FP Foresight Global Real Infrastructure Fund (GRIF) Investor Presentation - Foresight Group
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Important Information This financial promotion is issued and approved by Foresight Group LLP, which is authorised and regulated by the Financial Conduct Authority (FCA). Foresight Group LLP is the investment manager of the FP Foresight Global Real Infrastructure Fund (GRIF) and the Authorised Corporate Director (ACD) is FundRock Partners Limited. This presentation is directed only at financial intermediaries and financial institutions that are authorised and regulated by the FCA. Please ignore and delete this presentation if you are not a UK authorised financial intermediary or financial institution. There are a number of risks connected to an investment in GRIF and the opportunity described in this presentation is not suitable for all investors. Risk are explained in the Fund Prospectus. We recommend investors seek professional advice before deciding to invest. Investors must read the Fund Prospectus and Key Investor Information Document before making an investment decision. Past performance is not a reliable indicator of future performance and may not be repeated. Capital at risk.
Contents 1. Foresight Group Overview 2. Investment Philosophy: Real Infrastructure 3. Investment Strategy and Process 4. The Portfolio 3
Introducing Foresight Group Foresight Group is a global infrastructure and renewable energy investment manager with £4bn Assets Under Management. 35 year £4.0bn 10 offices investment assets under track record management 215 staff globally 90+ 28 1.6GW+ investment institutional renewable energy professionals and retail funds generation 4
Foresight Capital Management Foresight launched an income fund in December 2017 to address the real infrastructure gap in the OEIC market. The FP Foresight UK Infrastructure Income Fund UK Fund Overview Fund Flyer FP Foresight UK Infrastructure Income Fund Target Investment Company Holding TRIG HICL INPP NESF Level 2,000+ Infrastructure Asset 5
FP Foresight UK Infrastructure Income Fund (FIIF) vs FTSE All-Share Cumulative Total Return1 % 25 20 15 10 5 0 -5 -10 Dec/2017 Mar/2018 Jun/2018 Sep/2018 Dec/2018 Mar/2019 Jun/2019 FP Foresight UK Infrastructure Income Fund FTSE All-Share Index One Year Sharpe CumulativeTotal DT Risk 30 Day Vol 90 Day Vol 180 Day Vol 360 Day Vol Beta Ratio Return Rating2 KIID Rating3 FE Risk Scores FP Foresight UK Infrastructure Income Fund 5.79 4.36 4.29 4.50 0.20 2.76 22.20 4 4 44 FTSE ALL SHARE 8.98 9.19 11.82 11.93 1.00 N/A 6.95 N/A N/A N/A Source: 1) Bloomberg Data Notes: 2) DT Risk Rating is a score out of 10 3) KIID Rating is a score out of 7 6
Contents 1. Foresight Group Overview 2. Investment Philosophy: Real Infrastructure 3. Investment Strategy and Process 4. The Portfolio 7
The Investment Team The fund is managed by a team of infrastructure investment specialists and material investment decisions are approved by the fund’s investment committee. Fund Managers Investment Committee Nick Scullion Mark Brennan Carly Magee David Hughes Bernard Fairman Nigel Aitchison Philip Stephens Lead Fund Co-Manager Co-Manager Chief Investment Chairman and Head of Independent Manager Officer Founding Partner Infrastructure Director Nick is the Lead Fund Mark is a Senior Carly joined Foresight David joined Foresight in Bernard Formed Foresight Nigel Aitchison joined Philip retired from the City Manager responsible for Investment Manager at Group in 2014 and is a 2004 and is a member of Group in 1984. He has Foresight Group in 2009 after nearly 40 years investment decisions. He Foresight Group. He is Partner based in the the firm's Executive managed multiple and is a Partner and Head working in UK Corporate is the Head of Foresight also the Lead Manager of London office. She has Committee and has over portfolios through to IPO of Infrastructure based in Finance for various Capital Management and the FP Foresight UK over 11 years of 40 years of investment or trade sale. Responsible the London office. A financial institutions is responsible for fund Infrastructure Income infrastructure investment experience having started for strategic direction and member of the firm's including Lazard, Chase management and growth Fund. Mark joined experience. Carly is his career in 1974 at 3i management of Foresight Executive Committee, he Manhattan and UBS of Foresight's open-ended Foresight Group in 2017. responsible for raising and where he was responsible through organic growth has over 30 years of where he was head of UK fund business. He joined Prior to which, he held a deploying capital in the for advising public and and acquisition to leading experience covering Corporate Finance. Since Foresight Group in 2017 range of roles within the energy infrastructure private companies on positions in the VCT and specific areas such as 2002 he has served on the and has nine years of alternative investments sector across Europe and corporate strategy, UK environmental waste management, boards of many experience in fund space, including as a Australia with a focus on acquisitions, disposals, infrastructure markets. project finance and fund companies as a non- management, capital private equity fund-of- solar, wind and bioenergy mergers and capital management. executive Director mostly markets and corporate funds investor at SL projects. raising. as Chairman. finance. Capital Partners. 8
