Foresight Solar Fund Ltd's (LSE:FSFL) Ross Driver talks through the main drivers for renewable infrastructure and why 2025 is looking bright.
Ross Driver: The new year has started and we're excited about the positives for the industry and Foresight Solar.
First, energy prices have mostly normalised after a volatile period. A more stable outlook helps with long-term planning.
Second, the government is pushing through a very pro-renewables agenda, incentivising the growth of solar here in the UK.
Finally, while inflation is falling—though that’s a bit uncertain—interest rates are likely to come down.
That’s a positive direction for real assets, including renewable assets, which are part of that subsector. Investors like us in these asset classes would benefit significantly.
Proactive: 2024 was a tough year for real assets. What happened?
Ross Driver: There’s no getting away from it - 2024 was challenging for the entire sector.
There were multiple factors at play, but one key issue was the surge in UK bond yields after the autumn budget.
This made bonds more appealing to investors looking for low-risk assets with reliable income.
Renewable trusts and the wider alternative sector saw their share prices punished as a result.
Historically, there’s been a clear trend where gilt yields and sector stock prices move in opposite directions.
However, lower interest rates and recent developments in the gilt market should help rebalance this situation.
Proactive: Gilt yields remain high, though. How is Foresight Solar preparing for the next 12 months?
Ross Driver: We’ve been addressing this through our incoming growth strategy, to improve returns over time.
The macroeconomic environment today is quite different from two or three years ago, which is clear.
We’ve also been working on broader sector-level changes.
For us specifically, we have a growing proprietary development pipeline.
This offers more opportunities to capture the full financial benefit of projects for our shareholders, in addition to income from the existing operating portfolio.
Speaking of the portfolio, our assets have performed well, giving the board confidence in our 8p per share dividend target.
We generated more than enough cash—1.4 times over—to pay the dividend last year.
We’re also working to deliver on our promises, including updates on the sale of our Australian sites and new strategies to improve revenue visibility.
We’re excited about what 2025 has in store.