Good morning and welcome to the Foresight Solar Fund Limited full-year results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated in the right-hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself, however, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll, and I'd now like to hand over to Ross Driver, Managing Director. Good morning, Justin.
Thanks very much, and thanks for the handover. I guess we can crack on with the presentation to take you on through the full-year results. So just going to the first slide there, you've got with me this morning, I've got Toby Verno from the fund management team who works alongside me on that, and Matheus Fierro from our investor relations manager as well. We'll take you through this pack between us. So just a very quick overview, potentially for those of you who are new to Foresight Group. Foresight Group is an international alternatives manager with just under GBP 12.5 billion of AUM currently. The majority of that, just under GBP 10 billion, is within infrastructure. And the most relevant parts for our fund for Foresight Solar is our international presence there with offices in London, Madrid, Rome, and in both Sydney and Melbourne in Australia.
We have 175 infrastructure professionals that work with us across those regions, and we manage over 435 infrastructure assets across 16 different investment vehicles. If we get onto a bit of an overview and recap of Foresight Solar and the fund itself, it remains a predominantly U.K.-focused fund with a large portfolio of ROCs-backed U.K. solar assets. That is the bulk of our portfolio, with 50 projects there and 723 MW, making it one of the largest portfolios in the market. We also have three battery storage projects, one that's currently in construction and the project rights to further ones. We then also have our international exposure. The fund went into investing in Australia, first of all.
We've got four assets there comprising 170 MW of generation, and more recently into Spain, where we developed four projects there and also have recently made a 50% sell-down in the stakes of three of those assets known as the Lorca Portfolio above NAV. It is also the core market for us where we've also done our first development stage investment with just under 0.5 GW of pipeline there that we will talk you through in more detail. Yeah, so next slide. The first slide here is just giving an overview of what we're going to talk through this morning. Predominantly, the key focus for us and the board has been the capital allocation of the fund and keeping it very tight in the current timeframe. So what have we done? We'll go through in a bit more detail.
It's the share buybacks , relatively one of the largest in the renewables market, with GBP 40 million committed there. We've made our first investment with the sale of the Lorca Portfolio at a 21% premium to NAV, and we've used that alongside with cash generation to pay down the debt. Also, focus on that we are not progressing with significant capital expenditure at the moment and paused other construction projects, but we do see scope for modest investment in development stage pipelines in order to grow the fund in the future. Operational performance, over the strongest year or highest generation to date, at well over 1 TWh. The portfolio is not without some challenges that we'll come on to speak about, but it continues to be incredibly strong and incredibly cash-generative overall.
The financial outlook then, a very strongly covered dividend for 2023, 1.6 times cash covered, and that, along with what we'll talk about, power prices going forward, is what's given ourselves and the board the confidence to increase the dividend target, 6% again this year to GBP 0.08 per share. One of the other parts that we'll come on to speak about, we've got the valuation number up there. We've put out a comparable number to recent transactions in the market. We see our valuation as somewhat more conservatively valued than some of those transactions at GBP 1.17 million per megawatt there. So if we can go on to the next slide, just diving in a little bit more detail on the capital allocation and the rationale behind that. The share buyback program, why are we doing that?
Well, we see it in terms of it's a good way to acquire an investment decision on its own, which is acquiring, stocking our own portfolio that we believe is incredibly solid and is massively undervalued at the moment. And we believe that that has been borne out by the recent transactions in the market that we'll come on to. And it's also a good way to return cash to shareholders. We would say that we have done this. Others have talked about it and not done as much. And arguably, this is, like I say, the largest relative buyback program in the market, and it is NAV accretive in terms of on a pence-per-share basis that we'll come on to. We've made the first, as mentioned, first of our investment program with the sale of Lorca, circa 50 MW there. We're not intending to rest on our laurels with that.
We are looking to push ahead with the remainder of that investment program during 2024. We're not pinning ourselves to a mast and saying specifically which assets they are. We're looking to return a bit of flexibility on that, but we are making progress on all fronts and hope to report back on that before too long as well in terms of progress. The key area of what we've used monies from the sales for is to pay down the RCF balance, so the only variable-rate debt that the portfolio currently has, and it's just over 6% at the moment in terms of that. So it's a key area to focus on to reduce.
