Good afternoon and welcome to the Foresight Environmental Infrastructure Limited after your results investor presentation. Throughout this recorded meeting, investors will be in listen-only mode. Questions can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Just simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted to them and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. Now let's hand you over to Ed Mountney, Investment Manager. Good afternoon, sir.
All right. Hello. Yes, thanks for the introduction. Hello, everybody else. Welcome, and thank you for taking the time to attend the Foresight Environmental Infrastructure, or FGEN, results presentation for the six months to 30th September 2025. Hopefully, most of you will recognize me or know me by now. For anyone that does not, I'm Ed Mountney, Director at Foresight Group and one of the co-lead investment managers to FGEN. I'll be taking you through the first half of the results slides today before handing over to Charlie Wright, who will run through some analysis on the portfolio before talking a bit about our views on where FGEN is now and where it can seek opportunities for growth. Right, first up, we have our FGEN intro slide. As you'll know, FGEN is really an infrastructure-based proposition aiming to deliver stable returns, predictable income, opportunities for growth.
Being an infrastructure investor, it looks for all the sorts of characteristics that you'd expect. It prioritizes long-term stable cash flows, secured revenues, inflation linkage, and really the delivery of essential services. To do this, we've constructed a portfolio across three main pillars. Firstly, on the left-hand side of the screen, you can see that's assets that generate energy. That's really the bedrock of the portfolio. It stands just over 70% of the total at the moment. Secondly, we have assets that contribute towards the energy transition but do not generate energy themselves. That might be things like battery storage. Finally, assets that promote more sustainable use of resources. We believe that this combination gives us a balanced and diversified portfolio that's less exposed to individual risk factors.
This is where we normally talk about unpredictable weather patterns, but there are plenty of other real-life examples of why this strategy really works. Charlie will come back to a few of those a bit later. Here we have a slide just picking up on FGEN's track record. I will not really dwell too much on this here, other than just to point out that we are pleased to have been included as one of the next-generation dividend heroes by The AIC, the Association of Investment Companies, this year. That is recognizing we have now had over a decade of uninterrupted dividend growth since IPO with sustainable dividend coverage and low gearing, a combination that we think really sets us aside from the group. As in previous presentations, I will now get into a bit the main part of the results themselves.
Firstly, a very quick snapshot on the key figures. We have reported a NAV of GBP 652 million. That is equivalent to GBP 1.04 per share, giving us a positive NAV total return for the period of 2%. We remain comfortably on track to deliver our dividend targets of GBP 0.0796 per share for the full year. That is equivalent to a yield of about 12% on the current share price. Beyond those headline figures, the main thing that I just want to draw out on this slide here is that it was another strong period of solid performance from the underlying assets themselves. Cash yields remain encouraging, and we have a dividend cover of 1.22 times. That is after amortizing project-level debt, in other words, after paying off project-level debt in the assets that we have debt.
We are on track to match this for the second half of the year or potentially even slightly improve upon it, which is very pleasing for us. The continued strength of cash generation from the portfolio means that we have been able to selectively reinvest back into value-accretive opportunities within that existing portfolio, while still retaining one of the lowest gearing ratios, just over 30%, and also one of the highest discount rates in the renewable peer group, which is now just over 10% at 10.1%. Next up, we have a couple of slides on the financials. There is a lot of detail in here. There is a cash flow statement. After this, we have a balance sheet and income statement. I will not go into every number here in the presentation for people that want to pick into them.
I will just pull out a few of the ones that I think are a bit more pertinent, though. Here on the cash flow, in that top line, we can see nearly GBP 40 million of cash receipts coming through in that top line. That is what is driving the 1.22 dividend cover. You will see that figure is slightly down from this time last year. I will come back to analysis on performance in a moment. Broadly speaking, we had about GBP 6 million of cash yields that just missed the cutoff and slipped into the second half of the year. Had those made it into the bank, we would have been performing very similarly to last year. A couple of other points to bring out. You will see GBP 7.9 million of reinvestment, all of which is allocated to existing assets that we have in the portfolio.
You will see this figure has come down from last year, largely reflecting that our construction and early-stage operational assets are coming towards the end of their build-outs and just simply have lower capital requirements now. Finally, we returned GBP 10.7 million to shareholders as part of our buyback program. That took us up to a total of GBP 30 million, just under 5% of NAV. Next, we have that slide on income statements and balance sheet that I mentioned. I will not really dwell on the numbers here because most of the key bits of information are pulled out elsewhere in the presentation. I will just pick up on the earnings per share figure here. GBP 0.15 this period, and that is up from a negative GBP 0.1 this time last year.
Again, showing the overall positive asset performance over this year, but also improvement from last year as well. On to a slide on debt management. The first thing I'll say here is that the same thing that we always try and drill home at this point is that FGEN continues to operate with a prudent approach to debt management. It seeks to maintain a low level of gearing relative to both the sector average as well as what the assets themselves could sustain. Here we show the 18.1% gearing at the project level. That goes up to just over 30% when we add in the Revolving Credit Facility, the RCF, that's held at the fund level. As before, all long-term debt fully amortizes within subsidy lines.
