ANNUAL REPORT AND
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE
2020
Table of Contents
General Information
Highlights
Corporate Summary
Chairman’s Statement
The Company’s Investment Portfolio
Analysis of the Company’s Investment Portfolio
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
Report of the Audit Commitee
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 2020
Glossary of Defined Terms
Alternate Performance Measures
2
4
7
9
14
16
19
43
87
92
94
95
97
101
105
106
107
108
109
131
135
1
ANNUAL REPORT AND FINANCIAL STATEMENTS General
Information
Board of Directors (all non-executive)
JOHN RENNOCKS
(Chairman)
JOHN SCOTT
(Senior Independent
Director)
PAUL LE PAGE
(Chairman of Audit
Committee)
Registered Office
PO Box 286,
Floor 2,
Trafalgar Court,
Les Banques,
St Peter Port,
Guernsey,
GY1 4LY
LAURENCE MCNAIRN
MERIEL LENFESTEY
Investment Adviser
Bluefield Partners LLP
6 New Street Square
London, EC4A 3BF
JAMES ARMSTRONG
Managing Partner
GIOVANNI TERRANOVA
Managing Partner
NEIL WOOD
Partner
2
| GENERAL INFORMATION Administrator, Company Secretary & Designated Manager
Ocorian Administration (Guernsey) Limited
(formerly Estera International Fund Managers (Guernsey) Ltd)
Floor 2, Trafalgar Court, Les Banques,
St Peter Port, Guernsey, GY1 4LY
Independent Auditor & Reporting Accountants
KPMG Channel Islands Limited
Glategny Court, Glategny Esplanade
St Peter Port, Guernsey, GY1 1WR
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue, St Sampson
Guernsey, GY2 4LH
Receiving Agent & UK Transfer Agent
Link Asset Services Limited
The Registry
34 Beckenham Road
Beckenham, Kent, BR3 4TU
Sponsor, Broker & Financial Adviser
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London, EC4M 7LT
Legal Advisers to the Company (as to English law)
Norton Rose Fulbright LLP
3 More London Riverside
London, SE1 2AQ
Legal Advisers to the Company (as to Guernsey law)
Carey Olsen
PO Box 98, Carey House
Les Banques, St Peter Port
Guernsey, GY1 4BZ
Principal Bankers
NatWest International plc
35 High Street
St Peter Port
Guernsey, GY1 4BE
3
ANNUAL REPORT AND FINANCIAL STATEMENTS Highlights
As at 30 June 2020 / 30 June 2019
Net Asset Value (NAV)
£433.5m £436.4m
NAV per Share
117.01p 117.98p
Underlying Earnings1
(pre amortisation of debt)
£44.6m £40.7m
Underlying Earnings1
per share
(pre amortisation of debt)
12.03p 11.01p
Underlying Earnings1
per share
(post amortisation of debt)
9.53p 8.62p
Total Dividend per Share
7.90pps 8.31pps4
MWh Generated
per MWp3
1,048 1,030
Total return to Shareholders2
4.70% 19.12%
Total return to Shareholders
since IPO
79.89% 73.48%
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 10.
2. Total return to Shareholders is based on
share price movement and dividends paid
in the year.
3. Excludes assets
invested during the
period.
4. Includes an additional dividend of 0.63p
per share which was paid in addition to
the target dividend of 7.68p for the year.
4
| HIGHLIGHTS Forward Focus
Results Summary
An important solar acquisition has con-
tinued our policy of asset growth, while
modestly increasing our gearing level to
within the Board’s target range;
We continue to look at ways of growing
the Company through accretive secondary
acquisitions, new build capacity and
complementary renewable technologies;
Environmental, Social
& Governance (ESG)
Delivered Carbon Savings of 125,534
tonnes of CO2
For the year ended
30 June 2020
Total operating income
£29,577,878
Total comprehensive income
£28,239,647
Total underlying earnings1
£44,552,929
IFRS Earnings per share
Underlying EPS available for distribution
(including brought forward reserves)2
Total declared dividends per share
for year
Earnings per share carried forward
(See page 70)
7.63p
10.13p
7.90p
2.23p
NAV per share
117.01p
Share price at 30 June 2020
134.50p
Total return3
Total return to shareholders4
Total return to shareholders since
inception5
Dividends per share paid since
inception
6.30%
4.70%
79.89%
45.39p
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 69.
2. Underlying EPS is calculated using underlying earnings available
for distribution divided by the average number of shares.
3. Total return is based on NAV per share movement and
dividends paid in the year.
4. Total return to Shareholders is based on share price movement
and dividends paid in the year.
5. Total Return to Shareholders since inception is an alternative
performance measure based on share price movement and
dividends paid since the IPO.
5
ANNUAL REPORT AND FINANCIAL STATEMENTS 6
AERIAL VIEW AT SALHOUSE
Corporate Summary
Investment objective
The investment objective of the Company is to provide Shareholders
with an attractive return, principally in the form of regular sterling
income distributions, by investing in the UK into, primarily, a portfolio
of solar energy infrastructure assets.
is a non-cellular company
Structure
The Company
limited by shares
incorporated in Guernsey under the Law on 29 May 2013. The
Company’s registration number is 56708, and it is regulated by
the GFSC as a registered closed-ended collective investment
scheme and as a Green Fund after successful application under
the Guernsey Green Fund Rules to the GFSC on 16 April 2019.
The Company’s Ordinary Shares were admitted to the Premium
Segment of the Official List and to trading on the Main Market of
the LSE 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 the Company and now provides services to 36 of the
investment SPVs held by BSIFIL as at year end.
7
ANNUAL REPORT AND FINANCIAL STATEMENTS 8
AERIAL VIEW AT TRETHOSA
Chairman’s Statement
Introduction
The past financial year has been a remarkable one, not least because
it will be remembered long into the future for the Covid-19 virus and
for the chaos this pandemic has wrought on every country in the world,
a phenomenon which appears to be far from reaching its conclusion.
The principal features of the period have been:
• Bluefield has made one significant acquisitions of operating PV
assets
• The lockdown consequent on Covid-19 led to a significant drop
in electricity demand; this, combined with a collapse in the
price of fossil fuels, contributed to markedly lower power prices.
Notwithstanding this, we achieved record earnings for the year of
12.03pps pre-amortisation.
• Our technical performance has been excellent. Aided by high
irradiation levels and a power sales strategy that largely insulated
us from the significant falls in spot power prices, we have met our
dividend target of 7.90pps, while producing earnings of 9.53pps.
• Our investment objective has been amended to allow the Company
a limited involvement in other renewable energy technologies,
such as wind and hydro, and to invest into solar development
opportunities.
• We obtained support from our Shareholders to amend our future
dividend policy from that of a formal link to RPI to one where the
dividend objective will be progressive dividend growth.
• The Bluefield Group furloughed two members of staff connected
to the Company. Those who were not working in the field were
successfully transitioned to working from home.
9
ANNUAL REPORT AND FINANCIAL STATEMENTS Each of these themes is dealt with in more detail below.
Following the approval of a change in the description of
our dividend objectives at our EGM in July to progressive
dividend increases our objective for the financial year
2020/21 ending on 30 June 2021 is to pay total dividends of
not less than 8.00pps.
At the year end the Net Asset Value per share of the shares in
the Company was 117.01pps (30 June 2019 - 117.98pps)
and in respect of the year total dividends of 7.90pps have
been declared. The share price declined slightly from 136.5p
at 30 June 2019 to 134.5p at 30 June 2020, which equates
to a total return for Shareholders for the year of 4.70%. The
performance of the assets of the Company and how this is
reflected in returns to Shareholders and is set out in detail in
the Investment Adviser’s report on page 46.
Key Events
We have added consideration of a prudent level of non-solar
renewable technologies following the approval of the change
the asset mandate and are excited by the opportunities we
are exploring in this extended pipeline.
We have also continued to actively assess secondary solar
asset opportunities and were pleased to conclude the
acquisition of 13.6MWp of assets earlier in the year and of
15 solar plants totalling 64.2MWp in August 2020. These
investments, totalling £120 million, were financed from
increased debt facilities, bringing our borrowings level to
where the Board believes is appropriate in the range of 40-
50% of GAV. We continue to actively explore other asset
opportunities in our pipeline.
These acquisitions will underpin our objective to sustain
market leading earnings and dividend payments in the
years ahead. They enable us to build on the excellent asset
performance which has contributed to our ability to convert
high levels of irradiation into generation and revenues.
Our asset portfolio benefits from high regulated revenues
and beneficial power price fixes from September 2018, when
the power markets reached six year highs, which enabled
our Investment Adviser to avoid price fixes in the exceptional
circumstances at the height of the Covid-19 pandemic. The
high regulated revenues the Company receives from its
current portfolio will be further enhanced by the August
acquisitions.
Despite the turbulent economic conditions created by
Covid-19, the Company’s NAV per share has remained in
line with June 2019. The main drivers behind this have been
continued demand for subsidised renewable assets coupled
with significant progress made by the Company with respect
to lease extensions on the portfolio, which have offset
downward shifts within power price forecasts released since
December 2019.
As detailed in the Investment Adviser’s report, the Company
has now achieved successful planning determinations on
15 year lease extensions on over 240MWp, with activity
continuing on the remainder of the portfolio. Significantly,
the Company has not experienced, at the time of writing, any
planning rejections.
Underlying Earnings and Dividend Income
The underlying earnings for the year were £44.6m or
12.03pps (2018/19 numbers were £40.7m and 11.01pps
respectively). After amortising our long term debt, the
available profits, including brought forward reserves, were
£37.5m or 10.13pps (2018/19: £33.0m or 8.91pps).
The Board has elected to pay out our target dividend of
7.90pps and to retain the excess underlying earnings of
1.63pps generated in the period, resulting in carried forward
surplus earnings of 2.23pps. This adds to the Board’s
confidence that the Company will continue to retain its
position as the sector’s highest dividend distributor for the
foreseeable future.
Valuation and Discount Rate
Valuation methodology remains consistent with previous
reporting periods, with the Board receiving a valuation
recommendation from the Investment Adviser which is
derived from a comprehensive DCF model. This valuation is
then benchmarked, on a capacity basis, against comparable
transactional activity for UK based solar assets.
As a result of successful asset extension activity by the
Investment Adviser over the past 12 months, the Directors’
Valuation as at 30 June 2020 now includes 245MWp (ca
50% of the portfolio by capacity) being valued on the basis
of an additional 15 years of operational life, and a weighted
average life of the portfolio of 27.4 years (up from 24.2 years
in June 2019).
10
| CHAIRMAN’S STATEMENT
Demand for subsidised renewable assets has continued to be high and despite continued
softening in long term power forecasts, transaction activity has returned to levels last seen
in 2018. As such, asset valuations for portfolios with comparable subsidy bandings to the
Company’s have continued to remain between ca £1.20m/MWp to ca £1.40m/MWp.
By valuing the Company’s portfolio at an Enterprise Value of £602.5m (£1.26m/MWp), the
Directors’ Valuation as at 30 June 2020 is comparable to precedent market transactions,
in keeping with the Company’s valuation methodology of ‘willing buyer/willing seller’.
Ensuring the Directors’ Valuation remains comparable with transactional valuations, whilst
accommodating the latest power price forecasts, has resulted in the Directors reducing the
equity discount rate to 6.00% (from 7.18% in June 2019 and 6.50% in December 2019).
Furthermore, following the successful trial subscription over the past 18 months to a third
power price forecaster, the Board has determined the Directors’ Valuation as at 30 June
2020 should be based on a blended curve of three leading forecasters rather than two, as
has been the case since 2016. The blended curve is shown within the Valuation section of
the Report of the Investment Adviser, on page 74. Blending three leading curves enables the
Company to reduce the timing risk associated with using a smaller number of forecasts in
what has become an increasingly volatile market.
Investment Strategy
In June 2020 the Company requested, and subsequently received, in our July EGM, approval
to enhance its investment strategy.
Whilst the Company will continue to be primarily invested in long life UK solar energy
infrastructure, it is now able to invest up to a maximum of 25% of the Company’s Gross
Asset value in other renewable energy assets (including non-subsidised assets) and energy
storage assets.
Furthermore, the Company is now able to invest up to 10% of its Gross Asset Value* into
assets outside the UK to enable the Company to participate in acquisitions of portfolios
with a mix of UK and non-UK assets (although it remains the Company’s policy not to be
a long term holder of non-UK assets) as well as up to 5% of its Gross Asset Value into UK
solar development opportunities that are pre-construction and may be without the requisite
planning approvals or grid availability at the time of investment.
Notwithstanding the limits outlined above, the aggregate exposure to other renewable
energy assets (including non-subsidised assets) and energy storage technologies, UK solar
development opportunities and/or non-UK assets will be limited to a maximum of 30% of the
Company’s Gross Asset Value as calculated at the time of investment.
The widening of the Investment Policy is deliberately focused on the renewable technologies
that are closest to solar in terms of risk and return and the mandate change creates an
opportunity for Shareholders to benefit from continuing growth in renewables through their
investment in the Company.
* Gross Asset Value is an Alternative Performance Measure, which represents the total value of the
Company’s portfolio without deducting financing debt.
11
ANNUAL REPORT AND FINANCIAL STATEMENTS
Non-Subsidised Renewables
The subsidy free market in the UK is now with us.
As the Investment Adviser has been preparing for its arrival for the past 18 months, the
Company currently has a proprietary solar development pipeline in excess of 350MWp
through its agreements with a select number of developers and contract partners.
I have written previously about how this new market is well suited to the Investment Adviser’s
approach of working with developers and contractors in order to control the quality and scale
of the new pipeline – an approach that is essential for assets that will, in all likelihood, derive
100% of their revenue from the sale of electricity.
Looking past the severe depression in power prices caused by Covid-19 between March –
July 2020 and the hiatus this has placed on meaningful levels of construction, we believe the
conditions are in place for unsubsidised on-shore wind and solar to be scalable in the coming
years and for the Company to be a beneficiary.
The Board will continue to ensure that these potential new projects are capable of enhancing
the dividend opportunity for Shareholders by a judicious use of debt and equity financing that
leads to the expectation of higher earnings per share.
Debt Strategy
The Group has used the period to continue to amortise its debt, paying down £9.2m (£8.8m
in 2018/19) or 2.50pps. Overall leverage, at 34% of GAV as at 30 June 2020, was at the low
end of where we think is optimal for the Company.
However, in completing the acquisition of a 64.2MWp solar portfolio in August 2020 using
a bespoke £110.0 million, three-year term loan facility with National Westminster Bank plc
(‘NatWest’) the Group’s total outstanding debt has increased to £332.0 million. The debt
financing enables the Group to achieve the aim of optimising the Group’s leverage level,
increasing it to ca 44% of GAV.
Further details of the acquisition and the terms of the debt are outlined within the Report of
the Investment Adviser on page 45.
Power Prices
Looking back over the Company’s financial year, the wholesale power market continued its
decline from the highs in September 2018 as over-supply of LNG and saturated levels of UK
gas storage were exacerbated by the stringent lock down conditions imposed in March 2020
in response to Covid-19 and the material depression this created regarding overall demand
for electricity in the UK.
However, due to the flexibility of the Company’s power fixing strategy it has continued to
benefit over the period from the contribution of offtake agreements struck for up to 27
months from September 2018 when prices reached six year highs (up to £67/MWh), as well
as strategically avoiding fixing any PPAs during the period April 2020 and July 2020 when
day ahead power prices have been close to when day ahead power prices fell to historic lows.
12
| CHAIRMAN’S STATEMENT Covid-19 Contingency Planning
The Board has been delighted with the
exceptional response by our Investment Adviser
and all their employees, including those in both
Bluefield Services and Bluefield Operations,
to the rapid onset and extended period of the
Covid 19 pandemic. Full details of this response
are set out in the report of the Investment
Adviser - and while challenges still remain as
the world seeks to overcome this catastrophe,
we are confident our Investment Adviser has
the expertise and commitment to sustain this
excellent response.
Environmental, Social and Governance
In this report we introduce a detailed Environmental, Social and Governance (ESG) report that,
for the first time, lays out a more detailed and representative ESG position for the Company,
the Investment Adviser and the key service providers. It is an area of great importance and
we look forward to continuing to focus on this in coming years.
Board of Directors
With the exception of Meriel, all our Board members joined the Company at the time of
our creation in 2013 and this coming financial year will see us advance our plans for board
succession and refreshment, recognising the need for skills cognisant of the challenges
ahead, but also combining those skills with an appropriate level of continuity and ‘corporate
memory’ of the successes and challenges of our first seven years.
Summary
The performance of the Company in the past year has been very pleasing and consolidates an
above target performance since IPO. This strength of the financial performance, the valuation
and our conservative debt levels mean that the Company is in a position to look at growing its
asset base through either secondary or primary acquisitions, whilst continuing the focus on
the optimisation of the current portfolio and the delivery of attractive income.
I am well aware that the past six months have been a challenging time for all our staff,
whether working from home or in the field, and the Board and I would like to extend our
thanks for their service and support in delivering another set of exceptional results.
John Rennocks
Chairman
21 September 2020
13
ANNUAL REPORT AND FINANCIAL STATEMENTS 14
Cambridgeshire
HOBACK
Royston 17.5 MWp
1
Cornwall
2
3
NORTH BEER
Launceston 6.9 MWp
TRETHOSA
St Austell 4.8 MWp
MULTIPLE SITES
39
20 Sites
52
9 Sites
53
11 Sites
38
26
1
46
25
4
24
36
15
16
37
49
42
41
40
48
27
5
2
3
12
11
10
6
7
8
9
45
43
44
18
19
50
51
20
17
14
32
31
30
35
29
28
34
33
21
13
47
23
22
| INVESTMENT PORTFOLIO The Company’s Investment Portfolio
The Company has a geographically diverse group of assets containing a range of proven solar technology and infrastructure.