We gave ourselves a target of paying that down to GBP 75 million by the end of December, and we hit that by making GBP 40 million of reductions in the RCF drawings from the sale of Lorca, but also from cash generation of the fund as well. I would also say, on top of that, we've also paid GBP 42 million off our long-term amortizing debt. So in total, GBP 82 million was paid off the paid-off debt by the company. We've also extended out the RCF as well to 2026, deferring any refinancing risk there, but still see a very strong market from other funds that we manage and interest in RCFs for these funds. On the dividend increase, just coming back to that yet, it's another 6% increase, taking us to 8 pence per share. We'll go on to why we feel comfortable giving this.
We've seen there's a bit of a catch-up for the last couple of years of high inflation and high power prices and looking to pass some of that on to investors. But based on the current NAV, that's just under a 7% yield on that and around probably closer to 9% yield based on the current share price as of today. And we continue with our strong shareholder engagement, continuing to broaden the investment base, having many, many meetings and discussions with investors to get feedback. There can be a diverse range of views around what's best to do at the moment, but we hope in terms of our strategy here, we are looking to cover off as many things that we think are in to shareholders' interests as some of the feedback that we're getting and we believe is the right thing to do.
We've also done a shareholder perception study recently that's had some very good insights into that for us. I'll just hand over to Toby for the next slide to take through a little bit more of that in a diagrammatic form of capital allocation as well.
Thank you, Ross. So on this slide, we aim to illustrate the company's capital allocation policy. We presented a similar diagram to this to clearly communicate strategy to the market at the interim results. And what we do now is evidence what we actually delivered in the period in terms of capital allocation. So moving from left to right, you can see we started the year with some healthy cash balances and then went on to generate record levels of cash in the period, over GBP 120 million gross proceeds net of debt service and amortization. GBP 71 million was received by the company, in addition to GBP 24 million of proceeds from the sale of that 50% stake in Lorca, a 21% premium to the holding value of that asset. We then utilized that cash, carefully balancing it across a number of different capital allocations.
First and foremost, servicing our dividend, which was paid in full and in line with target, as we have done every year for the 10 years since IPO. Ross has already touched on paying down the RCF. We set ourselves a target of reducing this balance to GBP 75 million by the end of the year, and that was a target that we hit, paying down GBP 40 million of that balance. We are halfway through the share buyback program as of the end of the period, with GBP 20 million having been invested out of the total GBP 40 million budget that increased fourfold throughout the year. Finally, I'll touch on reinvestment in the pipeline and portfolio itself. We have GBP 11 million that went into reinvestment in the portfolio.
Some of that, the bulk of it, were pre-existing contractual commitments to further the construction of our first battery storage project, the Sandridge Project in Wiltshire that will connect later this year. And then the balance was invested in the acquisition of a 467 MW pipeline of Spanish development stage solar assets. And we're very excited to be taking that first step, investing in development stage projects, and that is shaping some of the future investment strategy for the fund that we'll come on to later in the presentation. If we could go to the next slide, please. So in this section, we recap on the net asset value that was announced earlier in the period. We present here an abridged version of the NAV bridge for the year, focusing on the key value drivers across the period.
So there was overall a fall in net asset value to a little over GBP 1.18 per share. The primary driver on that downward pressure on NAV was the increase in discount rates, just shy of 100 basis points increase over the period, bringing the weighted average discount rate for the fund to a little over 8%, the highest in its history since IPO. That is naturally a reaction to increasing risk-free rates in the countries in which we operate and around the world. There are also downward pressures from macro assumptions going forward, principally power price outlook and also inflation, both seeing modest downward pressure. In the case of power price forecasts, this was offset by reduced tax versus that budgeted under the Electricity Generator Levy, which was introduced during the energy crisis of 2022.
Going forward, we do not forecast to make any further payments under the Electricity Generator Levy, owing to the reducing power price outlook and also the allowance that's afforded under that regime. Finally, project actuals for the period came slightly below budget, and that's again as a function of prices actually secured, where we had projects that did not have hedges in place being below those that were originally budgeted. Moving to the right of the chart, we can see the positive levers that we've been pulling to drive value for the company and for its shareholders. Firstly, the share buyback program, the GBP 20 million invested in our own stock, was NAV accretive to the tune of 1.1 pence per share.
We also then crystallised value through the sale of the Lorca asset, both cash and proceeds received, but also marking up our residual stake in that portfolio, accreting 1.6 pence per share for our shareholders. And then finally, in that other bar, that's comprised of a markup of REGOs pricing outlook. Those are the certificates that the company, every megawatt-hour of renewable electricity generated in the UK, reflecting actual contracts that we've secured in our portfolio team for our assets. And then finally, the ongoing campaign to extend asset lives for our portfolio. We can move on to the next.
