Foresight Environmental Infra H2 2025 Earnings Report

Foresight Environmental Infra EPS Results

• Actual EPS: -GBX 0.40
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Foresight Environmental Infra Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Foresight Environmental Infra Announcement Details

• Quarter: H2 2025
• Date: 6/24/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, June 24, 2025
• Conference Call Time: 7:00AM ET

Foresight Environmental Infra (LON:FGEN)structure (FGEN) formerly known as JLEN. The Company's investment policy is to invest in a diversified portfolio of Environmental Infrastructure. Environmental Infrastructure is defined by the Company as infrastructure assets, projects and asset-backed businesses that utilise natural or waste resources or support more environmentally friendly approaches to economic activity, support the transition to a low carbon economy or which mitigate the effects of climate change. Such investments will typically feature one or more of the following characteristics: · long-term, predictable cash flows, which may be wholly or partially inflation-linked cash flows; · long-term contracts or stable and well-proven regulatory and legal frameworks; or · well-established technologies, and demonstrable operational performance FGEN's aim is to provide investors with a sustainable, progressive dividend per share, paid quarterly and to preserve the capital value of the portfolio over the long term on a real basis. The target dividend for the year to 31 March 2025 is 7.80 pence per share (1). FGEN is an Article 9 fund under the EU Sustainable Finance Disclosure Regulation and has a transparent and award winning approach to ESG. Further details of the Company can be found on its website www.fgen.com. LEI: 213800JWJN54TFBMBI68 (1) These are targets only and not profit forecasts. There can be no assurance that these targets will be met or that the Company will make any distributions at all.

Foresight Environmental Infra H2 2025 Earnings Call Transcript

Key Takeaways

• Board concludes to maintain core strategy with refinements, prioritizing proactive portfolio management, targeted asset disposals and a simplified continuation vote structure.
• Record cash generation drove flat NAV at 106.5p, dividend cover of 1.32x and a 2.1% dividend increase to 7.96p.
• £90m raised through disposals of non-core AD and rooftop solar assets, funding reduced debt, a £30m share buyback and maintaining one of the lowest sector gearing levels.
• Growth assets are advancing, with CNG Fuels network expansion, Glasshouse ramp-up to breakeven and Ruocan aquaculture nearing first harvest.
• Outlook remains disciplined, focusing on sustaining income generation, recycling capital into core environmental infrastructure and pursuing selective new investments meeting strict return and inflation-linkage criteria.

Presentation

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

Okay. Good morning. Hello, everyone. So thank you very much for coming to this presentation covering Foresight Environmental Infrastructure's annual results for the financial year 2025. So thank you to those of you who've come in person and also to those of you who are online.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

So first, some housekeeping. There are no fire alarms scheduled for this morning. So if an alarm sounds for those in the room, please follow the instructions of Fire Marshals who will guide you out of the building. And if you hear an alarm when you're online, I'm afraid that's your problem. So just to take you through the running order for today.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

In a minute, I will hand over to Ed Warner, the Chair of FGen, who will spend a few minutes running through the steps the Board took in arriving at the strategy update that we announced at the beginning of the month and that we reiterate in these annual results. Then Ed will hand over to Ed Mountney and Charlie Wright, who will run through the main elements of the annual report. I'll then return to give a view on outlook and to wrap up, and at which point, we will invite questions from those in the room in the first instance, and then we'll turn to those who had dialed in. So I will now hand over to Ed Warner to talk first of all. Thank you, Ed.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

Thanks very much, Chris, and good morning, everybody, those online and in the room here in the shard. Good to see you and thanks for the interest that you're showing in FGen's results. I won't be talking about the numbers themselves, the current state of the portfolio and the markets because I'll leave that to Ed, Charlie and Chris. But as Chris has trailed, we did make a strategic update announcement a few weeks ago, and I just wanted to take this opportunity to put that into some context for everybody. I've had a number of questions as to how a Board goes about a strategic refresh or review.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

So a little bit of insight might be helpful here, I hope. As a Board, this was not a one off moment looking at strategy. It's something that we do on a pretty continuous basis. We're always alive to the options available to us to serve our shareholders. And we are very cognizant of the way in which the shares trade and in particular, the relationship between the share price and net asset value, the discount.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

At times past, it's been a premium, but clearly that's not been the case for the last couple of years. And so earlier this year, we wanted to accelerate that continuous work and to look in even more granular detail into the range of strategic options open to the company because of the persistence of the discount at which the shares were trading. And we didn't do that just with captive advisers, either the investment manager or our retained advisers, we wanted to get independent external support in that as well because it's important that you don't end up with groupthink or an entrenched view based on years of looking at the company and believing in it. We wanted to ensure that as a Board, we were in the best possible position to conclude on the right strategic direction for the company in what is clearly a challenging environment, and we didn't want to be steered in that regard by our investment managers much as we love them. So what do we look at?

