Foresight Solar Fund Ltd is seeking shareholder backing for a strategy aimed at narrowing its persistent discount to NAV, as the renewable infrastructure sector continues to face pressure from higher interest rates and volatile power prices.
Fund manager Toby Virno told Proactive the company is focusing on portfolio renewal, long-term contracted revenues and potential private market partnerships to support future growth and dividend sustainability.
The company also reported a stable first-quarter NAV and reiterated its dividend target despite weaker seasonal solar generation.
Proactive: I'm joined by Toby Virno, he's fund manager at Foresight Solar Fund Ltd. Toby, very good to speak with you. You issued your notice of annual general meeting on Friday. Give us an idea of what you published.
Toby Virno: Hi there Stephen. Good afternoon, and thank you very much for having me. That's absolutely right. We've published the circular for this year's AGM. We're hosting our annual general meeting on the 3rd of June. This is a key feature of the governance that really differentiates the listed renewable infrastructure investment companies from other vehicles that can give similar exposures.
The board is inviting all shareholders to participate and have a say in the matters that are affecting, and are important to Foresight Solar. These are relevant resolutions to appoint directors to approve financial statements. And importantly, there's a vote on the future of FSFL also; because FSFL shares have traded at more than a 10% discount to NAV in 2025.
The board has put forward a resolution asking shareholders if the company should continue operating at its present form or not.
Proactive: Toby, in the announcement, the directors outline a comprehensive plan to address the share price discount to NAV. What does that entail?
Toby Virno: So, there are several macroeconomic challenges influencing the share price of the entire renewable infrastructure sector at the moment, and FSFL is certainly not immune from those challenges. Higher interest rates, a volatile power price outlook and uncertain regulatory environment as well, have dampened investor sentiment for the sector, in part leading to that depression in the share price.
In spite of the share price performance, Foresight Solar and the portfolio has performed well, doing what we say on the tin.
We've delivered another year of strong operational performance in 2025, and the portfolio has continued to generate stable cash flows, supporting a fully covered dividend. We were 1.3 times covered for 2025, and we're forecasting 1.1 times dividend cover for 2026.
Addressing the share price discount is our main priority. And as you say, we've outlined some measures to do that within the AGM circular.
Central to this plan is to evolve the portfolio mix and develop long-term contracted revenues, which will support the dividend sustainably going forwards. For that to happen, we are targeting continued efficient recycling of capital, selling through selective divestments and then reinvesting those proceeds into new projects which benefit from attractive revenue streams such as the UK Contracts for Difference, which we see as being really key for Foresight Solar going forwards in our home and target market of the UK.
This portfolio renewal will extend the duration of the portfolio's contracted revenues, cash flows and deliver modest capital appreciation as we bring projects through from construction into operations, de-risking them as we go.
Another important element of the plan is seeking private market partnerships to support our investment programme and possibly co-invest. Discussions are at an early stage and there can't be any certainty of outcome, but these arrangements have the potential to support an acceleration of portfolio renewal and reinvestment.
And we look forward to providing updates as we progress with that strategy.
Lastly, we continue to optimise the existing portfolio with our active power price hedging and balance sheet strengthening initiatives, seeking to optimise the portfolio both operationally and financially.
The board is also analysing a range of strategic options to enhance shareholder value.
One thing we'd like to highlight is that whilst all of these initiatives are underway, investors are benefiting from attractive income. Based on the latest share price, FSFL is currently yielding close to 12% on a dividend that's expected to be fully covered this year.
Proactive: Toby, today you unveiled your first quarter NAV update. What are the highlights of that announcement?
Toby Virno: That's right Stephen, we released our Q1 NAV this morning. As is typical for a solar fund, the first quarter of the year is seasonally weaker for generation, having just come out of the winter period.
In Q1, both production and radiation were below forecasts, leading to lower than expected production. In spite of the bad weather, we posted a stable NAV of 99.2 pence per share in line with the Q4 position.
On the policy front, the UK government has proposed a number of policy changes that will impact the sector, targeting a decoupling of electricity prices from natural gas prices as those continue to introduce volatility in the wake of geopolitical conflicts in the Middle East.
We're pleased to say that, as stated, these moves are not expected to affect Foresight Solar's 8.1 pence per share dividend target, or our anticipated 1.1 times dividend cover at this time, though we will of course provide further updates as more information becomes available later this year.
Proactive: Toby, I hope you continue to keep us updated with your progress. Thank you very much for your time today.