Oh, sorry, Matheus. You can see the question there about the buybacks as well. I think it's a fair question in terms of, does it make sense to continue buying back? The average purchase velocity was GBP 0.96. We're currently at GBP 0.89. What we just say to that is, Tom, we'll go through this on the next slide in terms of what we see as proof of valuations. And actually, I think there's an argument to buy even more of our shares back at the current share price because we still see it as massively undervalued versus what the value of our assets, particularly in the U.K., Spain, and Australia, are actually worth. It's always a good argument in terms of how much of a difference it makes on an ongoing basis.
But I think we always see there's been a bit of a small jump in the share prices across the markets this morning, literally just off the news that inflation is coming a bit lower. That feeds into views on when interest rates may be capped. We feel that we're doing everything we can here with the levers that we can pull. We do see our fair value being well in excess of GBP 1.00, closer to like GBP 1.18 at the moment. So we do see this as a significant discount to the fair value of the assets. We do intend to continue to keep buying the stock, even at these reduced prices. I think as soon as there's an indication from the Bank of England that rates are going to come down, you will see a re-rating in this sector.
That's why we continue to see it as a good investment. Tob, you will talk through how we see that in terms of the comparable transactions out there.
Yeah, no, absolutely. I mean, the opportunity to invest in a stable operational portfolio with a 10-year production track record at the implied returns that our current share price offers, it is a great investment by all accounts. And that is the primary driver to the buyback program. We would reiterate that it is in balance with tightening up the balance sheet through paying down variable interest rate debt and also investing in the future growth of the pipeline that we'll come on to a bit later on when we go through a case study for our development assets in Spain. On this slide that we're showing now, we present for the first time the split out of our UK portfolio valuation, the enterprise value on a pound-per-megawatt basis, to GBP 1.17 million per megawatt.
We think it's an appropriate time to be disclosing this level of detail in our valuation, as quite rightly, portfolio valuations are under scrutiny in the market against rising risk-free rates and high inflationary backdrop. What we do then is present this against a number of publicly available comparables. And we think that the three we've selected here are particularly relevant in the market for UK ROC-backed solar assets. In each case, these portfolios have very similar vintages in terms of ROC accreditation and subsidy support relative to FSFL's own portfolio. And in each case, we have some greater insight into the Foresight VCT sale, where that was managed in-house by Foresight Group. So we now have just how far in excess of GBP 100 million that did trade.
But otherwise, in each case, all of those portfolio valuations are in excess of our own portfolio valuation and at every stage throughout the last year that we've sent above. What we think this does overall is hopefully provide confidence to the markets in the robustness of our valuation methodology and give confidence that at least the cutting edge of the market is more aggressive than our own valuations. We do obviously have insights as to the range of bids that were received in a number of these processes, and we are very comfortable with the level of our valuation relative to the range of bids received. If we move on to the next slide, please, Matheus. We'll now move on to operational performance. I'll hand back over to Ross to talk through results from the year.
Yeah, so what the chart is showing here is the ongoing growth in the total generation of the portfolio that's hit over 1 TWh this year, predominantly with Spain coming online. What I point to is you see there the sort of dark grey bar being the UK generation. So once that portfolio was built up from about 2018, that generation has been pretty stable there. In fact, the major fluctuation is down to irradiance and us generating more when irradiation has been above budget because those I think we'll just say we are confident that our portfolio is one of the best performing in the market given the asset management team and their work to keep that portfolio operating and online in order to capture the additional days of sunshine out there when we have very limited downtime on that portfolio given their proactive asset management.
It's been very solid for a long time. The gold bar is the generation that's coming through Australia, which itself has been pretty consistent. It's fair to say that market has not been without its issues. We have had 9% below forecast for this year. It has been below forecast for the last couple of years. It has been impacted by high economic curtailment, which means that the products are ramped down at periods of oversupply into the markets. They still have a lot of coal there that has still yet to be ramped down. There are a lot of baseload production. It's something that the governments are looking to address there, and it's a key focus for us this year in terms of looking to rectify that.
