy
The Company has used the period to continue to
amortise its debt. The portfolio has the benefit of high
levels of regulated revenues, almost exclusively using
the Renewable Obligation Scheme, which provides
index-linked income for 20 years from the point of grid
connection. It is our view that it is in Shareholders’
best interests to seek to use every year of regulated
revenues to amortise the Company’s long term debt
as aggressively as is possible within the objectives of
our dividend target. The year under review saw a good
example of this in practice; we paid down £8.3m of debt,
equivalent to 2.24pps of earnings.
Power Prices
When we did the IPO in July 2013, short term fixed
price power contracts (12 to 36 months) were being
struck in excess of £55 per MWh. By Q1 2016, the power
market for contracts of a similar tenor were trading
in the £30s per MWh. From this low point the market
started to recover. Today I can report that new contracts
are consistently in the £50s per MWh and the most
recent contracts have been struck in the £60s per MWh.
This upturn is only just beginning to be fed into your
Company’s revenue generation. We should add the caveat
that we are not forecasting that the market is going to
keep marching forward but the Investment Adviser has
prepared some interesting analysis on the short term
drivers in the UK power market, which highlights why
we have seen this rebound since 2016 and also why this
recent increase seemed to have surprised some of the
independent forecasters.
Clearly, power prices are the biggest variable largely
outside our control. I say ‘largely outside our control’
because whilst we cannot influence the prevailing pricing
within the European and UK gas markets we can enhance
the value of the contracts that are available to us. This
means having flexibility in respect of the tenor of the
power and ROC contracts and flexibility in the choice
of the provider of the contract. We have that flexibility
for in excess of 75% of the portfolio and each year our
Shareholders benefit from this where we are able to
maximise the value of the available contracts that come
on to the market.
Technical Asset management
Bluefield Services, the Bristol based technical asset
management business that looks after all aspects of
the portfolio’s services, from monitoring through to
contract enforcement, has again delivered above budget
performance. As stated in earlier reports, there is no
alchemy in this - it is down to hard work, diligence and
skill. Positive, consistent engagement with the network
operators reduces downtime and by spending for
example: 5,400 hours analysing plant performance, 300
hours assessing performance calculations at critical
contractual milestones and spending in excess of 1,750
hours at the solar farms inspecting the condition of the
equipment and status of the sites, giving our Company
the greatest chance it can to minimise planned and
unplanned outages and maximise generation.
The Past and the Future
The period to the end of June 2018 was the Company’s
fourth full financial year. Since February 2014 the
Company has declared total dividends of 33.18pps,
delivered NAV total return of 51% and Shareholder
total return of 54%. We have achieved these results by
consistently focusing on the fundamentals of acquisition
discipline, debt negotiation and amortisation, strong
contractual protection and technical asset management.
We have also achieved these returns in a challenging
power market and by sticking to our original mandate of
investing only in UK solar assets.
Looking forward, the power markets seem more
favourable and the high performing portfolio is being
optimised by the Bluefield teams who are tasked with
maximising revenues. The success of this is measured
in an unchanged dividend policy, as set out at our IPO,
of increasing the dividend in line with RPI (7.43pps for
2017/18 and a target of 7.68pps for 2018/19).
As we enter our fifth year as a listed company you will
note that we are required by our Articles to propose a
discontinuation resolution at the forthcoming AGM. Some
companies have continuation votes whilst we have a
discontinuation vote. We strongly believe the Company
should continue in its present form and recommend that
you vote against the discontinuation resolution (as indeed
will all members of the Board with their own shares).
We are now preparing ourselves for the next wave of
investment, when the non-subsidised market becomes
economic in the UK and we plan to apply our highly
effective investment model for a primary market of
funding assets through construction.
John Rennocks
chairman
26 September 2018
11
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements The Company’s Investment Portfolio
the company has a geographically diverse group of assets containing a range of proven solar technology and
infrastructure.
Cambridgeshire
hoBack
Royston 17.5 MWp
1
Cornwall
2
3
noRth BeeR
launceston 6.9 MWp
tRethosa
st austell 4.8 MWp
Derbyshire
4
BuRnaston
Burnaston 4.1 MWp
Devon
5
6
7
8
caPelanDs
Barnstaple 8.4 MWp
langlanDs
ashill 2.1 MWp
olD stone
totnes 5.0 MWp
Place BaRton
totnes 5.0 MWp
Dorset
9
10
11
east
overmoigne 5.0MWp
holly
overmoigne 5.0MWp
galton ManoR
overmoigne 3.8MWp
Essex
12
BaRVills
east tilbury 3.2 MWp
Gloucestershire
gRange
newent 5.0MWp
13
Hampshire
RoMsey
Romsey 5.0MWp
14
15
16
saxley
andover 5.9 MWp
southWick
Fareham 47.9 MWp
Isle of Wight
DuRRants
newport 5.0 MWp
17
12
Kent
18
19
20
littleBouRne
canterbury 17.0 MWp
Molehill
herne Bay 18.0 MWp
shePPey
isle of sheppey 10.6 MWp
Leicestershire
gyPsuM
sileby 4.5 MWp
21
Lincolnshire
Folly lane
Boston 4.8 MWp
22
Newport
23
couRt FaRM
llanmartin 5.0 MWp
Norfolk
24
25
26
27
27
28
29
30
31
Bunns hill
north Walsham 5.0 MWp
FRogs loke
north Walsham 5.0 MWp
hall FaRM
east Beckham 11.4 MWp
haRDinghaM
Wicklewood 14.9 MWp
haRDinghaM x
Wicklewood 5.2 MWp
oulton
oulton 5.0 MWp
RookeRy
attleborough 5.0 MWp
salhouse
norwich 5.0 MWp
West RaynhaM
West Raynham 50.0 MWp
Northamptonshire
32
33
coRBy
corby 0.5 MWp
kislingBuRy
kislingbury 5.0 MWp
North Yorkshire
kellingley
Beal 5.0 MWp
34
Oxfordshire
35
36
37
38
ButteRiss DoWns
20 sites 0.8 MWp
elMs
Wantage 28.9 MWp
gooseWilloW
steventon 16.9 MWp
hill FaRM
abingdon 15.2 MWp
Somerset
39
40
41
ashlaWn
axbridge 6.6 MWp
claPton
cucklington 5.0 MWp
ReDlanDs
Bridgwater 6.2 MWp
Staffordshire
42
WilloWs
uttoxeter 5.0 MWp
Sussex
43
Pashley
Bexhill on sea 11.5 MWp
Swansea
44
Betingau
swansea 10.0 MWp
Warwickshire
45
tollgate
lemington spa 4.3 MWp
Wiltshire
46
47
PentylanDs
highworth 19.2 MWp
RoVes
sevenhampton 12.7 MWp
Berkshire / Hampshire
48
PRoMothaMes
9 sites 0.4 MWp
Oxfordshire /
Surrey / Sussex
goshaWk
11 sites 1.1 MWp
49
Solar Income Fund | InveStment PortFolIo MULTIPLE SITES
35
20 Sites
48
9 Sites
49
11 Sites
34
42
4
13
45
21
32
33
38
37
36
22
1
44
23
6
5
2
3
8
7
11
10
9
41
39
40
15
16
46
47
17
14
27
26
31
25
24
30
29
18
12
43
20
19
28
13
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Analysis of the Company’s
Investment Portfolio
the company’s investment portfolio, analysed by geography, revenue type,
subsidy tariff and contractor and as at 30 June 2018 is as follows:
other counties
10.3%
northamptonshire 1.2%
swansea 2.2%
sussex 2.5%
cornwall 2.5%
Dorset 3.0%
norfolk
23.2%
GEOGRAPHICAL
ANALYSIS
cambridgeshire
3.8%
somerset 3.9%
Devon 4.4%
Wiltshire
6.9%
kent
9.9%
hampshire
12.8%
PPa
39.3%
REVENUE
TYPE*
oxfordshire
13.4%
Fit
8.9%
* Revenue is based on the company’s operating
portfolio of 460.3 MWp and does not include
estimated Roc Recycle Revenue
14
Roc Buyout
51.8%
Solar Income Fund | InveStment PortFolIo Fit
3.6%
2.0 Roc
1.9%
1.2 Roc
12.3%
1.6 Roc
20.4%
1.3 Roc
9.5%
SUBSIDY
TARIFF
1.4 Roc
52.3%
Prosolia
2.2%
other contractors
3.6%
Juwi Renewables 3.2%
conergy 4.2%
Parabel uk
5.7%
solar century
38.3%
ikaros solar
6.6%
Maetel / acs
10.8%
CONTRACTOR
BREAKDOWN
Wirsol energy
11.2%
Vogt solar
14.2%
15
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 16
Solar Income Fund | StrategIc report Strategic Report
Introduction
the strategic Report sets out:
STRATEGIC ISSuES
1. Company’s Objectives and Strategy
2. company’s operating Model
3. investment Policy
4. Policies, approach and achievements adopted in respect of csR
oPERATIoNAl ISSuES
5. operational & Financial Review for the period (including kPis)
6. Directors’ Valuation of the company’s Portfolio
7. Principal Risks and uncertainties
STRATEGIC ISSUES
1. Company’s Objectives and Strategy
the company seeks to provide shareholders with an attractive
return, principally in the form of quarterly income distributions,
by investing in a portfolio of large scale uk based solar energy
infrastructure assets. the company targeted a dividend of
7.00pps in relation to the financial year ended 30 June 2015
with the intention of this rising annually thereafter with the RPi.
Subject to maintaining a prudent level of reserves, the Company
aims to achieve this through optimisation of asset performance,
future acquisitions and use of gearing. the company’s dividend
target for the financial year ended 30 June 2018 is 7.43pps
and the company has declared dividends of this amount. the
operational and Financial Review section on page 23 provides
further information relating to performance during the year.
17
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 2. Company’s Operating Model
Structure
the company holds and manages its investments through a uk limited company, BsiFil, in which it is the sole
shareholder.
Shareholders
investment
equity ownership
services
Parent
Bluefield Solar Income Fund
(guernsey: lse listed, July 2013)
investment advisory
agreement
investment
Investement Adviser
Bluefield Partners LLP
Portfolio Holding
Company
Bluefield SIF Investments Limited
(uk, Portfolio holding company)
investment
investment advisory
agreement
Asset Manager
Bluefield Services Limited
asset Management
agreement
SPV’s
(Portfolio investments held in
sPV’s ultimately owned by the
holding company)
o&M services
O&M Contractor
Bluefield Operations Limited
Independent Board
4 Independent Directors
(investment Policy, auditing
and Reporting)
company Management
service Providers
Company Advisers &
Service Providers
(company secretary, legal, corporate
Broking, Public Relations)
ltF agreement
Long Term
Finance Provider
AVIVA
SPV Level Management
and services contracts
18
Solar Income Fund | StrategIc report management
Board and committees
The independent Board is responsible to shareholders
for the overall management of the Company. The Board
has adopted a Schedule of Matters Reserved for the
Board which sets out the particular duties of the Board.
Such reserved powers include decisions relating to
the determination of investment policy, approval of
new investments, oversight of the Investment Adviser,
approval of changes in strategy, risk assessment, Board
composition, capital structure, statutory obligations and
public disclosure, financial reporting and entering into
any material contracts by the Company.
administrator
The Board has delegated administration and company
secretarial services to the Administrator.
Further details on the responsibilities assigned to the
Investment Adviser and the Administrator can be found
in the Corporate Governance Report.
Employees and Officers of the Company
The Company does not have any employees and
therefore policies for employees are not required. The
Directors of the Company are listed on page 72.
Through the Committees and the use of external
independent advisers, the Board manages risk and
governance of the Company. The Board consists of four
independent non-executive Directors. See the Corporate
Governance Report for further details.
Investment Process
Through its record of investment in the UK solar
energy market, the Investment Adviser has developed a
rigorous approach to investment selection, appraisal and
commitment.
investment adviser
The Company has entered into an Investment Advisory
Agreement with the Investment Adviser. This sets out the
Investment Adviser’s key responsibilities, which include
identifying and recommending suitable investments for
the Company to enter into and negotiating on behalf of
the Company the terms on which such investments will
be made.
Through a Technical Services Agreement with BSIFIL
the Investment Adviser is also responsible for all issues
relating to the supervision and monitoring of existing
investments (included within the fee cap under the
Investment Advisory Agreement). The Company has
appointed BSL, a company with the same ownership as
the Investment Adviser, to provide asset management
services for the Company’s portfolio.
During the year the Investment Adviser has been paid a
base fee of 0.76% of NAV at 30 June 2018 and a variable
fee, in respect of 2016/17, equating to 0.02% of NAV,
which was settled by issue of Ordinary Shares.
A summary of the fees paid to the Investment Adviser
is given in Note 16 of the financial statements. The
fees paid to BSL, the solar asset management business
with shared ownership with the Investment Adviser,
are detailed in Note 16. The fees paid to BOL, the O&M
business with shared ownership with the Investment
Adviser, are detailed in Note 16 also.
Repeat transaction experience with specialist
advisers
The Investment Adviser has worked with a range of
legal, technical, insurance and accounting advisers
in each of the transactions it has executed in the UK
market. This direct experience has enabled it to develop
an understanding of key areas of competence to
address specific issues; for example, identifying specific
individuals who are expert in advising on specific
detailed technical aspects of a project. Through this
direct specialist experience, the Investment Adviser
is able to source relevant expertise to address project
issues both during and following a transaction.
application of standardised terms developed from
direct experience
The Investment Adviser has developed standardised
terms which have been specifically tested by reference
to real transaction and project operational experience.
Whilst contract terms are specifically negotiated
and tailored for each individual project, solar project
contracts applied by the Investment Adviser typically
have specific protections from the construction
contracts regarding recovery of revenue losses for
underperformance and obligations for correction of
defects. Both such provisions have been specifically
exercised by the Investment Adviser giving it direct
experience in activating contractual protections.
19
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Rigorous internal approval process
All investment recommendations issued to the Company,
and all investment recommendations made in relation to
previous transactions of the Investment Adviser are made
following the formalised review process described below:
(1) investment origination and review by Managing
Partners
Before incurring costs in relation to the preparation
of a transaction, a project is concept reviewed
by the Investment Adviser’s Managing Partners,
following which a letter of interest or memorandum
of understanding is issued and project exclusivity is
secured.
(2) Director concept approval
In the event that material costs are to be incurred in
pursuing a transaction, a concept paper is issued by
the Investment Adviser for review by the Board. This
concept review fixes a project evaluation budget as
well as confirming the project proposal is in line with
the Company’s investment policy and strategy.
(3) Due diligence
In addition to applying its direct commercial
experience in executing solar PV project acquisitions
and managing operational solar plants, the
Investment Adviser engages legal, technical and,
where required, insurance and accounting advisers
to undertake independent due diligence in respect of
a project. Where specialist expertise is required due
to project specifications, the Investment Adviser has
experience in identifying relevant experts.
(4) Bluefield Partners LLP Investment Committee
Investment recommendations issued by the
Investment Adviser are made following the
submission of a detailed investment paper to the
Investment Committee. The Investment Committee
operates on the basis of unanimous consent and has
a record of making detailed evaluation of project risks.
The investment paper submitted to the Investment
Committee discloses all interests which the
Investment Adviser and any of its affiliates may have
in the proposed transaction.
(5) Board approval
Following approval by the Investment Adviser
Investment Committee, investment recommendations
are issued by the Investment Adviser for review by the
boards of the Company and BSIFIL. Both the Company
and the BSIFIL board undertake detailed review
meetings with the Investment Adviser to assess the
project prior to determining any approval. Both board
20
approvals are required in order for a transaction to be
approved. If the boards of the Company and BSIFIL
approve the relevant transaction, the Investment
Adviser is authorised to execute the transaction
in accordance with the Investment Adviser’s
recommendation and any condition stipulated in the
boards’ approval. The Board is continuously aware of
the overall pipeline of potential new investments that
can lead to choices between projects depending on
available funding facilities.
(6) closing memorandum
Prior to executing the transaction, the Investment
Adviser completes a closing memorandum
confirming that the final transaction is in accordance
with the terms presented in the investment paper to
the Investment Committee; detailing any material
variations and outlining how any conditions to
the approval of the Investment Committee and/or
Board approval have been addressed. This closing
memorandum is countersigned by an appointed
member of the Investment Committee prior to
completing the transaction.
aeRial VieW oF oulton (2018)
Managing conflicts of interest
The Investment Adviser and any of its members,
directors, officers, employees, agents and connected
persons, and any person or company with whom they are
affiliated or by whom they are employed may be involved
in other financial, investment or other professional
activities which may cause potential conflicts of interest
with the Company and its investments.
The Board has noted that the Investment Adviser has
other clients and have satisfied themselves that the
Investment Adviser has procedures in place to address
potential conflicts of interest. The potential conflicts of
interest are disclosed in the investment recommendation
for each investment.
Solar Income Fund | StrategIc report
3. Investment Policy
The Company invests in a diversified portfolio of solar energy assets, each
located within the UK, with a focus on utility scale assets and portfolios on
greenfield, industrial and/or commercial sites. The Company targets long life
solar energy infrastructure, expected to generate stable renewable energy
output over a 25 year asset life.
Individual solar assets or portfolios of solar assets are held within SPVs into
which the Company invests through equity and/or debt instruments. The
Company typically seeks legal and operational control through direct or indirect
stakes of up to 100% in such SPVs, but may participate in joint ventures or
minority interests where this approach enables the Company to gain exposure
to assets within the Company’s investment policy which the Company would
not otherwise be able to acquire on a wholly-owned basis.
The Company may, at holding company level, make use of both short term
debt finance and long term structural debt to facilitate the acquisition of
investments, but such holding company level debt (when taken together with
the SPV finance noted above) will also be limited so as not to exceed 50% of
the Gross Asset Value. The Company may make use of non-recourse finance at
the SPV level to provide leverage for specific solar energy infrastructure assets
or portfolios provided that at the time of entering into (or acquiring) any new
financing, total non-recourse financing within the portfolio will not exceed 50%
of the prevailing Gross Asset Value.
No single investment in a solar energy infrastructure asset (excluding any third
party funding or debt financing in such asset) will represent, on acquisition,
more than 25% of the Net Asset Value.
The portfolio provides diversified exposure through the investment in not
less than five individual solar energy infrastructure assets. Diversification is
achieved across various factors such as grid connection points, individual
landowners and leases, providers of key components (such as PV panels and
inverters) and assets being located across various geographical locations
within the United Kingdom.
The Company aims to derive a significant portion of its targeted return
through a combination of the sale of ROCs and FiTs (or any such regulatory
regimes that replace them from time to time). Both such regimes are currently
underwritten by UK Government policy providing a level of ROCs or FiTs fixed
for 20 years for accredited projects and each regime currently benefits from an
annual RPI escalation. The Company also intends, where appropriate, to enter
into power purchase agreements with appropriate counterparties, such as co-
located industrial energy consumers or wholesale energy purchasers.
The Company’s investment policy has the flexibility to commit to assets during
the construction phase or the operational phase. During the period under
review, the Investment Adviser has invested in construction phase assets and
has acquired a large secondary portfolio in order to:
1. Maximise quality and scale of deal flow: The flexibility of the strategy
maximises the pool of assets available to the Company. The majority of
developers and contractors in the UK solar market were unable to fund on
their own balance sheets, therefore construction funders such as Bluefield
were able to select their construction partners and assets from the widest
21
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements possible pool. The maturing of the UK solar market has resulted in the
Company being offered substantial operational asset portfolios for the first
time, during the period;
2. Optimise the efficiency of the acquisitions: Funding through the
construction phase removes a layer of financing cost provided by third party
construction funders, typically passed on to the end acquirer; likewise, when
acquiring secondary assets, the Company has selected assets based on
quality, cost and attractiveness of the financing attached to the acquisitions;
3. Minimise risk via appropriate contractual agreements: Risk can be further
minimised by appropriate contractual agreements. For construction assets,
these include making milestone payments backed, typically, by bonds,
security plant and equipment and significant cash hold backs; and
4. Acquire assets using conservative assumptions: As can be seen by the
valuation contained in this report, the Company has acquired assets based
upon a cautious set of assumptions.
listing Rule Investment Restrictions
The Company currently complies with the investment restrictions set out below
and will continue to do so for so long as they remain requirements of the FCA:
• neither the Company nor any of its subsidiaries will conduct any trading
activity which is significant in the context of the Group as a whole;
•
the Company must, at all times, invest and manage its assets in a way
which is consistent with its objective of spreading investment risk and in
accordance with the published investment policy; and
• not more than 10% of the Gross Asset Value at the time of investment is
made will be invested in other closed-ended investment funds which are
listed on the Official List.
As required by the Listing Rules, any material change to the investment policy
of the Company will be made only with the prior approval of the FCA and
Shareholders.
4. Policies, approach and achievements
adopted in respect of CSR
The Board and the Investment Adviser are focused on the corporate objective
of providing investors with an ethical, socially responsible and transparently
managed Company. The best standards of governance and CSR are central to
the Company’s ethics and important in ensuring the continued attractiveness
of the Company to the broad group of stakeholders with which it interacts. The
production of sustainable energy from the Company’s portfolio is expected
to save the emission of millions of tonnes of CO2 throughout the life of the
assets. In addition, the Company seeks to increase biodiversity at its sites by
appropriate planting and landscaping of the land it manages, as detailed in the
Environmental, Social and Governance report on page 65.
22
Solar Income Fund | StrategIc report 5. Operational & Financial Review for the period
Key Performance Indicators
The Board has identified the following indicators for assessing the Company’s annual performance in meeting its
objectives:
Market Capitalisation
Share price
Total dividends per share declared in relation to the year
NAV
NAV per share
Total Return to shareholders
(based on share price and dividends declared in the year)
Acquisitions
During the year, the Company completed four
acquisitions for a total consideration of £26.2m (2017:
£44.4m). Each investment has been carefully selected
to ensure the portfolio is well balanced geographically,
with appropriate levels of diversification of construction
and operation contractors and key equipment.
Summary Statement of Comprehensive Income
Total Income (Note 4 of the financial statements)
Change in fair value of assets (Note 8 of the financial statements)
Administrative expenses (Note 5 of the financial statements)
Total comprehensive income before tax
Tax
Total comprehensive income
Earnings per share
as at 30 June 2018
as at 30 June 2017
£447,559,071
£425,282,973
121.00p
7.43p
115.00p
7.25p
£418,995,484
£408,608,255
113.28p
11.68%
110.49p
22.56%
Portfolio Performance
Portfolio performance and power price movements
are discussed within the Investment Adviser’s report
under Sections 2 and 4.
The Company’s PPA strategy is to enter into short
term contracts with contracting periods spread
quarterly across the portfolio in order to minimise the
portfolio’s sensitivity to short term price volatility.
year ended 30 June 2018
£ million
year ended 30 June 2017
£ million
0.7
35.3
(1.2)
34.8
-
34.8
9.41p
0.6
64.6
(1.2)
64.0
-
64.0
18.26p
Income for the period represents interest income and monitoring fees by BSIFIL to BSIF.
The total comprehensive income before tax of £34.8m reflects the performance of the Company when valuation
movements and operating costs are included. Further detail on valuation movements of BSIFIL’s portfolio is given in the
Report of the Investment Adviser.
23
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements ONGOING CHARGES
YEAR TO 30 JUNE 2018
YEAR TO 30 JUNE 2017
the company
BsiFil
total (£)
the company
BsiFil
total (£)
Fees to Investment Adviser
310,783
2,857,938
3,168,721
355,371
2,642,082
2,997,453
Legal and professional fees
109,723
129,941
239,664
98,606
23,440
122,046
Administration fees
294,156
-
294,156
262,226
-
262,226
Directors’ remuneration
165,200
10,400
175,600
159,963
10,000
169,963
Audit fees
90,460
31,062
121,522
95,466
17,750
113,216
Other ongoing expenses
230,243
225,465
455,708
218,984
378,504
597,488
Total expenses
1,200,565
3,254,806
4,455,371
1,190,616
3,071,776
4,262,392
Non-recurring expenses
(10,738)
(142,959)
(153,697)
(122,392)
(224,093)
(346,485)
Total ongoing expenses
1,189,827
3,111,847
4,301,674
1,068,224
2,847,683
3,915,907
Average NAV
Ongoing Charges
(using AIC methodology)
Performance fee
Ongoing charges plus
performance fee
411,877,763
361,749,648
1.04%
0.00%
1.04%
1.08%
0.02%
1.10%
The ongoing charges ratio is calculated in accordance with the AIC recommended methodology, which excludes non-
recurring costs and uses the average NAV in its calculation.
