Bluefield Partners Managing Partner James Armstrong talked with Proactive about the strategic evolution underway at Bluefield Solar Income Fund (LSE:BSIF), including a major proposal to internalise operations and shift toward an Independent Power Producer (IPP) model.
Armstrong reflected on the fund’s strong performance over the past year, excluding share price fluctuations, highlighting the strategic partnership with GLIL — a local authority pool — which has scaled rapidly to become one of the largest UK-based solar owner-operators. “It’s been a very, very good 12 months,” Armstrong said, noting the platform now controls over 400MW of operational assets and 200MW of solar and battery projects in development or construction.
However, with the fund trading at a persistent discount to NAV, Armstrong emphasised the need to unlock value. The proposed change would see the fund internalise its team and operate as an IPP, leveraging a 1.4GW development pipeline and a 140-person integrated platform. Armstrong said, “Something has to be done to be able to unlock the value that we have within the business.”
The board has launched a consultation process with shareholders, aiming to determine the appetite for the structural change within the next few weeks.
Proactive: James, very good to speak with you. You're out with your results today and also an update on strategic initiatives that you announced previously. Before we get into those, take us through the highlights of the past year.
James Armstrong: So it's been a very good set of results for the period ending June 25th. For all the things that we can control — so that's excluding the share price — we've had a very, very good 12 months.
The standout, again, we spoke before about this, is the strategic partnership with GLIL, which is the local authority pool. It's grown in less than two years from a concept to having over 400MW of operational assets and over 200MW of solar and battery projects in development and construction. So within less than two years, it's become one of the largest owner-operators of solar in the UK. It's been a great success.
We've also been managing the balance sheet effectively. We refinanced the financing on that partnership with GLIL. We've refinanced our revolving credit facility. And we've also managed some of the development pipeline — there have been some disposals as well, which have been very accretive for the fund. So overall, there's a lot we have been doing. It's been a very, very busy period and one that's been very successful overall.
Proactive: You talk about things you can control and things you can't control — like your share price. The shares have been trading at a discount to NAV for some time. James, what's being done to address that, and could changing your structure help close the gap?
James Armstrong: Yeah. So it's an unfortunately typical story within the investment company space, particularly in infrastructure and renewables. We've been at a discount for over three years. But we are built as a business to grow. Where does that growth come from?
There are two big differentiators for the Bluefield Solar Income Fund relative to many others in the sector. One is our relationship with the Bluefield Group — the companies that provide services from development through to operations. There's about a 140-person platform that deals with all aspects of value creation and value protection for the fund. It's effectively like an externally managed independent power producer.
The second differentiator is that we have a very large development pipeline — 1.4GW in development, with over 1GW of assets that already have planning permission.
Another challenge, Stephen, is that the market is effectively shut for any new capital. So while we are primed to grow and create very accretive returns for our shareholders, we're not in a position to do so because of this discount to the net asset value.
So the board announced in February a strategic initiative where we were looking at all options. What they announced this morning is very significant and, I think, very exciting for shareholders.
If you take those unique features — a platform and a development pipeline — and reimagine how the Bluefield Solar Income Fund could operate, internalising the team (with support from the businesses that myself and my partners own), you create an operational company which is an independent power producer. Then you have the ability to manage debt levels and dividend policy differently. You've got the ability to have a self-funding model, grow these very attractive assets and build these types of assets.
So that's what's been announced. There’s a consultation — this is about starting the conversation with shareholders today and seeing what their reaction is. But we think something has to be done to unlock the value we have within the business. The announcement this morning is a bold one, but one we hope will be received well. We've thought very hard about how to take the unique features we've got and enable us to grow on a total return basis — grow a very significant pipeline of assets for shareholders. That’s what we’re looking forward to discussing with them.
Proactive: How long would you expect that consultation period to last, James?
James Armstrong: Well, I think if you make an announcement like this morning’s, you've got to get on and seek the views of shareholders. We've had an incredibly supportive, long-term shareholder base who are as frustrated as we are with the position we find ourselves in within the investment trust space.
So those conversations are starting today. In answer to your question, I think we should have a pretty clear view of shareholder appetite for the change to an IPP within the next few weeks. Then we can plan from that point.
Proactive: James, I hope you'll keep us updated on developments in that space. Thank you very much for your time today.