Derbyshire
4
BURNASTON
Burnaston 4.1 MWp
Devon
5
6
7
8
9
CAPELANDS
Barnstaple 8.4 MWp
LANGLANDS
Ashill 2.1 MWp
LITTLE BEAR
Exeter 5 MWp
OLD STONE
Totnes 5.0 MWp
PLACE BARTON
Totnes 5.0 MWp
Dorset
10
11
12
EAST FARM
Overmoigne 5.0 MWp
HOLLY FARM
Overmoigne 5.0 MWp
GALTON MANOR
Overmoigne 3.8 MWp
Essex
13
BARVILLS
East Tilbury 3.2 MWp
Fife
14
WORMIT
Wormit 5.0 MWp
Gloucestershire
GRANGE
Newent 5.0 MWp
15
16
GRETTON
Gretton 4.9 MWp
Hampshire
ROMSEY
Romsey 5.0 MWp
17
18
19
SAXLEY
Andover 5.9 MWp
SOUTHWICK
Fareham 47.9 MWp
Isle of Wight
DURRANTS
Newport 5.0 MWp
20
Kent
21
22
23
LITTLEBOURNE
Canterbury 17.0 MWp
MOLEHILL
Herne Bay 18.0 MWp
SHEPPEY
Isle of Sheppey 10.6 MWp
Leicestershire
GYPSUM
Sileby 4.5 MWp
24
25
THORNTON
Thornton 3.6 MWp
Lincolnshire
FOLLY LANE
Boston 4.8 MWp
26
Oxfordshire
39
40
41
42
BUTTERISS DOWNS
20 Sites 0.8 MWp
ELMS
Wantage 28.9 MWp
GOOSEWILLOW
Steventon 16.9 MWp
HILL FARM
Abingdon 15.2 MWp
Somerset
43
44
45
ASHLAWN
Axbridge 6.6 MWp
CLAPTON
Cucklington 5.0 MWp
REDLANDS
Bridgwater 6.2 MWp
Newport
27
COURT FARM
Llanmartin 5.0 MWp
Staffordshire
46
WILLOWS
Uttoxeter 5.0 MWp
Norfolk
Sussex
28
29
30
31
31
32
33
34
35
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
36
37
CORBY
Corby 0.5 MWp
KISLINGBURY
Kislingbury 5.0 MWp
North Yorkshire
KELLINGLEY
Beal 5.0 MWp
38
47
PASHLEY
Bexhill on Sea 11.5 MWp
Swansea
48
BETINGAU
Swansea 10.0 MWp
Warwickshire
49
TOLLGATE
Leamington Spa 4.3 MWp
Wiltshire
50
51
PENTYLANDS
Highworth 19.2 MWp
ROVES
Sevenhampton 12.7 MWp
Multiple Locations
PROMOTHAMES
9 Sites 0.4 MWp
(Berkshire / Hampshire)
52
53
GOSHAWK
11 Sites 1.1 MWp
(Oxfordshire / Surrey / Sussex)
15
ANNUAL REPORT AND FINANCIAL STATEMENTS Analysis of the Company’s
Investment Portfolio
The Company’s investment portfolio, analysed by geography, revenue type, subsidy tariff and contractor, as at
30 June 2020 is as follows:
Other Counties
13.0%
Norfolk
22.2%
GEOGRAPHICAL
ANALYSIS
Oxfordshire
12.9%
Derbyshire 0.9%
Swansea 2.1%
Sussex 2.4%
Cornwall 2.4%
Dorset 2.9%
Cambridgeshire
3.7%
Somerset 3.7%
Devon 5.3%
Wiltshire
6.7%
Hampshire
12.3%
Kent
9.5%
FiT
3.5%
2.0 ROC
1.9%
1.2 ROC
12.8%
1.6 ROC
19.5%
1.3 ROC
12.0%
SUBSIDY
SCHEME
16
1.4 ROC
50.3%
| INVESTMENT PORTFOLIO Sharp
1.5%
AEG 2.8%
Other Suppliers
2.8%
S-Energy 3.0%
REC 4.6%
Trina
15.3%
Yingli 5.8%
Qcells
6.3%
Jinko Solar
7.6%
MODULE
SUPPLIER
FiT
7.7%
Canadian Solar
10.3%
PPA
41.0%
JA Solar
12.1%
Hanwha
15.2%
Astroenergy
12.7%
REVENUE
TYPE*
* Revenue is based on the Company’s operating portfolio of 478.8 MWp
and does not include estimated ROC Recycle Revenue
ROC Buyout
51.3%
Refusol
1.4%
Gamesa
2.1%
Danfoss 2.8%
Other Suppliers
0.5%
Advanced Energy 3.7%
SolarMax 9.0%
Power One
19.4%
Power Electronics
11.5%
INVERTER
SUPPLIER
Huawei
18.9%
Schneider
12.8%
SMA
17.9%
17
ANNUAL REPORT AND FINANCIAL STATEMENTS 18
Strategic Report
1. Company’s Objectives and Strategy
The Company seeks to provide Shareholders with an attractive,
sustainable 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 had a dividend target that
was increased at the end of each financial year in line with RPI during
the financial year. This was amended to a progressive dividend target
after year end. Subject to maintaining a prudent level of reserves,
the Company aims to achieve this through optimisation of asset
performance, acquisitions and the use of gearing. The Company’s
dividend target for the financial year ended 30 June 2020 is 7.90pps
and the Company has declared four interim dividends totalling this
amount.
The Operational and Financial Review section on page 25 provides
further information relating to performance during the year.
19
ANNUAL REPORT AND 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
Independent Board
5 INDEPENDENT DIRECTORS
(Investment Policy, Auditing
and Reporting)
Company Management
Service Providers
Company Advisers &
Service Providers
(Company Secretary, Legal,
Corporate Broking, Public Relations)
Long Term
Finance Provider
AVIVA
LTF Agreement
RCF Agreement
Revolving
Credit Facility
ROYAL BANK OF SCOTLAND
INVESTMENT
Equity Ownership
Services
Parent
Bluefield Solar
Income Fund Limited
(Guernsey: LSE Listed, July
2013)
INVESTMENT
Portfolio Holding
Company
Bluefield SIF
Investment Limited (UK)
Investment Advisory
Agreement
Investment Adviser
BLUEFIELD PARTNERS LLP
Investment Advisory
Agreement
SPV Level Management and services contracts
INVESTMENT
Asset Manager
BLUEFIELD SERVICES LIMITED
ASSET MANAGEMENT AGREEMENT
O&M Contractor
BLUEFIELD OPERATIONS LIMITED
O&M SERVICES
20
SPVs
(Portfolio Investments held in SPVs
ultimately owned by the holding
company)
| 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.
Through the Committees and the use of external independent advisers, the Board manages
risk and governance of the Company. The Board consists of five independent non-executive
Directors, three of whom are Guernsey residents. See the Corporate Governance Report for
further details.
Investment Adviser
The Investment Adviser’s key responsibilities include identifying and recommending suitable
investments for the Company and negotiating 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 blended base fee of 0.7% of NAV at
30 June 2020.
A summary of the fees paid to the Investment Adviser is given in Note 16 of the financial
statements. The fees paid to BSL and BOL, the Solar Asset Management and Operations and
Maintenance businesses under common ownership with the Investment Adviser are also
detailed in Note 16.
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 pages 92 to 93.
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.
Repeat transaction experience with specialist advisers
The Investment Adviser has worked with a range of specialist advisers from multiple
disciplines in each of the transactions it has executed in the UK market and is able to source
relevant expertise to address project issues both during and following a transaction.
21
ANNUAL REPORT AND FINANCIAL STATEMENTS 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, the Investment Adviser always
includes contractual protection regarding recovery of
revenue losses for underperformance and obligations for
correction of defects.
Rigorous internal approval process
All investment recommendations issued to the Company,
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
the Investment Adviser’s Managing Partners,
by
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
the Investment Adviser
operational solar plants,
engages legal, technical and, where required, insurance
and accounting advisers from its extensive network to
undertake independent due diligence.
(4) Bluefield Partners LLP Investment Committee
to
Investment recommendations issued by the Investment
Adviser are made following the submission of a detailed
investment paper
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. The boards undertake
detailed review meetings with the Investment Adviser
to assess the recommended projects. If the boards
of both the Company and BSIFIL approve the relevant
transaction, the Investment Adviser is authorised to
execute it in accordance with the Investment Adviser’s
recommendation and any condition stipulated in the
boards’ approvals. The boards are regularly updated on
the pipeline of potential new investments to help provide
context for capital allocation decisions.
(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.
Managing conflicts of interest
The Investment Adviser is regulated by the FCA and is
bound by conduct of business rules relating to management
of 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 has satisfied itself that the Investment Adviser
has procedures in place to address potential conflicts of
interest which, together with any mitigation measures,
are disclosed in the investment recommendation for each
investment.
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| STRATEGIC REPORT
3. Investment Policy
The Company invests in a diversified portfolio of solar energy assets, all 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
renewable energy output over a minimum 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 GAV. 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 GAV.
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 NAV.
The portfolio provides diversified exposure through 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 UK.
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 from inception 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 invest up to 5% of GAV into development
opportunities and purchase assets pre or post construction 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 flexible
funders such as the Company are able to select their construction partners and assets
from the widest possible pool. The maturing of the UK solar market has resulted in the
Company being offered substantial operational asset portfolios;
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;
23
ANNUAL REPORT AND FINANCIAL STATEMENTS 3. Minimise risk via appropriate contractual agreements: Risk can be further reduced
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 prudent assumptions: As can be seen by the valuation contained
in this report, the Company has acquired assets based upon a prudent 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 GAV 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 pages 35 to 41. The Company was the first London listed investment company to
achieve Guernsey Green Fund Status.
24
| 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:
As at 30 June 2020
As at 30 June 2019
Market Capitalisation (£’000s)
Share price
Total dividends per share declared in relation to the year
NAV (£’000s)
NAV per share
Total Return to Shareholders
(based on share price and dividends paid in the year)
498,322
134.50p
7.90p
433,505
117.01p
4.70%
504,891
136.50p
8.31p*
436,396
117.98p
19.12%
* Total dividends declared for FY18/19 of 8.31pps included an additional dividend of 0.63pps reflecting unusually high earnings from both
higher electricity prices and high irradiation. The target dividend was 7.68p.
Acquisitions
Acquisitions are discussed within the Investment Adviser’s report in Section 2.
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.
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
Year ended 30 June 2020
£ million
Year ended 30 June 2019
£ million
0.7
28.8
(1.3)
28.2
-
28.2
7.63p
0.7
46.2
(2.0)
44.9
-
44.9
12.14p
Income for the period includes interest income and monitoring fees paid by BSIFIL to BSIF.
25
ANNUAL REPORT AND FINANCIAL STATEMENTS The total comprehensive income before tax of £28.2 million 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.
The Company’s ongoing charges ratio is 1.10% (2019: 1.07%), calculated in accordance
with the AIC recommended methodology, which excludes non-recurring costs and uses
the average NAV in its calculation. See page 136 for a tabular calculation of the Company’s
ongoing charges ratio.
SHEEP GRAZING AT CAPELANDS
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 semi-annually as at 31 December and 30 June each year, with the
Company committed to procuring a review of valuations by an independent expert at such
times as the Board deems appropriate.
Such an external review of valuation was undertaken by an independent third party for June
2018.
The Directors’ Valuation adopted for the portfolio as at 30 June 2020 was £624.3m (Note
8 of the financial statements), representing a cumulative 10.96% 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.
26
| STRATEGIC REPORT 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.
The Company’s risk register covers six main areas of risk:
• Portfolio Management;
• Operational;
• Regulatory;
• External;
• Reputational; and
• Covid-19 pandemic.
Each of these areas, together with the principal risks associated
with that category, is summarised in the table below and includes
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
EQUIPMENT AT CAPELANDS
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
NatWest plc, as well as the option to complete
a tap issuance to support further acquisitions
if required. The closure of the primary market
for subsidised solar assets has led to inflation
in secondary market prices reducing potential
yield of new purchases. The Investment Adviser
is working to secure a potential pipeline of non-
subsidised assets which the Company will have
a right to develop but not an obligation to build.
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 whilst the
Portfolio team in the Investment Adviser reviews
weekly and monthly reports.
27
ANNUAL REPORT AND FINANCIAL STATEMENTS 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.
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.
Additionally, the Board at its discretion has the
ability to obtain 3rd party valuations to corroborate
calculations prepared by the Investment Adviser.
To mitigate the impact of power price volatility on
the Company’s portfolio valuation blended power
price curves from three leading forecasters are
now used in the portfolio cash flow model.
4. Depreciation of NAV
The portfolio NAV will depreciate
towards the end of the Company’s life.
The Investment Adviser has been requested
to model how the portfolio NAV will move with
time, producing long term scenario planning for
the Board’s review. The Board has authorised the
Investment Adviser to negotiate lease extensions
on all active plants, as each successful extension
increases the life of the Company and reduces the
depreciation of the NAV. As at 30 June 2020, the
weighted average life of the portfolio is 27.4 years
(vs 24.2 years in June 2019).
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
in
weather could result in greater than
10% variability in revenue generation
year on year.
locations. Variability
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
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.
28
| STRATEGIC REPORT Risk
Potential Impact
Mitigation
5. Unfavourable
Weather and
Climate Conditions
(continued)
Global warming could impact supply
and demand for electricity.
6. Unfavourable
Electricity Market
Conditions
income generation of
Annual
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
dividend target.
The reduction of all energy prices may
also have a negative effect on the price
of all sources of energy.
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 of climate change 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.
The Company has commissioned a report on the
benefits of integrating storage technologies within
its portfolio. This technology can profit from power
price volatility.
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.
regular debt
An independent taxation review of the Company
was carried out as part of the long term debt
financing procurement process. The Company
reduce
repayments
makes
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.
to
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.
29
ANNUAL REPORT AND FINANCIAL STATEMENTS DURRANTS
Risk
Potential Impact
Mitigation
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. The Covid-19
pandemic has caused the government
to take extraordinary measures
in
2020, leading to a more volatile political
environment.
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 Company’s long term debt. 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.
10. Cyber risk
Key stakeholders could exchange
corrupt or virus infected emails with
key BSIF counterparties. Malicious
firmware may cause damage
to
hardware
loss of
resulting
generation or damage to the grid.
in a
The appointment of BSL to carry out a risk
assessment. Based on the outcome of the
assessment, corrective/improvement measures
will be produced and will be based on the level of
risk exposure the Company is exposed to.
30
| STRATEGIC REPORT REPUTATIONAL
Risk
Potential Impact
Mitigation
11. Adverse publicity
Adverse publicity within the Renewable
Energy sector could damage the Fund’s
ability to raise additional finance and/or
acquire new capacity.
Market responses have been considered and
agreed at all levels. The Board and the Investment
Adviser ensure the Fund’s activities are fairly and
accurately presented including through Broker,
Stock Exchange announcements, press releases
and web site maintenance. All incidences of
adverse publicity monitored via the Company’s
PR Adviser.
Covid-19
Risk
Potential Impact
Mitigation
12. Covid-19
pandemic
The UK government and many
other countries have
implemented
unprecedented measures to restrict
the possibility of transmission of the
Covid-19 virus by limiting personal
contact and international travel. Whilst
the ultimate scope and duration of
these measures is currently unclear,
they have had a severe impact on
the Global Economy, Governments
and the Central Banks are attempting
to offset
impact with both
traditional and unconventional fiscal
and monetary policy measures. The
Company’s portfolio will be impacted
by any risks emerging from changes in
the macroeconomic environment.
this
issues
face
The Company may
maintaining
if staff are
its plants
unable to travel or are unwell due to
Covid-19.
The Grid may experience periods of
instability or shut-down due to supply
demand imbalances resulting from
Covid-19.
The Investment Adviser monitors the situation
within Government and any potential changes to
power prices and will alert the Board accordingly.
The post year-end acquisitions of subsidy earning
assets with higher ROC earning capability than
the Company’s current portfolio should help
to reduce the portfolio sensitivity to UK power
prices.
The Investment Adviser implemented robust
remote working and social distancing and
separation protocols
to ensure business
continuity.
Plant maintenance engineers have been
designated as essential workers and are
permitted to travel during lock-down periods.
is
reviewing
the
The Investment Adviser
possibility of direct power sales to
large-
scale customers where feasible and has also
commissioned a report on the benefits of
integrating storage technologies within the
Company’s portfolio.
31
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 39, 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, 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 was held at the 2018 AGM and
resulted in a 99.46% vote in favour of continuation.
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 2023.
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 2023. 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 2023.
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 14
September 2020. 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.
32
| STRATEGIC REPORT
Directors’ Responsibilities Pursuant to Section 172 of the Companies
Act 2006
Section 172 of the Companies Act 2006 applies directly to UK domiciled companies.
Nonetheless the AIC Code requires that the matters set out in section 172 are reported
on by all companies, irrespective of domicile, provided this does not conflict with local
company law.
Section 172 recognises that directors are responsible for acting in a way that they
consider, in good faith, is the most likely to promote the success of the Company
for the benefit of its Shareholders as a whole. In doing so, they are also required
to consider the broader implications of their decisions and operations on other key
stakeholders and their impact on the wider community and the environment. Key
decisions are those that are either material to the Company or are significant to any of
the Company’s key stakeholders. The Company’s engagement with key stakeholders
and the key decisions that were made or approved by the Directors during the year are
described below.
Stakeholder group
Methods of engagement
Benefits of engagements
Shareholders
investors
The major
the
Company’s shares are set out on
page 89.
in
Continued access to capital is vital
longer term
to the Company’s
growth objectives, and therefore,
in
its objectives, the
Company seeks to maintain share-
holder satisfaction through:
line with
• Positive risk-adjusted returns
• Payment of Quarterly dividends
The Company engages with its Shareholders
through the issue of regular portfolio updates
in the form of RNS announcements and
quarterly factsheets.
the
The Company provides in-depth commentary
on
investment portfolio, corporate
governance and corporate outlook in its
semi-annual financial statements.
In addition, the Company, through
its
brokers and Investment Adviser undertake
regular roadshows to meet with existing
and prospective investors to solicit their
feedback, understand any areas of concern,
and share
investment
commentary.
forward
looking
receives quarterly
feedback
The Board
from its brokers in respect of their investor
engagement and investor sentiment.
In the financial year the Company
issued:
• Two Portfolio updates by way of
RNS
• The Company issued an EGM
circular
following consultation
with its Shareholders to revise
investment strategy and
its
fee structure. The proposals
were subsequently approved
by a substantial majority of the
Company’s Shareholders.
33
ANNUAL REPORT AND FINANCIAL STATEMENTS Stakeholder group
Methods of engagement
Benefits of engagements
Service providers
The Company does not have any
direct employees; however, it works
closely with a number of service
providers (the Investment Adviser,
Administrators, secretaries, auditor,
brokers and other professional
advisers).
The
independence, quality and
timeliness of their service provision
is critical to the success of the
Company.
Portfolio Companies
The Company held an operational
portfolio of 90 PV plants (consisting
of 49 large scale sites, 39 micro
sites and 2 roof top sites) with a
total capacity of 478.8MWp with
the portfolio displaying strong
geographical diversity.
The Company has identified its key service
providers and on an annual basis undertakes
a review of performance based on a
questionnaire through which it also seeks
feedback.
the Board and
its sub-
Furthermore,
committees engage regularly with its service
providers on a formal and informal basis.
The Company will also regularly review all
material contracts for service quality and
value.
to
The Feedback given by the service
review
is used
providers
the Company’s policies
and
procedures to ensure open lines
of communication, and operational
efficiency.
The Company is able to identify
and resolve problems with service
provider
this
process.
relationships via
to
The Feedback given by the service
review
providers
is used
the Company’s policies
and
procedures to ensure open lines
of communication, and operational
efficiency regarding
its Portfolio
Companies.
The board reviews cash-flow projections for
each investment that the company makes
and for the entire portfolio on a regular basis.
that
Investment Adviser ensures
The
when the agreements are initially put in
place, the end dates of the investments are
staggered in order to ensure a constant flow
of revenue. PPA counterparties are selected
on a competitive basis but with a clear focus
on achieving diversification of counterparty
risk. A quarterly update on the contracts is
provided in the Investment Adviser’s Report
within the Board Packs.
Community & Environment
The Company does not have any
direct employees
The Company aims to maximise its positive
environmental impact.
there
long
The Group and other clean energy
providers are doing their part to
the carbon emissions,
reduce
already
are
however
damaging
effects
term
which may
the Group
impact
during its life. The control of such
an outcome is largely out of the
Group’s control. The Company and
the Directors are minimising air
travel by making maximum use of
video conferencing for Company
related matters.
34
| STRATEGIC REPORT 8. Environmental, Social and Governance
The Company was the first solar energy focused investment
company to launch on the London Stock Exchange in 2013.
Since IPO, we have been part of a major investment theme
that has seen numerous renewable energy funds list and
build a multi-billion-pound investment sector.
Since listing, environmental considerations and concerns
about climate change have grown. So too have Shareholders’
evaluations of the social impact of their investments and of
the appropriate levels of governance, wrapping together
one of the most importance considerations in investment
today. Therefore the Board, the Investment Adviser and
service companies are delighted to present this detailed
ESG report relating to the Company for the period ending
June 2020, one that we hope demonstrates the Company’s
long held commitment to ESG.
Environmental Impact
Decarbonisation of the power sector in the UK has made
significant progress in the last ten years. The rise of
renewable energy generation, like solar, has played a major
role in this process. On a summer afternoon, the Company’s
portfolio is typically producing c.2% of the total electricity
in the UK.
Reporting Year
(01 July – 30 June)
Total CO2 Savings
(tonnes)
13/14
14/15
15/16
16/17
17/18
18/19
19/20
12,516
67,325
141,704
167,753
153,723
134,881
125,534
To increase accuracy, a different methodology has been
used to calculate CO2 savings, using actual generation data
aligned with the appropriate Government CO2 conversion
factor. Generation data has not been pro-rated in accord-
ance with conversion factor expiry dates, but instead the
conversion factor encompassing the largest proportion of
the reporting year has been used.
continuing to positively contribute towards the reduction of
CO2 emissions.
Based on a medium Ofgem’s Typical Domestic Consumption
Value of 2,900 kWh of electricity per household, last year,
our portfolio powered the equivalent of 170,700 homes,
providing enough electricity to power a medium sized city.