Five Key Reasons to Invest in the FP Foresight Global Real Infrastructure Fund The Fund is actively managed by the award winning Foresight Capital Management team and invests in the publicly traded shares of companies that own or operate real infrastructure or renewable energy assets anywhere in the world. The Fund targets an annual return in excess of CPI+3% over any five year period. Global Infrastructure Specialists 1 Foresight Group has been investing in infrastructure for decades and has transacted in billions of pounds of private and public infrastructure investments. The Foresight Capital Management team responsible for open-ended infrastructure funds won ‘Fund Manager of the Year’ at the 2018 PLC awards. Real Infrastructure 2 The investment proposition is truly unique, the Fund invests exclusively companies that own or operate real infrastructure anywhere in the world while avoiding traditional cyclical equities that make up the portfolio of many ‘equity infrastructure’ funds. Low Correlation to Equities 3 Real infrastructure asset owning companies typically have low correlation to equity markets due to highly visible and forecastable cashflows driving a steady return throughout the market cycles. Lower Volatility than Equities and Alternatives 4 The underlying assets that the Fund’s portfolio companies own are long-term, often government contracted, inflation linked real assets that are typically less volatile than investments in standard equities. True ESG 5 We will only invest in a companies that the investment team believes deliver a net social or environmental benefit and meets the ten principles of the United Nations Global Compact. 9
Why Global Real Infrastructure for Diversification and Attractive Risk Adjusted Returns? Infrastructure asset owning companies around the world are well placed to deliver attractive returns to investors as they provide essential services that allow the global economy to function. Further, they are well positioned to benefit from structural changes in both developed and emerging markets. Investment Thesis ▪ The global economy is changing. Economies are developing at the fastest pace in history and changes to demographics around the world are driving the need for more infrastructure than ever before. ▪ The transition to a global green economy is increasingly urgent and the renewable energy industry is seeing unprecedented level of demand and awareness. Real infrastructure assets benefit from attractive characteristics: inflation linkage, long-dated revenue streams, government and public sector counterparties, high barriers to entry and stable, predictable demand. ▪ Through global exposure, investors can access a highly diversified pool of infrastructure assets that display these characteristics but are unavailable in UK listed markets. ▪ Examples of highly attractive global infrastructure assets include large scale hydroelectric and geothermal generation, Government and medical facilities and diversified renewable energy generation across emerging markets. 10
FP Foresight Global Real Infra Fund Investment objective: The fund aims to grow, over any 5 year period, by more than 3% per annum above the rate of UK inflation (as measured by the UK Consumer Prices Index). There is no guarantee that the fund will achieve a positive return over this, or any other, period and you may not get back the original amount you invested. Investment policy: The fund will invest directly in the shares of companies (including listed Investment Trusts, Real Estate Investment Trusts (REITs), ETFs and other investment company structures depending on the relevant jurisdictions) or units of Master Limited Partnerships that, in each case, are publicly traded (listed) on stock exchanges in developed markets (meaning North America, Western Europe and Asia Pacific); and that own or operate real infrastructure or renewable energy assets anywhere in the world. Such companies’ revenue streams are typically directly or indirectly supported by long term government or public sector contracts and government supported initiatives. The companies that the fund invests in will typically own or operate assets in the following infrastructure subsectors: renewable energy generation (e.g. offshore wind, onshore wind, solar energy, and hydro-electricity), core economic infrastructure (e.g. schools, hospitals and transport) and property with infrastructure characteristics (e.g. social housing and medical facilities). No more than 50% of the fund by value will be invested in shares that have a primary listing in a single country. The fund may also invest in cash for liquidity and cash flow purposes and to pay fund expenses and redemptions. The fund may invest in certain financial contracts (derivatives or forward transactions) for efficient portfolio management (including hedging). The investment manager aims to manage the fund in a manner that maintains the fund’s eligibility for ISAs. Sustainability considerations play an important role in the investment manager’s stock selection process. The fund will only invest in the shares of a company if the investment manager in its discretion considers that the company delivers a net social or environmental benefit. In determining whether a company delivers a net social or environmental gain, the investment manager will assess company shares based on the ten principles of the United Nations Global Compact for business which cover areas including human rights, labour rights, environmental safeguards and combating bribery and corruption (“Sustainable Investment Strategies”). The investment manager will regularly monitor the companies in which the fund invests, against the Sustainability Investment Criteria. If it is the investment manager’s opinion that an investee company no longer meets the Sustainable Investment Criteria, the investment manager will not make any further investments in the company and will seek to realise in an orderly fashion, its investment in such a company. Benchmark The fund aims to grow, over any 5 year period, by more than 3% per annum above the rate of UK inflation (as measured by the UK Consumer Prices Index). The UK Consumer Prices Index is therefore a target benchmark against which the performance of the fund has been set (“Target Benchmark”). The Target Benchmark was chosen by the investment manager because the fund will invest in investments that are inflation-linked (infrastructure and renewable energy assets are typically inflation-linked as a result of benefitting from government or public sector subsidies, concessions or service provision contracts which are themselves normally inflation- linked). Investors may use the fund’s performance against the Target Benchmark to assess the risks of investing in the fund. 11
