Bluefield Solar Income Fund (BSIF) is to acquire five large-scale solar plants, which with the two it already holds will mean the fund is already over 75 per cent invested. This is ahead of previous deployment expectations and its total commitments are expected to be around £96m. This comes as Foresight Solar Fund (FORE) seeks £200m in an IPO to invest in eight UK solar parks, and venture capital trust (VCT) provider Albion invests £1.4m in Erin Solar to provide commercial landlords with solar photovoltaic solutions in Northern Ireland.
The plants Bluefield is acquiring are in East Anglia, the south and south west of England and, as with its two previous acquisitions, have planning consent and completed grid offers. Bluefield is in advanced negotiations on a further £175m of assets which it anticipates funding through further equity issuance.
The trust says it remains on course to deliver against its target dividend of 4p per ordinary share in its first financial year ending 30 June 2014, and 7p per share in its second financial year. Bluefield intends to raise this annually with retail price index inflation (RPI) thereafter.
The trust trades on a 4.6 per cent premium to net asset value (NAV), with all its infrastructure investment trust peers also on premiums.
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Bluefield Solar's initial public offering in July raised £130m.
Foresight Solar will invest the proceeds of its IPO, expected on 24 October, in solar parks which are already operating. It has also made agreements to acquire a further two solar plants. If acquired, the eight plants would be worth about £195.5m. The trust is targeting an initial dividend of 6p expected to rise in line with inflation. Foresight Solar expects its cash flows to be correlated with inflation over the long term because of the indexation of revenues derived from green benefits, and inflation linkage of the wholesale electricity price and operating costs.
Around 60 per cent of Foresight Solar's revenues will come primarily from sales of Renewable Obligation Certificates (ROCs) for generating renewable energy. Electricity prices provide the remaining 40 per cent of revenues.
The trust will aim for a sustainable and increasing dividend with the potential for capital growth over the long term. It does not currently have any debt but may introduce some going ahead, though not more than 40 per cent of gross assets.
The UK government has included solar as a key technology to meet its 2020 carbon targets, by when 15 per cent of primary energy use must come from renewable sources. The ROC regime provides a 20-year subsidised revenue stream that increases over time with RPI. As a result of the stability of the ROCs, Foresight Solar anticipates an expansion of the solar sector in the UK and expects to acquire more plants.
Foresight says solar returns are more predictable than wind as it is less variable and the UK has favourable radiation levels, particularly in the south of England. The UK solar market has grown significantly over recent years, largely because the costs of solar have fallen by up to 50 per cent. Investments outside the UK and assets which are still under construction will be limited to 25 per cent of gross asset value.
Foresight Group already has £450m solar assets under management, which include a venture capital trust and enterprise investment schemes. It has been running solar funds since 2008.
The offer for subscription closes on 15 October and the trust's shares are expected to start trading on 29 October.
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