Edison Investment Research Limited
London, UK, 19 February 2021
Foresight Solar Fund (FSFL): Initiation - Solar energy - the future is here
Foresight Solar Fund (FSFL) has consistently delivered on its investment objective from its launch in October 2013. It is the largest UK solar player and provides investors with a covered, sustainable and growing dividend, underpinned by subsidised assets in the UK and high-return growth opportunities globally. This continued during the fund's arguably most challenging few years, amid declining power prices and the COVID-19-triggered economic shock. The solar industry's growth potential remains huge. The IEA estimates that solar capacity needs to quadruple in the next decade globally (a 20% CAGR) to limit global warming to 1.5°C. The UK's solar capacity is forecast to more than double within the next 10 years.
FSFL's lower premium to NAV than the peer group average (6.7% vs 8.7%) could be attributed to weaker NAV growth, as valuation methodologies differ. As power prices recover, we expect FSFL to surprise on the upside. The trust's opportunity to revalue is underpinned by a higher energy yield due to a wider geographic mix (Australia and Spain) and valuation assumptions that appear more conservative.
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