Across the long-term project finance statement we have, we assume no refinancing, so we do not take any risk in our valuation assumptions there. Interest rates are fully hedged. FGEN is in a very stable and secure financial position. Following a downsizing of the RCF back in April, we now have a GBP 150 million multi-currency facility with margins ranging between 205-215 basis points and with headroom to cover outstanding commitments and some selective enhancement initiatives across the portfolio. Of course, the GBP 30 million uncommitted accordion facility that we have remains in place as well, if required. I have put our cost of debt at the bottom of the slide. That now stands at 4.6%. Still higher than we would like, but quite a bit down from the 5% that we experienced this time last year.
Overall, we continue to feel conservatively geared with flexibility and a stable financial platform to build from. We now have a couple of slides on performance. We consider performance on two levels. Firstly, cash generation. Then secondly, operational performance, where we look at renewable energy generation. This first one is the cash. That shows us where the cash is coming from in the portfolio. Overall, cash receipts were 12.9% below budget. That is equivalent to about GBP 6 million. Whilst this is indeed frustrating for the headline figures, actually about GBP 6 million is simply held up due to timing differences expected to be resolved before the end of the year, like I mentioned before. If we take those into account, we actually would have been about 2.2% off our budget.
That strong performance comes across all three of our key pillars, albeit, as you'd expect, the majority comes from the renewable energy generation portfolio, being the largest part of the book and the others being a smaller proportion, and some assets retaining cash as they go through late-stage construction or early-stage operational ramp-up. We move on to detail on the renewable energy generation across our assets. That was 5.2% below budget in aggregate. A bit like with the cash, we expect to recover that shortfall, this time through the contractual compensation mechanisms that we have in place with our operators and insurers. Once we take those into account, we estimate we'll be just above budget in terms of generation, about 0.5% up. Looking at individual sectors, if I just pull out some performance figures here.
Wind, 6.5% down, mainly due to low wind resource. Conversely, solar was 6.2% up with good irradiation and high asset availability for the period. The crop-based ADs, or Anaerobic Digestion assets, remain FGEN's largest energy producer, and they continue their tradition of outperforming budgets. Our Cramlington Biomass facility is our largest individual asset and probably one of our most successful investments to date. That had an extended period of downtime. The majority of that, we would expect to recover from the operator. Our Italian energy from waste facility was offline for most of the period, but we knew about that. In fact, that entered the budget at the start of the year, so that was already reflected into previous valuations.
For reference, the plant there started operations about two weeks ahead of its schedule in October and has since been outperforming budgets. With some sectors up and other sectors down, but the overall portfolio coming out about on budget, this period is a really simple illustration of why a diversified portfolio continues to be more stable to continue to contribute, sorry, towards a more stable overall group performance. Okay, now we move on to the valuation portion of the presentation. First up here, we have our valuation bridge showing the major movements so far this year. Anyone following these presentations before will have seen this. If we move from left to right, we start on the left-hand side with the cash that is coming in and out of the portfolio.
That's not changing the overall NAV because it's cash out of the portfolio and up to the fund level and vice versa. I'll just talk through those, and then we'll move on to the fair value movements on the right-hand side of the bridge. First of all, GBP 7.9 million of follow-on investments. I mentioned those earlier. When we looked at the cash flow statement, that's reinvestment back into the portfolio. There was a small GBP 1.2 million disposal of our interests in a ready-to-build battery. That was called Project Lunanhead. The GBP 39.7 million of cash yields from the projects that we saw earlier too. Like I said, we move into the right-hand side. That's the fair value movements. Overall, they contributed about 2.5% uplift from the start of the year. Firstly, there we've got power prices. They're slightly down.
That was largely due to a revision in one of the consultants' long-term curves that happened back in June. Since then, prices have been much more stable. A small increase from inflation rates. I'll come back to that in a couple of slides. We get the GBP 31 million uplift from the mechanical unwinding of the discount rate by six months. That is just a mathematical factor of doing a discounted cash flow valuation. There are three really good illustrations of progress that we have been making on value enhancement initiatives across the portfolio. The first there, GBP 3.3 million uplift from the construction of what is called a pressure reduction system at our flagship Vulcan Anaerobic Digestion facility. That has significantly increased the volume of gas that can be injected at that site.
That is a really good example of something we can do on our portfolio that you cannot do somewhere like a pure-play Wind or a pure-play Solar portfolio. We have GBP 2.2 million uplift from another period of promising performance at CNG Fuels as that investment continues to roll out its low-carbon transportation platform and cash generation there continues to exceed expectations. We also have GBP 2.9 million uplift from moving our Rjukan agriculture facility in Norway from cost to discounted cash flow now that the site has earned its first revenues from its initial trial harvests. Charlie will come back on to performance on Rjukan and CNG in a few slides' time as well. We have a GBP 4.5 million reduction from green certificates. We have a slide on that coming up. Lastly, there are various other smaller movements.
That includes operational updates and recognition of additional CapEx required at one of our food waste and Anaerobic Digestion facilities. That is really there designed to try to improve performance consistency at that site. A slide on discount rates now. We always put a slide on discount rates up, but actually we have kept them flat this period. There is not a great deal to talk about in terms of changes, albeit you will see the weighted average has ticked up 40 basis points to its highest since IPO at 10.1%. That is really owing to ongoing investment into higher returning early-stage operational projects and movements in underlying asset valuations. That is pulling the average up. I have also repeated the table on the right-hand side that we have used for a few reporting cycles now. That is breaking down the portfolios into sector-levered and unlevered discount rates alongside their respective gearing ratios.