6. Directors’ Valuation* of Company’s portfolio
The Investment Adviser or an independent external valuer
is responsible for preparing the fair market valuation
recommendations for the Company’s investments for
review and approval by the Board.
Valuations are carried out on a six monthly basis as at
31 December and 30 June each year and the Company
has committed to procure a review of valuations by an
independent expert not less than once every three years.
Such an external review of valuation was undertaken by an
independent third party for the current year and considered
by the Board in determining the portfolio fair value.
The Directors’ Valuation adopted for the portfolio as
at 30 June 2018 was £604.2m (Note 8 of the financial
statements), representing a cumulative 10.75% uplift on
investment cost, derived from a combination of income
generated within the investments and revaluation uplift
under discounted cash-flow methodology. The Board
reviews and considers the recommendations of the
Investment Adviser to form an opinion of the fair value of
the Company’s investments.
A detailed analysis of the Directors’ Valuation is presented
in the Report of the Investment Adviser.
* Directors’ Valuation is an alternative performance measure to show the gross value of the sPV investments held by BsiFil, including
their holding companies. A reconciliation of the Directors’ Valuation to Financial assets at fair value through profit and loss is shown in
Note 8 of the financial statements.
24
Solar Income Fund | StrategIc report aeRial VieW oF holly (2018)
7. Principal Risks and Uncertainties
under the Fca’s Disclosure guidance and transparency
Rules, the Board is required to identify those material
risks to which the company is exposed and take
appropriate steps to mitigate those risks.
these inherent risks associated with investments in the
solar energy sector could result in a material adverse
effect on the company’s performance and value of
ordinary shares.
Bluefield Solar Income Fund Limited’s risk register
covers four main areas of risk:
• Portfolio Management;
• Operational;
• Regulatory; and
• External.
each of these areas, together with the principal risks
with that category, is summarised in the table below and
include commentary on the mitigating factors. the list
is a subset of a much larger set of risks which the Board
review on a regular basis.
PoRTFolIo mANAGEmENT
Risk
Potential Impact
mitigation
1. Portfolio Acquisition
Missed investment opportunities.
Risk
2. Portfolio Operational
Risk
underperformance of solar plant
versus expectations at acquisition
the Board reviews the company’s investment
pipeline with the investment adviser on a
regular basis. the company, through BsiFil,
has access to additional debt financing under
terms of its three year revolving credit facility
with RBs, as well as the option to complete a
tap issuance to support further acquisitions if
required. the closure of the primary market for
solar assets has led to inflation in secondary
market prices reducing potential yield of new
purchases.
Bsl as asset manager prepares a quarterly
operational summary for the Board that
evaluates the performance of each plant
against budget and highlights any issues to be
addressed. the Board also receives a monthly
operations report from Bsl.
25
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements aeRial VieW oF FRogs loke (2018)
oPERATIoNAl
Risk
Potential Impact
mitigation
3. Valuation error
Valuations of the SPV investments are
reliant on large and detailed financial
models based on discounted cash
flows. Significant inputs such as the
discount rate, rate of inflation and
the amount of electricity the solar
assets are expected to produce are
subjective and certain assumptions
or methodologies applied may prove
to be inaccurate. This is particularly
so in periods of volatility or when
there is limited transactional data
for solar PV generation against
which the investment valuation can
be benchmarked. Other inputs such
as the price at which electricity and
associated benefits can be sold are
subject to government policies and
support.
4. Depreciation of NAV
The portfolio NAV will depreciate
towards the end of the Company’s life.
The discount factor applied to the cash flows
is reviewed by the Investment Adviser to
ensure that it is set at the appropriate level.
All papers supporting the GAV calculation and
methodology used are presented to the Board
for approval and adoption. Ongoing quarterly
reconciliations are performed between the SPVs
and BSIF.
The Board has committed to obtaining 3rd
party valuations at least every three years.
The first valuation was completed in June
2015 and a second in respect of this year end.
An additional and detailed independent review
of the portfolio cash flow model was carried
out as part of the long term debt financing
procurement process.
To mitigate the impact of power price volatility
on the Company’s portfolio valuation blended
power price curves from two leading forecasters
are used in the portfolio cash flow model.
The Investment Adviser has been requested to
model how the portfolio NAV will move with time,
producing long term scenario planning for the
Boards’ review. The Board has authorised the
Investment Adviser to negotiate lease extensions
on all active plants as it deems necessary.
The Board are also seeking to mitigate the risk
by extending the life of the assets
26
Solar Income Fund | StrategIc report EXTERNAl
Risk
Potential Impact
mitigation
5. unfavourable
Weather and Climate
Conditions
Weather related risks: annual income
generation of the Company is sensitive
to weather conditions and in particular
to the level of irradiation across the
investment locations. Variability in
weather could result in greater than
10% variability in revenue generation
year on year.
Global warming could impact supply
and demand for electricity.
6. unfavourable
Electricity market
Conditions
Annual income generation of the
Company is sensitive to future power
market pricing. A major structural shift
in power demand or supply will impact
the Company’s ability to meet its divi-
dend target.
The reduction of all energy prices may
also have a negative effect on the
price of all sources of energy.
The Company has diversified the locations of its
plants across the UK.
The Company uses on site measurement of
irradiation in order to measure performance
against budget, and its portfolio is dispersed
across the south of the UK. The use of solar
photovoltaic technology at the sites means
generation is not dependent only on direct
irradiation but also on predictable daylight,
limiting short term volatility when compared to
other weather dependent electricity generation.
The Company and other clean energy providers
are doing their part to reduce the Earth’s Carbon
Footprint, however there are already damaging
long term effects which may impact the
Company. The management of such an outcome
is largely out of the Company’s control.
The Investment Adviser regularly updates
the portfolio cash flow model to reflect future
power market forecasts and where appropriate
applies discounts to the forecasts. New projects
are always assessed using the most recent
power market forecast data available. A rolling
programme of PPA contract expiries has been
implemented to minimise risk. Protection
against a sustained period of low energy prices
can only be achieved by maximising exposure
to regulatory revenues through acquisition of
more legacy FiT and ROC plants. Some recent
acquisitions have included fixed power contracts
for a longer period, reducing exposure to short
term volatility. Long term power prices are
however beyond the control of the Company. A
third party review of the power strategy adopted
by the Investment Adviser has also given a
strong independent verification of the strategy.
The Investment Adviser is currently reviewing
possibilities for the private sale of electricity to
stabilise long term revenues.
27
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Risk
Potential Impact
mitigation
7. Changes in tax
regime
There may be unfavourable tax
related changes including restrictions
on renewables, or no relief on debt
structuring. The UK Finance Bill
enacted in December 2017 restricts
tax relief on borrowing to 30% of
EBITDA.
An independent taxation review of the Company
was carried out as part of the long term debt
financing procurement process. The Company
makes regular debt repayments to reduce
operating leverage and with the intention of
ensuring that debt is repaid before regulatory
revenues expire. The Board continues to
monitor the situation and take advice from the
Company’s tax advisers as necessary.
8. Changes to
Government Plans
Decisions affecting the wholesale
supply of electricity through either i)
a flooded market or ii) other available
forms of energy sources.
The Investment Adviser provides regular updates
in this regard within the quarterly Board papers.
9. Political risk
The decision by the UK to exit the
EU has elevated levels of political
uncertainty and may have an adverse
impact on the Company.
Since announcement of the EU referendum
result there has been a weakening of Sterling’s
exchange rate against a number of major
currencies, a downgrade of the UK’s credit rating
and a cut in interest rates. The Company has
been favourably impacted by these changes
to date. The Company has negligible foreign
currency exposure and the reduction in yield
on gilts has materially reduced the cost of the
long term debt issue. There are however other
unknown risks which may or may not occur
in the medium and longer term and which the
Board will monitor closely should they arise.
caPelanDs (2018)
28
Solar Income Fund | StrategIc report longer-term viability statement
assessing the prospects of the company
The corporate planning process is underpinned by
scenarios that encompass a wide spectrum of potential
outcomes. These scenarios are designed to explore the
resilience of the Company to the potential impact of
significant risks set out below.
The scenarios are designed to be severe but plausible and
take full account of the availability and likely effectiveness
of the mitigating actions that could be taken to avoid or
reduce the impact or occurrence of the underlying risks
and which would realistically be open to management in
the circumstances. In considering the likely effectiveness
of such actions, the conclusions of the Board’s regular
monitoring and review of risk and internal control
systems, as discussed on page 70, is taken into account.
The Board reviewed the impact of stress testing the
quantifiable risks to the Company’s cash flows in the
previous pages as detailed in risk factors 1-9 and
concluded that the Company, assuming current leverage
levels, would be able to continue to produce distributable
income in the event of the following scenarios:
strategic Report
Risk Factor
2.
2.
5.
6.
Plant performance degradation of 0.8%
per annum versus 0.4% per annum
Plant availability reduced to 95%
P90 irradiation
Power price set to zero
The Board considers that this stress testing based
assessment of the Company’s prospects is reasonable in
the circumstances of the inherent uncertainty involved.
In accordance with the Articles of Incorporation, every
five years the Board is required to propose an ordinary
resolution that the Company should cease to continue as
presently constituted. The first such discontinuation vote
is scheduled to be held at the 2018 AGM. However, for
the purposes of the longer term viability statement it is
assumed that no discontinuation resolution is passed.
The period over which we confirm longer term viability
Within the context of the corporate planning framework
discussed above, the Board has assessed the prospects
of the Company over a three year period ending 30 June
2021. Whilst the Board has no reason to believe the
Company will not be viable over a longer period, given
the inherent uncertainty involved, the period over which
the Board considers it possible to form a reasonable
expectation as to the Company’s longer term viability,
based on the stress testing scenario planning discussed
above, is the three year period to June 2021. This period
is used for our mid term business plans and has been
selected because it presents the Board and therefore
readers of the annual report with a reasonable degree
of confidence whilst still providing an appropriate longer
term outlook.
Confirmation of longer term viability
The Board confirms that its assessment of the principal
risks facing the Company was robust.
Based upon the robust assessment of the principal
risks facing the Company and its stress testing based
assessment of the Company’s prospects, the Board
confirms that it has a reasonable expectation that the
Company will be able to continue in operation and meet
its liabilities as they fall due over the period to June 2021.
These inherent risks associated with investments in the
solar energy sector could result in a material adverse
effect on the Company’s performance and value of
Ordinary Shares.
The Company’s risks are mitigated and managed by
the Board through continual review, policy setting and
half yearly review of the Company’s risk matrix by the
Audit Committee to ensure that procedures are in
place with the intention of minimising the impact of the
above mentioned risks. The Board carried out its last
formal review of the risk matrix at the Audit Committee
meeting held on 24 September 2018. The Board relies
on periodic reports provided by the Investment Adviser
and Administrator regarding risks that the Company
faces. When required, experts will be employed to gather
information, including tax advisers, legal advisers, and
environmental advisers.
Paul Le Page
Director
26 September 2018
Laurence McNairn
Director
26 September 2018
29
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 30
Solar Income Fund | report oF the InveStment advISer JAMES ARMSTRONG
Managing Partner
MIKE RAND
Managing Partner
GIOVANNI TERRANOVA
Managing Partner
NEIL WOOD
grouP finance director
Report of the
Investment Adviser
1. About Bluefield Partners LLP
Bluefield was established in 2009 and is an investment adviser
to companies and funds investing in solar energy infrastructure.
our team has a proven record in the selection, acquisition and
supervision of large scale energy and infrastructure assets in the
uk and europe. the management team has been involved in over
£1.5 billion of solar PV funds and/or transactions since 2008.
Bluefield was appointed Investment Adviser to the Company
in June 2013. Based in its London office, Bluefield’s partners
are supported by a dedicated and highly experienced team of
investment, legal and portfolio executives. as investment adviser,
Bluefield takes responsibility, fully inclusive within its advisory fees,
for selection, origination and execution of investment opportunities
for the company, having executed 49 individual sPV acquisitions
on behalf of BSIF since flotation. Due to the strong expertise of
the investment adviser, no additional transaction arrangement or
origination service providers are employed by the company and no
investment transaction arrangement fees have been paid either to
the investment adviser or any third parties.
Bluefield’s Investment Committee has collective experience of over
£15 billion of energy and infrastructure transactions.
31
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 2. Portfolio: Acquisitions, Performance and Value Enhancement
Portfolio
As at 30 June 2018, the Company held an operational
portfolio of 86 PV plants (consisting of 45 large scale
sites, 39 micro sites and 2 roof top sites) with a total
capacity of 460.3MWp with the portfolio displaying strong
diversity through: geographical variety (as shown by the
map on page 13), a range of proven PV technologies and
infrastructure (arising from the solar PV farms having
been constructed by a number of experienced solar
contractors), and a blend of asset sizes with capacities
ranging from microsites to substantial, utility-scale solar
farms (including two plants at c.50MWp).
Acquisitions
During the 12 month period to 30 June 2018, the
Investment Advisor reviewed approximately 500MWp
of opportunities, but due to the Investment Advisors
stringent acquisition criteria only 4% of the projects
assessed went on to be recommended to the BSIF board.
As such, out of this pipeline, the Company completed 4
acquisitions with a combined capacity of 18.8MWp. All 4
plants were constructed by IB Vogt and accredited under
the 1.2 ROC Scheme.
The investment of £26.2m used the available funds of £1.9m
remaining from the October 2016 fund raise (£60.6m) as
well as £24.3m from the Company’s £30m RCF.
.
table 1. Summary of BSIF Portfolio Performance for 2017/18:
The assets commenced generation in March 2017
and whilst they were acquired in December 2017 and
March 2018, the structure of the transaction enabled the
Company to still receive the benefit of the projects’ cash
flows from September 2017 onwards within the fixed
acquisition price.
In keeping with the Investment Adviser’s objective
to deliver value and return accretive acquisition
opportunities to the Company, securing these primary
assets which were developed during the last months
of the RO Scheme, was a success for the Company as
it enabled it to lock in the benefits of the 20 year RPI
indexed support mechanism, a scheme now closed to
further business.
The Investment Adviser is currently negotiating on
behalf of the Company a range of transactions as it
looks to continue its policy of securing high quality,
return accretive acquisitions during the course of the
2018/19 financial year, though its strong pricing discipline
means that its primary focus is now increasingly on the
optimisation of performance of the excellent asset base
already secured.
Performance
In the year to 30 June 2018, the portfolio, with a total
installed capacity of 460.3MWp, achieved a net PR of
82.1%, against a forecasted net PR of 81.5% (2017: 81.3%),
creating an ‘asset management uplift effect’ of +0.7%
actual
Forecast
% change
actual
2016/17
Irradiation (kWh/M2)1,2
1,175
1,186
-0.9%
1,182
Net Performance Ratio (%)1,2
82.1%
81.5%
+0.7%
83.4%
Generation Yield (MWh/MWp)1,2
965
966
-0.1%
986
Total unit Price – Power + ROCs +LDs3 (GBP/MWh)
126.7
122.2
+3.7%
119.4
Total Revenue - inc LDs (GBP/MWp)
£122.3k
£118.1k
+3.6%
£117.7k
notes to table 1.
1. Excluding grid outages and significant periods of constraint or curtailment that were outside of the Company’s control (for example,
Dno-led outages and curtailments)
2. the table excludes assets with a collective capacity of 18.8 MWp, which were acquired during the reporting period and therefore do not yet
offer 12 months of performance data. the solar farms excluded are shown in the second half of the full asset table on pages 35 and 36.
3. Actual and forecast revenue figures include ROC recycle estimates in line with standard forecasts
32
Solar Income Fund | report oF the InveStment advISer As shown in the above table, irradiation levels during the
financial year were marginally lower than forecast.
However, operational outperformance (exemplified
through the net PR being +0.7 above forecast levels)
across the portfolio substantially offset the effect of
lower irradiation, resulting in generation levels being
substantially in line with budget (only 0.1% below).
Although the portfolio’s net performance was higher than
expected, it was marginally lower than in the previous
reporting year. This is the result of a combination of
factors: the expected effects of degradation in the PV
modules’ performance (e.g. an industry standard rate
of degradation is c.-0.4%per annum), as well as the
unexpected effects of several weeks of settled snow
in March 2018 and the higher than average ambient
temperatures experienced in May 2018 and June 2018.
The previous year (2016/17) did not experience any such
severe weather events.
The portfolio’s ‘availability’ (the total time the plant was
operating, as a percentage of the maximum possible)
was in line with the expected 99% level at 98.89%.
The resulting revenue per MWp for the reporting year
was £122.3k, which includes £1.7m of LDs have been
recognised in relation to 11 plants which underperformed
warranted performance levels in the year, resulting in the
total revenue exceeding expectations by 3.6%.
Figure 1. Summary of BSIF Portfolio (441.5 MWp) generation for 2017/18
Note: The figure excludes assets with a collective capacity of 18.8 MWp, which were acquired during the reporting period and therefore
do not yet offer 12 months of performance data.
33
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements The geographical and equipment diversity within the
Company’s portfolio allows the effects of both ‘Outage
Risk’ (whereby a higher proportion of large capacity
assets would hold increased exposure to material losses
due to curtailments and periods of outage, as directed
by a specific DNO) and ‘Defect Risk’ (where over-reliance
on limited equipment manufacturers could lead to large
proportions of the portfolio suffering similar defects) to
be mitigated.
in line with expectations, is reflective of the fact that the
Company benefits from strong enforceable contractual
protections and warranties across its portfolio and that
the Investment Advisor has been disciplined in enforcing
the Company’s rights to deliver the optimal outcome for
its investors.
During the period, 12 plants completed and passed final
acceptance testing.
This diversification, combined with the considerable
efforts of the Company’s asset manager, BSL, is
demonstrated by the fact that the outages experienced
by the portfolio (those events both outside and inside the
Company’s control) equated to a drop against forecast
generation of only -1.39%, with the impact of outages
resulting from events directly within the control of the
Company (for example, periods when a plant, or part of
a plant, were shut to conduct essential maintenance or
repairs) accounted for decrease of only -0.21% against
forecast generation.
The most significant periods of outage were recorded
at The Grange, a 5MWp site, which experienced DNO
constraints from 29 June to 12 August 2017 (although
due to effective co-operation with the DNO, it was agreed
the plant would operate at 10% capacity during this
time, instead of being completely curtailed) and Elms
Solar Farm, which also suffered a planned 7 day DNO
led outage during July 2017 with a further planned 8
day outage during August 2017 successfully reduced to
a single day and delayed until October 2017, achieving
additional generation and revenue savings of 663MWh
and £66.2k respectively.
In April and May 2018, a small number of plants also
suffered unplanned DNO outages. The largest of these
occurred on Hoback Solar Farm, which lost 158.2MWh
(equivalent to c.£33.8k of lost revenue), Capelands Solar
Farm which lost 299MWh (c.£64.6k) and in June 2018,
North Beer Solar Farm which lost 100.1MWh (c.£23.1k)
of generation.
A planned 26 day outage for the Durrants Solar Farm,
located on the Isle of Wight did not proceed in the late
summer of 2017, following a detailed consultation with
the DNO which resulted in avoiding loss of generation and
revenue of 545MWh and £219k respectively.
During the financial year to date, the Company has
once again exercised the strength of its contractual
protections, enabling the recovery of £1.7m of LDs for
underperformance, revenue losses and the rectification of
equipment defects.
The ability of the Company to collect LDs in the year,
notwithstanding that the portfolio has overall performed
Final acceptance occurs following at least two years of
rigorous testing, of which these plants passed, as well as
a comprehensive audit of the site for defects by BSL, all
of which have been remedied or provided for before such
acceptance is past. Following this rigorous acceptance
procedure and completion of final acceptance, the EPC
is released of its obligations (though some warranties
remain for full statute of limitations periods).
As assets pass their final acceptance dates, the plants
enter new availability and/or performance guarantees
with their respective O&M providers whilst also
benefitting from comprehensive insurance coverage with
respect to damage, theft and business interruption.
Whilst the portfolio is maturing, a significant portion (35%
by installed capacity) remains protected by performance
warranties provided by the EPC contractors (in addition
to equipment manufacturers’ warranties), backed by
retentions or warranty bank bonds, applicable from each
asset’s provisional acceptance date. These warranties
provide a contractual entitlement to the recovery of
damages because of operational underperformance
against a contracted level of performance, or as a result
of defects.
Figure 2. BSIF Portfolio Assets Under EPC Warranty (‘pre-
FAC’) and post-FAC, as at 30 June 2018
Pre-Fac assets
(162.3MWp)
35%
Post-Fac assets
(298MWp) 65%
At the end of the reporting period, our operation and
maintenance subsidiary, BOL, now provides O&M
contractor services to 7 of the Company’s assets. Aside
from annual cost savings of c.£156k for the sites already
transferred, this transition of services is expected to deliver
noticeable benefits from increased contractual service
levels and, through a close operational working relationship
with the asset manager, BSL, faster response times.