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

We looked at a range of scenarios. These went for at the most extreme, a managed wind down of the portfolio or the company, a targeted divestment approach, and that could have been divestment of any of the assets within the portfolio the continuation of the current investment strategy and some refinement of the current investment strategy potential mergers and acquisitions with other listed investment companies. And we looked at all of those options on a qualitative and a quantitative basis. Our central objective throughout was delivering the best possible outcome to what is, let's face it, a broad base of shareholders who have a diverse set of views. And we didn't want at any time to take those views on trust.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

So we did speak to a number of investors through the course of, the last few months to test our thinking, subtly. We weren't asking them to tell us what we should do. We don't want to make them insiders, but we wanted to get an assessment of their attitude towards FGen and to plug that into our work. Now our overriding conclusion, and you'd have seen it in the strategy update, was that shareholders' interests are best served through a proactive management of our existing portfolio. So those range of options that we looked at very much that central case of a continuation of the current investment strategy, albeit with some refocus or refinement.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

And we concluded that because we believe this course of action is consistent with the long term objective we have of generating both income and a progressive dividend delivering that income and growth in net asset value over the medium to long term. This is a portfolio which you know or a company which you know has got a very diverse range of assets, technologies underlying those assets and has been positioned to deliver both a growing dividend, a high income yield, but also some growth as well. And that very much distinguishes it amongst the peer group in the listed market. Now having reached that conclusion, it's only right to say, well, what is your asset disposal strategy? Have you even got one?

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

And our answer is yes, we absolutely have. And it is to focus our exits of assets on selling our growth investments at the right time when they're sufficiently mature that we can really secure the value that has been created and is being created by the work that the operators of those assets are undertaking and the management team at Foresight are also generating and working alongside and above those operators. We're not looking to dispose of assets in the short term simply to validate our net asset value because we have that on a regular basis reaffirmed for us by external advisers. So we believe in our NAV. We don't think we need to sell assets just to prove NAV to anybody.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

This is a challenging market, and it's only right that you sell things when you can secure genuine value uplift from doing so and that you do so at a time at which you maximize the opportunity to deliver returns for shareholders. This disposal strategy is consistent with our refocused investment message. We will be disciplined and we are very conscious that one or two of our most exciting assets in the growth segment of our portfolio, particularly the Glasshouse and Roocan, have been a little controversial for some shareholders because they see them very much at the far end, if you like, of the technology spectrum that FGen is investing in. So what we are saying for now is that we would not make any further investments into controlled environment, businesses or projects such as these. But we do very much believe in them and their growing value, and we will look to exit them, but only at the right time when we've proven that value to the market and to ourselves and have secured that as hard cash and a significant return on the money invested in those projects.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

So what are we going to do in future? We will continue to allocate investment to growth assets. We will make selective disposals to facilitate capital recycling into reinvestment in our core portfolio and into new growth opportunities. This will be an important feature of our investment strategy going forward because as I said earlier, we want to generate a progressive dividend, a high yield, well covered and growth in the NAV. Now you may say that's Nirvana, but that is what we're aiming at.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

That's what this company has done for many years and will continue to do so into the future. One final thing, I just want to explain the change that we've announced today in the discontinuation vote structure from next year's AGM onwards. We have, as you know, been offering a discontinuation vote to shareholders if our shares trade on average at a greater than 10% discount through the course of the year. We had a vote last September. We have one coming up at the AGM this September.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

Looking at that, it feels to me it's very shareholder unfriendly for two reasons. One is it forces people to think sort of upside down in voting to discontinue, whereas normally when you have an AGM notice come out, the Board asks you to vote in favor of all the motions. So we were asking people last year and now this year to vote against one particular motion, even though it's a motion we have put forward seems a bit odd and can confuse, particularly maybe some, retail investors. And also the 75% threshold, just feels wrong to us. If we had, let's say, a vote of 51% to discontinue, what will we do?

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

Will we ignore that? Of course, we wouldn't. But it wouldn't have reached the 75% threshold. So it seems to us that a very simple democratic 50% threshold, a continuation vote in which we, if we have these votes in future, we'll be asking shareholders to vote in favor of a motion to continue the company. It seems simple, straightforward, understandable and very shareholder friendly.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

So, let's hope we don't have to have a vote next year, but if we did, then that would be the way in which it was structured. And we hope that shareholders will recognize that as a further indication of the Board's concern that it takes shareholders' interest into every decision that we make and is at the heart of all of our thinking strategically for the company. So that's the background. I'm going to be here throughout the presentation. Very happy to take questions at the end.

[Ed Warner, Chair of the Board & Nomination Committee at Foresight Environmental Infrastructure]

But I'm now going to hand over to the team for the more interesting bit, which is the portfolio update. Thank you very much.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

Thank you, Ed. Hello, everyone, and thank you again for taking the time to attend. I'm Charlie Wright, Co Lead Investment Manager to FGen. And I'll be taking you through the first half the results presentation today before handing over to Ed Mountney. Now the main focus is obviously our results and performance over the last financial year.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

But before we cover that in detail, following the statements and on the back of the strategic direction that the Board has concluded, I'll just take a couple of minutes to run through the key tenets of FGen's unique investment proposition and clearly establish why we are here, what our investment strategy is, what the fund is aiming to deliver and what makes ours a compelling story. Now obviously, some of this will be familiar, so I won't dwell too long on it, but we feel it is important that our investors and other stakeholders have a comprehensive understanding of our investment case, particularly in the light of the Board's strategic direction. So firstly, FGen is an infrastructure based proposition aiming to deliver stable returns, predictable income, opportunities for growth from environmental infrastructure investments with a focus on long term stable cash flows, secured revenues, inflation linkage and the delivery of essential infrastructure services. Looking forward, there'll be a very disciplined focus on these characteristics, particularly in this changed macroeconomic environment. And we've always emphasized diversification, and we cover a broad range of technologies.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