Like I said, given no changes in the rates themselves, I will not dwell on the numbers here, but they are there for reference and hopefully will simplify comparisons against other funds with differing technologies and differing debt structures. For instance, if we just took our Solar as an example, the weighted average rate there of 7.4% covers a mix of levered and unlevered Solar assets. The figure there represents a blended rate, albeit with a pretty low level of gearing. Next is a slide on inflation, which so far this year has been tracking ahead of our modeled assumptions. That is why we have taken the decision to increase our RPI rates for 2025 and 2026 by 0.5%- 4% and 3.5% before reverting back to what we assumed before, which was 3% until 2030, stepping down to 2.25% thereafter.
We think that remains conservative, not just when comparing against the number of the peer renewable funds in our sector. As you can see on the middle chart here, our RPI curve remains well below the long-term gilt-implied rate of inflation, being the dotted blue line on the screen. The chart on the right takes that logic one step further by comparing the real return available investing in FGEN's portfolio, being the difference between our inflation assumption and our weighted average discount rate, which we've taken here as a proxy for the overall return generated by our assets. That is then compared to what you get on a 10-year gilt. What you can see here is that FGEN offers a real return of 7.6% above inflation, whereas the gilt offers only 1.5%. That's five times higher from FGEN than from a gilt.
We think our approach to inflation offers good potential for value upside, particularly given that the portfolio itself remains highly correlated with inflation. Excuse me, with inflation. Before I move on, I'll just draw attention to our CPI assumptions here. It's perhaps more relevant than it has been in previous periods, given the proposed RO and FiT Consultations that are going on. Really, the only thing to mention is, again, our long-term CPI rate is lower than the majority of our peers, which is just worth bearing in mind when comparing sensitivities. Okay, just two more slides from me. Here we've got one on the case for AD or Anaerobic Digestion life extensions. We've got 11 AD assets in the portfolio worth a combined GBP 150 million. We've talked about life extension potential for a while now.
We thought we'd include a slide on what we're seeing in the markets and where biomethane is increasingly being recognized as a critical contributor to the U.K.'s decarbonization targets. Unlike electrification, which works well for many sectors, biomethane is essential for hard-to-abate areas such as heavy transport and agriculture. These sectors simply can't rely on electrification alone, and that makes biomethane a really attractive solution for them. When we first started investing in this sector back around 2017, 2018, the 20-year Renewable Heat Incentive, or RHI, was the primary government support scheme designed to bring new capacity online. That closed to new entrants in 2021. It was replaced by the green gas support scheme. Uptake on that, I think, was disappointing. That scheme is also now due to close in 2028. The government's scheduled to announce its position on biomethane in the coming months.
Speculation is that a new round of support will come into play, and it'll be designed to target funding towards assets that contribute the largest greenhouse gas savings. Now, for FGEN, that represents a real opportunity. Currently, our models assume our ADs simply cease to operate at the end of their 20-year RHI subsidies. We know that demand for biomethane is growing rapidly and already outpaces supply. We know that some AD owners out there are already pricing their assets on the basis of them running into perpetuity. In other words, no end date at all. We're optimistic that government policy will continue to incentivize suppliers to utilize biomethane. This year actually marked an important milestone with the U.K.'s first large-scale unsubsidized AD facility opening up, showing that over time, there is a model there that shows ADs should be able to run without government intervention altogether.
To do that, we expect to see a combination of a few things. Firstly, continued reductions in OpEx costs. There are some forecasters out there suggesting that these could drop by as much as 25% in the future. That would really make operating these assets more commercially viable without the subsidy. Alongside that, new revenue streams could open up as well. That might be driven by things like the recognition of biomethane as what is called a zero carbon fuel under the UK Emissions Trading Scheme. That would have two really important effects. Firstly, it would increase demand from corporate off-takers who could then use biomethane to offset their emissions. They currently cannot do that in the U.K. because biomethane does not have this classification. It does in Europe. It would not cost the government anything.
There is quite a lot of lobbying activity to persuade them to change their stance on that. Secondly, we think that would also boost prices of Green Gas Certificates, or our GGOs, guarantees of origin, as they gain compliance value rather than simply just voluntary ESG value. Alongside that, we could see growing revenues from the sale of Renewable Transport Fuel Certificates, or RTFCs. That is for biomethane that is generated and then used as a transport fuel. For example, we are already doing that, our CNG Fuels business. We recognize there is still uncertainty on the optimal revenue mix for these assets, which is why we think we have conservatively guided to an uplift of GBP 10 million-GBP 20 million from life extensions. That is equivalent to about GBP 1.5-GBP 3 per share.
With hard-to-abate sectors driving demand and policy support on the horizon, the fundamentals for this sector are compelling. It is an area that we really like. Lastly from me, before I hand over to Charlie, I have got a slide on green certificates, for which you probably remember back when we were looking at our valuation bridge, we saw a write-down a bit earlier. As a recap on certificates, we get something called REGOs, Renewable Energy Guarantees of Origin certificates on electricity, and our GGOs on gas generated. Within that, our GGO pricing can vary between gas generated from crop-based and waste-based feedstock ADs. In other words, they either use an energy crop or they use waste like food waste or manure or something like that. There is a premium on the waste side due to perceived enhanced sustainability credentials.