We are looking at modest sort of asset management spend to either put batteries on those projects to take off some of this generation during times of curtailment or even private wire connections to sell some of this electricity direct to other users to help alleviate some of this. It is something that's expected to alleviate from the market in general going forward, but looking at the Australian portfolio and how best we resolve those issues is a key focus for us this year. And then just going on to Spain, we've been very happy with the Spanish portfolio coming on for its first year, full year of generation there. It was just 1.5% below budget, but that was really because irradiation was 1.6% below forecasts. How much sunshine we were getting was 1.6% below forecasts due to it being quite stormy earlier in the year in southern Spain.
So Spain otherwise is on budget and on target. Just going on to the next slide. I think it's more before that. Oh, no. Nope. Okay. So again, in terms of the one of the questions we've had quite a bit around is power price forecasts and our hedging position as well. We are very well hedged on the portfolio for the next couple of years, for this year and for next, with on average around over 80% of our revenues either through from subsidies or through the price fixes actually covering that. The question is, what happens to power prices? A lot of people are pretty well fixed over the next few years in the immediate term. What happens longer term in this, particularly over from 2026 onwards?
So a number of the analysts covering the market have raised this question, sort of rightly so, and showing there that the chart on the top left is the Bloomberg forward curve in terms of what's happened to the forward rate prices in the market over the next few years, showing that those have come down significantly. We agree that's something that we've seen in the markets as well. This is the off-takers that we sell our energy to and what prices we can achieve for that. And we'd also agree that with certain off-takers, the liquidity is noticeably lower and has dropped off as well. What we would say is that we've put that chart there on the right to show the sort of range of prices that we're seeing in the market and have the ability to lock into for the rest of this decade.
We still have very strong dividend cover of 1.5 times we're forecasting for 2025, 1.35 times for 2026. But then we're saying, actually, in the broader pool of hedge counterparties and other off-takers that we see, this pricing that we're seeing on the right-hand side remains attractive in terms of what we can lock into. There's a lower band being the black line there and the upper band being the blue line. In terms of even at the middle point of that, around GBP 60 per megawatt-hour, we are comfortable at being able to lock into that and providing strong dividend cover for the foreseeable future from which we're talking well in excess of one times.
I think we've been a bit spoiled with the power prices in recent years, but given the consistency of solar production, I think a target dividend cover of 1.1-1.2 times is a very healthy target. That has given us and the board, with careful consideration about dividend cover when setting targets, we forecast dividend cover of what we think we will be giving in a continued progressive increase year on year. We forecast it out for the long term and to give ourselves the comfort that we're able to cover that with our electricity sales. Looking at that analysis has given us the confidence to, again, give that 6% uplift on the dividend for the year 2024. And we remain confident of robust dividend cover going forward for the foreseeable future, which we will give further updates on as we build out that hedge position. Toby.
Yeah, sure. Thanks. So we'll cover sustainability performance in the period on this slide, touching briefly on some of the key achievements in the year. As Ross has already mentioned in the operational performance, this is the first year that the fund or the fund's portfolio has generated over a terawatt-hour globally. And that's a great milestone for the fund as its full solar capacity has come online. And we clearly hope to add to that, bringing through that solar development pipeline going forward, just to put that 1 terawatt-hour into context in a more meaningful way. That's over 400,000 UK households' annual consumption or the total electricity consumption for businesses and households in the city as a whole. So a very substantial contribution to decarbonization of energy production that the fund is rightly proudly making.
Further initiatives that we'd like to touch on on this slide are a new initiative to boost biodiversity net gain across our projects, working with consultants and contractors to look at what we can do to support wildlife in and around our projects and positively contribute to biodiversity where these were previously farmers' fields with relatively poor biodiversity. And then finally, the sustainability-linked RCF has been extended in its term by a further year. This continues to be linked to KPIs that the fund can deliver on to be incentivised to receive reduced levels of interest. Can we go on to the next slide, please? I think that this large area is one that possibly skipped over earlier.
We'll dwell on it just quickly as it just illustrates the hedge position for the company over the coming years, giving that high comfort around visibility of dividend cover and prices that we can secure both in 2024 and 2025, underpinning that strong dividend cover guidance of 1.5 times for 2024 and 1.35 for 2025. And as Ross mentioned earlier, we have good visibility over continued dividend cover into the foreseeable future. We've skipped to the next slide now. This is a slide covering the gearing position of the company. At the head of the presentation, Ross reiterated our commitment to paying down our floating rate debt in the form of the RCF. And that was part of the overall reduction in our total debt balance of GBP 82 million over the year.