So we have simplified our investment thesis across three pillars in order ensure that, that diversification is more easily understood: Renewable energy generation, including wind, solar, AD and others. Other energy infrastructure such as storage and cleaner transport and heat and broader electrification and sustainable resource management such as water and waste management plus our controlled environment assets. And finally, as Ed said, we've been very clear about our disposal strategy whereby we are not pursuing short term asset disposals, but are focused on medium term disposals across our growth assets in order to recycle capital and grow through reinvestment. And looking forward, targeted exits will be an important feature in our investment strategy alongside that longer term objective to grow through reinvestment, which the company is well placed to do given the current makeup of its portfolio. And towards the end, Chris is going to highlight some examples of new investment opportunity that we're monitoring.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And so on the next slide, why FGen? Why do we think that investors should invest with us? Now I get some of this I've touched on the previous slide, but our key strengths and differentiators are the fact that we have attractive return objective, offering investors liquid access to a long term stable return profile. We have a huge market opportunity ahead of us. We're a differentiated offering versus our peers, investing not just in wind, solar and storage, but a range of sectors that reduce reliance and exposure to a single technology or subsidy framework.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

We've got a strong track record of eleven years of dividend growth. We're backed by a high quality manager with forty years of investment experience. And we have a robust governance framework in place with the investment manager accountable to the fully independent Board and in turn shareholders. Now again, this will obviously be familiar, but we do think it is worth just reminding ourselves of the sheer scale of the investment opportunity. So decarbonization, net zero are the key megatrends of this generation and the investment requirements are enormous in scale with nearly $50,000,000,000 of investment required in energy transition between 2025 to 2030 alone in order to hit the trajectory required for net zero.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And whilst Clean Power is critical, other sectors such as electrification of heat and transport are significant opportunities in their own right, and that plays to FGen's ability to work across the range of environmental infrastructure, particularly as we continue to evolve our portfolio revenue mix away from reliance on rocks. So now I'll move on to the performance summary. So first up, we have an overview of the highlights of the year. And the main thing I'd like to bring out here is a theme of resilience and a record cash generation. NAV per share stands at 106.5p with the reduction from 113.6 being counterbalanced by a dividend of 7.8p, leading to a flat NAV total return of 0.6% in the period and an annualized NAV total return of 7.3% since IPO.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

Now our operational portfolio continues to perform well with the tenth consecutive year of record cash receipts contributing to a dividend cover of 1.32 times, our second highest since IPO. And we've increased our dividend target for next year by 2.1% to 7.96p per share, which we expect to be well covered again. And finally, reflecting on our disciplined approach to capital allocation, which was obviously a crucial objective throughout the year, we are pleased with our execution here. First and foremost, we completed two value accretive and strategically important sales. The 51% disposal of part of our AD portfolio aligned interest between the parties with further value that's been recognized through delivery of value enhancements and alignment of operating assumptions, including the removal of operator profit sharing agreed as part of the transaction, which alone resulted in an additional 9% uplift in NAV.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And disposing of the solar rooftop portfolio as a non core lower returning part of the portfolio allowed us to put that capital to better use elsewhere. So this raised proceeds of £90,000,000 which is equated to 10% of the portfolio value at the beginning of the year, which we used to further reduce gearing maintain which was already one of the lowest gearing percentages amongst the peer group and facilitating our £30,000,000 share buyback program, which is still ongoing. And so here we have FGen's cash flow statement. I mentioned before about the record cash receipts from projects. And as per the previous year, this is primarily due to a combination of the high power prices that we successfully locked in at their peak with active management of short term fixed as a key focus for the team alongside the asset enhancements we've been able to deliver over the years, particularly our Bioenergy assets.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And as our growth assets progress, they will soon be contributing yield, so that will step in when these elevated price fixes roll off. And other points to bring out on this slide include the £30,700,000 of investment. Obviously, we remain very cautious in our approach to deploying capital in the current environment. And so this doesn't reflect investment into new opportunities. It instead covers existing commitments and value enhancement opportunities across our existing portfolio, most particularly, Roocan, CNG and the ADs.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And whilst funding this £31,000,000 of investment commitments, we have done this alongside a reduction of in debt of nearly £60,000,000 and £20,000,000 of share buybacks. Now these have been predominantly funded by the proceeds of our value accretive asset sales, but it also means that we funded nearly £20,000,000 of investment activity through surplus cash generated by the portfolio. So that's over 20% of cash generated being used to keep down borrowing. So the net of all these items on the screen gives us a dividend cover of 1.32 times or just under 1.4 times if you add back the EGL payments. And on to debt management, we continue to operate with a prudent approach here, maintaining one of the lowest levels of gearing amongst the peer group.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And this is something that we will continue to put great value on given the wider volatility across markets. Here we show the 18.5 gearing at project level, which goes up to 28.7% when adding in the RCF held at the fund level. And as before, all long term debt fully amortizes within subsidy lives with no refinancing risk and interest rates fully hedged on all long term project finance debt. And following the refinancing of the RCF last year, a few months ago, we downsized the size of the RCF facility from £200,000,000 to £150,000,000 with an associated cost saving. This reduced RCF still continues to provide ample headroom to cover outstanding portfolio commitments as well as investment opportunities across the portfolio during this current year, of which there are a few we're currently progressing.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And the £30,000,000 uncommitted accordion facility remains in place if required. As per previous updates, we are showing our weighted average cost of debt, which now stands at 4.4% for project level debt and 4.9% when factoring in use of the RCF. So we continue to feel conservatively geared with the flexibility position that we need. And so this looks at the asset financial performance and where the distributions are coming from. So to reiterate, again, we generated a record level of cash this year despite the fact that actual cash receipts are 7.7% behind budget.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