Community Benefits
The Company is committed to building strong relationships
with communities in close proximity to the solar assets.
Community benefit schemes are supported across the
portfolio, with significant donations made each year:
The West Raynham 50MWp solar farm is on the site of an old
RAF WWII airbase. When the site lease was extended last
year, the Company donated £13K to the RAF West Raynham
Heritage Fund in addition to the normal community benefits.
This has been used to support various initiatives, including
the inception of a visitor hub and preservation of derelict
heritage assets.
Environmental Accreditations
In 2019, the Company was awarded the LSE Green Economy
Mark and achieved Guernsey Green Fund status.
Corporate Governance
The Board recognises the importance of sound corporate
governance, particularly the requirements of the AIC Code.
The Company is currently complying with the new AIC code
effective 1 January 2019.
The Company has been a member of the AIC since 15
July 2013. The Board has considered the principles and
provisions of the AIC Code. The AIC Code 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
provides better information to Shareholders.
Since inception, the Company has saved over 800,000
tonnes of CO2 from being released into the atmosphere.
Despite the portfolio continually increasing in size, the CO2
savings started to decrease after 2017 as the mix of fossil
fuels altered. The switch from coal to gas means that the
amount of CO2 displaced by renewables diminishes. It
remains an objective of the Company to maintain and, where
appropriate, expand the portfolio over the coming year,
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.
35
ANNUAL REPORT AND FINANCIAL STATEMENTS The AIC Code is 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 2020, the Company
has complied with the provisions 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 7 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 99.
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 7 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 well-diversified representation
and it continues to value directors with diverse skill
sets, capabilities and experience gained from different
geographical and professional backgrounds that 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 pages 92 and
93 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, Laurence McNairn was appointed 1 July
2013 and Meriel Lenfestey was appointed on 1 April 2019.
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 each AGM of the Company; the next AGM is due
to take place on 26 November 2020.
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.
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 7 of the AIC Code, the Board
has considered the need for a policy regarding tenure of
service. As at 30 June 2020, each of the directors had been
on the Board for almost seven years, with the exception of
Ms Lenfestey who was appointed to the Board in 2019. With
regard to the nine year tenure limit in terms of independence,
a partial refreshment of the Board is intended to take place
at the 2021 AGM.
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 EU Market Abuse Regulations.
Directors’ Remuneration
The Chairman is entitled to an annual remuneration of
£60,000 (2019: £60,000). The other Directors are entitled to
an annual remuneration of £37,500 (2019: £37,500). Paul
Le Page receives an additional annual fee of £7,500 (2019:
£7,500) for acting as Chairman of the Audit Committee. The
Board will review all Directors’ remuneration annually.
36
| STRATEGIC REPORT The remuneration earned by each Director in the past two financial years was as follows:
Director
John Rennocks
John Scott
Laurence McNairn
Meriel Lenfestey (appointed 1 April 2019)
Paul Le Page
2020
£
60,000
37,500
37,500
37,500
45,000
2019
£
60,000
37,500
37,500
9,375
45,000
The total Directors’ fees expense for the year amounted to £217,500 (2019: £189,375).
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.
37
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 88. The Board is also responsible for issuing
appropriate half-yearly financial reports and other price-sensitive public reports.
The attendance record of the Directors for the year to 30 June 2020 is set out
below:
Director
John Rennocks
John Scott
Laurence McNairn
Meriel Lenfestey
Paul Le Page
Scheduled
Board Meetings
(max 4)
Ad-hoc
Board Meetings
(max 10)
Audit Committee
Meetings
(max 6)
3*
3*
4
4
4
1
1
9
8
10
4
4
6
5
6
* 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 all, or
the majority of, formally scheduled meetings in Guernsey, however they were
unable to attend one Board meeting, in May 2020, as a result of travel restrictions
caused by Covid-19. 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, Mr McNairn and Ms Lenfestey, ahead of such
meetings.
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.
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, is in
progress as at the date of this report. 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.
38
| STRATEGIC REPORT 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 2. 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 97 to 100. The Committee
operates within clearly defined terms of reference which are
available on the Company’s website (www.bluefieldsif.com).
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.
Internal Control and Financial Reporting
The Board acknowledge 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
• the Administrator provides administration and company
secretarial services to the Company.
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
internal control, which safeguards
management and
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 99.
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 Directors
formally appraise the performance and resources of the
Investment Adviser.
The Investment Adviser is led by its managing partners,
James Armstrong and Giovanni Terranova, who founded
the Bluefield business in 2009 following their prior work
together in European solar energy. Neil Wood, who joined
in 2013 was appointed partner in 2020 and runs the
Investment Adviser alongside the two founders. The
Investment Adviser’s team has 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 Mike Rand, Bluefield Partners
founder and former Managing Partner, 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
39
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 27 to 34 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.
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.
The Board, in conjunction with the Company’s advisers,
will continue to monitor the development of AIFMD and its
impact on the Company.
Changes in Regulation
The Board monitors and responds to changes in regulation as
they affect the Company and its policies. The key regulatory
change for the Company in the accounting period was the
adoption of the new AIC code effective 1 January 2019.
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.
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.
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 continue to be unaffected by the
changes. It is the Board’s intention that the Company will
40
| STRATEGIC REPORT 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.
PLACE BARTON
Guernsey Green Fund Status
The Guernsey Green Fund provides a platform for investments into various green initiatives
and gives investors a trusted and transparent product that contributes to the internationally
agreed objectives of mitigating environmental damage and climate change. The Company
successfully obtained Guernsey Green Fund Status on 16 April 2019.
Following an application to the GFSC, the Company was deemed to have met the following
investment criteria outlined in the Guernsey Green Fund Rules, 2019 (‘The Rules’):
• The Property of a Guernsey Green Fund shall be invested with the aim of spreading risk
and with the ultimate objective of mitigating environmental damage resulting in a net
positive outcome for the environment;
• A Guernsey Green Fund shall comprise 75% assets by value that meet the Guernsey Green
Fund Rules criteria. The remaining 25% must not lessen or reduce the Guernsey Green
Fund’s overall objective of mitigating environmental damage nor comprise an investment
of a type specified within schedule 3 of the Guernsey Green Fund Rules, 2019;
• A Guernsey Green Fund shall only comprise assets permitted to be held under its principal
documents or prospectus and of a nature described in its prospectus; and
• A Guernsey Green Fund shall not be invested in contravention of limits or restrictions
imposed under its principal documents or prospectus.
The Company fulfils the above investment criteria by investing in a diversified portfolio of
solar energy assets, each located within the UK, with a focus on utility scale assets and
portfolios on greenfield sites. The Group targets long life solar energy infrastructure,
expected to generate stable renewable energy output over a 25 year asset life. The Company
incorporates Environmental Social & Governance policies into its investment processes and
is conscious of its environmental and social impact. The production of renewable energy
equates to a significant amount of CO2 emissions saved, representing a sustainable and
ethical investment.
Paul Le Page
Director
21 September 2020
Laurence McNairn
Director
21 September 2020
41
ANNUAL REPORT AND FINANCIAL STATEMENTS 42
Report of the
Investment Adviser
JAMES ARMSTRONG
Managing Partner
GIOVANNI TERRANOVA
Managing Partner
NEIL WOOD
Partner
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 £2.5 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 over 50 individual SPV acquisitions on
behalf of BSIF since flotation in July 2013.
Bluefield’s Investment Committee has collective experience of over
£20 billion of energy and infrastructure transactions.
43
ANNUAL REPORT AND FINANCIAL STATEMENTS Covid-19 Contingency Planning
Despite the swift onset of the Covid-19 pandemic in March 2020, the Board was
pleased to see how quickly and effectively our Investment Adviser and key service
providers – Bluefield Services and Bluefield Operations – responded and successfully
implemented remote working policies for all individuals working on Bluefield Solar.
The Investment Adviser moved ten Bluefield Solar focused personnel out of its
London office in order to work remotely overseeing the investment performance
of the existing assets, portfolio enhancement (including lease extensions) and the
Company’s power sales strategy whilst Bluefield Services, the Bristol-based business
that oversees asset monitoring, reporting, technical asset management and financial
reporting successfully transitioned all employees to working remotely.
Bluefield Operations, the Company’s principal O&M contractor also ensured safe
remote working for all its staff. Furthermore, it successfully obtained ‘key worker’
status for all relevant field-based engineers so that O&M services provided to the
Company’s portfolio remained unaffected.
In total over 50 people have been working ‘remotely’ on Bluefield Solar full time since
March and it is a credit to the management teams and individuals how effective their
operations have been.
Activity that has been evidenced, as outlined in the Investment Adviser’s report, by
the strong operational performance of the portfolio before, during and after the strict
lockdown measures were first introduced by the UK Government in March 2020.
In addition, as part of the winter maintenance programme, Bluefield Services
completed a major review of the status of the portfolio’s spare parts and ordered
replacements where necessary.
A period of above-average irradiation puts into sharp focus a solar portfolio’s ability
to convert that natural resource into electrical energy. What is particularly pleasing
about the performance is that the high levels of irradiation we experienced were
captured and converted into electricity by the portfolio.
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. This performance is
attributable to our highly skilled and aligned team of asset management professionals
working diligently and expertly (and currently from home) on the portfolio which
benefits the Company every year.
44
| REPORT OF THE INVESTMENT ADVISER 2. Portfolio: Acquisitions, Performance and Value Enhancement
Portfolio
As at 30 June 2020, the Company held an operational
portfolio of 90 PV plants (consisting of 49 large scale sites,
39 micro sites and 2 roof top sites) with a total capacity of
478.8MWp, with the portfolio displaying strong diversity
through: geographical variety (as shown by the map on page
14), 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 2020, the
Investment Adviser reviewed over 700MWp of acquisition
opportunities, which included both subsidised portfolios
(500MWp) as well as a small number of ready to build
subsidy free assets (c. 200MWp). The Investment Adviser
continued to apply its stringent acquisition criteria to these
opportunities and consequently only three of the projects
assessed, totalling 13.5MWp, went on to be recommended
to the BSIF Board.
These projects, called Gretton, Thornton and Wormit
were acquired for £13.9m (including working capital and
transaction fees) in January 2020. The projects all qualify
for 1.3 ROC tariffs and were purchased using the Company’s
RCF which, as at 30 June 2020, stands drawn at £44.1m
(out of £50m).
Post Period End Acquisition
On 21 August 2020, the Company successfully completed
a material acquisition of a UK-based portfolio of 15 plants
with a total installed capacity of 64.2MWp for an initial cash
consideration of £106.6 million (including working capital)
with deferred consideration of up to £2.1 million, contingent
on securing asset life extensions. Notwithstanding the
timing of the acquisition, the Company will receive the
economic benefit of the portfolio from 1 January 2020.
The portfolio consists of 15 ground-mounted operational
solar PV plants, with 8 sites clustered in the south west
of England, 2 in west Wales and a further 5 across central
and eastern England. The portfolio benefits from attractive
subsidies; 13 of the projects are accredited under the
Renewable Obligation Certificate (‘ROC’) regime with tariffs
ranging from 1.4 – 2.0 ROCs, while two of the projects are
accredited under the feed-in-tariff (‘FiT’) scheme. Including
the FiT projects, the weighted average tariff for the portfolio
is equivalent to c.1.8 ROCs/MWh. In the period 2021-2033
(2033 being the year in which the subsidies on the earliest
plants begin to expire), the proportion of regulated revenues
from this portfolio is projected to be approximately 66%
(compared to 59% for the Company’s existing portfolio).
The acquisition has been financed by a bespoke £110m
three-year, interest only, re-drawable term loan at an
effective all in cost of c.1.40% (being margin and swap rate)
with National Westminster Bank plc, with the Company
electing to hedge 75% of the loan over a notional 18-year
period, at a swap rate of approximately 0.31% until 2038,
to provide underlying rate certainty in anticipation of a
refinancing scenario in or before August 2023.
Following the transaction, the Group’s total outstanding
debt has increased to £332.0 million and the total installed
capacity of its portfolio has grown to 543 MWp.
In keeping with the Investment Adviser’s objective to deliver
value and return accretive acquisition opportunities to the
Company, the Investment Adviser is currently assessing
a range of transactions as it looks to continue its policy of
securing high quality, return accretive acquisitions.
Subsidy Free
The Investment Adviser has continued to monitor the
progression of development across the market and through
a select number of partners, has grown the Company’s
proprietary pipeline to over 350MWp.
Whilst there remains considerable opportunity for the
Company’s development pipeline to continue to grow,
additions will only be done on a highly selective basis.
Performance
In the year to 30 June 2020 the portfolio, with a total installed
capacity of 478.8MWp, achieved a net PR of 79.12% (2019:
81.5%), against a forecast of 81.22%, generating 4.88GWh
of power, 8.3% above the forecasted level.
45
ANNUAL REPORT AND FINANCIAL STATEMENTS Table 1. Summary of BSIF Portfolio Performance for 2019/20:
Actual
2019/20
Forecast
2019/20
Delta
%
Actual
2018/19
Delta
%
Weighted Average Irradiation (Hrs)1,2
1,322.5
1,190.5
+11.1%
1,265.6
+4.5%
Net Performance Ratio (%)1,2
79.1%
81.2%
-2.6%
81.5%
-3.0%
Generation Yield (MWh/MWp)1,2
1,047.3
966.8
+8.3%
1,032.0
+1.5%
Total unit Price – Power + ROCs +LDs3 (GBP 000’s/MWh)
£133.42
£135.59
-1.6%
£129.97
+2.7%
Total Revenue – inc LDs (GBP 000’s/MWp)
£139.74
£131.08
+6.6%
£134.12
+4.2%
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 also excludes the Wormit, Thornton Lane and Gretton plants (13.5MWp, aggregated), acquired in January 2020 and Little Bear
(5.0MWp) acquired in October 2018
3. Actual and forecast revenue figures include ROC recycle estimates in line with standard forecasts
4. Actuals also include LDs of £0.39m (FY2018/19 £0.44m) and insurance claim payments of £0.37m (FY 2018/19 £0.171m).
As shown in the table above, irradiation levels during the period
were 11% higher than the Company’s forecast and 4.5% above
levels recorded in the previous reporting year with March, April
and May 2020 experienced unusually high levels of irradiation.
The high irradiation levels gave rise to significantly higher-
than-forecast generation (+8.3%) and +1.5% when compared
to the previous financial year, with a total generation of 487.6
GWh (vs. 480.2 GWh FY2018/19).
Although the Total Unit Price was slightly below forecasted
levels at £133.4/MWh (due to power price fixes in Q4 2020
being below the forecast curves from June 2019), the Total
Revenue of £139.74/MWp was considerably higher than
both expectations (+6.6%) and FY 2018/19 (+4.2%).
The portfolio’s ‘availability’ (the total time the plant was
operating, as a percentage of the maximum possible) was
97.4%, marginally lower than the forecasted level of 99%.
This was in part due to replacement of failed HV equipment,
for which insurance claims have been submitted, and in
part due to limited supplier delays outside of the control
of the Company as a result of the coronavirus pandemic.
During these periods, temporary equipment was sourced
to maintain generation where possible until the permanent
replacement parts could be delivered and installed.
Figure 1. FY 2019/20 – Actual Generation and Revenue
Note: The figure excludes assets with a collective capacity of 13.6MWp, which were acquired during the reporting period
46
| REPORT OF THE INVESTMENT ADVISER The portfolio’s net Performance Ratio of 79.1% was slightly lower than the forecast of 81.2%,
predominantly due to higher levels of irradiation reducing the efficiency of the plants (as
shown by Figure 2 below) and a small number of unexpected outages on a limited number of
plants (as outlined below in Table 3).
Taking each of the above points in turn; higher irradiation levels result in higher operating
temperatures which in turn can cause a slight reduction in the overall level of a plant’s efficiency
and some loss of power due to inverter saturation (known as ‘Clipping’ - when the Direct
Current (“DC”) power from the PV array exceeds the maximum input level for the inverter
which converts the power into Alternating Current (“AC”) - during periods of exceptionally
high irradiation levels). Although as the performance table on page 46 shows, this restriction
is overwhelmingly compensated for by outperformance in absolute power generation.
Figure 2 - 2019/20 Actual Net PR and Irradiation
Note: Figure 2 excludes assets with a collective capacity of 13.5MWp which were acquired during the
reporting period and therefore do not yet offer 12 months of performance data.
In the UK, due to lower average irradiation levels (e.g. when compared to Southern Europe)
it is common to ‘oversize’ the generating capacity by a factor of 1.2 to 1.4 (i.e. building more
module capacity than inverter capacity) to ensure that the AC power exported is maximised
at times when irradiation is below peak levels.
This is a design feature of most of our plants and has no correlation to the underlying
operational stability of the plant.
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.
47
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 within the Company’s control)
allowed the higher irradiation levels experienced during
the Reporting Period to be directly converted into higher
generation and, consequently, higher revenues being
collected.
The impact of outages resulting from events 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 a loss of 2.84% of
the Portfolio’s total generation.
Outages and curtailments which were outside the control of
the Company (for example, where these events are initiated
by a DNO for them to undertake upgrade works in the local
area) accounted for 0.70% of total generation. It should
be noted that some of the network upgrade activities
scheduled for March, April, May, and June were postponed
due to the Covid-19 pandemic. As such, it is possible that
an increased outage and curtailment regime from the DNOs
may occur during the FY20/21 reporting period, when the
upgrade works will probably need to be delivered by the
respective DNOs.
The table below summarises the main outage events during
the reporting period:
Table 2. Major Outage Events during 2019/20 Reporting Year
Generation
Lost (MWh)
Revenue Lost
(£)
Asset
Installed
Capacity
(MWp)
2,056
216.30
Southwick
47.9
1,547
120.74
Hill Farm
15.2
Brief description of Event
Systemic failure of AC circuit boards. Full replacement
programme underway by manufacturer. Insurance claim
submitted and plant fully operational.
Transformer failure between February 2020 and March
2020 due to grid voltage spikes. Insurance claim submitted
and plant fully operational.
1,138
142.82
Hall Farm
11.4
Transformer failure between March 2020 and April 2020.
Insurance claim submitted and plant fully operational.
1,264
170.70
Hardingham
20.1
770.00
96.37
Capelands
8.4
Series of central inverter faults during the reporting year
due to overheating. Replacements completed by manufac-
turer and plant fully operational.
Transformer replacement program we initiated in February
and completed in March 2020. All revenue losses covered
by the EPC contractor.
350.35
27.67
Gypsum
4.5
14.5 days DNO outage to undertake repairs to substation.
349.36
39.97
Rookery
5.o
Lower grid voltage causing the Power Plant Controller to be-
have erratically.
During the financial year, the Company received £393.4k
in LDs (£440k in FY18/19) for underperformance, revenue
losses and the rectification of minor equipment defects.
In addition, the Company’s subsidiaries received £375.4k
of payments from insurance claims and a further £1.64m of
business rates rebates, giving a combined total of £2.01m
(FY18/19 combined: £0.33m).
The ability of the Company to collect LDs in the year,
notwithstanding that the portfolio overall has performed in
line with expectations, reflects the fact that the Company
benefits from strong enforceable contractual protections
and warranties across its portfolio and that the Investment
Adviser has been disciplined in enforcing the Company’s
rights to deliver the optimal outcome for its investors.
48
| REPORT OF THE INVESTMENT ADVISER As at 30 June 2020, all but 3 PV plants, with a combined installed capacity of 454.31 MWp
had successfully passed their warranty periods and achieved final acceptance, equating to
94.9% of the portfolio. The remaining 3 sites are expected to achieve final acceptance by 31
December 2020.
During the financial year 11 plants (combined capacity of 51.47MWp, representing 10.75%
of the portfolio), completed and passed final acceptance testing.
Final acceptance occurs following the fulfilment of the contractual requirements by the EPC
Contractor. These requirements entail the plant’s performance being above the contractually
warranted levels over an average of at least two years of testing period, as well as the asset
being defect free. A comprehensive audit of the site for defects is conducted by BSL, all of
which are remedied or provided for before the final acceptance is passed. Following this
rigorous procedure and the issuance of the final acceptance certificate, the EPC Contractor is
released from its contractual obligations, though some warranties will remain in place for the
full statute of limitations period.