That's a 16% reduction in borrowings versus the start of the period, bringing total gearing for the portfolio down to 38.8% of GAV. We remain very committed to prioritize paying down the RCF, which had an interest rate cost of almost 6.5% in 2023, and clearly it is a higher cost than we would like. So we are focusing on paying that down. That will primarily be funded out to further disposals of our 200-MW investment program, as well as cash flows generated organically by the portfolio. The final thing that I'll just reiterate on this slide is that our long-term debt is sized against the subsidies and contractor revenues that our assets benefit from in the portfolio. It is fully amortizing and fully hedged against interest rate movements.
We believe that as a level of structural financial gearing, it's at an appropriate and conservative level, particularly relative to others in the peer group. Moving on to outlook and the strategic direction for the fund going forwards. We start with a case study of Foresight Solar's investment in the Lorca project in Spain. Now, the Lorca project is, in fact, three assets in a 99 MW portfolio. Those were acquired in 2020, leveraging the local connections of Foresight Group's Madrid office. They secured those projects right for the pre-construction stage on a bilateral basis with an experienced local developer. They then went on to structure the construction agreements, the financing agreements, and the off-take, securing a 10-year fixed-price PPA with a creditworthy counterparty, Statkraft, biggest energy house in Europe, adding value every step of the way.
Over the course of the next 18 months, the project was constructed, reaching commercial operations in August of 2022, at which point we wrote up the value of the asset by 17% to GBP 0.019 per share. That's illustrative of the value add through de-risking the project by taking it all the way through construction and bringing it to stable operations. If we fast-forward now to the end of 2023 and the successful delivery of the first phase of our investment program, we sold down a 50% stake in the Lorca Portfolio for a 21% premium to its holding value, generating GBP 0.016 per share of NAV output for our shareholders. Overall, we're amazingly pleased with this result.
We think this is a great illustration of how, through systematically bringing a project through its key lifecycle milestones and de-risking it, you can broaden the appeal and bring investors, as is the case here, a purely financial investor with a low cost of capital who is very happy to come in alongside a specialist investment manager such as Foresight to co-own an asset that we know well and continue to manage in full and crystallize that value for shareholders. Now, we think that this case study is illustrative of what we have achieved in terms of bringing projects through development all the way through to operations. This is something that we would like to emulate and repeat again going forwards as we look at our development stage investments.
If, Matheus, you wouldn't mind flipping to the next slide, I'll hand over to Ross to talk through our first step into development stage investments with the 467 MW portfolio in Spain and then how we hope to build on this as we pursue this strategy further.
Yes, Toby. So the reason for going through the Lorca example there was not just to talk about the investment that we made part of the first part of that, but also to give a steer for we see part of the strategy for the fund going forward as being more of a trading strategy and more of a recycling of capital, not just the initial 200 MW that we've talked about there. So the first step in our investments into development stage portfolios was this 467 MW pipeline of Spanish solar. That's across six projects, the first of which around a sort of 60 MW site in southern Spain could come through and get consented later this year.
What that would mean for us is we would actually have the in-lab project from an earlier stage than even the Lorca assets that we sold there and have an additional ability to take value from that. To give investors an idea, the investment to secure that pipeline upfront was EUR single low-digit million, with 85% of the payments made to the developer only at the point at which that gets planning consent and becomes an RtB or ready-to-build asset. We know from the price that is pre-agreed there, we can already sell those rights immediately out into the market without doing anything else around 2-2.5 times the cost that we will have paid for them. Alternatively, we can take them forward.
By going into that asset at an earlier stage, we know it will give us very high single-digit returns, almost double-digit returns, taking it forward to build it out and construct it. And therefore, we see it as very yield-accretive to the fund as well. Of course, assuming that markets really haven't still recovered at that point, at the point that this project comes out, it will be following our capital allocation program, which may mean that although it looks like a great opportunity, we may be passing on this one and selling it on to cash in, and that money then flows back into the decision-making process. But we see that as indicative of a pipeline that we're looking to build here.
It sounds like a lot. We're targeting 2-3 GW, so about whether that's 4- , I believe, 4-6 or 7 times the size of that at the moment. But we don't see that as actually being that much. When you say small single-digit GBP millions in order to secure these kind of rights, what we're looking at and in funds discussions at the moment on is sort of UK pipelines of solar, some co-location, some BESS in there as well in order to take through and build through developments. And we'd look to bid development stage UK solar projects into the CFDs and other subsidies that can long-term become a replacement for the ROCs in the portfolio. We're looking at more solar across Europe in other markets as well, potentially more in Spain, some Germany, other markets there.