34
Solar Income Fund | report oF the InveStment advISer The Company’s operating portfolio as at 30 June 2018 and the electricity generated in the 2017/18 financial year is
shown below:
table 2. BSIF Portfolio Generation for 2017/18 by Asset:
solar Farm asset
Southwick
West Raynham
Elms
Molehill
Hardingham
Littlebourne
Pentylands
Goosewillow
Hoback
Hill Farm
Pashley
Burnaston
Roves
Hall Farm
Sheppey
Betingau
North Beer
Capelands
Ashlawn
Saxley
Durrants
Redlands
Romsey
Trethosa
Salhouse
Frogs Loke
The Grange
total investment
commitment (gBP)
installed capacity
(MWp)
generation to 30 June 2018
(actual, MW/h)
61.0
55.9
32.8
23.1
22.7
22.0
21.4
19.0
19.0
17.3
15.4
14.4
14.0
13.4
12.0
11.2
9.3
8.6
7.6
7.0
6.4
6.4
5.8
5.8
5.6
5.6
5.4
47.9
50.0
28.9
18.0
20.1
17.0
19.2
16.9
17.5
15.2
11.5
4.1
12.7
11.4
10.6
10.0
6.9
8.4
6.6
5.9
5.0
6.2
5.0
4.8
5.0
5.0
5.0
46,101.21
49,227.82
26,599.79
18,253.81
19,390.09
16,474.82
18,008.95
16,479.29
16,391.85
14,560.01
12,301.24
3,675.78
11,874.88
11,038.52
10,952.48
8,755.77
6,595.47
7,890.12
6,607.95
5,779.00
5,394.60
6,323.14
4,942.54
4,674.26
4,881.69
4,817.51
4,266.41
35
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements solar Farm asset
Bunns Hill
Folly Lane
Oulton
Rookery
Tollgate Farm
Butteriss (20 micro sites)
Goshawk
Promothames (9 micro sites)
Old Stone
Place Barton
Court Farm
Kellingley
Kislingbury
Willows
Gypsum
Barvills
Langlands
Corby
SuB-ToTAl
total investment
commitment (gBP)
installed capacity
(MWp)
generation to 30 June 2018
(actual, MW/h)
5.3
5.3
5.3
5.2
4.6
2.3
2.0
1.3
5.7
5.5
5.5
5.0
5.0
4.6
4.4
3.3
3.1
2.3
5.0
4.8
5.0
5.0
4.3
0.8
1.1
0.4
5.0
5.0
5.0
5.0
5.0
5.0
4.5
3.2
2.1
0.5
4,900.58
4,596.52
4,828.66
4,765.46
3,981.17
615.30
1,150.36
303.81
4,835.49
4,956.85
5,171.76
4,330.18
4,707.22
4,605.27
4,216.52
3,310.69
2,099.27
402.47
523.8
441.5
426,036.58
Assets becoming Operational / Acquired during the reporting period
Clapton
Holly Farm
East Farm
Galton Manor
SuB-ToTAl
GRAND ToTAl
36
6.3
7.2
7.2
5.5
26.2
550.0
5.0
5.0
5.0
3.8
18.8
3,667.43
4,005.07
3,950.36
2,996.64
14,619.5
460.3
440,656,08
Solar Income Fund | report oF the InveStment advISer Assets with Multiple Sites
Butteriss Downs OWNERSHIP
20 sites
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
Promothames
9 sites
Goshawk
11 sites
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
august 2015
0.8
trina / lDk
British gas
Fit
100%
august 2015
0.4
trina
British gas
Fit
100%
september 2014
1.1
trina / suntech
British gas
Fit
37
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
Swansea, Devon and Cornwall
Betingau
swansea
Capelands
Barnstaple
Langlands
ashill
Old Stone
totnes
Place Barton
totnes
North Beer
launceston
Trethosa
st austell
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
December 2013
10.0
sharp / Rec
Prosolia
1.6 Roc
100%
august 2014
8.4
s-energy
Juwi Renewables
1.4 Roc
100%
February 2017
2.1
yingli
ikaros
2.0 Roc
100%
January 2017
5.0
Ja solar
solar century
1.2 Roc
100%
January 2017
5.0
Ja solar
solar century
1.2 Roc
100%
october 2013
6.9
hareon
Parabel uk
2.0 Roc
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
July 2015
4.8
Rec
Wirsol energy
Fit
38
Solar Income Fund | report oF the InveStment advISer
39
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Newport, Somerset and Dorset
Court Farm
llanmartin
Ashlawn
axbridge
Redlands
Bridgwater
Clapton
cucklington
Galton Manor
overmoigne
Holly
overmoigne
East
overmoigne
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
December 2016
5.0
hanwha Q cells
Parabel uk
1.2 Roc
100%
august 2014
6.6
hanwha Q cells
Parabel uk
1.4 Roc
100%
august 2014
6.2
s-energy
Juwi Renewables
1.4 Roc
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
august 2014
5.0
Jinko solar
Vogt solar
1.2 Roc
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
March 2018
3.8
Jinko solar
Vogt solar
1.2 Roc
100%
March 2018
5.0
Jinko solar
Vogt solar
1.2 Roc
100%
March 2018
5.0
Jinko solar
Vogt solar
1.2 Roc
40
Solar Income Fund | report oF the InveStment advISer
41
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 42
Solar Income Fund | report oF the InveStment advISer Warkwickshire, Glouchestshire,
Oxfordshire and Wiltshire
Tollgate
lemington spa
Grange
newent
Elms
Wantage
Goosewillow
steventon
Hill Farm
abingdon
Roves
sevenhampton
Pentylands
highworth
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
January 2016
4.3
canadian solar
solar century
1.3 Roc
100%
February 2016
5.0
canadian solar
solar century
1.3 Roc
100%
February 2015
28.9
astroenergy
Wirsol energy
1.4 Roc
100%
aug & nov 2013
16.9
trina
ikaros solar
1.6 Roc
100%
october 2013
15.2
yingli
solar century
1.6 Roc
100%
March 2015
12.7
astroenergy
Wirsol energy
1.4 Roc
100%
February 2014
19.2
astroenergy
conergy
1.6 Roc
43
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
44
Solar Income Fund | report oF the InveStment advISer Yorkshire, Lincolnshire, Staffordshire, Derbyshire,
Northamptonshire, Leciestershire and Cambridgeshire
Kellingley
Beal
Folly Lane
Boston
Willows
uttoxeter
Burnaston
Burnaston
Gypsum
sileby
Corby
corby
Kislingbury
kislingbury
Hoback
Royston
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
June 2017
5.0
trina
tsF construction
1.2 Roc
100%
December 2015
4.8
canadian solar
solar century
1.3 Roc
100%
november 2016
5.0
canadian solar
solar century
1.2 Roc
100%
april 2016
4.1
sharp
British gas
Fit
100%
December 2016
4.5
hanwha Q cells
Parabel uk
1.2 Roc
100%
December 2016
0.5
azur
British gas
Fit
100%
December 2016
5.0
canadian solar
solar century
1.2 Roc
100%
June 2014
17.5
Jinko solar
solar century
1.4 Roc
45
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
Hardingham
Wicklewood
Hardingham X
Wicklewood
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
september 2013
14.9
hanwha Q cells
solar century
1.6 Roc
100%
november 20014
5.2
hanwha Q cells
solar century
1.4 Roc
46
Solar Income Fund | report oF the InveStment advISer
Norfolk
Hall Farm
east Beckham
Bunns Hill
north Walsham
Frogs Loke
north Walsham
West Raynham
West Raynham
Oulton
oulton
Salhouse
norwich
Rookery
attleborough
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
December 2013
11.4
hanwha Q cells
ikaros solar
1.6 Roc
100%
December 2015
5.0
neo solar europe
solar century
1.3 Roc
100%
December 2015
5.0
canadian solar
solar century
1.3 Roc
100%
June 2015
50.0
trina
Maetel / acs
1.4 Roc
100%
February 2016
5.0
canadian solar
solar century
1.3 Roc
100%
June 2015
5.0
Rec
Wirsol energy
1.3 Roc
100%
January 2016
5.0
canadian solar
solar century
1.3 Roc
47
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
Saxley
andover
Romsey
Romsey
Southwick
Fareham
Durrants
newport
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
December 2013
5.9
hanwha Q cells
solar century
1.6 Roc
100%
February 2016
5.0
canadian solar
solar century
1.3 Roc
100%
January 2016
47.9
Ja solar
solar century
1.4 Roc
100%
september 2014
5.0
Rec
Rec systems
Fit
48
Solar Income Fund | report oF the InveStment advISer
Barvills
east tilbury
Sheppey
isle of sheppey
Hampshire, Essex,
Kent and Sussex
Molehill
herne Bay
Littlebourne
cantebury
Pashley
Bexhill on sea
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
OWNERSHIP
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
100%
December 2016
3.2
hanwha Q cells
Parabel uk
1.2 Roc
100%
January 2014
10.6
yingli
solar century
1.4 Roc
100%
January 2016
18.0
hanwha solar one
Vogt solar
1.4 Roc
100%
January 2016
17.0
hanwha solar one
Vogt solar
1.4 Roc
100%
January 2016
11.5
hanwha solar one
Voght solar
1.4 Roc
49
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
Value Enhancement Initiatives
As the Company has progressed from a focus on
growth in our asset base driven by attractive greenfield
opportunities, to a lower rate of asset growth and
increased operational focus, the Investment Adviser has
enhanced its focus on initiatives that seek to enhance
and create additional value for the portfolio, through the
optimisation of both operations and revenues.
The most significant of these initiatives is a wide ranging
asset life extension programme, which seeks to allow
the SPVs to extend the available tenor of the PV plants
(above 2MWp of installed capacity) up to 40 years (with
the majority of the assets’ leases and planning approvals
currently envisaging an average term of c.25 years).
This extension is achieved through direct consultation
and negotiation with each respective landowner to
add options into the lease which allow the SPV, at its
discretion, to extend the lease up to a total term of 40
years. Once lease negotiations have been concluded,
applications are made to the respective local planning
authority to extend the permitted tenure to 40 years.
During the negotiations with the landowners, the SPVs
are concurrently seeking to add further options in the
leases for the deployment of battery storage facilities,
without further landowner consent. This will allow such
facilities to be rapidly deployed, at suitable sites across
the portfolio, when the commercial conditions for doing
so become attractive.
In addition to extending the tenor and inserting battery
storage optionality, each SPV is also reviewing options
around future optimisation of the plant. Examples of
this include assessment of repowering, reconfiguring,
or permitting the laying of additional conducting media
(primarily cables to support the installation of batteries).
The negotiations also present an opportunity for
landowners to request variations which do not materially
affect the operation of the plants, such as rights to graze
livestock on the sites.
The decision to extend any individual asset’s life term is
taken only once it has been demonstrated that, with the
required planning approval, there is a positive uplift in NPV
and improvement on the original investment criteria which
was applied when the plant was acquired or funded.
To facilitate this significant undertaking, the Investment
Advisor has assembled a highly qualified and experienced
team of third-party land agents, law firms and planning
consultants. By the end of the Reporting Period, 28
separate landowner negotiations had commenced,
resulting in 8 formal agreements. The relevant planning
applications for these plants expect to be submitted
during 2018/19.
No allowance has been made within our valuation
models for the benefit of any lease extensions pending
completion of planning reviews and receipt of consent.
In addition, the Investment Adviser is actively discussing
opportunities within the UK’s burgeoning long term,
corporate and direct-wire PPA market, in order to provide
predictable and reliable income streams over the long
term, up to 25 years.
PPa strategy
Over the year the Company maintained its strategy to fix
the price of power sale contracts for individual assets,
not covered by long term contracts, for periods between
12 and 36 months. The majority of contracts are being
struck for a minimum of 18 months, which is the average
required duration under the LTF agreement.
The Company has continued to implement the approach
of fixing power prices evenly throughout the year, in
order to mitigate the Company’s exposure to seasonal
fluctuations and short term events which have the
potential to increase volatility in the price of electricity in
the UK.
Prices are fixed up to 3 months in advance of
the commencement of the fixing period and PPA
counterparties are selected on a competitive basis
but with a clear focus on achieving diversification of
counterparty risk.
The combination of the PPA renewal strategy applied
during the period, and c.95MWp of plants (some 20% of
the portfolio) benefitting from 15 year PPAs with floor
prices, means the Company, in the unlikely scenario
of power prices falling to nil, has c.62% of its revenue
guaranteed over the next 15 years. The graph below
shows that as at 30 June 2018 the Company has a price
confidence level of c.90% to December 2018 and c.70% to
June 2019 over its power and subsidy revenue streams.
The Company’s strategy of fixing prices over periods of
12-36 months means the portfolio retains the ability to
continue to benefit from some of the rising power price
trend in recent months.
50
Solar Income Fund | report oF the InveStment advISer Figure 3. % of BSIF revenues fixed as at 30 June 2018
The Investment Adviser’s strategy to secure leverage
at the portfolio rather than asset level has enabled the
Company to retain flexibility in implementing its short
term PPA strategy following the closing of the Company’s
long term borrowing facility in September 2016.
This means the Company has the flexibility to explore
value enhancing options such as negotiating corporate
PPA offtake, flexibility which would not be available if
it had been required by lenders to enter 15 year offtake
contracts. The Company also remains able to maximise
potential economies of scale by taking advantage of
opportunities only available to owners who can commit
significant volumes of generating capacity.
As a result, the Company has the opportunity to regularly
tender out a large portion of its power to ensure it always
achieves the most competitive pricing and avoids the
greater discounts applied by offtakers when they are
entering long term contracts. For example, a tender of 4
x 5MWp is preferred over 4 separate tenders of 5MWp in
order to maximise value.
Revenues and Power Price
The portfolio’s revenue streams in the reporting period,
excluding ROC recycle estimates, show that the sale of
electricity accounts for 39.3% of the Company’s income.
Regulated revenues from the sale of FiTs and ROCs
account for 60.7%.
Overall, wholesale power markets have shown
improvement from the lows experienced in Q2 2017 when
concerns over supply in the UK electricity market and
uncertainty following the Brexit referendum combined
to raise PPA strike prices with particular increases from
April 2018. This rise in short term power prices has been
principally down to three key factors:
1. High gas prices
The UK’s main gas storage facility (Rough) closed during
2017 which, combined with the reduction of the gas
production in the Netherlands (Groningen field’s output
being limited for security reasons), pushed up gas
prices. These gas market constraints come after the dry
weather of 2017 that depleted gas reserves (lower hydro
generation, placing higher demand on gas-fired) and at
the same time as rising oil prices, to which the majority of
gas contracts are indexed. Additionally, these fundamental
drivers must be seen in combination with the fact that
gas-fired generation is setting the price more often, due
to increased competitiveness versus coal as the carbon
intensity of gas is lower and therefore is less penalised
by rising carbon prices (which as per point 3 below
have also contributed to increasing power prices).
51
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 2. low wind combined with high demand
Spring months are usually characterised by low wind
generation and, in May 2018, onshore wind load
factors reached a 12 month low. This coincided with
a colder and longer winter, followed by a hotter than
usual spring.
3. Rising carbon prices
There has been a 42% increase since mid December
2017 as the market appears to be anticipating that
the European Commission’s reform (stability reserve
mechanism to start in January 2019 aiming at
removing oversupply of allowances from the market)
will balance the market.
These factors have meant short term electricity prices
have de-coupled from recent curves released by power
forecasters, who present figures on an average weather
year basis and do not accommodate these extreme
weather effects so precisely. Compounding this deviation
is also the fact that traded prices usually reflect present
views more than market fundamentals. In other words,
market prices in the short term are more representative of
current market circumstances (low wind + high demand
+ gas market constraints today) than balanced market
scenarios (e.g. what is the electricity market equilibrium
for an average weather in any given year).
As illustration of the points mentioned above, please see
below a chart comparing the wholesale electricity prices
versus gas and carbon over the last 18 months.
source data from Bloomberg. carbon price eu ets from Bloomberg, effective gB price based on ia calculations
This upward movement has been reflected in PPA fixes
completed by the Company during the period, with 12-36
month fixed contracts replaced in the period benefitting
from an increase to the average seasonal weighted
power price previously achieved (from £44.07 per MWh
the 12 months ending 30 June 2017, compared to
£45.40 per MWh to 30 June 2018). This compares to a
day ahead market base load power price of £45.77 per
MWh for the 12 months to 30 June 2017 and £49.16 per
MWh to 30 June 2018. As PPAs are struck on a rolling
basis the uplift in power prices is not immediately seen
in the portfolio.
Evidencing the Company’s PPA strategy provides it with
the ability to benefit from rising power prices is the fact
in the period post 30 June 2018, the weighted volume
average for fixes since 30 June 18 is £57.69/MWh
The impact of power prices on NAV is set out in the
valuations section.
52
Solar Income Fund | report oF the InveStment advISer holly (oPeRational MaRch 2018)
3. Analysis of underlying earnings
The total generation and revenue earned in 2017/18 by the Company’s portfolio, split by subsidy regime, is outlined
below.
subsidy Regime
generation (MWh)
PPa Revenue (£m)
Regulated Revenue (£m)
FiT
2.0 ROC
1.6 ROC
1.4 ROC
1.3 ROC
1.2 ROC
Total
16,217
8,695
88,995
234,015
41,981
50,753
440,656
0.9
0.4
4.0
10.6
2.0
2.3
20.2
4.6
0.9
7.0
16.2
2.7
3.0
34.4
The Company includes ROC recycle assumptions within
its long term forecasts and applies a market based
approach on recognition within any current financial
period, including prudent estimates within its accounts
where there is clear evidence that participants are
attaching value to ROC recycle for the current accounting
period.
In October 2017, Ofgem announced that the final value
for ROC recycle for the period April 2016 to March 2017
(CP15) was £4.89 per MWh (equivalent to 11.4% of CP15
ROC buyout prices). The Company had recognised only
a prudent estimate of ROC recycle in its 30 June 2017
accounts and additional income of £1.6m was received
during the current reporting period.
53
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Combined with ROC recycle revenues received during the
year (due to the ROC recycle for the period April 2016 to
March 2017, being higher than the prudent estimate built
into the 30 June 2017 year end results) of 0.43pps, the
Company’s total underlying earnings for the period are
9.67pps.
After deducting amortisation of debt of 2.24pps, the
Company generated earnings available for distribution of
7.43pps, fully covering the dividend of 7.43pps.
As result, the Company has been able to carry forward
dividend reserves of 0.30pps (2017: 0.30pps).
underlying Portfolio earnings
Portfolio Revenue*
Liquidated damages
Portfolio Income
Portfolio Costs
Project Finance Interest Costs
Total Portfolio Income Earned
Group Operating Costs#*
Group Debt Costs
underlying Earnings
Group Debt Repayments
underlying Earnings available for
distribution**
Bought forward reserves
Total funds available for distribution
-1
Target distribution***
Actual Distribution -2
underlying Earnings carried forward
(1-2)
Full year to
30 June 18
(£m)
Full year to
30 June 17
(£m)
Full year to
30 June 16
(£m)
Full year to
30 June 15
(£m)
56.2
1.7
57.9
-12.9
-0.7
44.3
-4.3
-4.2
35.8
-8.3
27.5
1.1
28.6
27.5
27.5
1.1
47.9
1.3
49.2
-11.4
-0.7
37.1
-4.2
-4.4
28.5
-3.4
25.1
0.8
25.9
24.6
24.8
1.1
35.6
0.9
36.5
-7.1
-0.7
28.7
-3.9
-3.2
21.6
-0.7
20.9
1.3
22.2
20.9
21.4
0.8
22.7
0.8
23.5
-0.9
-0.7
21.9
-3.1
-0.8
18.0
-0.7
17.3
0.0
17.3
15.3
16.0
1.3
#
*
includes the company and BsiFil
includes Roc recycle revenue of £1.6m for cP15 (april 2016-March 2017)
** excludes one off transaction costs and the release of up-front fees related to the company’s debt facilities
*** Target distribution is based on funds required for total target dividend for each financial period.
54
Solar Income Fund | report oF the InveStment advISer The table below presents the underlying earnings on a ‘per share’.
Target Distribution (RPI dividend)
Total funds available for distribution
(inc reserves)
Full year to
30 June 18
(£m)
27.5
28.6
Full year to
30 June 17
(£m)
24.6
25.9
Full year to
30 June 16
(£m)
Full year to
30 June 15
(£m)
20.9
22.2
15.3
17.3
Average Number of shares in year*
369,866,027
342,735,213
295,282,786
224,583,921
Target Dividend (pps)
Total funds available for distribution
(pps) - 1
Total Dividend Declared & Paid (pps) - 2
Reserves carried forward
(pps) ** - 1-2
7.43
7.73
7.43
0.30
7.18
7.55
7.25
0.30
7.07
7.55
7.25
0.30
7.00
7.71
7.25
0.46
* average number of shares is calculated based on shares in issue at the time each dividend was declared.
** Reserves carried forward are based on the shares in issue at the corresponding year end.
4. NAV and Valuation of the Portfolio
The Investment Adviser is responsible for advising the
Board in determining the Directors’ Valuation and, when
required, carrying out the fair market valuation of the
Company’s investments.
Valuations are carried out on a six monthly basis as at
31 December and 30 June each year and the Company
has committed to procure a review of valuations by an
independent expert not less than once every three years. In
keeping with this commitment, the Company commissioned
a benchmarking exercise with an independent third party
to support the 30 June 2018 valuation.
As the portfolio comprises only non-market traded
investments, the Investment Adviser has adopted
valuation guidelines based upon the IPEV Valuation
Guidelines as adopted by Invest Europe (formerly known
as the European Venture Capital Association), application
of which is considered consistent with the requirements
of compliance with IAS 39 and IFRS 13.
Following consultation with the Investment Adviser, the
Directors’ Valuation adopted for the portfolio as at 30
June 2018 was £604.2m (30 June 2017, £573.4m and 30
June 2016, £483.7m).
The table below shows a breakdown of the Directors’ Valuations over the last three financial years:
Enterprise Portfolio DCF value (EV)
Deduction of Project Co debt
Projects valued at cost (amount invested)
Project Net Current Assets
Directors’ Valuation
June 2018
June 2017
June 2016
592.5
-12.5
0.0
24.2
604.2
558.6
-13.2
5.0
23.0
573.4
479.7
-13.9
0.0
17.9
483.7
These items are outlined below in the portfolio valuation movement section.
55
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Changes to Directors’ Valuation methodology
During the financial year there have been a number
of developments that have been considered in the
Investment Adviser’s recommendation to the Directors’
Valuation:
(i) A number of large scale operational portfolios have
either been sold or brought to market. Notable sales
to 31 December 2017 include EFG Hermes’ 45%
stake in the 365MWp TerraForm Power portfolio and
Greencoat’s 75MWp purchase of Baywa’s remaining
UK portfolio, with additional sales in January 2018
including the completion of Solarplicity’s 135MWp
portfolio to an undisclosed buyer and Magnetar’s
350MWp portfolio to Rockfire Capital. Alongside
these private transactions there has also been
public announcements from Foresight and Next,
between May 2018 and August 2018, with respect
to acquisitions of portfolios in excess of 50MWp.
This activity continues to demonstrate the trend, first
identified by the Company within its 31 December
2016 Interim Statements, of pricing for solar assets
being between £1.29m/MWp and £1.35m/MWp;
(ii) The Finance Bill received Royal Assent on 16
November 2017. As Action 4 (Corporate Interest
restrictions) of BEPS was passed into law it confirmed,
as of April 2017, that corporates would be restricted
to the higher of net interest deductions of £2m, 30% of
EBITDA, or its ratio of third party debt to EBITDA;
(iii) Within the period inflation rose and then fell, as RPI
achieved a 7 year peak in December 2017 at 4.1%,
before falling to 3.4% by 30 June 2018. With the Bank
of England completing one rate increase of 0.25%
within the period, in November 2017 and another
shortly after, in August 2018, inflation has stabilised
post period end with forecasts predicting, over the
next few years for it to move more into line with the
Bank of England’s stated target of 2%;
(iv) Notwithstanding some near term (1 to 2 year) upward
movements in energy price forecasts, as outlined in
the PPA section on pages 50 and 51, the latest long
term forecast curves projected by our forecasters
have fallen by c.8.3% compared to June 2017;
reflecting revisions to coal closure dates, the volume
of renewables and new interconnection capacity.
To avoid sensitivity to a single forecast in a volatile
market, the Investment Adviser averages data from
two leading forecasters.
Each of these factors has been considered when
determining the Directors’ Valuation.
Discounting methodology and Discount Rate
The Directors’ Valuation is based upon the discounting of
the net, unlevered, project cash flows of each investment
held by the Company, through BSIFIL, irrespective of
whether the investment has project leverage or not with
the result then benchmarked against comparable market
multiples.
The discount rate applied on the project cash flows is
therefore the WACC.
This approach of discounting the unlevered cash flows
with a WACC is consistent with the approach taken in
every previous Directors’ Valuation and is intended to
avoid asset valuations being distorted by different debt
sizing or amortisation profiles.
Having discounted the unlevered project cash flows,
to establish a ‘willing buyer – willing seller’ enterprise
valuation or ‘EV’, project level debt (if any) is then
deducted along with additions of projects at cost and
period end working capital to establish the ‘Directors’
Valuation’ of the portfolio.
It is notable that of the 49 SPVs held by the Company,
only one (Durrants) has asset level debt (being £12.5m at
the financial period end).
In June 2017, as a result of increasing competition
within the UK solar market, the Board noted that a
sustained trend had now emerged with respect to the £/
MWp for large scale portfolios. At that time, the most
notable example of which was EFG Hermes’ purchase of
TerraForm’s 365MWp portfolio for an EV of £1.29m/MWp
in December 2016, of which it immediately sold down
50% to TNB. Further developments on this transaction
occurred in December 2017 when EFG sold down a
further 45% (leaving it with a 5% holding) to KWAP but
despite only selling a minority stake, pricing remained
equivalent to an EV of £1.29m/MWp.
Since the original TerraForm transaction in December
2016, a number of large scale portfolios, including recent
purchases by the Company’s listed peers as listed above,
have changed hands.
Analysis of transactions since December 2016 up to the
current date indicates all have fallen within an EV band of
£1.29m/MWp and £1.35m/MWp.
Consequently, the Board deemed it necessary, under
the ‘willing buyer-willing seller’ methodology, that the
valuation of the Company’s portfolio be prudently
benchmarked on £/MWp basis against these comparable
portfolio transactions.
56
Solar Income Fund | report oF the InveStment advISer As the period to 30 June 2018 has continued to see
high levels of competition for large scale portfolios,
the Board believes it appropriate to maintain a prudent
benchmarking approach, on £/MWp basis, in respect of
the valuation of the BSIF portfolio.
By valuing the portfolio at an EV of £592.5m, and
an effective price of £1.29m/MWp, the Board has
conservatively achieved this aim. On this basis, the WACC
discount rate of 5.90%, applied in December 2017, has
been reduced by a further 0.25% to 5.65%. This reduction
results in a drop of 0.50% compared to the WACC applied
in June 2017 of 6.15%.
The cost of equity implied by a WACC of 5.65% is 7.26%
(June 2017; WACC 5.90%, Cost of Equity 8.07%).
The reduction in WACC reflects in part an increase in both
short and long term leverage as a result of £24.3m from
the Company’s RCF, which it is expected to be carried
forward into long term debt under the conservative
assumption of replacing 70% (c.£17m), on maturity in
September 2019, of amounts drawn under the RCF with
long term amortising debt at an interest rate of 3.50%.
Given the Investment Adviser’s record of securing
competitive long term debt, as evidenced by the re-
financing in September 2016 of the Company’s £200m
RCF with Aviva Investors, the Directors are comfortable
with the assumptions applied to the conversion of such a
small tranche before September 2019.
In parallel, as further detailed below, the equity discount
rate has increased.
For completeness, following Royal Assent of the Finance
Bill on 16 November 2017, this discount rate now
incorporates a tax shield based on interest deductions
relating to both the Company’s external and, as permitted,
inter-company loans (See section below on Impact of
Finance Bill 2017 for more detail).
Commensurate with the drop in WACC, is a reduction in
the equity IRR implied by the Directors’ Valuation. This
has fallen, from 7.02% in December 2017, to 6.70% at the
end of June 2018 (down from 7.43% in June 2017).