FP Foresight Global Real Infrastructure Fund ▪ Targeting attractive risk adjusted returns by investing in a global portfolio of infrastructure and Strategy Objective renewable asset owning investment companies. ▪ The fund aims to grow, over any 5 year period, by more than 3% per annum above the rate of Performance Objective UK inflation (as measured by the Consumer Price Index). ▪ Global ‘Real’ Infrastructure, including global infrastructure investment trusts such as Boralex, Brookfield Infrastructure Partners and Encavis. Investment Universe ▪ Explicit exclusion of cyclical equities active in the broader infrastructure landscape that do not exhibit infrastructure characteristics of long-dated, index linked, government backed cash- flows. ▪ An infrastructure perspective to equity investing rather than an equity perspective to Investment Style infrastructure investing. Investment Basis ▪ Long-only Number of Stocks ▪ 25-35 listed owners and operators of real infrastructure assets ▪ GBP Unhedged Class A launch June 2019 Currency Management ▪ Hedged classes pending investor demand Inception ▪ 3 June 2019 12
Infrastructure characteristics Infrastructure are attractive asset classes as they are characterised by stable and predictable demand, high barriers to entry and long term contracted revenue streams. Infrastructure Characteristics: Stable and predictable Infrastructure assets tend to have constant demand because they provide critical services for daily demand living. This makes them relatively consistent and insensitive to economic and market cycles. Infrastructure assets are typically large physical assets that take substantial time and investment to High barriers to entry develop and maintain. The capital-intensive nature of infrastructure assets creates a barrier to entry that results in limited numbers of competitors and sometimes effectively monopolistic conditions. A high proportion of infrastructure investments’ revenues come from long term contracts that are Long term contracted often linked to inflation and interest rates rises. The counterparties for these revenue streams are revenues normally government and often revenue streams are protected to some extent by government policy. Examples 13
‘Real’ Vs ‘Fake’ Infrastructure ‘Fake’ infrastructure is defined as assets or companies analogous to the infrastructure sector, providing goods and services for example, but that may not provide investors with the fundamental characteristics of the underlying project-level cash flows. ▪ ‘Fake’ infrastructure can be defined as assets or companies ‘Fake’ Infrastructure analogous to the infrastructure sector, providing goods and services for example, but that may not provide investors with the fundamental characteristics of the underlying project-level cash flows. ‘Real’ Infrastructure ▪ Does a listed utility company, or a provider of operational and maintenance services to transport infrastructure really count as ‘infrastructure’? ▪ Examples of ‘fake’ infrastructure include Carillion, National Grid and Vodafone. 14
Risks to Consider For the full set of risk warnings, please refer to the fund prospectus which can be found on either the Foresight Group and FundRock Partners website. ▪ Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programmes, high leverage, Infrastructure costs associated with environmental and other regulations, the effects of economic slowdown, surplus Company Risk capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. ▪ The investments of the Company are subject to normal market fluctuations and other risks inherent in investing in securities. There can be no assurance that any appreciation in the value of investments will occur. The value of investments and the income derived from them may fall as well as rise and investors Market Risk may not recoup the original amount they invest in the Company. ▪ There is no certainty that the investment objective of any Fund will actually be achieved and no warranty or representation is given to this effect. Past performance is no guide to the future. ▪ Where a Fund has exposure to alternative asset classes there is a risk that the price at which an asset is Liquidity Risk valued may not be realisable in the event of sale. ▪ This could be due to a mis-estimation of the asset’s value or due to a lack of liquidity in the relevant market. ▪ Currency fluctuations may adversely affect the value of a Fund’s investments and, depending on an Currency Risk investor’s currency of reference, currency fluctuations may adversely affect the value of the investment 15
Contents 1. Foresight Group Overview 2. Investment Philosophy: Real Infrastructure 3. Investment Strategy and Process 4. The Portfolio 16
FP Foresight Global Real Infra Fund (GRIF) A target screening exercise identified 91 appropriate listed renewable and infrastructure real asset owning companies from a global universe of 5,700 companies. Infrastructure All listed companies that are involved in renewable energy and infrastructure were downloaded and Renewable from 28 stock exchanges and 3 financial reporting service providers. This returned 5,700 5,700 Universe companies. Infrastructure All listed companies that were not real renewable energy or infrastructure asset owners and operators 1,026 Asset Owners were removed (e.g. solar PV production companies or utility companies). This left 1,026 companies. and Operators All investment companies that were not investing into private renewable energy and infrastructure Company physical assets were removed (e.g. ETFs and equity funds). Companies that did not fit the desired 146 Structure structure were removed (e.g. open ended fund). Further, all companies that failed to supply sufficiently detailed Bloomberg information were removed. This left 146 companies. Market 102 All companies that had a market capitalisation 35% were removed. This left 91 companies. 17