Like many across the peer group, it hasn't been a great year for wind and solar generation, both due to weather resource itself and also D and O outages. And as per our update in last quarter, we have adjusted down our wind yield forecast to better reflect performance over the last few years. Other Energy Infrastructure, obviously, shows a large relative reduction, but overall that is not material And it relates to the retention of CNG yields in order to fund the growth of the business as opposed to distributions. And we have a good performance across our concession assets. And now on to the actual generation side across our Renewable Energy assets.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

Overall, that is expected to be 6.1% under budget once expected compensation measures are accounted for primarily in the form of warranties and insurance claims. As I said, wind and solar show some underperformance with the drop in solar generation also impacted by the sale of the solar rooftop portfolio in December. The crop ADs have continued to perform really well for us. And whilst Biocollectors has had a challenging year, a series of operational initiatives and improvements overseen by an industry expert installed as a new CEO are already bearing fruit. So Ed will talk more about Crammington later.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And whilst it has been a fantastic investment for us, there was an unplanned outage in Q1, which reduced generation, but with generation then exceeding its target for much of the year. And so with that, I'll now hand over to Ed, who will run you through the portfolio itself and the valuation.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

Thanks, Charlie. Good morning, everyone. So as Charlie just said, I'll take you through a bit on portfolio valuation and what's in the portfolio, how we're actually looking at portfolio composition at the moment. Before I get into that, think I recognize everyone in the room, but for anyone online that doesn't know me, I'm Ed Mountney, Director at Foresight. I'm one of the lead managers to FGen.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

I've been doing this role for about three years now. Before that, I was Head of Valuations at Foresight. So I've been involved in FGen in various roles for what dating back to 2016, so only a couple of years after IPO. So first up on the screen, we've got our usual valuation bridge, all no doubt familiar with the format. Starting on left hand side, I'll just run through, I think, all these movements on the left, they're cash items, they're things that Charlie has already talked about in the cash flow statement.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So I won't go into loads of detail, but it's the £30,000,000 of follow on investments into the construction assets and a few value enhancements, the £89,000,000 of disposals that Charlie mentioned as well. And then you'll see the £90,000,000 record cash flows coming off the assets. And then we move on to the right hand side, so just past the rebased column, and that's where we get into the underlying fair value movements within the portfolio. So that's £22,000,000 up from the previous year and includes the usual drivers for things like power prices and inflation, which actually have been pretty stable this year. So the main movements this time sit within the balance of portfolio return, and we've outlined that in a bit more detail, which you can see in the blue box on the screen.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And there, you've got the GBP 60,000,000 uplift from the mechanical unwinding of the discount rate twelve months. We've also got the £19,000,000 write down from the impairment in HH2E that we announced and talked about in some detail at the half year, pounds 8,000,000 reduction from the revision of our wind yields that we announced back in December. And then lastly, various other low value movements, which includes the operational items that Charlie just talked about as well as some of the updates from the regular reviews of things like our maintenance forecasts on our food waste ADs, so a whole bunch of things that go into that. So normally here, we'd have a slide on power prices, but this year, there's been a slight rejig of the slides, which I expect you've already noticed. We've moved the curves themselves to the appendices, so anyone that wants to see the detail, they're still in the presentation.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And then I'll cover the usual info on things like our hedging strategy and revenues more generally in a bit when I talk about the portfolio. So all that stuff is still in the presentation, just to come in a bit. But before I get into that, we've got discount rates. Main thing to say here is we kept those flat this year, albeit the weighted average has ticked up 20 basis points to its highest since IPO at 9.7%. And that's really owing to ongoing investment into the higher returning construction assets and then movements in underlying valuations just pulling the average up.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

But the main thing I wanted to put out here is the additional disclosures that we've put into the table on the right. So not only have we added more sectors to what we've disclosed before, but we've also now shown the levered and unlevered discount rates alongside the usual weighted average. So given no changes in the rates, say that we don't need to dwell on the numbers, but hopefully, will simplify further comparisons against other funds with differing technologies and differing debt structures for anyone that wants to go back and have a look. Next up, we have a slide on inflation. So, so far this year, has tracked ahead of our modeled assumptions, which is why we've increased the RPI rate for 2025 by 05% to 3.5% before we revert back down to 3% until 2030 and stepping down to 2.25% thereafter.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