The equity IRR is derived from the actual impact of the
Company’s amortisation profile over the tenor of its
third party debt, £217.5m as at 30 June 2018, taking
into account both the cost and declining leverage levels
(34%, based on the Company’s GAV as at 30 June 2018
of £635.7m*) as well as the effect of interest shielding on
£80m of Eurobond notes between BSIF and BSIFIL.
The equity IRR of 6.70% is the return from the equity forecast
cash flows of the portfolio (after tax deductions) which give
rise to the same resulting NAV as the WACC methodology
and is intended to assist in outlining the relationship between
a point in time valuation of the Company’s portfolio, based
on the Company’s underlying valuation assumptions, and
the commensurate equity return.
The equity IRR implies that the future cash flows of
the Company, based upon the Directors’ Valuation of
£604.2m, which includes the conservative assumption
of a zero terminal value of each asset after c.25 years
of operational life, are expected to deliver a c.6.7% gross
annualised return on today’s NAV.
The DCF has been applied on the basis of each asset
having a terminal value of zero after an operational life
of c.25 years from commissioning. For the Company’s
portfolio, this equates, within the Directors’ Valuation as
at 30 June 2018, to a weighted average portfolio life of
21.7 years. The Board has elected not to adopt a longer
assumed life, even for assets with extended lease or
planning permission at this early stage in the life of the
portfolio.
Nevertheless, the Investment Adviser is carrying out
an active programme of asset life extension through
planning and lease amendments and this may justify use
of a longer asset life in the future.
Consistent with the previous financial year, the Board
has adopted an assumed RPI of 2.75% throughout the
assumed asset life (including from 2019 onwards). This
inflation rate was increased in December 2016 following
a revision of market expectations with respect to long
term inflation rates.
Impact of Finance Bill 2017 - Base Erosion and
Profit Shifting
Prior to Royal Assent of the Finance Bill in November 2017,
Directors’ Valuations had only incorporated the benefit of
tax shielding from long term 3rd party debt profiles.
From September 2016, this included the interest shielding
from the Company’s 18 year, fully amortising finance
facility of £187m (at a fixed rate of 2.875% on £121.5m
and 0.7% over RPI on £65.5m) provided by Aviva Investors.
The average EBITDA interest tax shield from this long
term debt equates to 6.8% over the life, being 14.3% in
2019 and falling thereafter with amortisation of the debt.
No net tax shielding has previously been assumed from
intercompany loans within the group.
*GAV is the aggregation to the portfolio’s DCF value, project Durrant’s outstanding debt and the working capital balances from the portfolio and BSIFIL.
57
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
However, following Royal Assent of the Finance Bill
in November 2017 (permitting shielding up to 30%
of EBITDA), the Company moved to include interest
shielding from c.£80m of intercompany loans
(Eurobonds) between BSIF and BSIFIL within its 31
December 2017 valuation.
The average EBITDA interest tax shield from this
combination of third party long term debt and inter-
company debt equates to 17.7% over the life, being 26%
in 2019 and falling thereafter with amortisation of the
debt and remains conservative with respect to the 30%
level permitted under the fixed ratio test of the corporate
interest restriction rules.
Power Price
As with Directors’ Valuations since 31 December 2016, the
Directors have continued to adopt an equal blend of the
forecasts from the two leading independent forecasters for
the period to 30 June 2018, with the table below outlining
the valuation range over the last three valuation cycles,
resulting from applying each forecaster individually.
FORECASTER
PORTFOLIO ENTERPRISE VALUE (£M)
June 2018
December 2017
June 2017
December 2016
Leading independent power
forecaster 1*
Equal blending of leading independent
power forecasts
Leading independent power
forecaster 2
594.3
592.5
590.8
* Forecaster used in all previous BsiF valuations
566.1
568.5
570.9
553.9
558.6
563.7
500.5
510.5
520.4
The blended forecast used within the latest Directors’
Valuation is based on forecasts released in April 2018
(forecaster 1) and June 2018 (forecaster 2) and implies
an annual growth rate over the 25 year forecast of 0.5%
above the rate of inflation from a starting point in the high
£40s / MWh.
The DCF for each project applies the contractually fixed
power price applicable to each solar PV asset until
the end of the fixed period and, thereafter, the blended
independent forecast price. As in previous valuation
cycles, the short term pricing within the energy price
forecast used was compared by the Investment Adviser
to PPA prices achievable in the market for its solar
assets and was considered to reflect the market without
discount or premium.
2 years of operational data) is 19 (7 assets in June 2017)
and the Investment Adviser is pleased to confirm that
the average PR for these plants, including the effects of
degradation, is 83.3%.
This represents the possibility of future valuation uplifts
as the remaining plants, c.35% of the portfolio, move
through the FAC process and switch to operational PRs
over the next few years.
Consistent with the valuation approach taken in previous
periods, the Directors’ Valuation does not amend long
term plant performance forecasts based upon short term
performance while the plants remain within the warranty
period and subject to outstanding contractual testing
obligations.
Plant Performance
During the period, 12 plants completed and passed FAC
testing.
Other Cash flow Assumptions
No material changes have been made regarding
regulatory revenue or cost assumptions.
This process triggers the end of performance-related EPC
warranties and, in the context of the valuation approach,
marks the first point at which long term operational
performance can be adopted within the future cash flows
of the project.
The number of projects now being valued using PR from
operational or final acceptance (this covers a minimum of
NAV movement
In the period, the Company paid total dividends of
£24.4m, being 3.00pps in total for the third and fourth
interim dividends in respect of the year ended 30 June
2017 (which combined with the earlier interim dividends,
provided a total dividend in the 2016/17 financial year
of 7.25pps) as well as 3.60pps in total for the first and
second interim dividends for the 2017/18 financial year.
58
Solar Income Fund | report oF the InveStment advISer Over the period the Company’s NAV has increased by
£10.4m, from £408.6m as at 30 June 2017, to £419.0m
as at 30 June 2018. Adjusting the 30 June 2017 NAV of
£408.6m for the dividends paid in the period (£24.4m)
results in an uplift in the NAV of the Company during the
period of £34.8m.
A breakdown in the movement of the NAV (£m) of the
Company over the period and how this interacts with the
movement in the valuation of the portfolio is illustrated in
the charts below.
In February 2018, the Company paid a first interim
dividend for the 2017/18 financial year of 1.80pps. It
paid a second interim dividend of 1.80pps in May 2018,
a third interim dividend of 1.80pps in August 2018 and
is expecting to pay a final, fourth interim of 2.03pps in
October 2018 to meet the Company’s 2017/18 dividend
target of 7.43pps.
A breakdown in the movement of the NAV (£ million)
of the Company over the period and how this interacts
with the movement in the valuation of the portfolio is
illustrated in the charts below.
59
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Directors’ Valuation movement
30 June 2017 Valuation
Additions in the period#
Re-based Valuation
Cash receipts from portfolio
Power Price Movement
Tax shield update
Decrease in discount rate (6.15% to 5.65%)
Balance of portfolio return
as % of re-based
valuation
(£million)
573.4
599.6
(6.8)%
(4.0)%
1.9%
3.8%
5.8%
26.2
(40.8)
(24.1)
11.5
23.1
34.9
30 June 2018 Valuation
604.2
0.7%
# Additions in the period reflects acquisition of 18.8MWp; Clapton, Galton, Holly and East.
Each movement between the re-based valuation and the
30 June 2017 valuation is considered in turn below:
cash receipts from the Portfolio
This movement reflects the cash payments made from
the underlying project companies up to BSIFIL and the
Company to enable the companies to settle operating
costs and distribution commitments as they fall due
within the period.
Power Price Movement
The Company’s two independent forecasters released
updated forecasts in April and June 2018 and these have
been applied to the Directors’ Valuation. The impact of
adopting an equal blend of two independent forecasters
as well as the latest power price fixes, against power
price expectations applied in the 30 June 2017 valuation,
results in a decrease of £24.1m.
The discounted cash flow for each project applies the
contractually fixed power price applicable to each solar
PV asset until the end of the fixed period, and thereafter
the equal blend of two independent forecasters’ prices.
tax shield update
Following approval of the Finance Bill in November 2017,
the Company has increased the level of tax shielding by
including interest relief on a subset of its intercompany
loans. This change results in an average EBITDA shield
of c.18%, compared to the permitted limit of 30% of
EBITDA under the fixed ratio test of the corporate interest
restriction rules.
This is a change to prior valuations where the Company
had been factoring in only the tax shield from third party
loans held with Aviva Investors (c.£180m at portfolio
level) and Bayern Landesbank (c.£13m at project level), as
well as any amounts drawn under the Company’s short
term RCF (£24.3m as at 30 June 2018).
The shielding on these third party loans equates to c.14%
of EBITDA for 2019, and c.7% across the life of the loans.
Decrease in discount rate
The reduction of the WACC from 6.15% as 30 June 2017
to 5.65% as at 30 June 2018 reflects the continued
pricing tension within the UK solar market and results in
an increase of £23.1m to the 30 June 2018 valuation.
Balance of Portfolio Return
The balance of portfolio return is the result of the
unwinding of the discount rate over the period, as well
minor operational and financial assumption changes.
60
Solar Income Fund | report oF the InveStment advISer
other assumptions
Consistent with previous Directors’ Valuations, the valuation
assumes a terminal value of zero for all projects within
the portfolio c.25 years after their commencement of
operation.
There have been no material changes to assumptions
regarding the future performance or cost optimisation of
the portfolio when compared to the Directors’ Valuation of
30 June 2017.
Reconciliation of Directors’ Valuation to Balance sheet
On the basis of these key assumptions, the Board believes
there remains further potential for NAV enhancement
from adjustments to plant performance (PRs), subject
to operational delivery, as well as the potential impact
from extension of asset life (through increasing lease and
planning permissions).
The assumptions set out in this section will remain subject
to review by the Investment Adviser and the Board and may
give rise to a revision of valuation approach in future reports.
category
Directors’ Valuation
BSIFIL Working Capital
BSIFIL 3rd Party Debt
Financial Assets at Fair Value per Balance sheet
BALANCE AT YEAR END
30 June 2018 (£m)
30 June 2017 (£m)
30 June 2016 (£m)
604.2
18.8
(204.9)
418.1
573.4
15.9
(186.0)
403.3
483.7
2.4
(180.4)
305.7
Following the adoption of IFRS 10 and the Company’s
move to presenting its results on a non-consolidated
basis, rather than consolidating its immediate subsidiary
BSIFIL, the above table serves to aid the reader in
reconciling the Directors’ Valuation to the relevant line on
the Statement of Financial Position.
Directors’ Valuation sensitivities
Valuation sensitivities are set out in tabular form in Note
8 of the financial statements. The following diagram
reviews the sensitivity of the EV of the portfolio to the
key underlying assumptions within the discounted cash
flow valuation.
61
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 5. Financing
Aviva Investors long Term Facility
The LTF is provided by Aviva Investors in two tranches. The first is a £121.5m fixed rate long term facility and the
second is a £65.5m index-linked long term facility.
loan
amount
tenor
No Refinancing
Risk
cost
average
loan life at
drawdown
interest rate
exposure during
18 year tenor
Fixed
£121.5m
18 years and 3
months from
drawdown
Fully
amortising
over 18 years
sculpted to
cash flows
all in cost of
287.5bps
10.6
Zero
index-linked
£65.5m
18 years and 3
months from
drawdown
Fully
amortising
over 18 years
sculpted to
cash flows
RPi plus
70bps
11.3
linked to
RPi
Both tranches are fully amortising over 18 years,
providing natural alignment with the average remaining
life of the company’s regulated revenues, eliminating
refinancing risk as well as insulating the Company’s
equity cash flows from significant principal repayments
in the final years of the facility when the contribution of
revenue from power is increased.
During the period principal repayments of £7.4m,
combined with indexation increases of £2.2m, resulted
in a total outstanding balance to aviva as at 30 June
2018 of £180.6m (Fixed £114.9m, index linked, £65.7m).
the ltF is held by the company’s wholly-owned
subsidiary, BsiFil, and is the result of a deliberate
structuring approach to maximise both transparency and
portfolio management flexibility, whilst also delivering
the lowest cost of capital in our sector (as at 30 June
2018, the blended debt cost of the facilities was 3.1%).
thanks to the prudent leverage (34% of gaV as at 30
June 2018), on the Company’s base case projections the
average DscR remains close to 3 times, with the lowest
point of coverage over the entire tenor projected to be in
excess of 2.5 times.
62
RBS Revolving Credit Facility
the company’s RcF is provided by RBs to BsiFil and
has a current maturity date of september 2019 and a
constant margin of 2.0% over liBoR.
as at 30 June 2018 the company had drawn £24.3m,
out of £30m, from its RcF.
Both the new RcF and the ltF are secured upon a
selection of the company’s investment portfolio and
offer the ability to substitute reference assets.
Project level debt
in addition to the ltF and the three year RcF, the
Company also has a small project finance loan of
£12.5m secured against project Durrants (a 5 MWp FiT
plant located on the isle of Wight).
this facility was provided by Bayern landesbank and is
fully amortising with a final maturity of 2029.
Solar Income Fund | report oF the InveStment advISer 6. Market Developments
The UK’s total installed solar capacity reached 12.8GWp on 30 June 2018
according to the Department for Business, Energy & Industrial Strategy (BEIS)
latest data available, as of 26 July 2018.
Capacity accredited under the RO Scheme remains unchanged at 7.1GWp,
representing 56% of the total solar capacity in the UK, but only 2.4% of the
number of installations. This implies a high concentration of generation in
industrial scale sites. About 26% of all operational capacity are projects sized
50kWp to 5MWp and circa one third are larger than 5MWp but smaller than
25MWp.
Capacity accredited under the FiT was 4.8GWp as of 30 June 2018. This
equates to about 38% of total solar capacity and 86% of all installations.
The utility-scale primary PV market in the UK is nowhere to be seen since the
closure of the RO scheme in April 2017. Some 103MWp of capacity was added
to the grid in the first half of 2018, mainly across sub-utility scale new plants.
With 460MWp under management, the Company continues to maintain its
strong position within the UK solar market as one of the largest solar asset
owners by December 2017, operating about 5% of the country’s utility-scale
solar PV capacity.
The activity in the secondary market has slowed down considerably in the
first half of 2018. Approximately 420MWp has exchanged hands between the
beginning of January and the end of June 2018, compared to over 800MWp in
the same period in 2017.
The Company’s policy is that it will acquire only assets that are accretive to
shareholders’ returns.
galton ManoR (oPeRational MaRch 2018)
63
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 7. Regulatory Environment
update on Contracts for Differences
On 11 October 2017, the UK government announced new
CfD rounds to be scheduled in 2019. The total budget
of up to £557m in subsidies will again be restricted to
offshore wind and other “less mature technologies”. This
means there will be no new government support for solar
power until at least the end of the decade.
Subsidy free PV
The lack of supportive regulations means that any new
projects will have to be delivered on a subsidy free basis.
The economics of investment in solar PV continue to
improve as a result of falling equipment prices.
In continental Europe, solar power has already entered
the new era of unsubsidised project development.
Countries such as Spain, Portugal and Italy are taking the
lead and a few projects have already started operations.
In the first half of 2018, at least 12 such subsidy free
projects, totalling c.676MWp have been either built or
were under construction in the EU.
Figure 4: UK solar levelised cost vs power price (£/MWh)
In the UK, over 55MWp subsidy free solar PV capacity
has been added to the grid in the first half of 2018. Out of
this new capacity, 19MWp is sub-utility scale projects and
36MWp is utility scale. These are promising signs for the
future of subsidy free solar PV in the UK. As a result, the
Company will continue to monitor opportunities on the
primary market closely.
The figure below shows historical and projected levelised
cost of electricity (LCOE) for a UK solar project based on
data provided by a leading market intelligence service.
Plotted against historic and spot and forward prices in
the UK, which can act as a reference for potential PPA
prices, the Investment Adviser has observed a much
more rapid convergence of power prices to the UK
solar levelised cost of electricity compared to the same
projections in December 2017.
uk solaR leVeliseD
cost FoRcast Range
uk FoRWaRD anD PoWeR
PRice FoRecast
64
Solar Income Fund | report oF the InveStment advISer 8. Environmental, Social and Governance
in addition to this, we are looking to collaborate with
local wildlife trusts to further enhance the presence of
native local species in and around the solar parks.
as a solar energy infrastructure investor, the investment
adviser is conscious of the company’s environmental
and social impact. the production of renewable energy
equates to a significant amount of CO2 emissions saved,
representing a sustainable and ethical investment.
however, the investment adviser also considers its
impact on the biodiversity and the local community
surrounding its assets.
Environmental Impact
approximately 25 acres of land are required for every
5 MWp of installation, enough to power 1,612 homes
based on a medium typical Domestic consumption
Value (tDVc) of 3,100 kWh of electricity for every 5MWp
installed, this is an annual saving of 1,744 tonnes of co2.
Based on these figures, the portfolio capacity of 460.3MWp
as at 30 June 2018 will power the equivalent of 148,368
homes and save 160,517 tonnes of co2 in a year.
160,517 tonnes of co2
saved in a year
148,368 homes
powered for a year
Biodiversity
During the year the investment adviser completed a
benchmarking study of the biodiversity enhancement
measures implemented on the company’s large scale
assets. Results showed that across three major
measures; wildflower meadow creation, native tree and
hedgerow planting and creation of habitat to support
local wildlife (e.g. bat boxes, bird boxes, beehives) the
majority of plants had benefited from enhancements
in at least two of these areas and that all plants had
received enhancement in at least one area.
the investment adviser is working towards ensuring
all remaining plants benefit from biodiversity
enhancements covering at least two of the three major
measures listed above. it is important to note that these
proposed additional enhancement measures will be
based on the individual natural ecosystems and will be
using indigenous species.
Sheep Grazing
Many sites within the portfolio support sheep
grazing, demonstrating that solar farms can support
farming and are also providing a cost effective way of
managing grassland in solar farms while increasing
its conservation value. Where possible the investment
adviser facilitates the introduction of sheep grazing on
the existing and newly acquired assets.
Community Benefits
The Investment Adviser supports community benefit
schemes across its portfolio, assisting in the support
and development of the local communities surrounding
the asset sites. over the year to 30 June 2018, the
portfolio assets made donations of £169k to community
benefit schemes for local councils and parishes for
charitable, educational, environmental, amenity or
other appropriate purposes within the areas of the
community.
Bluefield Partners LLP
26 september 2018
65
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 66
Solar Income Fund | report oF the dIrectorS Report of the Directors
Investment objective
The Directors hereby submit the annual report and financial
statements of the company for the year ended 30 June 2018.
General Information
the company is a non-cellular company limited by shares
incorporated in guernsey under the law on 29 May 2013.
the company’s registration number is 56708, and it has been
registered and is regulated by the gFsc as a registered closed-
ended collective investment scheme. the company’s ordinary
Shares were admitted to the Premium Segment of the Official List
and to trading on the Main Market of the london stock exchange
following its iPo which completed on 12 July 2013.
Principal Activities
the principal activity of the company is to invest in a portfolio of
large scale uk based solar energy infrastructure assets.
The Company’s objective was to target a dividend of 7.00pps in
respect of its second financial year ended 30 June 2015, with
the intention of the dividend rising annually in line with uk RPi
thereafter. The dividend target for its fifth financial year ended 30
June 2018 is 7.43pps.
Business Review
a review of the company’s business and its likely future
development is provided in the chairman’s statement on pages 9
to 11, strategic Report on pages 17 to 29 and in the Report of the
investment adviser on pages 31 to 65.
listing Requirements
the company has complied with the applicable listing Rules
throughout the year.
67
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Results and Dividends
The results for the year are set out in the financial
statements on pages 89 to 92.
respect of the year ended 30 June 2017: 1.00pps), which
was paid on 18 May 2018 to shareholders on the register
as at 27 April 2018.
On 8 August 2017, the Board declared a third interim
dividend of £5,547,169, in respect of year ended 30 June
2017, equating to 1.50pps (third interim dividend in
respect of the year ended 30 June 2016: 1.50pps), which
was paid on 8 September 2017 to shareholders on the
register on 18 August 2017.
On 18 September 2017, the Board declared a fourth
interim dividend of £5,547,170, in respect of year ended
30 June 2017, equating 1.50pps (fourth interim dividend
in respect of the year ended 30 June 2016: 1.50pps),
which was paid on 27 October 2017 to shareholders on
the register on 29 September 2017.
On 8 January 2018, the Board declared a first interim
dividend of £6,656,603, in respect of year ended 30
June 2018, equating to 1.80pps (first interim dividend in
respect of the year ended 30 June 2017: 3.25pps), which
was paid on 9 February 2018 to shareholders on the
register on 19 January 2018.
On 19 April 2018, the Board declared a second interim
dividend of £6,657,904, in respect of year ended 30 June
2018, equating to 1.80pps (second interim dividend in
Share Capital
On 12 January 2018, the Company issued 72,249 new
Ordinary Shares to the Investment Adviser in respect of
their variable fee for the financial year ended 30 June
2017 at a price of 107.49pps.
The Company has one class of Ordinary Shares. The
issued nominal value of the Ordinary Shares represents
100% of the total issued nominal value of all share capital.
Under the Company’s Articles, on a show of hands, each
shareholder present in person or by proxy has the right to
one vote at general meetings. On a poll, each shareholder
is entitled to one vote for every share held.
Shareholders are entitled to all dividends paid by the
Company and, on a winding up, providing the Company
has satisfied all of its liabilities, the shareholders are
entitled to all of the surplus assets of the Company. The
Ordinary Shares have no right to fixed income.
Shareholdings of the Directors
The Directors of the Company and their beneficial
interests in the shares of the Company as at 30 June
2018 are detailed below:
ordinary shares of £1
each held 30 June 2018
% holding at
30 June 2018
ordinary shares of £1
each held 30 June 2017
% holding at
30 June 2017
0.09
0.12
0.04
0.12
446,713
367,506
137,839
441,764
0.12
0.10
0.04
0.12
Director
John Rennocks*
John Scott
Paul Le Page*
316,011
452,436
137,839
Laurence McNairn
441,764
*including shares held by Pcas
Directors’ Authority to Buy Back Shares
The Board believes that the most effective means of
minimising any discount to NAV which may arise on the
Company’s share price is to deliver strong, consistent
performance from the Company’s investment portfolio
in both absolute and relative terms. However, the Board
recognises that wider market conditions and other
considerations will affect the rating of the Ordinary
Shares in the short term and the Board may seek to
limit the level and volatility of any discount to NAV at
68
Solar Income Fund | report oF the dIrectorS which the Ordinary Shares may trade. The means by
which this might be done could include the Company
repurchasing its Ordinary Shares. Therefore, subject
to the requirements of the Listing Rules, the Law, the
Articles and other applicable legislation, the Company
may purchase Ordinary Shares in the market in order
to address any imbalance between the supply of and
demand for Ordinary Shares or to enhance the NAV of
Ordinary Shares.
In deciding whether to make any such purchases the
Board will have regard to what they believe to be in the
best interests of shareholders and to the applicable
Guernsey legal requirements which require the Board to
be satisfied on reasonable grounds that the Company will,
immediately after any such repurchase, satisfy a solvency
test prescribed by the Law and any other requirements in
its Articles. The making and timing of any buybacks will be
at the absolute discretion of the Board and not at the option
of the shareholders. Any such repurchases would only be
made through the market for cash at a discount to NAV.
On incorporation, the Company passed a written resolution
granting the Board general authority to purchase in the
market up to 14.99% of the Ordinary Shares in issue
immediately following admission. A resolution to renew
such authority was passed by shareholders at the AGM
held on 29 November 2017. Therefore, authority was
granted to the Board to purchase in the market up to
14.99% of the Ordinary Shares in issue immediately
following the AGM held on 29 November 2017 at a price
not exceeding the higher of (i) 5% above the average mid-
market values of Ordinary Shares for the five Business
Days before the purchase is made or (ii) the higher of the
last independent trade or the highest current independent
bid for Ordinary Shares. The Board intends to seek
renewal of this authority from the shareholders at the
next AGM scheduled to be held on 30 November 2018.
Pursuant to this authority, and subject to the Law and
the discretion of the Board, the Company may purchase
Ordinary Shares in the market on an ongoing basis with a
view to addressing any imbalance between the supply of,
and, demand for Ordinary Shares.
Ordinary Shares purchased by the Company may be
cancelled or held as treasury shares. The Company may
borrow and/or realise investments in order to finance
such Ordinary Share purchases.