Following the assets passing their final acceptance, they 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, equipment failure and
business interruption.
Figure 3. BSIF Portfolio Assets Under EPC Warranty (‘pre-FAC’) and post-FAC, as at 30 June
2020
454.31
24.59
Pre FAC (5%)
Post FAC (95%)
As at 30 June 2020, the O&M contracts for a further 13 assets (totalling 73.03MWp) were
transferred to Bluefield Operations Limited (‘BOL’). BOL now provides O&M services on a total
of 36 plants with a combined capacity of 365.68MWp, equating to 76.4% of the portfolio.
Using BOL as the O&M provider to these 36 assets has provided annual operational cost savings
of c. £269.3k, in addition to the tangible operational benefits from increased contractual
service levels and faster response times through a close operational working relationship with
the asset manager, BSL.
49
ANNUAL REPORT AND FINANCIAL STATEMENTS The Company’s operating portfolio as at 30 June 2020 and the electricity generated in the 2019/20 financial year is shown below:
Table 3. BSIF Portfolio Generation for 2019/20 by Asset:
Solar Farm Asset
West Raynham
Southwick
Elms
Hardingham
Pentylands
Molehill
Hoback
Littlebourne
Goosewillow
Hill Farm
Roves
Pashley
Hall Farm
Sheppey
Betingau
Capelands
North Beer
Ashlawn
Redlands
Saxley
Holly Farm
East Farm
Durrants
Clapton
Romsey
Old Stone
Salhouse
Frogs Loke
50
Total Investment
Commitment (GBP)
Installed Capacity
(MWp)
Generation to 30 June 2020
(Actual, MW/h)
55.9
61.0
32.8
22.7
21.4
23.1
19.0
22.0
19.0
17.3
14.0
15.4
13.4
12.0
11.2
8.6
9.3
7.6
6.4
7.0
7.2
7.2
6.4
6.3
5.8
5.7
5.6
5.6
50.0
47.9
28.9
20.1
19.2
18.0
17.5
17.0
16.9
15.2
12.7
11.5
11.4
10.6
10.0
8.4
6.9
6.6
6.2
5.9
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
53,699,121
48,405,178
31,156,781
19,911,461
20,044,679
20,917,576
18,712,898
18,590,805
18,447,782
14,088,665
13,059,353
13,000,715
9,888,645
11,756,293
9,166,091
8,260,189
7,355,070
6,784,913
6,371,584
6,038,817
5,672,967
5,638,773
5,544,257
5,485,796
5,608,890
5,318,042
5,418,876
5,140,269
| REPORT OF THE INVESTMENT ADVISER Solar Farm Asset
Place Barton
Court Farm
The Grange
Bunns Hill
Oulton
Rookery
Kellingley
Kislingbury
Willows
Trethosa
Folly Lane
Gypsum
Tollgate Farm
Burnaston
Galton Manor
Barvills
Langlands
Goshawk (10 micro sites)
Butteriss (20 micro sites)
Corby
Promothames (9 micro sites)
Little Bear
SUB-TOTAL
Assets acquired during the reporting period
Wormit
Gretton
Thornton Lane
SUB-TOTAL
Total Investment
Commitment (GBP)
Installed Capacity
(MWp)
Generation to 30 June 2019
(Actual, MW/h)
5.5
5.5
5.4
5.3
5.3
5.2
5.0
5.0
4.6
5.8
5.3
4.4
4.6
14.4
5.5
3.3
3.1
2.0
2.3
2.3
1.3
6.8
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
4.8
4.8
4.5
4.3
4.1
3.8
3.2
2.1
1.1
0.8
0.5
0.4
5.0
5,345,670
5,631,503
5,288,261
5,333,424
5,208,613
4,928,605
5,278,718
5,260,159
4,931,100
4,885,289
5,048,029
4,425,750
4,401,838
4,009,266
4,256,607
3,644,579
2,131,638
1,183,623
652,245
393,598
364,835
5,507,480
556.8
465.3
487,595,312
5.1
5.1
3.7
13.9
5.0
4.9
3.6
13.5
2,721,602
2,859,254
1,869,690
7,450,546
GRAND TOTAL
570.7
478.8
495,045,857
51
ANNUAL REPORT AND FINANCIAL STATEMENTS
Swansea, Devon and Cornwall
Betingau
Swansea
Capelands
Barnstaple
Langlands
Ashill
Little Bear
Exeter
Old Stone
Totnes
Place Barton
Totnes
North Beer
Launceston
Trethosa
St Austell
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
December 2013
10.0
Sharp / REC
Prosolia
1.6 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
August 2014
8.4
S-Energy
Juwi Renewables
1.4 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
February 2017
2.1
Yingli
Ikaros
2.0 ROC
October 2018
5.0
Canadian Solar
Canadian Solar
1.2 ROC
January 2017
5.0
JA Solar
Solar Century
1.2 ROC
January 2017
5.0
JA Solar
Solar Century
1.2 ROC
October 2013
6.9
Hareon
Parabel UK
2.0 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
July 2015
4.8
REC
Wirsol Energy
FiT
52
| REPORT OF THE INVESTMENT ADVISER
53
Newport, Somerset and Dorset
Court Farm
Llanmartin
Ashlawn
Axbridge
Redlands
Bridgwater
Clapton
Cucklington
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
December 2016
5.0
Hanwha Q Cells
Parabel UK
1.2 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
August 2014
6.6
Hanwha Q Cells
Parabel UK
1.4 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
August 2014
6.2
S-Energy
Juwi Renewables
1.4 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
August 2014
5.0
Jinko Solar
Vogt Solar
1.2 ROC
Galton Manor
Overmoigne
Holly
Overmoigne
East
Overmoigne
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
March 2018
3.8
Jinko Solar
Vogt Solar
1.2 ROC
March 2018
5.0
Jinko Solar
Vogt Solar
1.2 ROC
March 2018
5.0
Jinko Solar
Vogt Solar
1.2 ROC
54
| REPORT OF THE INVESTMENT ADVISER
55
ANNUAL REPORT AND FINANCIAL STATEMENTS 56
| REPORT OF THE INVESTMENT ADVISER Warkwickshire, Glouchestshire,
Oxfordshire and Wiltshire
Tollgate
Leamington Spa
Grange
Newent
Elms
Wantage
Goosewillow
Steventon
Hill Farm
Abingdon
Roves
Sevenhampton
Pentylands
Highworth
Gretton
Gretton
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
January 2016
4.3
Canadian Solar
Solar Century
1.3 ROC
February 2016
5.0
Canadian Solar
Solar Century
1.3 ROC
February 2015
28.9
Astroenergy
Wirsol Energy
1.4 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
Aug & Nov 2013
16.9
Trina
Ikaros Solar
1.6 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
October 2013
15.2
Yingli
Solar Century
1.6 ROC
March 2015
12.7
Astroenergy
Wirsol Energy
1.4 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
February 2014
19.2
Astroenergy
Conergy
1.6 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
January 2020
4.9
AEG
CTF Solar
1.3 ROC
57
ANNUAL REPORT AND FINANCIAL STATEMENTS
58
| 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
Thornton Lane
Thornton
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
June 2017
5.0
Trina
TSF Construction
1.2 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
December 2015
4.8
Canadian Solar
Solar Century
1.3 ROC
November 2016
5.0
Canadian Solar
Solar Century
1.2 ROC
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
April 2016
4.1
Sharp
British Gas
FiT
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
December 2016
4.5
Hanwha Q Cells
Parabel UK
1.2 ROC
December 2016
0.5
Azur
British Gas
FiT
December 2016
5.0
Canadian Solar
Solar Century
1.2 ROC
June 2014
17.5
Jinko Solar
Solar Century
1.4 ROC
January 2020
3.6
AEG
CTF Solar
1.3 ROC
59
ANNUAL REPORT AND FINANCIAL STATEMENTS
60
| 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
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
December 2013
11.4
Hanwha Q Cells
Ikaros Solar
1.6 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
December 2015
5.0
Neo Solar Europe
Solar Century
1.3 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
December 2015
5.0
Canadian Solar
Solar Century
1.3 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
June 2015
50.0
Trina
MAETEL / ACS
1.4 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
February 2016
5.0
Canadian Solar
Solar Century
1.3 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
June 2015
5.0
REC
Wirsol Energy
1.3 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
January 2016
5.0
Canadian Solar
Solar Century
1.3 ROC
Hardingham
Wicklewood
Hardingham X
Wicklewood
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
September 2013
14.9
Hanwha Q Cells
Solar Century
1.6 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
November 2014
5.2
Hanwha Q Cells
Solar Century
1.4 ROC
61
ANNUAL REPORT AND FINANCIAL STATEMENTS
| REPORT OF THE INVESTMENT ADVISER
Saxley
Andover
Romsey
Romsey
Southwick
Fareham
Durrants
Newport
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
December 2013
5.9
Hanwha Q Cells
Solar Century
1.6 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
February 2016
5.0
Canadian Solar
Solar Century
1.3 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
January 2016
47.9
JA Solar
Solar Century
1.4 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
September 2014
5.0
REC
REC Systems
FiT
62
Isle of Wight,
Hampshire, Essex,
Kent and Sussex
Barvills
East Tilbury
Sheppey
Isle of Sheppey
Molehill
Herne Bay
Littlebourne
Cantebury
Pashley
Bexhill on Sea
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
December 2016
3.2
Hanwha Q Cells
Parabel UK
1.2 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
January 2014
10.6
Yingli
Solar Century
1.4 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
January 2016
18.0
Hanwha Solar One
Vogt Solar
1.4 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
January 2016
17.0
Hanwha Solar One
Vogt Solar
1.4 ROC
Investment Date
Capacity (MWp)
Panel Supplier
EPC Contractor
Subsidy Vintage
January 2016
11.5
Hanwha Solar One
Voght Solar
1.4 ROC
63
ANNUAL REPORT AND FINANCIAL STATEMENTS
Other UK Assets
and Multiple Sites
64
Butteriss Downs INVESTMENT DATE
20 sites
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
Promothames
9 Sites
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
August 2015
0.8
Trina / LDK
British Gas
FiT
August 2015
0.4
Trina
British Gas
FiT
Goshawk
11 Sites
Wormit
Fife
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
September 2014
1.1
Trina / Suntech
British Gas
FiT
INVESTMENT DATE
CAPACITY (MWP)
PANEL SUPPLIER
EPC CONTRACTOR
SUBSIDY VINTAGE
January 2020
5.0
AEG
CTF Solar
1.3 ROC
| REPORT OF THE INVESTMENT ADVISER
Value Enhancement Initiatives
As previously reported, the Investment Adviser continues
to focus on initiatives that seek to enhance and create
additional value for the portfolio, through the optimisation
of both operations and revenues.
Looking ahead, if the Company were to decide it appropriate
to value all assets on the basis of 40 year operational lives
(being the remaining 50% of the portfolio) the prospective
valuation uplift would be c .£29.9m or c.8.1pps.
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 more than 25 years).
Beyond life extensions, the Investment Adviser is continuing
to discuss opportunities within the UK’s burgeoning long
term corporate and direct wire PPA market, as both routes
have the potential to provide predictable and reliable
income streams over the long term (in some cases up to
25 years).
In addition to extending the tenor and inserting battery
storage optionality, each SPV is also including options around
the future optimisation of each plant. Examples of this
include rights to re-powering, reconfiguring, or permitting
the laying of additional conducting media (primarily cables
to support the installation of batteries).
The discussions on lease extensions also present an
opportunity for landowners to request variations and where
these do not materially affect the operation of the plants
or adversely impact the economics of its investment, the
Company makes every effort to be sympathetic to the
landowner’s wishes (such as rights to graze livestock on the
sites).
Over the last 12 months the programme has continued
to progress well, with negotiations concluded and lease
variations exercised (through option agreements) on 29
assets with a combined total of 245MWp, representing
50.00% of the portfolio as at 30 June 2020. Of these 29
assets, 23 (combined total of 205.6MWp) have received
successful planning determinations following the execution
of the extension options.
To date, 100% of the planning submissions have been
successful, often with the amended terms receiving
unanimous support from the relevant planning authority.
At the time of writing, Sheppey (10.6MWp) is currently
awaiting approval, with a further 4 assets (20MWp) being
prepared for submission in October 2020.
As a reflection of the successful progress made regarding
negotiations with landlords and receipt of positive planning
determinations the Directors believe it appropriate, within
the June 2020 Directors’ Valuation, to value 245MWp
(106.5MWp in Jun 19) of the portfolio on the basis of a 40
year operational life.
The Company’s strategy remains the same, however, and it
will continue to apply stringent capital discipline to ensure
that only assets that are accretive to Shareholders’ returns
are acquired. However, it is confident that this can be
achieved through a mix of carefully selected development
investment, private wire or corporate PPA backed new build
installations and return adjusted additions from co-located
storage and solar.
A further discipline the Investment Adviser is progressing
is the review of previous business rates levied on each
asset holding SPV. On occasion, the rateable amounts are
miscalculated by the local Ratings Offices and, if these
can be identified and formally accepted as being incorrect,
rebates are issued.
The historical rates payments made by 39 SPVs between
the 2012/13 and 2018/19 tax years were reviewed, as well
as the 2 remaining years in the current cycle (2019/20 and
2020/21). A range of discrepancies was identified which
has led to a total of £1.9m in rebates and future savings
being secured (net of professional fees). A second phase,
reviewing historical rates payments relating only to the
2017 cycle, is now underway for 16 assets.
PPA Strategy
Over the year the Company maintained its strategy of
fixing power price contracts for periods between 12 and
36 months with the majority of contracts continuing to be
struck for a minimum of 18 months (the average required
duration under the LTF agreement with Aviva).
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.
65
ANNUAL REPORT AND FINANCIAL STATEMENTS Prices can be agreed 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
value and diversification of counterparty risk.
The graph below shows that as at 30 June 2020 the Company has a price confidence level of
100% to December 2020 and c.82% to June 2021 over the pricing of its power and subsidy
revenue streams.
Figure 4. % of BSIF revenues fixed as at 30 June 2020
Note: There is c.95MWp of capacity (some 20% of the portfolio) which benefits from long term offtake
agreements, with 10 years remaining. These agreements have built in floor prices, which are automatically
applied in the absence of direct short-term power price fixes.
The Company’s strategy of fixing prices over periods of 12-36 months means the portfolio
retains the flexibility to capitalise on periods of above-forecasted power prices, as it
successfully did during September 2018 when power prices rose to their highest level for 8
years. This flexibility was made possible by the Board and Investment Adviser’s strategy of
securing leverage at the portfolio, rather than asset, level.
Furthermore, this also gives the Company the flexibility to explore value-enhancing options,
such as negotiating corporate PPA offtakes, as well as maximising potential economies of
scale by taking advantage of opportunities available only to owners who can commit significant
volumes of generating capacity.
66
| REPORT OF THE INVESTMENT ADVISER Revenues and Power Price
The portfolio’s revenue streams in the reporting period, excluding ROC recycle estimates,
show that the sale of electricity accounted for 41.0% of the Company’s income. Regulated
revenues from the sale of FiTs and ROCs accounted for 59.0%.
Looking back over the Company’s financial year, the wholesale power market movement has
been weaker than the period to June 2019.
Prices continued to be impacted by the global oversupply of LNG, and the saturated UK gas
storage levels, both of which have been key drivers of the UK power market since March 2019
but conditions were exacerbated by the stringent lock down conditions imposed in March
2020 in response to Covid-19 and the material depression this created regarding overall
demand for electricity in the UK.
Whilst European carbon prices did offer some support to the UK power market up to March
2020, they were also dramatically impacted by the onset of Covid-19 as lockdown measures
introduced across Europe severely reduced both industrial demand and emissions from the
aviation sector. This resulted in the carbon market initially losing c. 35% of its value, before
recovering to pre-Covid-19 levels by June 2020.
Consequently, the inevitable impact of the drivers outlined above was a year-on-year decrease
of 36.3% between the UK day ahead market base load power price for the 12 months to 30
June 2019 of £55.01 per MWh to £35.06 per MWh for the 12 months to 30 June 2020.
As a further illustration of the points mentioned above, the below charts compare the
wholesale electricity prices versus gas and carbon over the last 30 months.
Source data from Bloomberg. Carbon price EU ETS from Bloomberg, effective GB price based on IA
calculations
67
ANNUAL REPORT AND FINANCIAL STATEMENTS The downward movement of the wholesale power market has not been reflected in the
Company’s average seasonal weighted power price for the period to 30 June 2020, which
rose by 7.1% from £50.18 per MWh the 12 months ending 30 June 2019 to £53.76 per
MWh to 30 June 2020 as the Company continued to benefit from the contribution of offtake
agreements struck for up to 27 months from September 2018 when prices reached six year
highs (up to £67 per MWh) as well as avoiding fixing any PPAs during the period April 2020
and July 2020.
The impact of power prices on NAV is set out in the valuations section.
Targeted Charging Review - Potential Changes to the treatment of BSUoS
Background
In August 2017 Ofgem launched a Targeted Charging Review (TCR): Significant Code Review
(SCR) to investigate the way in which residual network charges are applied across the
electricity network.
In November 2019, Ofgem confirmed a number of findings from the TCR that are relevant to
the Company. These were:
• From April 2021 the BSUoS benefit will be removed. Historically this has been worth up to
£2.50/MWh, but since the Directors’ Valuations have never recognised this as a forward
benefit (it is included in fixed PPAs) there is no impact to the portfolio valuation or forecast
revenue streams and;
• From April 2022, BSUoS was expected to be charged based on gross generation, meaning
that embedded generators (e.g. solar and onshore wind) may have to pay a charge. However,
following the unforeseen impact of Covid-19, the timing for implementation of this change
is now uncertain (some estimates are from April 2025) as is the exact way in which it will be
applied. Although two main options have been proposed: 1) directly applying the charge to
all generators; or 2) applying the charge to suppliers, in which case the charge would likely
lead to a decrease in wholesale power prices.
Potential future impact on the Company’s valuations and earnings
Were the reform to conclude that BSUoS be applied as a charge, at c.£2/MWh from April
2022, then the BSIF valuation could be reduced by c.£8m (c.2.1pps) based on the blended
forecast power curve adopted for the Company’s 30 June 2020 valuation.
However, given the proposal is under consultation and the outcome has not yet been finalised,
neither the Investment Adviser nor the Directors believe it appropriate that any speculative
assumptions on the outcome of the review should be included in the Company’s 30 June
2020 valuation.
68
| REPORT OF THE INVESTMENT ADVISER 3. Analysis of underlying earnings
The total generation and revenue earned in 2019/20 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
17,005
9,490
92,475
255,869
53,847
66,435
Total
495,122
0.7
0.6
5.1
12.8
2.8
3.7
25.7
4.8
1.0
7.8
18.7
3.7
4.2
40.2
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 2019, Ofgem announced that the value for ROC recycle for the period April 2018 to
March 2019 (CP17) was £6.80/MWh (equivalent to 13.9% of CP17 ROC buyout prices). This
was in line with the ROC Recycle estimate the Company had recognised in its 30 June 2019
Financial Statements.
However, a further ‘late payment’ amount of £1.06/MWh was also announced in December
2019, equating to a further £658k. Accordingly this amount has been included within ‘Other
Revenue’ earnings for the period to 30 June 2020.
The table below demonstrates that the portfolio generated underlying earnings, pre debt
amortisation, of £44.6m (12.03pps) and underlying earnings for distribution, post debt
repayments of £9.2m (2.50pps), of £35.3m (9.53pps).