We think this remains very conservative. And you can see on the middle chart how our blue RPI curve there steps down over time and that it compares favorably both in the short term versus the latest ABR forecasts, which are in green as well as the longer term gilt implied rate of inflation, which is the dotted purple line there. Then the chart on the right takes this one step further by then comparing the real return available investing in FGen's portfolio being here the difference between our inflation assumption and our weighted average discount rate, which we've taken as proxy here for the overall return generated by our assets. So the difference between that versus a ten year UK guilt. What you can see here is that FGen offers a real return of over 7% above our inflation assumptions, whereas the Gilt offers a real return of only 1.5%.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So that's nearly five times higher investing in FGen than a Gilt. So we think our approach here remains conservative. As I said, it offers good value for potential upside, particularly given that the portfolio itself remains very correlated with inflation. So lastly, on the valuations themselves, we've got a slide on useful economic lives. We haven't changed any assumptions here, but what I really wanted to draw your attention to is what we feel is the very conservative approach to valuing our ADs, our anaerobic digestion assets, which involves a DCF up until the end of their renewable heat incentive, that's their RHI subsidy that they receive.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

In other words, we assume they just simply cease to operate at the end of that twenty year period. In reality, we expect a very strong market for these assets already providing a crucial source of green gas to The UK, and we're seeing growing evidence of the ability to run these plants beyond their tariffs. And we're even now hearing instances where some investors are choosing to value their assets into perpetuity, I. E, with no end life at all. So these assets themselves, they're robust physical structures, and we're confident that with the right maintenance program, they can be run for more than twenty years, perhaps significantly more than twenty years.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So from a technical perspective, we're comfortable. Then it comes down to where does the revenue come from. And we've presented a couple of potential scenarios on the right hand side here. So firstly, a scenario we've put out before, which is a simple five year extension, assuming that the current RHI stays as it is, and we'll cap that extension at the leases that we have in place. And then secondly, an alternative that assumes a new market opens up to keep these plants going.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

We think those revenues could come from something like corporate offtakes or green certificates or probably more likely a combination of both. And we're already seeing that with some unsubsidized ADs being developed in The UK at the moment. So the government is currently developing a future policy framework for biomethane production in The UK. We'll refine these sensitivities when more information is released. But as we've said before, we remain optimistic for this sector.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And hopefully, you can see why on the screen. I mean these scenarios point to between GBP 10,000,000 to GBP 20,000,000 uplift on our assets, and that's equivalent to roughly GBP 1.5 to GBP 3 on the NAV. So that's the core valuation piece here. We now move on to a few slides on how we're looking at the portfolio. And firstly, a slide here that looks at our three pillars.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So Charlie referenced these earlier. I'll just go into a bit more depth in what sits within them and why we like each of them and why we've labeled them like this. So firstly, renewable energy generation. So at 73% of the portfolio, that really is the bedrock of Efgen, the primary bulk of the assets. It includes investments in things like wind, solar, AD, biomass, sectors with stable long term cash flows and inflation linked government backed revenues.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

They have mature technologies and their diversification means FGen is less exposed to individual risk factors, so things like the sun not shining or the wind not blowing. And they also include a complementary mix of energy generating profiles, recognizing the vital importance of baseload generators in the world with increasing renewables penetration. Secondly, we've got other energy infrastructure in the middle there. These assets don't generate energy, but they play a vital role in supporting the transition towards net zero. So that includes things like our battery storage and carbon transportation assets.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

Totaling 10% of the portfolio, this category provides exposure to energy markets, but also diversification away from generation. And then last but not least, we have an allocation called sustainable resource management. So in other words, assets that support the sustainable management of scarce resources will contribute towards cutting down waste, themes that are growing rapidly as we as a nation recognize that investment is needed beyond simply energy markets alone. So this could include long term government contracts for concession based projects or colocation investments like our Glasshouse facility we have at the moment. So we believe the complementary nature of these assets delivers highly sought after income and growth opportunities, whilst balancing assets across different stages in their life cycle and in different technologies will provide a differentiated yet targeted offering.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So hopefully, that gives you a steer for how we think about portfolio composition. Chris will come back to where we see future opportunities across each of these a bit later. So I'll talk there about diversification by sector. This slide has a bit on diversification or other forms of diversification rather. So 8% of the portfolio currently in construction and 11% of the portfolio sits outside The UK.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

That's the two charts on the left. These numbers will fluctuate as we recycle assets and look for opportunities to enhance the portfolio, but we'll always likely maintain a primary focus in The UK. And then the third pie here is remaining asset life. So we've got a long average remaining asset life of over sixteen years. And as I mentioned earlier, on the ADs, we think this is pretty conservative and actively considering extension opportunities there.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So here we've got the top 10 assets for FGen. This is a new slide for us, and we're trying to give a bit more visibility into what our largest and most important assets are. And the main things really to pull out here is the fact that no individual asset represents over 10% of the portfolio, giving FGen low exposure to single asset risk. And also that the top 10 gives a really good coverage of our main sectors. So it includes biomass, wind, solar, ADs and the growth assets are all represented here.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