The Company did not purchase any Ordinary Shares for
treasury or cancellation during the period.
Directors’ and Officers’ Liability Insurance
The Company maintains insurance in respect of directors’
and officers’ liability in relation to their acts on behalf of
the Company. Insurance is in place, having been renewed
on 12 July 2018.
Substantial Shareholdings
As at 20 September 2018, the Company had been
notified, in accordance with chapter 5 of the Disclosure
and Transparency Rules, of the following substantial
voting rights over 3% as shareholders of the Company.
shareholder
The Bank of New York (Nominees) Limited
BNY (OCS) Nominees Limited
shareholding
49,018,609
28,821,213
Pershing International Nominees Limited DSCLT Acct
20,413,007
Roy Nominees Limited 180571 Acct
Nortrust Nominees Limited TDS Acct
19,599,101
13,684,838
HSBC Global Custody Nominee (UK) Limited 921773 Acct
12,026,291
% holding
13.25
7.79
5.52
5.30
3.70
3.25
The Directors confirm that there are no securities in issue that carry special rights with regards to the control of
the Company. There have been no changes that have been notified to the Company with respect to the substantial
shareholdings since 30 June 2018.
69
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Independent Auditor
KPMG has been the Company’s external Auditor since the
Company’s incorporation. A resolution will be proposed
at the forthcoming AGM to re-appoint them as Auditor
and authorise the Directors to determine the Auditor’s
remuneration for the ensuing year.
vote will be but has no present indication that the vote
will not be positive given the Company’s performance,
feedback from shareholders and dividend payment
history. In making the going concern disclosure, the Board
has assumed that the Company will continue to operate
beyond the discontinuation vote in its present form.
The Audit Committee will periodically review the
appointment of KPMG and the Board recommends their
appointment. Further information on the work of the
Auditor is set out in the Report of the Audit Committee on
pages 81 and 84.
Articles of Incorporation
The Company’s Articles may be amended only by special
resolution of the shareholders.
Going Concern
At 30 June 2018, the Company had invested in 86 solar
plants, committing £545.6m to SPV investments. The
Company through its direct subsidiary, BSIFIL, has
access to a RCF which together with the net income
generated by the acquired projects, are expected to allow
the Company to meet its liquidity needs for the payment
of operational expenses, dividends and acquisition of new
solar assets. The Company, through BSIFIL, expects to
comply with the covenants of its long term loan and RCF.
The Board in its consideration of going concern has
reviewed comprehensive cash flow forecasts prepared by
the Investment Adviser, future projects in the pipeline and
the performance of the current solar plants in operation
and, at the time of approving the financial statements, has
a reasonable expectation that the Company has adequate
resources to continue in operational existence for the
foreseeable future and does not consider there to be any
threat to the going concern status of the Company.
An additional factor which the Board has considered is
the discontinuation vote which will be put to shareholders
at the AGM to be held in November 2018. The Board
cannot predict what the outcome of the discontinuation
The Board has concluded that it is appropriate to adopt
the going concern basis of accounting in preparing the
financial statements.
Internal controls review
Taking into account the information on principal risks and
uncertainties provided on pages 25 to 29 of the strategic
report and, the ongoing work of the Audit Committee in
monitoring the risk management and internal control
systems on behalf of the Board, the Directors;
• are satisfied that they have carried out a robust
assessment of the principal risks facing the Company,
including those that would threaten its business model,
future performance, solvency or liquidity; and
• have reviewed the effectiveness of the risk
management and internal control systems and no
significant failings or weaknesses were identified.
Fair, Balanced and understandable
The Board has considered whether the Annual Report is
fair, balanced and understandable, taking into account
the commentary and tone and whether it includes
the requisite information needed for shareholders to
assess the Company’s business model, performance
and strategy. In addition, the Board also questioned the
Investment Adviser on information included and excluded
from the Annual Report, and considered whether the
narrative at the front of the report is consistent with the
financial statements. As a result of this work, each of the
Board members considers that the Annual Report is fair,
balanced and understandable and includes the requisite
information needed for shareholders to assess the
Company’s business model, performance and strategy.
70
Solar Income Fund | report oF the dIrectorS
Financial Risks management Policies and
Procedures
Financial Risks Management Policies and Procedures are
disclosed in Note 15.
Principal Risk and uncertainties
Principal Risk and Uncertainties are discussed in the
Strategic Report on pages 25 to 29.
Subsequent Events
Post year end, on 31 July 2018, the Board declared a third
interim dividend of £6,657,904, in respect of year ended
30 June 2018, equating to 1.80pps (third interim dividend
in respect of the year ended 30 June 2017: 1.50pps),
which was paid on 31 August 2018 to shareholders on the
register on 10 August 2018.
Post year end, on 26 September 2018, the Board approved
a fourth interim dividend, in respect of year ended 30 June
2018, of 2.03pps (fourth interim dividend in respect of the
year ended 30 June 2017: 1.50pps), which will be payable
on 26 October 2018 with an associated ex-dividend date
of 4 October 2018.
Annual General meeting
The AGM of the Company will be held on 30 November
2018 at Lefebvre Place, Lefebvre Street, St Peter Port,
Guernsey. Details of the resolutions to be proposed at the
AGM, together with explanations, will appear in the Notice
of Meeting to be distributed to shareholders together with
this Annual Report.
Members of the Board will be in attendance at the AGM
and will be available to answer shareholder questions.
By order of the Board
John Rennocks
chairman
26 September 2018
71
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
Board of Directors
John Rennocks
(chairman)
John Rennocks was appointed as non-executive chairman on 12 June 2013 and is
chairman of utilico emerging Markets, an investor in infrastructure and related assets in
emerging markets and aFc energy plc, a developer and manufacturer of alkaline fuel cells.
he has broad experience in emerging energy sources, support services and manufacturing.
Mr Rennocks previously served as a non-executive director of greenko group plc, a
developer and operator of hydro and wind power plants in india, a non-executive deputy
chairman of inmarsat plc, a non-executive director of Foreign & colonial investment trust
plc, as well as several other public and private companies, and as executive Director-Finance
for smith & nephew plc, Powergen plc and British steel plc/corus group plc. Mr Rennocks
is a Fellow of the institute of chartered accountants of england and Wales.
John Scott
(senior independent Director)
John scott was appointed as a non-executive director of the company on 12 June
2013 and is a former investment banker who spent 20 years with lazard and is
currently a director of several investment trusts. Mr scott has been chairman of impax
environmental Markets plc since May 2014 and chairman of alpha insurance analysts
since april 2013. in May 2017, he was appointed chairman of Jupiter emerging and
Frontiers income trust. in June 2017, he retired as chairman of scottish Mortgage
investment trust Plc after 8 years and, until the company’s sale in March 2013, he was
Deputy chairman of endace ltd. of new Zealand. in november 2012, he retired after 12
years as a non-executive director of Miller insurance. he has an Ma in economics from
cambridge university and an MBa from inseaD. he is also a Fellow of the chartered
insurance institute.
Paul le Page
(chairman of the audit committee)
Paul le Page was appointed as a non-executive director of the company on 12 June
2013 and is a director of FRM investment Management guernsey limited, Man Fund
Management guernsey limited and Man group Japan limited which are subsidiaries of
Man group Plc. he is responsible for managing hedge fund portfolios, and is a director
of a number of Man group funds and companies. Mr le Page is currently a director of
highbridge Multi-strategy Fund limited and audit committee chairman for uk Mortgages
limited which are both lse listed investment companies. he was formerly a Director of,
and audit committee chairman for, cazenove absolute equity limited and thames River
Multi Hedge PCC Limited. Prior to joining FRM, he was employed by Collins Stewart Asset
Management where he was responsible for managing the firm’s hedge fund portfolios and
reviewing fund managers. He joined Collins Stewart in January 1999 where he completed
his MBA in July 1999. He qualified as a Chartered Electrical Engineer after a 12 year career
in industrial research and development, latterly as the Research and Development Director
for Dynex technologies (guernsey) limited, having graduated from university college
london in electrical and electronic engineering in 1987.
laurence mcNairn
laurence Mcnairn was appointed as a non-executive director of the company on 1
July 2013 and is a member of the institute of chartered accountants of scotland. he
is a consultant to estera international Fund Managers (guernsey) limited (previously
heritage international Fund Managers limited), the company’s administrator and
Secretary. He joined the Heritage Group in 2006 where, until late 2017, he was an
executive director and prior to this worked for the Baring Financial services group in
guernsey from 1990.
John Rennocks
John scott
Paul le Page
lauRence McnaiRn
72
Solar Income Fund | dIrectorS StatementS Directors’ Statement of
Responsibilities
The Directors are responsible for preparing the annual report and financial statements in
accordance with applicable law and regulations.
The Law requires the Directors to prepare financial statements for each financial
year. Under the Law, the Directors have elected to prepare the financial statements in
accordance with IFRS as adopted by the EU and the DTRs of the UK FCA. The Financial
Statements are required by the Law to give a true and fair view of the state of affairs of
the Company and of the profit or loss of the Company for that period. In preparing these
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
• assess the Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
The Directors confirm that they have complied with the above requirements in preparing
the financial statements.
The Directors are responsible for keeping proper accounting records, which disclose
with reasonable accuracy at any time, the financial position of the Company and enable
them to ensure that the financial statements comply with the Law. They are responsible
for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or
error, and have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
So far as each Director is aware, there is no relevant audit information of which the
Company’s Auditor is unaware, and each Director has taken all the steps that he
ought to have taken as a Director in order to make himself aware of any relevant audit
information and to establish that the Company’s Auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of
section 249 of the Law.
The Directors are responsible for the maintenance and integrity of the corporate and
financial information included on the Company’s website, and for the preparation
and dissemination of Financial Statements. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
By order of the Board
Paul Le Page
Director
26 September 2018
Laurence McNairn
Director
26 September 2018
73
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
Responsibility Statement of
the Directors in Respect of the
Annual Report
Each of the Directors, whose names are set out on page 72 in the Board of Directors
section of the annual report, confirms that to the best of their knowledge that:
• the financial statements, prepared in accordance with IFRS, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company;
• the Management Report (comprising Chairman’s Statement, Strategic Report, Report
of the Directors and Report of the Investment Adviser) includes a fair review of the
development and performance of the business and the position of the Company
together with a description of the principal risks and uncertainties faced on pages 25 to
29; and
• the Directors are responsible for preparing the annual report in accordance with
applicable law and regulations.
caPelanDs (2018)
Having taken advice from the Audit Committee, the Directors consider the annual report
and financial statements, taken as a whole, as fair, balanced and understandable and
that it provides the information necessary for shareholders to assess the Company’s
performance, business model and strategy.
By order of the Board
Paul Le Page
Director
26 September 2018
74
Laurence McNairn
Director
26 September 2018
Solar Income Fund | dIrectorS StatementS Corporate Governance Report
the Board recognises the importance of sound
corporate governance, particularly the requirements of
the aic code.
the company has been a member of the aic since 15
July 2013. the Board has considered the principles
and recommendations of the aic code by reference
to the aic guide. the aic code, as explained by the
aic guide, provides a ‘comply or explain’ code of
corporate governance and addresses all the principles
set out in the uk code as well as setting out additional
principles and recommendations on issues that are
of specific relevance to investment companies such
as the company. the Board considers that reporting
against the principles and recommendations of the aic
code, and by reference to the aic guide, provides better
information to shareholders.
the gFsc issued a guernsey code which came into
effect on 1 January 2012. the introduction to the
guernsey code states that “companies which report
against the uk code or the aic code of corporate
governance are also deemed to meet this code”.
therefore, aic members which are guernsey-domiciled
and which report against the aic code are not required
to report separately against the guernsey code.
the aic code and aic guide are available on the aic’s
website (www.theaic.co.uk). the uk code is available
from the FRc’s website (www.frc.org.uk). the guernsey
code is available from the gFsc’s website (www.gfsc.gg).
throughout the year ended 30 June 2018, the company
has complied with the recommendations of the aic
code and the provisions of the uk code, except to the
extent highlighted below.
Provision a.2.1 of the uk code requires a chief
executive to be appointed, however, as an investment
company, the company has no employees and therefore
has no requirement for a chief executive. as all the
Directors including the chairman are non-executive and
independent of the investment adviser, the company has
not established a nomination committee, remuneration
committee or a management engagement committee,
which is not in accordance with provisions B.2.1 and
D.2.1 of the uk code, and Principle 5 of the aic code
respectively. The Board is satisfied that as a whole, any
relevant issues can be properly considered by the Board.
the absence of an internal audit function is discussed in
the Report of the audit committee on page 81.
the Board monitors developments in corporate
governance to ensure the Board remains aligned with
best practice, especially with respect to the increased
focus on diversity. the Board acknowledges the
importance of diversity, including gender (as stated in
Principle 6 of the aic code), for the effective functioning
of the Board and commits to supporting diversity in
the boardroom. it is the Board’s ongoing aspiration
to have a well-diversified representation. The Board
also values diversity of business skills and experience
because directors with diverse skill sets, capabilities
and experience gained from different geographical
and professional backgrounds enhance the Board by
bringing a wide range of perspectives to the company.
The Board is satisfied with the current composition and
functioning of its members.
The Board
the Directors’ biographies are provided on page 72
which set out the range of investment, financial and
business skills and experience represented.
John Rennocks, John scott and Paul le Page were
appointed on 12 June 2013 and laurence Mcnairn
was appointed 1 July 2013. the Board appointed John
scott as senior independent Director effective from 10
December 2013 to fulfil any function that is deemed
inappropriate for the chairman to perform.
all Directors shall retire and submit themselves for re-
election at the next agM of the company, due to take place
on 30 november 2018. each Director retires and seeks
re-election at each subsequent agM of the company.
any Director who is elected or re-elected at that meeting
is treated as continuing in office throughout. If he is not
elected or re-elected, he shall retain office until the end of
the meeting or (if earlier) when a resolution is passed to
appoint someone in his place or when a resolution to elect
or re-elect the Director is put to the meeting and lost.
75
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements The Board is of the opinion that members should be
re-elected because they believe that they have the right
skills and experience to continue to serve the Company.
As recommended in Principle 4 of the AIC Code, the
Board has considered the need for a policy regarding
tenure of service. However, the Board believes that any
decisions regarding tenure should consider the need for
maintaining knowledge, experience and independence,
and to balance this against the need to periodically
refresh the Board in order to have the appropriate mix
of skills, experience, age, length of service and with due
regard for the benefits of diversity.
The Board meets at least four times a year in Guernsey
with unscheduled meetings held where required to
consider investment related or other issues. In addition,
there is regular contact between the Board, the
Investment Adviser and the Administrator. Furthermore,
the Board requires to be supplied in a timely manner with
information by the Investment Adviser, the Company
Secretary and other advisers in a form and of a quality
appropriate to enable it to discharge its duties.
The Company has adopted a share dealing code which
applies to the Board and any persons discharging
managerial responsibilities. This is to ensure compliance
by the Board, and relevant personnel of the Investment
Adviser, with the requirements of the recently updated EU
Market Abuse Regulations.
Directors’ Remuneration
The Chairman is entitled to an annual remuneration
of £56,900, with effect from 1 July 2017 (2017:
£55,000). The other Directors are entitled to an annual
remuneration of £34,200, with effect from 1 July 2017
(2017: £33,000). Paul Le Page receives an additional
annual fee of £5,700 (2017: £5,500) for acting as
Chairman of the Audit Committee. The Board will review
all Directors’ remuneration annually.
The remuneration earned by each Director in the past two
financial years was as follows:
Director
2018 (£)
2017 (£)
John Rennocks
56,900
55,164
John Scott
34,200
33,104
Paul Le Page
39,900
38,605
Laurence McNairn
34,200
33,090
The total Directors’ fees expense for the year amounted
to £165,200 (2017: £159,963). As disclosed in Note 16,
John Rennocks and John Scott are Directors of BSIFIL,
and have received remuneration in respect of BSIFIL.
All of the Directors are non-executive and each is
considered independent for the purposes of Chapter 15 of
the Listing Rules.
In accordance with Article 22 of AIFMD, the Company
shall disclose the total amount of remuneration for the
financial year, split into fixed and variable remuneration,
paid by the AIFM to its staff, and number of beneficiaries,
and, where relevant, carried interest paid by the AIF. As
the Company is categorised as an internally managed
Non-EU AIFM for the purposes of AIFMD, Directors’
remuneration reflects this amount.
Duties and Responsibilities
The Board has overall responsibility for optimising the
Company’s success by directing and supervising the
affairs of the business and meeting the appropriate
interests of shareholders and relevant stakeholders, while
enhancing the value of the Company and also ensuring
the protection of investors. A summary of the Board’s
responsibilities is as follows:
• statutory obligations and public disclosure;
• strategic matters and financial reporting;
• investment strategy and management;
• risk assessment and management including reporting,
compliance, governance, monitoring and control; and
• other matters having a material effect on the Company.
The Directors have access to the advice and services
of the Administrator, who is responsible to the Board
for ensuring that Board procedures are followed and
that it complies with the Law and applicable rules and
regulations of the GFSC and the LSE. Where necessary,
in carrying out their duties, the Directors may seek
independent professional advice and services at the
expense of the Company.
The Company maintains appropriate Directors’ and
Officers’ liability insurance in respect of legal action
against its Directors on an ongoing basis.
The Board’s responsibilities for the annual report are set
out in the Directors’ Responsibilities Statement on page
73. The Board is also responsible for issuing appropriate
half yearly financial reports and other price sensitive
public reports.
76
Solar Income Fund | corporate Governance report The attendance record of the Directors for the year to 30 June 2018 is set out below:
Director
John Rennocks
John Scott
Paul Le Page
Laurence McNairn
scheduled Board Meetings
(max 4)
ad-hoc Board Meetings
(max 4)
audit committee Meetings
(max 7)
4
3
4
4
-
-
4
4
6
5
7
7
Ten ad-hoc Board Meetings were held during the period to
formally review and authorise each investment made by
the Company, to discuss the placing of Ordinary Shares
and to consider interim dividends, amongst other items.
It should be noted that Mr Rennocks and Mr Scott are
ordinarily resident in the United Kingdom and as a result
are not permitted to participate in Board Meetings from
the United Kingdom in accordance with the Article 29.2
of the Company’s Articles of Incorporation. Mr Rennocks
and Mr Scott have participated in the majority of formally
scheduled meetings in Guernsey. It should be noted that
Mr Rennocks and Mr Scott actively communicate their
views on any matters to be discussed at ad-hoc Board
Meetings to their fellow Directors, Mr Le Page and Mr
McNairn, ahead of such meetings.
The Board believes that, as a whole, it comprises an
appropriate balance of skills, experience, age, knowledge
and length of service. The Board also believes that
diversity of experience and approach, including
gender diversity, amongst Board members is of great
importance and it is the Company’s policy to give careful
consideration to issues of Board balance when making
new appointments. With any new Director appointment
to the Board, induction training will be provided by an
independent service provider at the expense of the
Company.
Performance evaluation
In accordance with Principle 7 of the AIC Code, the
Board is required to undertake a formal and rigorous
evaluation of its performance on an annual basis. A
formal evaluation of the performance of the Board as
a whole, and the Chairman, took place in early 2018.
The evaluation is undertaken utilising self-appraisal
questionnaires and is followed by a detailed discussion
of the outcomes which includes an assessment of the
Directors’ continued independence.
Committees of the Board
audit committee
The Board established an Audit Committee in 2013. It
is chaired by Paul Le Page and at the date of this report
comprised all of the Directors set out on page 3. The
report of the role and activities of this committee and its
relationship with the Auditor is contained in the Report of
the Audit Committee on pages 81 to 84. The Committee
operates within clearly defined terms of reference which are
available on the Company’s website (www.bluefieldsif.com).
Internal Control and Financial Reporting
The Board acknowledges that it is responsible for
establishing and maintaining the Company’s system of
internal control and reviewing its effectiveness. Internal
control systems are designed to manage rather than
eliminate the failure to achieve business objectives and
can only provide reasonable but not absolute assurance
against material misstatements or loss. The Board
reviews all controls including operations, compliance and
risk management. The key procedures which have been
established to provide internal control are:
• the Board has delegated the day–to-day operations
of the Company to the Administrator and Investment
Adviser; however, it remains accountable for all of the
functions it delegates;
• the Board clearly defines the duties and responsibilities
of the Company’s agents and advisers and
appointments are made by the Board after due and
careful consideration. The Board monitors the ongoing
performance of such agents and advisers;
• the Board monitors the actions of the Investment
Adviser at regular Board meetings and is also given
frequent updates on developments arising from the
operations and strategic direction of the underlying
investee companies; and
77
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements • the Administrator provides administration and
company secretarial services to the Company. The
Administrator maintains a system of internal control on
which it reports to the Board.
The Board has reviewed the need for an internal
audit function and has decided that the systems
and procedures employed by the Administrator and
Investment Adviser, including their own internal controls
and procedures, provide sufficient assurance that a
sound system of risk management and internal control,
which safeguards shareholders’ investment and the
Company’s assets, is maintained. An internal audit
function specific to the Company is therefore considered
unnecessary, as explained on page 83.
The systems of control referred to above are designed
to ensure effectiveness and efficient operation, internal
control and compliance with laws and regulations. In
establishing the systems of internal control, regard is paid
to the materiality of relevant risks, the likelihood of costs
being incurred and costs of control. It follows therefore
that the systems of internal control can only provide
reasonable but not absolute assurance against the risk of
material misstatement or loss.
The Company has delegated the provision of all services
to external service providers whose work is overseen
by the Board at its quarterly meetings. Each year a
detailed review of performance pursuant to their terms of
engagement will be undertaken by the Board.
Investment Advisory Agreement
In accordance with Listing Rule 15.6.2(2)R, the Board
formally appraises the performance and resources of the
Investment Adviser.
The Investment Adviser is led by its managing partners,
James Armstrong, Mike Rand and Giovanni Terranova, who
founded the Bluefield business in 2009 following their prior
work together in European solar energy. The Investment
Adviser’s team have a combined record, prior to and
including Bluefield Partners LLP, of investing more than £1
billion in solar PV projects. The management team have
been involved in over £1.5 billion of solar PV transactions
in the UK and Europe since 2008. The Investment Adviser’s
non-executive team includes William Doughty, the founding
CEO of Semperian; Dr. Anthony Williams, the former chair
of the Risk Committee for the Fixed Income, Currencies &
Commodities Division, and Partner at Goldman Sachs & Co;
and Jon Moulton, the current chairman of Better Capital and
former managing partner and founder of Alchemy Partners.
In view of the resources of the Investment Adviser and
the Company’s investment and operational performance
for the period, in the opinion of the Directors the
continuing appointment of the Investment Adviser is in
the interests of the shareholders as a whole.
Dealings with Shareholders
The Board welcomes shareholders’ views and
places great importance on communication with its
shareholders. The Company’s AGM will provide a forum
for shareholders to meet and discuss issues with the
Directors of the Company. Members of the Board will also
be available to meet with shareholders at other times, if
required. In addition, the Company maintains a website
which contains comprehensive information, including
regulatory announcements, share price information,
financial reports, investment objectives and strategy and
information on the Board.
Principal Risks and uncertainties
Each Director is aware of the risks inherent in the
Company’s business and understands the importance
of identifying, evaluating and monitoring these risks. The
Board has adopted procedures and controls that enable
it to manage these risks within acceptable limits and to
meet all of its legal and regulatory obligations.
The Board considers the process for identifying,
evaluating and managing any significant risks faced by
the Company on an ongoing basis and these risks are
reported and discussed at Board meetings. It ensures
that effective controls are in place to mitigate these
risks and that a satisfactory compliance regime exists
to ensure all applicable local and international laws and
regulations are upheld.
The Company’s principal risks and uncertainties are
discussed in detail on pages 25 to 29 of the Strategic
Report. The Company’s financial instrument risks are
discussed in Note 15 to the financial statements.
The Company’s principal risk factors are fully disclosed in
the Company’s Prospectus, available on the Company’s
website (www.bluefieldsif.com) and should be reviewed
by shareholders.
Changes in Regulation
The Board monitors and responds to changes in
regulation as they affect the Company and its policies.
A number of changes to regulation occurred during the
period.
78
Solar Income Fund | corporate Governance report AIFmD
AIFMD was introduced on 22 July 2014 in order to
harmonise the regulation of AIFMs and imposes
obligations on managers who manage or distribute AIFs
in the EU or who market shares in such funds to EU
investors. After seeking professional regulatory and legal
advice, the Company was established in Guernsey as
a self-managed Non-EU AIF. Additionally, the Company
has taken advice on and implemented sufficient and
appropriate policies and procedures that enable the
Board to fulfil its role in relation to portfolio management
and the management of risk. The Company is therefore
categorised as an internally managed Non-EU AIFM for
the purposes of AIFMD and as such neither it nor the
Investment Adviser is required to seek authorisation
under AIFMD.