As a result, after meeting the FY19/20 dividend target of 7.90pps, the Company has been able
to increase its dividend reserves from 0.60pps to 2.23pps
69
ANNUAL REPORT AND FINANCIAL STATEMENTS Underlying Portfolio Earnings
Portfolio Revenue
Liquidated damages and Other Revenue*
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 June20
(£m)
Full year to
30 June 19
(£m)
Full year to
30 June 18
(£m)
Full year to
30 June 17
(£m)
65.9
3.8
69.7
63.6
0.8
64.4
56.2
1.7
57.9
47.9
1.3
49.2
-14.1
-13.1
-12.9
-11.4
-0.6
55.0
-5.8
-4.6
44.6
-9.2
35.3
2.3
37.6
29.3
29.3
8.4
-0.6
50.7
-5.4
-4.6
40.7
-8.8
31.9
1.1
33.0
28.4
30.7
2.3
-0.7
44.3
-4.3
-4.2
35.8
-8.3
27.5
1.1
28.6
27.5
27.5
1.1
-0.7
37.1
-4.2
-4.4
28.5
-3.4
25.1
0.8
25.9
24.6
24.8
1.1
Excess Distribution Paid
0.0
2.3
0.0
0.2
*
Other Revenue includes ROC mutualisation, ROC recycle late payment CP 17, insurance proceeds, O&M settlement agreements and
rebates received.
Includes the Company and BSIFIL (included within BSIFIL is a group tax charge of £1.2m vs £284k June 2019).
#
** 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.
70
| REPORT OF THE INVESTMENT ADVISER SUNSET AT ELMS
The table below presents the underlying earnings on a ‘per share’ basis.
Full year to
30 June 20
(£m)
Full year to
30 June 19
(£m)
Full year to
30 June 18
(£m)
Full year to
30 June 17
(£m)
Target Distribution (RPI dividend)
Total funds available for distribution (inc
reserves)
29.3
37.6
28.4
33.0
27.5
28.6
24.6
25.9
Average Number of shares in year*
370,499,622
369,883,530
369,866,027
342,735,213
Target Dividend (pps)
Total funds available for distribution (pps)
- 1
Total Dividend Declared & Paid (pps) - 2
Reserves carried forward
(pps) ** - 1-2
7.9
10.13
7.90
2.23
7.68
8.91
8.31
0.60
7.43
7.73
7.43
0.30
7.18
7.55
7.25
0.30
* 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.
*** An additional dividend of 0.63pps was paid for the year ended 30 June 2019.
71
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 with the Company
committed to conducting independent reviews as and when
the Board believes it benefits the Shareholders to do so (in
the period 2013-2019 two independent valuation reviews
were commissioned).
the portfolio comprises only non-market
As
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 IFRS 9 and IFRS 13.
Following consultation with the Investment Adviser, the
Directors’ Valuation adopted for the portfolio as at 30 June
2020 was £624.3m (30 June 2019, £622.1m).
The table below shows a breakdown of the Directors’
Valuations over the last three financial years:
Valuation Component (£m)
June 2020 June 2019 June 2018
Enterprise Portfolio
DCF value (EV)
Deduction of Project
Co debt
Projects valued at cost
(amount invested)
Project Net Current
Assets
602.7
605.2
592.5
-10.8
-11.7
-12.5
0.0
0.0
0.0
32.4
28.6
24.2
Directors’ Valuation
624.3
622.1
604.2
Portfolio Size (MWp)
478.8
465.3
460.3
During the reporting period there have been a number of
key factors that have been considered in the Investment
Adviser’s recommendation to the Directors’ Valuation:
(i) Competition for operational assets has remained high,
with demand for subsidised renewable assets continuing
to outpace the trend of falling long term power forecasts.
As such, the range of pricing on subsidised solar assets
equivalent to the ROC weighting of the Company’s
portfolio
(average c.1.4ROC) has been between
c.£1.20m/MWp and c.£1.40m/MWp. Accordingly, to
ensure the Company’s portfolio sensibly reflects market
72
pricing as at 30 Jun 2020, the Directors have reduced
the discount rate to 6.00% (versus 7.18% in June 2019
and 6.50% in December 2019);
(ii) Progress continued regarding the Company’s asset
life extension programme (as outlined in the Portfolio
section), with 245MWp (107MWp as at 30 June 2019)
of the Company’s portfolio now valued on the basis of
an additional 15 years of operational life. The Board
continues to believe the most suitable method to value
the additional cash flows from these assets is to apply
a combination of prudent assumptions on performance
and maintenance reserve as well as an increased
discount rate of 7.5% (vs 8.5% in June 2019) over the
final 10 years of extended operating life. As at 30 June
2020, the weighted average life of the portfolio was 27.4
years (June 2019; 24.2 years);
(iii) As reported in the Company’s 30 June 2019 annual
accounts and the December 2019 Interim Statements,
the Board took the decision in H1 2019 to subscribe,
on an initial 12 month trial basis, to a third power price
forecaster. This trial period has been successful and so
the Board, subject to consultation with the Investment
Adviser, considers
third
forecaster’s power curve, blended with those of the other
two leading forecasters historically used, be adopted in
the 30 June 2020 Directors’ Valuation.
it appropriate
that
this
Discounting Methodology and Discount Rate
The Directors’ Valuation is based on the discounting of post-
tax, projected cash flows of each investment, based on the
Company’s current capital structure, with the result then
benchmarked against comparable market multiples. The
discount rate applied on the post-tax levered project cash
flows is the weighted average discount rate.
In addition, the Board continues to adopt the approach
under the ‘willing buyer/willing seller’ methodology, that
the valuation of the Company’s portfolio be appropriately
benchmarked on £/MWp basis against comparable portfolio
transactions. As the period to 30 June 2020 has continued
to see high levels of competition for large scale portfolios of
equivalent or lower ROC banding to the Company’s, within
a pricing range of £1.20m/MWp - £1.40m/MWp, the Board
believes it appropriate to maintain a prudent benchmarking
approach to market activity in respect of the valuation of the
BSIF portfolio.
As a result, by valuing the portfolio at an EV of £602.7m
(June 2019: £605.2m), and an effective price of £1.26m/
MWp (June 2019: £1.30m/MWp), using a discount rate of
6.00%, the Board remains conservatively within the pricing
range of precedent market transactions.
| REPORT OF THE INVESTMENT ADVISER to apply
the conservative
The Company continues
assumption that 70% (£30.1m) of the amounts drawn under
the RCF (£44.1m as at 30 June 2020) will be converted into
long term fully amortising debt on maturity in September
2021, at an interest rate of 3.50%.
The average EBITDA interest tax shield from third party
long term debt (£178.7m) and inter-company debt (£80m)
equates to 17.9% over the life of the long term debt, being
27% (15% from external shielding and 12% from internal
shielding) in 2020 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
The blended forecast of three leading consultants used
within the latest Directors’ Valuation, as shown graphically
below, is based on forecasts released in June and July
2020 and implies a compound annual growth rate, in real
terms from 2020, over the 30 year forecast of 1.39% per
annum from a starting point in the low £30s / MWh to £45/
MWh in 2050.
For illustration purposes, the graph also includes the
impact on the June 2020 valuation if historic curves from
June 2018 and June 2019 were used in place of the latest
blended curve as well as a reference to the December 2016
curve (as this was the last point where forecasters assumed
continuous increases in power prices).
The impact of Covid-19 has meant power prices in the
short term have fallen significantly (as outlined in the PPA
section on page 65), but pricing expectations over both the
medium and longer term horizons have also been lowered
as a consequence of projected lower gas prices in the long
term, higher renewable penetration driving down prices
post 2030, and higher levels of interconnection capacity to
European markets, where prices are forecast to be lower.
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.
The percentage of the Company’s portfolio now being valued
with reference to PR from operational or final acceptance
(this covers a minimum of 2 years of operational data) is
91% (425MWp) compared to 88% (409MWp) in June 2019.
The weighted average PR for these plants, including the
effects of degradation, is 82.4% (June 2019: 82.6%).
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,
especially while the plants remain within the warranty period
and subject to outstanding contractual testing obligations.
Plant Performance
In the twelve month period to 30 June 2020, a further 11
plants (combined capacity 51.5MWp) passed FAC testing.
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 potentially be adopted within the future
cash flows of the project.
Inflation
Consistent with the change in June 2019, the Directors have
continued to apply an inflation assumption between 2020
and 2024 of 3.00% and from 2025 onwards of 2.75%.
Other Cash flow Assumptions
No material changes have been made regarding regulatory
revenue or cost assumptions.
73
ANNUAL REPORT AND FINANCIAL STATEMENTS
NAV movement
In the period, the Company paid total dividends of £31.1m,
being 4.51pps in total for the third and fourth interim
dividends in respect of the year ended 30 June 2019 and
3.90pps in total for the first and second interim dividends in
respect of the year ended 30 June 2020.
Over the period the Company’s NAV has decreased by
£2.9m, from £436.4m as at 30 June 2019, to £433.5m
as at 30 June 2020. Adjusting the 30 June 2019 NAV of
NAV Movement Graph
£436.4m for the dividends paid in the period (£31.1m)
results in an uplift in the NAV of the Company during the
period of £28.9m.
A breakdown in the movement of the NAV 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.
Post period end, in August 2020 the Company paid the third
interim dividend for the 2019/20 financial year of 1.95pps.
Portfolio Value Movement Graph
Jun 19 - Jun 20
)
n
o
i
l
l
i
m
(
£
74
-48.1
-
-
| REPORT OF THE INVESTMENT ADVISER
Directors’ Valuation movement
30 June 2019 Valuation
Additions in the period#
13.9
Re-based Valuation
Cash receipts from portfolio
Power price movement
Updated Corporate Tax rate to 19.0%
Asset life extensions
Equity discount rate change to 6.0%
Balance of portfolio return
(48.1)
(56.4)
(5.8)
15.1
42.7
40.7
(£million)
As % of re-
based valuation
622.1
636.0
(7.7)%
(9.9)%
(0.9)%
2.4%
6.9%
6.6%
30 June 2020 Valuation
624.3
(1.9%)
# Addition in the period reflects acquisition of Wormit, Thornton Lane and Gretton plants (13.5MWp in
aggregate), acquired in January 2020
Each movement between the re-based valuation and the 30 June 2020 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 three independent forecasters released updated forecasts in April and June
2020 and these have been applied to the Directors’ Valuation. The impact of adopting an even
blend of three independent forecasters as well as the latest power price fixes, against power
price expectations applied in the 30 June 2019 valuation, results in a valuation decrease of
£56.4m.
Increase in Corporation Tax to 19%
In March 2020, the UK Government announced that proposed reduction in Corporation Tax
from 19% to 17% from April 2020 was being postponed. As such, the Directors’ valuation has
duly recognised this change and this results in a reduction in value of £5.8m compared to the
30 June 2019 valuation.
Asset life update
As at 30 June 2020, 245MWp of the Company’s portfolio has been valued on the basis of 40
year operating life (versus 107 MWp in June 2019). To reflect the increased uncertainty in the
latter period of each asset’s lifetime, a discount rate of 7.50% (8.50% in June 2019) has been
applied to all cash flows after a 30 year asset life. The £15.1m increase in valuation compared
to 30 June 2019 reflects the progress of the Company’s asset life extension programme over
the last twelve months.
75
ANNUAL REPORT AND FINANCIAL STATEMENTS
Equity Discount rate
To ensure the Directors’ Valuation appropriately reflects
transactional pricing for lowly levered, UK focused portfolios
of subsidised solar assets within the UK, the Directors
have reduced the weighted average discount rate from
7.18% in June 2019 to 6.0% in June 2020. This material
reduction allows the rate applied in the Directors’ Valuation
to be prudently comparable to those now being applied by
buyers in market transactions. The impact of closer aligning
the discount rate to precedent market transactions, is an
increase of £42.7m to the Directors’ Valuation compared to
30 June 2019.
Balance of Portfolio Return
The balance of portfolio return is the result of the unwinding
of the discount rate over the period, as well as minor
operational and financial assumption changes.
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,
or 40 years for those with asset life extensions.
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 2019.
On the basis of these key assumptions, the Board believes
there remains further potential for NAV enhancement from
the potential extensions of asset life for further projects in the
portfolio as well as cost optimisation on long term O&M fees.
The assumptions set out in this section will remain subject to
continuous review by the Investment Adviser and the Board.
Reconciliation of Directors’ Valuation to Balance sheet
BALANCE AT YEAR END
Category
30 June
2020(£m)
30 June
2019 (£m)
30 June
2018 (£m)
Directors’ Valuation
624.3
622.1
604.2
BSIFIL Working Capital
20.9
19.5
18.8
BSIFIL Debt
(212.8)
(205.9)
(204.9)
Financial Assets
at Fair Value per
Balance sheet
432.4
435.7
418.1
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.
76
| REPORT OF THE INVESTMENT ADVISER 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
Original Amount
(Sept 16)
Current Amount
(Jun 20)
Tenor
Cost
Average Loan Life at
drawdown
Fixed
£121.5m
£104.6
Index-Linked
£65.5m
£62.6m
Fully amortising
over 18 years to
2034, sculpted
to cash flows
Fully amortising
over 18 years to
2034, sculpted
to cash flows
All in cost of
287.5bps
10.6
RPI plus 70bps
11.3
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.
RBSI Revolving Credit Facility
On 23 October 2018 the Company’s subsidiary RCF,
provided by RBSI to BSIFIL, was increased from £30m
to £50m and extended by a further two years to 30
September 2021. The re-stated and amended facility also
includes the option for BSIFIL to request a further one
year extension to 30 September 2022.
During the period principal repayments of £8.0m,
combined with indexation increases of £1.0m, resulted
in a total outstanding balance to Aviva Investors as at
30 June 2020 of £167.2m (Fixed £104.6m, Index linked
£62.6m).
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 one of the
lowest costs of capital in our sector (as at 3o June 2020,
the blended all in debt cost of the facilities was 2.6%).
Thanks to the prudent leverage (33.8% of GAV* as at 30
June 2020), 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.
The terms of the facility have not changed, with a constant
margin of 2.0% over LIBOR.
As at 30 June 2020 the Company’s subsidiary had drawn
£44.1m, out of £50m, from its RCF.
Both the 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, there is a
small project finance loan of £10.8m secured against
Durrants, a 5 MWp FiT plant located on the Isle of Wight.
This facility is provided by Bayern LB and is fully amortising
with a final maturity of 2029.
* GAV is the aggregation to the portfolio’s DCF value, Durrants’ outstanding debt and the working capital balances from the portfolio and
BSIFIL. As at 30 June 2020 the Company’s GAV is £656.1m.
77
ANNUAL REPORT AND FINANCIAL STATEMENTS 6. Market Developments
The first six months of the year have been characterised by the nationwide lockdown due to
the Covid-19 pandemic and a change to life as we know it. Linked to fears concerning the
pandemic, equity markets tumbled in March, after which a partial recovery was seen running
into June.
After this period of volatility in the financial markets, UK equities recovered over half of
2019’s losses in the first half of 2020. Between 1 July 2019 and 30 June 2020, the Company
generated a total return to Shareholders of 4.7% compared to negative 15.36% for the FTSE
100 index. This compares to the previous twelve month period, when the Company yielded
19.12% compared to 2.71% for the FTSE 100 index.
In terms of the UK solar PV market, evidence suggests that there has been only a relatively
small increase in the amount of capacity installed but that the momentum in project
development activity has continued.
According to statistics published by the Department of Business, Energy & Industrial Strategy
(BEIS), the cumulative capacity of solar PV installed in the UK was 13.45 GW as at the end of
June 2020 (the latest available statistics). This represents a 1.4% uplift compared to June
2019 (figures are provisional). In terms of the size of new projects, most of the new capacity
installed (55%) was in the 0 – 50 kW range but there was also 82 MW of capacity installed in
the 5 – 50 MW range (40% of new capacity).
Operational capacity accredited under the RO scheme remains broadly unchanged at c.7.3
GW, representing 54% of the total solar capacity in the UK but only 2.2% of the number of
installations. This indicates a high concentration of generation in utility scale sites. Capacity
accredited under the FiT was 5.1 GW, which equates to about 38% of total solar capacity and
83% of all installations. Unaccredited capacity is reported to be 1.1 GW (8% of total installed
capacity) and accounts for 15% of all installations.
* Source: BEIS
78
| REPORT OF THE INVESTMENT ADVISER The activity in the UK secondary solar PV market has picked
up since the start of 2020, with signs that activity may be
returning to the levels seen in 2018 and earlier. According to
the most recent figures from Bloomberg New Energy Finance
(BNEF), 350MWp changed hands between January and June
2020, which is the same level of capacity that was subject
to M&A activity in the whole of 2019. For reference, around
800MWp of solar PV capacity changed hands in 2018.
Activity in the subsidy-free market has also continued to
gather pace, despite interruptions during the period related
to Covid-19. Significant development activity is now being
carried out within the UK and estimates from Solar Power
Media indicate that that there is now a c. 10 GW pipeline of
large-scale solar projects in the development phase (as at
the end of July 2020), which is more than triple the capacity
compared to the beginning of 2019 (3.3 GW).
However, whilst development activity remains high the
level of construction remains limited to a small number of
community funded projects and a few larger projects. The
Solar Power Portal database suggests 187 MW is currently
under construction (9 projects), with a further 2.5 GW
awaiting construction.
With a portfolio of 543MWp, following the acquisition
of 64.2MWp in August 2020, the Company continues to
maintain a strong position within the UK solar market, as
it operates about 6% of the country’s utility-scale solar
PV capacity. As an established and experienced market
participant, this will be a strong foundation as the Company
continues to assess unsubsidised opportunities.
7. Regulatory Environment
Net zero target
In June 2019, Parliament passed legislation requiring the
government to reduce the UK’s emissions of greenhouse
gases so that it is a ‘net zero’ emitter by 2050. Since the
target was introduced, the Government has announced a
HM Treasury Net Zero Review. The review is expected to be
published in autumn 2020 and will set out principles to guide
decision-making in the transition to net zero. In particular, it
will focus on how the UK can maximise economic growth
opportunities from its transition to a green economy, while
also ensuring that emissions are not exported elsewhere.
UK Carbon Budgets
Carbon budgets were introduced under the 2008 Climate
Change Act. They are legally binding greenhouse-gas
reduction targets that are set for five-year periods, with
the ultimate goal of reducing emissions from in-line with
the UK’s emissions targets. The budgets are developed
considering the advice of the Committee on Climate Change
(the CCC) and are set by Parliament 12 years in advance to
provide sufficient long-term guidance to investors.
So far, five carbon budgets have been set. The fifth budget
(which was set in 2016 for the period 2028-2032) limits
UK greenhouse gas emissions to 1,725Mt carbon dioxide
equivalent (CO2e), excluding international shipping and
aviation. The CCC recommended that the target should be
met without the use of international carbon credits (apart
from the EU ETS). Most relevant to the Company, the CCC
recommended that the government should implement
policies to reduce the power sector’s carbon intensity to
below 100gCO2/kWh in 2030 compared with 450g CO2/
kWh in 2014. This represents a target reduction of 78%
with respect to 2014 levels and would be a positive step for
renewables deployment.
The CCC has reported that the targets for the first and
second carbon budgets were achieved and that the UK is
on course to meet the third target; however, it is not on
track to meet the fourth or fifth budgets. The CCC is due to
issue its recommendations for the sixth Carbon Budget in
December 2020. This will be the first budget to reflect the
Government’s net zero by 2050 target.
Update on the Contracts for Difference (CfD) scheme
On 2 March 2020, the Department for Business, Energy
and Industrial Strategy (“BEIS”) launched a consultation
to seek views on proposed changes to the CfD scheme
for the next auction, Allocation Round 4 (AR4). AR4 is due
to take place in 2021 and will bring back the inclusion of
“established” technologies such as onshore wind and solar
PV, which have not been included since the first allocation
round in 2015. Although certain design principles for AR4
are known based on previous auctions (for example, a CfD
with a 15-year strike price inflated in line with CPI inflation),
there are still a number of unknown parameters, such as
the budget, allocation for onshore wind and solar and rules
related to negative power price periods. The consultation
closed on 29 May 2020 and BEIS is currently analysing the
feedback.