As you can see on the left-hand side of the chart, that shows historic pricing for these certificates. REGOs have seen downward pressure due to increased supply, with prices dropping to around GBP 2 per MWh . That is the solid red line coming down on the screen. However, our GGOs, the gas certificates, they tell a different story. They have held firm at about GBP 9, supported by scarcity and strong voluntary demand from sectors looking to decarbonize their gas usage. Our GGOs are the solid yellow and green lines on the chart. This premium really reflects the market's appetite to decarbonize those harder-to-abate sectors that electrification cannot target. If biomethane were to be reclassified as zero carbon under that U.K. ETS model I mentioned before, the gas certificates could see increased demand push up prices even higher.
For investors like us, that stability and potential growth in certificate value adds another layer of attractiveness to a sector that we already really like and understand well. Okay, that is it from me. I will hand you over to Charlie now for the rest of the presentation.
Thank you, Ed. I think most of you know me by now, but I am Charlie Wright, Investment Director at Foresight Group and co-manager to FGEN. I will be taking us through the rest of the presentation and wrapping things up. Firstly here, we have the three pillars that you heard about earlier. As we said at the year end, we have simplified the categorization of our portfolio like this in order to make our diversification more easily understood. Firstly, we have renewable energy generation.
At 71% of the portfolio, this is the bedrock of FGEN. Importantly, it includes investments across not just wind and solar, but AD and biomass and hydro as well, and energy from waste. We are diversified across weather patterns, forms of feedstock, both intermittent and baseload generators, and power and gas pricing, which means we are just simply less exposed to individual risk factors such as the sun not shining or the wind not blowing. Secondly, we have other energy infrastructure. These assets do not generate energy, but they play a vital role in supporting the transition towards net zero. That includes things like our battery storage and low-carbon transportation assets. This totals 11% of the portfolio. This category provides exposure to energy markets, but also diversification away from generation. Finally, sustainable resource management.
These are assets that support the sustainable management of scarce resources or contribute towards cutting down waste. This includes our waste and water concessions and controlled environments assets. Putting these all together, we believe that the complementary nature of these assets gives us a differentiated yet targeted offering that can give us both an attractive balance of income and growth. Moving on to portfolio analysis. This slide gives a feel for other forms of diversification. You can see we now only have 3% of the portfolio in construction, which is one of our battery assets, which is targeting commissioning by year-end. Shortly, we will have a fully operational portfolio, albeit with our growth assets still in the early stages of ramp-up. I will come on to those shortly.
That evolution reflects our strategy to manage development and construction stage risk, grow and realize that value, and where appropriate, recycle into new opportunities and extend the life of the company. Looking forward to new investment when the time is right, we will look to utilize that development and construction allocation to support that strategy. 12% of the portfolio sits outside of the U.K. That is an asset in Norway and an asset in Italy. The third pie here is remaining asset life, where we have a long average remaining asset life of just over 16 years. You have heard Ed speak about the life extension opportunity across the ADs. Here we show our top 10 assets, just trying to give more visibility into our largest projects in the book. I think there are a couple of things to pull out here.
The first is that no individual asset represents over 10% of the portfolio, which gives FGEN low exposure to single asset risk. You will also see that compared to last year, for those that saw our results at the year-end, our three growth assets are now the largest assets in the portfolio behind Cramlington. This is a result of the increase in value across the three that we have been able to recognize, which is a real positive for us. I will come on to those in more detail shortly. Next, here we have a look at revenues across the portfolio. Firstly, the chart on the left shows how underlying revenues earned by our portfolio companies evolve over time. There are a few things I think we point out here.
The first is that in the past, we've shown this revenue analysis in terms of absolute percentage, whereas now we're shifting in pounds over time, which hopefully gives a clearer picture of what our revenue streams really look like over the long term. Secondly, you'll see that there's some growth in our merchant revenue streams over time, and more so compared to the chart seen at our year-end for those that saw that. That is, again, a reflection of our growth assets progressing and contributing greater revenues as they continue on that trajectory. For example, moving Rjukan from valuing it just at cost to a discounted cash flow, with those revenues now featuring in that chart as well.
I think what is really important for us here is the diversification within that merchant exposure, which is spread across power price, different forms of green certificates that, as Ed has spoken about, and of course, fish and medicinal cannabis price as well. We are simply not as exposed to shocks in any of those individual price markets. The other thing to say here is that our diversified revenue streams reduce reliance on government subsidies, as you can see those rolling off. I note that has been one of the questions that is raised in the Q&A. We will certainly cover that at the end. Our stated strategy on the growth assets is to dispose of those once they are fully operational and ramped up.
In reality, whilst the chart here shows merchant revenues being a larger part of the revenue stack from 2030 onwards, our goal is to have sold the assets before then and recycle proceeds into new investments that maintain the company's secured revenues at around 50%-60% and extend the life of the fund. We would expect to see that level of secured revenues in earlier years to be maintained before that merchant exposure increases. That is obviously really important for us, given stable income is one of our core objectives. The chart on the right shows that diversification of revenues does not mean compromising on our inflation linkage, which is also very important for us. We have 51% of the underlying portfolio on an NPV basis with explicit inflation linkage.