And also looking at there are some interesting opportunities in battery storage at the moment to get in early stage in other markets, including Spain and potentially Italy, where there could be subsidies towards that as well. But the idea being at all of these assets, we look to build early stage. We have the assets cross-collateralized, meaning that if one falls over, we can offset the costs and investment into that with the developers to set it up against another asset coming through. What we're looking to do here is build an ongoing basis where we have several assets coming through to get planning consent every year. And then we'll be taking a view on which we take forward through this process, maybe sell earlier stage, maybe sell later stage, but to recycle that capital back into the business.
There's an argument to say we could sell the rest if we have more Spanish projects coming through. We could sell the rest of the Lorca Portfolio at some point as well. So it just gives you investors a bit of an idea of the strategy that we're looking to progress with this. Okay. There's important considerations in the regulatory environments as well, but Toby will just talk through it at the moment.
Sure thing. So we note that this slide is already out of date as of the date of publication. The second round consultation from the REMA, Review of Electricity Market Arrangements, was released. We have, of course, been digesting that over the coming days. We'll be responding to that consultation and giving a view in due course. At a high level, we're pleased to see that the direction of travel is away from some of the more revolutionary aspects and initiatives that were being initially consulted on. Within the scope of consultation, there remains regional pricing and a national pricing model. It also looks like they're moving away from disaggregating the market, meaning that renewable generators such as solar farms will retain exposure to the marginal price setter, which will remain gas-led in the near-term future.
We will, of course, continue to monitor progress on REMA as a key initiative of the U.K. electricity markets. There's been no further feedback from the consultation into the transition to fixed-price certificates. That doesn't have launched last year. We await that along with the rest of the market and trust that the government will hopefully see sense in not making dramatic changes to the subsidy regime in order to continue to support investor confidence in the market. In Spain, there has been a reintroduction of generation tax. However, the impact of this has been offset by the fact that the windfall tax, the clawback tax, has not been continued into 2024. There has also been a reduction in the Bono Social, which are actually community benefit contributions that projects make. The overall impact of regulatory changes in Spain has been somewhat muted.
Could move on to the next slide, please?
Yeah. Just to summarize everything, it's been record electricity generation for the fund for the year and very strong, good operational performance in the UK and Spain, not without some issues there in Australia. But we're looking to rectify those as soon as possible and deal with them. The strongest ever cash generation from the assets, delivering GBP 120 million in the last year due to the strong price fixes we've had in place. On an income, we are upping the dividend. But we are also targeting more of a high-yielding income-plus-growth strategy here, long-term growth being brought through by the development pipeline as well, and looking at strong cash generation for the coming years to support that as well. As I said, the growth, really, the acquisition of those rights in the first development stage project is just the beginning of that.
We're targeting 2-3 GW in what we see as the engine room to drive the fund forward. We know that the markets will continue to be challenging, probably for the rest of this year, at least until we're getting towards some significant rate cuts. We're going to do everything we can to position the fund in the best place possible to take advantage of the situation when markets turn. We will continue with our capital, I think, disciplined capital allocation between ourselves and the board that we are all in line with and agreed upon and think that the opportunity is still there once markets turn, once there is a clear reduction in interest rates.
We do not think they're going to go down to. Clearly, we see them moderating back over the next couple of years, not going back to the levels we saw of the last decade. And that's why it's important to give a good spread there in terms of yield versus other alternatives in terms of fixed income and other bank and the fact that it will continue to be a growing dividend. It will continue to have the ability for long-term NAV growth in the portfolio as well, we see as being an attractive alternative. But we'll pause there. I see there's quite a few questions. And maybe we can try and get through as many of those as possible in terms of this.
Yeah. Perfect, Ross, Toby. Thank you very much for your presentation. We do have another poll which will appear on your screens now. If you could respond to that, the company would be most grateful. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab, which is situated on the top right-hand corner of your screen. But just while the company takes a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. As you did mention, we have received a number of questions throughout today's presentation. At this point, Matheus, if I can hand over to you just to chair the Q&A, that'd be great. Then I'll pick up from you at the end.
I'm going to see if we can run down that list.