On the next slide, we've actually got a mini case study that Charlie alluded to earlier on our largest and arguably most successful asset, and that's Cranmington Biomass, which I'll just take a moment to talk about. So Cranmington, that sits within our renewable energy generation portfolio. It's a biomass facility that creates electricity and heat by combustion of woody biomass to produce superheated steam, which in turn then drives a large turbine that generates electricity and heat. We bought this asset out of administration back in 2021 and completely turned performance around. So it has generated enough income to pay back our investment within less than four years and a current IRR of over 25%, and that's something that's almost unheard of for typical operational infrastructure or renewables assets.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So why am I talking about this? Well, to give you a flavor for what our largest asset is, but also because it's a great example of the sorts of things that FGen can target within its mandate. And it's also a great example of the capabilities that Foresight has in active asset management of complex bioenergy assets. So moving on, we've got a couple of slides that look at revenue across the portfolio. And firstly, the chart on the left here shows how underlying revenues earned by the portfolio evolve over time.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And the main thing to say here is that our diversified revenue streams reduce reliance on government subsidies and therefore provide greater opportunities to continue to extend the life of the fund once those subsidies expire. And then the chart on the right shows that careful diversification doesn't mean compromising on familiar infrastructure like characteristics. So for instance, inflation linkage there, you can see 61% of underlying portfolio revenues having explicit inflation linkage. And that chart also shows us that, that linkage comes through all three of the pillars that we've talked about. Then on to the next slide, we look at how we manage our exposure to the largest uncontracted revenue stream that we saw on the previous slide, so that's Merchant Power.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And just to say, we typically fix generation for a period of between six months and three years. And what you can see from the table on the left is that the approach will vary depending on the nature of the underlying asset. So intermittent generators such as wind and solar typically have a higher proportion of their generation fixed than the baseload generators like the ADs, that's in the biomass. That's because baseload generators have a profile, which means they'll be running throughout the day. So a best place to capture the very highest prices as they arise, whatever the weather conditions.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And we believe this gives good protection against downside risk for the portfolio if prices fall, while also retains the ability to capture upside potential. And since the year end, I'll just say as well that we've seen prices tick up, so we've fixed more out into 2026 and levels above our valuation assumptions. And we'll continue to monitor how current global events impact Energy Markets. Then the table on the right there tries to put those hedges into context. And you can see that when we factor in our other contracted revenues, such as the subsidies and the long term contracts, some 68% of revenues have fixed pricing for 2026 with similar numbers for the next two years afterwards.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And that gives us really good visibility across the portfolio, allowing us to make informed capital allocation decisions and monitor dividend cover. In fact, we've run sensitivities over the next three years telling us that even under a very severe downside scenario where unhedged prices fall to £40 a megawatt hour from the current forecast of £70 to £80 assuming standard levels of generation, dividends remain covered, albeit with less headroom. Okay. So lastly from me, I'm just going to talk a little bit about our growth assets and the progress that FGen has made over the year. So that's CNG Fuels, the Glasshouse and Roocan.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

There's a lot of information in our asset spotlights that we have in the annual report, and we've also put quite a lot of information in the appendices to this presentation as well for anyone that's minded to really get into the detail. But for now, here's quick summary of what's happened. So taking CNG fuels first, that's about 5% of the portfolio. This is a leading clean fuel infrastructure platform consisting of 16 operational refueling stations providing renewable CNG or compressed natural gas biomethane to heavy goods vehicles across The UK. So it's a bit of a mouthful.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

One of the only players at scale in this sector, hence its customers include a roster of companies like John Lewis, Amazon, Royal Mail to name just a few. Not only does CNG BioMethane have excellent sustainability credentials compared to diesel, it's also cheaper to run, hence why we've seen a huge growth year on year in the amount of fuel dispensed as more and more fleet operators convert their vehicles. We also recently announced a restructuring of the CNG Group intended to create a more simplified business ahead of an eventual exit. Next up, we've got the Glasshouse in the middle there. So that's also 5% of the portfolio.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

Now the Glasshouse is a sophisticated 2.4 hectare controlled environment for growing high value crops. To put that in context, 2.4 hectares is about the size of six football pitches. Our operating partner there is using the facility to grow heavily regulated cannabis for pharmaceutical use under special license from the home office. It's co located with one of FGen's bioenergy facilities, so it benefits from cheaper green heat and power via a private wire. The facility is now fully operational and in the process of ramping up sales, targeting EBITDA breakeven later this year ahead of a full ramp up into 2027.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

Now this sector has seen huge growth in recent years and is forecast to have growth in the years ahead as well. And then lastly for me, we've got Rukan Aquaculture. So that's a construction stage land based aquaculture facility in Norway, capable of producing nearly 8,000 tonnes of trout each year, and I'm told that's equivalent to about 22,000,000 dinners. The world faces an increasing demand for quality protein amid limited resources of land and water. And Ruchan's unique location provides access to high quality source of fresh water and renewable electricity.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And its highly controlled growing environment is intended to provide optimal growth conditions and consistent fish quality. Construction continues to progress well there, and it's now largely complete. Fish are in the tanks and working their way through the facility ahead of first harvest targeted in July. Given it's yet to make its first sales, Ruchen is still valued at cost and represents 6% of the total portfolio. So we remain really excited by each of these assets as they continue to mature.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

And like Ed said at the start, they remain a key focus for us to seek to maximize value for shareholders likely via an exit once they've demonstrated fully ramped up performance, they can therefore command the highest pricing. And on that positive note, I'll pass back to Chris.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

Okay. Thanks very much, Ed and Charlie. So I will recap the final key points for the year in review. So first of all, income performance was really strong, and that remains a key priority for FGen. So we had record cash generation from the assets and a good level of dividend cover of 1.32x covered.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

