Thursday, 19 September 2019

Bluefield Solar Trust - Full Year Results


Bluefield Solar (BSIF) was added to my SIPP portfolio in March. It's focus is purely on solar power in the UK and the technology is advanced but fairly simple with few moving parts to go wrong. It is one of the largest solar operations in Europe with net assets under management of around £436 million and generating 470MW of electricity is sufficient to power 150,000 homes.

Approximately 60% of their solar assets are covered by the old subsidy scheme which provides a guaranteed return for 20 years from the date of connection to the grid. The other 40% have rolling power purchase agreements which generally last for between 12 months to 3 years and are then renewed.

Results

The company has today issued full year results to end June (pdf link via company website).

The report seems positive. Underlying earnings per share increased by 13.8% to 11.01p and the total return including dividends was 19.1%.

The company pays quarterly dividends and will pay out a total of 8.31p for the year which includes an additional payment of 0.63p which gives a yield of 6.3% based on the current share price of 131p.

The total annualised return for shareholders since launch in 2013 has been 9.6% p.a.
 
3 Yr Performance v Foresight Solar
(click to enlarge)

Chairman John Rennocks said: 

"The year has been outstanding with above target earnings and dividends, a satisfying result for a Company that has as its first priority the delivery of attractive levels of sterling income, covered by earnings.

The explanation for the outperformance is straightforward. The period had higher than average irradiation (+6.6%), favourable conditions which were effectively translated into high levels of actual generation (+7.5%), made possible by the quality of the operating portfolio and a credit to the work of BSL.

This increased generation was then converted into high levels of revenue, enhanced in the period by the Company being able to respond to, and capture, higher power prices.

The Company has also seen a modest increase in its NAV. The main driver for this is the significant progress the Company has made in lease extensions on the portfolio, which have offset the lower power price forecasts since December 2018. As detailed in the Investment Adviser's report, the Company has had several successful planning determinations on 15 year lease extensions (amounting to over 100MWp), with a further 64MWp still awaiting an outcome or under negotiation. Significantly, the Company has not had, at the time of writing, any planning rejections".

Future Expansion

The trust's portfolio has been fairly stable for the past couple of years with 87 solar 'farms' located mainly across southern England. The UK governments subsidy for renewable infrastructure has now ceased (short-sighted imo) however, the cost of solar has fallen dramatically - 50% reduction over the past five years - and this should provide opportunities for growth.

The company are currently looking for opportunities to increase assets and a number of potential sites are currently under consideration to support the next phase of growth.

As mentioned above, BSIF are in the process of increasing the life expectancy of its solar assets from 25 years to 40 years subject to planning considerations and agreement with the owners of the sites. Successful negotiations have been completed on a two thirds of existing assets and will hopefully be concluded over the coming months. This could add a further 5% to net assets. The boost to asset appreciation over the past year means the discount has narrowed and the shares are currently trading at a premium to NAV of around 12% - down from 20% earlier this year.

My holding in Bluefield Solar accounts for around 6% of my 'green' portfolio which has been gradually building over the past year. The government will roll out its plans to get us to net zero emissions over the coming months and I am sure solar, wind and wave plus battery storage will continue to benefit from the transition away from fossil fuels. I feel comfortable with this trust in the mix and will continue to hold and roll up my quarterly dividends within my SIPP. I look forward to seeing how the management deal with expansion of the portfolio and whether debt increases but for now it can return to the bottom drawer.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

2 comments:

  1. I currently have an investment in NextEnergy Solar Fund . I did a brief side by side comparison of Bluefield and Nextenergy and the similarities between the two are such that I wasn't sure which was which for the most part. I'm genuinely curious, is there is anthing between the two that convinces you one way or the other which is the better investment barring the trading cost of moving?

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    1. Thanks Richard. You are correct, there's not a great deal of difference between Bluefield, NextEnergy and Foresight Solar. Historically, Bluefield has the better overall returns but that could reverse in the future. I looked at all three earlier this year and chose Bluefield partly as it had slightly lower charges. Also, I liked the write-up from IT Investor...possibly following last years results?

      It will be interesting to compare relative progress over the coming years. Good luck with NextEnergy!

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