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FSF's NAV increased to £771.2 million from £754.9 million due to high power forecasts and rising inflation. Image: Pxfuel NC.
Foresight Solar Fund (FSF) has recorded a 2.1% net asset value (NAV) increase to £771.2 million due to high power forecasts and rising inflation.
The two tailwinds helped balance the negative effect of the discount rate in the solar and battery storage investor's portfolio, to leave its NAV per share at 126.4p.
High power forecasts grew the NAV per share by 7.1%, inflation increased it by 1.5% while the discount rate reduced it by 7%.
The Fund results come after an uptick in interest in the UK solar sector after a hot, dry summer. Data released by The Eco Experts in August revealed that the UK collectively reached a score of 100 for the first time searching for solar panels on Google Trends.
This represented an increase of over 100% from the previous two months’ average score and became a record amount primarily due to the heatwaves witnessed in both July and August.
Due to the increase in solar availability, the industry could see further growth with solar enquiries additionally having soared due to this year’s heatwaves.
The heatwave additionally showcased the potential of solar panels as a means to supply the UK with sufficient amounts of energy. During the heatwave on Tuesday 19 July, solar power output met up to a quarter of the UK’s power demand.
Generation hit a peak of 7.7GW by midday according to Sheffield Solar’s PV Live website, more than six times the capacity of the country’s largest nuclear power station, the 1.3GW Heysham 2 plant in Lancashire.
Despite the positivity witnessed in the solar sector and FSF’s third quarter results, the Fund’s NAV is presented at a time of significant uncertainty for the renewable generation sector.
Given the current lack of clear UK Government policy around the UK energy markets, additional prudence in relation to the power price forecasts has been included within the underlying valuation, FSF stated.
In September, FSF indicated power prices had been continuing to boost solar asset value, with the Fund having reported its NAV per share, EBITDA and consolidated revenues had jumped over the first six months of 2022. However, the Fund said the power prices are currently unsustainably high.
FSF has applied a discount to its UK baseload power price forecasts of 50% for the fiscal year (FY) 2023, reducing by 10% per year to a final discount of 10% applied in FY 2027.
The UK portfolio remained “well ahead of budget” primarily due to strong irradiation and availability of solar in the third quarter of 2022. Its global portfolio was 3.3% above base case for the nine-month period to date, which has been driven by continued strong operational performance, FSF said.
The Fund indicated that forecasts for UK inflation for the remainder of 2022 and FY 2023 remain unchanged at 5% (annualised) and 3% respectively.