The marketing of shares in AIFs that are established
outside the EU (such as the Company) to investors
in an EU member state, is prohibited unless certain
conditions are met. Certain of these conditions are
outside the Company’s control as they are dependent on
the regulators of the relevant third country (in this case
Guernsey) and the relevant EU member state entering
into regulatory co-operation agreements with one
another.
Currently, the NPPR provides a mechanism to market
Non-EU AIFs that are not allowed to be marketed
under AIFMD domestic marketing regimes. The Board
is utilising NPPR in order to market the Company,
specifically in the UK pursuant to Regulations 57, 58
and 59 of the UK Alternative Investment Fund Managers
Regulations 2013. The Board is working with the
Company’s advisers to ensure the necessary conditions
are met, and all required notices and disclosures are
made under NPPR. Eligible AIFMs will be able to continue
to use NPPR for the time being.
Any regulatory changes arising from implementation of
AIFMD (or otherwise) that limit the Company’s ability
to market future issues of its shares may materially
adversely affect the Company’s ability to carry out
its investment policy successfully and to achieve its
investment objectives, which in turn may adversely affect
the Company’s business, financial condition, results of
operations, NAV and/or the market price of the Ordinary
Shares.
aeRial VieW oF hoBack (2018)
FATCA and CRS
The Company is registered under FATCA and continues
to comply with FATCA and the Common Reporting
Standard’s requirements to the extent relevant to the
Company.
PRIIPs
The Company is in compliance with the requirements
under PRIIPs to publish a KID. The KID is available on the
Company’s website.
NmPI
On 1 January 2014 FCA rules relating to the restrictions
on the retail distribution of unregulated collective
investment schemes and close substitutes came into
effect.
The Board has been advised that the Company would
qualify as an investment trust if it was resident in the
UK, and therefore the Board believes that the retail
distribution of its shares should be unaffected by the
changes. It is the Board’s intention that the Company
will make all reasonable efforts to conduct its affairs
in such a manner that its shares can be recommended
by independent financial advisers to UK retail investors
in accordance with the FCA’s rules relating to non-
mainstream investment products.
By order of the Board
Paul Le Page
Director
26 September 2018
The Board, in conjunction with the Company’s advisers,
will continue to monitor the development of AIFMD and
its impact on the Company.
Laurence McNairn
Director
26 September 2018
79
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements
80
Solar Income Fund | report oF the audIt commIttee Report of the Audit
Committee
the audit committee, chaired by Paul le Page and comprising all
of the Directors set out on page 3, operates within clearly defined
terms of reference (which are available from the company’s
website, www.bluefieldsif.com) and includes all matters indicated
by Rule 7.1 of the uk Fca’s DtRs and the aic code. appointments
to the audit committee shall be for a period of up to three years,
extendable for one further three year period. it is also the formal
forum through which the auditor will report to the Board of
Directors.
the audit committee meets no less than twice a year, and at such
other times as the audit committee shall require, and meets the
auditor at least twice a year. any member of the audit committee
may request that a meeting be convened by the company
secretary. the auditor may request that a meeting be convened if
they deem it necessary. any Director who is not a member of the
audit committee, the administrator and representatives of the
investment adviser shall be invited to attend the meetings as the
Directors deem appropriate.
the Board has taken note of the requirement that at least one
member of the committee should have recent and relevant
financial experience and is satisfied that the Committee is properly
constituted in that respect, with two of its members who are
chartered accountants and two members with an investment
background.
81
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Responsibilities
The main duties of the Audit Committee are:
• monitoring the integrity of the financial statements of
the Company and any formal announcements relating
to the Company’s financial performance and reviewing
significant financial reporting judgements contained in
them;
• reporting to the Board on the appropriateness of the
Board’s accounting policies and practices including
critical judgement areas;
• reviewing the valuation of the Company’s investments
prepared by the Investment Adviser or independent
valuation agents, and making a recommendation to the
Board on the valuation of the Company’s investments;
• meeting regularly with the Auditor to review their
proposed audit plan and the subsequent audit report
and assess the effectiveness of the audit process and
the levels of fees paid in respect of both audit and non-
audit work;
• making recommendations to the Board in relation to
the appointment, re-appointment or removal of the
Auditor and approving their remuneration and the
terms of their engagement;
• monitoring and reviewing annually the Auditor’s
independence, objectivity, expertise, resources,
qualification and non-audit work;
• considering annually whether there is a need for the
Company to have its own internal audit function;
• keeping under review the effectiveness of the accounting
and internal control systems of the Company;
Financial Reporting
The primary role of the Audit Committee in relation to
the financial reporting is to review with the Administrator,
Investment Adviser and the Auditor the appropriateness
of the interim and annual financial statements,
concentrating on, amongst other matters:
• the quality and acceptability of accounting policies and
practices;
• the clarity of the disclosures and compliance with
financial reporting standards and relevant financial and
governance reporting requirements;
• material areas in which significant judgements have been
applied or there has been discussion with the Auditor;
• whether the annual report and financial statements,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Company’s performance,
business model and strategy; and
• any correspondence from regulators in relation to the
Company’s financial reporting.
To aid its review, the Audit Committee considers reports
from the Administrator and Investment Adviser and also
reports from the Auditor on the outcomes of their half
year review and annual audit. Like the Auditor, the Audit
Committee seeks to display the necessary professional
scepticism their role requires.
meetings
The Committee has met formally on 7 occasions in the
year covered by this report. The matters discussed at
those meetings were:
• reviewing and considering the UK Code, the AIC Code,
of the Audit Committee for approval by the Board;
• consideration and agreement of the terms of reference
the FRC Guidance on Audit Committees and the
Company’s institutional investors’ commitment to the
UK Stewardship code; and
• review of the Company’s risk matrix;
• review of the accounting policies and format of the
• reviewing the risks facing the Company and monitoring
financial statements;
the risk matrix.
The Audit Committee is required to report formally to the
Board on its findings after each meeting on all matters
within its duties and responsibilities.
The Auditor is invited to attend the Audit Committee
meetings as the Board deems appropriate and at which
they have the opportunity to meet with the Committee
without representatives of the Investment Adviser or the
Administrator being present at least once per year.
• review and approval of the audit plan of the Auditor
and timetable for the interim and annual financial
statements;
• review of the valuation policy and methodology of the
Company’s investments applied in the interim and
annual financial statements;
• detailed review of the interim and annual report and
financial statements;
82
Solar Income Fund | report oF the audIt commIttee • assessment of the effectiveness of the external audit
process as described below; and
• a review of the process used to determine the viability
of the Company.
The Audit Committee chairman or other members of the
Audit Committee appointed for the purpose, shall attend
each AGM of the Company, prepared to respond to any
shareholder questions on the Audit Committee’s activities.
Primary Area of Judgement
The Audit Committee determined that the key risk of
misstatement of the Company’s financial statements
is the fair value of the SPV investments held by the
Company’s subsidiary, BSIFIL, in the context of the
high degree of judgement involved in the assumptions
and estimates underlying the discounted cash flow
calculations.
As outlined in Note 8 of the financial statements, the fair
value of the BSIFIL’s investments (Directors’ Valuation) as
at 30 June 2018 was £604,235,581 (2017: £573,361,486).
Market quotations are not available for these investments
so their valuation is undertaken using a discounted cash
flow methodology. The Directors have also considered
transactions in similar assets and used these to infer the
discount rate. Significant inputs such as the discount
rate, rate of inflation and the amount of electricity the
solar assets are expected to produce are subjective and
include certain assumptions. As a result, this requires a
series of judgements to be made as explained in Note 3 in
the financial statements.
The valuation of the BSIFIL’s portfolio of solar assets
(Directors’ Valuation) as at 30 June 2018 has been
determined by the Board based on information provided
by the Investment Adviser and an independent
benchmarking exercise.
The Audit Committee also reviewed and suggested
factors that could impact BSIFIL’s portfolio valuation
and its related sensitivities to the carrying value of
the investments as required in accordance with IPEV
Valuation Guidelines.
Risk management
The Company’s risk assessment process and the way
in which significant business risks are managed is a
key area of focus for the Committee. The work of the
Audit Committee is driven primarily by the Company’s
assessment of its principal risks and uncertainties as
set out on pages 25 to 29 of the Strategic Report, and
it receives reports from the Investment Adviser and
Administrator on the Company’s risk evaluation process
and reviews changes to significant risks identified.
Internal Audit
The Audit Committee considers at least once a year
whether or not there is a need for an internal audit
function. Currently it does not consider there to be a
need for an internal audit function, given that there are no
employees in the Company and all outsourced functions
are with parties who have their own internal controls and
procedures.
External Audit
KPMG has been the Company’s external Auditor since the
Company’s inception.
The Auditor is required to rotate the audit partner every
five years. The current partner is in his second year of
tenure. There are no contractual obligations restricting
the choice of external auditor and the Company will
consider putting the audit services contract out to
tender at least every ten years. In line with the FRC’s
recommendations on audit tendering, this will be
considered further when the audit partner rotates every
five years. Under the Companies Law, the reappointment
of the external Auditor is subject to shareholder approval
at the AGM.
The objectivity of the Auditor is reviewed by the Audit
Committee which also reviews the terms under which
the external Auditor may be appointed to perform
non-audit services. The Audit Committee reviews the
scope and results of the audit, its cost effectiveness
and the independence and objectivity of the Auditor,
with particular regard to any non-audit work that the
Auditor may undertake. In order to safeguard Auditor
independence and objectivity, the Audit Committee
ensures that any other advisory and/or consulting
services provided by the external Auditor do not conflict
with its statutory audit responsibilities. Advisory and/or
consulting services will generally only cover reviews of
interim financial statements, tax compliance and capital
raising work. Any non-audit services conducted by the
Auditor outside of these areas will require the consent of
the Audit Committee before being initiated.
The external Auditor may not undertake any work
for the Company in respect of the following matters:
preparation of the financial statements; provision of
investment advice; taking management decisions;
advocacy work in adversarial situations; provision of tax
and tax compliance services; promotion of, dealing in, or
underwriting the Company’s shares; provision of payroll
services; design or implementation of internal control
or risk management or financial information technology
systems, provision of valuation services, provision of
services related to internal audit; and provision of certain
human resources functions.
83
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements aeRial VieW oF RoMsey (2018)
The Committee reviews the scope and results of the
audit, its cost effectiveness and the independence and
objectivity of the Auditor, with particular regard to the
level of non-audit fees. During the year, KPMG was also
engaged to provide a review of the Company’s interim
information. Total fees paid amounted to £107,542 for the
year ended 30 June 2018 (30 June 2017: £114,096) of
which £91,500 related to audit and audit related services
to the Company (30 June 2017: £95,466) and £16,042 in
respect of non-audit services (30 June 2017: £18,630).
Notwithstanding such services, which have arisen
in connection with review of the interim financial
statements the Audit Committee considers KPMG to be
independent of the Company and that the provision of
such non-audit services is not a threat to the objectivity
and independence of the conduct of the audit as
appropriate safeguards are in place.
To fulfil its responsibility regarding the independence of
the Auditor, the Audit Committee has considered:
• discussions with or reports from the Auditor describing
its arrangements to identify, report and manage any
conflicts of interest; and
• the extent of non-audit services provided by the Auditor
and arrangements for ensuring the independence and
objectivity and robustness and perceptiveness of the
Auditor and their handling of key accounting and audit
judgements.
• feedback from other service providers evaluating the
performance of the audit team;
• arrangements for ensuring independence and
objectivity; and
• robustness of the Auditor in handling key accounting
and audit judgements.
In addition, during the year, the FRC’s Audit Quality
Review Team reviewed KPMG’s audit of the Company’s
30 June 2017 audit as part of their annual inspection of
audit firms. This reviewed KPMG’s work performed in
connection with the valuation of investments, revenue
recognition, the quality of communications with the Audit
Committee and certain matters relating to quality control
and completion. The Audit Committee received and
reviewed the final report from the FRC which indicated
that there were no significant areas of concern. Feedback
received from the FRC has been discussed with KPMG as
part of the audit planning process for 2018.
The Audit Committee is satisfied with KPMG’s
effectiveness and independence as Auditor, having
considered the degree of diligence and professional
scepticism demonstrated by them. Having carried out the
review described above and having satisfied itself that
the Auditor remains independent and effective, the Audit
Committee has recommended to the Board that KPMG be
reappointed as Auditor for the year ending 30 June 2019.
To assess the effectiveness of the Auditor, the Committee
has reviewed:
The Chairman of the Audit Committee will be available at
the AGM to answer any questions about the work of the
Committee.
• the Auditor’s fulfilment of the agreed audit plan and
On behalf of the Audit Committee
variations from it;
• discussions or reports highlighting the major issues
that arose during the course of the audit;
Paul Le Page
chairman of the audit committee
26 September 2018
84
Solar Income Fund | report oF the audIt commIttee
Independant Auditor’s Report
Independent Auditor’s Report to the members of Bluefield Solar Income
Fund limited
Our opinion is unmodified
We have audited the financial statements of Bluefield Solar Income Fund Limited (the
“Company”), which comprise the statement of financial position as at 30 June 2018,
the statements of comprehensive income, changes in equity and cash flows for the
year then ended, and notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying financial statements:
• give a true and fair view of the financial position of the Company as at 30 June 2018,
and of the Company’s financial performance and the Company’s cash flows for the
year then ended;
• are prepared in accordance with international Financial Reporting standards (iFRs) as
adopted by the eu; and
• comply with the companies (guernsey) law, 2008.
Basis for opinion
We conducted our audit in accordance with international standards on auditing (uk)
(isas (uk)) and applicable law. our responsibilities are described below. We have
fulfilled our ethical responsibilities under, and are independent of the Company in
accordance with, uk ethical requirements including FRc ethical standards as applied
to listed entities. We believe that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion.
key audit Matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most
significance in the audit of the financial statements and include the most significant
assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. in arriving at our audit opinion above, the key audit matters
were as follows (unchanged from 2017):
Valuation of financial assets held at fair value through profit or loss
£418,098,105
(2017: £403,339,287)
Refer to page 83 of the Report of the Audit Committee, note 2(j) accounting policy and
note 8 disclosures
85
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements THE RISK
OUR RESPONSE
BASIS:
The Company’s investment in its immediate subsidiary
is carried at fair value through profit or loss and
represents a significant proportion of the Company’s
net assets (2017: 99.8%; 2016: 98.7%). The fair value of
the immediate subsidiary, which reflects its net asset
value, predominantly comprises of the fair value of
the special purpose vehicle solar project investments
(“SPVs”) and the immediate subsidiary level debt.
£604,235,581 of the fair value (see note 8) comprises
of the SPVs for which there is no liquid market.
The Company measures its SPVs at fair value based on
unleveraged cash flows of the underlying solar projects
discounted using a portfolio weighted average cost of
capital (“WACC”).
The valuations are performed using forecast cash
flows generated by each solar project over the term
of the site lease/planning consent and by selecting
Key Assumptions including the base energy yield
assumptions, electricity price forecasts, operating
costs, irradiation, leverage and macroeconomic
assumptions such as inflation and tax rates
(collectively “Key Assumptions”).
In determining the portfolio WACC, the relevant long
term government bond yields, cost of debt, specific
infrastructure asset risk and evidence of recent market
transactions are considered.
The valuations are adjusted for other specific assets
and liabilities of the SPVs.
RISk:
The valuation risk represents both a risk of fraud
and error associated with estimating the timing
and amounts of long term forecasted cash flows
alongside the selection and application of appropriate
assumptions. Changes to long term forecasted cash
flows and/or the selection and application of different
assumptions may result in a materially different
valuation of financial assets held at fair value through
profit or loss.
Our audit procedures included, but were not limited to:
COnTROL evALuATIOn:
We met with the Investment Advisor and Directors
of the Company to observe the Board’s challenge
and approval process of the Key Assumptions made
within the valuation model which were prepared by
the Investment Advisor.
MODeL InPuTS:
We assessed the key project specific inputs into the
cash flow projections, focusing on the significant
changes for existing projects since the previous
reporting period or from the date of acquisition
for newly acquired projects, to corroborate key
contracted revenues and costs with reference to
underlying contracts, agreements and management
information.
MODeL InTeGRITy:
For a selection of data routines, we tested the
valuation model for integrity, logic and for material
formula errors.
BENCHmARKING THE VAluATIoN
ASSuMPTIOnS:
We challenged, with the support of our internal
valuation specialist, the WACC and Key Assumptions
applied in the valuation by benchmarking these to
independent market data, including recent market
transactions, and using our specialist’s experience in
valuing similar investments.
We further assessed the reasonableness of the
WACC by comparing this to that used by comparator
companies.
ASSeSSInG TRAnSPARenCy:
We have considered the adequacy of the Company’s
disclosures made in accordance with IFRS 13 (see
note 8) including the use of estimates and judgments
in arriving at fair value. We assessed whether the
disclosures around the sensitivities to changes in
Key Assumptions reflected the risks inherent in the
valuation of the SPVs.
86
Solar Income Fund | Independant audItor’S report
our application of materiality and an overview of
the scope of our audit
Materiality for the financial statements as a whole was
set at £12,470,000, determined with reference to a
benchmark of Net Assets of £418,995,484, of which it
represents approximately 3% (2017: 3%).
We reported to the Audit Committee any corrected
or uncorrected identified misstatements exceeding
£623,000, in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the
materiality level specified above, which has informed our
identification of significant risks of material misstatement
and the associated audit procedures performed in those
areas as detailed above.
We have nothing to report on going concern
We are required to report to you if we have anything
material to add or draw attention to in relation to
the directors’ statement in note 2 (b) to the financial
statements on the use of the going concern basis of
accounting with no material uncertainties that may cast
significant doubt over the Company’s use of that basis
for a period of at least twelve months from the date of
approval of the financial statements. We have nothing to
report in this respect
We have nothing to report on the other
Information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and we do not express an
audit opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether, based on our financial
statements audit work, the information therein is
materially misstated or inconsistent with the financial
statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in
the other information.
Disclosures of principal risks and longer term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or
draw attention to in relation to:
• the directors’ confirmation within the Directors’ viability
statement (page 29) that they have carried out a robust
assessment of the principal risks facing the Company,
including those that would threaten its business model,
future performance, solvency or liquidity;
• the Principal Risks disclosures describing these
risks and explaining how they are being managed or
mitigated; and
• the directors’ explanation in the Directors’ viability
statement (page 29) as to how they have assessed
the prospects of the Company, over what period they
have done so and why they consider that period to be
appropriate, and their statement as to whether they
have a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment,
including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider
that the Annual Report and financial statements taken
as a whole is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy; or
• the section of the Annual Report describing the work
of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
We are required to report to you if the Corporate
Governance Statement does not properly disclose a
departure from the eleven provisions of the 2016 UK
Corporate Governance Code specified by the Listing
Rules for our review.
We have nothing to report to you in these respects.
We have nothing to report on other matters on
which we are required to report by exception
We have nothing to report in respect of the following
matters where the Companies (Guernsey) Law, 2008
requires us to report to you if, in our opinion:
• the Company has not kept proper accounting records;
or
• the financial statements are not in agreement with the
accounting records; or
• we have not received all the information and
explanations, which to the best of our knowledge and
belief are necessary for the purpose of our audit.
87
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements claPton (2018)
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 74, the Directors
are responsible for: the preparation of the financial statements including
being satisfied that they give a true and fair view; such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error; assessing
the Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of
the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by persons
other than the Company’s members as a body
This report is made solely to the Company’s members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members,
as a body, for our audit work, for this report, or for the opinions we have formed.
Rachid Frihmat
For and on behalf of kPMg channel islands limited
chartered accountants and Recognised auditors, guernsey
26 September 2018
88
Solar Income Fund | Independant audItor’S report Statement of Financial Position
As at 30 June 2018
Assets
non-cuRRent assets
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
note
Financial assets held at fair value through profit or loss
8
418,098,105
403,339,287
Total non-current assets
418,098,105
403,339,287
cuRRent assets
trade and other receivables
cash and cash equivalents
Total current assets
TOTAL ASSETS
Liabilities
cuRRent liaBilities
9
10
753,237
501,751
625,717
4,980,341
1,254,988
5,606,058
419,353,093
408,945,345
other payables and accrued expenses
11
357,609
Total current liabilities
357,609
337,090
337,090
TOTAL LIABILITIES
NET ASSETS
Equity
share capital
other reserves
Retained earnings
TOTAL EQUITY
Shares
357,609
337,090
418,995,484
408,608,255
368,012,390
367,934,730
-
77,660
50,983,094
40,595,865
13
418,995,484
408,608,255
ordinary shares in issue at year end
net asset value per ordinary share (pence)
13
7
369,883,530
369,811,281
113.28
110.49
These financial statements were approved and authorised for issue by the Board of Directors on 26 September 2018
and signed on their behalf by:
Paul Le Page
Director
26 september 2018
Laurence McNairn
Director
26 september 2018
The accompanying notes form an integral part of these consolidated financial statements.
89
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Statement of Comprehensive Income
For the year ended 30 June 2018
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
note
Income
investment income
4
702,603
interest income from cash and cash equivalents
2,600
563,288
15,243
Net gains on financial assets held at fair value through
profit or loss
Operating income
Expenses
administrative expenses
Operating expenses
705,203
578,531
35,291,437
64,657,803
35,996,640
65,236,334
1,200,565
1,190,616
1,200,565
1,190,616
8
5
Operating profit
34,796,075
64,045,718
Profit and total comprehensive income for the year
34,796,075
64,045,718
earnings per share:
Basic and diluted (pence)
12
9.41
18.26
all items within the above statement have been derived from continuing activities. the accompanying notes form an
integral part of these financial statements.
aeRial VieW oF hill FaRM (2018)
90
Solar Income Fund | Statement oF FInancIal PoSItIon Statement of Changes in Equity
For the year ended 30 June 2018
note
number of
ordinary shares
share capital
other reserves
Retained
earnings
total equity
Shareholders’ equity at
1 July 2017
SHARES ISSUED DURING THE PERIOD:
369,811,281
367,934,730
77,660
40,595,865
408,608,255
Ordinary Shares issued in
settlement of variable fee
13
72,249
77,660
(77,660)
-
-
Dividends paid
13,14
Total comprehensive
income for the period
Shareholders' equity at
30 June 2018
-
-
-
-
369,883,530
368,012,390
-
-
-
(24,408,846)
(24,408,846)
34,796,075
34,796,075
50,983,094
418,995,484
For the year ended 30 June 2017
note
number of
ordinary shares
share capital
other reserves
Retained
earnings
total equity
Shareholders’ equity at
1 July 2016
SHARES ISSUED DURING THE PERIOD:
309,631,765
307,985,091
167,201
(399,754)
307,752,538
Ordinary Shares issued via
placing
Shares issue costs
Ordinary Shares issued in
settlement of variable fee
Ordinary shares to be issued
in settlement of variable fee
13
13
13
Dividends paid
13,14
Total comprehensive
income for the period
Shareholders' equity at
30 June 2017
13
60,000,000
60,600,000
-
(817,562)
-
-
179,516
167,201
(167,201)
-
-
-
-
-
-
77,660
-
-
-
-
-
-
60,600,000
(817,562)
-
77,660
(23,050,099)
(23,050,099)
64,045,718
64,045,718
369,811,281
367,934,730
77,660
40,595,865
408,608,255
The accompanying notes form an integral part of these financial statements.
91
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Statement of Cash Flows
For the year ended 30 June 2018
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
note
cash FloWs FRoM oPeRating actiVities
Total comprehensive income for the year
34,796,075
64,045,718
Adjustments:
Increase in trade and other receivables
(127,520)
(84,328)
Increase in other payables and accrued expenses
Movement in other reserves relating to
Investment Adviser shares
Net gains on financial assets held at fair value through
profit or loss
Net cash used in operating activities
cash FloWs FRoM inVesting actiVities
Purchase of financial assets held at fair value through
profit or loss
Receipts from investments held at fair value through
profit or loss
Net cash generated from / (used in) investing activities
activities
cash FloW FRoM Financing actiVities
Proceeds from issue of Ordinary Shares
Issue costs paid
Dividends paid
net cash (used in) / generated from financing activities
activities
13
8
8
8
13
13
14
20,519
-
45,058
77,660
(35,291,437)
(64,657,803)
(602,363)
(573,695)
(4,320,601)
(55,500,000)
24,853,220
22,541,016
20,532,619
(32,958,984)
-
-
60,600,000
(817,562)
(24,408,846)
(23,050,099)
(24,408,846)
36,732,339
Net (decrease) / increase in cash and cash equivalents
(4,478,590)
3,199,660
Cash and cash equivalents at the start of the year
4,980,341
1,780,681
Cash and cash equivalents at the end of the year
10
501,751
4,980,341
The accompanying notes form an integral part of these financial statements.