That comes through across all three asset classes or all three pillars within the portfolio. Here, we look at how we manage our exposure to the largest uncontracted revenue stream that we saw on the previous slide, which is merchant power. We typically fix generation for a period of six months out to three years. What you can see from the table on the left is that the approach taken will vary depending on the nature of the underlying asset. In general, prices have been pretty stable over the year. In that sort of environment, there tends to be greater value in maintaining slightly lower fixed proportions, which is why our forward fixes next year are still towards the lower end. The table on the right tries to put those hedges into context.
You can see that when we factor in our other contractive revenues, some 66% of revenues have fixed pricing for 2026, which gives us really good visibility across the portfolio and our dividend cover. As at the year-end, even under a severe downside scenario where unhedged prices fall to GBP 40 per MWh from levels of around GBP 70-80 at the moment, our dividend remains fully covered, which speaks to the robustness of div cover we benefit from. Here we thought we would briefly touch on some of the regulatory updates you have seen in the U.K. power market during the period, because there is a bit going on. Firstly, the ongoing REMA consultation and going back to the summer, the decision to drop zonal pricing, which investigated the possibility of having different zones across the U.K. with different power prices within them.
We think the decision to drop that was a pragmatic and positive step with a unified national price offering both investors, developers, and all stakeholders just greater levels of certainty, which is important for ongoing investment. There is now a stated preference to reform national pricing within that unified national price to better optimize the delivery of renewables alongside ongoing grid reforms. We await further clarity on that. The second, which many of you might have seen, is the RO and FiT Consultations, which obviously creates uncertainty for the renewable sector and is a change to the basis as investors, which ultimately includes all of our pensions and savings, have committed to these important projects. This consultation is ongoing, which is looking at adjusting the inflation mechanics to revenues looking forward. We will see what the outcome of that is come April next year.
FGEN's diverse portfolio, whereby we do not just generate revenues from RO or FiT, but we generate revenues across a whole range of different frameworks and sectors, means we are generally less impacted than, say, core renewables funds. Our div cover under all of the options being considered by government is still very robust. The third is the fixed price certificate consultation, which I will not go into too much detail now, but it is another consideration for ROC projects. It is a consultation that has been out there for a while, but we expect to see something on that soon, but it is not really clear how that interacts with the RO consultation. That is another thing we are monitoring. There is a bit going on, but I think our key message here is that FGEN's diversification means we are well placed to navigate such political and regulatory risk.
That is a fundamental reason of why we diversify across different sectors and technologies. Here, we've got a slide on the three growth assets that we've mentioned. These are the earlier stage non-energy investments that hold real potential for material capital growth. That's firstly the Glasshouse, which is our sophisticated 2.4-hectare controlled environment for growing high-value crops with our operating partner, using it to grow heavily regulated cannabis plants for pharmaceutical use under special license from the Home Office. The facility is now fully operational and is in the process of ramping up with clear visibility on reaching not just EBITDA break-even, but cash flow break-even in the coming months, which is a big milestone.
It has made some really positive progress over the last few months, building out its sales pipeline and with an opportunity to target sales in Germany now, as well as the U.K., with Germany being a deep and established medicinal cannabis market. That has remained subject to some regulatory clearances, which Glasshouse is working on. That is a really exciting step. We have CNG, which is our 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 U.K. It is one of the only players at scale in this sector. Hence, its customers include a roster of blue-chip names such as John Lewis, Amazon, and Royal Mail, to name a few.
The reason they are using biomethane is not just the excellent sustainability credentials compared to diesel, but it is also just cheaper to run, which is why more and more fleet operators are converting their vehicles. We have seen real progress here during the period. Truck numbers and volumes dispensed are growing. The RTFCs business, which is the part of the business that trades in essentially Clean Transport Fuel Certificates, is showing really strong cash generation as well, which we directly benefit from, given the consolidation of all these different revenue streams within the platform. Rjukan, the third one, which is our land-based agriculture facility in Norway, is growing trout by using specially designed technology with significant sustainability benefits compared to conventional near coastal pens. Construction at the facility has now been materially completed.
Following first harvest in the summer, we are now ramping up the cycle of regular harvests and sales. Again, really good steps for us in the period. The facility is up and running. It is making sales. Now it is about ramping up production volumes as operations at the facility are optimized and achieving the best pricing we can on the volumes being sold. Putting this all together, following years of hard work, this is the first period where all of our three growth assets are now operational. We have taken our first steps to realizing some of that value with incremental valuation increases, both at CNG and at Rjukan. As their respective ramp-ups progress, we hope to steadily reflect the increasing value as we go and will remain conservative on that front.
However, these assets are all now at a really exciting point in their J-curve. The foundations are there for us to work towards realizing the meaningful capital appreciation that these assets have the potential to deliver via targeted disposals in the next couple of years. Also, what is really important is how these assets work within our portfolio. These assets are not contributing any cash yield or to our dividend cover, which means our progressive dividend and strong dividend cover is backed by just 80% of the portfolio.
Now, looking forward, that means that we're in a really good position to both continue the stable dividend, but also deliver growth via exits and the recycling of proceeds into new investments without having to compromise that core income objective of selling yielding assets and reducing our dividend cover to get there, which we think puts us in a really strong position compared to many in the peer group and gives us a clear route to growing the company and creating further value into the long term without a reliance on new fundraising. Moving on to summary and outlook. Firstly, to recap the key points for the year so far, income performance has been robust with good cash generation from the assets and a healthy dividend cover in line with targets whilst maintaining our low level of gearing.