The Investment Universe The 91 listed renewable and infrastructure investment companies have a combined market cap of £198bn and represent an excellent access point into ‘real’ infrastructure. Cumulative Market Capitalisation of Global Listed Renewable and Cumulative Number of Global Listed Renewable and Infrastructure Infrastructure Investment Companies1 Investment Companies1 GBP, billions # Companies +146% 91 91 200 82 79 68 150 51 51 57 47 46 47 38 100 42 37 32 30 27 50 26 40 40 33 35 30 25 15 17 11 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Infrastructure Renewable ▪ The market capitalisation of the sector has grown from £45bn in 2010 ▪ Renewable and infrastructure investment companies have grown in to over £198bn in 2018. number by 146% since 2010. ▪ Since 2010, the renewable market has grown by £41bn and the infrastructure market by £111bn. Source: 1) Bloomberg data 18
Sustainable Investment Strategies UN Global Compact By incorporating Global Compact principles into strategies and establishing a culture of integrity, companies are not only upholding their basic responsibilities to people and planet, but also setting the stage for long-term success. 1. Businesses should support and respect the protection of internationally proclaimed human rights; and Human Rights 2. Business should ensure they are not complicit in human rights abuses. 3. Businesses should uphold freedom of association and the effective recognition of the right to collective bargaining; 4. The elimination of all forms of forced and compulsory labour; Labour 5. The effective abolition of child labour; and 6. The elimination of discrimination in respect of employment and occupation. 7. Businesses should support a precautionary approach to environmental challenges; Environment 8. Undertake initiatives to promote greater environmental responsibility; and 9. Encourage the development and diffusion of environmentally friendly technologies Anti-Corruption 10. Businesses should work against corruption in all its forms, including extortion and bribery 19
Contents 1. Foresight Group Overview 2. Investment Philosophy: Real Infrastructure 3. Investment Strategy and Process 4. The Portfolio 20
June 2019 Performance Cumulative Total Return1 % 3.5 3 2.5 2 1.5 1 0.5 0 Jun/2019 FP Foresight UK Infrastructure Income Fund 20 Day Vol 90 Day Vol 180 Day Vol Beta One Year Sharpe Ratio Cumulative Total Return KIID Rating3 FP Foresight Global Real Infrastructure Fund 6.58 PENDING PENDING 0.60 PENDING 3.07 5 Source: 1) Bloomberg Data 21
Portfolio Geographic Breakdown Portfolio by company domicile Portfolio by asset location 4.75% 3.8% 1.00% 4.9% 5.50% 5.50% 27.00% 11.8% 31.6% 6.00% 9.50% 15.6% 10.75% 25.50% 31.3% CANADA UNITED KINGDOM NORWAY North America Asia UNITED STATES SINGAPORE GERMANY Europe South America NEW ZEALAND IRELAND LUXEMBOURG Australia/Oceania Africa 22
Portfolio Sectors and Assets Portfolio by sector Underlying asset split 5.50% 2.2% 6.50% 3.2% 2.5% 1.1% 3.8% 20.3% 4.2% 14.50% 5.8% 46.30% 8.6% 15.2% 28.30% 12.2% 14.0% Renewables Government Property Wind Other Core Infrastructure Cash Transmission and gas distribution Waste and Water Medical Property Healthcare infrastructure Government Buildings Solar Energy Other Energy Transport and logistics Digital Infrastructure Hydro-electric energy Research Labs/Manufacturing/ Storage 23
Global Real Infrastructure Fund The Fund’s diversified approach is highlighted in its top 10 holdings which show seven different listing locations and encompass three different infrastructure asset sub-sectors. Company Listing Location Sector Target Allocation1 Brookfield Infrastructure Partners Canada Core-Infrastructure 9.50% Easterly Government Properties United States Government Property 6.50% Greencoat Renewables Ireland Renewables 6.00% Keppel Infrastructure Trust Singapore Core-Infrastructure 5.50% Infratil Ltd New Zealand Core-Infrastructure 5.50% Scatec Solar Norway Renewables 5.50% Encavis AG Germany Renewables 4.75% Brookfield Renewable Partners Canada Renewables 4.75% Boralex Inc. Canada Renewables 4.75% Hannon Armstrong Sustainable United States Renewables 4.50% Infrastructure 1 The target allocation for the launch portfolio was signed off on the 20 May (in advance of the 3 June launch date). This allocation is expected to be the basis for investment at launch but is subject to change. 24
Case Study: Portfolio Company Profile Brookfield Infrastructure Partners Example Portfolio Company and Assets - Brookfield Infrastructure Partners 25
Case Study: Portfolio Company Profile Healthcare Trust of America (HTA) HTA focuses on acquiring medical office buildings that are core-critical to the delivery of healthcare and are located on campuses of hospitals, around university and academic medical centre campuses. Commentary1: ▪ HTA’s investments are targeted in 20-25 key markets that are attractively positioned as a result of academic university concentrations, highly educated population, above average wages and strong economic growth, low unemployment and other unique characteristics that make them economic hubs for the future. ▪ Ageing demographics and an increasing shift to outpatient services are driving strong medical office demand. ▪ HTA have achieved scale in 17 markets with greater than 500,000 square feet and 9 markets with over 1 million square feet; in each market they service their healthcare providers through their institutional full-service operational platform including property management, leasing, and development services. ▪ The above has driven strong tenant and health system relationships, and strategic partnerships that result in high levels of tenant retention, rental growth, and long-term value creation across the portfolio. 431 Medical Office Buildings (MOBs), 23.2 million square feet of Portfolio Summary property, $6.8 billion invested into healthcare real estate. Asset Type Healthcare real estate. Major US health insurance companies supported by US government Ultimate Counterparty initiatives. Customer Type Blue-chip healthcare providers. Medical Office is one of the most attractive sectors in real estate, Certainty Of Revenue providing steady and dependable returns throughout the full cycle. Contract Type Long-term leases to healthcare providers. Source: 1) Healthcare Trust of America 26
