UK’s Foresight Solar makes maiden Spanish investment following Shell deal

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The Escallonila Norte y Sur project in Spain, owned and operated by Foresight Group.

UK solar investor Foresight Solar Fund has agreed a €20 million deal to acquire a 26.1MW solar project in Spain, the company’s first in the country and its first ever subsidy-free solar investment.

Foresight Solar Fund, part of the Foresight Group, has acquired the under-development project for a total investment of €20.2 million. Construction is due to start at the end of this month and operations are slated to commence in Q3 2021.

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While Foresight Group has been active in Spain’s solar market for some time, progressing a number of projects, this deal represents the first acquisition in Spain from its flagship Foresight Solar Fund (FSF) investment vehicle.  

Entirely unsubsidised, the project is backed via a long-term power purchase agreement (PPA) with Shell Energy Europe, the power utility subsidiary of oil and gas major Royal Dutch Shell. Power produced by the project will be sold to Shell Energy Europe at a fixed rate until 2030.

Foresight said it had been able to tap into the “significant” regional expertise of its investment manager, Foresight Group, which has offices in Madrid and manages a portfolio of other renewables assets in Spain, in completing the deal.

“This acquisition is a milestone in the development of Foresight Solar’s geographically diversified portfolio, representing the Fund’s first acquisition in Continental Europe and our first investment in subsidy-free solar.

“With a long-term, fixed price PPA in place and a high production profile, the acquisition is a clear demonstration of our ability to source and deliver stable cash flows at attractive risk-adjusted returns and marks an important step in Foresight Solar’s international expansion strategy,” Alek Ohlsson, chairman at Foresight Solar, said.

The acquisition takes FSF’s total solar portfolio to 895MW, the majority of which is located in the UK with a portfolio of under-development solar projects in Australia.

Foresight teased that a deal in Spain was close within its H1 2020 results disclosure last week. In discussing the current investment landscape for solar, Foresight said that while utility-scale solar assets remain attractive and sustainable investments, yield compressions in its home market of the UK have presented “challenges in finding suitably attractive opportunities”.

Competition in the UK market for secondary solar assets is high, with the majority of operational solar farms in the country owned by long-term holders. As a result, prices for those up for sale have increased, deterring some institutional funds from making acquisitions.

This has sent many seeking opportunities overseas and Foresight revealed during its results disclosure that it had exclusivity over a pipeline of projects in Spain, which it was looking to acquire.

“If successful, the Board believes the acquisition of the Fund’s first subsidy-free assets is a clear sign of the exciting growth opportunities in the European solar market,” the company said.

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