Bluefield lauds PPA strategy as it helps offset energy price volatility

  • Solar.

    Energy price volatility wiped almost £25 million off BSIF's net asset value in the six months ended 31 December 2015.

Bluefield Solar Income Fund (BSIF) has lauded its PPA strategy after it helped offset the impact wholesale electricity price volatility and lower than forecasted irradiance had on its interim results.

BSIF this morning reported revenues for the six months ended 31 December 2015 of circa £16.7 million – 2.8% below those originally expected.

This, the company claimed, was attributable to a 4.4% slide in forecasted generation from its solar assets due to poor solar irradiance and isolated incidents at three solar farms which impacted on their generation.

As well as the operations and management services provided by BSL – which Bluefield said helped the company to an overall performance ratio 1.7% above the original investment case – the company said that its PPA strategy had played a significant role in helping offset market conditions.

Peak power prices for the reporting period fell 2.5% in comparison to the previous six months. This has impacted the company both in its total revenues, 40% of which are derived from the sale of power, and its net asset valuation, which fell by almost £25 million as a result of power price movement.

But Bluefield managed to offset at least some of the impact on revenues through its PPA strategy, designed specifically to minimise its exposure to such volatility.

The company aims to have around 25% of its portfolio entered into long-term PPAs each quarter to mitigate against seasonality and short-term power price fluctuations, with most PPAs lasting between 12 to 18 months.

BSIF’s results show that the company managed to secure an average power price for the period of around £47.40/MWh, substantially higher than the average day ahead power price of between £43.70 and £39.80 during the period.

This has also been buoyed by 95MW of Bluefield’s most recently acquired portfolio being engaged in longer-term PPAs out to Q1 2018, which it said was a source of “significant comfort” to the company’s performance.

Meanwhile the company also gave a vote of confidence to the UK solar market in general. BSIF chairman John Rennocks said that the company “strongly believes” that the country “remains an interesting place for investors” despite threats posed by market price volatility and policy intervention.

HM Treasury’s decision to remove Climate Change Levy Exemption Certificates for renewable generators initially wiped some value off solar asset holders but Rennocks this morning said the danger was of investors seeing this as the “thin end of the wedge” and discussed growing fears of retroactive changes to the Renewable Obligation scheme; a significant contributor to BSIF’s revenue.

“As a company, we think the government would be well served not to confuse shareholders by ‘tinkering’ but we still view the UK market to present low regulatory risk and to be one in which the government has demonstrated its strong commitment to the existing primary regulation,” Rennocks said.

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