Notice of EGM Proposed Change to Investment Policy

RNS Number : 5039A

Bluefield Solar Income Fund Limited

08 June 2016

 

8 June 2016

BLUEFIELD SOLAR INCOME FUND LIMITED
(the "Company")

Proposed Amendment to Investment Policy and Notice of Extraordinary General Meeting

Introduction

The Board today announced that it is seeking approval from Shareholders for an amendment to the Company's investment policy (the Proposal).  The amendment, if approved, will enable the Group to incur long term structural debt at the holding company level whereas the existing investment policy envisages that the Group will only use short term debt at the holding company level. Shareholders should note that the proposed amendment will not increase the overall limit on borrowings set out in the existing investment policy and in all cases the combined short term and long term leverage will not exceed 50 per cent. of the Company's Gross Asset Value at the time of drawdown.

As the Proposal involves a material amendment to the Company's existing investment policy, the approval of the Shareholders is required in accordance with the Listing Rules and the Proposal is therefore conditional on the passing of the Resolution, which will be proposed at the Extraordinary General Meeting of the Company as an ordinary resolution. The proposed amendment of the investment policy has been approved in principle by the FCA in accordance with the Listing Rules.

Background to and reasons for the Proposal

As explained in the Placing Programme Prospectus published by the Company on the 26 October 2015, the Investment Adviser was exploring a large number of both primary and secondary project opportunities, the acquisitions of a number of which were completed utilising the amended and restated Acquisition Facility, upon which it intends to enter into exclusivity arrangements, subject to securing availability of sufficient funding. To realise the acquisition of the pipeline assets, the Company intends to utilise the Acquisition Facility as a short term financing measure, with the intention that it would be replaced by long term structural debt (subject to Shareholders' approval of the Proposal), as well as further equity, with a target long term leverage of 25-35 per cent. of Gross Asset Value. In all cases, the combined short term and long term leverage of the Group and the SPVs in which it invests will not exceed 50 per cent. of Gross Asset Value at the time of drawdown (this being the limit on Aggregate Group Debt set out in the Company's existing investment policy).

The Directors believe, as advised by the Investment Adviser, that the introduction of long term structural debt at holding company level, in conjunction with an acquisition facility, will have the following benefits:

●          the Company may, in combination with the targeted long term structural leverage of 25 to 30 per cent. of GAV (which will not exceed 50 per. cent. of GAV), achieve, overall, a more favourable debt package, with particular reference to the interest rate and covenants on the long term debt;

●          these favourable terms, in respect of the long term debt, may be locked in over a longer period thereby providing a better match of the debt servicing costs with the cashflows from, and life of, the underlying assets;

●          by having a significant element of the overall gearing of the Group provided through long term debt, any refinancing risk associated with an acquisition facility will be reduced;

●          reducing the amount of debt at SPV level relative to overall debt may reduce the risk that any cashflow will be locked at SPV level, with a corresponding reduction of risk to the Group's revenue and dividend targets; and

●         the use of long term structural debt at the holding company level will provide greater transparency to shareholders as to the capital structure of the Company and the cost of debt that it has incurred.

Shareholders should note, however, that it may not be possible to refinance any long term debt either: (i) during the duration of the debt should better terms become available in the market; or (ii) on maturity of the debt when the balance of any debt outstanding will become repayable. In addition, any long term debt will be secured over the Company's portfolio as a whole rather than over any specific asset within the portfolio (on a basis that limits the recourse to other assets within the portfolio).

Together with The Royal Bank of Scotland plc and Investec Bank plc, the "Long Term Debt Advisers" to the HoldCo, the Investment Adviser has commenced, as requested by the Board, the work required in order to introduce long term structural debt. As at the date of this announcement, this work has progressed well.  The Long Term Debt Advisers issued an indicative teaser to potential lenders, following from which indications were received from multiple leading debt providers in both the size required and at the coupon rates prevailing in the infrastructure sector for debt of this nature.  Together with the Long Term Debt Advisers, the Investment Adviser has identified and recommended a short list of potential lenders with whom a formal due diligence and bidding process has been initiated.  That process is anticipated to progress substantially over the next few months.

The proposed amendment of the investment policy set out at the end of this announcement has been approved in principle by the FCA in accordance with the Listing Rules.

Extraordinary General Meeting

The Proposal is conditional on the approval by Shareholders of the Resolution to be put to Shareholders at the Extraordinary General Meeting, which has been convened for 1 July 2016 at 10:00 a.m.

The Resolution will be proposed as an ordinary resolution of the Company, requiring the approval of a simple majority of the votes recorded and will, if passed, amend the investment policy of the Company so as to enable the Group to incur long term structural debt at the holding company level.

All Shareholders are entitled to attend, speak and vote at the Extraordinary General Meeting and to appoint a proxy or corporate representative to exercise that right.

Recommendation

The Board considers that the Proposal and the Resolution are in the best interests of the Company and Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution, as all of the Directors intend to do in respect of their own beneficial holdings of Ordinary Shares which amount in aggregate to 1,144,653] Ordinary Shares (representing approximately 0.37 per cent, of the existing issued ordinary share capital of the Company).

Investment Policy

If the Resolution is passed at the EGM, the full text of the Company's amended investment policy will be as set out below.  The only section that will be amended if the Investment Policy Resolution is passed relates to the ability of the Group to incur both short term and long term structural debt at the holding company level.  This amendment is underlined in the text below.