92
Solar Income Fund | Statement oF FInancIal PoSItIon Notes to the
Financial Statements
for the year ended 30 June 2018
1. General information
the company is a non-cellular company limited by shares and
was incorporated in guernsey under the law on 29 May 2013 with
registered number 56708 as a closed-ended investment company.
it is regulated by the gFsc.
The financial statements for the year ended 30 June 2018
comprise the financial statements of the Company only (see Note
2 (c)).
The investment objective of the Company is to provide
shareholders with an attractive return, principally in the form of
income distributions, by investing via sPVs into a portfolio of large
scale uk based solar energy infrastructure assets.
The Company has appointed Bluefield Partners LLP as its
investment adviser.
93
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 2. Accounting policies
a) Basis of preparation
The financial statements included in this annual report
have been prepared in accordance with IFRS as adopted
by the EU and the DTRs of the UK FCA.
These financial statements have been prepared under the
historical cost convention with the exception of financial
assets measured at fair value through profit or loss, and
in compliance with the provisions of the Companies Law.
The principal accounting policies adopted are set out
below.
Standards and Interpretations in issue and not yet
effective:
new standards
IFRS 9
IFRS 15
iasB effective
date
1 January 2018
1 January 2018
Financial
Instruments
Revenue from
Contracts with
Customers
IFRS 16
Leases
1 January 2019
Revised and amended standards
IFRS 2
Share-based
payment
1 January 2018
Annual
Improvements*
Annual
improvements to
IFRS Standards
2015-2017 cycle
1 January 2019
* not yet endorsed by the eu
At the date of authorisation of these financial statements,
certain new standards, and amendments to existing
standards have been published by the IASB that are not
yet effective.
The Board expects that all relevant pronouncements will
be adopted in the Company’s accounting policies for
the first period beginning after the effective date of the
pronouncement.
The amendments to IFRS 2 are effective for annual
periods beginning on or after 1 January 2018 and have
not been applied to these financial statements. The
accounting clarifications included in the amended IFRS
2 will not result in any changes to the reported results or
financial position of the Company.
IFRS 9 replaces IAS 39 and is effective for annual periods
beginning on or after 1 January 2018. It has not been
applied to these financial statements. The Company’s
financial assets comprise of its investment in BSIFIL
held at fair value and the introduction of IFRS 9 is not
expected to have a material impact on the reported
results or financial position of the Company.
As at 30 June 2018 IFRS 15 and IFRS 16 had been
issued but are not effective for this accounting period
and have not been adopted early by the Company. As the
Company’s investments are held at fair value through
profit and loss and the revenue and lease contracts are
held at the SPV level, the introduction of these standards
is not expected to have a material impact on the reported
results or financial position of the Company.
b) Going concern
At 30 June 2018, the Company had invested in 86 solar
plants, committing £545.6m to SPV investments. The
Company through its direct subsidiary, BSIFIL, has
access to a RCF which together with the net income
generated by the acquired projects, are expected to allow
the Company to meet its liquidity needs for the payment
of operational expenses, dividends and acquisition of new
solar assets. The Company, through BSIFIL, expects to
comply with the covenants of its long term loan and RCF.
The Board in its consideration of going concern has
reviewed comprehensive cash flow forecasts prepared by
the Investment Adviser, future projects in the pipeline and
the performance of the current solar plants in operation
and, at the time of approving the financial statements,
have a reasonable expectation that the Company has
adequate resources to continue in operational existence
for the foreseeable future and do not consider there to be
any threat to the going concern status of the Company.
An additional factor which the Board has considered is the
discontinuation vote which will be put to shareholders at
the AGM to be held in November 2018. The Board cannot
predict what the outcome of the discontinuation vote will
be but have no present indication that the vote will not be
positive given the Company’s performance, feedback from
shareholders and dividend payment history. In making
the going concern disclosure, the Board has assumed
that the Company will continue to operate beyond the
discontinuation vote in its present form.
94
Solar Income Fund | noteS on the conSolIdated StatementS The Board has concluded that it is appropriate to adopt
the going concern basis of accounting in preparing the
financial statements.
c) Accounting for subsidiaries
The Company makes its investments in the SPVs through
its single, direct subsidiary, BSIFIL, in which it is the sole
shareholder.
In light of the December 2014 amendments to IFRS
10 (the Consolidation Exception Amendments), which
clarified the scope of the exceptions to mandatory non-
consolidation amendments, the Board considered the
investment entity status of BSIFIL and concluded that it
is, like the Company, an investment entity. As such the
Company is not permitted to consolidate BSIFIL in the
preparation of its financial statements and all subsidiaries
are recognised at fair value through profit or loss.
d) Functional and presentation currency
These financial statements are presented in Sterling,
which is the functional currency of the Company as well
as the presentation currency. The Company’s funding,
investments and transactions are all denominated in
Sterling.
e) Income
Monitoring fee income is recognised on an accruals basis.
Interest income on cash and cash equivalents is
recognised on an accruals basis using the effective
interest rate method.
f) Expenses
Operating expenses are the Company’s costs incurred
in connection with the ongoing administrative costs and
management of the Company’s investments. Operating
expenses are accounted for on an accruals basis.
g) Finance costs
Finance costs are recognised in the Statement of
Comprehensive Income in the period to which they
relate on an accruals basis using the effective interest
rate method. Arrangement fees for finance facilities are
amortised over the expected life of the facility.
h) Dividends
Dividends declared and approved are charged against
equity. A corresponding liability is recognised for any
unpaid dividends prior to year end. Dividends approved
but not declared will be disclosed in the notes to the
financial statements.
i) Segmental reporting
IFRS 8 ‘Operating Segments’ requires a ‘management
approach’, under which segment information is presented
on the same basis as that used for internal reporting
purposes.
The Board has considered the requirements of IFRS
8 ‘Operating Segments’, and is of the view that the
Company is engaged in a single segment of business,
being investment mainly in UK solar energy infrastructure
assets via its holding company and SPVs, and mainly
in one geographical area, the UK, and therefore the
Company has only a single operating segment.
The Board, as a whole, has been determined as constituting
the chief operating decision maker of the Company. The
key measure of performance used by the Board to assess
the Company’s performance and to allocate resources
is the total return on the Company’s NAV, as calculated
under IFRS, and therefore no reconciliation is required
between the measure of profit or loss used by the Board
and that contained in these financial statements.
The Board has overall management and control of the
Company and will always act in accordance with the
investment policy and investment restrictions set out
in the Company’s latest Prospectus, which cannot be
radically changed without the approval of shareholders.
The Board has delegated the day-to-day implementation
of the investment strategy to its Investment Adviser but
retains responsibility to ensure that adequate resources
of the Company are directed in accordance with their
decisions. Although the Board obtains advice from the
Investment Adviser, it remains responsible for making
final decisions in line with the Company’s policies and the
Board’s legal responsibilities.
j) Financial instruments
Financial assets and financial liabilities are recognised in
the Company’s statement of financial position when the
Company becomes a party to the contractual provisions
of the instrument. The Company offsets financial assets
and financial liabilities if the Company has a legally
enforceable legal right to offset the recognised amounts
and interests and intends to settle on a net basis or
realise the asset and liability simultaneously.
Financial assets
The classification of financial assets depends on the
nature and purpose of the financial assets and is
determined at the time of initial recognition. All financial
assets are initially measured at fair value.
95
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements The Company has not classified any of its financial
assets as ‘held to maturity’ or as ‘available for sale’. The
Company’s financial assets comprise of only financial
assets held at fair value through profit or loss, cash and
loans and receivables.
i) Financial assets held at fair value through profit or loss
• Classification
The Company has been classified as an investment
entity and as such its investment in its subsidiary,
BSIFIL, is held at fair value through profit or loss and
measured in accordance with the requirements of IAS
39 (see Note 2 (c)).
• Recognition
Investments made by the Company in BSIFIL are
recognised on the day on which monies are transferred.
No transaction costs are incurred.
• measurement
Subsequent to initial recognition, investment in BSIFIL
is measured at each subsequent reporting date at
fair value. The Company holds all of the shares in the
subsidiary, BSIFIL, which is a holding vehicle used to
hold the Company’s SPV investments. The Directors
believe it is appropriate to value this entity based on the
fair value of its portfolio of SPV investment assets held
plus its other assets and liabilities. The SPV investment
assets held by the subsidiary are valued semi-annually
as described in Note 8 on a discounted cash flow basis
which is benchmarked against market transactions.
Gains or losses, through profit or loss, are made up of
BSIFIL’s profit or loss, which comprises mainly cash
receipts from its SPVs, the fair value movement of
BSIFIL’s SPV portfolio and cash received in respect
of Eurobond instrument interest. Further more, cash
receipts (excluding Eurobond interest) made to the
Company by BSIFIL are accounted for as a repayment of
loans and not reflected in the Company’s profit and loss,
apart from monitoring fees (see Note 4).
ii) Derecognition of financial assets
A financial asset (in whole or in part) is derecognised
either:
• when the Company has transferred substantially all the
risks and rewards of ownership; or
• when it has neither transferred nor retained substantially
all the risks and rewards and when it no longer has
control over the assets or a portion of the asset; or
• when the contractual right to receive cash flow has
expired.
iii) cash and cash equivalents and trade and other
receivables
Cash and cash equivalents comprise cash on hand and
short term deposits with an original maturity of three
months or less that are readily convertible to a known
amount of cash and are subject to an insignificant
risk of changes in value. Other receivables are non-
derivative financial assets with fixed or determinable
payments that are not quoted in an active market.
These financial assets are included in current assets,
except for maturities greater than twelve months after
the reporting date, which are classified as non-current
assets. They are initially recognised at fair value plus
transaction costs that are directly attributable to the
acquisition, and subsequently carried at amortised cost
using the effective interest rate method, less provision for
impairment.
Financial liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the
financial liability was issued and its characteristics.
All financial liabilities are initially recognised at fair
value net of transaction costs incurred. All purchases
of financial liabilities are recorded on the trade date,
being the date on which the Company becomes party
to the contractual requirements of the financial liability.
Unless otherwise indicated the carrying amounts of the
Company’s financial liabilities approximate to their fair
values.
The Company’s financial liabilities consist of only
financial liabilities measured at amortised cost.
i) Financial liabilities measured at amortised cost
These include trade payables and other short term
monetary liabilities, which are initially recognised at fair
value and subsequently carried at amortised cost using
the effective interest rate method.
ii) Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised
when the Company has extinguished its contractual
obligations, it expires or is cancelled. Any gain or loss on
derecognition is taken to profit and loss.
96
Solar Income Fund | noteS on the conSolIdated StatementS
k) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity instruments issued by the Company are
recognised as the proceeds received, net of direct issue costs. Direct issue costs include
those incurred in connection with the placing and admission which include fees payable
under the Placing Agreement, legal costs and any other applicable expenses.
l) Share based payments
investment adviser’s variable fee
The Company recognises the variable fee for the services received in a share-based
payment transaction as the Company becomes liable to the variable fee on an accruals
basis. The variable fee will be accrued in the accounting period in which the Company
exceeds its target distribution as per the Investment Advisory Agreement (see Note 5).
A corresponding increase in equity is recognised when payment for the variable fee is
made in an equity settled share based payment transaction based on the fair value of the
services provided.
3. Critical accounting judgements, estimates and assumptions
in applying the Company’s accounting policies
The preparation of these financial statements under IFRS requires management to
make judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and other factors that are
believed to be reasonable under the circumstances, the results of which form the basis
of making judgements about carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
The area involving a high degree of judgement and/or complexity and/or area where
assumptions and estimates are significant to the financial statements has been identified
as the valuation of the Company’s investment in BSIFIL which is predominantly based on
the valuation of the portfolio of investments held by BSIFIL (see Note 8).
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if
the revision affects only that period or in the period of the revision and future period if the
revision affects both current and future periods.
As disclosed in Note 8, the Board believes it is appropriate for the Company’s portfolio to
be benchmarked on a £m / MWp basis against comparable portfolio transactions and
on this basis the WACC discount rate of 5.90% (as applied in December 2017) has been
lowered to 5.65%. A bench marking analysis in respect of 30 June 2018 was completed
by an independent third party valuer and considered by the Board.
It is assumed that future long term debt will increase slightly. The average EBITDA
interest tax shield from a combination of third party long term debt and intercompany
Eurobond debt debt equates to 17.7%.
Use of a blended power forecast is unchanged as is the inflation assumption which
remains at 2.75%.
97
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 4. Investment income
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
Monitoring fee in relation to loans supplied
(note 16)
702,603
563,288
702,603
563,288
The Company provides monitoring and loan administration services to BSIFIL for which
an annual fee is charged, payable in arrears.
5. Administrative expenses
Investment advisory base fee * (see note 16)
310,783
277,711
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
Investment advisory variable fee
Legal and professional fees
Administration fees
Directors’ remuneration
Audit fees
Non-audit fees
Broker fees
Regulatory Fees
Registrar fees
Insurance
Listing fees
Other expenses
-
93,681
294,156
165,200
90,460
16,042
50,120
42,365
38,546
8,727
22,021
68,464
77,660
79,976
262,226
159,963
95,466
18,630
51,556
37,061
40,022
7,999
12,454
69,892
1,200,565
1,190,616
*the investment advisory base fee is paid by both the company (10%) and BsiFil (90%). the amount
shown above reflects the amount paid by the Company only. Note 16 shows the full fee paid to the
investment adviser.
98
Solar Income Fund | noteS on the conSolIdated StatementS investment advisory agreement
The Company, BSIFIL and the Investment Adviser have
entered into an Investment Advisory Agreement, dated 24
June 2013, pursuant to which the Investment Adviser has
been given overall responsibility for the non-discretionary
management of the Company’s (and any of BSIFIL’s
SPVs) assets (including uninvested cash) in accordance
with the Company’s investment policies, restrictions and
guidelines. Under the terms of the Investment Advisory
Agreement, the Investment Adviser is entitled to a
combination of a base fee and variable fee. The base fee
is payable quarterly in arrears in cash, at a rate equivalent
to 1% per annum of the NAV up to and including
£100,000,000, 0.80% per annum of the NAV above
£100,000,000 and up to and including £200,000,000 and
0.60% per annum of the NAV above £200,000,000. The
base fee will be calculated on the NAV reported in the
most recent quarterly NAV calculation as at the date of
payment. The variable fee is based on the following:
(i) if in any year, the Company exceeds its distribution
target (7.43pps for the year ended 30 June 2018
and increasing with the annual RPI), the Investment
Adviser will be entitled to a variable fee equal to 30%
of the excess, subject to a maximum variable fee
in any year equal to 1% of the NAV as at the end of
the relevant financial year. The variable fee shall be
satisfied either by the issue of Ordinary Shares to
the Investment Adviser at an issue price equal to
the prevailing NAV per Ordinary Share; acquisition
of Ordinary Shares held in treasury; or purchase of
Ordinary Shares in the market. In any year, the Ordinary
Shares issued to the Investment Adviser will be
subject to a three year lock-up period, with one-third of
the relevant shares becoming free from the lock-up on
each anniversary of their issue.
(ii) if in any year (excluding the Company’s first financial
year), the Company fails to achieve its distribution
target of 7.00 pence per Ordinary Share per year
which will rise with the annual RPI in the third year, the
Investment Adviser will repay its base fee in proportion
by which the actual annual distribution per Ordinary
Share is less than the target distribution, subject to a
maximum repayment in any year equal to 35% of the
base fee calculated prior to any deduction being made.
The repayment will be split equally across the four
quarters in the following financial year and will be set
off against the quarterly management fees payable to
the Investment Adviser in that following financial year.
delegate the provision of the consultancy services to the
Investment Adviser in its capacity as technical adviser
to the SPVs. On the same date, 11 June 2014, the Group
entered into a base fee offset arrangement agreement,
whereby the aggregate technical services fee and base
fee payable (under the Investment Advisory Agreement)
shall not exceed the base fee that would otherwise have
been payable to the Investment Adviser in accordance
with the Investment Advisory Agreement had no fees
been payable under Technical Services Agreement.
In the event that the Investment Adviser becomes liable
to pay the variable fee repayment amount, the Investment
Adviser shall be liable to pay such amount regardless of
whether or not the base fee previously paid to it under
the Investment Advisory Agreement had been reduced by
virtue of the application of the set off arrangements as
outlined on the base fee offset arrangement agreement
dated 11 June 2014.
The fees incurred for the period and the amount outstanding
at the period end have been disclosed in Note 16.
administration agreement
The Administrator has been appointed to provide day-to-
day administration and company secretarial services to
the Company, as set out in the Administration Agreement
dated 24 June 2013.
Under the terms of the Administration Agreement,
the Administrator is entitled to an annual fee, at a
rate equivalent to 10 basis points of NAV up to and
including £100,000,000, 7.5 basis points of NAV above
£100,000,000 and up to and including £200,000,000 and
5.0 basis points of the NAV above £200,000,000, subject
to a minimum fee of £100,000 per annum. The fees are
for the administration, accounting, corporate secretarial
services, corporate governance, regulatory compliance
and stock exchange continuing obligations provided to
the Company. In addition, the Administrator will receive
an annual fee of £6,000 and £3,000 for the provision of
a compliance officer and money laundering reporting
officer, respectively.
The Administrator will also be entitled to an investment
related transaction fee charged on a time spent basis,
which is capped at a total of £5,000 per investment
related transaction. All reasonable costs and expenses
incurred by the Administrator in accordance with this
agreement are reimbursed to the Administrator quarterly
in arrears.
On 11 June 2014, BSIFIL entered into a Technical
Services Agreement with the Investment Adviser, with a
retrospective effective date of 25 June 2013, in order to
The fees incurred for the period and the amount outstanding
at the period end have been disclosed in Note 16.
99
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements SolAR INComE FuND | NoTES oN THE CoNSolIDATED STATEmENTS
6. Taxation
The Company has obtained exempt status under the Income Tax (Exempt Bodies)
(Guernsey) Ordinance 1989 for which it paid an annual fee of £1,200 (2017: £1,200)
(included within regulatory fees).
The income from the Company’s investments is not subject to any further tax in Guernsey
although the subsidiary and underlying SPVs, as UK based entities, are subject to the
current prevailing UK corporation tax rate. The standard rate of UK corporation tax is 19%.
This is due to decrease to 17% by 2020.
7. Net asset value per Ordinary Share
The calculation of NAV per Ordinary Share is based on NAV of £418,995,484 (2017:
£408,608,255) and the number of shares in issue at 30 June 2018 of 369,883,530 (2017:
369,811,281) Ordinary Shares.
8. Financial assets held at fair value through profit or loss
The Company’s accounting policy on the measurement of these financial assets is
discussed in Note 2(j)(i) and below.
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
Opening balance (Level 3)
403,339,287
305,722,500
Additions – funds passed to BSIFIL
4,320,601
55,500,000
Additions – acquisition of Eurobonds*
76,565,712
Disposal – de-recognition of loans*
(76,565,712)
-
-
Change in fair value of financial assets held
at fair value through profit or loss
10,438,217
42,116,787
Closing balance (level 3)
418,098,105
403,339,287
*non-cash transaction: on 12 July 2017, a number of loan facilities, totalling £76.6m, between the
company and BsiFil were de-recognised and replaced with a eurobond instrument listed on the tise.
100
Investments at fair value through profit or loss comprise the fair value of the SPV
investment portfolio held by BSIFIL, the Company’s single direct subsidiary, which is valued
semi-annually by the Directors, and the fair value of BSIFIL’s cash, working capital and debt
balances. A reconciliation of the SPV investment portfolio value to financial assets at fair
value through profit or loss shown on the Statement of Financial Position is shown below.
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
SPV investment portfolio, Directors’ Valuation
604,235,581
573,361,486
BsiFil
Cash
14,687,260
14,121,967
Working capital
4,083,400
1,848,655
Debt
(204,908,136)
(185,992,821)
(186,137,476)
(170,022,199)
Financial assets at fair value through
profit or loss
418,098,105
403,339,287
Analysis of net gains on financial assets held at fair value through profit or loss
(per statement of comprehensive income)
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
Unrealised change in fair value of financial
assets held at fair value through profit or loss
10,438,217
42,116,787
Cash receipts from non-consolidated
subsidiary*
24,853,220
22,541,016
net gains on financial assets held at fair
value through profit or loss
35,291,437
64,657,803
*comprising of repayment of loans and eurobond interest
101
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Fair value measurements
IFRS 13 ‘Fair Value Measurement’ requires disclosure of
fair value measurement by level. The level of fair value
hierarchy within the financial assets or financial liabilities
is determined on the basis of the lowest level input that
is significant to the fair value measurement. Financial
assets and financial liabilities are classified in their
entirety into only one of the three levels.
operational are valued at cost and exclude acquisition
costs which are expensed in the period in which they
are incurred, whilst investments that are operational
are valued on a DCF basis over the life of the asset
(typically 25 years) and, under the ‘willing buyer-willing
seller’ methodology, prudently benchmarked on a £/MWp
basis against comparable transactions for large scale
portfolios. No assets were valued at cost as at year end.
The fair value hierarchy has the following levels:
• level 1 – quoted prices (unadjusted) in active markets
for identical assets or liabilities;
• level 2 – inputs other than quoted prices included
within Level 1 that are observable for the assets or
liabilities, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
• level 3 – inputs for assets or liabilities that are not
based on observable market data (unobservable
inputs).
The determination of what constitutes ‘observable’
requires significant judgement by the Company. The
Company considers observable data to be market data
that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the
relevant market.
The only financial instruments carried at fair value
are the investments held by the Company, through
BSIFIL, which are fair valued at each reporting date. The
Company’s investments have been classified within Level
3 as BSIFIL’s investments are not traded and contain
unobservable inputs.
transfers during the period
There have been no transfers between levels during
the year ended 30 June 2018. Any transfers between
the levels will be accounted for on the last day of each
financial period. Due to the nature of the investments,
these are always expected to be classified as Level 3.
Directors’ Valuation methodology and process
The same valuation methodology and process for
operational solar plants is followed in these financial
statements as was applied in the preparation of the
Company’s financial statements for the year ended 30
June 2017. Solar plants under construction and not yet
Each investment is subject to full UK corporate taxation
at the prevailing rate with the tax shield being limited to
the applicable capital allowances from the Company’s
SPV investments.
The key inputs to a DCF based approach are: the equity
discount rate, the cost of debt (influenced by interest rate,
gearing level and length of debt), power price forecasts,
long term inflation rates, irradiation forecasts, operational
costs and taxation. Given discount rates are a product of
not only the factors listed previously but also regulatory
support, perceived sector risk and competitive tensions,
it is not unusual for discount rates to change over time.
Evidence of this is shown by way of the revisions to the
original discount rates applied between the first UK solar
investments and those witnessed in the past twelve
months and given the fact discount rates are subjective,
there is sensitivity within these to the interpretation of
factors outlined above.
Judgement is used by the Board in determining the
reduction of the WACC from 5.90%, from 31 December
2017, to 5.65% and key developments over the year that
have impacted the adoption of this rate are outlined below:
a. Transaction values have remained consistent at ca.
£1.29 -1.35/MWp for large scale portfolios and which
the Board have used to determine that an effective
price of £1.29m/MWp is an appropriate basis for the
valuation of the BSIF portfolio as at 30 June 2018;
b. Further falls in the long term power price forecasts,
and
c. Clarification of BEPS legislation in the December 2017
Finance Bill.
In order to smooth the sensitivity of the valuation to
forecast timing or opinion taken by a single forecast, the
Board continues to adopt the application of a blended
power curve from two leading forecasters.
102
Solar Income Fund | noteS on the conSolIdated StatementS It is only the SPVs of BSIFIL, and their intermediate
holding companies, that the Directors fair value (see
Note 2(j)(i)). Fair value of operational SPVs is calculated
on a discounted cash flow basis in accordance with the
IPEV Valuation Guidelines, benchmarked on a £/MWp
basis against large scale portfolio transactions. The
Investment Adviser produces fair value calculations on a
semi-annual basis as at 30 June and 31 December each
year. However, in every third year the Board will have an
external valuation performed by an independent expert.