We made some value accretive follow-on investments, which alongside incremental value increases across the growth assets has helped us deliver a positive NAV total return for the period. Our strategic priorities remain consistent going forward. We are on track to deliver against our dividend target of GBP 0.0796 per share, which is a yield of around 11%-12% on the current share price. We will continue to focus on proactive management of our diverse portfolio, including further value enhancement initiatives. Finally, we are monitoring attractive opportunities for new investment for the fund when the conditions are right. What does that new investment look like? We thought we would illustrate that to investors, firstly noting that clearly any new investment is subject to liquidity and, of course, has to be assessed against broader capital allocation measures.
The board and investment manager are actively considering new investment opportunities in line with our stated strategy, which would be targeting an attractive balance of income and growth across our three pillars and with a disciplined alignment on infrastructure characteristics such as stable cash flows and inflation linkage. Any new investment will be funded by excess cash flow from the portfolio, essentially the dividend cover, and potentially cautious use of the RCF if it is considered materially value accretive. We will be targeting minimum double-digit returns as part of the assessment against broader capital allocation measures. Here we have shown a few examples that we are actively tracking that would fit within FGEN's environmental mandate. The first is a development stage investment in repowering in a market that is very familiar to us, backing an experienced developer that we know well.
That is something we highlighted after the year-end as well, in which we remain very close to. Across other energy infrastructure, we are investigating an interesting opportunity in biofuels and the provision of off-grid biomethane to high-energy consumers and a heat network utilizing waste heat for local municipal buildings, both of which will be backed by long-term offtake agreements with healthy levels of secured revenue. Within sustainable resource management, an interesting wastewater treatment plant backed by an annuity-style fixed revenue stream. As I said, we will be very disciplined when it comes to new investment, given liquidity and effective capital allocation. Such opportunities are an illustration of the kinds of investment that Foresight is originating regularly and that FGEN can do when the conditions are right.
Finally, just to bring it all together, why we think FGEN is such a compelling investment opportunity amongst the wider listed infrastructure renewables sector. We have a diverse and well-performing portfolio combining stable operational assets with exciting growth opportunities. We have an excellent track record with 11 years of dividend growth and looking forward a robust dividend cover forecast. We have a huge market opportunity ahead of us with our investment strategy supported by long-term megatrends. We take a particularly active approach to portfolio management with deep origination capabilities backed by Foresight's wider platform. We benefit from high levels of contracted income and low merchant exposure, and we are backed by a high-quality and well-resourced investment manager with 40 years of investment experience. That draws us to a close, and I think we can perhaps move on to Q&A.
Fantastic.
Charlie, thank you very much indeed, Ed also. Thank you for your presentation. Ladies and gentlemen, please continue to submit your questions just using the Q&A tab situated in the right-hand corner of the screen. Just for the team, take a few moments to review those questions submitted today. I'd like to remind you we're recording the presentation along with a copy of the slides and the published Q&A to give you access via your investor dashboard. Ed, Charlie, as you can see, we've had a number of questions submitted both throughout today's presentation and pre-submitted. Thank you to all the investors for submitting those. If I may just ask you just to click on that Q&A tab where appropriate to do so. Just read out the question, give your response, and I'll pick up from you at the end. Excellent.
Shall I, Charlie, because I've had the benefit of looking through these questions whilst you've been going through your slides, shall I sort of go through them and then as we pick up on them, we can sort of divvy them up between us?
Sure.
What I'll just say is there's a lot of questions there. Thank you, everyone, for submitting those. Given the time, we will get through as many of them as we can. If we don't get to all of them, I apologize. People, obviously, feel free to come back to us outside of this forum if there's still things that are outstanding. I'll try and go quickly, though, just to address as many as possible. First up, we've got a question here about subsidy income and our replacement strategy roadmap beyond 2035.
I think Charlie started talking about that during the revenue analysis piece that he had on his slides earlier. Hopefully, that addresses the question there. Broadly speaking, we are not reliant on chasing subsidies for new investment. There are lots of things that we can do in sectors that do not have government support or do not need government support.
I think the only thing I would add to that, perhaps, is that the new investment illustrations I talked about at the end, that is a good example of that. Those are investments that are generating secured revenues, both from a combination of subsidies such as CFDs in the U.K., but also long-term offtake agreements with corporate buyers, PV, PPAs with local authorities or other private buyers. As Ed said, there is a wide range of secured revenues that we would be targeting outside of subsidies.
That is the benefit of our diversified mandate as well.
Okay. There is a question about earnings per share. Would it be substantially lower with the dividend being grossly uncovered if we included depreciation in the P&L? I think just as a recap on the way that the investment companies typically do their valuations, how they account for valuations. We value a discounted cash flow to come up with a fair value of the portfolio. There is no depreciation charge as such that is applied to those. However, the value goes up and down based on the underlying performance of assets and the outlook of those assets. That is reflected in the valuation each time. Quite often, we produce an adjusted earnings per share that takes out the value of the portfolio in that.
If we'd have done that, I think the EPS would have been up to something like 4 or 5p. Depreciation does not typically come into it for our structure of business. Got a question about share weakness. Does it concern Foresight? Are more buybacks being considered? I mean, broadly speaking, does it concern us? We would not prefer if it was there, for sure. There are questions generally on what are we doing to close the discount. I will probably try and answer those all together. First of all, what we have tried to get across here is that there are lots of exciting opportunities we have within the assets within the portfolio currently. The board conducted a review earlier in the year.
