PPAs help Bluefield Solar’s earnings to remain strong despite challenging 2020

Thanks to fixed power purchase agreements (PPAs) and strong irradiation throughout the last year, Bluefield Solar Income Fund’s underlying earnings continued to grow to record levels.

In its full year (FY) results, released today (22 September) it shows that its gross earnings for the period ending 30 June 2020 grew to 12.03 price per share (pps), from 11.01pps the year previously.

This has allowed the company to declare a dividend of 4.7pps, hitting its target for the year despite unexpected challenges, and just a small drop from the 8.31pps of the year ending 30 June 2019. It will carry forwards surplus earnings of 2.23pps, to help secure high dividends in the foreseeable future.

Bluefield Solar’s net asset value (NAV) fell slightly to £433.5 million, from £436.4 million in 2019. As such it’s NAV per share fell to 117.01p, from 117.98p. The company’s total return to shareholders was one of the most dramatically impacted metrics, falling to 4.70% in its FY 2020 results, from 19.12% the year previously.

John Rennocks, chairman of Bluefield Solar, said the company’s performance had been “very pleasing” and had consolidated its target performance since IPO.

“The strength of the financial performance and our conservative debt levels, mean that the company continues to be well placed to deliver attractive levels of income for the foreseeable future.”

Strong generation and secure PPAs

Generation remained high throughout the period, with 1,048MWh generated per MWp, compared to 1,030MWh last year. Currently, it has an operational portfolio of 90 PV plants, consisting of 49 large scale sites, 39 micro sites and 2 roof top sites, which have a total capacity of 478.8MWp.

This was particularly important for mitigating the volatility seen during 2020, driven in part by the COVID-19 pandemic. Irradiation was 11.1% higher than last year however, leading generation to be 8.3% higher, and revenues 6.6% thanks to the company’s low risk approach.

Power prices have been greatly impacted over the last six months, by both the saturated gas market and the COVID-19 lockdown driving down demand. As such they posed a particular challenge to the success of energy companies, but Bluefield Solar has managed to avoid much of this impact thanks to 90% of its portfolio having fixed revenues.

“Due to the flexibility of the company’s power fixing strategy it has continued to benefit over the period from the contribution of offtake agreements struck for up to 27 months from September 2018 when prices reached six year highs (up to £67/MWh), as well as strategically avoiding fixing any PPAs during the period April 2020 and July 2020 when day ahead power prices have been close to when day ahead power prices fell to historic lows,” noted Rennocks in the FY results report.

The company estimated that there was a c. £10 million benefit from power price contract fixes, as opposed to baseload prices. During the 12 months to 30 June 2020, Bluefield Solar recorded PPA revenues of £25.7 million, regulated revenues of £40.2 million and other revenues of £3.8 million.

Continued portfolio growth as it broadens scope

Due to a continued strong performance, Bluefield Solar is able to reaffirm its focus on growth within its results. In August – just shortly after the close of the FY for the company – it acquired a 64.2MWp UK solar portfolio for an initial cash consideration of £106.6 million.

It announced in June that it is broadening the scope of its investment mandate, with up to 25% of its Gross Asset Value (GAV) to be invested into technologies other than solar.

Speaking to Solar Power Portal recently, Bluefield Partner’s James Armstrong explained the potential of technologies like onshore wind and storage that will be “complementary” to solar for the company.

The majority of its investment will continue to go into solar in the UK, helping it to build on its ‘excellent asset performance’ and sustain its market-leading earning and dividend payments, said Bluefield Solar.

It has a proprietary solar development pipeline in excess of 350MWp it noted, through agreements with a select number of developers and contract partners. This is supported by the maturity of the UK’s solar market now, with Rennocks noting: “The subsidy-free market in the UK is now with us.”

Managing staffing during COVID-19

Despite challenges created by COVID-19 therefore, Bluefield Solar is looking to continue to grow and develop. It has recently made a number of significant hires to help it along this journey, including Baiju Devani who joined the company as investment director, and solar sector veteran Jonathan Selwyn, who has joined another branch of the company as managing director of the newly created Bluefield Renewable Developments Limited (‘Bluefield Development’).

The company’s office staff were quickly transitioned to remote working during the COVID-19 lockdown, while its field-based engineers received key worker status allowing operations to continue. Two staff members were furloughed during the period according to the FY results.

“The Board has been delighted with the exceptional response by our Investment Adviser and all their employees, including those in both Bluefield Services and Bluefield Operations, to the rapid onset and extended period of the COVID-19 pandemic,” added Rennocks. “As such, the Board and I would like to extend our thanks for their service and support in delivering another set of exceptional results.”