Foresight Solar (LON:FSFL) management outlined a year of strong UK operating performance, a maintained dividend for 2026, and continued efforts to address a wide share price discount, while also acknowledging a meaningful decline in net asset value (NAV) driven by power price assumptions, Australia, and a concluded tax review.
Operational performance and updated technical assumptions
Fund manager Toby Virno said 2025 saw “strong” operational performance, led by the UK portfolio, which generated 3.4% above budget. That outperformance was offset by underperformance in Spain and Australia, which management attributed primarily to curtailment. Virno noted Australia continued to experience “outsized economic curtailment,” while Spain faced increased negative pricing periods during the year.
The company engaged an independent technical adviser in the second half of 2025 to revise key performance assumptions. Management said the review incorporated multiple years of actual operating data, rather than relying mainly on simulations prepared at acquisition, and resulted in several updates reflected in the Q4 NAV:
- Energy yield assumptions: Expected generation for the UK portfolio increased by 2.8%, which management said will be the new benchmark for future reporting.
- Availability: Site-specific studies led to only a “fraction of a percent” reduction versus the prior assumption, with the prior 99% cap referenced as a limit on upward revision.
- Lifecycle investment forecasts: The adviser concluded prior assumptions were conservative and refined estimates on a site-by-site basis, contributing positively to valuation as the fund targets 40-year asset lives.
- Technical useful life: The adviser concluded assets should be technically capable of operating for at least 40 years from commercial operations, citing better-than-expected degradation experience across the industry.
Revenue strategy, hedging, and dividend cover
Virno emphasized revenue visibility as central to dividend sustainability, describing a revenue mix with roughly 60% contracted through subsidies and long-term power purchase agreements (PPAs), supplemented by active hedging in the near term. He said the fund had increased hedged volumes over recent reporting periods and added further hedges after volatility associated with conflict in the Middle East, which he described as a “headline-driven market.”
As presented, management said FSFL had about 87% contracted revenues for 2026, providing a “high degree” of visibility. Virno said contracted revenues plus actual results for January and February were expected to deliver around 1x dividend cover for 2026 before considering merchant exposure, with 13% of revenues uncontracted and offering potential upside if prices rise.
Acting Finance Director David Goodwin said dividend cover was a “clear highlight” in 2025, with the fund delivering 1.3x cover, matching its target. Goodwin attributed the outcome to UK asset performance, the hedging strategy, and reduced investment management fees following a fee structure change.
Looking ahead, Goodwin said the 2026 dividend target of 8.1 pence per share was expected to be around 1.1x covered “based on what we know today,” and described that level as a return to pre-pandemic norms, adding that the elevated cover seen in recent years is “not sustainable in the longer term.” Management also addressed investor questions referencing dividend cuts or changes at sector peers, stating the board remains committed to what it characterized as a sustainable, progressive dividend approach, and that holding the dividend flat for 2026 was intended to rebuild cover rather than pursue a large increase.
NAV decline, tax review conclusion, and portfolio developments
Management said NAV fell to 0.992 pounds per share at year-end, an 11% reduction over the year, describing the outcome as “very disappointing.” Virno cited several key detractors:
- Lower long-term power price forecasts as markets moved beyond the post-Ukraine invasion shock (while noting the possibility of future upward pressure in prices amid the Middle East conflict).
- A write-down of the Australian portfolio due to ongoing curtailment issues and reduced investor appetite; management said exiting Australia remains a strategic objective but buyers have been selective.
- A material negative impact from the tax review announced at Q3 and concluded at Q4.
Goodwin provided additional detail on the tax review, saying the group worked with advisers and engaged with HMRC, and that the engagement has now concluded with an agreement covering historic submissions and methodology going forward. He said adjustments largely reflected reduced interest deductibility after the financing structure reached debt capacity under thin capitalization rules and agreed principles, increasing taxable income and expected cash tax payments. He added that tax payable for some prior years was higher than previously paid on account, with historical liabilities to be settled through existing cash reserves and operational cash flows. Management said the issue is now concluded, with no further impacts expected, and stated dividends remain fully covered including historical periods.
Virno also addressed questions about share buybacks in the NAV bridge, explaining that buybacks reduce absolute NAV because cash leaves the structure, but are accretive to NAV per share when shares are repurchased below NAV. Management said the buyback program has generated more than 3 pence per share of accretion since it began.
On portfolio execution, Virno highlighted the commissioning of the fund’s first battery storage project at Sandridge, saying delays occurred but costs were “really well controlled,” resulting in a positive NAV impact of 0.4 pence per share when the asset moved to a discounted cash flow valuation. He said the battery project is now in commercial operations, with a primarily merchant revenue strategy that complements the UK generation portfolio’s market exposure.
Balance sheet, buybacks, and capital allocation priorities
Goodwin said the fund resized and extended its revolving credit facility (RCF) during 2025, which is expected to save around 1 million pounds in interest over its life. He reported a low weighted average cost of long-term debt of 3.6% per annum and total gearing of just over 41%, within the 50% investment policy limit.
He noted that financing costs have reduced, in part due to the multi-currency RCF, which allows euro-denominated drawings and provides a “natural hedge” against the Spanish portfolio. Management said it continues to explore opportunities to optimize the capital structure and allocate released cash toward returns of capital, debt repayment, or reinvestment.
Virno described the fund’s buyback program as sector-leading relative to fund size, with a 60 million pound budget, of which 55 million pounds has been deployed. He said buybacks have been NAV-per-share accretive and supportive of future dividend cover.
Strategy updates: asset cycling, policy backdrop, and corporate initiatives
Management reiterated that “efficient asset cycling” is central to its plan to support dividends and improve revenue quality, referencing a target of 75 MW of operational asset sales announced previously. Virno also said the board is proactively exploring options to promote shareholder value, including potential private market solutions, while noting limitations on what can be disclosed.
In Spain, Virno responded to questions about negative pricing and said a key differentiator is that the fund’s projects hold 10-year fixed-price PPAs, which protect 70% of generation against negative pricing; the remaining 30% remains exposed. He said the fund is focused on developing standalone battery storage and exploring “hybridization” of existing solar sites by co-locating batteries behind the meter to store curtailed generation and deploy it later.
On the policy environment, Goodwin said energy security and affordability have returned to the top of policy agendas and described solar as one of the cheapest and quickest power sources to deploy. He said UK policy signals have been mixed, pointing to practical conclusions from REMA, less helpful ROC and FIT consultation outcomes, and ongoing monitoring of an upcoming Fixed Price Certificate consultation. He cited Allocation Round 7 awarding five gigawatts of solar capacity at attractive prices and said Allocation Round 8 has been accelerated, which management expects to support opportunities to recycle capital into assets with longer-dated contracted revenues.
The presentation also included an update on personnel, with Virno introducing Will Morgan as a new team member expected to join mid-April, citing more than 20 years of infrastructure and renewables investment management experience, including work in Spain and the UK.
About Foresight Solar (LON:FSFL)
Foresight Solar Fund Limited (“FSFL”) is a Jersey-registered, closed-end investment company investing in a diversified portfolio of ground-based solar PV and battery storage assets in the UK and internationally. The Company aims to deliver sustainable investment returns alongside strong environmental, social and governance (“ESG”) benefits.