The manager, so us at Foresight, we contributed to that, but it was very much led by the board involving independent third-party consultants as well to try and look at all the different options that were available. The conclusion of that analysis was that actually, because of the nature and the unique mix of assets we've got, the best way of delivering shareholder value is to continue to build out the growth assets to make sure that we can seek exits at those at the right time and then determine the right course of action with regards to capital allocation at that point. It may well be that there is an allocation to paying down debt, to returning money to shareholders, but all of that would need to be discussed based on the other available uses of capital at that point in time.
It is certainly something that the board are acutely aware of. At this moment in time, the idea is to try to focus on growing the portfolio and delivering value. There is a question there on how confident the directors would disclose asset valuations. Just sort of recap, I guess, what our process is. We have an in-house valuations team at Foresight, but we also have several layers of independent review. We will have, obviously, the auditors come and look at things, but we get an independent review of valuations as well. I do not think many of the listed investment companies in the infrastructure and renewables space do that. It is an extra layer of verification that we try to get every six months, really focusing on things like looking at discount rates, looking at what else is happening in the market, and trying to critique our investments, our valuations.
I think the board places a lot of comfort knowing that that additional review is there. We have a few questions on the RO consultation, which I think Charlie has largely addressed. There is a question about will the change happen on the 12th of December. I think that is when the consultation ends and we would expect a decision to be announced shortly after that. Certainly, our understanding is that it would come into play from the 1st of April of next year if indeed it does come to pass.
I think just to add to that, we have previously released figures on what the two different options on what impact on FGEN's valuations the two options have.
The first option, which I think everyone considers to be the most likely, has only a 0.5% impact on FGEN's valuation, which, again, just endorses the fact that our diversification away from ROCs is very helpful for us in this case.
We then have a question around, are we looking to reduce our reliance on subsidies going forwards? I think hopefully what's come across is that we already, and perhaps more so than the majority of our peers, have a high degree of contracted revenues that sit outside of subsidies. While they are a large value driver for us, and there is a lot of good things to say about subsidies, they've got us to where we are at the moment in terms of our cash performance, we do see more and more opportunities coming through that aren't reliant on subsidies.
As we seek to construct a portfolio that is less exposed to individual risk factors, that is absolutely something that we consider. Question on proposed government, the RO change to CPI, will it affect future dividends? We've done quite a bit of modeling on what would happen in the event of scenario one and scenario two that the government have put forward. Under both scenarios, we continue to, or we forecast that we will continue to have strong dividend coverage for the next five years. That is really as far as we typically look out because beyond that, there are a lot of things that obviously could change. We do genuinely think that scenario one is much, much more likely than scenario two. That is certainly the feedback that we're getting across the market.
If that scenario comes to pass, we should have very little impact from the consultation altogether. Question here on, can the business grow, continue paying growing dividends over the next 5- 10 years? Again, hopefully what we've illustrated is that there is an opportunity to recycle capital and invest into our own portfolio to seek to extend the lives of assets, to find new investment opportunities. All those sorts of things have growth in mind. What we are, we are very, very mindful of making sure that any money that's reinvested back in really delivers on that as a minimum to extend the life of the overall portfolio. I think given the high dividend cover that we've got, there are lots of opportunities for us to do that. Clearly, there's a lot of things that need to happen, and markets are the way they are.
I mean, that we need to make various decisions around how we allocate capital, but that is absolutely a strategic consideration. Question there on decommissioning costs across the portfolio. I mean, typically, because we have got a broad range of assets, we have got a broad range of exposure to decommissioning costs. Quite a lot of our assets, as Charlie pointed to before, we think we have got pretty conservative views on the lives of them. Actually, those decommissioning costs in most instances will be pretty far away for us. We do factor those into our valuations. I am afraid I do not have all the details across all the different sectors to hand. I think the typical approach is to make sure, first of all, that there is cash set aside in order to deliver the decommissioning of assets in their lives. Secondly, that appropriate adjustment is made in the valuations.
Question on the RCF. Why was the RCF drawn down a further GBP 22 million? Where did those funds go? A combination of places, really. I mean, about half of that drawdown is actually still sat in cash. As you'll see, our cash balance is quite a bit higher at 30 September back than when it was at 31st of March. That money is really sitting there available for the remaining commitments that we do have in the portfolio. The other half, as I mentioned earlier, GBP 7.9 million was reinvested back into the portfolio for enhancement opportunities and finishing the build-out of some of our construction assets. Also the buyback facility that we had. Some of that was funded out of surplus cash flows coming off the assets. Really, all that money goes into a general pot.
There was some RCF financing of those as well.
I think there's a few questions just on the general discount. What potentially could trigger a re-rating? What is the board thinking about this? It is something we are always thinking about. The discount is massively frustrating for the board, for the investment manager, and obviously for all shareholders. As Ed said, the board concluded with its strategic review earlier this year that the proactive management of the existing portfolio, a refocused investment strategy, and being able to recycle and invest well into new opportunity was the best route to delivering long-term shareholder value. Some of the factors that are behind the discount are obviously outside of the company's control.