Case Study: Asset Analysis Isagen Acquired in 2016 from the Colombian government, Isagen owns and operates a renewable energy portfolio consisting of 3,032 MW of hydroelectric generating capacity and a 3,800 MW development portfolio in Colombia. Commentary1: ▪ Market leader with a premier generation portfolio. Isagen is the third-largest power generation company. The portfolio comprises of six hydroelectric plants, and includes the country’s largest operating hydro power generating facility and largest hydro-based reservoir by volume. Average annual generation accounts, on average, for approximately 20% of Colombia’s annual production. ▪ Strong operating track record. Isagen has high-quality and modern generating facilities with an average facility age of 18 years. The company’s management team possess extensive experience in operating electricity businesses and a comprehensive knowledge of the Colombian energy market. ▪ Attractive economy and electricity sector. Colombia is one of the strongest and most stable economies in South America with a population of approximately 48 million. Hydroelectricity is integral to the country’s supply mix, accounting for 70% of installed capacity. Asset Owned By Brookfield Renewable Partners. Asset Type Hydroelectric power. Ultimate Counterparty Colombian Government. Approximately 80% of Isagen’s energy sales are derived from contracts Customer Type with a broad base of large commercial and industrial customers and distribution companies. Certainty Of Revenue Isagen benefits from a fixed stream of reliability and capacity payments. Inflation linked with over 15% of the contracts now on five to ten-year Contract Type terms. Source: 1) Brookfield Renewable 27
Case Study: Asset Analysis Phoenix, Az HTA invests in medical office buildings that are core-critical and a key part of the integrated delivery of healthcare. To ensure these properties will increase in value over time, these properties are in community-core locations. Commentary1: ▪ Phoenix is one of the fastest growing, large cities in the United States. It benefits from a temperate climate, low cost of living, and business friendly regulatory environment that should continue to attract new businesses and residents. ▪ The expected growth in the Phoenix area and its senior friendly infrastructure make it an attractive market for healthcare services. ▪ With a total investment of $267.8 million, the majority of HTA’s Phoenix portfolio is primarily in Phoenix’s West Valley, including Goodyear, Glendale, and the retirement destination of Sun City. ▪ HTA also recently acquired four medical office buildings through the purchase of the Dignity Medical Office portfolio. ▪ This portfolio includes the McAuley Medical Center, a nine-story 168,307 square feet Medical Office Building (MOB), located on the campus of Dignity Health’s nationally recognized St. Joseph’s Hospital and Medical Center. As one of the only Class A medical office buildings in Downtown Phoenix and its on-campus location, McAuley Medical Center has had consistently high occupancy rates. Asset Owned By Healthcare Trust of America. Asset Type Healthcare real estate. Ultimate Counterparty Banner Health (major health insurer) Customer Type Blue-chip healthcare providers. Medical Office is one of the most attractive sectors in real estate, Certainty Of Revenue providing steady and dependable returns throughout the full cycle. Contract Type Long-term lease to insurance providers. Source: 1) Healthcare Trust of America 28
Case Study: Asset Analysis Svartsengi geothermal plant In 2017, Innergex meaningfully diversified their asset portfolio in terms of geography and energy source by acquiring two Icelandic geothermal power facilities. Commentary1: ▪ The Svartsengi geothermal power plant is located in the municipality of Grindavík at the southwestern tip of Iceland, approximately 45 km from Iceland’s capital, Reykjavik. The Svartsengi plant was the first geothermal power plant in the world to combine generation of electricity and production of hot water for district heating. ▪ The total installed electricity production capacity of the Svartsengi Power Plant is 74 MW. The plant also generates 190 MW thermal capacity for district heating, supplying heat to the Reykjanes peninsula and thousands of households. ▪ Michel Letellier, President and CEO of Innergex highlighted that the acquisition showed “another significant step forward in Innergex’s international expansion, which should be beneficial for shareholders”. Asset Owned By Innergex Renewable Energy. Asset Type Geothermal energy. Ultimate Counterparty State-owned utility. Customer Type State-owned utility provider. Certainty Of Revenue The long-term contract with Norðurál expires in 2026. HS Orka hf. sells power to a number of commercial and retail customers including power sold under long-term PPAs with Contract Type Landsvirkjun (state-owned utlity provider, Norðurál and Advania ehf (major Icelandic corporations). Source: 1) Innergex 29