We achieved some capital growth in parts of the portfolio such as the ADs, and that helped to offset the write down of HH2E, our development investment in German hydrogen. And we continue to see the growth of our the progress of our growth assets, which are conservatively valued until they remain while they remain in the ramp up phase, and that gives us the potential for capital growth in the medium term. We adhered to our capital allocation policy, returning £19,200,000 to shareholders through NAV accretive buybacks, and we reduced gearing further so that we remain one of the lowest geared funds within the sector. And as part of our capital allocation policy, we successfully delivered asset sales representing 10% of the portfolio, enabling us to recycle capital out of lower returning non core parts of the portfolio in the case of the Rooftop Solar and to strengthen strategic alignment for further value enhancement in the case of the ADs. And in addition to that, the Board and the Investment Manager lowered fees for the fund, and there's a further proposed reduction to come, improving alignment with shareholders.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

So now just moving on to outlook for the year ahead. Our strategic priorities are clear. So first of all, we are an income paying fund, and this remains key to our offering to investors. So the record cash generation from the portfolio for the year in review provides a good platform for the target dividend for the coming year, which increases to 7.96p per share, and that's about a 10% yield on the current share price. Second, our main investment focus continues to be the existing portfolio.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

So as well as managing our operating assets and the issues that will arise from time to time there, we will assess value enhancement opportunities as an effective use of funds for reinvestment. We will also continue to be closely involved in our growth assets as we monitor their progress towards maturity and the planned asset sales in the medium term. And then third, we'll continue to scan for suitable opportunities for new investment for the Fund when the conditions are right. So we will be highly disciplined in this area, taking into account other potential uses for cash such as reinvestment in the portfolio, reduction of debt and share buybacks and ensuring that any new investment compares favorably with these other options and sticks to the refocused proposition that we've spoken about around core environmental infrastructure characteristics. Now what kind of things could new investment mean?

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

What we have here are three actual examples from the investment managers' wider origination activities that would fit within FGen's environmental infrastructure mandate. So the first is a development stage investment in repowering of wind assets in the European renewables market that is very familiar to us, and that would be backing an experienced developer. Capital outlay would be fairly low for Efgen and returns targeted would be two to three times the development expenditure deployed. The second is a European AD platform in a market with attractive government support for biomethane. So the platform consists of construction ready assets and also a development pipeline of sites and has an experienced team.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

And target returns there would be in the mid teens. And third is a provider of last mile water services, which has an established customer base and already has good revenue visibility. And there, we will be providing investment for further growth into a business that has high barriers to entry. So I stress that these are not deals that we are pursuing currently for FGen. What we are showing you is the kind of thing that FGen could go into if the conditions are right.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

These are the kind of opportunities that Foresight originates on a regular basis and just shows the breadth of the environmental infrastructure mandate. So to wrap up on outlook, we have a clear strategic direction followed by a measured that's been that's following a measured analysis by the Board of what is in the best interest of shareholders. We'll focus on the existing portfolio, ensuring that we prioritize income from the operating portfolio while also bringing the growth assets through their ramp up periods to a stage where they're ready for sale. And these sales will provide us with an opportunity to recycle material amounts of capital, which depending on conditions at the time, may be used to refresh the portfolio. But new investment will be highly selective and consistent with key infrastructure characteristics such as contracted revenues and inflation linkage.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

Within this refocused investment proposition, FGen continues to benefit from its strategic environmental infrastructure mandate that positions it well to be able to assess a wide range of opportunities that the world needs if it's to decarbonize and live more sustainably. So that concludes the prepared part of the portfolio. So we can now open up to questions in the room in the first instance. So Ian?

[Iain Scouller, Managing Director at Stifel Financial]

Hi. Good morning. Thanks for the presentation. It's Ian Schuller from Stifel. I've just got a question on PPAs and power prices and also the dividend cover was good at 1.32 times.

[Iain Scouller, Managing Director at Stifel Financial]

But I assume there'll be some sort of benefit from PPAs that were put in place two or three years ago. What sort of price did you achieve on PPAs that were in place last year? And what prices are being achieved on new PPAs that are being put in place at the moment?

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

Yes.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

I'm not sure if the mic is picking me up, so I'll hover next to Chris. So Chris, that's right. No, don't think so. So the in the annual report, we've got a breakdown of the all in energy price received across each of the sectors. And the reason we do it that way around is because it's very different for the ADs versus something that you get on the winds and the solars.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So we've got prices ranging from in the low hundreds up to $3.50 odd that we secured some while ago. We've still got some fixes in place that we've had for a couple of years now running for the next kind of twelve months. So some of those are still very attractive terms. And the newer ones that are being signed up now are more, it could be GBP 70 to 80 or plus. So markets have ticked up a bit since then.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So actually pricing is starting to improve, and that's off the back of various global events that are happening. But we're live to those and we're fixing daily where we see opportunities. So it's right that prices come down, but that's why that we wanted to put out the guidance around dividend cover for the next few years even under some pretty severe downside scenarios. So I think whilst we've talked a lot about the record cash flows here, we'll monitor how that evolves for next year, but we're still very comfortable on the dividend cover.

[Iain Scouller, Managing Director at Stifel Financial]

Thank you.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

Fiona, hi.

[Analyst]

I think kind of following the dividend cover ish question. Just on when I look at your guidance, you pointed to 1.2 to 1.3, you have obviously exceeded that to one point at 1.32. I just kinda wanna understand, like, what drove that positive performance since interim? Because interim, I think you were at 1.2 x not two x, two zero, but two something. And you didn't mention any outperformance in H2, so I wanted to delve into that a bit.

[Analyst]

And following that, what is your thinking around dividend cover for this well, 2026?

