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Date: October 2018
Published by: Investment Trust Newsletter
Written by: Andrew McHattie
We have written about Bluefield Solar Income a few times in the
newsletter, highlighting its 6%-plus dividend yield, reliability, and
well-managed risks. After the fund’s final results for 2018, which
most importantly confirmed the year’s total dividends at 7.43p per
share, we spoke to Bluefield Partners’ managing director James
Armstrong about the outlook.
These results marked the fund’s fifth year
of operation since its IPO in July 2013, since
when the shareholder total return has
been over 50%, something of which James
is justifiably proud. He says the fund has
exceeded its targets over these five years, in
spite of falling power prices, providing steady
returns to investors that are uncorrelated
with movements in the stockmarket. That
last point is important if you are looking
for diversification away from equity funds
– Bluefield Solar derives its income from
UK solar photovoltaic assets, with 60% of
revenue in the form of regulated flows. It
owns and operates solar farms across the
UK, from Trethosa in Cornwall to Kellingley
James stresses that this is “an income
product” – he does not want to become
obsessed with the net asset value (113.3p at
the end of June) – he wants to position the
fund as a very defensive, very predictable
income producer that simply provides a good
sterling yield to shareholders. Based on the
target dividend of 7.68p per share for 2019,
the prospective dividend yield is 6.3%, which
we think is very attractive.
Much of the fund’s revenue for next year is
already locked in, thanks to fixed contracts
that are already signed for power supply.
Ironically enough, at a time when the trust’s
assumptions (used to calculate the NAV) have
been heading lower for long-term power
prices, there has been a spike in short-term
prices that is beneficial for revenue. From
around £45/MWh of energy earlier this
year, power purchase agreement prices are
closer to £57/MWh now. Another potential
windfall has been the sudden termination
by the EU of a minimum import price for
Chinese solar modules, effective as of last
month, meaning a fall in the cost of new
installations. James sees the solar market
moving towards economic unsubsidised
projects, and whilst virtually no new solar
capacity is currently being built in the UK,
he thinks the trust will have expansion
opportunities again in the future.
For now it is simply business as usual
for Bluefield, delivering power to the UK
network and growing dividends to its
shareholders. For non-correlated income
from a quality operator, we think BSIF is a
solid defensive holding.