Case Study: Asset Analysis Ukrainian Solar Power Scatec Solar entered the Ukraine market in 2017 and is currently developing a significant project portfolio in the country with 77 MW under construction. Commentary1: ▪ Ukraine’s target is to generate 11% of its energy from renewable sources by 2020 in an effort towards more autonomy and less coal intensive production. ▪ Since 2014, a feed-in-tariff programme was launched and more than 1GW of solar capacity have been installed since then. ▪ Scatec is currently constructing two solar power plants with commercial operations expected to begin in 2019. ▪ Rengy, Ukraine, 47 MW: The Rengy project, situated in the Mykolaiv region in the South of Ukraine, is being built in partnership with Rengy Development Group. The project will be realised under the country’s 10 years Feed-in-Tariff scheme and the plants are expected to deliver power also beyond the Feed-in – tariff period. The project will power 15,000 homes and offset 51,000 tons of CO2 emissions. ▪ Kamianka, Ukraine, 30 MW: The Kamianka project is located in the Cherkasy region in central Ukraine. The project is developed, constructed and operated by Scatec Solar. As with the Rengy project, the project will be realized under the country’s 10 years Feed-in-Tariff scheme. The plant will power 11,000 households and offset 34,000 tons of CO2 emissions. Asset Owned By Scatec Solar. Solar power plants: Asset Type ▪ Rengy (47 MW) ▪ Kamkianka (30 MW) Ultimate Counterparty Ukrainian government. Customer Type State owned electricity providers underwritten by the Ukrainian government. The feed-in tariff scheme for electricity generated from renewable energy Certainty Of Revenue sources will be open until 1st of January 2030. Contract Type Feed-in-tariff subsidy. Source: 1) Scatec Solar 30
Case Study: Asset Analysis Solar power, South Africa Scatec Solar entered the South African market in 2010. Operating four solar power plants including 190 MW in operation and 258 MW under construction Scatec Solar is a leading solar player in the country. Commentary1: ▪ The Renewable Energy Independent Power Producer Program (REIPPP) was launched by the Government in 2011. To date, close to 9 GW of renewable energy has been procured by the Government, of which 1.5 GW is solar. The country aims to install more than 8 GW of solar by 2030. ▪ Scatec’s Kalkbult plant, situated in the Northern Cape region, is one of the largest solar plants in Africa. ▪ The plant boasts an exceptional production record contributing to regional growth and portfolio performance. ▪ Acquiring its grid connection in 2013, the plant powers 35,000 households and has offset 137,000 tons of CO2 emissions. ▪ Scatec’s entire South African solar portfolio powers 206,000 households and has offset 995,000 tons of CO2 emissions. Asset Owned By Scatec Solar. Solar power plants ▪ Upington (258 MW) Asset Type ▪ Kalkbult (75 MW) ▪ Dreunberg (75 MW) ▪ Linde (40 MW) Ultimate Counterparty South African Government. Customer Type Utility providers underwritten by the South African government. A ceiling tariff level is established for each technology in the auctions. Winning Certainty Of Revenue bidders sign PPAs, which are guaranteed for a period of 20 years. Contract Type Public Procurement Programme. Source: 1) Scatec Solar 31
Case Study: Asset Analysis FEMA storage facility Easterly Government Properties focus on the acquisition, development and management of class A commercial properties that are leased to US government agencies that serve essential US government functions. Commentary1: ▪ Built in 2018, this 210,373 square feet state-of-the-art warehouse facility is leased to the Federal Emergency Management Agency (FEMA). ▪ As part of FEMA’s mission to deliver immediate, on-the-ground response in moments of disaster, FEMA maintains eight distribution centers within the United States for emergency response preparedness. FEMA – Tracy is one of these eight regional distributions centers located strategically throughout the country. ▪ In 2018, Easterly assumed all redevelopment activities and later in 2018 commenced a 20-year non-cancelable lease with the General Services Administration (GSA) on this mission critical facility. ▪ The FEMA – Tracy property is a single-story warehouse that sits on just over 19 acres of land and includes a blend of office, warehouse, and refrigerated space for full-time cold storage. ▪ FEMA – Tracy will further enable FEMA to serve the mission critical function of providing much needed supplies and support to U.S. citizens faced with disaster. Asset Owned By Easterly Government Properties. Asset Type State-of-the-art warehouse facility for disaster preparedness. Ultimate Counterparty United States government. Customer Type US government agency. Certainty Of Revenue Long-term leases provide steady and dependable returns throughout the cycle. Contract Type 20-year noncancelable lease. Source: 1) Easterly Government Properties 32
Case Study: Asset Analysis Indian Natural Gas Transmission Brookfield Infrastructure Partners L.P. is one of the largest owners and operators of critical and diverse global infrastructure networks which facilitate the movement and storage of energy, water, freight, passengers and data. Commentary1: ▪ Spanning five countries and four continents, Brookfield’s utilities portfolio benefits from steady, inflation linked cash flows. ▪ The portfolio encompasses 6.6 million electricity and gas connections, 2,000 kms of regulated natural gas pipeline and 2,200 km of electricity transmission lines. ▪ Brookfield recently completed its largest-ever transaction in India by acquiring a 1,500 km natural gas pipeline for $2 billion. ▪ The share of natural gas in India’s energy mix is set to rise from 11% in 2010 to 20% by 2025. The pipeline connects the natural gas reserves of the KG Basin, off India’s east coast, with fast-growing regions in the west of the country. ▪ Brookfield has entered into a 20-year agreement with Mumbai-based conglomerate Reliance Industries to reserve 33 mmscmd (million metric standard cubic metres per day). Asset Owned By Brookfield Infrastructure Partners. Asset Type Natural gas transmission. Ultimate Counterparty Major Indian conglomerate holding company (Reliance Industries Limited) Customer Type Blue-chip Indian corporation Certainty Of Revenue Stable, secure cash flows from a 20 year take-or-pay contract. Contract Type 20 year take-or-pay contract. Source: 1) Brookfield Infrastructure Partners 33