Yeah. Yeah. I think there were quite a few questions about that structure and cost. So I think if you could address some of those from the start, maybe we can then pick off some of the more broad ones.
Yeah. So the cost of the long-term debt, this one, it's 4.15%. It's all fully hedged out as well. So we don't have, we continually keep kicking the tires on that to see if there's other options to do it. But it's fully amortized and fully paid down. We would look at that if we saw there being a benefit from breaking hedges. At the moment, we don't quite see that. But there might be a sweet spot at some point, something we continue to look at. Total debt and RCF moving to over the next 1-2 years, good question. Our target with investments is to substantially pay the RCF off over the next year or so.
I think it'll be a good question of where things sort of sit in capacity by the time we need to refire that facility in a couple of years' time and whether we need as much as we do currently have. So we will continue to look at that.
I think that was mostly on that. I think there were a couple of questions on BESS as well in terms of what is the plan for BESS for solar. And then there was also one about co-location BESS. So if you can cover both of those.
I'll pick up both those questions separately. I guess there's no shying away from the fact that 2023 was a bad year for batteries in terms of revenue performance with batteries across the country seeing substantially lower levels of revenue than forecast one or two years ago. This is a confluence of a number of factors that all were headwinds to revenues in the sector, some of which are well-documented and some of which are less well talked about and understood. Just to summarize briefly, power prices softened throughout the period. With lower absolute power prices, there was less volatility for batteries to trade within. That was a combination of demand destruction as the cost-of-living crisis hit and businesses and households consumed less energy. It was also a low-wind year. There was less periods where wind caused very low pricing through overproduction.
So again, contributing to that reduced volatility. During the tightest points in the period, the introduction of demand flexibility services for the first time dampened the very extremes of pricing. In the first year, we feel that that was oversubscribed relative to how it performed going forwards due to the pricing set by the regulator there. And then finally, I'll come on to the exceptions rates for batteries, or more affectionately known as skip rates in the industry, where batteries have been overlooked and dispatched from the balancing mechanism to the tune of 85%-90%. This is a data issue that the control room at the ESO need to resolve, where they need to understand what the state of charge is of batteries over the network so they can be more effectively dispatched in the balancing market going forward.
A number of headwinds all coincided to drive very poor battery performance in 2023. There is some cause for optimism as some of those issues are addressed. Hopefully, there won't be coincidence of those issues going forward, noting the coincidence of bad weather and those markets of structural factors. Our view is that there will probably continue to be a slightly rocky revenue outlook for the near term as we expect that there may be a degree of overbuild given the number of batteries looking to connect in the immediate future. We'll be looking with interest at the performance of our first battery that comes online later this year. I guess we would just then go on to say that we are currently causing material capital investments into progressing our 2 pre-construction battery projects.
That is a view that's aligned with our co-shareholder, JLEN Environmental Assets Group. Those assets are very well protected in terms of their project rights. So we are evaluating the best course of action to progress those projects and realize best value for shareholders going forwards. Just touching on the co-location point, I saw the question early on in the presentation around, "Does it make sense to connect batteries to all solar projects?" The business case for co-location is a viable one, albeit I think our analysis demonstrates it only makes sense to do so at scale. So we would see large batteries being connected to large solar projects as being most beneficial. It is not necessarily straightforward to retrofit to existing solar projects due to constraints in the configuration of the grid connection.
And so we would see the most profitable strategy for pursuing co-location in new build sites where the system is designed from day one to be co-located, allowing you to take full benefit of the efficiencies that could be gained there.
Yeah. I guess the only thing we'd add to that is if there is, we know, there's scope for it on some of our existing sites. They're quite modest-sized batteries. It's more of an asset management initiative than anything that's going to turn the dial in the valuations.
There's a couple of other questions there, Matheus. Do you want to do some of those?
Yeah.
Falling power prices affecting NAV and revenues this year yet? Fair question. I think it comes to some of that we've been talking about. I think because of the—it's fair to say that the power curves that most of us rely on in the market and a blend of we use the blend of three consultants are lagging the fall in the forward rates a bit at the moment. And where those are are slightly below the curves. All I'd say is that we are very well hedged for the next couple of years. We've looked at this. Actually, a drop in the merchant element isn't going to have a significant impact. There may be a bit of downside there. But it doesn't look significant because of the hedges that we've got.
