Foresight Solar Q3 2025: NAV knocked by tax review, valuation tweaks and sector headwinds
Foresight Solar Fund Limited (FSFL) has posted a tougher quarter. The unaudited net asset value (NAV) fell to £564.5 million at 30 September 2025, equating to 102.1 pence per share, down from 108.5 pence at 30 June. A tax review, weaker project actuals and higher discount rates did the damage, partly offset by time value, inflation and the ongoing buyback.
Quick definitions for clarity: NAV is the value of the portfolio after debt, expressed per share. “pps” means pence per share. A discount rate is the yield used to value future cash flows – higher rates reduce asset values.
Q3 2025 headline numbers investors should know
| Metric | Q3 2025 | Prior |
|---|---|---|
| Group NAV | £564.5 million | £603.8 million (30 June 2025) |
| NAV per share | 102.1 pence | 108.5 pence |
| Gross Asset Value (GAV) | £969.4 million | £1,005.6 million |
| Total outstanding debt | £404.9 million | £401.8 million |
| Gearing (debt/GAV) | 41.7% | 40.0% |
| RCF drawn at period end | £91.7 million | £75.9 million (30 June 2024) |
| RCF drawn currently (post period) | £72.7 million | — |
| Electricity production vs budget | 6.3% below | — |
| Irradiation vs base case | 3.6% above | — |
What moved the NAV this quarter
The per-share bridge shows the main drivers behind the 6.4p fall from 108.5p to 102.1p.
| Item | Movement (pps) |
|---|---|
| NAV on 30 June 2025 | 108.5p |
| Interim dividends paid | -2.0p |
| Time value | +2.1p |
| Power price forecasts | +0.1p |
| Project actuals | -0.4p |
| REGO price forecasts | -1.3p |
| Inflation | +0.5p |
| Portfolio discount rate adjustments | -1.4p |
| Share buyback programme | +0.1p |
| Tax review adjustments | -3.6p |
| Other movements | -0.5p |
| NAV on 30 September 2025 | 102.1p |
Two items stand out. First, the tax review: increased future tax payment estimates took 3.6pps off NAV. The company says engagement with HMRC has achieved clarity on historic submissions and future obligations, but the near-term effect is a hit to value. Second, valuation assumptions: discount rates were raised, notably +165 basis points for Australia and +75bps for Spain, reflecting market feedback and recent transactions. That shaved 1.4pps from NAV, with Australia alone accounting for -1.3pps.
On the positive side, time value (the passage of time on discounted cash flows) added 2.1pps, inflation tweaks added 0.5pps, and power price forecasts contributed a small 0.1pps. The buyback added 0.1pps this quarter and has delivered a cumulative 2.9pps since it began. The main operational negative was project actuals at -0.4pps, driven by outages and curtailment.
Operational performance: outages and curtailment bite
Portfolio generation was 6.3% below budget despite irradiation being 3.6% above base case – a frustrating combination. Two quick definitions: DNO outages are grid interruptions by distribution network operators, and curtailment is when grid limitations force plants to reduce output.
- UK: Generation 1.8% under budget with irradiation 6.9% higher. Excluding DNO outages, production would have been in line with forecast.
- Spain: Curtailment was the issue, leaving generation 17.9% under budget.
- Australia: Curtailment again, with generation 4.4% under budget.
Operationally, management says performance year to date is in line with budget, supporting confidence in achieving this year’s dividend cover target (the exact target is not disclosed).
Valuation assumptions: higher discount rates in Australia and Spain
FSFL increased the Australian discount rate by 165bps after receiving market feedback during the attempted sale process. It has been a buyer’s market for standalone solar, with no pure-play solar deals for more than 12 months. Spain’s discount rate rose 75bps, and the team added a third consultant into the Spanish power price blend, aligning it with the UK methodology. Net effect from these valuation changes was -1.4pps.
REGO (Renewable Energy Guarantees of Origin) pricing assumptions were cut, taking a further 1.3pps off NAV – a reminder that certificate markets can be a swing factor for cash flows.
Strategy and disposals: Australia sale paused, 75MW UK/Europe process ongoing
The sale of the Australian portfolio has been paused. A few whole-portfolio bids were received but deemed undeliverable after due diligence. The board will consider repositioning the portfolio and, in the meantime, focus on refinancing and pushing on with two co-located BESS (battery energy storage system) projects.
Separately, sales processes for an additional 75MW of operational solar assets marked for disposal are underway. No pricing or timing is disclosed, but the stated aim is to unlock capital, pay down debt and address the discount to NAV, alongside one of the sector’s larger buyback programmes relative to NAV.
Gearing, liquidity and the RCF
Gearing rose modestly to 41.7% of GAV, still within the 50% cap. The revolving credit facility (RCF) stood at £91.7 million drawn at quarter-end, reflecting working capital timing and summer cash receipts. After post-period distributions, the RCF was repaid to £72.7 million. Debt reduction remains a stated priority.
Regulatory watch: ROC and FIT indexation consultation could hit UK revenues
The UK is consulting on changing how the ROC (Renewables Obligation) and FIT (Feed-in Tariff) schemes are inflation-linked. Two options are on the table:
- Option 1: Move the switch from RPI to CPI to April 2026 (from April 2030) – modelled by FSFL as a c.1.7pps downside to the latest NAV.
- Option 2: Temporarily freeze indexation with retrospective realignment – modelled as a c.10.4pps downside.
The board is clearly disappointed, flagging the risk to investor confidence and future build-out. Estimates may evolve as the consultation progresses, but this is a material swing factor, especially under option 2.
My take: a tough but transparent quarter with clear swing factors
This update is mixed. The negatives are plain: the HMRC-related tax adjustment, higher discount rates, and weaker project actuals pulled NAV down 6.4p. The pause in the Australian sale underscores softer buyer appetite for standalone solar portfolios, and the ROC/FIT consultation adds a live regulatory overhang.
On the positive side, management is being forthright. Operationally, year-to-date performance is in line with budget and dividend cover is guided as on track. The buyback is accretive, gearing is controlled, and there are credible levers to narrow the discount to NAV: selective disposals, refinancing, and progressing co-located storage.
What matters next: clarity on the ROC/FIT consultation, progress on disposals (including the 75MW sale), and any update on Australian refinancing and BESS timelines. Watch for continued buyback deployment and further debt reduction. For income-focused investors, keeping an eye on dividend cover and any changes to inflation indexation assumptions will be key.
