Latest Investment Manager's Report

Ordinary Shares

In December 2016 the Company completed the sale of the Italian and Spanish investments, which may be redeployed further into Euro denominated assets. The Investment Manager also previously reported that it was exploring opportunities to refinance its Turweston asset in the current low interest rate environment. The Turweston refinancing process completed in March 2017 and a drawdown from the facility occured in May 2017. The refinancing was provided by Royal Bank of Scotland and the proceeds were used to finance the tender offer described below and also to facilitate further acquisitions made by the Company, as described below.

The fifth anniversary of the final closing of the original public offer for subscription for the Ordinary Share class of the Company occurred on 8 November 2016.

During March 2017, the Company’s shareholders were invited to participate in a tender offer and the shareholders who elected to exit were provided liquidity on 11 May 2017 when 10,570,589 Ordinary Shares were bought back at a price of 100.19p per share. A further 395,435 Ordinary Shares were bought back on 27 June 2017 also at a price of 100.19p. A total of 10,966,024 Shares were bought back through the tender offer.

Portfolio performance

For the period 1 July 2016 to 30 June 2017 total electricity production was 7% below expectations against irradiation levels that were 2% below expectations.

Malmesbury’s annual production was 15.3% down against expectations due to a transformer malfunction, though the effect of this at a portfolio level is not material.

Kent’s annual production was 4.4% lower than expected due to a High Voltage cable incident, however this was covered by insurance. These specific issues were identified early on by the Investment Manager and are not expected to impact the long term performance of the assets.

"C" Shares

On 1 July 2016, the Investment Manager invested £3.7m in a 5MW solar project at Marchington, Staffordshire. The site was connected to the grid in March 2016 and benefits from a ROC subsidy.

As reported in March 2017, the Investment Manager began the process of evaluating the potential sale of the C Shares US asset known as EOSOL Solar. The sale process is now underway and is expected to complete by Q1 2018.

During the period Saron’s existing Investec debt facility was refinanced on significantly improved terms. The refinancing was provided by Royal Bank of Scotland.

"D" Shares

The D Share class offer was closed to new subscriptions in early 2017. A total of £5.6m has been raised following the issuance of a supplemental prospectus in March 2017. The Investment Manager is continuing to explore investment opportunities that will be value accretive for the Company.

Outlook

The UK solar sector experienced another period of significant growth driven by the closure of the Renewable Obligation scheme to new solar projects in March 2017. This resulted in the total installed solar capacity in the UK reaching c.12GW, with over 8GW of large scale solar.

The Investment Manager believes that the level of activity in the secondary market will continue in the short and medium term with 1 to 2GW of operational projects expected to be sold in the next 12 to 18 months. With the scarcity value of UK operational portfolios increasing, the Company will maintain a prudent approach to acquisitions in the UK secondary market.

During the financial year ended 30 June 2017, the Investment Manager continued to focus on the optimisation of the existing portfolio, both from an operational perspective and in respect of the capital structure of the assets. As previously discussed the Investment Manager is considering selling certain assets in the portfolio in order to provide liquidity to allow the Company to explore new acquisition opportunities that the Investment Manager believes will be accretive to the value of the Company and benefit the shareholders in the long term.

While there remains political uncertainty following the UK’s decision in June 2016 to withdraw from the European Union and the recent snap election, which resulted in a hung parliament, current indications suggest that the UK Government remains committed to a carbon reduction agenda.

Dan Wells
Partner
Foresight Group
31 October 2017

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