Case Study: Asset Analysis Senoko Waste-to-Energy Plant Keppel Infrastructure Trust (KIT) aims to provide investment into infrastructure assets located in jurisdictions with well-developed legal frameworks that support infrastructure investment. Commentary1: ▪ Fulfilling a concession of 2,310 tonnes/day of waste incineration Senoko Waste-to-Energy Plant (Senoko WTE Plant) is the third waste incineration plant built in Singapore and is one of four incineration plants currently operating. It was commissioned in 1992 with a land area of 7.5 ha. ▪ Senoko WTE Plant is equipped with six incinerator-boiler units with two condensing turbine-generators offering a power generation capacity of 2 x 28 MW. Waste incineration is carried out at the plant 24 hours a day throughout the year. ▪ The plant underwent an upgrade in June 2012, which was completed within the contracted timeframe and budget, and with an accident-free safety record. ▪ In 2014, KIT entered into an agreement with NEA to progressively increase the contracted incineration capacity of the plant by up to 10% from 2,100 tonnes per day to 2,310 tonnes between July 2015 and September 2016. The capacity payments from NEA were correspondingly increased with the completion of each incineration unit upgrade. Asset Owned By Keppel Infrastructure Trust. Asset Type Waste-to-Energy plant. Ultimate Counterparty Singaporean government. Customer Type NEA, Singapore’s National Environment Agency. Certainty Of Revenue Stable, secure cash flows from a 15 year contract. Contract Type 15 year contract until 2024. Source: 1) Keppel Infrastructure Trust 34
ESG Case Study Scatec – UN Global Compact In June 2018, Scatec Solar became a signatory of the UN Global Compact and affirmed its support to the Ten Principles of the Global Compact on human rights, labour, environment and anti-corruption. Commentary: ▪ Scatec are committed to making the UN Global Compact and its principles part of the strategy, culture and day-to-day operations of the company. ▪ Scatec seek to engage in collaborative projects which advance the broader development goals of the United Nations, particularly the Sustainable Development Goals. ▪ Sustainability is an integral part of the organization and is embedded in all business units. The sustainability team in each country consists of both corporate support teams and specialists as well as fieldworkers who report to the global headquarters. ▪ Recognizing that a key requirement for participation in the UN Global Compact is the annual submission of a Communication on Progress (COP) the company has committed to reporting on progress annually according to the UN Global Compact COP policy. ▪ This public accountability and transparency includes: ▪ A statement signed by the CEO expressing continued support for the UN Global Compact and renewing their ongoing commitment to the initiative. ▪ A description of practical solutions that Scatec has taken to implement the UN Global Compact principles on human rights, labour, environment and anti-corruption. ▪ A measurement of outcomes quantifying the degree to which targets and performance indicators were met. 35
ESG Case Study Scatec – UN Global Compact Scatec’s core mission is do deliver competitive and sustainable solar energy globally, to protect the environment and to improve quality of life though innovative integration of reliable technology. Commentary1: ▪ Scatec’s material sustainability priorities are selected based on two sources; stakeholder expectations and internal strategic priorities. Stakeholder expectations are mapped through formal interviews, and in dialogue with local stakeholders as part of daily business on the ground. Internal priorities are mapped through a sustainability survey. ▪ Topics of high external and internal importance receive the highest degree of management attention. For such topics, clear goals are established, monitored regularly, and reported externally. ▪ The matrix attached serves as the basis for their corporate sustainability framework and reporting. ▪ Scatec’s core mission is supported by its three sustainability pillars: 1. Managing social and environmental impacts. 2. Being a trusted business partner. 3. Contributing to local value creation. Source: 1) Scatec Solar Sustainability Report 36
ESG Case Study Scatec – UN Global Compact Respecting and supporting human rights remains one of the most challenging areas of corporate sustainability. Businesses now realise their legal, moral and commercial need to support human rights within their activities and business relationships. Human Rights Checklist1 Measure2 Scatec commits to respect human rights and recognise their responsibility of avoiding the infringement of rights wherever they Human rights code operate. A key target of Scatec’s for 2019 is to develop a corporate policy on human rights in line with the Universal Declaration of Human Rights. Scatec’s project activities are conducted in accordance with local laws, Impact Assessment corporate Company policies and requirements defined by the IFC’s performance standards for specific areas of impact on human rights. Meaningful consultations with affected communities and other stakeholders on a regular basis and a well-functioning grievance Complaint Mechanism mechanism that local communities trust are the main tools used for continuous review of risks and for development of appropriate mitigating actions. Approximately 60% of security personnel contracted by Scatec Solar globally have been trained in principles related to human rights. Scatec Employee Training and Awareness is looking to integrate human rights aspects into the standardized training for all our managers, community liaison officers, and security personnel globally. Stakeholder dialogue is of the utmost importance to Scatec. In addition to regular and continuous dialogue with local stakeholders, they see Multi-Stakeholder Dialogue increasing expectations from investor communities and project partners. Source: 1) UN Global Compact Guide to Corporate Sustainability 2) Scatec Solar Sustainability Report 37