79
ANNUAL REPORT AND FINANCIAL STATEMENTS
8. Environmental, Social and Governance
ESG Report from Bluefield Solar’s Investment Adviser & Key
Service Providers
Evolution of ESG within the Investment Adviser
Bluefield Partners LLP, appointed Investment Adviser to the Company in July 2013, was
established in 2009 as a solar investor before renewable energy was mainstream and a
commitment to ESG considerations was an elective choice.
Since the establishment of the Investment Adviser we have built one of the largest
solar energy portfolios in the UK. In 2013, when establishing the Company, we elected
to have a high level of oversight and governance via a fully independent board. The
Board ultimately approves any investment and we have sought to deliver sector leading
transparency in our reporting. But there is much more to do, and we look forward to
highlighting where we are today and to a path of constant evaluation and improvement.
Purpose of this Report
This report is the first full ESG report generated by the Investment Adviser and Bluefield
Group’s subsidiaries. It will act as a benchmark, highlighting current ESG activities and
providing a platform on which an informed ESG strategy can be delivered. The report will be
produced annually, creating transparency for Shareholders and highlighting the Bluefield
Group’s ongoing commitment to ESG activities.
The Bluefield Group is made up of three separate, complementary businesses: Bluefield
Partners LLP, Bluefield Services Ltd and Bluefield Operations Ltd. This business model
provides a unique opportunity to integrate and report on ESG factors across all portfolio
related tasks.
Environmental Considerations
Introduction
The threat posed by climate change has resulted in regional and global initiatives to
slow the acceleration of global warming. Environmental change (and its unpredictability)
will create both risks and opportunities, with the potential to significantly impact the
profitability of investments. To generate sustainable, long-term returns, these risks must
be acknowledged and incorporated into investment strategies.
Renewable Energy Generation
The Bluefield Group is committed to having a positive environmental impact, most notably
through the production of clean, renewable energy. The Investment Adviser was founded
to attract capital into renewable energy assets and, through the funds it acts as Investment
Adviser to, produces thousands of megawatts of clean energy each year. As a result,
thousands of tonnes of CO2 are saved from being released into the atmosphere annually,
supporting climate initiatives and the UK’s commitment to end its contribution to global
warming by 2050.
80
| REPORT OF THE INVESTMENT ADVISER Carbon Balancing
The Bluefield Group is focused on minimising its negative
environmental impact, but some impact from its activities
is unavoidable. Given this reality, the group seeks to
mitigate its impact, and where this is not possible, chooses
to offset. Through partnership with C-Level, offsetting has
been completed in 2018 and 2019 and the Bluefield Group
is certified Carbon Balanced through investment in two
C-Level projects.
Bluefield continually seeks solutions to further reduce
its impact. This includes the potential use of electronic
vehicles in the future, as suitable options become available.
Case Study: Hadza Hunter Gatherers
Based in the Yaeda Valley, Tanzania, this project empowers
this community to conserve their land and safeguard it
against deforestation. This scheme was the winner of the
2019 UN Equator Award for nature based sustainable
development.
Case Study: Communitree in Nicaragua
This scheme goes further than conventional tree planting
initiatives, providing long-term support for local communities.
To date, this project has invested US$4 million in communities
and has captured over 700,000 tonnes of CO2
Land Management
Bluefield Operations Ltd is responsible for ensuring each
asset under management is fully compliant with its Land
Environmental Management Plan (LEMP). This ensures
the asset has no net negative impact on the surrounding
environment, and
in some cases can enhance the
diversity of the fauna and flora present. Under correct
management, a solar farm can return intensively farmed
land back into natural meadows, increasing diversity and
returning nitrates to soils.
Working with environmental specialist TWIG, the focus in
2019 was given to evaluating the success of land measures
previously
landscape or
planting schemes did not succeed as hoped, due to factors
such as poor weather, measures were either repeated or
revisions to the LEMP were proposed.
implemented. Where
initial
Molehill case study
Following previous unsuccessful attempts to control a
broadleaf weed species at Molehill solar park, a new
strategy was developed in 2019 in collaboration with the
landowner. Spot treating heavily infested areas, alongside
wildflower seeding, effectively reduced the broadleaf
succession whilst also enhancing biodiversity.
Biodiversity
Bluefield is committed to supporting biodiversity and
intends to take a considered and informed approach to
increasing biodiversity across the portfolio. Benchmarking
constitutes the first step in this process and as reported
in the 2018/19 Annual Report, the Bluefield Group has
already undertaken a desktop biodiversity benchmarking
study. Distinctive biodiversity enhancement measures
were identified across the portfolio, including wildflower
seeding, bird/bat box installations and the placement of
beehives.
Enhancement Measure
% BSIF portfolio (large scale
sites only) with measure
Wildflower Seeding
Bird box
Bat box
Beehives
Grazing
86%
60%
62%
4%
32%
81
ANNUAL REPORT AND FINANCIAL STATEMENTS The focus for the upcoming financial year is to benchmark biodiversity through ecological
surveys. The quantitative data obtained will be used to measure the effectiveness of additional
biodiversity enhancement measures implemented in the future. A small sample of sites will
be surveyed initially, potentially in collaboration with a University.
Sheep grazing
Many sites within the portfolio allow sheep grazing, demonstrating that solar farms can
support farming. Grazing also provides a cost-effective way of managing grassland in solar
farms while increasing its conservation value.
Beehives
Bluefield has been trialling placement of beehives on various sites, supporting local bee
farmers as well as surrounding ecosystems. There are plans for the widespread deployment
of hives across the portfolio.
Social Considerations
Introduction
The Bluefield Group strives to achieve the highest levels of social responsibility and aims
to maximise its positive impact on local communities and provide a dynamic environment
for its workforce.
Covid-19 Response
The Bluefield Group adjusted efficiently to the circumstances imposed by the Covid-19
pandemic, continuing to run as normal with only slight adjustments to service. In
accordance with Government instructions on 23 March, all employees who were able to
work from home were asked to do so with immediate effect. Key workers were identified
and remained working as normal, with additional measures implemented to mitigate
Health & Safety risk.
Mental health remained a priority, with managers frequently meeting with employees
about their mental and physical well-being. No organisational redundancies took place
and the majority of staff have been able to work effectively from home locations.
Employees were encouraged to help with local initiatives to support the pandemic relief
efforts and were granted paid time off to do so if they indicated interest.
The Bluefield Group acknowledges that working practices will differ in the post-pandemic
era. Work is underway to define the ‘new normal’ and how employees can be best supported
to achieve a good work/life balance.
Bluefield Culture
Bluefield is an equal opportunities employer and believes all employees should be treated
fairly and equitably. There is zero tolerance for bullying or harassment and mental health
is treated as a priority. A staff Engagement Survey will be introduced at the end of 2020
to provide insight into job satisfaction and inform strategies to further enhance employee
experience.
82
| REPORT OF THE INVESTMENT ADVISER A strong Health and Safety (H&S) culture has been generated
within the group, with further detail listed in the ‘Health and
Safety’ section of this report.
Staff Development
The Bluefield Group promotes a learning culture and
growth mindset. An annual training budget is maintained
per employee and internal talent is regularly identified and
developed, with numerous progression pathways within the
business. During the last 12 months there were 8 internal
promotions across the group – over 10% of the total
employees as at 30th June 2020.
Case Study – Nunzia
“I joined Bluefield Partners LLP as a document manager after
completing my law degree. Though I joined as a paralegal,
Bluefield offered me the opportunity to study for my Legal
Practice Course. During my two-year training contract, I was
given flexibility to complete my studies and with Bluefield’s
support I am now a fully qualified lawyer.
Education
Work Experience & Internships
The Bluefield Group provides internships, apprenticeships
and work experience for students across the UK, increasing
awareness of career opportunities within the renewable
energy sector and further promoting Bluefield’s objective
of sustainability. Last year, the Bluefield Group provided 8
work experience placements (including an apprenticeship).
Two of these placements resulted in permanent job offers
within the Monitoring and Administration teams.
George Oxley case study
“I completed an internship with Bluefield during summer
2019 and gained knowledge and experience of the renewable
sector. Upon completing my degree, I was keen to apply to
Bluefield for a full-time position and was offered the role of a
Monitoring and Performance Engineer. I have no doubt that
my internship helped with my application and I look forward
to my future with Bluefield.”
Governance
The Bluefield Group’s reputation and integrity could not
have been achieved without strict governance and controls.
Each Bluefield business is independent of the other and its
governance is carefully crafted, with each company led by a
different management team. This ensures the fiduciary duty
to act in the best interest of each company, is paramount.
At the same time, common goals and aspirations are
developed to focus group direction.
Commitment to ESG
ESG principles have been intrinsic to the development of the
Bluefield Group. The group is committed to upholding ESG
considerations and creating a transparency with regard to
its accountability by reporting annually to its Shareholders.
Responsibility for ESG was placed with the Portfolio Director
and has been fully supported at the highest level by the
Directors of the companies.
Third party due diligence
A comprehensive vetting process has been developed
to ensure subcontractors are suitably qualified, carry
appropriate levels of insurance and have planned works in
a safe manner. This is primarily achieved through use of a
sub-contractor questionnaire and analysis of contractor
certification. Training in these matters is undertaken by
appropriate staff. Searches and checks are tools that are
applied during initial tenders and negotiations, as well as
during formal audits. The Group focuses on ensuring that
none of its counterparties have ever been sanctioned by
worldwide authorities.
Anti-Bribery, Money Laundering and Slavery
Internal policy requires that the companies, and all those
who work for them and with them, uphold principles
embodied in the anti-bribery, anti-money laundering and
anti-slavery/trafficking legislation. These requirements are
reflected in contractual obligations and may be followed up
with annual audit requirements of contractors. Policies are
subject to periodical reviews and renewed as appropriate,
with staff trained on a yearly basis.
Engagement with Universities
The Bluefield Group has attended multiple University
events, promoting the group as an employer of choice.
Included was the University of Bristol’s first Sustainability
Careers Event. CEO of Bluefield Services Ltd, Howard Johns,
ran voluntary seminars for students at Bristol and Exeter
Universities, discussing the climate emergency and the role
of renewable energy in its resolution. The seminars proved
popular and several students subsequently applied for
future placements within the Bluefield Group.
Compliance
Regulation and compliance direct Bluefield’s decision
making and underpin all work undertaken. Widespread
awareness of legal obligations throughout the senior teams
ensures a vigilant company approach. The Investment
Adviser uses third party compliance advisers to ensure
its regulatory obligations are met through annual audit
on business activities. Annual training on regulation and
internal policies is given to relevant staff.
83
ANNUAL REPORT AND FINANCIAL STATEMENTS | REPORT OF THE INVESTMENT ADVISER
Asset Management ensure compliance with the specific conditions associated with
each asset, throughout the asset’s lifetime. Internal processes and procedures are used
alongside the Asset Management platform to ensure all regulations are adhered to, with
regular site visits confirming that environmental conditions are being met.
GDPR
Staff compliance with GDPR regulation is a priority. Risk impact assessments have been
conducted across every department to ensure that GDPR principles are embedded
throughout the group. Comprehensive policies have been implemented and reviewed
regularly, and all employees undertake mandatory GDPR training. The result is a workforce
highly aware of confidentiality matters, with full understanding around data treatment
and retention.
Cyber Security
Cyber security has been a focus for the Bluefield Group. In addition to formal training in
this area, there has been careful penetration testing on systems and benchmark studies
on one of the largest solar farms, to identify risks. Active plans are underway to strengthen
security across the portfolio and office networks.
Transparency & Reporting
Over the last year significant investment has been made into systems, improving
transparency and making reporting automated and consistent across the group. Creation
of a data warehouse and implementation of a specialist Asset Management system will
allow for more powerful and frequent reporting on the status of the assets, and a more
standardised approach to portfolio management.
PRI
In 2019 the Investment Adviser became signatory to the Principles of Responsible
Investment (PRI). The PRI principles are part of the Investment Adviser’s due diligence
when making acquisitions. Compliance with these principles is reported to the Company
board before any acquisition is completed.
Health and Safety
The Bluefield Group has a rigorous approach to Health & Safety management, with Health
& Safety awareness embedded at every level of the organisation. The on-site activities of
Bluefield Operations Ltd pose the highest risk and are therefore a key area of focus.
Comprehensive Health & Safety policies and processes, created alongside specialist
consultants, are frequently reviewed to ensure compliance with the latest Health & Safety
guidance. Every task, whether corrective maintenance or just a site visit, is proceeded by Health
& Safety analysis. This identifies the set of risk assessments and method statements required.
Technology is integral to the Health & Safety management approach. Documenting Health
& Safety information electronically allows for powerful Health & Safety reporting and
ensures a consistent method of Health & Safety management across a remote, field-based
team. Office staff can be notified in minutes of the latest Health & Safety risk assessments,
reports and incidents on site.
During the last contractual year, Bluefield Operations Ltd spent over 2,350 contracted
hours on corrective maintenance. There were no major Health & Safety issues to declare.
84
Corporate Responsibility
Partnership
The Bluefield Group believes that collaboration between organisations is essential to
maximising the positive impact society can have on climate change. The group supports
a number of schemes focused on the preservation and restoration of the environment,
including several tree planting initiatives. The Bluefield Group will continue to contribute to a
variety of schemes during the upcoming financial year.
to go
further with
Wild Aligned Programme
Developed by C Level, Wild Aligned allows
their
organisations
commitment to reforestation and rewilding.
It provides opportunities for organisations
to have direct involvement with native tree
planting initiatives. Reforestation partners
include: The Children’s Forest, Forests
without Frontiers and Rewilding from Within.
Charities
The Bluefield Group organises an annual charity event. For the 2019 fundraiser, employees
cycled from Bristol to the London office. Beneficiaries of the event included: MIND, Julian
House and the Bumblebee Conservation Trust. If staff undertake additional fundraisers,
historically Bluefield matches the donations raised.
Objectives for the upcoming year include aligning each business with an appropriate charity
and the introduction of corporate responsibility days across the group.
Contribution to Sustainable Development Goals
The Bluefield Group understands the importance of the SDGs and their role in the positive
development of human society. Moving forward, the Bluefield Group hopes to incorporate
Sustainable Development Goals (SDGs) into its ESG strategy.
Looking Forward
The Bluefield Group is committed to increasing its ESG activities. This report, the first of its
kind for Bluefield, has been created to act as a benchmark from which an ESG strategy can
be devised and integrated across the group.
Over the next year the Bluefield Group will continue to develop its strategy, as well as
continuing with current ESG activities. An ESG report will be produced annually, providing
transparency to Shareholders and highlighting Bluefield’s ongoing dedication to maximising
the positive impact it has on the societies and environments it is part of.
Bluefield Partners LLP
21 September 2020
85
ANNUAL REPORT AND FINANCIAL STATEMENTS 86
AERIAL VIEW AT ROOKERY
Report of the Directors
The Directors hereby submit the annual report and financial
statements of the Company for the year ended 30 June 2020.
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 and
as a Green Fund after successful application under the Guernsey Green
Fund Rules to the GFSC on 16 April 2019. 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 7pps 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 seventh financial year ended 30 June 2020 was 7.90pps.
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 13, Strategic
Report on pages 19 to 41 and in the Report of the Investment Adviser
on pages 43 to 85.
Listing Requirements
The Company has complied with the applicable Listing Rules through-
out the year.
s and Dividends
Results and Dividends
The results for the year are set out in the financial statements on
pages 105 to 129.
The dividends for the year are set out in the financial statements in
Note 14 on page 124.
87
ANNUAL REPORT AND FINANCIAL STATEMENTS Share Capital
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 2020 are detailed below:
Director
Ordinary Shares
of £1 each held
30 June 2020
% holding at
30 June 2020
Ordinary Shares
of £1 each held
30 June 2019
% holding at
30 June 2019
John Rennocks*
316,011
John Scott
512,436
Laurence McNairn
441,764
Meriel Lenfestey
-
0.09
0.14
0.12
-
316,011
452,436
441,764
-
0.09
0.12
0.12
-
Paul Le Page
70,000
0.02
70,000
0.02
*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 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 it
believes 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.
88
| REPORT OF THE DIRECTORS 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 26 November 2019. 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 26 November 2019 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 26 November 2020.
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 24 July
2020.
Substantial Shareholdings
As at 21 September 2020, 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
Shareholding
% Holding
Newton Investment Management
44,858,860
12.11
BlackRock
32,194,783
Legal & General Investment Management
24,617,401
CCLA Investment Management
Gravis Capital Management
L&P Group
23,964,426
23,932,457
19,930,005
Hargreaves Lansdown, stockbrokers (EO)
18,728,896
Aberdeen Standard Capital
JM Finn, stockbrokers
17,123,059
14,841,562
8.69
6.64
6.47
6.46
5.38
5.06
4.62
4.01
89
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 2020.
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.
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 97 to 100.
Articles of Incorporation
The Company’s Articles may be amended only by special resolution of the Shareholders.
Going Concern
At 30 June 2020, the Company had invested in 90 solar plants, committing £566.3 million
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 these
financial statements, has 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.
The current worldwide Coronavirus outbreak (Covid-19), declared by the World Health
Organization as a global health emergency in March 2020, has caused disruption to
businesses and economic activity. The Board and Investment Adviser have been closely
monitoring this and indeed all other material macro sources of uncertainty related to
Covid-19 and its potential impact on the Company and its operations.
The Investment Adviser activated its business continuity plan and its regular working
pattern has changed to remote working, though all staff are continuing to assume their
day-to-day responsibilities remotely. There has been regular communication with its
employees, as well as with its investors. In addition, the Investment Adviser is continuing
to explore potential investment opportunities in this new environment, so that the
Company can best position the portfolio for the future.
The Board has concluded that it is appropriate to adopt the going concern basis of
accounting in preparing the financial statements.
90
| REPORT OF THE DIRECTORS Internal controls review
Taking into account the information on principal risks and uncertainties provided on pages 27
to 34 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 taken as a whole 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.
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 27 to 34.
Annual General Meeting
The AGM of the Company will be held on 26 November 2020 at Floor 2, Trafalgar Court,
Les Banques, 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
Paul Le Page
Director
21 September 2020
Laurence McNairn
Director
21 September 2020
91
ANNUAL REPORT AND 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, 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. He has an MA in Economics from
Cambridge University and an MBA from INSEAD. He is also
a Fellow of the Chartered Insurance Institute.
92
| DIRECTORS STATEMENTS FRM
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 former
executive Director
and
Senior Portfolio Manager
of
Investment
Management Limited, a
subsidiary of Man Group,
and holds non-executive
directorships at a number
of London Stock Exchange
listed investment funds. Mr. Le Page is Audit Committee
Chair of UK Mortgages Limited and RTW Venture Fund
Limited and was previously Audit Committee Chair of
Thames River Multi Hedge PCC Limited and Cazenove
Absolute Equity Limited. Mr. Le Page has 16 years’ Audit
Committee experience within the closed end investment
fund sector and has a broad-based knowledge of the
global investment industry and product structures. Mr Le
Page graduated from University College London and later
received an MBA from Heriot Watt University in Electrical
and Electronic Engineering and qualified as a Chartered
Electrical Engineer whilst leading the development of
robotic immunoassay equipment. He obtained an MBA
from Heriot Watt University in 1999 which he used to
switch from industrial R&D to investment research
a
Laurence McNairn
Laurence McNairn was
appointed
non-
as
executive director of the
Company on 1 July 2013.
He was a founding director
and co-owner of Heritage
International Fund Managers
Limited from 2006 where
for
he was
the operational delivery
and
relationship
management for a number
of key relationships. Prior to his time with the Heritage
Group Laurence was a director of Guernsey International
responsible
client
Fund Managers Limited, a Baring Asset Management
Group company. During his career with Heritage and
Barings he held board appointments with a number of
prominent Fund Management groups with particular focus
on private equity, infrastructure, property and alternative
investment funds. Prior to his career in fund management
and administration Laurence was the Finance Director of
an industrial electronics manufacturing company which
was a subsidiary of a UK plc. Prior to this he worked in
professional practice with KPMG. He is a member of the
Institute of Chartered Accountants of Scotland and holds
a degree in Accountancy and Operational Research from
Strathclyde University.
tactical
Lenfestey
Meriel Lenfestey
Lenfestey was
Meriel
appointed
a non-
as
executive director of the
Company on 1 April 2019.