This year the Company commissioned a benchmarking
exercise with an independent third party for the 30 June
2018 valuation, which was considered by the Board in
determining the portfolio fair value in these financial
statements. An external valuation was previously
undertaken for the year ended 30 June 2015.
sensitivity analysis
The table below analyses the sensitivity of the fair value
of the Directors’ Valuation to an individual input, while all
other variables remain constant.
The Directors consider the changes in inputs to be within a
reasonable expected range based on their understanding
of market transactions. This is not intended to imply that
the likelihood of change or that possible changes in value
would be restricted to this range.
input
change in input
change in fair value
of Directors’ Valuation
(£m)
change in naV
per share
(pence)
change in fair value
of Directors’ Valuation
(£m)
change in naV
per share
(pence)
30 JUNE 2018
30 JUNE 2017
+ 0.5%
(23.0)
(6.22)
(22.5)
(6.08)
24.5
28.9
6.62
7.81
24.0
27.5
6.49
7.44
(29.0)
(7.84)
(27.7)
(7.49)
8.4
(8.1)
2.27
(2.19)
Discount rate
(5.65%)
Power prices
Inflation rate
(2.75%)
Energy yield
- 0.5%
+10%
-10%
+ 0.25%
- 0.25%
10 year P90
(48.3)
(13.06)
10 year P10
47.9
Operational costs
Interest shield
+10%
-10%
+50%
-50%
(11.4)
10.9
9.3
(9.6)
12.95
(3.08)
2.95
2.51
(2.60)
11.9
(11.6)
(43.0)
40.0
(11.3)
9.8
n/a
n/a
3.22
(3.14)
(11.63)
10.82
(3.06)
2.65
n/a
n/a
103
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 9. Trade and other receivables
30 June 2018
(£)
30 June 2017
(£)
cuRRent assets
Monitoring fees receivable
702,603
577,465
Interest receivable
Other receivables
Prepayments
-
10,400
40,234
842
10,000
37,410
753,237
625,717
There are no other material past due or impaired receivable balances outstanding at the
period end.
The Directors consider that the carrying amount of all receivables approximates to their
fair value.
10. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Company and short term bank
deposits held with maturities of up to three months. The carrying amount of these assets
as at 30 June 2018 was £501,751 (2017: £4,980,341) and approximated their fair value.
Cash held by BSIFIL, the Company’s single direct subsidiary, as at 30 June 2018 is shown
in Note 8.
11. Other payables and accrued expenses
cuRRent liaBilities
Investment advisory fees
Administration fees
Audit fees
Other payables
30 June 2018
(£)
30 June 2017
(£)
77,379
70,716
70,800
72,634
66,761
90,000
138,714
107,695
357,609
337,090
The Company has financial risk management policies in place to ensure that all payables
are paid within the agreed credit period. The Directors consider that the carrying amount
of all payables approximates to their fair value.
104
Solar Income Fund | noteS on the conSolIdated StatementS
12. Earnings per share
Profit attributable to shareholders of the
Company
Weighted average number of Ordinary
shares
year ended
30 June 2018
year ended
30 June 2017
£34,796,075
£64,045,718
369,845,327
350,740,529
Basic and diluted earnings from continuing
operations and profit for the year (pence)
9.41
18.26
For the calculation of Earnings per Share at 30 June 2017 the estimated number
of shares earned by the Investment Adviser but not yet issued were included in the
calculation of the weighted average number of shares based upon them being issued at
the end of the year in which they were earned.
13. Share capital
The authorised share capital of the Company is represented by an unlimited number of
Ordinary Shares of no par value which, upon issue, the Directors may designate into such
classes and denominate in such currencies as they may determine.
number of ordinary shares
year ended
30 June 2018
(number)
year ended
30 June 2017
(number)
Opening balance
369,811,281
309,631,765
Shares issued for cash
-
60,000,000
Shares issued as settlement of variable fee
72,249
179,516
Closing balance
369,883,530
369,811,281
shareholders’ equity
year ended
30 June 2018
(£)
year ended
30 June 2017
(£)
Opening balance
408,608,255
307,752,538
Shares issued for cash
Share issue costs
Shares to be issued as settlement of
variable fee
-
-
-
60,600,000
(817,562)
77,660
Dividends paid
(24,408,846)
(23,050,099)
Retained earnings
34,796,075
64,045,718
Closing balance
418,995,484
408,608,255
105
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements On 12 January 2018, the Company issued 72,249 new
Ordinary Shares to the Investment Adviser in respect of
their variable fee for the financial year ended 30 June
2017 at a price of 107.49pps.
Rights attaching to shares
The Company has a single class of Ordinary Shares
which are entitled to dividends declared by the Company.
At any general meeting of the Company each ordinary
Shareholder is entitled to have one vote for each share
held. The Ordinary Shareholders also have the right
to receive all income attributable to those shares and
participate in distributions made and such income shall
be divided pari passu among the holders of Ordinary
Shares in proportion to the number of Ordinary Shares
held by them.
14. Dividends
On 8 August 2017, the Board declared a third interim
dividend of £5,547,169, in respect of year ended 30 June
2017, equating to 1.50pps (third interim dividend in
respect of the year ended 30 June 2016: 1.50pps), which
was paid on 8 September 2017 to shareholders on the
register on 18 August 2017.
Post year end, on 31 July 2018, the Board declared a third
interim dividend of £6,657,904 in respect of year ended
30 June 2018, equating to 1.80pps (third interim dividend
in respect of the year ended 30 June 2017: 1.50pps),
which was paid on 31 August 2018 to shareholders on
the register on 10 August 2018.
Post year end, on 26 September 2018, the Board
approved a fourth interim dividend, in respect of year
ended 30 June 2018, of 2.03pps (fourth interim dividend
in respect of the year ended 30 June 2017: 1.50pps),
which will be payable on 26 October 2018 with an
associated ex-dividend date of 4 October 2018.
15. Risk management policies and
procedures
The Company is exposed to a variety of financial risks,
including market risk (including price risk, currency
risk and interest rate risk), credit risk, liquidity risk and
portfolio operational risk. The Investment Adviser and
the Administrator report to the Board on a quarterly basis
and provide information to the Company which allows
it to monitor and manage financial risks relating to its
operations.
On 18 September 2017, the Board declared a fourth
interim dividend of £5,547,170, in respect of year ended
30 June 2017, equating 1.50pps (fourth interim dividend
in respect of the year ended 30 June 2016: 1.50pps),
which was paid on 27 October 2017 to shareholders on
the register on 29 September 2017.
The Company’s overall risk management programme
focuses on the unpredictability of financial markets
and government energy policy and seeks to minimise
potential adverse effects on the Company’s financial
performance, as referenced in the Principal Risks and
Uncertainties section in the Strategic Report.
On 8 January 2018, the Board declared a first interim
dividend of £6,656,603, in respect of year ended 30
June 2018, equating to 1.80pps (first interim dividend in
respect of the year ended 30 June 2017: 3.25pps), which
was paid on 9 February 2018 to shareholders on the
register on 19 January 2018.
The Board is ultimately responsible for the overall
risk management approach within the Company. The
Board has established procedures for monitoring and
controlling risk. The Company has investment guidelines
that set out its overall business strategies, its tolerance
for risk and its general risk management philosophy.
On 19 April 2018, the Board declared a second interim
dividend of £6,657,904, in respect of year ended 30 June
2018, equating to 1.80pps (second interim dividend in
respect of the year ended 30 June 2017: 1.00pps), which
was paid on 18 May 2018 to shareholders on the register
as at 27 April 2018.
In addition, the Investment Adviser monitors and
measures the overall risk bearing capacity in relation
to the aggregate risk exposure across all risk types and
activities. Further details regarding these policies are set
out below:
106
Solar Income Fund | noteS on the conSolIdated StatementS market price risk
Market price risk is defined as the risk that the fair value
of future cash flows of a financial instrument held by the
Company, in particular through the Company’s subsidiary,
BSIFIL, will fluctuate because of changes in market
prices.
Market price risk will arise from changes in electricity
prices whenever PPAs expire and are renewed. The timing
of these is staggered to minimise risk.
BSIFIL’s future SPV investments are subject to
fluctuations in the price of secondary assets which could
have a material adverse effect on the BSIFIL’s ability to
source projects that meet its investment criteria and
consequently its business, financial position, results of
operations and business prospects.
The Company’s overall market position is monitored by
the Investment Adviser and is reviewed by the Board of
Directors on an ongoing basis.
Currency risk
The Company does not have any direct currency risk
exposure as all its investments and transactions are in
Sterling. The Company is however indirectly exposed
to currency risk on future equipment purchases, made
through BSIFIL’s SPVs, where equipment is imported.
Interest rate risk
Interest rate risk is the risk that the value of financial
instruments and related income from the cash and
cash equivalents will fluctuate due to changes in market
interest rates.
The Company is also exposed, through BSIFIL, to interest
rate risk via BSIFIL’s index linked element of its long-term
debt facility (£65.5m at 70 bps plus RPI).
The Company’s interest bearing financial assets consist
of cash and cash equivalents. The interest rates on the
short term bank deposits are fixed and do not fluctuate
significantly with changes in market interest rates.
The following table shows the portfolio profile of the
financial assets at year end:
Floating rate
RBSI
Fixed rate
Lloyds
Floating rate
RBSI
Fixed rate
Lloyds
interest rate
total as at
30 June 2018
£
0.00%
501,268
0.10%
483
501,751
total as at
30 June 2017
£
interest rate
0.00%
88,352
0.10%
4,891,989
4,980,341
The valuation of BSIFIL’s SPV investments is subject
to variation in the discount rate, which are themselves
subject to changes in interest rate risk due to the discount
rates applied to the discounted cash flow technique when
valuing the investments. The Investment Adviser reviews
the discount rates bi-annually and takes into consideration
market activity to ensure appropriate discount rates are
recommended to the Board. Total exposure to interest
rate risk on the financial assets held at fair value through
profit or loss at the year end is £604,235,581 (2017:
£573,361,486), the Directors’ Valuation (see Note 8).
Credit risk
Credit risk is the risk that a counterparty will be unable to
pay amounts in full when due. BSIFIL’s SPVs have entered
into turnkey EPC contracts with contractors for the
design and construction of the solar plants. Payments
advanced to the contractors in accordance with the terms
of the EPC contracts are protected through performance
bonds or titles to assets for amounts greater than any
payment made. At the reporting date BSIFIL’s SPVs
held performance bonds totalling £19,176,312 (2017:
£27,091,616) with banks that have a credit rating which is
of investment grade.
107
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements The Company’s credit risk exposure is due to a portion
of the Company’s assets being held as cash and
cash equivalents and accrued interest. The Company
maintains its cash and cash equivalents and borrowings
across two different banking groups to diversify credit
risk. The total exposure to credit risk arises from
default of the counterparty and the carrying amounts of
financial assets best represent the maximum credit risk
exposure at the period end date. As at 30 June 2018, the
maximum credit risk exposure in relation to cash and
cash equivalents in the Company was £501,751 (2017:
£4,980,341). If the cash and cash equivalents held by
BSIFIL are included this increases to £15,189,011 (2017:
£19,102,308). All cash and cash equivalents held by the
Company and BSIFIL is with banks that have a credit
rating which is of investment grade.
RBSI
Lloyds
RBSI
Lloyds
cash
£
501,268
-
501,268
cash
£
88,352
Fixed deposit
£
interest accrued
£
-
483
483
-
-
-
Fixed deposit
£
interest accrued
£
-
-
4,891,989
88,352
4,891,989
-
842
842
total as at
30 June 2018
£
501,268
483
501,751
total as at
30 June 2017
£
88,352
4,892,831
4,981,183
The carrying amount of these assets approximates their
fair value.
listed, the return from these investments is dependent on
the income generated or the disposal of solar assets by
the SPVs and will take time to realise.
liquidity risk
Liquidity risk is the risk that the Company will not be able
to meet its liabilities as they fall due. The Investment
Adviser and the Board continuously monitor forecasted
and actual cash flows from operating, financing and
investing activities.
As the Company’s investments, through BSIFIL, are in the
SPVs, which are private companies that are not publicly
The Company, through BSIFIL, expects to comply with
the covenants of its long term loan and revolving credit
facility.
The following table details the Company’s expected
maturity for its financials assets and liabilities. These are
undiscounted contractual cash flows:
108
Solar Income Fund | noteS on the conSolIdated StatementS less than one year
£
Between one and
five years
£
After five years
£
total as at
30 June 2018
£
assets
Financial assets held at fair value
through profit or loss
-
Trade and other receivables*
713,003
Cash and cash equivalents
501,751
liaBilities
Other payables and accrued ex-
penses
*excluding prepayments
(357,609)
857,145
-
-
-
-
-
289,840,966
289,840,966
-
-
-
713,003
501,751
(357,609)
289,840,966
290,698,111
As part of the long term financing terms provided by Aviva Investors to BSIFIL, the lender has a security package which
includes a charge over the shares in BSIFIL and its wholly owned subsidiaries.
less than one year
£
Between one and
five years
£
After five years
£
total as at
30 June 2017
£
assets
Financial assets held at fair value
through profit or loss*
-
Trade and other receivables**
588,307
Cash and cash equivalents
4,980,341
liaBilities
Other payables and accrued ex-
penses
(337,090)
5,231,558
-
-
-
-
-
271,534,264
271,534,264
-
-
-
588,307
4,980,341
(337,090)
271,534,264
276,765,822
*the company passes debt to BsiFil under loan agreements; as at the year end there is an additional amount of non-contractual cash
which is not reflected above
**excluding prepayments
109
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements Portfolio operational risk
Portfolio operational risk is defined as the risk that solar assets perform below
expectation after acquisition and revenue received from the sale of electricity is reduced.
This risk is mitigated by BSL ensuring that operation and maintenance contractors are
compliant with their contractual obligations including reaction times, maintenance plans
and service levels.
concentrations of risk
Concentrations of risk arise from financial instruments that have similar characteristics
and are affected similarly by changes in economic or other conditions. The
concentrations of the Company’s solar assets by geography, construction contractor and
revenue type are shown on pages 12 to 15. This analysis forms an integral part of the
financial statements.
capital management policies and procedures
The Company’s capital management objectives are to ensure that the Company will
be able to continue as a going concern while maximising the capital return to equity
shareholders.
In accordance with the Company’s investment policy, the Company’s principal use of
cash (including the proceeds of the IPO, placings and the loan facility) is to fund BSIFIL’s
projects, as well as expenses related to the share issues when they occur, ongoing
operational expenses and payment of dividends and other distributions to shareholders in
accordance with the Company’s dividend policy.
The Board, with the assistance of the Investment Adviser, monitors and reviews the broad
structure of the Company’s capital on an ongoing basis.
The Company has no imposed capital requirements.
The capital structure of the Company consists of issued share capital and retained
earnings.
16. Related party transactions and Directors’ remuneration
In the opinion of the Directors, the Company has no immediate or ultimate controlling
party.
Laurence McNairn, Director of the Company, is a consultant to the Company’s
Administrator, Estera International Fund Managers (Guernsey) Limited (formerly Heritage
International Fund Managers Limited). Administration fees incurred during the period
of £294,156 (2017: £262,226) relate to the fees of the Administrator, of which £70,716
(2017: £66,761) was outstanding at the year end.
The Chairman is entitled to an annual remuneration of £56,900 (2017: £55,000). The
other Directors are entitled to an annual remuneration of £34,200 (2017: £33,000).
Paul Le Page receives an additional annual fee of £5,700, (2017: £5,500) for acting as
Chairman of the Audit Committee.
The total Directors’ fees expense for the period amounted to £165,200 (2017: £159,963)
of which £43,900 was outstanding at 30 June 2018 (2017: £42,375).
110
Solar Income Fund | noteS on the conSolIdated StatementS At 30 June 2018, the number of Ordinary Shares held by each Director is as follows:
John Rennocks*
316,011
446,713
2018 number of
ordinary shares
2017 number of
ordinary shares
John Scott
Paul Le Page*
Laurence McNairn
*including shares held by Pcas
452,436
137,839
441,764
367,506
137,839
441,764
1,348,050
1,393,822
John Scott and John Rennocks are Directors of BSIFIL and receive an annual fee of
£5,200 each for their services to this company (2017: 5,000). Mike Rand and James
Armstrong, who are partners of the Investment Adviser, are also Directors of BSIFIL.
The Company and BSIFIL’s investment advisory fees for the year amounted to £3,168,721
(2017: £2,997,453) of which £241,822 (2017: £259,047) was outstanding at the year
end. Included within the investment advisory fee expense for 2017 is £77,660 earned in
respect of performance fees for the year ended 30 June 2017. The Investment Adviser
received the variable element of their 2017 fees through the issue of 72,249 Ordinary
Shares on 12 January 2018 (see Note 13).
Fees paid to BSL during the period by SPVs, a company which has the same ownership
as that of the Investment Adviser totalled £2,293,384 (2017: £2,229,749). BSL provides
asset management and other services relating to the operation of daily management
activities of the solar project companies.
Fees paid to BOL during the period by SPVs, a company which has the same ownership
as that of the Investment Adviser totalled £508,138 (2017: £Nil). BOL provides O&M and
other services relating to the operation of daily management activities of the solar project
companies.
The Company’s monitoring fee income received from BSIFIL amounted to £702,603
(2017: £563,288) of which £702,603 was outstanding at the year end (2017: £577,466).
17. Subsequent events
Post year end, on 31 July 2018, the Board declared a third interim dividend of £6,657,904,
in respect of year ended 30 June 2018, equating to 1.80 pps (third interim dividend in
respect of the year ended 30 June 2017: 1.50 pps), which was paid on 31 August 2018 to
shareholders on the register on 10 August 2018.
Post year end, on 26 September 2018, the Board approved a fourth interim dividend, in
respect of year ended 30 June 2018, of 2.03 pps (fourth interim dividend in respect of the
year ended 30 June 2017: 1.50 pps), which will be payable on 26 October 2018 with an
associated ex-dividend date of 4 October 2018.
111
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements 112
Solar Income Fund | GloSSary oF deFIned termS Glossary of
Defined Terms
administrator estera international Fund Managers (guernsey)
agM
aic
aic code
aic guide
aiF
aiFM
aiFMD
articles
limited
the annual general Meeting
the association of investment companies
the association of investment companies code
of corporate governance
the association of investment companies
corporate governance guide for investment
companies
alternative investment Fund
alternative investment Fund Management
the alternative investment Fund Management
Directive
the Memorandum of 29 May 2013 as amended
and articles of incorporation as adopted by
special resolution on 7 november 2016.
kPMg channel islands limited (see kPMg)
auditor
aviva investors aviva investors limited
Beis
BePs
Bluefield
Brexit
Bol
Bsl
Board
BsiF
BsiFil
the Department for Business, energy and
industrial strategy
Base erosion and profit shifting
Bluefield Partners LLP
Departure of the uk from the eu
Bluefield Operations Limited
Bluefield Asset Management Services Limited
the Directors of the company
Bluefield Solar Income Fund Limited
Bluefield SIF Investments Limited being the only
direct subsidiary of the company
Business days Every official working day of the week, generally
Monday to Friday excluding public holidays
113
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements cagR
calculation time
cfD
company
companies law
consolidation exception
amendments
cost of debt
cP15
cRs
c shares
csR
DcF
Defect Risk
Directors’ Valuation
Dno
DscR
DtR
eBitDa
egM
ePc
eu
eV
Compound annual growth rate
The Calculation Time as set out in the Articles of
Incorporation
Contract for Difference
Bluefield Solar Income Fund Limited
The Companies (Guernsey) Law 2008, as amended (see Law)
The 18 December 2014 further amendments to IFRS 10
Investment Entities: Applying the Consolidation Exception
(Amendments to IFRS 10, IFRS 12 and IAS 28)
The blended cost of debt reflecting fixed and index-linked
elements
Compliance Period 15 in respect of the RO Scheme (1 April
2016 to 31 March 2017)
Common Reporting Standard
Ordinary Shares approved for issue at no par value in the
Company
Corporate Social Responsibility
Discounted Cash Flow
An over-reliance on limited equipment manufacturers which
could lead to large proportions of the portfolio suffering
similar defects
Gross value of the SPV investments held by BSIFIL, including
their holding companies.
Distribution Network Operator
Debt service cover ratio
The Disclosure Guidance and Transparency Rules of the UK’s
FCA
Earnings before interest, tax, depreciation and amortisation
Extraordinary General Meeting
Engineering, Procurement & Construction
The European Union
Enterprise valuation
Fac
Fatca
Financial statements
Fit
Final Acceptance Certificate
The Foreign Account Tax Compliance Act
The audited annual financial statements
Feed-in Tariff
gaV
gFsc
group
guernsey code
gWh
gWp
114
Gross Asset Value on a consolidated basis including debt
held at SPV level
The Guernsey Financial Services Commission
Bluefield Solar Income Fund Limited and Bluefield SIF
Investments Limited
The Guernsey Financial Services Commission Finance Sector
Code of Corporate Governance
Gigawatt hour
Gigawatt peak
Solar Income Fund | GloSSary oF deFIned termS ias
iasB
iFRs
International Accounting Standard
The International Accounting Standards Board
International Financial Reporting Standards as adopted by
the EU
Bluefield Partners LLP
investment adviser
iPeV Valuation guidelines The International Private Equity and Venture Capital Valuation
iPo
iRR
iVsc
kiD
kPi
kPMg
kWh
kWp
law
lD
liBoR
listing Rules
lloyds
lloyds international
lcoe
lse
ltF
Main Market
MW
MWh
MWp
naV
nMPi
nPPR
o&M
Official List
ordinary shares
outage Risk
Guidelines
Initial public offering
Internal Rate of Return
The International Valuation Standards Council
key Information Document
Key Performance Indicators
KPMG Channel Islands Limited (see Auditor)
Kilowatt hour
Kilowatt peak
Companies (Guernsey) Law, 2008 as amended (see
Companies Law)
Liquidated damages
London Interbank Offered Rate
The set of FCA rules which must be followed by all
companies listed in the UK
Lloyds Bank Group plc
Lloyds Bank International Limited
Levelised Cost of Electricity: average unit cost of electricity
over the lifetime of a generating asset expressed on a net
present cost basis
London Stock Exchange plc
Long term facility provided by Aviva Investors Limited
The main securities market of the LSE
Megawatt
Megawatt hour
Megawatt peak
Net Asset Value as defined in the prospectus
Non-mainstream Pooled Investments and Special Purpose
Vehicles and the rules around their financial promotion
The AIFMD National Private Placement Regime
Operation and Maintenance
The Premium Segment of the UK Listing Authority’s Official
List
the issued ordinary share capital of the Company, of which
there is only one class
A higher proportion of large capacity assets hold increased
exposure to material losses due to curtailments and periods
of outage
115
AnnuAl RepoRt And ConsolidAted FinAnCiAl stAtements P10
P90
Pca
PPa
pps
PR
PRiiPs
PV
RBs
RBsi
RcF
Ro scheme
Roc
Roc recycle
RPi
sPa
sPVs
sterling
tise
Irradiation estimate exceeded with 10% probability
Irradiation estimate exceeded with 90% probability
Persons Closely Associated
Power Purchase Agreement
Pence per share
Performance ratio (the ratio of the actual and theoretically
possible energy outputs)
Packaged Retail and Insurance-Based Investment Products
Photovoltaic
The Royal Bank of Scotland plc
Royal Bank of Scotland International plc
Revolving Credit Facility
The Renewable Obligation Scheme which is the financial
mechanism by which the UK Government incentivises the
deployment of large-scale renewable electricity generation by
placing a mandatory requirement on licensed UK electricity
suppliers to source a specified and annually increasing
proportion of the electricity they supply to customers from
eligible renewable sources, or pay a penalty
Renewable Obligation Certificates
The payment received by generators from the redistribution
of the buy-out fund. Payments are made into the buy-out fund
when suppliers do not have sufficient ROCs to cover their
obligation
The Retail Price Index
Share Purchase Agreement
The Special Purpose Vehicles which hold the Company’s
investment portfolio of underlying operating assets
The Great British pound currency
The International Stock Exchange (formerly CISE, Channel
Islands Securities Exchange)
uk
uk code
uk Fca
united nations Principles for
Responsible investment An approach to investing that aims to incorporate
The United Kingdom of Great Britain and Northern Ireland
The United Kingdom Corporate Governance Code
The UK Financial Conduct Authority
environmental, social and governance factors into investment
decisions, to better manage risk and generate sustainable,
long term returns
Wacc
Weighted Average Cost of Capital
116
Solar Income Fund | GloSSary oF deFIned termS COmPAnY REgISTRATIOn nUmBER: 56708
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