Foresight Environmental Infrastructure

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Market Overreaction Presents Value Opportunity

On 21 November 2024, Foresight Environmental Infrastructure* (FGEN) published its interim results for the six months to 30 September 2024. Highlights included:

 NAV per share -3.3% to 109.8p (net assets: £720.1m); NAV TR +0.04%. The decline in NAV per share was primarily driven by the payment of interim dividends (-3.8p) and an impairment to HH2E (-2.9p), which was less than offset by value enhancements to AD (Anaerobic Digestion) operating contracts (+1.1p).

 Project distributions were +2% above budget, largely driven by cash generation of wind assets (including recovery of under-budget distributions from FY24), and strong AD performance. Net cash generation -2.8% YoY to £31.3m (after operating and finance costs), having been impacted by the EGL (Electricity Generator Levy) and an increase in interest costs (£6.8m vs £3.8m a year prior).

 FY25 dividend target of 7.8p reaffirmed, +3.0% YoY (+2.7% CAGR since IPO). Dividends paid in period of 3.8p were 1.23x cash covered (1.36x before EGL payment). Base case dividend cover is expected to be more than 1.20x over the next three years.

 Fund-level gearing reduced to 28.7% from 31.2%; project-level gearing 18.0%; £113.7m drawn on £200m RCF. Weighted average cost of debt including RCF is 5.0%.

We held a call with co-manager Edward Mountney on 26 November 2024.

*Denotes a corporate broking client of Winterflood Securities

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