However, what is in the control of the company is optimal execution of that stated strategy and the subsequent delivery of consistent and stable NAV and dividend growth over the medium to long term, which we can achieve without reliance on new fundraising, given the growth opportunity we have in the portfolio and the new investment that we can look to across our diversified mandate. That is our strategy and our route to trying to do everything we can to close the discount. Clearly, external factors drive the discount as well. I think interest rates or a very sudden increase in interest rates was the key factor in the discounts, in the development of the discounts. We would hope that a downward trajectory in interest rates will also be a factor in helping close that alongside our performance as well.
Yeah.
There are a few questions in here around the proposed combination between HICL and TRIG and thoughts generally on consolidation in the sector. Just take that briefly. I think in order for any combination to be successful and to make sense, it has to meet certain criteria. There has to be an overlapping investor base and what those investors want. There has to be mandate fit between the two investment companies. There has to be an alignment on valuations. I think there was a perception on that particular business combination that not all of those criteria were achieved. As such, it did not manage to get through. I think any future corporate activity such as that will be met with a lot of caution and skepticism going forwards.
It's not to say that it's not possible to deliver for some in the broader investment company landscape, but it certainly, each time these opportunities have been proposed to investors, there have been reasons why it hasn't been delivered. I think it's a challenging market to deliver those combinations now.
A question about current U.K. exposure and would we be looking to invest more outside the U.K. to reduce political risk concentration? The majority of our portfolio is in the U.K. We've made some investments outside of Europe, and those have been done on more of an opportunistic basis where we think those are attractive assets that complement the portfolio and diversify us into different revenue streams, into different regulatory and political landscapes.
Foresight itself as an infrastructure platform is very experienced across Europe, and about 80% of the new investment across the wider platform has actually been into Europe over the last five years. It is a market we know very well. Looking forward to new investment, yes, very possible that if there is really solid rationale for investing into continental Europe, then we will do so. I think the majority of our investments in our portfolio will always be in the U.K.
We have a question here on giving some reassurance that a recent tax valuation adjustment that was announced by Foresight Solar is not also applicable to FGEN. You will appreciate that we have very separate teams between the listed investment companies that we manage at Foresight. There is a separate Foresight Solar team. I do not have all of the details on what caused that tax adjustment.
However, I can say that we have no ongoing HMRC investigations with that sort of thing in mind. There are no concerns that we have over tax adjustments for FGEN's valuations. My understanding is that that is a portfolio-specific matter that that team have dealt with. There are still some open questions on the Q&A. I think a lot of them, I think, have been dealt with. Just bear with us as we sort of pick up the ones that we think perhaps have not. There is a question here on any future investment planning to buy gas or Anaerobic Digestion , AD. Hopefully, what came across is our success that we have had in that particular sector and why it appeals to us for future investment.
I think in the first instance, there are lots of things that we could do with the portfolio of AD assets that we already have. Very, very good performers. Clearly, it makes sense to try to extend those assets and maximize value from those rather than to invest in something unfamiliar and new that does not have that level of track record. That would probably be the priority in the immediate term. Beyond that, it is, like I said, a sector we have had a lot of success in. One that we are pretty close to and we monitor. There is a question about when did we find out about the RO consultation. Appears to have come out on Friday afternoon. I think whoever raised that found out about it before I did.
I got it on Friday evening, which was a lovely treat and no doubt intended to be that way. Yeah, I'm afraid I didn't have a crystal ball that saw that before anybody else. We have a question on plausible scenarios that could reduce div cover to below one. I think Charlie talked about a pretty severe downside scenario whereby power prices dropped to GBP 40 from their current levels of around GBP 80-GBP 85 at the moment. Even under that scenario, we'd cover the dividend in the near term. Hopefully, that illustrates the resilience of the portfolio. I think in order to get it to below one, certainly in the short term, you would have to have a pretty large number of issues come together at the same time.
That's why we have the diversified portfolio that we have, so that we are not overly exposed to any individual risk that comes up. You'd have to have the wind not blowing plus the sun not shining plus no crops growing plus technical issues at our largest plants. There'd have to be a whole load of things that would do that. I have just been rightly reminded that we only have a minute left. I will just scan through. Charlie, if you can see any questions you think we've missed, then shoot up.
I guess there's two questions at the end about AD on the ADs. Is gas direct to grid an option for AD life extension? That's certainly one of the possibilities, injecting gas directly into the grid.
With respect to the main feed for the AD assets, it's a combination of agricultural crops and food waste across the different projects in the portfolio.
Yeah. Those agricultural crops are typically energy crops, so they're grown on rotation. It's an additional revenue stream for farmers, which improves their financial prospects, but also sustainability credentials of AD.
Fantastic. On that note, thank you indeed for answering all those questions you can from investor. Of course, the company can review all questions submitted to them and publish any further responses where appropriate to do so on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to you and the team, Ed, if I may just ask you for a few closing comments, please. Yeah.
Really, I suppose just to thank everyone for not just listening to this, but participating. I mean, there's a lot of questions that come through there. That's great for us. We love engaging with the retail investor base that we have. It's a very important part of FGEN. Please do come along to future events like this.
Fantastic. Thank you both for updating investors today. Could I please ask investors not to close the session? It should now be automatically redirected to provide your feedback. All the team can better understand your views and expectations. This will only take a few moments to complete, and there's great value by the company. On behalf of the management team of Foresight Environmental Infrastructure Limited, I'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you.