Ms
founded
Flow Interactive in 1997,
a London based Customer
Experience
Consultancy
providing creative strategic
and
expertise
across all sectors embracing
digital transformation. Since exiting the business
in
2016 she has held a portfolio of non-executive director
and advisory roles across Energy, Telecoms, Transport,
Infrastructure, Technology, E-gaming, Entrepreneurial
Support and local charities. She is Chair of Gemserv, a
provider of consultancy and governance services helping
the Energy and Health markets embrace technology-driven
change and deliver large programmes effectively; Senior
Independent Director at Jersey Telecom who are leading
the world in full fibre, delivering innovative global IOT
(Internet of Things) services and providing local data and
voice services; as well as holding non-executive director
roles at International public partnerships (FTSE 250 INPP)
and Aurigny Air Services. She has an MA in Computer
Related Design from the Royal College of Art, a Financial
Times Non-Executive Director Diploma and is a Fellow of
the RSA.
93
ANNUAL REPORT AND FINANCIAL 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 are required to prepare the financial statements in
accordance with IFRS as adopted by the EU and applicable
law. Under the Law, the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Company
and of its profit or loss 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,
relevant and reliable;
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements;
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.
• assess the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to
going concern; and
By order of the Board
• 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 are
for keeping proper
responsible
accounting records that are sufficient to show and explain
the Company’s transactions and 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
Paul Le Page
Director
21 September 2020
Laurence McNairn
Director
21 September 2020
94
| DIRECTORS STATEMENTS Responsibility Statement
of the Directors in Respect
of the Annual Report
Each of the Directors, whose names are set out on pages 92 and 93 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 27 to 34.
DUSK AT ELMS
Having taken advice from the Audit Committee, the Directors consider the annual report
and financial statements, taken as a whole, is fair, balanced and understandable and that
it provides the information necessary for Shareholders to assess the Company’s position,
performance, business model and strategy.
By order of the Board
Paul Le Page
Director
21 September 2020
Laurence McNairn
Director
21 September 2020
95
ANNUAL REPORT AND FINANCIAL STATEMENTS 96
AERIAL VIEW AT WEST RAYNHAM
Report of the Audit
Committee
The Audit Committee, chaired by Paul Le Page and comprising all
of the Directors set out on page 2, 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 or further three year periods. 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
three members with an investment background.
97
ANNUAL REPORT AND 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, 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;
• reviewing and considering the UK Code, the AIC Code, the FRC Guidance on Audit Committees
and the Company’s institutional investors’ commitment to the UK Stewardship code; and
• reviewing the risks facing the Company and monitoring 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.
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.
98
| REPORT OF THE AUDIT COMMITTEE Meetings
The Committee has met formally on 6 occasions in the
year covered by this report. The matters discussed and
challenged at those meetings were:
• consideration and agreement of the terms of reference of
the Audit Committee for approval by the Board;
• review of the Company’s risk matrix;
• review of the accounting policies and format of the
financial statements;
• 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;
• 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.
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 27 to
34 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.
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 investments held by the Company 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 2020 was £624,268,573 (2019: £622,055,477).
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 8 in the
financial statements.
The valuation of the BSIFIL’s portfolio of solar assets
(Directors’ Valuation) as at 30 June 2020 has been
determined by the Board based on information provided by
the Investment Adviser.
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 fourth 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
99
ANNUAL REPORT AND FINANCIAL STATEMENTS To assess the effectiveness of the Auditor, the Committee
has reviewed and challenged:
• the Auditor’s fulfilment of the agreed audit plan and
variations from it;
• discussions or reports highlighting the major issues that
arose during the course of the audit;
• 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.
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 2021.
The Chairman of the Audit Committee will be available at
the AGM to answer any questions about the work of the
Committee.
On behalf of the Audit Committee
Paul Le Page
Chairman of the Audit Committee
21 September 2020
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
investment
of the financial statements; provision of
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.
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 £150,822 for the year ended 30 June 2020
(30 June 2019: £116,814) of which £133,744 related to
audit and audit related services to the Company (30 June
2019: £94,406) and £17,078 in respect of non-audit
services (30 June 2019: £22,253).
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.
100
| 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 2020,
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 2020, and
of the Company’s financial performance and the cash flows for the year then ended;
• are prepared in accordance with International Financial Reporting Standards 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 matter was as follows (unchanged from
2019):
Valuation of financial assets held at fair value through profit or loss:
£432,426,000; (2019: £435,736,000)
Refer to the Report of the Audit Committee on pages 97 to 100, note 2 (j) accounting policy
and note 8 disclosures.
101
ANNUAL REPORT AND 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 (2020: 99.8%; 2019: 99.8%). The fair
value of the immediate subsidiary, which reflects its
net assets value, predominantly comprises of the fair
value (£624,269,000) of underlying special purpose
vehicle solar project investments (“SPVs”) and the
immediate subsidiary level debt (see note 8).
The fair value of the SPVs has been determined using
the income approach, discounting the future cash
flows of underlying solar projects (the “Valuations”),
for which there is no liquid market. The Valuations
incorporate certain assumptions including discount
rate, electricity price forecasts, useful economic life
and other macro-economic assumptions.
in the
In determining the discount rate used
Valuations, the relevant long term government bond
yields, cost of debt, specific 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 Valuations represent both a risk of fraud and error
associated with estimating the timing and amounts of
long term forecast cash flows alongside the selection
and application of appropriate assumptions and the
impact COVID-19 has had on those assumptions.
Changes to long term forecast 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 assessed the design and implementation of controls
over the Valuations.
MODEL INPUTS:
We assessed the key project specific inputs into the cash
flow forecast, 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 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:
With support from our KPMG valuation specialist, using
their experience in valuing similar assets, we assessed
and challenged the appropriateness of the Company’s
key assumptions
rate, useful
economic life and other macro-economic assumptions
applied in the Valuations, and the impact COVID-19 has
had on those assumptions, by:
including discount
• assessing, for a risk based selection, the historical
accuracy of the cash flow forecasts against actual
results in order to assess their reliability; and
• benchmarking against independent market data and
relevant peer group companies, where available.
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 judgements in
arriving at fair value.
We assessed whether the disclosures around the
sensitivities to changes in assumptions reflected the
risks inherent in the valuation of the SPVs.
102
| 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 £8,374,000, determined with reference to a benchmark
of Net Assets of £433,505,000, of which it represents
approximately 2% (2019: 3%).
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £418,000,
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
The directors have prepared the financial statements on
the going concern basis as they do not intend to liquidate
the Company or to cease its operations, and as they have
concluded that the Company’s financial position means
that this is realistic. They have also concluded that there are
no material uncertainties that could have cast significant
doubt over its ability to continue as a going concern for
at least a year from the date of approval of the financial
statements (“the going concern period”).
In our evaluation of the directors’ conclusions, we
considered the inherent risks to the Company’s activities
including where relevant the impact of the COVID-19
pandemic and
the applicable
the requirements of
financial reporting framework. We analysed how those
risks might affect the Company’s financial resources or
ability to continue operations over the going concern
period, including challenging the underlying data and key
assumptions used to make the assessment, and evaluated
the directors’ plans for future actions in relation to their
going concern assessment.
Based on this work, 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
these respects.
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report but does not include the financial
statements and our auditor’s report thereon. 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.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
Disclosures of emerging and 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 viability statement
(page 32 and 33) that they have carried out a robust
assessment of the emerging and 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 viability statement (page
32 and 33) 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
103
ANNUAL REPORT AND FINANCIAL STATEMENTS 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
provisions of the UK Corporate Governance Code specified
by the Listing Rules for our review.
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.
We have nothing to report to you in these respects.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
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.
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
21 September 2020
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
94, 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.
104
| INDEPENDANT AUDITOR’S REPORT Statement of Financial Position
As at 30 June 2020
Assets
NON-CURRENT ASSETS
Note
Year ended
30 June 2020 (£ ’000)
Year ended
30 June 2019 (£ ’000)
Financial assets held at fair value through profit or loss
8
432,426
Other payables and accrued expenses
11
Total non-current assets
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Liabilities
CURRENT LIABILITIES
Total current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Other reserves
Retained earnings
TOTAL EQUITY
Shares
9
10
432,426
768
747
1,515
435,736
435,736
768
278
1,046
433,941
436,782
436
436
436
386
386
386
433,505
436,396
368,712
368,013
-
64,793
699
67,684
13
433,505
436,396
Ordinary Shares in issue at year end
Net asset value per Ordinary Share (pence)
13
7
370,499,622
369,883,530
117.01
117.98
These financial statements were approved and authorised for issue by the Board of Directors on 21 September 2020 and
signed on their behalf by:
Paul Le Page
Director
21 September 2020
Laurence McNairn
Director
21 September 2020
The accompanying notes form an integral part of these financial statements.
105
ANNUAL REPORT AND FINANCIAL STATEMENTS Statement of Comprehensive Income
For the year ended 30 June 2020
Income
Investment income
Interest income from cash and cash equivalents
Note
4
Year ended
30 June 2020
(£’000)
Year ended
30 June 2019
(£’000)
725
2
727
725
1
726
Net gains on financial assets held at fair value through profit
or loss
8
28,851
46,166
Operating income
29,578
46,892
Expenses
Administrative expenses
5
1,338
Operating expenses
1,338
1,967
1,967
Operating profit
28,240
44,925
Profit and total comprehensive income for the year
28,240
44,925
Earnings per share:
Basic and diluted (pence)
12
7.63
12.15
All items within the above statement have been derived from continuing activities.
The accompanying notes form an integral part of these financial statements.
106
| STATEMENT OF FINANCIAL POSITION Statement of Changes in Equity
For the year ended 30 June 2020
Number of
Ordinary
Shares
Note
Share capital
(£’000)
Other reserves
(£’000)
Retained
earnings
(£’000)
Total equity
(£’000)
Shareholders’ equity at
1 July 2019
SHARES ISSUED DURING THE PERIOD:
Ordinary Shares to be issued in
settlement of variable fee
369,883,530
368,013
699
67,684
436,396
16
616,092
699
(699)
-
-
Dividends paid
13,14
Total comprehensive income for
the period
-
-
-
-
Shareholders' equity at
30 June 2020
370,499,622
368,712
-
-
-
(31,131)
(31,131)
28,240
28,240
64,793
433,505
For the year ended 30 June 2019
Number of
Ordinary
Shares
Note
Share capital
(£’000)
Other reserves
(£’000)
Retained
earnings
(£’000)
Total equity
(£’000)
Shareholders’ equity at
1 July 2018
SHARES ISSUED DURING THE PERIOD:
Ordinary Shares issued in
settlement of variable fee
Dividends paid
16
13,14
Total comprehensive income for
the period
Shareholders' equity at
30 June 2019
369,883,530
368,013
-
50,983
418,996
-
-
-
-
-
-
699
-
699
-
-
(28,224)
(28,224)
44,925
44,925
369,883,530
368,013
699
67,684
436,396
The accompanying notes form an integral part of these financial statements.
107
ANNUAL REPORT AND FINANCIAL STATEMENTS Statement of Cash Flows
For the year ended 30 June 2020
Year ended
30 June 2020
(£’000)
Year ended
30 June 2019
(£’000)
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Total comprehensive income for the year
28,240
44,925
Adjustments:
Increase in trade and other receivables
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
16
8
-
50
-
(14)
28
699
(28,851)
(46,166)
Net cash used in operating activities
(561)
(528)
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts from investments held at fair value through
profit or loss
8
32,161
28,528
Net cash generated from investing activities
32,161
28,528
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid
13
(31,131)
(28,224)
Net cash used in financing activities
(31,131)
(28,224)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
10
469
278
747
(224)
502
278
The accompanying notes form an integral part of these financial statements.
*The issuance of shares during the year was a non-cash transaction. Refer to Note 16 for further information
108
| STATEMENT OF FINANCIAL POSITION Notes to the
Financial Statements
for the year ended 30 June 2020
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 2020 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.
ROMSEY
109
ANNUAL REPORT AND 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 Law.
Standards, interpretations and amendments to published standards adopted in the period
The Company has not adopted any new standards, amendments or interpretations to existing
standards in the accounting period.
New and Revised Standards
The Company has not adopted any new standards, amendments or interpretations to existing
standards because none effective to the Company have been published in the accounting
period.
The Company has not adopted early any standards, amendments or interpretations to existing
standards that have been published and will be mandatory for the Company’s accounting
periods beginning after 1 July 2020 or later periods.
New Standards
Revised and amended standards
IASB effective date
IFRS 9
2015 – 2017 cycle
Financial Instruments (Amendments
regarding pre-replacement issues in the
context of the LIBOR reform)
1 January 2020
IFRS 17
Insurance Contracts
1 January 2021
IAS 1
IAS 8
Presentation of Financial Statements
(Amendments regarding the definition of
material)
Accounting Policies, Changes in Accounting
Estimates and Errors (Amendments
regarding the definition of material)
1 January 2020
1 January 2020
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
and have not been adopted early by the Company.
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.
New standards, interpretations and amendments are not expected to have a material impact
on the Company’s financial statements.
110
| NOTES TO THE FINANCIAL STATEMENTS b) Going concern
At 30 June 2020, the Company had invested in 90 solar plants, committing £566.3 million
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 do not consider there to be
any threat to the going concern status of the Company. The current worldwide Coronavirus
outbreak (Covid-19), declared by the World Health Organization as a global health emergency
in March 2020, has caused disruption to businesses and economic activity. The Board and
Investment Adviser have been closely monitoring this and it has been considered as part of
its going concern assessment.
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 wholly owned subsidiary, BSIFIL.
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.
111
ANNUAL REPORT AND FINANCIAL STATEMENTS g) Finance costs
Finance costs are recognised
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.
in
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
in UK solar energy infrastructure assets via its holding
company and SPVs, 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
Classification and measurement of financial assets and
financial liabilities
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.
i) Financial assets held at fair value through profit or loss
Investments at fair value through profit or loss
• Classification
The Company’s investment in BSIFIL is accounted for
as a financial asset rather than consolidated as the
Company qualifies as an investment entity under IFRS
10, therefore the Company’s investment is held at
fair value through profit or loss in accordance with the
requirements of IFRS 9.
• Recognition and de-recognition
Purchases and sales of investments are recognised on
the trade date – the date on which the Company commits
to purchase or sell the investment. A financial asset is
de-recognised either when the Company has transferred
all the risks and rewards of ownership; or 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 the contractual right to receive
cash flow has expired.
• 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. Furthermore, 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).
112
| NOTES TO THE FINANCIAL STATEMENTS ii) 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.
iii) 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.
The Company’s financial liabilities consist of only financial liabilities measured at
amortised cost.
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.
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.
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. Post year end, the Board approved revisions to
the Investment Adviser base fee and the removal of the variable fee, which will apply
from 1 July 2020 onwards (See Note 17 for further detail).
113
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 estimated predominantly 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
a weighted average discount rate of 6.00% (7.18% as at 30 June 2019) has been utilised.
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
equates to 16.5% (June 2019: 16.5%) over the life of the long term debt as at 30 June 2020.
The Company continues to use a blended power forecast for the year ended 30 June 2020,
but for the first time has adopted a third provider within the blended forecast. The inflation
assumption for the period to June 2024 remains at 3% (June 2019: 3%) before reverting to
the standard long term assumption of 2.75% (June 2019: 2.75%) thereafter.
4. Investment income
Monitoring fee in relation to loans supplied
(Note 16)
Year ended
30 June 2020
(£’000)
Year ended
30 June 2019
(£’000)
725
725
725
725
The Company provides monitoring and loan administration services to BSIFIL for which an
annual fee is charged, payable in arrears.
114
| NOTES TO THE FINANCIAL STATEMENTS 5. Administrative expenses
Investment advisory base fee * (see Note 16)
Investment advisory variable fee (see Note 16)
Legal and professional fees
Administration fees
Directors’ remuneration
Audit fees
Non-audit fees
Broker fees
Regulatory Fees
Registrar fees
Insurance
Listing fees
Other expenses
Year ended
30 June 2020
(£’000)
Year ended
30 June 2019
(£’000)
321
-
108
302
218
134
17
50
44
45
8
31
60
313
699
145
292
189
95
22
50
43
37
8
16
58
1,338
1,967
* 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.
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.
115
ANNUAL REPORT AND FINANCIAL STATEMENTS PANORAMA AT ELMS
The variable fee is based on the following:
(i) if in any year, the Company exceeds its distribution target (7.90pps for the year ended 30
June 2020 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 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.
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 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 the 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.
Post year end, on 6 July 2020, the Board approved revisions to the Investment Adviser base
fee and the removal of the variable fee which will apply from 1 July 2020 onwards
116
| NOTES TO THE FINANCIAL STATEMENTS 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 £7,500 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.
The Administrator will also be entitled to a fee of £5,000 per annum in relation to the
administration of the Company’s Guernsey Green Fund Status.
The fees incurred for the period and the amount outstanding at the period end have been
disclosed in Note 16.
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 (2019: £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%.
117
ANNUAL REPORT AND FINANCIAL STATEMENTS 7. Net asset value per Ordinary Share
The calculation of NAV per Ordinary Share is based on NAV of £433,504,651 (2019:
£436,396,238) and the number of shares in issue at 30 June 2020 of 370,499,622 (2019:
369,883,530) 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.
30 June 2020
Total (£’000)
30 June 2019
Total (£’000)
Opening balance (Level 3)
435,736
418,098
Change in fair value of financial assets
held at fair value through profit or loss
(3,310)
17,638
Closing balance (Level 3)
432,426
435,736
Analysis of net gains on financial assets held at fair value through profit or loss (per
statement of comprehensive income)
Unrealised change in fair value of
financial assets held at fair value
through profit or loss
Cash receipts from non-consolidated
subsidiary*
Year ended
30 June 2020
(£’000)
Year ended
30 June 2019
(£’000)
(3,310)
17,638
32,161
28,528
Net gains on financial assets held at
fair value through profit or loss
28,851
46,166
* Comprising of repayment of loans and Eurobond interest
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.
118
| NOTES TO THE FINANCIAL STATEMENTS 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 also shown below.
30 June 2020
Total (£’000)
30 June 2019
Total (£’000)
SPV investment portfolio, Directors’ Valuation
624,269
622,055
BSIFIL
Cash
16,918
15,466
Working capital
4,012
4,035
Debt
(212,773)
(205,820)
(191,843)
(186,319)
Financial assets at fair value through
profit or loss
432,426
435,736
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.
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 instrument carried at fair value is the investment held by the Company,
BSIFIL, which is fair valued at each reporting date. The Company’s investment has been
classified within Level 3 as BSIFIL’s investments are not traded and contain unobservable
inputs.
119
ANNUAL REPORT AND FINANCIAL STATEMENTS Transfers during the period
There have been no transfers between levels during the year ended 30 June 2020. 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 2019. Solar plants under construction and not yet 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 more than 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 30 June 2020 (2019: Nil).
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.
Given 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 decrease of the weighted average
discount rate from 7.18%, as at 30 June 2019, to 6.00% as at 30 June 2020 with three key
factors that have impacted the adoption of this rate outlined below:
a. Transaction values have remained consistent at ca. £1.20-1.40/MWp for large scale
portfolios and which the Board have used to determine that an effective price of £1.26m/
MWp is an appropriate basis for the valuation of the BSIF portfolio as at 30 June 2020;
b. Inclusion of the latest long term power forecasts from the Company’s three providers.
c. Inclusion of a prudent uplift with respect to asset extensions of 15 years on a subset (132
MWp) of the portfolio.
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 leading forecasters. For the year ended 30 June 2020, the Company adopted a third
provider, having previously used two, upon recommendation by its Investment Adviser and
approval by the Board.
120
| NOTES TO THE FINANCIAL STATEMENTS The fair value of operational SPVs are calculated on a
discounted cash flow basis in accordance with the IPEV
Valuation Guidelines. The Investment Adviser produces fair
value calculations on a semi-annual basis as at 30 June and
31 December each year. Previously, in every third year, the
Board had an external valuation or benchmarking exercise
performed by an independent expert. Based on the availability
of market data, the Board does not intend to continue this
practice and will ask for an external valuation to be carried out
from time to time at its discretion. An external benchmarking
exercise was undertaken for the year ended 30 June 2018.