Then you're quite quickly getting down to that sort of GBP 60 per MWh in the forecast, GBP 5.26 and onwards. Sorry, not a material. We don't foresee any of the big drops that we've sort of seen throughout the last year as those prices moderate back down.
Just to the latest question that we received around sustainability of dividend cover, this is something that we look at very carefully when deciding our dividend policy going forward. We aim to deliver a progressive dividend every year, growing that dividend as we have done every year since IPO. And part of the consideration for any increase in any individual year is the outlook for dividend cover going forward. And a significant part of that is the power price outlook. So we very carefully, as a management team with our investment committees and then with our board, look at the power price outlook, what we're able to lock into in terms of fixed price hedges, and then always targeting robust dividend cover in the years ahead.
We are very confident, in our opinion, that the dividend will remain well covered in the years ahead as we continue to create on a progressive basis.
Yeah. I'm seeing a couple of other questions there. There was one question about holdings of our directors in the company. If you look on, it's all there disclosed on page 114 of the accounts. Another question there about the impact of irradiation changes across future forecasts. There's also included in the report in the sustainability section; we've run some analysis on this with consultants to what the increase in temperatures could mean for the portfolio. Admittedly, it's still a little bit at the sort of theoretical level. But effectively, what it's sort of saying is actually, as temperatures increase, if they do increase sort of slightly, it actually becomes more beneficial to the portfolio. And I think what you'd start to see is sort of drier spells in the sort of places such as the UK, which will probably have higher irradiation.
But as temperatures continue to increase, if we get to that more than 1.5, 2.5%, or beyond that, then you start suffering solar starts suffering from extreme heat in certain areas. And that's particularly in places such as southern Spain or Australia where it's more risk to us. So it's a bit of a balanced picture in terms of that. So I think what we're all keen to make sure is that we are working towards limiting climate change in general. But there's analysis on that within the annual report as well.
Toby, do you want to pick a few more?
This one more. I'll just stop there, which is just around the returns that the disposal of the Lorca asset represents. So yeah, we've mentioned it was a 21% premium to holding value, that sale value. Overall, that's in excess of a 12% IRR that was generated on the investment in that 50% holding of the Lorca asset. We think that that was a great result and highly accretive to the fund's investment targets. What we would say is that that was acquiring an asset and taking it from immediate pre-construction. We hope to go better than that as we look to invest in development-stage projects, taking them through from an earlier stage, something that the Foresight Group has been doing for a number of years in its unlisted strategies. And now our listed solar fund is going to benefit from that experience and track record.
Yeah. I see a question that was highlighted there about cover on possibilities of M&A in the solar or renewables space. I think it's fair to say it's something that the House is looking at from various different angles when considering this. For those of you who know the REIT sector, yes, it feels like the renewables and our sector here is lagging behind what's going on in the REIT space. There is every opportunity, I think, for some consolidation in this market. And it's something that we're thinking about very, very closely through different means as well, I think. Just want to say there. You've only seen one sort of approach for one of the smaller funds at the moment.
I think we've covered most of them. I'll have a detailed look through. If there are any other ones remaining, we can just answer those via text as well. Let's wrap it up there.
Perfect. Thank you very much for answering all those questions from investors. And of course, the company can review all questions submitted today, as Matheus just pointed out. And we'll publish those responses on the Investor Meet Company platform. But just before redirecting investors, provide you with their feedback, which I know is particularly important to the company. Ross, could I just ask you for a few closing comments?
Yeah, certainly. Look, definitely, the market and the current macroeconomic backdrop at the moment remains challenging. We don't think that's necessarily going to turn quickly. What we are doing is positioning the fund to be as self-reliant as possible in not requiring the need to get out there for capital raises at the moment because we can't. So what we're looking to do is recycle capital. I think the main message we want to get across today is even when things do eventually turn that we expect could be a bit more positive news by later this year or next, it won't go back to being business as usual.
That's why we're looking at this as more of a trading strategy for the fund, going through making more divestments and recycling of capital, and really looking at now more of a total return strategy in terms of very strong yield for the company along with long-term growth that we hope to drive through that development pipeline as well. That's the key message we want to leave for investors today.
Perfect. Could I please ask investors not to close the session as you will now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few minutes to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Foresight Solar Fund Limited, we'd like to thank you for attending today's presentation and good morning to you all.
Thank you all.
Thank you very much.
Thank you for attending today's presentation and good morning to you all.
Thank you all.
Thank you very much.