"Investment objective

The Company seeks to provide Shareholders with an attractive return, principally in the form of quarterly income distributions, by investing in a portfolio of large scale UK based solar energy infrastructure assets.

The Company and its Board have set a target of growing dividends from a 7p per Ordinary Share base level for 2014/15 by RPI and this would lead to a target dividend for the Company's third financial year in 2015/16 of 7.07p. However, as a result of good operational performance in 2014/15 the Board declared an increased dividend of 7.25p for that financial year, and subject to operating performance in the current year being within its expectations the Board intends to maintain that level of dividend. Subject to maintaining prudential level of reserves, the Company intends to distribute cash generated in order to optimise Shareholders' returns and expects to achieve its target returns without recourse to reinvestment of spare cash flows.

Investment policy

The Group invests in a diversified portfolio of solar energy assets, each located within the UK, with a focus on utility scale assets and portfolios on greenfield, industrial and/or commercial sites. The Group targets long life solar energy infrastructure, expected to generate stable renewable energy output over a 25 year asset life.

Individual solar assets or portfolios of solar assets are held within SPVs into which the Group invests through equity and/or debt instruments. The Group typically seeks legal and operational control through direct or indirect stakes of up to 100 per cent. in such SPVs, but may participate in joint ventures or minority interests where this approach enables the Group to gain exposure to assets within the Company's investment policy which the Group would not otherwise be able to acquire on a wholly-owned basis.

The Group may make use of non-recourse finance at the SPV level to provide leverage for specific solar energy infrastructure assets or portfolios provided that at the time of entering into (or acquiring) any new financing, total non-recourse financing within the portfolio will not exceed 50 per cent. of the prevailing Gross Asset Value. In addition, the Group may, at holding company level, make use of both short term debt finance and long term structural debt to facilitate the acquisition of investments, but such short term holding company level debt (when taken together with the SPV finance noted above) will also be limited so as not to exceed 50 per cent. of the Gross Asset Value.

No single investment in a solar energy infrastructure asset (excluding any third party funding or debt financing in such asset) will represent, on acquisition, more than 25 per cent. of the Net Asset Value.

The portfolio provides diversified exposure through the investment in not less than five individual solar energy infrastructure assets. Diversification is achieved across various factors such as grid connection points, individual landowners and leases, providers of key components (such as PV panels and inverters) and assets being located across various geographical locations within the United Kingdom.

The Group aims to derive a significant portion of its targeted return through a combination of the sale of Renewables Obligation certificates and FiTs (or any such regulatory regimes that replace them from time to time). Both such regimes are currently underwritten by UK Government policy providing a level of Renewables Obligation certificates or FiTs fixed for 20 years for accredited projects and each regime currently benefits from an annual RPI escalation. The Group also intends, where appropriate, to enter into power purchase agreements with appropriate counterparties, such as co-located industrial energy consumers or wholesale energy purchasers.

Listing Rule investment restrictions

The Company currently complies with the investment restrictions set out below and will continue to do so for so long as they remain requirements of the Financial Conduct Authority:

●             neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in the context of the Group as a whole;

●             the Company must, at all times, invest and manage its assets in a way which is consistent with its objective of spreading investment risk and in accordance with the published investment policy; and

●             not more than 10 per cent. of the Gross Asset Value at the time of investment is made will be invested in other closed-ended investment funds which are listed on the Official List.

As required by the Listing Rules, any material change to the investment policy of the Company will be made only with the prior approval of the Financial Conduct Authority and Shareholders."

Further Information

Capitalised terms used but not defined in this announcement will have the same meaning as set out in the Circular to shareholders dated 8 June 2016.

A copy of the Circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Circular will also shortly be available on the Company's website at www.bluefieldsif.com where further information on the Company can also be found.

Enquiries:

James Armstrong / Mike Rand / Giovanni Terranova

Bluefield Partners LLP - Company Investment Adviser

Tel: [phone]

Tod Davis / David Benda

Numis Securities Limited - Company Broker

Tel: [phone]

Kevin Smith

Heritage International Fund Managers Limited - Company Secretary & Administrator

Tel: [phone]

Tom Karim

CNC

Tel: [phone]

Note to editors

About Bluefield Solar Income Fund Limited

The Company is a Guernsey-registered investment company focusing on large scale agricultural and industrial solar assets. It had an initial public offering of shares on the main market of the London Stock Exchange in July 2013 and currently has over 309 million shares in issue.

BSIF seeks to provide shareholders with an attractive return, principally in the form of income distributions, by investing in a diversified portfolio of solar energy assets, each located within the UK, with a focus on utility scale assets and portfolios on greenfield, industrial and/or commercial sites.  The Company intends to pay quarterly distributions.

About Bluefield Partners LLP (Bluefield)

Bluefield was established in 2009 and is an investment adviser to companies and funds investing in solar energy infrastructure. It has a proven record in the selection, acquisition and supervision of large scale energy and infrastructure assets in the UK and Europe. The team has been involved in over £1.5 billion of solar PV funds and/or transactions in both the UK and Europe since 2008, including over £750m in the UK since December 2011.

Bluefield has led the acquisitions, and currently advises on over 70 UK based solar PV assets that are agriculturally, commercially or industrially situated. Based in its London office, Bluefield's partners are supported by a dedicated and highly experienced team of investment, legal and portfolio executives. 

Bluefield was appointed Investment Adviser to the Company in June 2013.

 

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