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 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 2020
30 JUNE 2019
Discount rate
Power prices
Inflation rate
Energy yield
Operational costs
Interest Shield
Asset Life
+ 0.5%
(24.0)
(6.48)
(16.0)
(4.33)
- 0.5%
+10%
-10%
+ 0.25%
- 0.25%
25.7
31.5
(32.0)
9.8
(9.5)
6.94
8.50
(8.64)
2.65
(2.56)
16.3
31.7
(31.8)
8.8
(8.5)
4.41
8.57
(8.60)
2.38
(2.30)
10 year P90
(51.8)
(13.98)
(50.6)
(13.68)
10 year P10
+10%
-10%
+50%
-50%
+5 Years
51.4
(6.2)
6.2
11.9
(13.9)
17.2
-5 Years
(26.3)
13.87
(1.67)
1.67
3.21
(3.75)
4.64
(7.10)
50.3
(5.4)
5.4
9.5
13.60
(1.46)
1.46
2.57
(10.3)
(2.78)
N/A
N/A
N/A
N/A
121
ANNUAL REPORT AND FINANCIAL STATEMENTS 9. Trade and other receivables
CURRENT ASSETS
Income from investments
Other receivables
Prepayments
30 June 2020
(£’000)
30 June 2019
(£’000)
725
12
31
768
725
23
20
768
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
2020 was £746,501 (2019: £277,876) and approximated their fair value. Cash held by BSIFIL,
the Company’s wholly owned subsidiary, as at 30 June 2020 is shown in Note 8.
11. Other payables and accrued expenses
CURRENT LIABILITIES
Investment advisory fees
Administration fees
Audit fees
Directors’ fees
Other payables
30 June 2020
(£’000)
30 June 2019
(£’000)
78
74
135
57
92
436
78
73
95
57
83
386
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 amounts of all
payables approximate to their fair value.
122
| NOTES TO THE FINANCIAL STATEMENTS
12. Earnings per share
Profit attributable to Shareholders of the
Company
Weighted average number of Ordinary
shares
Basic and diluted earnings from continuing
operations and profit for the year
(pence per share)
Year ended
30 June 2020
Year ended
30 June 2019
£28,239,647
£44,925,088
370,203,359
369,883,530
7.63
12.15
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 2020
(Number)
Year ended
30 June 2019
(Number)
Opening balance
369,883,530
369,883,530
Shares issued as settlement of variable fee
616,092
-
Closing balance
370,499,622
369,883,530
Shareholders’ Equity
Year ended
30 June 2020
(£’000)
Year ended
30 June 2019
(£’000)
Opening balance
436,396
418,996
Ordinary Shares issued in settlement of
variable fee
Ordinary Shares to be issued in settlement
of variable fee
699
(699)
-
699
Dividends paid
(31,131)
(28,224)
Retained earnings
28,240
44,925
Closing balance
433,505
436,396
On 23 December 2019, the Company issued 616,092 new Ordinary Shares to the Investment
Adviser in respect of their variable fee for the financial year ended 30 June 2019 at a price
of 113.47 pps.
123
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 22 July 2019, the Board declared a third interim dividend of £7,027,787, in respect of the
year ended 30 June 2019, equating to 1.90pps (third interim dividend in respect of the year
ended 30 June 2018: 1.80pps), which was paid on 23 August 2019 to Shareholders on the
register on 2 August 2019.
On 18 September 2019, the Board declared a fourth interim dividend of £7,323,694, in
respect of the year ended 30 June 2019, equating to 1.98pps (fourth interim dividend in
respect of the year ended 30 June 2018: 2.03pps), which was paid on 1 November 2019 to
Shareholders on the register on 4 October 2019. In addition to the fourth interim dividend, an
additional dividend of £2,330,267 (0.63pps) was declared which was paid on the same date
to Shareholders on the register on 4 October 2019.
On 23 January 2020, the Board declared a first interim dividend of £7,224,743, in respect
of the year ended 30 June 2020, equating to 1.95pps (first interim dividend in respect of the
year ended 30 June 2019: 1.90pps), which was paid on 28 February 2020 to Shareholders
on the register on 7 February 2020.
On 30 April 2020, the Board declared a second interim dividend of £7,224,743, in respect
of the year ended 30 June 2020, equating to 1.95pps (second interim dividend in respect of
the year ended 30 June 2019: 1.90pps), which was paid on 29 May 2020 to Shareholders on
the register as at 11 May 2020.
Post year end, on 24 July 2020, the Board declared a third interim dividend of £7,224,743,
in respect of the year ended 30 June 2020, equating to 1.95pps (third interim dividend in
respect of the year ended 30 June 2019: 1.90pps), which was paid on 21 August 2020 to
Shareholders on the register on 7 August 2020.
Post year end, on 22 September 2020, the Board declared a fourth interim dividend of
£7,595,242, in respect of the year ended 30 June 2020, equating to 2.05pps (fourth interim
dividend in respect of the year ended 30 June 2019: 2.03pps), which will be paid on or
around 28 October 2020 to Shareholders on the register on 2 October 2020.
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.
124
| NOTES TO THE FINANCIAL STATEMENTS 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.
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.
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:
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 (£64.6 million at 70 bps plus RPI as at 30 June 2020).
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:
Interest rate
Total as at
30 June 2020
(£’000)
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.
Floating rate
RBSI
Fixed rate
Lloyds
0.00%
0.25%
443
304
747
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.
Floating rate
RBSI
Fixed rate
Lloyds
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
Total as at
30 June 2019
(£’000)
0.00%
0.25%
277
1
278
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
investments. The Investment Adviser reviews the
the
discount rates semi-annually and takes into consideration
market activity to ensure appropriate discount rates are
recommended to the Board. The Group is exposed to
interest rate risk on the Directors’ Valuation of £624.3m
(2019: £622.1m).
125
ANNUAL REPORT AND FINANCIAL STATEMENTS 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 £4,286,334 (2019: £10,446,168) with banks that have a credit
rating which is of investment grade.
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 2020, the maximum credit risk exposure in relation to cash and cash equivalents
held by the Company was £746,501 (2019: £277,876). If the cash and cash equivalents
held by BSIFIL are included this increases to £17,664,313 (2019: £15,744,257). 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
(£’000)
Fixed deposit
(£’000)
Total as at
30 June 2020
(£’000)
443
-
443
-
304
304
443
304
747
Cash
(£’000)
Fixed deposit
(£’000)
Total as at
30 June 2019
(£’000)
277
-
277
-
1
1
277
1
278
The carrying amount of these assets approximates their fair value.
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 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.
The Company, through BSIFIL, expects to comply with the covenants of its long term loan
and revolving credit facility.
126
| NOTES TO THE FINANCIAL STATEMENTS The following table details the Company’s expected maturity for its financials assets and liabilities. These are undiscounted
contractual cash flows:
Less than one year
(£’000)
Between one and
five years
(£’000)
After five years
(£’000)
Total as at
30 June 2020
(£’000)
ASSETS
Financial assets held at fair value
through profit or loss*
Trade and other receivables**
Cash and cash equivalents
LIABILITIES
Other payables and accrued
expenses
-
737
747
(436)
1,048
-
-
-
-
-
241,321
241,321
-
-
-
737
747
(436)
241,321
242,369
* 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
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.
ASSETS
Financial assets held at fair value
through profit or loss*
Trade and other receivables**
Cash and cash equivalents
LIABILITIES
Other payables and accrued
expenses
Less than one year
(£’000)
Between one and
five years
(£’000)
After five years
(£’000)
Total as at
30 June 2019
(£’000)
-
748
278
(386)
640
-
-
-
-
-
268,104
268,104
-
-
-
748
278
(386)
268,104
268,744
* 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
127
ANNUAL REPORT AND 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.
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 issue 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.
Capital management policies and procedures
The Company’s capital management objectives are to
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.
The Chairman is entitled to an annual remuneration of
£60,000 (2019: £60,000). The other Directors are entitled to
an annual remuneration of £37,500 (2019: £37,500). Paul
Le Page receives an additional annual fee of £7,500 (2019:
£7,500) for acting as Chairman of the Audit Committee. The
Board will review all Directors’ remuneration annually.
The total Directors’ fees expense for the period amounted
to £217,500 (2019: £189,375) of which £57,375 was
outstanding at 30 June 2020 (2019: £57,375).
At 30 June 2020, the number of Ordinary Shares held by
each Director is as follows:
2020 Number of
Ordinary Shares
2019 Number of
Ordinary Shares
John Rennocks*
316,011
316,011
John Scott*
512,436
452,436
Laurence McNairn
441,764
441,764
Paul Le Page
70,000
70,000
Meriel Lenfestey
-
-
1,340,211
1,280,211
John Scott and John Rennocks are Directors of BSIFIL.
They receive an annual fee of £6,000 (2019: £6,000) each
for their services to this company. Neil Wood 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 £3,368,872 (2019: £3,214,023)
of which £255,331 (2019: £256,236) was outstanding
at the year end. Included within the investment advisory
fee expense for 2019 is £699,080 earned in respect of
performance fees for the year ended 30 June 2019. The
Investment Adviser received the variable element of their
2019 fees through the issue of 616,092 Ordinary Shares on
23 December 2019 (see Note 13).
Fees paid during the period by SPVs to BSL, a company which
has the same ownership as that of the Investment Adviser
totalled £2,358,016 (2019: £2,159,495). BSL provides asset
management and other services relating to the operation of
daily management activities of the solar project companies.
Fees paid during the period by SPVs to BOL, a company
which has the same ownership as that of the Investment
Adviser totalled £3,159,791 (2019: £1,486,408). 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 £725,000 (2019: £725,000) of which £725,000
was outstanding at the year end (2019: £725,000).
*Including shares held by PCAs
128
| NOTES TO THE FINANCIAL STATEMENTS 17. Subsequent events
The following events happened after the end of the Company’s reporting
period on 30th
On 6 July 2020, Shareholders approved revisions to the Company’s investment
objectives and policies at an EGM. The Company will no longer exclusively
invest in UK based assets, with its minority exposure to non-UK assets limited
to a maximum of 10% of the Company’s GAV. The Company will also no longer
exclusively invest in solar infrastructure assets but will now have the ability to
invest a minority of its capital into wind and hydroelectric energy storage assets;
such a minority exposure will be limited to a maximum of 25% of the Company’s
GAV. In addition to the above, the Company can invest up to 5% of its GAV into UK
solar development opportunities that are pre-construction and may be without
the requisite planning approvals at the time of investment. However, in addition to
the specific investment limitations set out above, the aggregate exposure to other
renewable energy assets (including non-subsidised assets) and energy storage
technologies, UK solar development opportunities and/or non UK assets will be
limited to a maximum of 30% of the Company’s GAV calculated at the time of
investment.
At the 6 July 2020 EGM, Shareholders approved the adoption of a progressive
dividend distribution strategy to replace the index linked strategy previously
adopted by the Company. Shareholders also approved revisions to the Investment
Adviser’s base fee and removal of the Adviser’s variable which will apply from
1 July 2020 onwards. The base fee is payable quarterly in arrears in cash, at a
rate equivalent to 0.8% per annum of the NAV up to and including £750,000,000,
0.75% per annum of the NAV above £750,000,000 and up to and including
£1,000,000,000 and 0.65% per annum of the NAV above £1,000,000,000. The
base fee will be calculated on the NAV reported in the most recent quarterly NAV
calculation as at the date of payment.
Post year end, on 24 July 2020, the Board declared a third interim dividend of
£7,224,743, in respect of year ended 30 June 2020, equating to 1.95pps (third
interim dividend in respect of the year ended 30 June 2019: 1.90pps), which was
paid on 21 August 2020 to Shareholders on the register on 7 August 2020.
On 20 August 2020, the Company completed the acquisition of a UK-based portfolio
of 15 operational solar PV plants for an initial cash consideration of £106.6 million
including working capital. The final consideration may be increased by up to £2.1
million, contingent on securing asset life extensions. The Company will receive the
economic benefit of all cash flows from the portfolio from 1 January 2020. The
Group has also agreed a new £110.0 million, three-year term loan facility with
National Westminster Bank plc.
Post year end, on 22 September 2020, the Board declared a fourth interim
dividend of £7,595,242, in respect of the year ended 30 June 2020, equating
to 2.05pps (fourth interim dividend in respect of the year ended 30 June 2019:
2.03pps), which will be paid on or around 28 October 2020 to Shareholders on the
register on 2 October 2020.
129
ANNUAL REPORT AND FINANCIAL STATEMENTS 130
Glossary of
Defined Terms
Administrator Ocorian Administration (Guernsey) Limited
AGM
AIC
AIC Code
The Annual General Meeting
The Association of Investment Companies
The Association of Investment Companies Code of
Corporate Governance
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)
AIF
AIFM
AIFMD
Articles
Auditor
Aviva Investors Aviva Investors Limited
BEIS
BEPS
Bluefield
BOL
Board
Brexit
BSIF
BSIFIL
The Department for Business, Energy and Industrial
Strategy
Base erosion and profit shifting
Bluefield Partners LLP
Bluefield Operations Limited
The Directors of the Company
Departure of the UK from the EU
Bluefield Solar Income Fund Limited
Bluefield SIF Investments Limited being the only
direct subsidiary of the Company
Bluefield Asset Management Services Limited
Balancing Services Use of System charges: costs
set to ensure that network companies can recover
their allowed revenue under Ofgem price controls
Business days Every official working day of the week, generally
BSL
BSUoS
Monday to Friday excluding public holidays
131
ANNUAL REPORT AND FINANCIAL STATEMENTS CAGR
Calculation Time
CCC
CfD
Company
Companies Law
Consolidation Exception
Amendments
Cost of debt
CRS
C shares
CSR
DCF
DECC
Defect Risk
Directors’ Valuation
DNO
DSCR
DTR
EBITDA
EGM
EIS
EPC
EPS
ESG
EU
EV
Compound annual growth rate
The Calculation Time as set out in the Articles of
Incorporation
Committee on Climate Change
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
Common Reporting Standard
Ordinary Shares approved for issue at no par value in the
Company
Corporate Social Responsibility
Discounted Cash Flow
Department of Energy and Climate Change
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
Enterprise Investment Scheme
Engineering, Procurement & Construction
Earning per share
Environmental, Social & Governance
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
Gross Asset Value
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
132
| GLOSSARY OF DEFINED TERMS
GWh
GWp
IAS
IASB
IFRS
Investment Adviser
IPEV Valuation Guidelines
IPO
IRR
IVSC
KID
KPI
KPMG
kWh
kWp
Law
LD
LIBOR
Listing Rules
Lloyds
LSE
LTF
Main Market
MW
MWh
MWp
NAV
NMPI
NPPR
O&M
Official List
Ofgem
Ordinary Shares
Outage Risk
Gigawatt hour
Gigawatt peak
International Accounting Standard
The International Accounting Standards Board
International Financial Reporting Standards as adopted
by the EU
Bluefield Partners LLP
The International Private Equity and Venture Capital
Valuation 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
London Stock Exchange plc
Long term facility provided by Aviva Investors Limited
The main securities market of the LSE
Megawatt (a unit of power equal to one million watts)
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
Office of Gas and Electricity Markets
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
133
ANNUAL REPORT AND FINANCIAL STATEMENTS P10
P90
PCA
PPA
pps
PR
PRIIPS
PV
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
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
The United Kingdom of Great Britain and Northern Ireland
The United Kingdom Corporate Governance Code
The UK Financial Conduct Authority
An approach to investing that aims to incorporate
environmental, social and governance factors into
investment decisions, to better manage risk and generate
sustainable, long term returns
134
| GLOSSARY OF DEFINED TERMS Alternative Performance Measures
Unaudited
APM
DEFINITION
PURPOSE
CALCULATION
Total return
The percentage increase/
(decrease) in NAV, inclusive of
dividends paid, in the report-
ing period.
A key measure of the success
of the Investment Manager’s
investment strategy.
Shareholder Total
return
The percentage increase/
(decrease) in share price,
inclusive of dividends paid, in
the reporting period.
A measure of the return that
could have been obtained
by holding a share over the
reporting period.
Underlying
Earnings
Total net income of the
Company’s investment
portfolio.
NAV per Ordinary
Share
The Company’s closing share
price on the London Stock
Exchange for a specified date.
A measure to link the underly-
ing financial performance of
the operational projects to the
dividends declared and paid
by the Company
A measure of the value of one
ordinary share.
Sale of Electricity
The total proportion of
revenue generated by the
Company’s portfolio that is
attributable to electricity
sales.
A measure to understand
the proportion of revenue
attributable to sales of
electricity.
The quotient of the NAV per
share at the end of the period
(117.01p) and the NAV per
share at the beginning of the
period (117.98p), plus any
dividends paid, minus one
expressed as a percentage.
The quotient of the price per
share at the end of the period
(134.5p) and the price per
share at the beginning of the
period (136.5p), plus any
dividends paid, minus one ex-
pressed as a percentage. The
measure excludes transaction
costs.
Total income of the Com-
pany’s portfolio minus Group
operating costs minus Group
debt costs.
The net assets attributable
to ordinary shares on the
statement of financial position
(£433.5m) divided by the
number of ordinary shares in
issue (370,499,622) as at the
calculation date
The amount of revenue
attributable to electricity
sales divided by the total
revenue generated by
the Company’s portfolio,
expressed as a percentage.
Total Revenue
Total net income of the Com-
pany’s investment portfolio.
PPA Revenue
Revenue generated through
PPAs.
Regulated
Revenue
Revenue generated from the
sale of FiTs and ROCs.
A measure to outline the
Total revenue of the portfolio
on per MWp basis.
Total income of the Compa-
ny’s portfolio owned for a full
12 months.
A measure to outline the
revenue earned by the
portfolio from power sales.
Total revenue from all power
price sales during the period
from the Company’s portfolio.
A measure to outline the
revenue earned by the
portfolio from government
subsidies.
Total revenue from all subsidy
income earned during the
period from the Company’s
portfolio.
135
ANNUAL REPORT AND FINANCIAL STATEMENTS APM
DEFINITION
PURPOSE
CALCULATION
Ongoing charges
ratio
The recurring costs that
the Company has incurred
during the period excluding
performance fees and one off
legal and professional fees
expressed as a percentage of
the Company’s average NAV
for the period.
A measure of the minimum
gross profit that the
Company needs to produce
to make a positive return for
Shareholders.
Calculated in accordance with
the AIC methodology detailed
in the table below.
Weighted Average
Life
The average operational life of
the Company’s portfolio
A measure of the Company’s
progress in extending the life
of its portfolio beyond the end
of the subsidy regime in 2036.
Directors’
Valuation
The gross value of the SPV
Investments held by BSIFIL,
including their holding
companies.
A measure of the gross value
of the Company’s investment
portfolio.
Gross Asset Value
The Market Value of all Assets
within the Company.
A measure of the gross value of
the Company’s Assets.
The sum of the product of each
plant’s operational capacity in
MWp and the plant’s expected
life divided by the total
portfolio capacity in MWp.
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.
The total assets attributable
to ordinary shares on the
statement of financial position.
Ongoing Charges
Year to 30 June 2020
Fees to Investment Adviser
320,640
3,048,232
3,368,872
Legal and professional fees
125,343
38,997
164,340
The Company
BSIFIL
Total (£)
Administration fees
Directors’ remuneration
Audit fees
302,445
-
302,445
217,500
133,744
12,000
23,460
229,500
157,204
Other ongoing expenses
238,560
1,816,196
2,054,756
Total expenses
1,338,232
4,938,885
6,277,117
Non-recurring expenses
(25,560)
(1,434,366)
(1,459,926)
Total ongoing expenses
1,312,672
3,504,518
4,817,190
Average NAV
Ongoing Charges (using AIC methodology)
438,381,263
1.10%
136
| ALTERNATIVE PERFORMANCE MEASURES COMPANY REGISTRATION NUMBER: 56708
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