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

I'll take that as well. So I guess it goes without saying that when we're putting expectations for us, there is an element of forecasting in that of uncertainty. So there's some parameters up or down where it could go either way from what we're expecting, where you get things like a large cash distribution come from the wind assets. Sometimes that can be a bit more or sometimes it can be a bit less. We try and get that model as accurately as possible.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

What did happen is that we had a different profile of maintenance on some of the assets. So some bits of CapEx were brought forwards, others were delayed based on whatever is needed. And sometimes that can have an impact on the available cash at that moment in time. There are also operational things that go on where we think, let's hold a bit of cash back because we've got something coming up, circumstances might improve or some insurance proceeds might come in or something like that. That means actually we're in a more comfortable position to release a little bit more cash than we were expecting.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

So there's always a bit of movement back and forth. What we try to do is give guidance that is both accurate but also not too aggressive because I don't think it helps anyone for us to put out a 1.5% diff cover and then we only get to 1.2%. So we're trying to balance the sort of accuracy of what we can do versus being helpful as well. For next year, I think it is probably fair to say that dividend cover will likely come down slightly from where we've seen this year's, but that's still healthily covered. And I think we're in the range of somewhere close to 1.2, I think, the top of my head for the next financial year.

[Analyst]

Okay. And an unrelated question. I was looking at your Yokan commitment what you announced at interim. And then it looks like your H2 actually exceeded what was the outstanding commitment at that time. Could you provide a bit more context around that?

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

Can. Charlie, do you want to speak anything on?

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

Sorry, can you repeat the question?

[Analyst]

It looks like the outstanding commitment for RioCan at interim, it looks like it's slightly less than what you actually invested in H2. I just kind of want to understand, is there more costs that like unexpected? Or is that just related to yes, I'm not really sure what it's related to.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

Yes. So good question. Yes. So there has been compared to I think compared to six or nine months ago, there has been some investment into it. There a small cost a fairly small cost overrun related to the construction of the facility, which when you follow it through the investment structure between the parties related to I'll follow-up with the exact number, but yes, an incremental amount on top of what was initially expected.

[Analyst]

Thank you.

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

Quite often, I'll say, often with these sorts of construction based projects, you might find, particularly towards the latter phases, the developer or the constructor comes to you and says, I can do it this way or actually there is a better way of doing something over here. It might cost a little bit more money, but it will improve the process. It will make things quicker or it might introduce some sort of So we're trying to sort of balance those two things as well without saying is Karp launched to just go and make whatever you want, but we'll make individual decisions around wherever there's an additional funding requirement to say, do we want to do that or not, particularly if it's beyond our original commitment.

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

And also just to say, when we enter into these commitments, there is a commitment, but then there is also a contingency element to that as well. Obviously, we've been doing this a long time. We know that, as Ed says, particularly towards the latter stages of construction, there are sometimes a need to dip into a contingency pot in order to get to the facility exactly where you want it to be, whether that's a value enhancement or not. And so it's not unexpected to have this, and we manage that accordingly.

[Analyst]

Thank you.

[Analyst]

Thanks for the presentation. Just on the AD assets, were they part of the yield revision that exercise that you guys performed?

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

No. The yield revision was on wind and solar.

[Analyst]

Okay, fine. And just kind of on the performance versus budget because it was materially lower for this year and kind of operational maintenance you'll be doing going forward. Could you just provide like a little bit more detail on that, please?

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

I was just going say, so ADs in terms of the agri ADs performed in line with their budget, which is the bulk of the AD assets that we have. We've got two food waste AD assets, which is the ones where we've signaled that there's been some revision to maintenance profiles on those two. So that's the Codford under EBITDA digestion and Biocollectors. I think, Charlie, you mentioned a bit about Biocollectors in the presentation. If there's anything you want to add on those?

[Charlie Wright, Investment Manager - Director at Foresight Environmental Infrastructure]

Yes. So Biocollectors, as we said, it's had some underperformance throughout the year. And over the last six to twelve months, we've taken very proactive measures to put in place a series of initiatives backed by a new CEO that we that joined Biocollectors during the year, a very experienced lead in the sector, and we're already seeing that already seeing some of that bear fruit, as I said. And so we hope that performance this year will be much better there. Did you have a question on the wind as well? Did I hear that?

[Analyst]

That was just for Just

[Edward Mountney, Investment Manager - Head of Valuations at Foresight Environmental Infrastructure]

to add, Chris put it on the screen. You can see the ADs are the largest generator that we've got within the portfolio, the Agri ADs. There's a very large bit there. The sort of purpley ones down over here being the food waste ADs are a much smaller contribution to sort thing.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

Okay.

[Chris Tanner, Investment Manager at Foresight Environmental Infrastructure]

First of all, I'll just say to Charles, if you want to get in touch with us offline, we're very happy to answer your question. That goes for everyone else. If you have any further questions, please do file them through to the team, and we'll be happy to get back to you. Just remains for me to thank everyone for taking the time, and we look forward to seeing you soon. Goodbye.

Participants

Executives

• Chris Tanner, Investment Manager
• Ed Warner, Chair of the Board & Nomination Committee
• Charlie Wright, Investment Manager - Director
• Edward Mountney, Investment Manager - Head of Valuations

Analysts

• Iain Scouller, Managing Director at Stifel Financial
• Analyst