ESG Case Study Scatec – UN Global Compact Decent working conditions are far from assured in today’s global business community. By promoting decent work and inclusive employment opportunities, business also plays a key role in advancing societal priorities. Human Rights Checklist1 Measure2 Providing safe and healthy working environments for their employees and sub-contractors and protecting labour rights are identified as the Safe Working Conditions most material topics for Scatec. Scatec have accrued 6.3 million work hours with no serious injuries across ten projects in eight countries. Scatec sees labour management as a priority area for all projects. By developing management plans for labour recruitment, training and Employee Training and Awareness accommodation and by conducting regular inspections, Scatec’s goal is to ensure continuous compliance with IFC’s Performance Standards and to avoid any practice harmful to workers’ rights. The Company’s Global HR policy and related procedures are applicable to all employees, emphasising fair salary levels. In countries where Collective Bargaining labour unions and rights are not effectively enforced, Scatec aim to find mechanisms for workers to express their grievances and protect rights. Scatec’s total global workforce is represented by 32 different nationalities. In 2018, Scatec increased female representation at Equal Opportunity executive management level by 14%. The 2018 target of increasing the global number of female employees by 10% was exceeded. Source: 1) UN Global Compact Guide to Corporate Sustainability 2) Scatec Solar Sustainability Report 38
ESG Case Study Scatec – UN Global Compact The Global Compact asks businesses to address environmental risks and opportunities and have major sustainable initiatives in the areas of climate, water and food. The Compact’s signatories are preparing for a more sustainable future and becoming part of the solution. Environment Checklist1 Measure2 The development of solar projects has environmental and social impacts. In alignment with Scatec Solar’s policies, requirements of local Risk and Impact Assessment legislation, and their commitment to international standards and best practices, they endeavour to minimise their negative impacts and to maximize local benefits in positive dialogue with project stakeholders. Water is a scarce resource in many areas and is an important aspect of Scatec’s environmental management. Water conservation awareness, minimizing water use for dust suppression by maintaining road Water Footprinting conditions, and monthly monitoring for identifying causes of abnormal volumes are among the management considerations implemented at all our plants. All of Scatec’s projects have regular Environmental and Social monitoring and reporting procedures in place. Important monitoring Monitor and Evaluate Performance measures include: regular site inspections, environmental and social internal and external audits, project reports reviewed in biweekly management meetings and monthly Board of Directors meetings. By providing clean electricity, Scatec’s plants contribute to reducing greenhouse gas emissions in every country they operate. In 2018, Report Emissions Scatec started preparations to report to the Carbon Disclosure Project (a global disclosure system to manage environmental impacts) with a timeline of completion by May 2019. Source: 1) UN Global Compact Guide to Corporate Sustainability 2) Scatec Solar Sustainability Report 39
ESG Case Study Scatec – UN Global Compact Corruption represents a major hinderance to advancing societies, with a disproportionate impact on poor communities. Corruption raises transaction costs, undermines fair competition, distorts development priorities, and impedes long-term investment. Companies need robust anti-corruption measures as part of their corporate sustainability strategy. Corruption Checklist1 Measure2 Zero-tolerance Policy Scatec maintain a zero-tolerance principle for bribery and corruption. A whistleblower function is available to all employees, suppliers, partners, and clients of the company. The mechanism includes a hotline Anonymous Hotline For Reporting Corruption available 24/7 operated a neutral third party. All whistleblowers have the option to be anonymous. Scatec provide mandatory anti-corruption training for all employees. In Employee Training and Awareness addition, they offer specific anti-corruption and integrity due-diligence training for particularly exposed business units. All operations, including projects and business partners of Scatec Solar, Monitor and Evaluate Performance were assessed for risks related to corruption in 2018. Source: 1) UN Global Compact Guide to Corporate Sustainability 2) Scatec Solar Sustainability Report 40
FP Foresight Global Real Infrastructure Fund Key Features Fund Name: FP Foresight Global Real Infrastructure Fund Fund Structure: A sub-fund of FP Foresight OEIC, a UK open-ended investment company (“OEIC”) Regulatory Status: FCA Authorised UCITS IA Sector: Global Unit Type: Income & Accumulation Currency: GBP (unhedged) Lump Sum: £1,000 + subsequent increments of £500 Minimum Investment: Regular Savings: £100 per month Ongoing Charge: 0.85% Transaction Costs: Please refer to your platform or the latest fund EMT Fund Price At Launch: 100p Expected Return: More than UK CPI+3% per annum over any five year period Income: Quarterly from 31 October 2018 (Jan, Apr, Jul, Oct) Distributions: Accumulation: Reinvested Authorised Corporate Director (ACD): FundRock Partners Limited Investment Manager and Distributor: Foresight Group Launch Date: 3rd June 2019 Final Accounting Date: 31st May Interim Accounting Dates: Last day of February; 31st August; and 30th November 41
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