Four ‘Pure Play’ UK Solar Investment Trusts

By Richard Howard

Many investment trusts, companies, or funds focused on renewables invest in a range of different technologies and assets. This diversification can spread the risk. However, there are also ‘pure play’ renewable investments which typically invest in one sector [1]. These are only exposed to one renewable sub-sector, such as wind or solar. These wind or solar investment trusts are, therefore, more exposed to the ups and down of a particular sector and consequently can be seen as more risky. However, as their activities are not watered down by other businesses it can make them easier to analyse and potentially led to higher returns if their particular sectors is doing well with respect to other sectors.

Below are four UK-based solar investment trusts which currently only invest in solar power plants.

Foresight Solar Fund

FSFL

This solar fund has a range of assets in the UK, Australia and Spain with a combined energy generating capacity of 1GW. The majority of the assets are located in the UK and all are subsidised through either the feed in tariff scheme (FiT) or the renewable obligations certificate (ROCs). All four of the individual Australian assets are larger than any one of the UK assets, however, FSFL only owns one project outright. The Spanish assets were acquired in late 2020 and are all currently under construction in the South of the country. Once operational the Spanish assets will all generate power subsidy-free.

The fund is targeting a regular annual dividend of around 7p per share, which at the time of writing translates to a 7% yield with a share price hovering around 100p. The fund’s management aims to pay the dividend in quarterly installments and for it to be inflation-linked.

Currently the fund has a market capitalisation of around £600m and is currently trading at a 2% premium to its net asset value (NAV).

NextEnergy Solar Fund Limited

NESF

This solar investment trust owns a range of assets which are split between the UK and Italy. The UK sites are primarily composed of small generating sites in the single digit MW range scattered around the South, South East, and East of England. Nearly all of their UK sites are supported by either the FiT or ROC schemes. NESF’s eight Italian schemes all have less than 10MW in generating capacity and are supported by the local FiT scheme.

Interestingly, one their largest UK site is 50MW array in Staughton, Bedfordshire operates as subsidy-free [2].

The fund’s investment objective is to provide regular returns to investors. This has primarily been in the form of regular dividends. The target annual dividend yield is approximately 7%, with a target divident of 7.16p for the financial year 21/22 and a current share price hovering around 100p. As of June 2021 the market capitalisation was essentially on par with the NAV (trading at a 0.3% premium on £580m).

US Solar Fund Plc

USF

This US-focused solar investment trust was founded in 2019 and has grown rapidly to own over 40 operational solar projects in four US states. The bulk of the solar power projects are located in North Carolina (28 out of 42). The rest are located in the Western half of the country (Oregon, California, and Utah). The projects have a combined generating capacity of just under 0.5GW.

The acquisitions were made in six lots, with the most recent occurring in March 2021. The largest asset that US Solar Fund Plc own is the 128MW Milford solar project in Utah [3]. This project, as well as all of their other projects, generates revenue via power purchase agreements (PPA). As of March 2021, the average PPA contract length is 15.1 years and all the ‘energy offtakers’ were local electric utilities.

US Solar’s target dividend is 5.5 cents per share. As of August 2021 this translates to a dividend yield of 5.3%. As of March 2021 their shares were trading at a 6.6% premium to the NAV.

Bluefield Solar Income Fund

BSIF

Bluefield Solar claims to be the first solar PV investment fund to be listed on a major stock exchange with the companies IPO taking place in July 2013. The fund currently owns an array of 106 solar assets and is solely focused on the UK. Its largest solar farm is the 70MW in Bradenstoke in Wiltshire, which it acquired for £90m in January 2021. As of August 2021 all of BSIF’s assets are supported through either FiTs or ROCs.

Although the fund only owns UK solar assets its investors have voted to allow its investment managers to broaden its investment options to onshore wind, hydro, and storage technologies. As a result BSIF might not remain a pure-solar investment for long.

The investment managers are currently targeting an annual dividend per ordinary share of 8p, which is equivalent (in August 2021) to a 6.5% annual dividend yield. Their aim is to continue delivering long term income via quarterly dividends.

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Remember, the value of your investments may go down as well as up and you may not get back the value you initially invested.

References

  1. Investopedia, 2021, What Is a Pure Play?
  2. Solar Power Portal, 2019, NESF lauds switch on of ‘UK’s largest’ subsidy-free solar site
  3. Power Technology, 2019, US Solar Fund acquires Milford solar project in Utah

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